These are words that deserve attention as we begin a new year, entering into what looks like the worst economic crisis since the Great Depression. The author is a foreigner, hence his stilted language.
The Great Slump of 2009 – Excerpt:
The world has been slow to realise that we are living this year in the shadow of one of the greatest economic catastrophes of modern history. But now that the man in the street has become aware of what is happening, he, not knowing the why and wherefore, is as full to-day of what may prove excessive fears as, previously, when the trouble was first coming on, he was lacking in what would have been a reasonable anxiety. He begins to doubt the future. Is he now awakening from a pleasant dream to face the darkness of facts? Or dropping off into a nightmare which will pass away?
He need not be doubtful. The other was not a dream. This is a nightmare, which will pass away with the morning. For the resources of Nature and men’s devices are just as fertile and productive as they were. The rate of our progress towards solving the material problems of life is not less rapid. We are as capable as before of affording for every one a high standard of life — high, I mean, compared with, say, twenty years ago– and will soon learn to afford a standard higher still. We were not previously deceived. But to-day we have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand. The result is that our possibilities of wealth may run to waste for a time — perhaps for a long time.
… In this quandary individual producers base illusory hopes on courses of action which would benefit an individual producer or class of producers so long as they were alone in pursuing them, but which benefit no one if every one pursues them. For example, to restrict the output of a particular primary commodity raises its price, so long as the output of the industries which use this commodity is unrestricted; but if output is restricted all round, then the demand for the primary commodity falls off by just as much as the supply, and no one is further forward. Or again, if a particular producer or a particular country cuts wages, then, so long as others do not follow suit, that producer or that country is able to get more of what trade is going. But if wages are cut all round, the purchasing power of the community as a whole is reduced by the same amount as the reduction of costs; and, again, no one is further forward.
Thus neither the restriction of output nor the reduction of wages serves in itself to restore equilibrium.
… In our situation it is doubtful if the necessary adjustments can be made in time to prevent a series of bankruptcies, defaults, and repudiations which would shake the capitalist order to its foundations. Here would be a fertile soil for agitation, seditions, and revolution. It is so already in many quarters of the world. Yet, all the time, the resources of Nature and men’s devices would be just as fertile and productive as they were. The machine would merely have been jammed as the result of a muddle. But because we have engine trouble, we need not assume that we shall soon be back in horse-drawn wagons and that the of automobiles is over.
The author is John Maynard Keynes, from ”The Great Slump of 1930 (not 2009), originally published in The Nation & Athenæum, issues of 20 December and 27 December 1930.
Originally published at Fabius Maximus and reproduced here with the author’s permission.