Keynes and Civilization

Sometimes it can help to look at the big picture -- when you're doing a jigsaw puzzle, say, or studying the macroeconomy.

William Manchester, The Glory and the Dream

"Yes. It was called the Dark Ages, and it lasted four hundred years." That's big-picture.

William Manchester says comparing the Great Depression to the Dark Ages is "calamity howling on a cosmic scale". Only in ignorance, I think, would anyone be so dismissive of John Maynard Keynes. 

 

Keynes compared the severity of two economic slowdowns. But the comparison tells us more than just their relative severity.

A recession is a slump in the business cycle. 

A Dark Age is a slump in the massive cycle that I'm in the habit of calling the Great Cycle or the Cycle of Civilization: a very long economic cycle, with a long, deep low.

We commonly think of a depression as a severe recession. But it may be the "recession phase" of an economic cycle more severe than the business cycle, like the debt supercycle. Or it may be, or it may become, the recession phase of the cycle of civilization.

Keynes didn't compare the Great Depression to normal recessions. He compared it to the Dark Ages. At the very least, this tells us Keynes understood that the cycle of civilization is an economic cycle. He may also have been using the severity of the Depression as a way to gauge the economic cycle of which it was part.

Was it "the big one"?  The question was almost certainly on his mind. 

Late in the General Theory, in chapter 24, section iii, Keynes summarizes his recommendations as "the task of adjusting to one another the propensity to consume and the inducement to invest". In other words, the task is to correct the imbalance between the two factors we noted previously, when we found similarities between Keynes and Carroll Quigley, author of The Evolution of Civilizations.

Keynes described the task as "the only practicable means of avoiding the destruction of existing economic forms in their entirety". There are not very many things that can destroy an economic system "in its entirety". One that can is a Dark Age.

Was it necessary for Keynes to include in his discussion this "worst case" scenario involving the destruction of our entire economic system and the end of life as we know it? Evidently, Keynes found it necessary. And he offered his solution as the only practicable way to avoid that worst-case outcome. 

Maybe Keynes was wrong about his solution being the only way. Maybe he was wrong about it being practicable. Dunno. What I know for sure is that Keynes saw the cycle of civilization, recognized it as an economic cycle, and recognized that dark ages and depressions have features in common. He recognized that the Great Depression was similar to the Dark Age in that both were the low points of economic cycles. He also knew that an economic low can be an unforgiving problem capable of wiping an entire civilization off the map. 

He didn't dwell on it, but he knew.

 

From Essays in Persuasion, the "Paris" essay, the third paragraph:

But perhaps it is only in England (and America) that it is possible to be so unconscious. In continental Europe the earth heaves and no one but is aware of the rumblings. There it is not just a matter of extravagance or "labour troubles"; but of life and death, of starvation and existence, and of the fearful convulsions of a dying civilisation.

The words "dying civilisation" are not a reference to the first world war. Rather, the war is part of the larger problem Keynes describes. From the first paragraph:

Very few of us realise with conviction the intensely unusual, unstable, complicated, unreliable, temporary nature of the economic organisation by which Western Europe has lived for the last half-century.

Not the war, but the last half-century of troubles is what Keynes had in mind: troubles in the "economic organisation" of Western Europe. The essay is dated 1919; half a century moves the date back to 1869; call it 1870. 

What was his concern? Not the war, obviously. 

Civilization? I think so, yes.

 

At the same link, in another essay (also dated 1919) Keynes considers the role of the US in relation to the problems of Europe:

The impulse which, we are told, is now strong in the mind of the United States to be quit of the turmoil, the complication, the violence, the expense, and, above all, the unintelligibility of the European problems, is easily understood. No one can feel more intensely than the writer how natural it is to retort to the folly and impracticability of the European statesmen,—Rot, then, in your own malice, and we will go our way—

Remote from Europe; from her blasted hopes;
Her fields of carnage, and polluted air.

But if America recalls for a moment what Europe has meant to her and still means to her, what Europe, the mother of art and of knowledge, in spite of everything, still is and still will be, will she not reject these counsels of indifference and isolation, and interest herself in what may prove decisive issues for the progress and civilisation of all mankind?

He quotes poetry and promotes "the progress and civilisation of all mankind".

The words, from 1919, feel Eurocentric and may lack the political correctness you expect, but clearly Keynes's concern was civilization and the advance of civilization.

Keynes is often given credit for inventing macroeconomics, for looking at the "big picture" of the economy. Yes. He made economics interesting.

But we don't give him enough credit. We fail to notice how big the big picture really is. Keynes knew. He knew that the rise and fall of civilizations is an economic cycle, a cycle driven by economic forces. And he knew this is where it really gets interesting.