2013년 5월 29일 수요일

[발췌: S. Howson & D. Winch's] The Economic Advisory Council 1930-1939

출처: Susan Howson & Donald Winch, The Economic Advisory Council 1930-1939: A Study in Economic Advice during Depression and Recovery (Cambridge University Press, 1977)
자료: 구글도서

Contents:

  1. Introduction
  2. The council and the slump
  3. Economic advice during the crisis
  4. The committee on economic information 1932–9
  5. Conclusions 
  6. Appendices

* * *
※ 발췌 (excerpts)

of which 

Chapter 2. The Council and the Slump

wherein are found some sections entitled “The Prime Minister's Questions”, and then The Committee of Economists some excerpts of which are taken below:

* * *
p. 47

( ... ?diag)nosis of our present problems, and a reasoned list of possible remedies'. Although the letter stressed diagnosis rather then remedies, there is little doubt that Keynes hoped to be able to secure a high degree of consensus on remedies as well. (Pigou ... ) Nevertheless, this must have been the first occasion that an official body consisting entirely of economists was entrusted with such a far-ranging brief. Of the many reports produced under the auspices of the Economic Advisory Council the one submitted by this committee has certainly aroused most comment so far, though the course of the discussion leading up to the report has not been dealt with fully before.[39] For these reasons it seem worth tracing the genesis and subsequent history of the report in some detail.

  In his original letter to MacDonald, Keynes admitted that the committee would be an experiment. Economists, he claimed, have a language and a method of analysing problems which though unfamiliar to businessmen 'enables them to understand one another fairly quickly'. The results could be made intelligible to everyone, and would therefore be available for criticism.

  ( ... a quote ... )

( ... ) Even without Clay and Robertson the committee was a strong one, and well primed for its purpose. Keynes had just put the finishing touches to his about-to-be-published ^A Treatise on Money^, the book which provided the analytical framework for the diagnosis and remedies which he had been canvassing for the past year or so. He had given an extended exposition of this framework in his private evidence to the members of the Macmillan Committee; it featured in a long letter of advice written to the Governor of the Bank of England in May; and it provided the basis for his answers to the Prime Minister's questions on the state of trade in July. Pigou and Stamp had also given evidence before the Macmillan Committee. In fact Pigou stated initially that there was little he wished to add to his Macmillan evidence, which, together with that of Stamp, D.H. Robertson, and A.L. Bowley, was among the first documents circulated to the Committee of Economists.[40] Robbins, the youngest member of the group at 32, had not appeared before the Macmillan Committee; but he had assisted Sir William Beveridge in producing the second edition of his book on ^Unemployment: A Problem of Industry^, and made a thorough study of trade-cycle theories, particularly the monetary over-investment theories associated with the names of von Mises and Hayek.

  Keynes's main hopes of producing an agreed diagnosis rested explicitly on the assumption of a common language, and implicitly perhaps on confidence in his powers of persuading his fellow economists to accept the diagnostic framework of his ^Treatise^. In his letter to the Governor of the Bank of England in May, after giving a brief account of one of his main theoretical propositions to the effect that business losses and unemployment followed 'inevitably and mathematically' from the inequality of savings and total investment, he had said that is was 'very important that a competent decision should be reached whether it is true or false. I can only say that I am ready to have my head chopped off if it is false!' [41] The Committee of Economists was obviously seen by Keynes as an appropriate body to make this 'competent decision'. From the outset, therefore, an attempt was made to tackle the brief on a fundamental theoretical level.

  Most of the members of the committee knew something about Keynes's ^Treatise^ position prior to the meetings of the committee. Pigou had received and commented on galley proofs of the ^Treatise^ in 1929; he had also crossed swords with Keynes on a number of related issues when he appeared before the Macmillan Committee. (Henderson ... Stamp ... ) Robbins was more of an outsider, he was probably aware of some features of Keynes's position at this time; he received a copy of proofs of the ^Treatise^ when the committee began its meetings.

  ( ... ) An early version of Kahn's multiplier idea, together with an attempt to measure the relationship between primary employment and secondary employment, was circulated to the Committee of Economists.[42] Keynes tried to use the idea to argue for public works in the report, but Pigou's and Henderson's objections ensured that there was no sign of this in the final report.[43]

  ( ... ... )

p. 50

  Kahn's document served as the agenda for the committee's first discussion of its line of approach, but during  the second meeting, held on the following day, the committee decided to proceed on the basis of members's replies to a much shorter, and ostensibly less ambitious, questionnaire drawn up by Keynes. This ran as follows:
I. 
In what way would (a) British employment (b) British prices (c) British real wages be affected by (i) an increase of investment (a) in the world at large (b) in Great Britain, (ii) a tariff (iii) a reduction of British money wages (a) all round (b) in the relatively highly paid industries?
II.
How much too high (in order or magnitude) are (a) real wages (b) money wages at the existing level of world prices?
What is your estimate of the increase (a) of real wages (b) of productivity per head since 1910-14? If your estimate of the excess of real wages is greater than your estimate of the increase in real wages per unit of productivity, how do you explain this? [45]
  When the committee met again two weeks later for a weekend session at Stamp's home (...) on 26-28 September, they had before them each members's written answers to these questions. This marks the opening of the real proceedings, which were to develop rapidly in the next three weeks or so under pressure from the Prime Minster to produce the report by 20 October so that it could be considered by the government before Parliament assembled on the 28th. After four meetings in London, the committee held another weekend session on 18-19 October at King's College, Cambridge. Controversy resulted in two more meetings in London, but the committee finally managed to complete its report by 24 October.

  Although the final report did contain an agreed diagnosis, and a majority of the committee endorsed some of Keynes's policy proposals, the outcome fell short of Keynes's hopes. The agreement reached did not result from whole-hearted acceptance of Keynes's theoretical framework, and was often based on uneasy compromise between points of view that remained deeply divided on fundamental questions of analysis and terminology. Such divisions were more serious than the usual kinds of disagreements (which also figured in the report) over remedies and the weight to be attached to particular pieces of empirical evidence, where political and other value-judgments were inevitably brought into play. In order to understand the nature of the underlying divisions over both theory and policy it is necessary to consider the main features of Keynes's ^Treatise^ position and the response which it evoked from Robbins, Henderson, and Pigou. Stamp played a fairly passive role throughout the proceedings; he was not interested in theoretical questions ^per se^, and tended to defer to Keynes's authority on such matters. [46]

*
p. 51

By virtue of his ^Tract on Monetary Reform^(1923), and his contribution to the gold standard debate, Keynes had established himself as the leading exponent of a monetary interpretation of Britain's economic difficulties. Throughout the latter half of the 1920s he was a consistent opponent of deflationary monetary policies, and became one of the chief advocates of loan-financed public works. But over this period the theoretical rationale underwent considerable refinements as a result of Keynes's abandonment of the purely monetary approach of the ^Tract^ in favour of one couched in terms of the relationship between savings and investment, which attempted to bring 'real' and monetary variables into closer relationship. [47] As in the ^Tract^, though, one of Keynes's chief concerns was with the possibilities of conflict between the conditions required for internal and external stability. He also retained his earlier interest in short-run analysis, though in the ^Treatise^ this interest became focussed primarily on the problems of moving from one equilibrium position to another in a world of large-scale change but reduced flexibility. 

  From an insular British point of view the essence of ^Treatise^ positin can be approached as an elaboration of the special problems faced by the nation prevented from achieving domestic equilibrium at full employment by gold standard constraints which precluded actions to reduce the long-term rate of interest to a level consonant with  the expectations of domestic investors.[48] It is important to underline the fact that Keynes depicted dilemma as occurring withing an international context; in spitte of his criticisms of the gold standard, and his espousal of what many regarded as insular solutions, Keynes's theoretical system was essentially an 'open' one. According to the ^Treatise^ explanation of post-war maladies, the root of world problems lay in the height and stickiness of long-term rates of interest. A combination of circumstances, chiefly of tight money associated with the return to the gold standard, had kept post-war interest rates at a level which was too high in relation to profit expectations, particularly in older countries such as Britain. The United States, with its greater buoyancy, had not suffered from this problem until 1929-9, when speculation had driven rates above what could be borne by 'genuine' borrowers. For Keynes the world slump was not simply a dramatic departure from a normal state of affairs, but a product of these post-war strains, as well as being a possible means of finding release from them. Hence his ( ... pp. 52-53 unavailable ...)

p. 54

  For a country in Britain's position the ^Treatise^ analysis furnished dual criteria for judging policy measures: 'Nothing is any good which does not either increase our favourable balance or find an increased outlet for our savings at home'. In his attempt to counter what he described as the negative 'grin and bear it' school of thought personified by Snowden, he was willing to support almost all the active remedies being canvassed in 1930 which met one or other of these criteria. In his answer to the Prime Minister's questions in July he said that 'the peculiarity of my position lies, perhaps, in the fact that I am in favour of practically all the remedies which have been suggested in any quarter. Some of them are better than others. But nearly all of them seem to me to tend in the right direction.' He commended with varying degrees of warmness as 'means to increase our favourable foreign balance' rationalisation, reduced aggregate taxation, reduced efficiency-wages, tariffs, import boards, and international reflationary action. As 'means to increase the outlet for our savings at home' he supposed public investment, subsidies to private investment, discrimination in favour of home investment, an embargo on foreign loans, and budget economies designed to foster business confidence.

  Several negative policy conclusions also followed from his savings and investment analysis. Since high rates of interest were not evidence of a deficiency in the supply of savings relative to the demand for savings for investment purposes, thrift and economy campaigns were the very opposite of what was needed.[55] On the other hand, although reductions in the level of total savings would have the desired effect in reducing deflationary pressure on the economy, such a policy was a 'council of despair' because the savings could have been used to finance additions to the community's capital stock. [56] He was in favour, however, of temporary suspension of the sinking fund. A related argument concerned the negative savings resulting from financing the dole out of borrowing. Keynes pointed out that under the right conditions an increase in the rate of dole, in common with other unproductive expenditure similarly financed, would have the effect of reducing unemployment; the objection was simply, but crucially, that it had a less beneficial effect on 'the rate of accumulation of our capital wealth' than other expedients which had the same effect on unemployment.[57]

  Another negative conclusion to emerge from the ^Treatise^ position concerned the controversial question of wage reductions as a remedy for unemployment. When drawing attention in 1925 the deflationary implications of return to gold at the pre-war parity, Keynes had contended that it would result in an overvaluation of sterling of around 10%, and that this in turn would required reducing prices and wages in the export industries by the same amount. He called the theory 'that wages should be settled by economic pressure, otherwise called "hard facts" ' , the 'theory of the economic juggernaut', contrasting it unfavourably with a theory which holds 'that wages should be fixed by reference to what is "fair" and "reasonable" as between classes'. At this time his main objection to wage-cuts was solely on grounds of equity; since there was no way of reducing incomes and prices generally,  the decision to return to gold involved singling out a vulnerable group of workers. But he did not rule out the possibility of achieving a fair and economically desirable result from a national treaty to reduce all income s simultaneously.[58]  By the time he reached the ^Treatise^ position the argument about the effect of wage reductions was more sophisticated. Keynes's attitude to the moral aspect of such a policy had not changed: if anything it had hardened as a result of his examination of the ineffectiveness and harmful side-effects of monetary policy as a way of reducing prices and wages. As a member of the Macmillan Committee he was also impressed by public opposition to the policy of general wage-cuts: 'The unwillingness of employers and associations of employers, who have appeared before the Macmillan Committee to recommend this solution has been truly remarkable. In order to test this feeling, I have often in examination pressed them to fall back on this recommendation and almost always without success.'[59]

  He acknowledged, however, that wage-cuts could have beneficial effects. A reduction of money wages, or an undertaking by trade unions to increase efficiency without demanding commensurate increases in pay, could have a favourable effect on profit expectations and hence domestic investment; and it would also improve the foreign balance over the long period, provided that elasticities of demand were favourable and other nations did not follow suit. It certainly could not be ruled out of account, and Keynes kept returning to the question.
The almost complete rigidity of our wage-rates since 1929, in spite of the great reduction of all other price levels, is very striking to the imagination. The fact that, in spite of all adverse circumstances, we have been increasing real wages faster than ever before in our history, has undoubtedly much aggravated our other difficulties. We have been going aheadㅡby force of circumstances rather than by any deliberate decisionㅡrather faster than is wise. [60] 
He frequently urged restraint on trade union and pointed out that specific wage-reductions in the sheltered trades were in the interests of the workers themselves. During the Council's discussion of the Economists' report he committed himself to 'a theoretical case for, say, a 10% cut in wages and salaries accompanied by an extra 2/- income tax on other sources of income'. [61] Earlier he had raised doubts as to whether it was not preferable to raise working-class living standards by means of taxes and public welfare expen- ( ... ... )


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