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Keynes and Protection

Published online by Cambridge University Press:  03 March 2009

Barry Eichengreen
Barry Eichengreen
Affiliation:
Assistant Professor of Economics, Harvard University, Cambridge, Massachusetts 02138
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Abstract

The paper traces the development of Keynes's views of free trade and protection and their relationship to British economic policy from 1922 to 1946.

“Is there anything that a tariff could do which an earthquake could not do better?”

Type
Papers Presented at the Forty-Third Annual Meeting of the Economic History Association
Information
The Journal of Economic History , Volume 44 , Issue 2 , June 1984 , pp. 363 - 373
Copyright
Copyright © The Economic History Association 1984

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References

1 Keynes, John Maynard, Nation and Athenaeum (1 Dec. 1923).Google Scholar

2 See, for example, Balogh, Thomas, “Keynes and the International Monetary Fund,” in Keynes and International Monetary Relations, ed. Thirlwall, A. P. (London, 1976), pp. 68–89;Google ScholarRobbins, Lionel, Autobiography of an Economist (London, 1971), p. 156;CrossRefGoogle ScholarCrotty, James R., “On Keynes and Capital Flight,” Journal of Economic Literature, 21 (03 1983), 59–65.Google Scholar

3 To many readers, “planning” will connote central direction of the economy along Soviet lines. In the British discussion of the 1920s and 1930s, however, it was the labe lattached to incentives to induce the market to direct resources toward particular sectors—what is referred to in the current literature as “industrial policy.” In this paper I use “planning,” as that was the term preferred by contemporaries.Google Scholar

4 See Keynes, J. M., “The Underlying Principles,” reprinted in J. M. Keynes, Activities, 1922–1929: The Return to Gold and Industrial Policy, part 1, vol. 17 of The Collected Writings of John Maynard Keynes, ed. Moggridge, Donald (London, 1981), pp. 450–51 [henceforth JMK, followed by volume number].Google Scholar

5 JMK, vol. 19, part 1, p. 152.Google Scholar

6 Ibid., part 2, pp. 729–30.

7 The discussīons of these two bodies are treated with extreme brevity because they are also analyzed in Barry J. Eichengreen, “Sterling and the Tariff, 1929–32,” Princeton Studies in International Finance, pamphlet no. 48 (1981).Google Scholar

8 JMK, vol. 20, p. 115.Google Scholar

9 Ibid. For the arguments of Keynes's, critics, see Tariffs: The Case Examined, ed. Beveridge, William (London, 1931).Google Scholar The competing positions are analyzed further in Eichengreen, Barry J., “Protection, Real Wage Resistance and Employment,” Weltwirtschaftliches Archiv, 119 (09. 1983), 430–52.CrossRefGoogle Scholar

10 For details, see Cairncross, Alec and Eichengreen, Barry, Sterling in Decline: The Devaluations of 1931–1949 and 1967 (Oxford, 1983), chap. 3.Google Scholar

11 See JMK, vol. 9. On the use of Keynes's arguments, see Public Record Office, T172/1768, “Samuel to Chamberlain,” 17 Dec. 1931.Google Scholar

12 Harrod, R. F., The Life of John Maynard Keynes (London, 1951), p. 504.Google Scholar

13 Much the same debate appears in the recent literature on the economic effects of the Hawley-Smoot Tariff. The dominant view would appear to be that Hawley-Smoot's domestic impact was initially expansionary (since it raised prices relative to costs and encouraged supply) but ultimately contractionary (since it elicited retaliation that depressed American export demands). See Meltzer, A. H., “Monetary and Other Explanations for the Start of the Great Depression,” Journal of Monetary Economics, 2 (05 1976), 455–71.CrossRefGoogle Scholar

14 JMK, vol. 25, p. 28.Google Scholar

15 Ibid., p. 188. Discussions of the negotiations over Lend-Lease and the Clearing Union are provided by Gardner, Richard N., Sterling-Dollar Diplomacy (New York, 1956);Google Scholar and Horsefield, J. Keith, The International Monetary Fund, 1945–1965, Volume 1: Chronicle (Washington, D.C., 1969).Google Scholar

16 Again, see Gardner, Sterling-Dollar Diplomacy.Google Scholar

17 See, for example, Hubert Henderson's views in “International Economic History of the Interwar Years” (originally circulated on 3 Jan. 1943) in Henderson, H. D., The Interwar Years and Other Papers (Oxford, 1955).Google Scholar

18 JMK, vol. 26, p. 304; JMK, vol. 27, pp. 427–46.Google Scholar

19 For further discussion of Keynes's views of the relationship between market forces and planning, see Cairncross, Alec, “Keynes and the Planned Economy,” in Keynes and Laissez-Faire, ed. Thirlwall, A. P. (London, 1976), pp. 36–58.Google Scholar

20 JMK, vol. 21, p. 208.Google Scholar Keynes's views also may have been influenced by Young's and Robinson's contemporaneous work on scale economies and imperfect competition: see Young, Allyn, “Increasing Returns and Economic Progress,” Economic Journal, 38 (1928), 527–42;CrossRefGoogle ScholarRobinson, Joan, The Economics of Imperfect Competition (London, 1933).Google Scholar

21 JMK, vol. 21, pp. 208–10.Google Scholar

22 Ibid.

23 This essay appeared in The New Statesman and Nation, and also in the Yale Review; JMK, vol. 21, pp. 233–46.Google Scholar

24 Hansard Parliamentary Debates, vol. 138, no. 41, 18 Dec. 1945.Google Scholar