2 - ECONOMIC POSSIBILITIES FOR OUR GRANDCHILDREN (1930)

Summary

This essay was first presented in 1928 as a talk to several small societies, including the Essay Society of Winchester College and the Political Economy Club at Cambridge. In June 1930 Keynes expanded his notes into a lecture on ‘Economic Possibilities for our Grandchildren’ which he gave at Madrid. It appeared in literary form in two instalments in the Nation and Athenaeum, 11 and 18 October 1930, in the midst of the slump.

We are suffering just now from a bad attack of economic pessimism. It is common to hear people say that the epoch of enormous economic progress which characterised the nineteenth century is over; that the rapid improvement in the standard of life is now going to slow down—at any rate in Great Britain; that a decline in prosperity is more likely than an improvement in the decade which lies ahead of us.

I believe that this is a wildly mistaken interpretation of what is happening to us. We are suffering, not from the rheumatics of old age, but from the growing-pains of over-rapid changes, from the painfulness of readjustment between one economic period and another. The increase of technical efficiency has been taking place faster than we can deal with the problem of labour absorption; the improvement in the standard of life has been a little too quick; the banking and monetary system of the world has been preventing the rate of interest from falling as fast as equilibrium requires.