Skip to main content

2024 | OriginalPaper | Buchkapitel

9. Keynes’s Employment Policy in the Making

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config
loading …

Abstract

The main purpose of this chapter is to examine, chronologically, the course taken by “the Keynesian Revolution in economic policy” in the 1940s of the UK.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 340 Zeitschriften

aus folgenden Fachgebieten:

  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Versicherung + Risiko




Jetzt Wissensvorsprung sichern!

Fußnoten
1
On the essentials of Keynes’s employment theory developed in the General Theory there exist a variety of interpretations, which brought about a diversification of the Keynesian School.
 
2
On this, see Chap. 8 of this book.
 
3
Henderson wrote: “Mr. Keynes … invites the world to throw upon the scrap-heap a large part of the orthodox theory in which I still believe, to discard the methods of analysis which I intend to continue to employ, and to substitute a new theoretical system of his own which in my opinion asserts what is false and denies what is true, and is likely to cause an immense amount of confusion” (Henderson 1955, p.161).
 
4
Peden wrote that “Hopkins and Phillips were prepared to rethink the theoretical basis of financial policy in the light of new economic [Keynesian] ideas” (1979, p.61). For the Treasury officials, see Peden (1979, pp.20–26).
 
5
Originally it was written for the Times in November 1939, followed by publication as a booklet in 1940 (JMK.9, pp.367–439). The material concerned is reproduced as Chapter 2 of JMK.22.
 
6
In fact, the rate of unemployment was still over 10 percent.
 
7
It should be noted that an analysis of inflation is also contained. See JMK.9, pp.413–425.
 
8
Keynes’s criticism of Tinbergen (1939a)—a pioneering work in econometrics—was, however, thoroughly harsh (1939a. Reproduced in JMK.14, pp.306–318).
He shows us his two stances. One is a position which regards economics as a field of logic. He argues that economics can make progress through improvement of a model, but that if actual figures are put in variable functions, it will lose usefulness. The purpose of statistical studies is to test the relevance/effectiveness of a model.
The other is a position which characterizes economics as a moral science in which motives, expectations, and psychological uncertainty are addressed with introspection and value judgment. The related material is contained in JMK.14, pp.285–320.
 
9
The related material is contained in Chapters 4 “The 1941 Budget” and 5 “The Later Budgets” of JMK.22.
 
10
In the same letter Keynes expressed his appreciation of Hopkins’s favorable understanding, while he confessed that Henderson frayed his nerves. It should be noted, however, that Hopkins did not belong to the Keynes camp.
 
11
An economic advisory office, first in history, composed of full-time economists. It was established in December 1939 (up until then there was no full-time economist working for the central government in Britain. See Cairncross = Watts, 1989, p.3). The “Stamp Survey” (the principal members were J. Stamp, Henderson, and H. Clay), which was set up in July 1939, was split up into two offices: the Economic Section and the Central Statistical Office, both of which belonged to the War-Time Cabinet Office. The first director of the Economic Section was J. Jewkes (1939–1941), the second L. Robbins (1941–1945), and the third Meade (1946–1947). For details, see Cairncross = Watts (1989).
 
12
See Robbins (1971, pp.186–188). As will be clear, however, we should be wary about Robbins’s use of the word “interest”, for Hopkins continued to take a critical stance on the Meade plan.
Robbins acknowledged his role in the Economic Section as representing public relations and diplomacy with regard to ministers and officials. This role was, in his mind, connected with the idea of redemption for a mistaken diagnosis in Robbins (1934).
 
13
We have “How Much Does Finance Matter?” (The Listener, 2 April 1942. Reproduced as JMK.27, pp.264–270), which was broadcast in a series of the post-war planning by the BBC, as showing Keynes’s fundamental stance around this period. Two points are worth noting.
The first point is his judgment that the financial problem is not that difficult for post-war reconstruction. The grounds for this opinion lay in reduced interest payment by the government due to a low rate of interest and in a climate of public opinion and political circumstances which would facilitate continued control over the financial institutions. Therefore, Keynes says, magnificent reconstruction would be possible using material and human resources; bold, large-scale planning should be implemented on a long-term planning.
The second point is his judgment that in managing the national economy, two policy tasks based on the analysis of aggregate demand and supply should be essential—securing of demand for full employment and prevention of inflation (demand which exceeds the physical capacities of supply). This judgment is backed up by his conviction that it would be feasible with wise policy measures.
 
14
It is based on the assumption of 1 million military persons and 0.8 million frictional unemployment. The wage cost is assumed to be 30 percent higher than that in 1938.
 
15
With regard to the terms of trade, Keynes himself sees that although they had shown continuous improvement in the inter-war period, there are various reasons why a reverse might be expected.
 
16
Keynes himself sees that the living standard will be 13 percent higher than in the pre-war period.
 
17
According to Moggridge, around May 1942 Hopkins “saw counter-cyclical public works as hindered by administrative and other practical problems, while change in most direct and indirect taxes would prove slow in operation and politically difficult and might not help the situation when they did occur. … [Hopkins rejected] equalisation funds operated over the trade cycle in which the surpluses of booms covered the deficits of slumps” (JMK.27, p.277).
 
18
Henderson assumed the number of unemployment to be 2 million.
 
19
Meade’s main concern was with the development of economic analysis contributory to practical economic policy. Around this period he was also involved in post-war commercial policy. His plan became an official plan of the Board of Trade in the fall of 1941 and was to be discussed in the Overtone Committee. The relevant material is reproduced in Chapter 2 of JMK.26.
It should be noted, in passing, that he was a member of the “Cambridge Circus” which made critical examination of the Treatise (see “Mr Meade’s relation”) and one of the inventors of the “IS-LM model” (see Young 1987).
 
20
There was a rumor that Beveridge was writing a report on employment policy (which was, in fact, published as Beveridge (1944)). Nevertheless, Keynes did not respond to Meade’s request. As will be explained later, however, the role which he was to play in the process of drawing-up the White Paper on Employment Policy (1944a) by Meade and others was very important.
 
21
This idea can be traced back to the pre-war period, for which see Robbins (1971, p.186).
 
22
Keynes himself, however, thinks it might be better for changes to be confined to the contributions for employees, for the multiplier there is 3 while the multiplier for changes in the contributions for employers is much smaller. See JMK.27, pp.308–309.
 
23
In Beveridge (1944, pp.263–264), however, it is pointed out that it might be practically and psychologically difficult to implement. It also doubts its quantitative effect, and the effect which changes in contributions for employers will have.
 
24
See Keynes’s letter to Eady dated 3 September 1942 (JMK.27, p.313).
 
25
See Meade’s letter to Keynes dated 19 April 1943 (JMK.27, pp.317–318).
 
26
See Keynes’s letter to Meade dated 25 April 1943 (JMK.27, pp.319–320).
 
27
See, for example, JMK.27, p.225. For a point of difference between the two, we can mention Meade’s advocacy of “the socialization of rentier property” and nationalization. See JMK.27, p.214.
 
28
We owe the following description to Cairncross = Watts (1989, pp.79–80).
 
29
Henderson, who was co-author of “Can Lloyd George Do It?” (Keynes = Henderson, 1929), became thereafter the keenest critic of Keynes. However, we should not overlook the similarity between the two by focusing too much on the difference. For example, at the end of this memorandum, Keynes approvingly quotes a social-philosophical description by Henderson, which is, by nature, a statement by a “New Liberalist”. See, moreover, Keynes’s evaluation of Henderson’s view on the post-war rates of interest (JMK.27, p.280) and on commercial policy (JMK.26, p.253).
 
30
We owe the following description to Cairncross = Watts (1989, pp.81–82).
 
31
Keynes’s criticism of Henderson was not related so much to his theory as to the judgment and practical implication he derived from it.
 
32
See his letter to Eady dated 27 May (JMK.27, p.325) and to Meade dated 27 May 1943 (JMK.27, p.327). The following statement in the letter, among other things, is worth quoting: “… Eady tells me that my own paper moves in the stratosphere and will be entirely unintelligible to any civil servant, -to which, however, I am replying that he really must try to understand it, since the theory which I have brought out into the open underlies both your paper and Henderson’s …”.
 
33
See JMK.27, pp.352–353.
 
34
Unlike Henderson, it should also be noted that Eady, in his memorandum, fails to envisage the determination of the volume of employment through the aggregate demand and supply, and therefore, the control over the aggregate demand.
 
35
We owe the following description to Cairncross = Watts (1989, pp.82–83). The conflictive point between the Economic Section and the Board of Trade was that the latter was trying to set up various organizations with a view to promoting industrial efficiency and concentration, whereas the former was critical of the strengthening of restrictive practice which it would entail. This is clearly seen in Robbins’ Note of Dissent on Restrictive Developments in Industry in the White Paper on Employment Policy. And Keynes, the man who believed in “a middle way”, whole-heartedly applauded it (see JMK.27, p.369).
 
36
We owe the following description to Cairncross = Watts (1989, pp.83–84).
 
37
These points should be understood in the context of Keynes’s methodology of economics (see footnote 8).
 
38
Beveridge (1944) highly evaluated the White Paper on Employment Policy as an epoch-making event in economic and political history. What he was dissatisfied with, however, was that it undervalued the seriousness of the “disease”, i.e. unemployment, which the unplanned market economy induces, arguing that it comes from a mistaken value judgment by which private firms are treated like saints, and the balanced budget is evaluated as a key priority.
 
39
See an argument between Keynes and Meade over Import Restrictions (JMK.26, pp.272–287).
 
40
For the situation of the academic community at the time, see, for example, the recollections by Peacock (Greenaway = Presley eds.(1989), pp.4–5), stressing in particular that Keynes’s achievement, far from being a source of disruption, was almost a unifying force.
Seventeen years later, Robbins referred to Keynes’s influences, observing that the speed at which the Keynesian approach had become the crux of the judicial and administrative custom in the free world must be unique in history. He also stated that although it is not true that we are now all Keynesians, it is true that almost all of us are Keynesians “after our fashion”. See Robbins (1961a, p.11).
 
Literatur
Zurück zum Zitat Beveridge, W., Full Employment in a Free Society, George Allen & Unwin, 1944. Beveridge, W., Full Employment in a Free Society, George Allen & Unwin, 1944.
Zurück zum Zitat Cairncross, A. and Watts, N., The Economic Section 1939–1961, London: Routledge, 1989. Cairncross, A. and Watts, N., The Economic Section 1939–1961, London: Routledge, 1989.
Zurück zum Zitat Greenaway, D. and Presley, J. eds., Pioneers of Modern Economics in Britain, Vol.2, London: Macmillan, 1989. Greenaway, D. and Presley, J. eds., Pioneers of Modern Economics in Britain, Vol.2, London: Macmillan, 1989.
Zurück zum Zitat Henderson, H., The Inter-War Years and Other Papers (ed. by Clay, H.), Oxford: Clarendon Press, 1955. Henderson, H., The Inter-War Years and Other Papers (ed. by Clay, H.), Oxford: Clarendon Press, 1955.
Zurück zum Zitat Keynes, J.M., “The Income and Fiscal Potential of Great Britain”, Economic Journal, December 1939 (JMK.22, pp.52–66). Keynes, J.M., “The Income and Fiscal Potential of Great Britain”, Economic Journal, December 1939 (JMK.22, pp.52–66).
Zurück zum Zitat Meade, J.E. and Stone, R., “The Construction of Tables of National Income, Expenditure, Savings and Investment”, Economic Journal, Vol.51, 1941 (in Howson, ed. 1988, 8). Meade, J.E. and Stone, R., “The Construction of Tables of National Income, Expenditure, Savings and Investment”, Economic Journal, Vol.51, 1941 (in Howson, ed. 1988, 8).
Zurück zum Zitat Ministry of Reconstruction, The White Paper on Employment Policy, Cmd 6527, 1944a. Ministry of Reconstruction, The White Paper on Employment Policy, Cmd 6527, 1944a.
Zurück zum Zitat Peden, G.C., British Rearmament and the Treasury 1932–1939, Scottish Academic Press, 1979. Peden, G.C., British Rearmament and the Treasury 1932–1939, Scottish Academic Press, 1979.
Zurück zum Zitat Peden, G.C. ed., Keynes and His Critics: Treasury Responses to the Keynesian Revolution 1925–1946, Oxford: Oxford University Press, 2004. Peden, G.C. ed., Keynes and His Critics: Treasury Responses to the Keynesian Revolution 1925–1946, Oxford: Oxford University Press, 2004.
Zurück zum Zitat Robbins, L., The Great Depression, London: Macmillan, 1934. Robbins, L., The Great Depression, London: Macmillan, 1934.
Zurück zum Zitat Robbins, L., “On the Relations between Politics and Economics”, 1961a (in Robbins, 1963). Robbins, L., “On the Relations between Politics and Economics”, 1961a (in Robbins, 1963).
Zurück zum Zitat Tinbergen, J., A Method and Its Application to Investment Activity, League of Nations, 1939a. Tinbergen, J., A Method and Its Application to Investment Activity, League of Nations, 1939a.
Metadaten
Titel
Keynes’s Employment Policy in the Making
verfasst von
Toshiaki Hirai
Copyright-Jahr
2024
DOI
https://doi.org/10.1007/978-3-031-40135-0_9