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Treasury Chambers.—Returns Pethick-Lawrence’s annotated copy of the White Paper (on employment policy), with a revised version incorporating the suggested changes (see 2/222).

(Carbon copy of a typed original. Marked ‘Sent to Keynes’.)

Treasury Chambers.—The Commons debate (on monetary co-operation after the war) was characterised by isolationism and anti-Americanism, but he has no doubt that the House will eventually change its mind.

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Transcript

Treasury Chambers, Great George Street, S.W.1
16th May, 1944.

My dear Pethick-Lawrence,

It was very comforting to get your letter. I spent seven hours in the cursed Gallery, lacerated in mind and body, and the only moment of satisfaction came when you rose to speak followed by the Chancellor. I thought both these contributions were first-class. For the rest, apart from another brave speech from Spearman, the whole thing was smeared by this unreasoning wave of isolationism and anti-Americanism which is for no {1} obscure reason passing over us just now. Somewhat superficial perhaps but nevertheless to be reckoned with.

However, I do not feel that any real harm was done. The thing will grind along. We shall produce a further version and when at a later date the House is eventually faced with the alternative of turning their back on all this sort of thing and begin to appreciate what that means, I have not the slightest doubt that they will change their minds.

Sincerely yours,
Keynes

The Rt. Hon. F. W. Pethick-Lawrence, M.P.
House of Commons.

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{1} ‘? an’ written above in pencil, probably by Pethick-Lawrence.

Treasury Chambers.—Sends cuttings showing Canada’s current attitude towards Britain. Denies having said that Britain had no intention of borrowing in Canada after the war.

Offers to write an article for the Economic Journal on the economics of war, a hitherto neglected subject.

Asks for copies of his article ‘War Economics’. Has been attending Keynes’s lectures at University College.

Sends his article on deflation (‘Deflation and Prices after the War’). Nothing in the report of Lord Cunliffe’s committee upsets any of the views he has put forward.

Is writing a paper on the finances of Europe for the Royal Statistical Society. Asks who to contact for national budget figures. The Treaty of Versailles is gradually being recognised as a foolish thing.

Deplores the behaviour of the English, French, and German premiers at the indemnity negotiations. Suggests issuing a pamphlet on the present financial situation as a postscript to Keynes’s book (The Economic Consequences of the War).

His visit to Germany has suggested to him the idea of paying the fixed charges of railways out of taxation, leaving running costs to be borne out of the traffic. Asks whether this idea has been developed by economists. Alludes to French activities in Germany. Refers to Charles Trevelyan’s speech at the Political Economy Club propounding the capital levy.

Clarifies his ideas about the provision of free public services, and discusses Pell’s book The Riddle of Unemployment.

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Transcript

20th. February, 1923.

Dear Keynes,

Thank you very much for your letter of the 14th inst. {1} in reply to mine.

I quite understand your point of caution with regard to offering public services to people below cost. This would of course not occur if the public relief was confined to payment of interest on capital already expended. In the case of the road it actually goes beyond this and covers current capital expenditure. I think probably I shall attack the problem in a very general way and consider simply the question of “Prices under National Ownership”. Assuming there is going to be no move in the direction of Socialism this is certainly a very important question.

If I put anything together suitable for “The Economic Journal” I will let you see it in case you care to use it. In the meanwhile if you happen to have in mind the name of any special book on Municipal Finance and Municipal Trading which bears on the subject, you might put it on a postcard and let me have it.

I have just been reading Pell’s book on “The Riddle of Unemployment” {2} which all boils down to his proposal that prices should be kept stabilised through manipulation of the bank rate with an inconvertible paper currency. If you are reviewing it yourself in “The Economic Journal” I shall be interested to see your views about it; if not I should like to know some time what you think of it. It is somewhat arrogantly written but it seemed to me offhand a very valuable suggestion. The two points of criticism that occur to me are, firstly, that there would be considerable opposition among business men to raising the bank rate just at the very time trade began to revive and prices show their first upward tendency, and secondly, whether even this proposal would in fact keep prices stationary or only make the oscillations in prices less intensive than at present. In the metaphor which I used in my little book on prices published by the Oxford Press {3}, would Pell’s machinery produce a completely sensitive governor?

Don’t trouble to reply to this if you are too busy.

Yours sincerely,
[blank]

J. Maynard Keynes Esq.,
46, Gordon Square,
W.C.1.

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{1} PETH 2/198.

{2} The Riddle of Unemployment and its Solution (1922), by Charles Edward Pell.

{3} Why Prices Rise and Fall (1920). A revised edition was issued in 1923.

Was sorry to miss this afternoon’s meeting on the stabilisation of prices. Is writing a book on the national debt. Asks whether American bankers oppose the repayment of the English debt to America, and for details of the German indemnity.

Thanks him for his ‘important’ letter (2/201). Refers to his own comments on the subject (in the Commons?) the day before and to Keynes’s public statement in today’s Times.

Apologises for missing a meeting of the Royal Economic Society. Comments on Keynes’s evidence (about the capital levy) before the Colwyn Committee (on the National Debt). Asks for his opinion of an annual tax on capital.

Congratulates him on his forthcoming marriage. Commends his articles on the gold standard. Will raise a question on the subject in the Commons in connection with the Appropriation Bill. Asks why the price of bread has not fallen with the rate of exchange.

Commends Keynes’s pamphlet.

Asks his opinion of certain arguments in Abbati’s book The Unclaimed Wealth.

Mr Pethick-Lawrence thinks Keynes might be interested in the enclosed (see 2/238b).

(Carbon copy of a typed transcript.)

Points out some omissions in Professor Procopovitch’s recent article in the Economic Journal (on the distribution of national income), and offers to provide addenda.

Summarises his recent address to the Free Trade Union Congress on ‘Pitfalls for Free Traders’, which provoked a surprising amount of indignation.

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Transcript

4th. October, 1926.

Dear Keynes,

Your book on “Laissez-Faire” {1} and the paragraphs about it in this week’s “Nation” prompt me to write you a word for your personal interest only, with regard to my visit to the Free Trade Union Congress at Manchester and my address on “Pitfalls for Free Traders” which I delivered to them.

I set out to establish five points:

1) That free traders were unwise if they said without qualifications when a new duty was being imposed that the price of the article would rise. I quoted artificial silk and motor cars as an illustration.

2) I urged them to disentangle free trade meaning free imports, from free trade meaning laissez-faire and unlimited individual competition.

3) I warned them that in opposing Imperial Preference, the argument based on the idea that the preference given to our traders in Australia was quite worthless, was rather a dangerous one to maintain.

4) I warned them that the doctrine of exports balancing imports was only true when invisible exports and imports were taken into consideration, and said I was doubtful whether any economists to-day (when there are pools of unemployment in various countries, unstable and artificial exchanges, and politically created loans, reparations, etc.) would be prepared to put his hand upon his heart and say that the current effect of an order for a million pounds placed abroad, would be identical with the same order placed at home.

5) I warned them that free traders must not be indifferent to labour conditions if they wanted to continue to have the support of the majority of the people of this country, and that though I thought tariffs were the wrong way, some consideration ought to be devoted to the question of production under sweated conditions in other lands.

I was purposely controversial but I was hardly prepared for the storm of indignation which I evoked. Every one of my points was very hotly challenged and had there been more time I should have had a torrent of opposition to meet. All the same, one or two of the best men in the meeting afterwards said that though they did not necessarily agree with everything, they thought there was a great deal of truth in what I had said.

Do not trouble to reply to this letter: I thought you would be amused to know how little some of the Manchester free traders have moved with the times.

Yours sincerely,
[blank]

J. Maynard Keynes Esq.,
46, Gordon Square,
W.C.1.

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{1} The End of Laissez-Faire (1926).

Has sent a letter to Henderson for publication (in The Nation; see 2/243), which is likely to provoke controversy. Asks Keynes to maintain his side of the argument in the paper, as he is going to India next week.

Outlines five points which should be borne in mind by supporters of free trade, and refers to the opposition he met when making these points before an audience of free traders recently.

Has returned from India. Encloses a letter summarising his views of the situation in that country (see 6/135), and two others describing the Indian National Congress (wanting) and his meeting with Gandhi, Tagore, and Bose (see 6/133). His wife is recovering from the illness she suffered on board ship. Refers to adverse reactions to his recent pronouncements on the subject of free trade.

Commends Keynes’s article in the Standard and sends a copy of Hansard containing the text of his speech at the end of the debate. Asks him to read over the proofs of his book (This Gold Crisis).

Sends the text of Pethick-Lawrence’s book (This Gold Crisis) for his perusal, partly in proof, partly in manuscript.

The proofs of Pethick-Lawrence’s book (This Gold Crisis) must be returned to the publisher (Gollancz) by Monday.

Sends the script of his recent broadcast to the United States. Asks whether he knows anything of the Monetary Reform League.

(Keynes’s reply is 2/212, dated 12 Dec. 1931.)

Queries certain points in Keynes’s article for The Times (see 2/214-15).

Explains why he opposes the introduction of compulsory saving.

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Transcript

22nd. November, 1939.

Dear Keynes,

Thank you for your letter. I am glad you like the speech I sent to you.

Of course I read with great interest your articles in The Times on compulsory saving as indeed I do everything of yours that gets into the public press, and I have thought about your proposal a great deal. I have not read Greenwood’s article so I do not know the line he took with regard to them.

I fully appreciate the motives that underlie your scheme and I recognise that if we have inflation during the present war the people who will be hardest hit will be the very poor who have tiny fixed incomes. At the same time I should not be frank with you if I did not add that I do not favour compulsory saving if it can possibly be avoided. The cirsumstances† of individual people are so different that what would be too small a modicum for some of them would be an impossible burden for others and would lead in my opinion to very great difficulty for them and give rise to much unemployment.

In any case you will probably agree that the time for the adoption of any compulsory scheme has not yet arrived while there are still a million and a half industrial workers unemployed as well as large numbers of people in the middle classes who are not included in this figure.

I therefore for the present prefer to see voluntary saving going forward. If the time should ever come when this proves inadequate some scheme of compulsory saving may have to be adopted. But it seems to me that such a scheme would have to include much more drastic proposals even than yours to prevent persons with other means selling capital and so evading the effective control of spending that you wish to enforce. Would it not be necessary for instance to close the Stock Exchange and prohibit other forms of realising capital? These in turn would create fresh difficulties of their own.

With regard to your suggestion that you should come to discuss this with myself and others at the House of Commons some day in the middle of the week, I have not had an opportunity yet of mentioning this to my colleagues; but for my own part and I am sure for some of them, it would be a very interesting experience as you have always so much light to throw on economic problems.

Yours sincerely,
[blank]

Professor J,† Maynard Keynes,
King’s College,
Cambridge.

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† Sic.