John Maynard Keynes said, “We can afford whatever we can do.” Few sentences in economics are more radical. In this video, I explain what he really meant — and why it matters more now than ever.
A currency-issuing government cannot run out of its own money. The true constraints on public action are people, skills, energy and materials — not a Treasury balance sheet. That means the key question is not “What can we afford?” but “What should we choose to do?”
This is the heart of democracy. Markets chase profit, not the public good. Only the state can set society's goals, mobilise idle resources, and tax to free capacity for essential work. Keynes used these tools to direct the British war economies. We can use them now for housing, care, education, climate transition and energy security.
This video explains why politics – not markets – must lead, and why tax and spending are tools of direction, not constraints. Keynes gives us a moral economics. It's time we used it.
This is the audio version:
This is the transcript:
As regular viewers of this channel will know, I am a great fan of John Maynard Keynes, the greatest, in my opinion, economist of the 20th century. And one of the things that he said was that " We can afford whatever we can do," and that is one of the most radical sentences in economics. It overturns the myth of government affordability, but it also implies a duty. The state must decide what we should do, and that's important because it's only politics and not markets that can set society's goals. And that also is in itself a really radical idea in a world where we are told that markets rule.
Let's stand back for a moment and understand what Keynes really meant. He understood that a currency-issuing state is never short of its own money. He wrote that line in the middle of the Second World War, and we were a currency-issuing state at that time. A government can always buy what is for sale in its own currency is the consequence of that idea that the government can never run out of money.
The limit is not money. It can do whatever the real capacity of the economy lets it deliver, but it can't go beyond that. So the real limit on what is possible in our world is not money, but the availability of people and skills - and that's vital - and materials. If those exist, money can be used to mobilise them.
But the question then becomes to what purpose? And this is fundamental to the role of the state, and it's almost being forgotten by modern politicians. The market does not define the public good; the market chases profit and not social need. So the state's job is to identify what society requires, and then it must use its monetary power to make it happen. That is what Keynes meant by saying, "We can afford whatever we can do."
Care, housing, education, energy, security, the climate transition, all of these are collective priorities, but they're never going to be market outcomes. Left to itself, the market underinvests in all of them. So if we want these things, and I suggest that we do, because without them, we cannot live in a good, stable society in which everyone can prosper, then the government must lead investment, direction of the economy, and the coordination of the skills that are required to make these things happen. And this I stress, is not interference, as those on the right wing of politics would say, it's democracy in action, and democracy does, in my opinion, have significantly more power than markets, which are oriented to those with the maximum number of pounds, yen, euros, dollars, or whatever else.
The state can make things possible by spending the money it creates into use. It can direct idle resources into purpose for work, and it can determine what work that should be by allocating resources to particular tasks, and if necessary, freeing those resources by taxing their current use so that they become available for use for what the state determines. I stress this point, tax does in part exist to actually prevent private sector activity so that resources like labour and materials are available to deliver social activities for the common good.
In that case, tax doesn't fund spending; it frees capacity for new priorities, and that is a fundamental job of the state. That's how we move labour and materials to where they're needed to meet the public purpose. And it has to do that because, as I've noted before, the real constraints are people, energy, skills, and materials, and not the Treasury's bank balance.
So, so long as we work within those real constraints, spending does not create inflation, but it does redirect money to where it can deliver the best outcomes for everyone, and that's why state planning and taxation fit together. The right will hate me saying that because they'll say, "That's the definition of the control of the state by socialists," and I say, "I don't care, this is what democracy does, democracy only exists to make decisions about what the state does. If you don't believe that, that's what the state is for, then you don't believe in democracy either."
Of course, the state exists to make decisions about how we fulfil the public purpose; it is pointless without those decisions being made. So the fact is that the state has to make
decisions by balancing ambition with capacity, and that's a crucial role that it has to undertake, and which does require very particular skills, which I'm afraid to say quite a lot of our politicians have forgotten. And they've forgotten it because of the myth of market discipline.
Neoliberals pretend that only markets allocate resources efficiently, and too many of our politicians have believed them. And they're wrong to do so because markets ignore social value and ecological cost. The state, by contrast, can set moral priorities, including around those issues of social value and ecological cost. It can demand that capital serve life and not the reverse. And Keynes knew this was the heart of a civilised economics, and Keynes knew a great deal about this because he directed most of the economic war effort in both the First World War and the Second World War in the UK, achieving the command of resources to deliver victory in both cases.
Taxation was used as a means of redirecting society's limited resources by Keynes, in particular, and he highlighted this in his 1941 book, How to Pay for the War. It can release labour and capital from low-value uses and direct them towards high-value uses.
So, for example, in 1941, he made clear that energy was not available to people who wanted to drive their private cars. It had to be used solely for the war effort, and he used tax and regulations to achieve that goal.
He also used tax to curb the excesses of wealth and inequality at that moment because he realised that everybody had to think that they were in that war together, just as we have to always believe that we live in society together. There is no real difference. And as a result, he created space for public goods and sustainable investment as it was seen at the time. And of course, we would have different priorities now, but we still need public goods and sustainable investment, and the state can still do that. That's how fiscal power reshapes the economy.
So this still matters; saying we can afford whatever we can do is not about creating blank checks, as some people would claim. It's actually about responsibility, and it's about most particularly the government deciding what matters and acting on it.
And that is what people are now demanding of government and are not getting. They're fed up with cowardly governments that are unable to make decisions. They
want to see leadership, and all I'm saying is, let's have some of it.
The type of politics I'm talking about puts purpose before price; it restores politics to economics, and Keynes gave us a moral economics as a result of understanding that. He knew the state must decide what we should do, and he knew the state can always afford to do it if the resources exist.
And it can decide what the state and market should also do best to deliver these goals. In other words, the decision is the balance between the two is not something which is on the basis of the market can do whatever it wants and the state can pick up the rest. We have to decide the optimal outcome. And again, that is a role for government.
Tax and spending are tools of direction, and they are not limitations. The real choice is whether we govern money or let money govern us, and Keynes gave us the answer. We are in control, and we must decide what is done for the benefit of you or me and everyone else who might ever watch this video.
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Thanks to you and your team for a most timely article!
Might the genuinely democratic government’s involvement, for its citizens, in “the market” be an essential factor in making the private sector/market more efficient and sustainable?
In other words, might a genuinely democratic govrnment, representing the opportunities and needs of regular citizens and their children, be a necessary symbiotic partner with private enterprises which, in combination, results in a well run for all, sustainable society?
Might such provide deep competition for the private sector and facilitate both enterprise and enabling security?
Might our currentl Neoliberally run society be unsustainable, not least because it has a predatory/parasitic relationship with such a large majority of the populace?
Yes, in a word.
Thanks for the excellent post as always. Not a quote I’ve seen before but I certainly understand the principle and it makes so much more sense than what we are constantly told – that the government is running out of the thing it creates!
One thing I would like to see included is planetary constraints. Maybe it doesn’t fit within the economic theory but we very much need to be focused on keeping within those as well, which we are certainly not doing at the moment!
Read my book, The Courageous State.
“… the key question is not “What can we afford?” but “What should we choose to do?
This is the heart of democracy. Markets chase profit, not the public good. Only the state can set society’s goals, mobilise idle resources, and tax to free capacity for essential work.”
For the people of a nation, or collective of nations, to maximise their choosing there needs to be maximum democracy. The UK certainly doesn’t have a Full Democracy Party. The Labour Party was meant to be it but it’s clear that under the current leadership and for many decades it’s been subverted by the Capitalist Class. A full democracy country would take especial care to regulate its market capitalism. It’s therefore essential the UK now creates a Full Democracy Party. Before this can be done we need to define what the basic essentials of a full democracy are. The sociologist Charles Tilly defines them as follows:-
1. Breadth: From only a small segment of the population enjoying extensive rights, the rest being largely excluded from public politics, to very wide political inclusion of people under the state’s jurisdiction (at one extreme, every household has its own distinctive relation to the state, but only a few households have full rights of citizenship; at the other, all adult citizens belong to the same homogeneous category of citizenship).
2. Equality: From great inequality among and within categories of citizens to extensive equality in both regards (at one extreme, ethnic categories fall into a well-defined rank order with very unequal rights and obligations; at the other, ethnicity has no significant connection with political rights or obligations and largely equal rights prevail between native-born and naturalized citizens.
3. Protection: From little to much protection against the state’s arbitrary action (at one extreme, state agents constantly use their power to punish personal enemies and reward their friends; at the other, all citizens enjoy publicly visible due process).
4. Mutually binding consultation: From non-binding and/or extremely asymmetrical to mutually binding (at one extreme, seekers of state benefits must bribe, cajole, threaten, or use third-party influence to get anything at all; at the other, state agents have clear, enforceable obligations to deliver benefits by category of recipient).
https://voidnetwork.gr/wp-content/uploads/2016/09/Democracy-by-Charles-Tilly.pdf
See pages 13 to 15
This cannot be said too often.
Once understood it becomes clear that government has three roles. 1) enact policies to improve what we can potentially “do”; 2) mobilize resources to get as close to that potential as possible 3) control inflation through taxation and bond sales.
Simple.
And it works. During WW1 prices rose by 100%; during WW2, under Keynseian policies, prices rose just 30% (most of which happened in 1939/40 before his policies really took hold). After the war we had growth and moderate inflation until the 1970s external shocks (oil price hikes) and, rather than pursuing Keynsian solutions we allowed the Neo-liberals a crack at the whip…… 40 years on the failure and destruction they wrought is evident to all that have eyes to see.
Thanks
I haven’t forgiven Rachel Reeves for propagandising Keynes’s quote when she said “if we cannot afford it, we cannot do it.” (29/07/2024)
Source: https://www.gov.uk/government/speeches/chancellor-statement-on-public-spending-inheritance
Agreed
Such is her limited grasp of economics she’s never bothered to ask how can we as a society “afford” to buy anything. In other words what is the enabling mechanism that facilitates “affording” and how does it work coherently! To be fair to her though there are an awful lot of economic professors not to mention pontificating journalists who appear to be congenitally unable to ask these questions. Perhaps “congenitally” is the wrong word “compromised” would be better!
“I haven’t forgiven Rachel Reeves”
I suspect it was a very deliberate denunciation of Keynes for the markets, A statement that she was 100% neoliberal and totally opposed to Keynesian thinking.
https://www.theguardian.com/society/2025/nov/15/english-councils-sell-off-social-clubs-sports-centres
“We can afford whatever we can do.”…….not if you are a Local Authority deliberately starved of money by the neo-libtards in central gov so that you are forced to sell off public assets (emphasis – assets) because the self-same neo-libtards have imposed on LAs, responsibiities which they can only discharge by selling everything.
UK serfs don’t even know what is going on – because the UK/English meeja don’t tell them.
“We can afford whatever we can do.”………unless you are a neo-libtard with your hands on the UK’s purse-strings and a hatred of all forms of gov – & particualrly local gov.
Much to agree with.
You make a sound like the GDR. Is that what you want?
Politely, don’t be stupid.
They can’t help it Richard – comparing Keynes to the GDR shows you are dealing with the sort of people who thought the Tories under Sunak were “too socialist” and believe Keir Starmer and Rachel Reeves are hard left.
Which segeus perfectly into the fact the Keynes was a Liberal. The whole driving force behind Keynes economics was his implaccable opposition to Commuism and Socialism. Keynes wanted to save capitalism from itself – he knew that neoclassical economics inexorably leads to inequality, instability and crises and would ultimately collapse under the weight of it’s own contradictions.
The great tragedy of Keynes was that he died tragically young at only 63 just after the end of the war. He was therefore unable to prevent the bastardisation of his work under the guise of the neoclassical synthesis – the adding of micro-foundations on to Keynes macro insights thus strangling it at birth. We see the disastrous results all around us to this day, not least in the laughably stupid DSGE models used by central banks and the attendant voodoo economics of HM Treasury.
I agree
I wish he had remained active for another 20 years – it would have made a massive difference
At 67, and in good health, I coumnt my fortune to still be working
“In a 1939 interview in the New Statesman and Nation, Keynes described the economic order he envisioned as “liberal socialism, by which [he meant] a system where we can act as an organised community for common purposes and to promote social and economic justice, whilst respecting and protecting the individual — his freedom of choice, his faith, his mind and its expression, his enterprise and his property.”
Source: Was Keynes a Socialist? — Catalyst, Vol 3No 4, Winter 2020
https://catalyst-journal.com/2020/03/was-keynes-a-socialist
That’s good.
Excellent stuff!
You mention “the war” in the context of Keynes’s thought.
That made me think of the difference between WW2 – a war in which the government, the state, took a primary role, as did the government of the USA. Markets would not have defeated the Nazis, they wanted to trade with them, even to the extent of supplying Zyclon B for the gas chambers. Perhaps Reform (and Reeves) should reflect on that?
But nowadays it seems that markets can and do, create and fight wars, private armies, “security” firms, arms lobbyists, can initiate and sustain very profitable conflicts around the world (especially in the Middle East) and get fat on starting them, sustaining them and on “cleaning up” afterwards – (the Tony Blair Institute springs to mind, as do some of the organisations contracted into the Gaza “Humanitarian” Foundation murder squads).
This is just a reflection, economically I don’t know where to go with it.
The state can fight evil wars or, very occasionally, “just” ones.
But the markets seem only to fight and sustain horribly evil ones where the main outcome is misery and destruction for the many, and unjust profit for the few.
My father spoke of food riots in Nottinghamshire during the first word war which he felt the knowledge of had been suppressed, so the 100% price rises rings true to me. Nottinghamshire has a long history of shall we say rather authoritarian rule by the well to do and I’ve seen that elsewhere too even today.
Our Shires have been little reserves of the medieval feudal system this country uses to keep people in place, sitting there waiting. One day, I hope that we can have a really good clear out.
The parsimony in this country is because we no longer care about the functional use of money; it’s all about (apparently) who deserves it. And the twisted morality around that is that money follows money – those who have money must be deserving of more.
No wonder we have hardly any industry when we decide that ‘money maketh money’. You could say that it is all just fucked up. But to me, looking at what we need doing to preserve what we have created – promises made in the blood of two world wars included, it is simply just unintelligent and immoral.
That is why I do not buy poppies. Those worthies at the cenotaph wanting to remember the ‘glorious dead’ should stick to their promises of a better life that were made instead of selling it all off.
The ‘glorious dead ‘were also in bad health, under fed, in poor condition, ill-housed, ill-educated, treated as chattels, lived from day to day. And promises were made and not kept. Stick yer plastic flowers up your bum I say and give us social justice and equality – you can afford it, stop carping about it.
As you can see, your post resonates with me. This country sickens me with its false ideas about money as much as its false worship of its fallen and much else.
In todays Observer, Will Hutton repeats the trope that: “Britain, given its need to borrow and its dependence on overseas lenders, needs a fiscal framework to assure the markets it operates within credible limits.”
I know this is rubbish, but it sounds awfully grown-up and responsible to many ears. How can we put counter-arguments in a way that will win over cautious voters?
I know Will; not well, but well enough to have shared lunch, drinks and conversations. Wherever his thinking got to in the 1990s is where it has remained.
“How can we put counter-arguments in a way that will win over cautious voters? ”
I think more people just need state counter-arguments as fact. For example:
✅Most people are catching on that tax does not pay for spending.
✅Most people know that the national debt is not a debt and does not need repaying.
✅The governments of the last 40 years are privatising as many public services as they can.
And then point them to a good source such as Stephanie Kelton’s book, The Deficit Myth.
Novara Media have been disparaging about MMT in the past and, as far as I know, have never seen fit to discuss anything with you, Richard. It’s somewhat amusing to see Novara’s Michael Walker starting to (maybe) get MMT at last in a recent video discussion with Steve Keen:
Michael: ”Should that [healthcare etc] not be funded by taxes instead of by printing money?”
Steve: ”Taxation doesn’t fund the government” (@46:00):
https://www.youtube.com/watch?v=k68a9TkHyc4&t=2806s
Steve then gives a shout-out to you, Richard, as being one of the few who understand how government spending is financed (@49:00).
Thanks.
It’s so disappointing to hear the left arguing so strongly against the power and competence of the state. How do they expect to change anything?
And why are they do determined to deny reality?
I’m a fan of Novara Media. I watch them daily as well as following this blog daily too.
I posted on X a week or so ago pointing out to the founder Aaron Bastani that he clearly has an unfortunate blind spot for MMT. I recommended he speak to his close colleague Helena who I believe, having listened carefully to her contributions on the channel, does appear to have bought into MMT. She recently said she has joined the Greens. These people are all firmly and progressively left wing. Some of them are clearly rising stars in their own right.
The founder, Aaron, resigned from Labour as soon as Starmer appeared on the scene. He is an excellent speaker, debater and is extremely well-read. My judgement is that, like Gary Stevenson, he knows he would be incapable of publicly defending any version of MMT to the standard set by Richard and he probably feels he should therefore remain a sceptic, possibly to save face during on-air confrontations with “non-believers”. Sadly, it mars all of his contributions about economics and macroeconomics on an otherwise very successful channel.
Which brings me to Michael Walker’s Novara interview with Steve Keen, mentioned by JIm, which I watched on Friday evening. I believe Michael is certainly a rising star because of his open mind and calmly analytical approach to debate. I can see him coming over to MMT eventually in the same way Zack Polansky seems to be gradually sliding in this direction. It was refreshing to see Michael disagree very agreeably with certain of Steve’s ideas while very warmly welcoming others; the debt jubilee in particular. Michael is a long term campaigner on renters’ rights so the jubilee idea seemed to make sense for him.
I seem to remember Richard appearing occasionally on Novara and he is listed as a contributor on their website, I believe. I’d be interested to see a more thoroughgoing interview on Novara with Richard, perhaps with Michael Walker. Some good would almost certainly come from that.
The reason I am writing at such length about this is that they have well over a million subscribers now and a more sympathetic attitude to Richard’s thinking should not be to hard to achieve there. More importantly, it would do no harm at all to the figure of just below a million subscribers on this blog.
I would be happy to do it.
Extremely important analysis!!
Extremely well communicated!!
This is a link to the PDF of a Brad Delong blog which includes a radio lecture by Keynes with the quote – Anything we can actually do, we can afford!
https://gandalf.fee.urv.cat/professors/AntonioQuesada/Curs2324/Keynes_How_Much_Does_Finance_Matter.pdf
Keynes too provide a concrete explanation which the public can digest.
Well done Richard!!
Thanks
I’m a great advocate of Keynes and I think we should follow your thesis to provide for the needs of our society. Capitalists are less interested in the needs of society and more interested in profitng from what people want once their basic needs are met. It’s the battle for resources between govs providing what society really needs and businesses deciding whether this is a profitable activity for them, or can they make more profit in supplying things that are not essential, but desirable for those who can afford them.If the resources are used for guns, they are not available for butter used to be the old dilemma. I don’t think we’ve really adressed this question.as such.
We would all like to have a society where needs are more important than wants and politicians should be doing that, but consumers are irrational and might want something different. I know govs can influence this with taxation to someextent.
Much to agree with