Inflation

John Maynard Keynes

Essays in persuasion, London, 1931, pp. 57–58

Abstract

The structural instability of the post-war European economy originated in a peace settlement that ignored the essential economic interdependence of the continent, specifically regarding the unfeasibility of reparations. Monetary policy throughout the 1920s further exacerbated these tensions by prioritizing the restoration of the gold standard over internal price stability, resulting in chronic unemployment and a misalignment between money-wages and international values. These systemic failures necessitate a rejection of laissez-faire in favor of managed capitalism, where central authorities coordinate credit and investment to mitigate the volatility of the business cycle. Despite immediate disruptions, the secular trend of increasing technical efficiency and capital accumulation suggests that the traditional economic problem of scarcity is a transitory phase in human development. Within a century, the primary challenge for humanity will likely shift from the struggle for subsistence to the creative management of abundance and leisure. Achieving this transition requires an institutional framework that balances economic efficiency with social justice, ultimately subordinating pecuniary motives to the broader requirements of human welfare and social stability. – AI-generated abstract.

PDF

First page of PDF

Quotes from this work

Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, Governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. ‘The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become “‘profiteers,” who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as tobe almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.

Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of Society than to debauch the ‘The process engages all the hidden currency. forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

pp. 77–78