The Enlargement of Government and the End of War

The enlargement of government is for adjusting the propensity to consume and the inducement to invest.

• To a contemporary American financier, this would seem as a terrific encroachment on individualism.

But it is the only practicable means of avoiding the entire destruction of existing economies and individual initiative.*

If effective demand is deficient then:

• the public scandal of wasted resources will be intolerable
• the individual enterpriser who brings these resources into action is operating with the odds against him.

The game of hazard which he plays is furnished with many zeros, so that the players as a whole will lose if they have the energy and hope to deal all the cards.

Hitherto, the increment of the world’s wealth has fallen short of the aggregate of positive individual savings.

The difference has been made up by the losses of those whose courage and initiative have not been supplemented by exceptional skill or unusual good fortune.

But if effective demand is adequate, average skill and average good fortune will be enough.

The authoritarian state systems of today solve unemployment at the expense of efficiency and freedom.

The present-day capitalistic individualism creates unemployment which the world will no longer tolerate.

My theory cures the disease while preserving efficiency and freedom.

My system is more more favourable to peace than the old system. I emphasize this.

The expectation of war offers dictators a pleasurable excitement.

War is commonly caused by the hatred between peoples.

But it is fanned by economic causes:

1. Population pressure

2. The competitive struggle for markets

This second factor played a predominant part in the 19th century.

The latter half of the 19th century used a system of:

• domestic laissez-faire
• an international gold standard

In that system, governments could only mitigate economic distress at home through the competitive struggle for markets.

This is because all measures helpful to a state of chronic or intermittent under-employment were ruled out, except measures to improve the balance of trade on income account.

Economists applauded the prevailing international system as:

• furnishing the fruits of the international division of labour
• harmonising the interests of different nations

They correctly believed that if a rich, old country neglected the struggle for markets, its prosperity would droop and fail.

If nations can provide themselves with full employment by their domestic policy, then countries would not need to go to war with others.

In the old system, countries would do trade wars to upset the equilibrium of payments so as to develop a balance of trade in its own favour. But in my system, there would be no need for this.*

Currently, international trade is a desperate way to maintain employment at home by forcing sales on foreign markets and restricting purchases.

• This merely shifts unemployment to the neighbour.

A willing and unimpeded exchange of goods and services in conditions of mutual advantage avoids this problem.*

5. Is the fulfilment of these ideas a visionary hope?

Have they insufficient roots in the motives which govern the evolution of political society? Are the interests which they will thwart stronger and more obvious than those which they will serve? I do not attempt an answer in this place.

It would need a volume of a different character from this one to indicate even in outline the practical measures in which they might be gradually clothed.

But if the ideas are correct — an hypothesis on which the author himself must necessarily base what he writes — it would be a mistake, I predict, to dispute their potency over a period of time.

At present, people are unusually expectant of a more fundamental diagnosis; more particularly ready to receive it; eager to try it out, if it should be even plausible.

But apart from this contemporary mood, the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood.

The world is ruled by little else.

Practical men believe themselves to be exempt from any intellectual influences. They are usually the slaves of some defunct economist.

Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.

The power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.

Not immediately, but after a certain interval.

Few people are influenced by new economic or political theories after they are 25 or 35 years old.

The ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest.

But, soon or later, it is ideas, not vested interests, which are dangerous for good or evil.