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KEYNES ON SOCIAL JUSTICE Professor Rod O’Donnell University of Technology, Sydney

ABSTRACT This paper explores the relatively neglected topic of social justice in J.M. Keynes’s writings, the ongoing contemporary relevance of which has been heightened by the current global economic and financial crisis and its associated ‘return to Keynes’. It criticises those commentators who contend that he had little interest in, or motivation for, social justice and its advancement, or referred to it only for reasons of political expediency or social stability. In contrast, the paper argues six key points. First, that from 1904 to the 1940s a deep concern for social justice runs consistently through Keynes’s writings; second, that social justice is never considered in isolation but always in combination with other important elements of which economic efficiency and individual liberty are the most prominent; third, that such consideration always embraces both the short and long terms; fourth, that his concern for social justice has intellectual foundations in his philosophy and is not based solely on expediency or stability; fifth, that these foundations lie primarily in his (modified) Moorean ethics, and finally, that his views can be encapsulated in a number of instructive underlying principles. In sum, Keynes’s approach may be characterised as an ethicallybased, multi-dimensional approach in which social justice, economic efficiency and individual liberty co-exist and interact within organic wholes proceeding through time.

Keywords: Keynes, social justice, ethics, policy making. JEL Code: B31, D30, D63, E60.

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KEYNES ON SOCIAL JUSTICE1 Some people may contemplate this forecast with equanimity. I do not. It…will leave behind much social injustice... J.M. Keynes 1925 The political problem of mankind is to combine three things: economic efficiency, social justice and individual liberty. J.M. Keynes 1926 [A general reduction of wages] would certainly lead to social injustice and violent resistance, since it would greatly benefit some classes of income at the expense of others. J.M. Keynes 1931 The decadent international but individualistic capitalism…after the War is not a success. It is not intelligent, …it is not just, it is not virtuous – and it doesn’t deliver the goods. J.M. Keynes 1933 I see much social justice and social efficiency in this system. J.M. Keynes 1939 [Sacrifice] will be inevitable under any proposal. My object is to divide the sacrifice fairly. J.M. Keynes 1940 …it will be the role of this country to develop a middle way of economic life which will preserve the liberty…of the individual in a framework serving the public good and seeking equality of contentment amongst all. J.M. Keynes 19442 1. Introduction Keynes was a persistent advocate of social justice, and often appealed to this powerful force in human affairs in his economic and political writings. However, his interest in, and espousal of, social justice have not received adequate recognition or close investigation in the enormous Keynes literature. This is quite remarkable given its clear and steady presence from 1904 onwards. Most commentators appear hesitant to engage with the topic, possibly because it is regarded as too difficult, resistant to conceptualisation or discordant with received interpretations,3 while those few who have addressed the topic have inclined towards one-sided or incomplete accounts. The purpose of this paper is to contribute to a better and more rounded appreciation of Keynes’s approach to social justice. It will be contended not only that social justice is always an important element in his thought, but also that a grasp of his position as a whole is a necessary condition of its better understanding. Three important features of this whole are that it is a multi-variable analysis, that the variables interact with each other positively and negatively, and that the emphasis given to any variable varies with circumstances. More specifically, my argument is based on the following inter-related propositions. (i) A positive concern for social justice forms a strong thread of continuity in Keynes’s economic and political thought from 1904 to the 1940s. (ii) Social justice is always an ethically-related, and intellectually serious, component of his thought. It is not appealed to merely for other reasons, such as political expediency or social stability. 2

(iii) His concern for social justice has its primary philosophical foundations in his (modified) Moorean ethics, with secondary foundations in his political philosophy and his economics. (iv) Social justice is not the only important component in his thought. As required by his philosophy, it has to be combined with other important components (particularly economic efficiency and individual liberty) to form judgments of situations as wholes under prevailing circumstances. (v) Circumstances include the passage of time. Social justice may need to play a lesser role in the short term, so as to play larger roles in the medium and long terms after further economic and social development has occurred. (vi) Overall, Keynes’s remarks on social justice constitute a coherent position with few (if any) internal inconsistencies.4 2. Contrary Views My argument runs counter to those of prominent commentators in the secondary literature. One opposing viewpoint is advanced by Robert Skidelsky who arrives at the generally conservative conclusion that Keynes was never much motivated by, or interested in, social justice. Volume II of his biography (1992, pp. 61-6) discusses the issue, but the discussion proceeds on the basis of two early influences on Keynes rather than an investigation of the full gamut of his writings. Two arguments are advanced. The first derives from Burke who is taken to be a highly significant influence on Keynes. Keynes accepts equity in a Burkean (or Hayekian) sense of the absence in law or policy of ‘artificial discrimination in regard to individuals or classes’. It is primarily in this sense that Keynes deploys the term ‘social justice’ in his mature writings. …Keynes never showed himself much interested in the distribution issue raised by an appeal to justice. (Skidelsky, 1992, pp. 62) The notion of a strong Burkean (or Hayekian) influence on Keynes is contestable, however, for both the young and the mature Keynes. As noted later, the young Keynes found Burke’s treatment of this topic ‘wholly inadequate’.5 And the subsequent writings of the mature Keynes provide, as indicated below, a large body of evidence to the contrary. The second of Skidelsky’s reasons derives from a supposedly hidden flaw in Moore’s philosophy. Although correctly accepting the influence on Keynes of the Moorean point that ‘the more prosperous and contented a community is, and the juster its social arrangements, the better will be the states of mind of its inhabitants’, he finds that Moorean reformers are fatally ensnared by a ‘mixed goods problem’. The putative dilemma is that since some good states of mind depend on evil events (compassion depends on suffering, for example), increases in goodness will necessarily involve increases in evil. It is then contended that Keynes’s keen awareness of this problem severely cramped his enthusiasm for social reform, including improvements in social justice.6 However, it is not difficult to show that this argument is quite spurious – the mixed goods problem does not exist in the thought of either Moore or Keynes.7 Michael Freeden’s interesting, but rather patchwork, treatment of liberalism and social justice in Keynes’s writings makes several valid points, but its overall conclusions are, like Skidelsky’s, quite conservative. According to Freeden (1986, pp. 154-73), Keynes’s thought was marked by the following characteristics: (i) economic efficiency had ‘prime of place’ and ‘completely overshadowed’ social reform (including social justice), 3

(ii) redistribution was relegated into ‘relative insignificance’ and jettisoned ‘as a major tool of socio-economic policy’, (iii) ‘unequal opportunity’ was promoted as one of the pillars of his social vision, (iv) social justice was excluded from ‘the main concerns of liberalism’, and (v) his concern for social reform derived from a preoccupation with social stability. Not surprisingly, Freeden concludes that Keynes was neither a left-liberal nor a new liberal, but a ‘centrist-liberal, if not slightly to the right of that’. However, the great gap in Freeden’s account is Keynes’s philosophical beliefs which are not examined at all, apparently because of the curious (and erroneous) remark that Keynes ‘repudiated his undergraduate views’. More awareness of the significance of Keynes’s philosophy may have led Freeden to different conclusions. Commentators who take the view that Keynes had very little (if any) enthusiasm for, or ethical motivation towards, social justice, or that it occupied a place of virtual insignificance in his thought, are obliged to provide a different explanation for Keynes’s many references to social justice. They consequently refer to non-ethical reasons such as political expediency or social stability. I have no objection to these considerations entering the mix of factors that might have influenced Keynes’s thinking. My objections are to their inadequacy as foundations for understanding social justice in his thought, and to the failure to examine his ethical philosophy as the major reason for his persistent concern with this issue. In my account, what prevents Keynes from being merely expedient, pragmatic, preservative of the status quo, or even cynical in his appeals to social justice, is his commitment to an ethical position. 3. Keynes and the Meaning of Social Justice From the ancient world to the present, social justice and injustice have always been very significant influences on polities, economies, legal systems, institutions and individual behaviour. In the extensive literature on the subject, definitions of the complex ideas of social justice and injustice are difficult to find. Nevertheless, these abstractions have at least three important properties. Firstly, they involve social situations containing subgroups of people. Secondly, they are concerned with the satisfaction (or violation), explicitly or implicitly, of some notion of fairness between the sub-groups. And thirdly, fairness is an elastic notion capable of being informed by different (and not always compatible) values, three of the most important of which appear to be shared humanity, deservedness of rewards and burdens (according to some criteria), and equality of treatment (in some sense). It is the contestable content of the notion of fairness that helps generate divergent theorisations of social justice and injustice. Most writers on the subject accept the existence of social justice and injustice, and regard them as important considerations in policy prescription. However, a minority challenges these notions, claiming that there are no such things, at least in an economic or distributional sense. Free market libertarians, whose economic, political and social philosophies are often poles apart from Keynes’s, are strident opponents of such notions. Hayek (1976, pp. 62-7), for example, is completely contemptuous, describing social justice as ‘a mirage’, a ‘will-o’-the-wisp’, a vacuous concept, a ‘quasi-religious superstition’, ‘probably the gravest threat to most other values of a free civilisation’, and an ‘ abuse of the word [justice] which threatens to destroy the conception of law which made it the safeguard of individual freedom’. In his view (1978, p. 65), ‘Incredibly high incomes may… sometimes be just’. 4

Keynes never discussed his understanding or conception of social justice. He appeared, as Freeden (1986, p. 163) has rightly put it, to be ‘content to assume that its nature was adequately clear’. Nevertheless four comments may be made. Firstly, from his scattered remarks and his line of thought, his underlying notion seems consistent with the characteristics noted above – a social concept based on fairness, with fairness associated with humanity and notions of deservedness and equality of treatment. In 1926, he declared, for example, that social justice derived from ‘an unselfish…spirit, which loves the ordinary man’ (CW IX 311). Secondly, consistent with the plasticity of the concept, there occurs in his writings the idea that prevailing views of social justice are endogenously determined by society and hence depend on circumstances such as time and morality. Thus in 1925 he spoke of ‘contemporary ideas as to what is fit and proper’ as regards social justice (CW IX 306). Thirdly, his overall stance is a far cry from Hayekian or Burkean views of social justice which derive from intellectual traditions that champion laissez-faire and extreme individualism, both of which are antithetical to Keynes’s economics and politics. And finally, it deserves noting that Keynes is primarily concerned with social justice in the economic sphere, that is, in relation to the distribution of income and wealth as influenced by the economy and economic policy. This is not, however, to say that he was indifferent to social justice in other areas. 4. Keynes’s Ethical Philosophy In ethics, Keynes was a follower of G.E. Moore’s Principia Ethica, under the spell of which he fell as an undergraduate and to the general framework of which he adhered throughout his life. He was, however, a constructively critical follower, advancing changes and modifications to Moore’s theorising in various philosophical papers without rejecting Moore’s overall system. His 1938 memoir, My Early Beliefs, presents his qualified reaffirmation of Moore’s framework: ‘I see no reason to shift from the fundamental intuitions of Principia Ethica though they are much too few and too narrow to fit actual experience’ (CW X 442-4). For reasons of length, my focus here will be on Moore’s ethics alone, with no discussion of Keynes’s immanent critiques and modifications. This is sufficient foundation, however, for the subsequent arguments. Were his additional reflections to be included, they would only strengthen, not weaken, these arguments. For present purposes, the key points in Moore’s ethics are as follows. (i) The ‘rational end of human action and the sole criterion of social progress’ is the creation of as much intrinsic goodness as possible (Moore, 1903, p.189). Rational reformers should therefore aim at bringing into existence wholes of maximum goodness (or minimum evil). (ii) A vast array of things are intrinsically good (or evil), with almost all of them being complex organic unities involving states of consciousness and appropriate emotional attitudes. However, of all intrinsic goods known to humans, the greatest two are personal affection (in its many forms) and aesthetic appreciation (in its many forms). (iii) Organic unities are wholes, the goodness (or badness) of which is always determined by considering the state of affairs as a whole and not as an aggregate of its constituent parts. The values of organic wholes are typically quite different from the summed values of their separate parts. (iv) Some things are purely good (or evil), but most things are mixed goods (or evils). 5

Mixed goods are things which are always good as wholes but which necessarily contain the cognition of something evil. An example is the state of mind of someone committed to reducing another person’s hardship; the good feelings of compassion and kindness are accompanied by knowledge of, and hatred towards, something evil such as unemployment, poverty or injustice. (v) The means-end distinction is crucially important. While some things are good in themselves, others are only good as means. Freedom, honesty, justice and virtue, for example, are only means to good and not intrinsic goods. By implication, their opposites are means to evil and not intrinsic evils. Certain implications for social justice follow from this framework. If justice and social justice are means to goodness (and their opposites means to evil), then the maximisation of goodness requires more of these means (and fewer of their opposites), ceteris paribus. Social justice creates a variety of good mental states (contentment through notions of fairness and rightness, sense of community, peace of mind), whereas social injustice creates various bad mental states (unhappiness, depression, anger and revenge), such that greater goodness will obviously result from more of the former and less of the latter. In the absence of any modifying circumstances, we should prefer situations of social justice to those of social injustice. However, in reality, situations are far more complex because of the inevitable presence of other factors. Consider the organic whole of a society in which some form of social injustice exists, say large economic inequalities. As above, social injustice will be a means to evil but, before reaching any policy conclusions, we need to examine whether it might not also be a means to good. This will be the case if, say, the wealthy save more, this saving leads to more investment, and greater investment produces benefits to society that are shared with the less wealthy. The benefits may be higher employment and material standards of living, or increased leisure time for non-economic pursuits, either of which can lead to better mental states for most people, including the poor. We now have a complex organic unity where injustice produces opposing effects, and social reformers face more complex decisions. If, given current circumstances, inequality has good effects as well as bad, the drive to reduce inequality cannot be pushed past a certain point without lessening the goodness of the whole. Reformers now have to make balancing judgments. Some inequality may be tolerated because of its good effects, but never too much because the bad effects will then dominate. Such judgments are contingent, and can never lead to generalisations concerning correct or desirable levels of inequality; the appropriate mix of inequality and equality at any time will vary with circumstances. 8 The general conclusion that Moorean consequentialism reaches along these lines may be illustrated by considering the three means to goodness on which Keynes placed most attention – social justice, economic efficiency and individual liberty. Each of these means, on its own, is a means to good, but in combination with the others it may also be a means to evil because it might interfere with the goodness-enhancing capacities of the other means. Situations involving combinations of means thus become complex organic unities in which the interaction of the means becomes critical in determining the value of the whole. In such situations, a Moorean reformer can never be a ‘single issue’ advocate with allegiance to one cause alone (such as social justice), but must adopt a ‘multi-dimensional’ or ‘multivariable’ approach in which all means are assessed in interactive combinations. These interactions and their outcomes will depend on circumstances, so that generalisations 6

regarding any one means, or even right combinations of means, can never be reached independently of circumstances. 5. Keynes’s Advocacy of Social Justice Appeals to social justice form a constant theme in Keynes’s writings from 1904 to the 1940s. The form and nature of the appeal may have changed with time, place and the problem at hand, but it is its persistence and importance that is notable for present purposes. It would be highly surprising if it were otherwise. A concern with economic inequality was a significant element in the Cambridge Marshallian tradition within which Keynes was raised,9 and social justice was an important theme in much liberal political writing during Keynes’s lifetime.10 Additionally, Keynes was a secular humanist with typically warm feelings towards humankind. His ethical philosophy required increases in the amount of intrinsic goodness in the world, this goodness residing chiefly in people’s mental states. Anything that detracted from increases in goodness, such as feelings of injustice, unfairness or arbitrariness, was therefore a problem to be remedied as much as possible under the circumstances. As there is enough supporting evidence to fill a monograph, I shall restrict the discussion to a relatively small number of instances covering the period 1904 to 1940. Following this brief survey, some general principles underpinning Keynes’s writings on social justice will be outlined in an attempt to systematise his approach. 5.1 Early Reflections (1904-1914) (a) Keynes’s 1904 essay on the eighteenth century conservative, Edmund Burke, was his earliest and deepest excursion into political theory. From the perspective of a recent convert to Moorean philosophy, he found some elements in Burke’s thought worthy of support but many more deserving of overall rejection. One such was Burke’s extreme hostility to any redistributive measures, a hostility deriving from his defence of laissez-faire. According to Burke, private property was sacrosanct, inequalities of wealth and income were natural, public charity was to be opposed, and even drawing attention to the suffering of the poor should be regarded as criminal! It is in this discussion that Keynes described Burke’s view of equity. By equity he seems to mean an absence of artificial discrimination in regard to individuals or classes, and he holds that such equity must never be overridden, even for purposes of apparent utility. After a predominantly critical review of Burke’s position, Keynes summed up his own view as follows. All this is a matter of great complexity and difficulty and it is not likely that the problem is capable of any very simple solution, but Burke’s treatment is wholly inadequate and he seems to convince himself in passages which certainly ought to convince nobody else.11 (b) Prior to World War I, Keynes lectured on various topics from 1908 to 1914, many of which concerned money and finance. Distributional issues were treated under the heading of ‘consequences of fluctuations in the value of money’, with changes in the distribution of income and wealth between different classes the main focus. Rising prices were ‘likely to redistribute wealth in an undesirable way by reducing real wages’, with further redistributions from relatively poor lenders to relatively rich borrowers adding to the 7

problem. Keynes concluded his discussion in 1914 with the following judgment. We may say, therefore, that the effect of rising prices on the distribution of wealth is likely, on the whole, to be undesirable – i.e. to increase rather than to diminish existing inequalities. (CW XII 717: also 690-3, 173-5, 722, 783) 5.2 A Tract on Monetary Reform (1923) Here the economic and social evils flowing from significant instability in the value of money (inflation and deflation) are a central theme. Chief among these evils was social injustice. Each process, inflation and deflation alike, has inflicted great injuries. Each has an effect in altering the distribution of wealth between different classes, inflation in this respect being the worse of the two. Each has also an effect in overstimulating or retarding the production of wealth, though here deflation is the more injurious. (CW IV 3) For Keynes, inflation had deleterious effects because (i) it transferred wealth from savers/bondholders/lenders to debtors/borrowers/business; in particular, it acted as a hidden tax shifting resources to the government, and, at high levels, largely wiped out the savings of the middle class; (ii) it additionally benefited business through windfall profits; (iii) it encouraged speculative activity and undermined investment; and (iv) the real wages of organised labour either remained constant or increased, but those of poorly-organised labour tended to fall. The extreme case was Germany where ‘great fortunes were snatched out of general calamity; and those who made most were those who had seen first, that the right game was to borrow and to borrow and to borrow’ (CW IV 22). We conclude that inflation redistributes wealth in a manner very injurious to the [financial] investor, very beneficial to the business man, and, probably,…very beneficial on the whole to the [wage] earner. Its most striking consequence is its injustice to those who in good faith have committed their savings to titles to money rather than to things. (CW IV 29) Deflation had its own evils and injustices. Arbitrary transfers occurred in the opposite direction, added to which were the large inequalities engendered by unemployment and consequent impoverishment of sections of the population. 5.3 The Economic Consequences of Mr. Churchill (1925) Keynes vigorously opposed Britain’s return to the gold standard in 1925 at pre-war parity, excoriating it as a ‘rash act’ from which ‘any humane or judicious person must shrink’ because it amounted to the deliberate ‘intensification of unemployment’ to force wage reductions on workers (CW IX 218-9). The effects were particularly severe in the coal industry (and contributed to the subsequent General Strike of 1926). Colliery owners insisted that miners accept money wage cuts which, in the absence of a fall in prices, meant cuts in real wages. The workers were asked to sacrifice part of their standard of living for events ‘for which they are no way responsible and over which they have no control.’ Like other victims of economic transition…, the miners are to be offered the choice between starvation and submission, the fruits of their submission to accrue to the benefits of other classes. On grounds of social justice no case can be made out for reducing the wages of the miners. They are victims of the economic juggernaut. They represent in the flesh the ‘fundamental adjustments’ engineered by the Treasury and the Bank of England… (CW IX 223) 8

Society, as Keynes saw it here, was caught between the two opposing approaches of a centralised economy and laissez-faire. The former could fix wages by reference to what was ‘fair’ and ‘reasonable’ as between classes, while the latter allowed an economic juggernaut to determine wages regardless of distributional and other consequences. Keynes rejected the juggernaut approach. Even if it were successful in the long run, it left too much misery and unfairness in its wake. [I]t will leave much injustice behind it on account of the inequality of the changes it will effect, the stronger groups gaining at the expense of the weaker. For the method of economic pressure, since it bears most hardly on the weaker industries…, tends to increase the existing disparities between the wages of different industrial groups. (CW IX 224-5) Was an alternative remedy available? Given that abandonment of pre-war parity was off the table, Keynes suggested two policies. The first was a financial policy of lowering the bank rate to reduce the inflow of gold from the US and raise prices in the rest of the world. The second was an industrial (or incomes) policy seeking to share the unavoidable burden of adjustment more fairly – the government would seek trade union cooperation for a general cut in money wages subject to the condition that prices must also fall to keep real wages constant; rents and profits would also fall with declining prices (although there may be some unwelcome stickiness); and additional income tax could be imposed on rentiers. 5.4 Economic Policy in 1931 During the Great Depression, the British government presented an Economy Bill in 1931 along with its budget. Keynes was aghast at the proposals. His position was that the right economic policies should be those (a) which had a high probability of solving problems, and which (b) respected the principles of social justice. The government’s policy failed on both counts – it was ‘foolish’ because it would worsen and not improve the central economic problems (the adverse trade balance and high unemployment), and it was ‘wrong’ because it ‘outrages the principles of justice’ to a degree which he thought ‘inconceivable’ (CW IX 146-7). The incomes of well-to-do people have been cut by 2.5 to 3.5 per cent. The schoolteachers are cut by 15 per cent, in addition to the extra taxes which they have to pay. It is a monstrous thing to single out this class and discriminate against them, merely because they happen to be employees of the government. It is particularly outrageous, because efforts have been made in recent years to attract…teachers of higher qualifications by holding out…certain expectations. It is even proposed to take powers to dissolve existing contracts. That the schoolteachers should have been singled out for sacrifice to the Moloch of finance is a sufficient proof of the state of hysteria and irresponsibility into which cabinet ministers have worked themselves. … The schoolteachers are the most outstanding case of injustice. But the same considerations apply in varying degrees to all the attacks on the standards of government employees. The principle of discriminating against persons in the service of the State, because they can be reached most easily, is not right. (CW IX 146-7) What added to the foolishness was that, as well as creating social injustice, the proposed discriminatory wage cuts would not even help solve the economic difficulties. A few days earlier, in a speech to MPs, he had been almost apoplectic. In my opinion the Govt’s programme is one of the most wrong and foolish things which Parliament has deliberately perpetrated in my lifetime. I should like to say a word first of all on social justice. Can scarcely trust myself to 9

speak. The attacks on the schoolteachers seem to me a most foul iniquity. The wellto-do suffer 3 or 4 per cent, the schoolteachers 15. …[T]he whole principle of attacking Gov’t employees as such when other people are to be left alone seems utterly wrong. …I speak from a full heart. …I declare to you…that we have been making in the last few weeks as dreadful errors of policy as deluded statesmen have ever been guilty of. (CW XX 608, 611) 5.5 The General Theory (1936) Two aspects of his magnum opus are directly linked to social justice. The first is involuntary unemployment, where individuals are unemployed because of insufficient aggregate demand. Idleness is suffered through no fault or characteristics of the workers, for they have the right skills and locations, they have not quit to pursue job search, and they have not participated in any union campaigns for higher real wages; what has left them jobless is the workings of the market system. From a social viewpoint, any economic system which arbitrarily provides jobs and income for some and none for others is unjust, the injustice being compounded when it bears hardest on those with fewest resources. The removal of this type of unemployment therefore increases social justice. The second aspect occurs in the final chapter where fully fifty percent of its content is given over to social justice issues concerning inequalities of income and wealth. It opens with one of his more famous remarks. The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes. (CW VII 372) Both faults are closely associated with social justice – involuntary unemployment deprives individuals of income and exposes them to hardship (material and psychological); while inequalities that are arbitrary, and therefore undeserved, offend against notions of fairness. In relation to the latter fault, the General Theory outlines two policy responses. The first concerns redistributive fiscal policies. Although direct taxation had previously made significant progress towards eliminating ‘very great disparities of wealth and income’, many reformers, Keynes argued, wanted to continue this unfinished task but were held back by three objections – (a) increased tax evasion, (b) undue diminution of risk-taking, and (c) reduction in the growth of capital. The General Theory does not bear on the first two objections but it does indicate a need to change conventional opinion on the third. Here the standard view holds that accumulation depends largely on saving by the wealthy classes, so that inequalities are essential to capital growth. According to Keynes, however, this is only true at full employment. In the more general, less than full employment, case, it is false because redistribution can raise the marginal propensity to consume, increase the inducement to invest and hence expand the capital stock rather than decrease it. Thus our argument leads towards the conclusion that in contemporary conditions the growth of wealth, so far from being dependent on the abstinence of the rich…is more likely to be impeded by it. One of the chief social justifications of great inequality of wealth is, therefore, removed. I am not saying that there are no other reasons, unaffected by our theory, capable of justifying some measure of inequality in some circumstances. But it does dispose of the most important of the reasons why hitherto we have thought it prudent to move carefully. (CW VII 373, emphases added) In conditions of less than full employment, one major obstacle to redistributive measures has been eliminated, thus strengthening the case for social justice in these circumstances. 10

Here Keynes was much keener on increasing death duties than tax rates on high incomes, for ‘there are certain justifications for inequality of incomes which do not apply equally to inequality of inheritances’ (CW VII 373-4).12 Redistribution using fiscal policy had a double effect – it reduced inequality directly through greater imposts on the well-off, and indirectly by lowering unemployment. Here were circumstances where greater equality and greater efficiency could be generated at the same time. The second response concerned monetary policy, which could assist in reducing inequalities through the gradual euthanasia of the rentier or functionless investor. Conventional wisdom saw high interest rates as necessary to induce sufficient saving but, on Keynes’s theory, saving depends primarily on investment which is promoted by low rates of interest. By making capital more abundant, its scarcity-value would fall, thus causing the rentier aspects of capitalism to diminish, thereby contributing to the reduction of inequalities. ‘Interest to-day’, he provocatively wrote, ‘rewards no genuine sacrifice’. Keynes summed up his overall position as follows. For my own part, I believe that there is social and psychological justification for significant inequalities of incomes and wealth, but not for such large disparities as exist to-day. There are valuable human activities which require the motive of moneymaking and the environment of private wealth-ownership for their full fruition. (CW VII 374, emphases added) Ever the gradualist, optimistic and resourceful reformer, he saw a glimmer of hope in the future so long as capitalists could be induced to operate at lower profit rates. But it is not necessary…that the [money making] game should be played for such high stakes as at present. Much lower stakes will serve the purpose equally well, as soon as the players are accustomed to them. (CW VII 374) Lower stakes would, of course, mean reduced inequalities. All of this is perfectly consistent with his underlying philosophical framework, for it takes into account both the positive and negative effects of inequalities. As usual, he takes a middle position – currently, inequality is too high and should be reduced; suitable policies can do this (and also increase efficiency); but such policies should not be pushed too far lest they cripple the benefits flowing from inequalities. 5.6 How to Pay for the War (1940) This ‘radical plan’ is infused with a very strong sense of social justice. Here Keynes saw the problem as one of balancing expenditure and available product in the consumption sector of a war economy, while at the same time respecting social justice and individual freedom as far as possible. In its early versions, social justice figured as a significant element, but in the final version Keynes seized the opportunity to give his proposals even greater impetus in this direction. He sought to ‘snatch from the exigency of war positive social improvements’ which embodied ‘an advance towards economic equality greater than any which we have made in recent times’ (CW IX 368). [It is] a plan conceived in a spirit of social justice, a plan which uses a time of general sacrifice, not as an excuse for postponing desirable reforms, but as an opportunity for moving further than we have moved hitherto towards reducing inequalities. (CW IX 373, emphasis added) If we can make the upsetting of established arrangements, which the exigencies of war finance require, the opportunity to improve the social distribution of incomes, all 11

the better. (CW IX 394, emphasis added) Whatever policy was adopted, whether proactive or laissez-faire, significant impacts on social justice were unavoidable. In this context, Keynes claimed that his plan was capable of achieving ‘more social justice than any other’. Having no plan would merely increase social injustice (as well as inefficiency) because runaway inflation would eventually occur, bringing ‘advantage to the entrepreneur class’ and causing real wages to fall by up to 20% (CW IX 390-2). The plan had five main components. (i) Deferred Pay (or Compulsory Saving), whereby a percentage of wages and salaries were compulsorily withheld, the amounts being deposited in interest-bearing accounts and made available to their owners at the end of the war on an instalment basis dependent on the state of the economy (in particular at the onset of the first post-war slump). The percentages were progressively graded against income. (ii) Direct War Taxes levied on income on a steeply progressive basis, ranging from zero to around 80%, with the bulk of tax revenue coming from the middle and upper income levels. (iii) Protection of Low Income Earners. Several measures protected this group and decreased distributional inequalities at the lower end, including exemption of very low income earners from deferred pay and war taxes, and a system of family allowances. (iv) Indexation to an Iron Ration, whereby increases in wages, pensions and allowances were tied to the price index of a limited range of rationed items, with the government seeking to keep this index as stable as possible. (v) Capital Levy or Wealth Tax, to be imposed (in instalments) after the end of hostilities to raise funds to repay the deferred pay; the wealthier classes would thus bear the cost of the deferred earnings. All five components made significant contributions to social justice and greater distributional equality in various ways. Pay deferral meant that workers would actually receive rewards for their efforts (albeit at a later date) rather than having them entirely dissipated in an inflationary spiral (accompanied by other social injustices) or paid to the government through higher taxation. The range of disposable income was also heavily compressed by the steeply progressive war taxes and post-war wealth tax at the upper end and the system of exemptions and allowances at the lower. 5.7 Keynes’s Political Philosophy (1920s-40s) In a 1939 BBC broadcast, Keynes indicated that his preferred political system was one of ‘liberal socialism’, a system aiming to combine the best elements of liberalism and socialism. It was to be a structure where ‘we can act as an organised community for common purposes, and to promote social and economic justice’ (the socialist side), and in which we can respect and protect the individual, ‘his freedom of choice, his faith, his mind and its expression, enterprise and his property’ (the liberal side). The strategy sought was ‘a particular amalgam of private capitalism and state socialism’ which was ‘the only practicable recipe for present conditions’ (CW XXI 492, 500). Although only called liberal socialism late in his life, his thinking from at least the 1920s onwards was cut from the same cloth. In 1925, for example, his stance was outlined as follows. The transition from economic anarchy to a regime which deliberately aims at controlling and directing economic forces in the interests of social justice and social stability, will present enormous difficulties both technical and political. …In the 12

economic field this means, first of all, that we must find new policies and new instruments to adapt and control the working of economic forces, so that they do not intolerably interfere with contemporary ideas as to what is fit and proper in the interests of social stability and social justice. (CW IX 305-6) The following year, he sought to fuse the constructive elements in the Liberal and Labour parties. ‘The political problem of mankind’, he declared, ‘is to combine…economic efficiency, social justice, and individual liberty’. The first and third ingredient would come from the Liberal party which had been ‘the home of economic individualism and social liberty’ (note social, not individual, liberty), while the second ingredient, which needed ‘an unselfish and enthusiastic spirit, which loves the ordinary man’, would come from the Labour party (CW IX 311).13 Two consistent threads run through Keynes’s writings from the 1920s to the 1940s – an opposition to laissez-faire, but not to well-run market systems, and an opposition to centralised planning, but not to all forms of state planning or policy activism. Laissez-faire generated social injustice (among other things), while planning and activism were capable of creating greater social justice (among other things). For the long term, Keynes had a vision of a possible future world towards which his political philosophy might lead, a vision most clearly outlined in 1930 in ‘Economic Possibilities for our Grandchildren’. This contains important remarks concerning social justice. When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals. We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years… . All kinds of social customs and economic practices, affecting the distribution of wealth and of economic rewards and penalties, which we now maintain at all costs, however distasteful and unjust they may be in themselves, because they are tremendously useful in promoting the accumulation of capital, we shall then be free, at last, to discard. (CW IX 329, emphasis added) We shall once more value ends above means and prefer the good to the useful. …The course of affairs will simply be that there will be ever larger and larger classes and groups of people from whom problems of economic necessity have been practically removed. This critical difference will be realised when this condition has become so general that the nature of one’s duty to one’s neighbour is changed. For it will remain reasonable to be economically purposive for others after it has ceased to be reasonable for oneself. (CW IX 331, emphasis added) The development of this utopia would naturally take time and, until its arrival, people would need to accept certain distasteful things (such as tolerable levels of inequality) until these had performed the work of generating the material abundance which was a precondition to utopia. Certain levels of bad consequences would need to be endured in the present in order that better consequences could arrive in the future. But beware! The time for all this is not yet. For at least another hundred years we must pretend to ourselves and to everyone that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into 13

daylight. (CW IX 331) In this possible future world, social injustice would be eliminated in the economic sphere, or at least reduced to relative insignificance. Everyone could satisfy their basic needs, the working week would be much shorter, people could devote greater leisure time to more fulfilling non-economic pursuits, including helping others, and high incomes or wealth would lose their social status. Private enterprise and money-making could well continue, but only at lower returns and with less public acclaim than at present.14 6. The Strength of Keynes’s Advocacy All the remarks in the above quotations are quintessential Keynes. Would they have been written by someone who was unmotivated by, or uninterested in, social justice, or who merely appealed to it because it was politically expedient to do so? Or would they have come from the pen of someone who had a deep and positive concern for social justice and sought to advance it as much as was feasible under given circumstances. I suggest that, beyond all reasonable doubt, it is the latter. His remarks do not reflect merely peripheral issues in his thinking, but central beliefs and core issues. They express the views of a person who took social justice seriously and did not regard it merely as a convenient stratagem to win social or political support for policies with other objectives. To reinforce this point, consider two further questions. Why did Keynes criticise social injustice so strongly? And why did he make major improvements in social justice important components of his plans for the short and long terms? The obvious answers are because he cared deeply about social justice. I think the obvious answers are right, and that Keynes’s concern derived from the belief that greater social justice is ethically desirable, ceteris paribus. Instead of pushing the issue so vigorously, he could easily have produced proposals that left social justice roughly the same, or encouraged only small improvements. For example, in 1939-40, Britain was not so politically or socially unstable that such significant steps towards greater social justice were required. There is nothing, moreover, in his writings, public or private, to suggest that he thought that the degree of inequality reduction he pursued was necessary only to buy political support, to save capitalism, or to maintain social stability. Nor is there anything in his writings to suggest he was disingenuous, insincere, dishonest or cynical in his appeals to social justice. In this area, he rarely chose the milder course that was always available, especially to someone of his persuasive powers, but typically argued for more demanding policies unwelcome to the moneyed classes and extreme advocates of market forces. 7. Some Underlying Principles It is possible to extract from Keynes’s writings a set of principles underpinning his overall approach to social justice.15 While the following appear internally consistent, no claim is made that they are free of difficulties in their application, or that they provide simple solutions. 1. Ethics, economics and politics are all important to social justice. Ethics sets the ends, with other factors being the means. Social justice is one means, as are economic efficiency, individual liberty and political feasibility. Economically, the means employed must use resources well, while politically, the means must preserve individual liberty as far as possible, respect contemporary ideas concerning social justice, and have sufficient general acceptance to ensure durability over time. 14

2. All means are important. No means (social justice, say) is ever the sole factor to be considered, although one means might be an over-riding element in difficult or extreme situations. 3. Each means to goodness has its own sub-principle that more of it is better than less, ceteris paribus. Considered independently of other means, greater levels social justice, efficiency or liberty are superior to lower levels. 4. Means should never be considered in isolation but always in combination with other means. This is because means interact positively and negatively, such that one means can reinforce or impede the effects of other means, with these interactions depending on circumstances. 5. There is no structured hierarchy or fixed ordering of means, in which one is always placed ahead of others. Social justice or individual liberty are never permanently subordinate to economic efficiency, for example. 6. Nor are there permanent antimonies or alliances between means. The universal tradeoffs between efficiency and equity or between equity and liberty, and the universal alliance between efficiency and liberty, that are commonplace in much orthodox economic discourse, do not exist. Trade-offs and alliances are always contingent, never universal. Sometimes means conflict, in which case one (efficiency, say) may be given precedence over others for (possibly extended) periods of time. At other times means mutually reinforce each other in which case (possibly powerful) synergies occur. The relationships between means are subtle, complex and context-dependent. There are circumstances where greater social justice may lead to greater efficiency, or where some restrictions on liberty to reduce inequality may actually extend the sphere of liberty and assist its preservation. Concentrating on static substitutions involving equity versus efficiency, for example, loses sight of the more important case of dynamic complementarities involving equity and efficiency. 7. There are no canons of distributive justice. There are no general principles, rules or criteria which specify how much inequality should exist at any time (or at all times), nor are there universal limits on distributional changes. More social justice may be preferred to less, ceteris paribus, but one is never entitled to start with a specific social justice principle and reach conclusions solely from that principle. In market-based societies, arguments for reductions in high levels of income and wealth inequalities may be appropriate, but arguments for complete equality (the caricature of egalitarianism favoured by the political right) will rarely be justified. Since greater equality will generally have both benefits and costs, the possible existence is implied of threshold levels of inequality beyond which it is not worth proceeding under the given circumstances. 8. Social situations are organic unities, the goodness or value of which have to be assessed as wholes. The overall goodness depends on the combined effects of interacting means, and not on linear additions of the effects of each means considered separately. 9. Organic wholes must be considered over time, so that they embrace the short, medium and long terms. A certain level of social injustice may need to be tolerated in the short term in order for greater levels of social justice to be possible for longer periods in the future. In addition, the scale of social justice-enhancing policies may vary over time with affordability, such that extensive policies likely to be affordable in the future may need to be scaled back to meet present capacities.16 15

10. All plans and policies are to be assessed on consequentialist grounds, that is, by the totality of their (probable) consequences under the prevailing circumstances. Each means (greater social justice, economic efficiency, individual freedom and political stability) may have positive and negative effects in terms of generating goodness. Situations need to be evaluated as (organic) wholes with a view to choosing that policy that maximises probable goodness. 11. All policies and plans must satisfy two criteria – they must be wise and just, never foolish or wrong. They must possess intelligence in that they are informed and likely to solve the problem, and justice in that they are morally acceptable on ethical grounds and to the general populace. With the above in mind, some reasons for the relative neglect of social justice in other treatments of Keynes’s thought may be ventured. One is a common but inadequate interpretation of Keynes’s political position which views it as resistant to, or inconsistent with, serious concerns for social justice. For example, Keynes’s politics are commonly seen as inclining to the right, associated with which is the popular but simplistic view that his only interest was in ‘saving capitalism’; from this perspective a lack of serious concern for distributive justice falls neatly into place A second reason is that because Keynes typically considered social justice in combination with other factors, it is capable of being overlooked, or relegated to secondary importance, compared to such other factors as economic efficiency or individual liberty. Commentators have the opportunity either to neglect the mix by concentrating on whichever other factor appears, in the light of their particular interests (as orthodox economists, for example), to have greater significance; or they can recognise the mix but elevate various of the other factors to greater relative importance, by saying, for example, that social justice was not really a serious ethical objective but was merely included to placate certain interest groups whose support was needed. Most importantly, the third reason is a failure to appreciate that the key to understanding Keynes in this area lies in his philosophy. While social justice is not an extensively discussed theme in either Moore’s or Keynes’s philosophical writings, their philosophies nevertheless have significant implications for social justice that can be uncovered by the kind of intellectual effort for which most economists have no training or inclination. 8. Conclusion This paper has highlighted the significant but neglected theme of social justice in Keynes’s writings. On its negative side, it has criticised misunderstandings of his views, particularly the claims that he was not much motivated by, or interested in, social justice, and that any appeals he made in this direction were largely or entirely for non-ethical reasons such as political expediency or social stability. More constructively, it has advanced a deeper and better grounded account of his position on this topic. It has argued, firstly, that he had a persistent and intellectually serious interest in pursuing greater social justice; secondly, that it is necessary to take an holistic rather than partial perspective to understand his approach; thirdly, that his position is coherent and capable of being explained by a number of guiding principles; and, fourthly, that these principles derive largely from a philosophical framework based on Moore’s ethics. However, it may be noted that there is much in Keynes’s underlying principles that is separable from his particular philosophical background and hence available for 16

appropriation by other approaches. Whether linked to Moore or not, his principles continue to have contemporary relevance for economic and social decision-making in modern societies. Just as calls for a ‘return to Keynes’ seek to gain deeper insight into the financial and economic aspects of current crises, so too can a return to Keynes assist with the incorporation of social justice into the remedies proposed to prevent their recurrence in both the short and long terms.

Bibliography Clarke, P. 1978. Liberals and Social Democrats, Cambridge University Press, Cambridge. Freeden, M. 1978. The New Liberalism, An Ideology of Social Reform, Oxford University Press, Oxford. Freeden, M. 1986. Liberalism Divided, A Study in British Political Thought 1914-1939, Oxford University Press, Oxford. Groenewegen, P.D. 1995. A Soaring Eagle: Alfred Marshall 1842-1924, Edward Elgar, Aldershot. Harrod, R.F. 1951. The Life of John Maynard Keynes, Macmillan, London. Hayek, F.A. 1976. Law, Legislation and Liberty, Volume 2, The Mirage of Social Justice, University of Chicago Press, Chicago. Hayek, F.A. 1978. New, Studies in Philosophy, Politics, Economics and the History of Ideas, University of Chicago Press, Chicago. Herland, M. 1998. ‘Concilier liberte economique et justice sociale: les solutions de Keynes’, Cahiers d’economie politique, no.30-31. Keynes, J.M. 1904. ‘The Political Doctrines of Edmund Burke’, Typescript, Keynes Papers, King’s College, Cambridge. Keynes, J.M. 1971-89. The Collected Writings of John Maynard Keynes, Volumes I to XXX, Macmillan, London. Moggridge, D. 1992. Maynard Keynes, An Economist’s Biography, Routledge, London. Moore, G.E. 1903. Principia Ethica, Cambridge University Press, Cambridge. O’Donnell, R.M. 1989. Keynes: Philosophy, Economics and Politics, Macmillan, London. O’Donnell, R.M. 1991. ‘Keynes’s Political Philosophy’, in Barber W. J. (ed.) Perspectives on the History of Economic Thought, vol. 6, Edward Elgar, Vermont. O’Donnell, R.M. 1998. ‘Mixed Goods and Social Reform’, Cahiers d’economie politique, no.30-31. Schneider, M. 2004. The Distribution of Wealth, Edward Elgar, Cheltenham. Skidelsky, R. 1991. ‘Keynes’s Philosophy of Practice and economic Policy’ in O’Donnell R.M. (1991) (ed) Keynes as Philosopher-Economist, Macmillan, London. Skidelsky, R 1992. John Maynard Keynes, Volume II, The Economist as Saviour 19201937, Macmillan, London. Skidelsky, R. 1996. Keynes, Oxford University Press, Oxford. Skidelsky, R 2003. John Maynard Keynes 1883-1946, Economist, Philosopher, Statesman, Macmillan, London.

Endnotes My thanks to Craig Freedman, Richard Toye, Giles Dostaler, Geoff Harcourt and John King for helpful comments. Advance apologies are tendered to any author whose relevant work has been neglected. 1

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2

The quotations are respectively taken from CW IX 225, IX 311, IX 235, XXI 239, XXII 50, XXII 112 and XXVII 369. All references to the Collected Writings of John Maynard Keynes (Keynes 1971-89) take the form of CW followed by the volume number and page number(s). 3 Moggridge’s lengthy biography (1992) provides one example of minimalist treatment. Social justice, social injustice, equality, inequality or distribution do not appear in its index and, although occasionally occurring in the text and quotations, are unaccompanied by analytical exploration. This near-silence may derive from a primary concern with Keynes ‘the economist’, but even here a further narrowing of focus is evident because distribution is part of economics. Passing reference without close investigation is also evident in Harrod (1951). 4 The argument was first broached in briefer form in O’Donnell (1989, pp. 132, 274, 27980, 318-20) and (1991, pp. 20-1). While compatible with some parts of Herland (1998), it diverges significantly in other parts and is broader in scope. 5 See Keynes (1904, pp 19, 26). 6 See also Skidelsky (1991) and (1996). 7 See O’Donnell (1998). Skidelsky (2003, pp. 288-9) has subsequently modified his argument but his overall conclusion, that the influence of Moore’s philosophy was ‘to restrict rather than enlarge [Keynes’s] passion for social reform’, remains the same. 8 Note that the above argument depends on two conditions. One is that revolutionary social transformations are off the agenda because they will produce wholes of lesser goodness, and the other is the existence of a causal connection between economic inequalities and higher investment. Each of these is open to challenge. While Keynes agreed with the first, he questioned the generality of the second in the General Theory. 9 For Marshall’s concern with poverty, inequality and redistribution, see Groenewegen (1995), especially chs 10, 13 and 16. 10 See, for example, Clarke (1978, ch 4) and Freeden (1978) and (1986). One could also add family influences, such as his mother’s social activism. 11 See Keynes (1904, pp. 19, 25-6). 12 The case for stressing the distribution of wealth rather than income is bolstered by the fact that inequalities in the former are typically much greater than those in the latter. See Schneider (2004, pp. 5, 53, 59-60). 13 This division of attributes was actually unfair to both sides – progressive Liberals were also interested in social justice, while Labour was also interested in planning to promote efficiency and in the development of individual liberty. 14 Keynes’s utopia subsequently echoes in his later writings, including the final chapter of the General Theory, and notes for an undelivered maiden speech to the House of Lords in 1943 where he observed that among the problems of the future will be the ‘profound moral and social problems of how to organise material abundance to yield up the fruits of a good life’ (CW XXVII 260-1). For more extended discussion of Keynes’s political philosophy, see O’Donnell (1989, chs 13, 14) and (1991). 15 The principles also apply, with suitable modification, to all other means, including economic efficiency and individual liberty. 16 This last point is relevant to Keynes’s approach to Beveridges’s social security proposals of 1941-42, a topic deserving more discussion than can be given here.

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