JM Keynes – An Ecological Economist? Multipliers and Morality
by Iulie Aslaksen and Per Arild Garnåsjordet
Iulie Aslaksen is senior researcher in the research department of Statistics Norway and works with sustainability indicators, the Nature Index, and policy for sustainable development.
Per Arild Garnåsjordet (Norwegian, born 1945) is a geographer and senior researcher at Statistics Norway. From 1995–2006 he was managing director for Asplan Viak, a major consulting firm in urban and regional planning.
The visionary ideas of JM Keynes need to be re-established as a leading light in the global effort to solve the economic problem – to shift the world’s focus from production to wellbeing. The understanding of society and public trust expressed by Keynes is urgently needed today as basis for collective action to solve the sustainability crisis.
By the provocative question – was JM Keynes an ecological economist and a leader of sustainability? – we encourage to Keynes to be re-read with an eye to his visionary ideas on public trust and collective action. We suggest resuscitating Keynes from a technocratic framework. When we were students and Keynesian economics was the prevalent approach, we learned about the arithmetical Keynes, in the context of multipliers for public expenditure. Nowhere did we learn about the moral Keynes with his concern for sustainability and questioning long-term economic growth.
On later reflection, we discovered the understanding of public trust embedded in Keynes’ thinking and his idea for redirecting capital to improve society as a vision of sustainability. The time has come to re-establish the visionary ideas of Keynes in a global effort to solve the sustainability crisis – to shift the world’s focus from production to wellbeing, within planetary boundaries. Restoring public trust is a fundamental condition for the macro-economy to function in its role of supporting the public good.
In his book, The General Theory of Employment, Interest and Money (1936), Keynes explains: ‘It is the return of confidence, to speak in ordinary language, which is so insusceptible to control in an economy of individualistic capitalism. This is the aspect of the slump which bankers and business men have been right in emphasising, and which the economists who have put their faith in a “purely monetary” remedy have underestimated.’
During the unemployment crisis of the 1930s, Keynes realized that increased public spending was necessary to avoid a social disaster, but the increased spending was not supposed to last for a long time. His recommendation for public spending rested on a notion of public trust to ensure that economic balance would be established afterwards. Keynes argued that with income growth over a long period of time, the human mind would be induced to perceive high consumption as the ultimate goal – an end in itself rather than the means to a good life.
In his Annual Report of the Arts Council 1945-1946, Keynes envisaged that: ‘The day is not far off when the economic problem will take the back seat where it belongs, and the arena of the heart and the head will be occupied, or reoccupied, by our real problems – the problems of life and of human relations, of creation and behavior and religion’.
In his vision of sustainability, Keynes was far ahead of his time, saying: ‘When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals … The love of money as a possession – as distinguished from the love of money as a means to the enjoyments and realities of life – will be recognised for what it is, a somewhat disgusting morbidity … But beware! … For at least another hundred years we must pretend to ourselves and to everyone that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight.’ (The Future: Essays in Persuasion, 1931).
Keynes also warned against the speculative economy, saying: ‘It is generally agreed that casinos should, in the public interest, be inaccessible and expensive. And perhaps the same is true of Stock Exchanges (The General Theory of Employment, Interest and Money, 1936). The current financial crisis shows that the world has forgotten Keynes and does not have the public trust to stimulate the economy. In the United States, the Glass-Steagall legislation from 1933, which formed the basis for President Roosevelt’s New Deal, was repealed in 1999.
The current crisis of unemployment calls for a revitalization of regulation of the financial sector. A problem for collective action is that the current crisis is framed either as pro-employment or pro-environment, but what is called for is a Green New Deal, a program for collective action to secure the common good, with regard to the environment as well as equity and employment. Society needs a vision for shared public values and strategies for collective action to protect them. The mission statement of the Green New Deal recalls Keynes’ vision of sustainability: ‘The Green New Deal will rekindle a vital sense of purpose, restoring public trust and refocusing the use of capital on public priorities and sustainability.’
Keynes is often misunderstood as a prophet of economic growth and excessive consumption since his message was to keep the economy running – in recession times. But Keynes was concerned that human weakness and greed would destroy nature and our livelihood, warning that: ‘The same rule of self-destructive financial calculation governs every walk of life. We destroy the beauty of the countryside because the unappropriated splendours of nature have no economic value. We are capable of shutting off the sun and the stars because they do not pay a dividend.’ (National Self-Sufficiency, 1933.). This is an ecological economist speaking – a philosopher of an ecological mindset.
Keynes’ ideas contributed to President Roosevelt’s New Deal for solving the unemployment crisis of the 1930s. The call for collective action embedded in Keynes’ ideas reflects an understanding of society as having the ability to act in times of crisis. After World War II, Keynes’ visions of redirecting funds to public priorities for the common good were put into practice in the rebuilding of society. Public funds were used in a context of public trust with the stated goal of improving society.
His ideas for a new Green New Deal are explored further at: http://www.greennewdealgroup.org/