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Royal Economic Society, 3 Gower Street, W.C.—Would gladly consider an article from him for the Economic Journal on the same subject as his letter in The Nation (i.e. the economics of war; see 2/225).

King’s College, Cambridge.—Is pleased that Pethick-Lawrence likes his book (The Economic Consequences of the Peace). Agrees with his views on foreign investments.

King’s College, Cambridge.—Sends a copy of his memoir of Marshall. Looks forward to reading Yule’s paper on population, but has little confidence in what he is likely to say.

King’s College, Cambridge.—Will send him his capital levy evidence when it is printed. Thanks him for his efforts ‘about gold’ (i.e. in opposing a return to the gold standard), and deplores Snowden’s behaviour (see Fate Has Been Kind, p. 141).

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Transcript

King’s College, Cambridge
10. 5. 25

Dear Lawrence,

I will send you my Capital Levy evidence when it is printed,—it is in no way confidential so far as I am concerned. I am against an annual tax on capital, because I think one can get almost all the same results by differentiating further against unearned or investment income, without the difficulties of valuation. From the point of view of relaxing {1} saving, I am more afraid of a tax on profits than of a tax on capital.

Thanks for doing your best about gold. In my opinion Snowden disgraced himself with his insincere speech of mock opposition. Why is half your party hard boiled and the other half addled? (Just like mine—except that my left wing is h.b. and right wing a., whereas your right wing is h.b. and left wing a.)

Yours sincerely
J M Keynes

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{1} This word is indistinct.

46 Gordon Square, Bloomsbury.—Agrees with his views (on the re-armament loan). Does not think it necessary to impose punitive measures to stop alternative projects. Sends a copy of his article for The Times (2/215).

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Transcript

46 Gordon Square, Bloomsbury
March 7, 1937

The Rt. Hon. F. W. Pethick-Lawrence, M.P.
House of Commons,
Westminster, S.W.1.

Dear Pethick-Lawrence,

The line of thought you indicate in your letter of March 5th is in my judgment entirely the right one. Fundamentally this is not a matter of finance, but of calling out, as you say, new sources of production. The answer must depend upon the elasticity of supply.

Personally I believe that the programme can be carried through without any punitive measures to stop alternative projects; though doubtless there will be cases where shortage of plant will for the manufacturer to choose between one thing or another.

I have, as I said I might, written a further article for the Times and enclose a copy of it herewith.

J M Keynes

46 Gordon Square, Bloomsbury.—Thanks him for his suggestions on the White Paper (see 2/222), which will be carefully examined.

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.)

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).

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

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.

Thanks him for his compliments on his speech (on post-war international currency; see 2/219), and comments on the debates in both Houses.

Sends a copy of the suggestions about the White Paper Cmd. 6438 (see 2/220-2, 2/254) which Pethick-Lawrence has sent to Keynes.

(Padmore is addressed as Principal Private Secretary to the Chancellor of the Exchequer.)

Has made a reservation at the Charing Cross Hotel for the next dinner discussion with Keynes, Schuster, and members of the group (the all-party group on India).

107 Albert Bridge Road, S.W.11.—Is in favour of stabilising the price level and therefore does not believe the Treasury Minute should be abrogated at present (see 1/192), as it is a defence against inflation.

(Printed letter-head of the London School of Economics, which Dalton has enclosed in square brackets.)

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Transcript

107 Albert Bridge Road, S.W.11.
5/3/24.

Dear Pethick Lawrence,

I should like a talk with you sometime before the next Finance Committee meeting. I regret to find that I shall again have to leave early, as I have an engagement at 6.30 on that day to dine with Charles Latham and the London Accountants.

Shortly, my view is the following.

I am in favour of stabilising the price level now & in the near future, though, looking further ahead, I hesitate to commit myself to a definite policy. Many factors seem to me to complicate the distant view.

I am more afraid of inflation in the near future than, I think, you are. I want stabilisation as a defence against the F.B.I., no less than against the old-fashioned deflationist authorities, who are, I think, the weaker of the two possible disturbers of the price level.

I don’t, therefore, feel happy about abrogating the Treasury Minute at this stage. It is our only real defence against inflation at present.

Nor am I so certain as, I think, you are that the Minute will operate to check a healthy, as distinct from a hectic & inflationist, trade revival in the near future.

Keynes said a few months ago at a Committee, of which I am a member, that he thought there was a good deal of margin in the situation, even with the Treasury Minute unchanged. In addition to the margin in the Currency Note Issue, he attached importance to the prospect, with reviving trade, of a more rapid circulation of bank deposits. I would add another factor, pointing in the same direction, namely the prospect of an increase in trade credits (between business men,—I don’t mean bank credits), as confidence grows.

Further, our situation may be eased by a rise in American prices, sufficient to restore the pre-war parity of exchange & lead to British imports of American gold. This has been long in coming, but it may come quickly, if the Federal Reserve Board’s stabilising policy gives way before the strong forces opposed to it.

My present feeling, therefore, is to pronounce in favour of a stable price level as our immediate objective, without committing ourselves to anything very general in the way of economic principles, & not to mention explicitly the Treasury Minute. Nor would I say that a future rise in bank rate is undesirable. If prices continue to rise as they have been doing lately, it may be desirable to raise bank rate in order to secure stability. My belief, (in opposition to that of others, I hear) is that you can stabilise any level of price you choose, & that there is no causal relation between the level chosen & the volume of unemployment.

If, for the time being, we could get the Govt to agree to stabilisation of the price level as a principle, and, implicitly, to whatever measures may be required to secure it, I should feel satisfied.

But I wouldn’t meet trouble half way, or give any encouragement to profiteers, by proclaiming in advance that more money shall be printed than the Treasury Minute allows.

Yours sincerely
Hugh Dalton.

King’s College, Cambridge.—Will send him twenty reprints of his article in the forthcoming number of the Economic Journal (see 2/226).

Charleston, Firle, Sussex.—The American economists and financiers most likely to be interested in a capital levy are Seligman, Taussig, and Norman Davis.

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Transcript

Charleston, | Firle | Sussex
18. 9. 19

Dear Lawrence,

I am really rather at a loss as to how to answer your letter about Americans interested in a Capital Levy;—the project is so remote from their ideas and their necessities. Amongst economists there is Seligman of Columbia and also old Taussig. Amongst financiers I hardly know whom to mention,—perhaps Norman Davis, whom you may find in Washington, is the best. With any of these, if you meet them, and with any others who know me, certainly make use of my name to any advantage you are able. I presume you will be seeing the New Republic crowd in any case.

Yours sincerely,
J M Keynes

King’s College, Cambridge.—Has written to Snowden proposing an amendment (to the Gold Standard Bill) repealing Section IV of the Bank Act, 1844. He overlooked the importance of this point in his article in this week's Nation.

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Transcript

King’s College, Cambridge
3 May 1925

Dear Pethick-Lawrence,

In my article in this week’s Nation, which you may have seen, I made a bad mistake and gave the Treasury more credit than they deserve. I forgot Section IV of the Bank Act, 1844, which they are not proposing to repeal. This Section obliges the Bank of England to buy gold bullion in unlimited amounts at £3-17-9.

Thus all the dangers, which in my article I thought they were avoiding, they are in fact inviting.

If an amendment could be carried on Monday, repealing Section IV of the Bank Act 1844, it would be an enormous improvement.

I have written a letter to Snowden on the same lines as the above. If you agree with me, I wish you would go round to see him on Monday morning.

Yours sincerely,
J M Keynes

46 Gordon Square, Bloomsbury.—Thanks him for a copy of Hansard. Churchill seems to be having doubts (about the reform of the House of Lords?). Is not sorry an inquiry was refused, as it would have been premature.

Tilton, Firle, Sussex.—‘I am very glad you have left the Government and sympathise entirely with your circular letter.’

King’s College, Cambridge.—Commends Pethick-Lawrence’s contribution to a debate in the Commons. Is disappointed by Arthur Greenwood’s response in the Daily Express to his own articles in The Times on compulsory saving.

King’s College, Cambridge.—Explains his views on compulsory saving (see 2/250-1), and suggests that the term ‘deferred pay’ might be preferable.

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

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.

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.

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.