Economic Possibilities for Our Grandchildren — Will We Ever Get Enough?

We recently learned that U.S. family income had enjoyed the largest one-year increase on record. Up 5.2 percent, the number rose to $56,516. Will that be enough to satisfy our longing for more stuff?

Writing at the outset of the Great Depression in 1930, John Maynard Keynes took a longer view of the situation. He wrote down his thoughts in an essay on “Economic Possibilities for Our Grandchildren.” Keynes was convinced that in spite of its problems, a market economy would outperform any other system when it came to producing food, clothing, shelter, transportation and the other stuff of life that people wanted. But he believed that by the year 2030 people would be satisfied; they would have more than enough stuff to go around.

Back in 1930, Keynes expressed the wish that his generation’s grandchildren would no longer be driven by personal gain. He hoped a new form of state capitalism would focus attention on the provision of things that markets did not provide so very well. Keynes predicted an expansion of government support of the arts, the humanities, and enhancement of the human condition. He put it this way:

“Thus for the first time since his creation man will be faced with his real, his permanent problem — how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.”

We have 14 years to go to reach 2030. How are we doing?

At the time Keynes wrote, in 1930, U.S. per capita GDP stood at $11,266 expressed in 2015 dollars. It was down 10 percent from 1929, the roaring year of the November crash. I think we would all agree the 1930 middle class was not doing very well. Do you know anyone today who is getting by cheerfully on $12,000 a year? By comparison, President Herbert Hoover was paid $75,000 that year, the equivalent of more than a million in today’s money. He was doing great! (This year, President Obama will earn only $400,000, but there are a lot of fringe benefits. Shouldn’t he get at least a cost-of-living increase?) By the year 2015, just 85 years after Keynes penned his essay, world per capita GDP stood at $10,000, an amount almost equal to the 1930 U.S. average.

Keynes thought that U.S. real per capita GDP would rise four- to eightfold from 1930 to 2030. In 2015, the number was $51,486, a bit less than a fivefold increase. He made a darn good forecast!

Keynes might have thought that this would surely be enough to provide all the stuff desired for life, that we Americans would have long ago embraced his hope and lifted our eyes to higher ground. But if he were around today, I think he might be disappointed. The conversation is still very much about wages, jobs, income, paying off debt, getting more healthcare, and picking up a larger piece of American pie.

There is always another necessity to yearn for. Or so it seems. Pokemon GO, anyone?