Many commentators use John Maynard Keynes’ quotation “In the long run we are all dead” to suggest that Keynes, and by association those economists today who urge a moderation of government austerity policies, didn’t care about the future. The implication is that Keynes and Keynesian economists are recklessly short termist and would happily buy some temporary economic benefit at the price of ruinous long term debt increases and great damage to future generations.
The British professor of history Niall Ferguson made this implication explicit in an answer to a question at a recent conference in California. He went further and attributed Keynes’ supposed lack of interest in the future to the fact that he had no children, because he was gay. Ferguson has made an unreserved apology for his remarks. He acknowledged that Keynes (whose earlier gay life is not in dispute) was later married and his wife, the Russian ballerina Lydia Lopokova, suffered a miscarriage.
Ferguson is popular on the conference circuit because he makes controversial comments. With the academic credibility of a Harvard professorship this frankness gives him a ready and high paying audience. But his academic reputation lies in his distinguished work in financial history. He is not an economist and his emphatic forecasts about the inflationary consequences of high US federal debt and quantitative easing have been completely wrong.
But the more important point is that he, like so many others, clearly misunderstands the point that Keynes was making. Here is the context for Keynes’ quotation:
The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again.
Keynes wrote this in one of his earlier works, The Tract on Monetary Reform, in 1923. It should be clear that he is not arguing that we should recklessly enjoy the present and let the future go hang. He is exasperated with the view of mainstream economists that the economy is an equilibrium system which will eventually return to a point of balance, so long as the government doesn’t interfere and if we are only willing to wait. He later challenged that view in his most important work The General Theory of Employment, Interest and Money (1935). arguing that the economy can slip into a long term underemployment equilibrium from which only government policy can rescue it.
Unemployment is the great scourge of economic life. It is far more pervasive than the hyperinflation that Fergusson and others worry about. Hyperinflation is very rare and usually occurs following wars or other major dislocations. We know how it can be stopped e.g. Bolivia’s 1985 hyperinflation was stopped in ten days – this was one of the few 20th century hyperinflations not to be caused by war or revolution. It is a very damaging but rare disease.
Unemployment causes enormous harm to individuals and families, reduces long term potential output as people lose their skill and motivation and can last for many years. The appalling rates of unemployment in southern Europe are doing great damage right now, as well as storing up serious political problems for the future (once again I have to cite the fact that the Nazis achieved power in Germany on the back of mass unemployment, not inflation). It is in this sense that economists should not let themselves off the hook by saying that these countries will somehow eventually return to full employment if we are just patient. This is both immoral and incorrect.
Keynes wrote about the future of mankind and the possibilities that greater economic prosperity might bring. He cherished a high quality of life and wanted to preserve a capitalist system capable of delivering this against the danger of a collectivist tyranny. It is nonsense to imply that he had no conception of the value of the future. And those many economists today who argue that Europe is needlessly wasting human life and capabilities are not reckless about the future either. They have both economic theory and history on their side to argue that we should not let mass unemployment continue.