Keynes prediction about the future economy- Keynes’ equitable society won’t be attained without intervention

Source: The post Keynes prediction about the future economy has been created, based on the article “Keynes’ equitable society won’t be attained without intervention” published in “Live mints” on 26th February 2024.

UPSC Syllabus Topic: GS Paper 3-

News: This article discusses John Maynard Keynes’ 1930 essay about the future economy. Keynes predicted less work and more leisure due to technology but underestimated human greed and the need for government intervention. The article suggests taxing the rich to reduce income inequality.

What did Keynes predict about the future economy?

Keynes envisioned a future with less work and more leisure due to technological progress. He predicted that the “economic problem” of needing to work for survival would be resolved in a hundred years.

Keynes believed that technological unemployment would lead to rapid GDP growth and an era of leisure.

He speculated that living standards would be four to eight times higher in a century.

Keynes’s view was that people might work only three hours a day for personal fulfillment.

Contrary to his prediction, productivity gains have not led to significantly increased leisure time for all.

Why did Keynes get some predictions wrong?

Keynes assumed financial security would satisfy most people, not accounting for the relentless pursuit of wealth.

Keynes didn’t anticipate that the wealthy would be driven by competitive greed, working more than ever.

He failed to consider the cultural and societal factors influencing work habits. For example, U.S. workers still work more hours than their European counterparts, contrary to Keynes’s vision of reduced work hours.

Keynes’s expectation of a naturally occurring shift towards an equitable world was too optimistic, not considering the necessity of government intervention for such a change.

What should be done to overcome the issues of inequality?

Implement the “accordion tax” to redistribute income from the wealthy to the poor.

This tax system targets those with above-average earnings and benefits those with below-average wages.

It aims to narrow the income gap while maintaining the relative status of the wealthy.

The system would reduce the post-tax earnings of billionaires but keep their motivation for innovation intact. For example, billionaires like Elon Musk and Jeff Bezos would still have incentives to innovate.

This approach aligns with Keynes’s vision of an equitable world, adapting to the realities of modern economic disparities.

What is the way forward?

1. Acknowledge Keynes’s vision but adapt it to current economic realities.
2. Recognize that human greed and the desire for wealth accumulation are significant factors in economic behavior.
3. Understand that achieving reduced work hours and increased leisure time is more complex than Keynes anticipated.
4. Address the cultural and societal factors that drive long working hours, especially in countries like the U.S.
5. Promote government intervention to facilitate the shift towards a more equitable world.
6. Foster a growing awareness of economic disparities and the need for redress.

Question for practice:

Examine how John Maynard Keynes’ predictions about the future economy align with the realities of modern-day wealth accumulation and income inequality.