MoneyMirage
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MoneyMirage

21. We can afford what we can actually do

(A full list of the contents of this blog series is available here.)

There’s a widespread belief in our society that ‘money equals wealth’, so therefore all the really important decisions revolve around money: who has how much of it, what to spend it on, how to get more of it.

Day to day it often seems that way, given the central role we give money in our society. But deep down it’s an illusion.

The nature of this illusion was simply and brilliantly explained by John Maynard Keynes in a BBC radio talk in the middle of the Second World War.

It’s spring 1942. The allies are beginning to think they might win after all. The Soviet Union has repulsed the Nazis and is now on the offensive. American troops have started piling into Europe. Attention is beginning to turn to how to rebuild, once hostilities end.

Keynes wanted an ambitious building programme to build homes, libraries, theatres, concert halls and dance halls to “add in every substantial city the dignity of an ancient university or a European capital”. But he was meeting strong resistance from the financial establishment who insisted we couldn’t do this because we didn’t have the money.

This is how he replied to the financiers (whom he addressed as ‘Sir John’) in his BBC talk on 2 April 1942.

“The money?”, I said. “But surely, Sir John, you don’t build houses with money? Do you mean that there won’t be enough bricks and mortar and steel and cement?”

“Oh no,” he replied, “of course there will be plenty of all that”.

“Do you mean,” I went on, “that there won’t be enough labour? For what will the builders be doing if they are not building houses?”

“Oh no,” he replied, “of course there will be plenty of all that”.

“Well,” I said “if there are bricks and mortar and steel and concrete and labour and architects, why not assemble all this good material in houses?”

Keynes finished by saying “anything we can actually do we can afford”. I’ll say that again because it is so important:

“Anything we can actually do we can afford.”

Consequences

I don’t think it’s possible to underestimate the power or importance of this simple insight.

Operating by the maxim of “we can only afford what we can pay for”

  • deflects attention to only those things that money can buy
  • concentrates power in the hands of those who have money (or hold the purse strings)
  • generates a highly particular agenda — how to get more money

Operating by the maxim “we can afford what we can do” on the other hand:

  • embraces all activities that may improve human welfare and serve human purposes
  • distributes agency to all those who ‘can do’
  • generates an agenda that focuses on how to improve a) our capabilities (e.g. what we ‘can actually do’) and b) how we decide what to do — which points in the direction of democratisation rather than concentration of power

‘We can only afford what we can pay for’ stifles human potential, including hope. ‘We can afford what we can do’ liberates it.

In a post-COVID world increasingly crippled by global warming and obscene levels of inequality, it seems to me that resurrecting Keynes’ simple but profound insight could change everything.

Note 1: The quote above is from an address Keynes made on the BBC and published in The Listener, 2 April 1942. It’s odd but no matter how hard I try, I can’t find the full text online. But it can be found in his Collected Works, volume XXVII, How much does finance matter? p264. Why is it being overlooked in this way?

Note 2: Looking at wealth creation through the lens of what we can actually do generates a completely different picture to normal, money-based explanations. I explore these differences in a series of blogs starting here.

Previous: 20. Money as an Instrument of Power

Next: 22. Ten Toxic Myths About Money

The full contents of this blog series can be found here.

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Alan Mitchell

Alan Mitchell

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