Re: Keynes and autarky

[Ted Winslow <egwinslow@xxxxxxxxxx>]

Michael asked:

> Did Keynes ever follow up his 1933 thoughts on National
> Self-Sufficiency?
>

I don't recall another explicit discussion of self-sufficiency, but the
central idea - that the "ideal social republic of the future" would differ
radically from national and international laissez faire capitalism - is
reiterated.

The consequences aimed at by a policy of national self-sufficiency include
the freedom to move closer to the ideal.  Keynes claims free trade and
capital flows severely constrain this freedom.  For example, free
international capital flows exacerbate the irrationality of capital markets.

Keynes's "pragmatism" involves taking account of the "real potentiality" of
the present.  This changes over time.  A policy which might have been
practicable in the real potentiality of 1933 had become impracticable in the
real potentiality created by WW II.  In particular, the increased financial
power of the US made a UK policy of national self-sufficiency impracticable.
This, I would argue, explains an important part of Keynes's changed approach
to international trade and finance policy during the war.

That the central idea remained unchanged is, however, made evident by the
passages below, passages I've quoted before.  The first two are from the
1933 essay; the third is from a 1942 radio talk, "How Much Does Finance
Matter?".

"The decadent international but individualistic capitalism, in the hands of
which we found ourselves after the War, is not a success.  It is not
intelligent, it is not beautiful, it is not just, it is not virtuous - and
it doesn't deliver the goods.  In short, we dislike it and we are beginning
to despise it.  But when we wonder what to put in its place, we are
extremely perplexed." ("National Self-Sufficiency", vol. XXI, p. 239)

"The nineteenth century carried to extravagant lengths the criterion of what
one can call for short the financial results, as a test of the advisability
of any course of action sponsored by private or by collective action.  The
whole conduct of life was made into a sort of parody of an accountant's
nightmare.  Instead of using their vastly increased material and technical
resources to build a wonder-city, they built slums; and they thought it
right and advisable to build slums because slums, on the test of private
enterprise, 'paid', whereas the wonder-city would, they thought, have been
an act of foolish extravagance, which would, in the imbecile idiom of the
financial fashion, have `mortgaged the future'; though how the construction
today of great and glorious works can impoverish the future no man can see
until his mind is beset by false analogies from an irrelevant accountancy.
Even today we spend our time - half vainly, but also, I must admit, half
successfully - in trying to persuade our countrymen that the nation as a
whole will assuredly be richer if unemployed men and machines are used to
build much needed houses than if they are supported in [241] idleness.  For
the minds of this generation are still so beclouded by bogus calculations
that they distrust conclusions which should be obvious, out of a reliance on
a system of financial accounting which casts doubts on whether the operation
will 'pay'.  We have to remain poor because it does not `pay' to be rich.
We have to live in hovels, not because we cannot build palaces, but because
we cannot 'afford' them.
    "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.
London is one of the richest cities in the history of civilisation, but it
cannot `afford' the highest standards of achievement of which its own living
citizens are capable, because they do not 'pay'.
    "If I had the power today I should surely set out to endow our capital
cities with all the appurtenances of art and civilisation on the highest
standards of which the citizens of each were individually capable, convinced
that what I could create, I could afford - and believing that money thus
spent would not only be better than any dole, but would make unnecessary any
dole.  For with what we have spent of the dole in England since the War we
could have made our cities the greatest works of man in the world.
    "Or again, we have until recently conceived it a moral duty to ruin the
tillers of the soil and destroy the age-long human traditions attendant on
husbandry if we could get a loaf of bread thereby a tenth of a penny
cheaper.  There was nothing which it was not our duty to sacrifice to this
Moloch and Mammon in one; for we faithfully believed that the worship of
these monsters would overcome the evil of poverty and lead the next
generation safely and comfortably, on the back of compound interest, into
economic peace.
    "Today we suffer disillusion, not because we are poorer than we were -
on the contrary even today we enjoy, in Great Britain at least, a higher
standard of life than at any previous period - but because other values seem
to have been sacrificed and because, moreover, they seem to have been
sacrificed unnecessarily.  For our economic system is not, in fact, enabling
us to exploit to the utmost the possibilities for economic wealth afforded
by the progress of our technique, but falls short of this, leading us to
feel that we might as well have used up the margin in more satisfying ways.
    "But once we allow ourselves to be disobedient to the test of an
accountant's profit, we have begun to change our civilisation.  And we need
to do so very warily, cautiously and self consciously.  For there is a wide
field of human activity where we shall be wise to retain the usual pecuniary
tests.  It is the state, rather than the individual, which needs to change
its criterion.  it is the conception of the Chancellor of the Exchequer as
the chairman of a sort of joint-stock company which has to be discarded.
Now if the functions and purposes of the state are to be thus enlarged, the
decision as to what, broadly speaking, shall be produced within the nation
and what shall be exchanged with abroad, must stand high amongst the objects
of policy." ("National Self-Sufficiency", vol. XXI p. 241-3)

"Where we are using up resources, do not let us submit to the vile doctrine
of the nineteenth century that every enterprise must justify itself in
pounds, shillings and pence of cash income, with no other denominator of
values but this.  I should like to see the war memorials of this tragic
struggle take the shape of an enrichment of the civic life of every great
centre of population.  Why should we not set aside, let us say, £50 millions
a year for the next twenty years to add in every substantial city of the
realm the dignity of an ancient university or a European capital to our
local schools and their surroundings, to our local government and its
offices, and above all perhaps, to provide a local centre of refreshment and
entertainment with an ample theatre, a concert hall, a dance hall, a
gallery, a British restaurant, canteens, cafés and so forth. Assuredly we
can afford this and much more.  Anything we can actually do we can afford.
Once done, it is there.  Nothing can take it from us.  We are immeasurably
richer than our predecessors.  Is it not evident that some sophistry, some
fallacy, governs our collective action if we are forced to be so much meaner
than they in the embellishments of life?
     "Yet these must be only the trimmings on the more solid, urgent and
necessary outgoings on housing the people, on reconstructing industry and
transport and on re-planning the environment of our daily life.  Not only
shall we come to possess these excellent things.  With a big programme
carried out at a properly regulated pace we can hope to keep employment good
for many years to come.  We shall, in very fact, have built our New
Jerusalem out of the labour which in our former vain folly we were keeping
unused and unhappy in enforced idleness." ("How Much Does Finance Matter?"
vol. XXVII, p. 270)

Ted