3 April 2009
It was Keynes's view that 'Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.' He is now become the posthumous eponym of his own adage, as the economic crisis forces the resuscitation of politically unpopular measures that are no longer appropriate to our times.
Commenting on the horrific consequences of capitalism's last truly spectacular bust, Keynes noticed that people's natural response to be cautious in times of crisis could actually make the problem worse. In the typically natty way he had with language Keynes referred to this conundrum as 'the paradox of thrift'. While saving at the individual level may be entirely noble, at the level of an economy as a whole, and especially one with insufficient demand, it can be devastating. Japan is often taken to be the paradigmatic case.Wise he may have been, but Keynes did not recognise the planetary frontier and so his plans to save us from Depression through exhorting us to consume more are now dangerously outdated.
Thrift has been a concept with a serious PR problem for several decades, as built-in obsolescence and the fashion industry have generated wants and desires that were then satisfied by production and consumption. In my paper 'Sen and the Art of Market-Cycle Maintenance' I sketch the environmentally destructive consequences of this capitalistic modus operandi.
The paradox itself is easily resolved once we think our way beyond the ideology of capitalism, since its existence results from the underlying assumption that individual behaviour is only helpful if it fits in with that system's logic. We are, in reality, free to make much wider choices than whether to spend or save, or what variety of washing powder to buy. We are free to choose a whole new economic system based on balance rather than growth and justice rather than inequality. Tweet