No.19

Henderson and Keynes on the Welfare State:desertion and integration
Atsushi KOMINE
April 2000

1

Henderson and Keynes on the Welfare State:desertion and integration
Atsushi Komine
Key Words : Henderson, Keynes, Lloyd George, the General Election in 1929,
a managed economy, public works, the Welfare State.
JEL Classification (Journal of Economic Literature)(a)primary: B31 History of Thought: Individuals
B Methodology and History of Economic Thought(b)secondary: N14 Europe: 1913-71, N1 Macroeconomics and Monetary
Economics; Growth and Fluctuations, N Economic History
Abstract
It is difficult to judge their collaboration and division appropriately, unless wetrace Henderson's basic idea. Previous studies have paid little attention to the idea
and his original writings.
We will develop the next two viewpoints. Firstly, before 1929, is it certain that
their views coincided, and can we really call their work co-operative research?
Secondly, if breakdowns really occurred between the two men, when, why, and towhat extent were Henderson and Keynes divided? The latter question implies
doubts as to whether or not Henderson's experience of public office was the only
true reason for their division.
We can summarise this paper into the following four points. Firstly, we assert
that, before 1929, Henderson and Keynes shared the same logical steps: threeelements (bad monetary policy, the unemployment problem, and the capital plan)
are naturally joined into one ring. Secondly, we should consider primarily the
impact of the general election in June 1929, and secondarily the impact of his
inauguration as secretary in the Economic Advisory Council in January 1930.
Thirdly, we can claim that the fears and warnings of Henderson stem from his
consistent doubt about the dole type Welfare State. Fourthly, we can arrive at theconclusion that they share the same idea, "managed economy", on the grounds ofthe concept of "entrepreneur-in-chief".

2Henderson and Keynes on the Welfare State: desertion and integration
Atsushi Komine*
Section 1 Introduction
Section 2 A brief biography
Section 3 The relation between the two men
3-1 Collaboration
3-2 Estrangement
Section 4 The pledge examined
4-1 Summary
4-2 Five points at issue
4-3 Economic thought reflected
Section 5 Causes of unemployment and countermeasures
5-1 Leading articles
5-2 The logic of both sides
Section 6 The cataclysm from 1930
6-1 Classification of unemployment
6-2 Weak points of public works
6-3 Cutting of the link
Section 7 The unemployment allowance
7-1 From scepticism to unemployment allowance
7-2 The establishment of the Labour Party administration
7-3 Qualitative alteration after 1930
7-4 Henderson's objection to the idea
Section 8 The entrepreneur-in-chief
8-1 Abstraction of economics
8-2 The price mechanism
8-3 Managed economy
Section 9 Conclusion
References*

Niigata Sangyo University. Contact me by e-mail, komine@econ.nsu.ac.jp3Section 1

Introduction

The goal of this paper is to investigate both the meaning and the extent of thecollaboration between H. D. Henderson (1890-1952) and J. M. Keynes (18831946). As a fervent supporter of the Liberal Party, Henderson was the chief editorof the Nation and Athenaeum, which could at that time be regarded as the
instrument of the Party. In addition, he was so close to Keynes that they worked
together. For example, they co-authored such writings as the article "Can Lloyd
George do it?" (1929) and the book Britain's Industrial Future (1928). However,their collaboration suddenly came to an end around 1930. Some studies tried toclarify the reason for this. According to them, Henderson's making public office inJanuary 1930 was a crucial event. He became a secretary of the Economic
Advisory Council and a member of its treasury side. However, those studies, whichemphasised his experience as a public officer, did not mention his own writings,
thus overlooking his consistent economic thought. The question of how to weighup the similarities and differences between the two famous economists is still open.
This paper distinguishes itself from previous research by focusing specificallyon Henderson's own papers, leading articles, and memoranda, as well as on his
1929 joint article with Keynes. Furthermore, in order to elucidate points at issue, afull comparison is made between Henderson and Keynes. After that, the following
two aspects or questions are addressed: firstly, before 1929, did their views reallycoincide, allowing us to call their work co-operative research? Secondly, if they
disagreed, when, why, and to what extent were Henderson and Keynes divided?
This paper is organised as follows. Section 2 gives a short biography ofHenderson. Section 3, which is regarded as the research proper, presents a surveyof their contemporaries' and researchers' judgement on the collaborative or divided
nature of their relationship. Section 4 analyses "Can Lloyd George do it?" indetail in order to bring out the key points of the article, and compares it with his
own economic thought before and after 1929. Sections 5 to 8 constitute the core of
the paper. In accordance with central points indicated, Section 5 considers hisanalysis, prior to 1929, of unemployment. The comparison with Keynes' is also
made. Section 6 traces the change of Henderson's claim, which was made around41930, on the causes of unemployment and its remedies. Section 7 concentrates on
the discussion of unemployment benefit. Section 8 focuses on Henderson's
economic thought as a background to his assertion. Finally, Section 9 summarises
this paper in order to clarify the most important claim, and draws the conclusion.
Section 2 A brief biography1
Hubert Douglas Henderson (1890-1952) was born in Beckenham, Kent on 20
October 1890. He was the youngest of six brothers, his father was a Scottish
banker2, and his mother was descended from an Edinburgh ship-owner.
While he was being educated at Aberdeen Grammar School and then at Rugby
Public School, his interest gradually shifted from classics to mathematics. He wasselected to study at Emmanuel College3, Cambridge in 1909. During his college
life, a movement of social reform, which later came to be known as the Liberal
Reforms4, was organised by the Liberal Party Governments (1905-1915). In
addition to this political background, because he only attained a Third Class in thefirst part of the Mathematical Tripos, Henderson changed to read the second part of
the Economics Tripos. This time he was awarded a First Class in 1912. At that time,
Dennis Holme Robertson5 was his classmate. His college life was so active that he

1

This section relies mainly on Clay [1955], Robinson [1987], and Wilson ? [1953].

2

At first, his office was in the North of Scotland Bank in Aberdeen. He later moved to Cydesdale

Bank in Glasgow.
3

Richard Valentine Nind Hopkins (1880-1955) graduated from the same college. Hopkins andHenderson later worked together in the Treasury.
4

The Chancellor of the Exchequer was Lloyd George. Examples of the reforms abound: theAdministrative Provisions (1907), the Old Age Pensions Act (1908), the Labour Exchange Act(1909), the National Insurance Act (1911), and so on. He also established the "People's Budget"(1909), in which new taxes were imposed on the rich.
5

Robertson changed from classics to economics (Skidelsky [1983] p.213). F. Lavington, who isfamous for his theory of trade cycles, took the Tripos in 1911. After working in the Board ofTrade, he returned to Emmanuel College as a teaching fellow.
5became President of the Union, as Keynes did in 19046. In those days in Cambridge,
young teachers - not only Professor Pigou, but also Keynes, Charles Ryle Fay, andWalter Thomas Layton7 - played both an active and an attractive part.
The First World War broke out in 1914. Though he applied for military
service, Henderson was refused on medical grounds. Then, after graduating, he wasrecruited by the statistics division - organised by Layton - of the Board of Trade.
For the first time, he had experience as a government officer. He was dispatched
to Manchester as Secretary of the Cotton Control Board in 1917. After observing
practical aspects of industrial management, he recognised himself to be a specialist
who could afterwards publish the pamphlet on the Board. During the War8, hemarried Faith Bagenal.
After the end of the War, in 1919, Henderson was employed as a teaching
fellow at Clare College, Cambridge. He published a textbook, Supply and Demand(1922), although he was busy with classes and tests. The textbook was volume
one9 of the Cambridge Economic Handbooks of which Keynes was general editor.
For the next three decades, Supply and Demand was used as an introductory bookto economics10. In 1922, he also published the Cotton Control Board.
The first turning point for him was in 1923, when he was invited - on Keynes'
powerful recommendation - to become editor of The Nation and Athenaeum, which
was to change its character11. Keynes was chairman of the Board of Directors.
Writing leading articles and so on, Henderson played an important role as chief
editor, and the magazine spread Liberal Party views to the masses. Additionally,
he published Inheritance and Inequality: A Practical Proposal in 1926. This was
one of "The New Way" Series12, which were the outcome of discussions among

6
7

Harrod [1982(1951)] p.97.
A Liberal economist (1884-1964), Editor of The Economist. Moggridge [1992] p.888.

8

He shared a flat with Robertson, see Clay [1953] p.27, preface.
Volume two is Robertson's Money (1922).
10
Robinson [1987] p.639.
11
H. W. Massingham, the previous editor, had resigned and decided to join the Labour
9

Party. Moggridge [1992] p.391.
12
The pamphlets were designed as a contribution to the clarification of post-war confusion.
6

members of the Committee and the Council of the Liberal Summer Schools.
Members included Keynes, Layton, and Henry Clay. Moreover, Henderson
participated in the writing of Britain's Industrial Future in 1928, later known as the
Yellow Book. This book was also a product of the Liberal Summer Schools, andwas written by the executive committee of the Liberal Industrial Inquiry. Naturally,
Henderson was also one of the writers13, though his contribution cannot be
disentangled from the book as a whole. To sum up, in the 1920s, he was positively
concerned with the ideals of the Liberal Party and liberalism.
The year 1929 was important for Henderson. Taking the coming generalelection into consideration, Lloyd George - whose Party was out of office officially announced a pledge in March, in the pamphlet "We can conquer
unemployment". This pledge caused a great dispute in the Conservative Party andin Whitehall. In May, in support of his policy, Henderson and Keynes publishedtogether "Can Lloyd George do it?: the pledge examined". What is more, as a
Liberal candidate14, Henderson stood for Cambridge University. The Party was
defeated completely in the general election on 30 May. He himself was one of the
failures15. For Henderson, this was closely associated with actual political action.
After that, the McDonald's Labour Party administration took office on 5 June.
The second turning point came in 1930. Under the Labour Party Cabinet, a
new national conference on industry was organised. It was the Economic
Advisory Council. In January, Henderson16, who left the Nation, took part in theCouncil as an assistant secretary, and later as joint secretary. This was his
second time as a civil servant. However, since this national committee did notfunction at all, other segmented multiple sub-committees were set up as advisoryorgans. One of them was the committee of economists, appointed in May 1930.
Keynes became chairman, and Henderson participated on the side of the Treasury.
13

There were thirteen members, including Layton (chairman), Lloyd George, B. S. Rowntree,

and Keynes.
14

Keynes had once refused to contest. See CW19 p.816.
Clarke [1988] p.101.
16
He did not accept to be a professor at the London School of Economics.
15

Clarke [1988] p.142.
7

Now the two men seemed to be divided. Almost at the same time, a committeeorganised by Lord Stamp was also set up. As a member of the committee,
Henderson explained the current economic situation to the Prime Minister every
month. This continued until the next World War broke out. Over and above, in1935 he became chairman17 of a sub-committee that examined the unemployment
insurance act. In short, Henderson was a public servant during the first half of the
1930s.
Finally, he reached a third turning point in 1934. Henderson took up the
position of lecturer at All Souls, Oxford University. He became engaged inmanaging university administration. For example, he formed an economist
research group18 to investigate businessmen's actual behaviour, and in 1938 he
founded an academic magazine, Oxford Economic Papers. Though he entered ascientific environment, he remained in contact with the government office. For
instance, in 1938 and 1939, he took a trip to the West Indies in order to study its
economic situation, as a member of the Morne Commission19. On the eve of theWar, in 1939, the investigation department - organised by Lord Stamp - was again
set up in Whitehall. Henderson also took part in it. However, he moved to theTreasury during the War as an advisor on economic policy. He was chosen as amember of the Royal Commission on Population in 1944, and later took over thechairmanship.
In 1945, Henderson was elected as Drummond Professor20 of Political
Economy at Oxford University. Outside Oxford, he became President of theRoyal Economic Society in 1950. Although his colleagues elected him to the postof Warden in 1951, that is, President of the college in the symbolic sense, he wasunable to perform the job because of his disease. Henderson died on 22 February
1952.

17
18

See Debenham [1953] p.42.
Empirical interviews made it clear that the form of actual business behaviour was not the

maximum principle as to price and interest. One product of the group is Hall and Hitch [1939].
19

Royal Commission of Enquiry into the economic problems of the West Indies.

20

His successor was John Richard Hicks.
8Section 3 The relation between the two men
No papers or books brought out Henderson's own economic thought, treating
him as a protagonist. He was only referred to in his own obituaries, memorial
writings, and in the context of researches on Keynes. This section begins by listing
quotations about him. Those references then come to be summarised in two parts:
collaboration and estrangement.
3-1

Collaboration

First of all, we will show the very close relationship between the two
economists. Many related contemporaries and present researchers have testified
along the following lines.
Few knew about their exact relationship better than Henderson's wife, Faith.
Remembering the day when Keynes came and asked him to be the editor of the
Nation, she testified that "for the next seven years Hubert worked in the closest
collaboration with Keynes"21. As to the joint pamphlet (1929), she regarded it as " ...
a true work of collaboration about which there was never any question as to whogave the most"22.
Henry Clay23, who had left the University of Manchester and come to the
Bank of England, reviewed the Yellow Book (1928) as follows: "Henderson's partin conducting the inquiry and drafting the report was considerable, though it cannot
be disentangled from a large co-operative work"24.
We naturally introduce Keynes' own words. When Henderson ran for generalelection in 1929, as mentioned above, Keynes expressed his support for him,stating:

21

F. Henderson [1953] p.8.
F. Henderson [1953] p.8. See also CW9 p.86.
23
A specialist on Rationalization of Industry. Later, he edited a book of collected writings of
22

Henderson, The Inter-War Years and other Papers (1953).
24

Clay [1953] p.7, preface.
9

in the two causes of international peace and disarmament, and of national
development as a remedy for unemployment25, which look like being the two
principal issues of this Election. For Mr Henderson has played a prominent partin forming the opinion and policy of the Party on these questions. (CW19 p.816)
Moreover, special acknowledgement was made 26 to him in Keynes' The Treatise on
Money (1930):
Amongst several others who have helped at different stages, I would
particularly like to mention Mr H. D. Henderson. (CW5 p.14, preface)Thus, we can conclude that Lady Henderson, Clay, and Keynes himself
considered it natural that there was surely a strong co-operation between the twomen. We now turn to present studies.
Today, the most famous view is taken by the editor of the Collected Writingsof John Maynard Keynes (hereafter referred to as CW) as follows:
It has not proved possible to apportion the pamphlet between its joint
authors ... As editor-in-chief of the Nation and chairman of its advisory board,
Henderson and Keynes worked closely together, and both men had taken a majorpart through the years leading up to the election in framing the Liberal plans.
(CW9 p.86)
Moggridge later recorded that "by 1930, Henderson had a long record ofcollaboration with Keynes on campaigns to influence economic policy, if not of
success in achieving that influence"27. Two things are clear. Firstly, the editors,
especially Moggridge, shared the same view as Lady Henderson, quoting the above
sentences in footnote 22. Secondly, it is necessary here to emphasise the fact thatsuch professional editors as E. A. Robinson, Elizabeth Johnson, and Donald
25

Keynes himself had tackled the unemployment problem since 1924. See CW19 p.182.

26

The others are Robertson and R. Kahn.
Moggridge [1992] p.502.

27

10

Moggridge could not find any drafts of "Lloyd George". Therefore, we cannot
directly decide on which part of the article Henderson really wrote.
Peter Clarke described it from a different angle. According to Clarke [1988]:
He and Keynes shared a schooling in the Marshallian tradition ineconomics and in politics an outlook shaped by the New Liberalism of the
Edwardian period. (Clarke [1988] p.78)
New Liberalism consists of four elements: the end of laissez-faire, the rejection ofclass war or nationalisation, a remodelled Liberalism or the managed economy, andco-operation with Labour28.
From the above quotations, we can conclude that both their contemporaries
and themselves and present researchers recognised them to be close, in thought andin theory. In addition, as Skidelsky [1992] made it clear29, the Hendersons were on
friendly terms with the Keynes, at least in the 1920s.
3-2

Estrangement

Secondly, we will discuss their estrangement in theory and in thought, if itexisted at all. A final conclusion can be drawn from Keynes' conscious statement
about the 1941 budget, later called "the first Keynesian budget"30.
The critics are now all content except Hubert. (CW22 p.347)31
Indeed we were a wonderfully united team. The opposition which has given
me trouble and worn down my nerves was mainly from Hubert Henderson.

28

Clarke [1988] pp.79-80.
For example, see Skidelsky [1992] p.145, p.217, and p.339.
30
The budget includes national income account and inflation-gap analysis whose target point is
29

full employment.

Keynes appreciated the budget as follows: "the logical structure, and methodof a wartime Budget which, together with the new White Paper, is really a revolution in publicfinance" (CW22 pp.353-354).
31

A letter to James Meade, 28 March 1941.
11

(CW22 p.354)32
Researchers share the view that, around 1930, when Henderson left the Nation,
the two men differed in many respects. Take five quotations, for example. As
Clarke [1997] pointed out: "Henderson was thus one of the first and one of themost persistent critics of Keynesianism, both in theory and in practice"33. The
editor of CW said: "Keynes retained an intermittent exchange of memorandumwith Sir Hubert Henderson, in many ways the White Paper's strongest critic"34. As
Middleton [1998] demonstrated: "Indeed, the case of Henderson illustrates how anessentially radical and optimistic spirit can be broken by experience of government
service ... "35. As Clay [1955] stated: "The changes in his attitude to particular
projects or policies were the fruit of experience"36. To quote Harrod [1953],"Henderson had been deeply impressed with all those practical difficulties whichdamp the zeal of the most ardent reformer when he finds himself in Whitehall"37.
We need to pay attention to the fact that they focused on Henderson's experience of
civil service.
Then, when and why did his change in opinion occur? Three scholars tried toanswer this question. Firstly, as Skidelsky [1992] put it: "The change inHenderson's views was partly the result of a change in position: Henderson was
now inside the government machine, Keynes outside it"38. Then, Skidelsky pointed
out that his defection was signalled in a letter from May 1930. We will deal withthis letter in Section 6. Secondly, as Howson and Winch [1977] said:
After their collaboration in the latter half of the 1920s, a gap opened up
between Henderson and Keynes on a variety of issues - a gap which widenedwith time and the deterioration of the economic situation. This divergence of32

A letter to his mother, 14 April 1941.
Clarke [1997] p.147.
34
CW27 p.372.
35
Middleton [1998] p.82.
36
Clay [1955] p.15, preface.
37
Harrod [1955] p.59.
38
Skidelsky [1992] p.365.
33

12

opinion can perhaps be partly attributed to the differences in their official
positions, with Henderson becoming increasingly associated with the problemsof government seen from inside, while Keynes remained a privileged outsider ...
(Howson and Winch [1977] p.66)
They continued to state that "as early as March 1930 Henderson had expressed
doubts to Keynes"39. Thirdly, Moggridge [1992] completely approved of this study,
stating that "a gap opened up between the two .... Their differences may havereflected a difference in their official positions, and hence sense of
responsibility"40.
Austin Robinson [1987] looked at another aspect of the estrangement.

It was not Henderson's fault that, despite the ingenuities of Keynes and thedebates of countless committees, they failed to do so. It was the fault of ageneration of politicians who could not be persuaded to grasp the nettle. But
these years of frustration had turned Henderson into a different man. He was nolonger the crusading optimist. (Robinson [1987] p.639)
As mentioned above, their opinions almost coincided. To put it briefly, for along time - especially for the seven years following Henderson's coming to the
Nation - he and Keynes shared a political and theoretical style in common.
However, the two men seemed to be thoroughly divided when the Economic
Advisory Council was held in January 1930. According to past studies, the reason
was quite clear. Henderson's experience of public service had been influential. In
consequence, he became a drastic and persistent critic of Keynesianism.
This paper will distinguish itself from previous studies by criticising theirover-simplification, and by focusing on Henderson's own economic thought. To
make the question at issue evident, we will develop the next viewpoints. Firstly,
before 1929, is it certain that their views coincided, and can we really call their
39
40

Howson and Winch [1977] p.66.
Moggridge [1992] p.502.
13

work co-operative research? Secondly, if breakdowns really occurred between
the two men, when, why, and to what extent were Henderson and Keynes divided?
The latter question implies doubts as to whether or not Henderson's experience of
public office was the only true reason for their division.
In order to answer this question, we need to examine Henderson's own
writings. Before describing them in detail, however, it is useful to address thequestion raised by the article "Lloyd George" (1929) in Section 4. It is necessary
here to sum up and to highlight the key points of the joint paper.
Section 4 The pledge examined
As for the coming general election in 1929, the issue in those days was a
remedy for unemployment. Since 1920, the rate of unemployment in Britain had
reached the level of one million41. Some of the Liberal Party camps such as
Keynes's were convinced that public works were a solution to cut down
unemployment, and pressed the Government to carry them out. Their claim wassymbolised by Lloyd George's pledge, "We can conquer unemployment" (March
1929). The government reacted to his pledge immediately. In April 1929, theTreasury View was stipulated for the first time in a budget speech by Winston
Churchill, the Chancellor of the Exchequer. The central point of this view was
the following: "Borrowing money by the government should crowd out private
investment. Therefore, public works by national debts do not bring additional
employment." In May, a pamphlet, "Can Lloyd George do it? --- The pledge
examined," was published by the co-signatories Keynes and Henderson in supportof the pledge. The following day, only Chapter 7 was printed again in the Nationby the co-signatories. Keynes later edited Chapters 3, 9, 10, and 11 in his Essays in
Persuasion (1931). In May, the Treasury in turn announced a White Paper,"Memoranda on certain proposals relating to unemployment". It was just a41

According to Feinstein [1972] pp.T126-T127, Table 57, the figure for unemployment in 1929

was 1500000, and the rate was 7.3 %. However, there is still a dispute about the figures frominter-war Britain.
14

declaration of war that would be called an "economic dispute" between the twocamps.
4-1

Summary

The co-signatory pamphlet consisted of 11 chapters. In this section, after
each chapter is introduced, it is summarised in five important points.
In Chapter 1, "Mr Lloyd George's pledge," they were wholeheartedly
supporting the pledge, and appealed to public opinion for the carrying out ofnational programmes. They reproached people for being pessimistic, stating that"the cumulative effect of renewed prosperity will surpass expectations"42. A crucial
point to emphasise here is that they rightly recognised that the vital point, which
generated arguments for and against, lay in the "transfer problem". This phrase
meant "shifting men from industries where they are permanently redundant andsettling them in their new work"43. This difficulty, however, was only of secondary
importance to them.
It is useless to try to tackle the "transfer problem" seriously until the jobs
have first been created elsewhere, and employers are crying out for men. ... It isuseless to transfer men until there is something to transfer them to. (CW9 p.90)
According to Keynes and Henderson, the government should start by carrying out
large-scale investment plans, and go on to tackle the transfer problem. The
converse was not true. In other words, priority was given to the macroeconomic
area, not to the microeconomic one. The former meant raising demand in general,
whereas the latter indicated the transfer problem between individual industries.
In Chapter 2, "the common sense of the problem," they criticised the policiesof the Prime Minister, Baldwin. They declared that, in the pamphlet, they would
justify the claim that: "if new forms of employment are offered more men will be

42
43

CW9 p.89.
CW9 p.89.
15

employed"44. In Chapter 3, "the facts of unemployment," the loss due tounemployment in the 1920s was outlined. In Britain, one-tenth or more of the
population had had no jobs for eight years. The number of insured workers had
never been under one million. For this reason, the unemployed took in cash a sumof £500 millions. It was, nevertheless, in vain. Added to this, there was also the loss
in profits to employers and in taxation to the Treasury. There had been a total lossof £2000 millions since 1921, estimated from the annual output per capita. In
contrast, the pledge of the Liberal Party was a plan ensuring 500,000 returns toemployment for £100 millions a year. The cost of the plan was only 5%
compared to the loss hitherto shown - "it is a very modest programme"45. This
chapter had unique characteristics, as the economic situation was analysed using
newly-developed macro-statistics of unemployment46, and the cost ofunemployment was too high because the "opportunity cost" of unemployment wasalso too high. What needs to be emphasised here is that there was no reference tothe cause of unemployment.
In Chapter 4, "the Liberal programme", concrete National Development plans
were presented. Such plans included the national transport system --- roads,
railways, and bridges ---, national housing, and other developments --- telephoneand electrical development, and drainage ---. Their argument in this chapter was
in fact a summary of Britain's Industrial Future. In Chapter 5, "the Government's
case", they accused the Conservative administration of overlooking remedies tounemployment, owing to temporality and inefficiency.
In Chapter 6, "How much employment will the Liberal plan provide?", theyexamined the quality and quantity of employment created by the plan. They
claimed that each million pounds spent annually on roads would employ 5,000
workers. Not only did this have a direct effect, but it also had an indirect one. It isvaluable to point out that Keynes and Henderson realised the importance of indirect
employment and a cumulative force. For example, these phenomena indicated that"the construction of the road entails a demand for labour and also for other

44

CW9 p.92.
CW9 p.93, italics in original.
46
It was started by the Ministry of Labour in 1923, see CW9 p.92.
45

16

commodities, which, in their turn, entail a demand for labour"47. For them, a policyof development "would mean an increase in effective purchasing power which
would give general stimulus to trade"48.
the indirect employment which schemes of capital expenditure would entail
is far larger than the direct employment. (CW9 p.106)
It is not possible to measure effects of this character with any sort ofprecision .... (CW9 p.107)
These quotations were very important, because they pointed out that starting by
developing aggregate demand benefited employment. They also showed that there
was a cumulative positive effect for the economy as a whole. Moreover, a concept
similar to effective demand was used. Again, macroeconomic scope took priority.
Simultaneously, the sum of the total effect by the cumulative process could not be
identified; that is, it is not yet the perfect multiplier analysis. Besides, the above
quotations were very important in the light of the quality of employment.
Objections against the policy of development were: "the unemployed can not suitthe new jobs". According to the co-authors, these objections missed out the indirect
employment factor. Taking this factor into consideration, the demand for newworkers would grow in the whole of industry if aggregate demand expanded.
Chapter 7, "What will it cost?", was reproduced in the Nation. According totheir calculation, nearly half of the cost of the Liberal plan "would be recovered at
the time"49. The reasons for this were that some programmes would pay forthemselves, that the reduction of the number of unemployed people would lead tothe creation of the Unemployment Fund, and that revenues were expected to go up
with the increase in national income. In Chapter 8, "Is it socialism?" the question
was asked, "why must the government play a part itself?"50 The answer was thefollowing: it was a fact that a large part of capital programmes "have fallen under47

CW9 p.105.
CW9 p.106.
49
CW9 p.112, italics in original.
50
CW9 p.113.
48

17

the influence or the control of governmental departments" 51. This attempt was nota socialist one, because the government did not deprive private companies of theirmeans of production.
Chapter 9, "Will it merely divert employment from other enterprises?", was a
direct objection to the Treasury View. According to the Chancellor's budget speech,
the issue of public bonds must reduce the amount of money available for privatecompanies. Therefore, new employment on state plans was a mere substitute forordinary employment. For Keynes and Henderson, this argument was false, as
well as unfounded. To begin with, if this inference was applied to private
enterprises, a fallacy of composition was clearly revealed. It never happens that a
new plant scheme by some motor company would derive the capital of some otherchemical firm 52. Secondly, this argument did not take the main sources of the newinvestment into account. In fact, there were three sources: firstly, the savings to pay
the unemployed; secondly, the savings wasted through lack of credit; and finally, adecrease in the amount of foreign lending or bonds. Regarding the second point,
the claim that credit expansion brought about inflation was fallacious, because
inflation occurred when everyone was already employed and when all savings werebeing used up. The next sentence will be a conclusion.
It is precisely with our unemployed productive resources that we shall makethe new investments. (CW9 p.120, italics in original)
Chapter 9 was a good mirror for Keynes' economic thought. This is why it was also
reproduced in Essays in Persuasion. Let us point out three features. Firstly, theyrecognised that savings did not bear fruit to investment, even though they did not
use the specific word, hoarding. In those days, Keynes frequently argued on thispoint with D. H. Robertson. Secondly, their analysis implied the macroeconomic
saving-investment technique. The crucial proposition in Treatise on Money (1930)
was that inequalities between saving and investment should generate trade cycles,in the manner of Knut Wicksell. Thirdly, Keynes' economic thought was reflected
51
52

CW9 p.113.
See CW9 p.115.
18

in the pamphlet in the sense that it contained an original idea53 to be called "thepriority-of-the-internal-equilibrium principle". These features meant that theauthors regarded it as natural that human, material, and financial resources had
been left unused in Britain.
In Chapter 10, "the policy of negation", the attitude of the Treasury wascriticised. The Treasury had blocked the outlets and purposes of savings bycurtailing all capital expenditure. It turned out that huge amounts of savings flowedabroad. Consequently, the bank rate had to be raised due to a loss of gold. Needlessto say, this policy was not desirable for the economic situation. In Chapter 11, "thebreath of life", they impeached the government for its watchwords --- negation,
restriction, and inactivity. It was now necessary "to be bold, to be open, to
experiment, to take action, to try the possibilities of things"54.
4-2

Five points at issue

Let us bring out the main five points, summing up the co-authored article.
The first point is the cause of unemployment. Strange as it may seem, thiscause was not clearly dealt with in the article. They only criticised the Treasury
for being frightened by the national development programmes; that is, for making
the reduction of public bonds their number one priority. For example, they did notconsider that a high bank rate led to unemployment, as Keynes argued in otherpapers55. In connection with this point at issue, let us also refer to the "transfer
problem". They realised that this problem was important. It was so important that it
could be the object of the most powerful criticism of their pamphlet. However, it
was not the basic "cause" of unemployment but a "difficulty" which was reducedby the extension of general effective demand. The second point concerns thecountermeasures to unemployment. The pamphlet consistently advocated largescale national investment plans. The reasons lie in the third and fourth points. The
53

Hawtrey shares this view in common. The point is argued by Komine [1996].
CW9 p.125.
55
For instance, "The Economic Consequences of Mr Churchill" (1925) and "The Industrial
54

Crisis" (1930). See CW9 p.220 and CW20 p.345.
19

third point is the importance of indirect employment and of the cumulative process.
The large-scale capital plan was approved because it would create the two elements
as well as direct employment. The fourth point is the cost of the plan. They
pointed out the existence of an idle balance and the decrease in unemployment
benefit. Using these funds, the Liberal plan would cost much less and work a lot
better. The fifth point is the background to this plan. It was neither socialism nor
Laissez-faire. They became aware of the real economic world. Managed economy
had been an inevitable trend. Therefore, they envisaged a third solution.
4-3

Economic thought reflected

To what extent then did the pamphlet reflect Henderson's economic thought?
Let us examine his leading articles in the Nation from January to May 1929, justbefore the pamphlet was published. It will be summarised in five parts.
First of all, Henderson recognised56 that, in 1929, the most urgent economic
problem was finding a solution to unemployment, and that the means to solve it
was the National Development Policy. In addition, this plan was only practicable
under Liberal administration. The acknowledgement of these facts corresponded
to Chapter 1 of the joint article. Secondly, he stressed the importance of indirect
employment, especially in road construction. As he put it:
When you build a road, not only do you employ men directly on the road,but also many others indirectly in supplying the materials of which the road isbuilt. The greater part of the expenditure (though, of course, by no means all) is
translated in one form or another into a demand for labour.
(Henderson [1929d] p.710) 57
This logic was quite similar to that of Chapter 6 of the pamphlet. Thirdly, he

56"The Conversion to National Development" (26 January 1929), Henderson [1929a] p.574.

57"The Objections to Capital Expenditure" (23 February 1929). A similar claim is seen in "Is

there any Unemployment?" (4 May 1929), Henderson [1929m] p.150.
20

considered that even a large-scale capital expenditure plan would be payable, since
he noticed that the costliest thing was to let the unemployed be unemployed. The
reason was that "many workpeople who are now employed would be receiving
wages instead of unemployment pay, and would increase accordingly theirconsumption of commodities" 58. This part corresponded to Chapter 7. Fourthly, thecrowding-out phenomenon was denied. In other words, the Treasury View was
discarded as an old doctrine. The view that work by public authorities simply
diverted one from the ordinary industry was "the old and obsolete dogma"59. The
dogma was as stupid as the claim that banks "can only grant manufacturer Paul anadvance by taking it away from manufacturer Peter"60. This metaphor was used in
Chapter 9. Fifthly, the following sentences were important:
We are wasting at present in idleness not only a substantial portion of ourlabour power, but a substantial portion of our savings as well.
(Henderson [1929d] p.711)
We conclude, therefore, that a policy of capital expenditure ... would serve
mainly to divert to home development savings which now find their way
abroad ... (Henderson [1929d] p.711)
This acknowledgement was also identical to that of Chapter 9 of the joint article.
As mentioned above, it was proved that Henderson's economic thought wasreflected perfectly in "Can Lloyd George do it?", precisely because of this coreacknowledgement. For instance, Henderson powerfully supported the importanceof indirect employment and the rejection of the Treasury View. In that sense, we
can conclude that his collaboration with Keynes worked completely. They only
disagreed on the fundamental cause of unemployment.
The next problem is how their collaboration changed with time. On the basisof the above summary, we will investigate how Henderson's claim about economy
was changing. We will compare his thought before 1930 with that after 1930 with
58

Henderson [1929m] p.151.
"The Government Decision" (20 April 1929), Henderson [1929l] p.66.
60
Henderson [1929a] p.575. The same metaphor appeared in Henderson [1929d] p.710.
59

21

respect to the five points in this section.
Section 5

Causes of unemployment and countermeasures

Let us examine some of the leading articles from the Nation, as they are agood reflection of Henderson's economic thought before 1929. The following
paragraphs sum up his representative leading articles from 1923 to 1927.
Afterwards, we will reconstitute his economic thought at that time, and compare itwith that of Keynes.
5-1 Leading articles
In a leading article from November 1923, he opposed the policy of theConservative Party. According to him, the abolition of the deflationary policy wascompletely different from protective trade. The effect of the latter only reached alimited number of industries. On the other hand, the abandonment of thedeflationary policy removed an obstacle. There was "the home market at theexpense of the export trades, which account for the greater part of ourunemployment"61. Putting forward protection and a high exchange rate as asolution to unemployment was "the most extreme instance of false political
diagnosis in our modern history"62.
In "Will unemployment increase?" (4 April 1925), he asserted that63: the main
explanation of large unemployment is the decline in foreign trade. This is a factor
which it is not in our power to correct. It is necessary to secure a diversion oflabour power to new industry. There are two answers. First, to decrease
unemployment in the metallurgical industries, what is needed is the undertaking of
capital development at home, which calls for this type of industry. Second, "thesituation calls for the greatest possible mobility of labour"64, mobility between

61

From F. Henderson [1953] p.16.
From F. Henderson [1953] p.16.
63
Henderson [1925a] p.15.
64
Henderson [1925a] p.15.
6222

different occupations and between different districts in the same occupation. It wasthen summarised as follows:
Capital development and greater mobility are two essential conditions of areduction of unemployment substantially below the figure of a million; and Mr.
Lloyd George is, we believe, entirely right in the persistence with which hestresses both these points. (Henderson [1925a] p.16)
Moreover, according to him, a much more important problem was hidden in the
background. Our "monetary policy is of critical importance ... a return to gold thisyear cannot be achieved without terrible risk of trade depression and a serious
aggravation of unemployment"65. As Keynes pointed out, due to a considerably
overvalued sterling, the export industry had been largely damaged.
"Diagnosis and remedy" (9 May 1925) criticised Churchill's policy. In
particular, the return to the gold standard was carried out at an unduly high parity.
Therefore, "the cotton trade will suffer ... from a high Bank Rate and diminishedcredit"66.
In "the new industrial revolution" (27 November 1926), the difference
between regions and industries was taken up. If one drew a line across the map ofEngland, the line divided Great Britain into two parts. To the left (to the north andwest), "unemployment is almost exactly double what it is on the right"67 (to thesouth and east). The west and the north were occupied in coal, iron, steel, cotton
fabric, and shipbuilding industries. All of these industries were declining. On theother hand, the east and the south were developing; new industries such as
automobiles, chemistry, and electricity were growing68. In short, the degree ofdifficulty varied with occupations and regions. As he put it:

65

Henderson [1925a] p.16.
Henderson [1925b] p.19.
67
Henderson [1926a] p.29.
68
Similar recognition is seen in "The Industrial Transition" (23 July
66

1927), Henderson [1927]

p.538.
23

Our economic life is shifting, we believe, from one sort of equilibrium toanther. Our unemployment and our labour troubles represent essentially thedifficulties and the pains of the transition ... To organise and to direct thattransition is today the central task of economic statesmanship.
(Henderson [1926a] pp.31-32)
Further Capital plans were explained in "Economy or development" (30 July
1927). Roads, bridges, electricity, housing, and urban planning were necessary tonational development. They "all depend upon State Policy"69.
It would provide employment for many workpeople directly, and, by thefillip it would give to almost every economic activity, indirectly for many more.
It would, by absorbing our savings in greater degree in home investment, andthus diminishing the quantity seeking outlets abroad, provide the most efficient
form of safeguard against ... an adverse balance of payment ...
(Henderson [1927] p.566)
Henderson asked himself, "which are we to place first: economy ordevelopment?"70 At that time, the whole trend of Government policy was tosubordinate development to economy. This drift was based on "a widespread but
baseless belief that our high level of national taxation is a major cause of ourindustrial troubles"71. It was high time that people stopped encouraging thisnotion.
To sum up, from the middle stage to the latter half of the 1920s, Henderson
acknowledged the following: on the one hand, the key industries which had shown
an initiative in export trade declined; on the other hand, new industries such as
automobiles and chemicals were now rising. The State must carry out a policy ofnational development72, because the mobility of labour from old to new was

69

Henderson [1927b] p.566.
Henderson [1927b] p.567.
71
Henderson [1927b] p.567.
72
Capital expenditure on roads is insufficient in particular. See Henderson [1929i] p.903.
70

24

lacking - this was the transfer problem.
A policy of capital expenditure clearlyranked above a reduction of fiscal spending. Since only the rich disliked andrejected a high income-tax, the possibility of imposing extra tax revenue still
existed.
5-2 The logic of both sides
The logical steps taken by Henderson were as follows. The basic cause of the
difficult situation in the United Kingdom was a depression of export industry. Thispredicament deteriorated because of a mistaken financial policy; the return to gold
at the pre-war parity. It was the export price in the United Kingdom being madeto rise by an unduly high pound, which killed her international competitive power.
In addition, a policy of dear money and credit squeeze had led to more deflationary
effects. In contrast with the traditional export industries, the new industries
became prevalent. This gap (the transfer problem) was the origin of massunemployment. One was excess demand for labour, whereas the other was excess
supply. Economic intervention by the State was necessary to solve this difficult
question. As for the means, a large-scale capital programme was suitable. There
were two reasons why this plan was useful. Firstly, it was possible to convert
savings, which had flowed abroad, into funds at home. Secondly, public works
could employ people both directly and indirectly by stimulating the economy as awhole. As discussed above, an erred financial policy, the unemployment problem,and capital plans were linked with each other in Henderson's logic.
The logical steps taken by Keynes73 were the following: by erred means of thehigh bank rate policy, the United Kingdom had suffered from mass unemployment.
Two management systems needed to be executed in order to save the situation.
The first was a managed currency system which replaced the gold standard.
Under this system, investment had to be promoted by lowering interest andeasycredit. The second system was large-scale capital development programmes.
Both labour and savings were being idle. Therefore, it was possible for thegovernment to find outlets of investment at home. Mistaken monetary policies
73

For further details on this, see Komine [1998] pp.66-70.
25

resulted in an unemployment problem, and investment promotion by credit
relaxation had been required for its solution.
Let us compare the two different logics. There are common points as awhole, but emphatically different points in detail. In those days, they naturally
shared the view that a bad monetary policy (failure of the policy), theunemployment problem (current recognition), and a national development plan(solution) were all connected. In that sense, Henderson and Keynes almost shared
the same economic thought in the 1920s.
However, we should not overlook their difference in detail. It did not lie in theremedy to unemployment but in its fundamental cause. Indeed, the two economists
justified a policy of national development as a solution, because they shared thesame point of view on macroeconomics, as mentioned above. Again, they both
opposed the return to gold for the reason that the pre-war parity was unduly high.
With regard to these points, almost nothing could be added by Henderson. He
seemed to be strongly influenced by Keynes in these respects. Nevertheless,differences revealed themselves on the true cause of unemployment. For
Henderson, the failed monetary policy was a "factor" --- or one of the factors --which worsened the predicament of the export industry. In any case, the basic"cause" of mass unemployment was the downfall of the export industry itself. Whatis more, the reason why the unemployed had not decreased in spite of new
industries was the "transfer problem". It was the very problem that Henderson
regarded as the "essence" of the unemployment question. In contrast, Keynes
looked upon the mistake of the deflationary policy as the "essence" and "cause" ofunemployment. He seemed to regard the transfer problem in the labour market as
the "factor" which caused the unemployment situation to deteriorate. That is to say,the microeconomic scope, such as each industry or each region, strayed from
Keynes' central concern.
The elaborate logic of the three linked elements, however, already seemed to
involve the germination of their division. In particular, the thought that
Henderson emphasised every region and industry might not be compatible withthat of Keynes' emphasis on national economy --- or macroeconomics ---.
Nonetheless, they were satisfied with their mutual agreement in the outline at that26

time, thus they could not think of the possibility of dividing them (the unawarenesstheory). Otherwise, we should not miss the fact that Henderson stood as a Liberal
candidate. The joint paper with Keynes was a powerful manifestation to approve
the pledge (the Orange Book) of the Liberal Party. We can also interpret histhought as the attitude that he dared to ignore different points in detail, and set up
his election as the first priority (the consciousness theory). We cannot yet be surewhich is correct. Here, we only marshal the two theories equally.
Section 6 The cataclysm from 1930
The Economic Advisory Council was formed in January 1930. After theCouncil started functioning, Henderson's claim clearly changed. In the process ofchanging, the link which connected the three elements mentioned above had been
destroyed. Within his logic which cut the chain, we will consider in particular theclassification of unemployment and defects of public works.
6-1

Classification of unemployment

Firstly, his view on the problem of unemployment radically changed.
Evidence can be found in the following material from 1930: A letter to Keynes(May) and a memorandum, "the present unemployment" (July). Henderson
consciously declared to Keynes how he had changed from what he had been. As he
put it:My first shifting of opinion from my position a year or so ago, is that I am
less disposed to regard (I don't say our 2 million unemployment) but our
1,200,000 unemployment as a short period transitional problem, yielding to thetreatment of a pure temporary stimulus. (CW20 p.358) 74
In short, he asserted that 60% of unemployment could not be saved by temporary
public works. How then was the remaining 40% treated?
74

A letter to Keynes, 30 May 1930.
27

His approach in this stage was to classify unemployment into three types.
He tried to classify it in a memorandum "the present unemployment" (July 1930)
for the first time. The first category, called "minimum unemployment", was the onethat "would exist even if industry were in a healthy and prosperous condition"75.
This phenomenon had a seasonal character, and resulted from the unemployed
being in the process of finding other jobs.
The second category was
unemployment "arising from the post-war difficulties"76 in British industries. The
third was the unemployment "attributable to the present world-wide tradedepression"77. Although the first was estimated at about 600,000 persons, "there is
no real unemployment problem"78. The third was about 750,000, owing to acyclical and temporary phenomenon. Again, it was not important simply because
recovery will certainly come sooner or later. Therefore, the real problem lay withthe second category, to which about 500,000 persons belonged. "The heart of thisproblem is the long-continued depression of some of our leading exporting
industries"79. While a large surplus of labour existed in old industries like cottonand coal, which were of a highly localised character, it was not yet possible toabsorb it in other new industries. Briefly, for Henderson, the second type ranked
above the first and the third one. Incidentally, the second and the third type werelater named in 1936. The second being named "transfer unemployment", and thethird "cyclical unemployment". Transfer unemployment was solved only when
labour was transferred to other districts or to other industries. Cyclicalunemployment was "an expression of a deficiency of effective demand, but not achronic deficiency"80.
6-2 Weak points of public works

75

Henderson [1930c] p.56.
Henderson [1930c] p.56.
77
Henderson [1930c] p.56.
78
Henderson [1930c] p.58, italics in original.
79
Henderson [1930c] p.60.
80
Henderson [1936b] p.166.
76

28

The second logical structure was his claim that public works have many
defects. He pointed out four characteristics.
First and foremost, the large-scale capital plan would worsen the financial
situation in Great Britain:
it is important that nothing should be done in the meantime which would be
likely to check business enterprises or to disturb confidence. There is a danger
both in Great Britain and elsewhere that Budget deficits and consequential
increased taxation may enter into the vicious circle ...; in the case of GreatBritain the danger is increased by a growing nervousness as to the soundness of
our financial situation ... (Henderson [1930c] p.59)
If a large capital plan was announced, taxation was likely to be increased year by
year indefinitely81. The effect does not fully appear in the course of execution.
Secondly, public works could not solve most unemployment in relation to theclassification of unemployment. He regarded most unemployment as minimum
and transfer unemployment.
Our present unemployment is mainly a matter of the depression of ourexport trade ... More shortly, public works cannot hope to improve our export
trade ... (Henderson [1935] p.156)
The third point was the inefficiency of public works82.
The idea of using public works as a trade-cycle tap is a very old one. ... Inprinciple I think the idea is uncontroversial and unobjectionable. But in practice
I think that experience has shown that the idea is barren. Regarded as a tap
public works are a most unwieldy and inefficient instrument.
(Henderson [1935] p.155)
81
82

CW20 p.359.
See also the following phrase. "I am frankly disillusioned with public works form the practicalstandpoint" (Henderson [1935] p.155).
29

The reasons why they are inefficient are that most public works are in the hands of
local authorities, not directly controlled by the central government, and that there is"inevitably an immense time-lag between preparation and execution"83.
The fourth point was the crowding-out phenomenon. The following lines aresome comments to the drafts of Keynes' The means to prosperity (1933):
Take, for example, your £100 millions "to be spent under the auspices of a
National Housing Board". Obviously to a considerable extent your Board would
build houses which private enterprise would build otherwise. (CW21 p.164)84
Similar claims were shown in his comments to the drafts of the White Paper on
Employment Policy (1944):
I do urge that the possibility that the stimulation of public investment may
react adversely on the volume of private investment is a major difficulty which
ought not to be ignored. (Henderson [1944] p.320)
The other type of classification is worth a mention here in passing. These were
three categories related to time. The first was a short-term remedy. Public works
might be advocated "as a means of evening out the trade cycle"85. The second was alonger but limited period. They might be advocated "as a means of facilitating alarge readjustment of the national economy"86. The third type of public works
might be advocated "as a permanent policy to check a chronic tendency todisequilibrium"87. According to Henderson, the emphasis had shifted from the firstcategory to the second, and then to the third. At the beginning of the 1920s justafter the war, the first category was argued. When the great depression struck in

83

Henderson [1935] p.155.
A letter to Keynes, 28 February 1933.
85
Henderson [1935] p.152.
86
Henderson [1935] p.152.
87
Henderson [1935] p.153.
84

30

1929, the main discussions were the second. Now in 1935, however, the third typehad gradually come into the spotlight --- though it was confined to academic circles.
What was important here was that "they may be largely irreconcilable with one
another"88. In particular, the first was incompatible with the others. A short-term
counter-cyclical policy was incompatible with a log-term capital programme, since
the former must be changed immediately and drastically when a short-termbusiness trend was changing.
How did Henderson understand the advantages of public works once
mentioned in 1929? The advantages were the diversion of idle savings fromabroad to home, and the cumulative effect to the economy in general. We willconsider three aspects.
Now, these merits did disappear for him. Firstly, as to tax revenue, he came toignore idle balance. Using only the available resources would naturally cause
budget deficits, and consequently increased taxation. Secondly, in the matter ofcumulative process, he rejected the effect, or regarded it as very restricted.
Now undoubtedly a strong condition of effective demand helps to promote
the process of transfer; ... provided it is not made so strong relatively to existing
supply as to cause prices to rise ... / But this proviso is in my judgement
essential. (Henderson [1936b] p.166)
Increasing effective demand would cause a boom. Since profits were abnormallyhigh, the level of unemployment would temporarily reduce. However, thiscondition would not continue, simply because rising prices and wages "lead on to acrisis followed by a depression"89. He concluded that "I do not believe therefore thedevelopment of boom conditions is likely to be helpful in the long run to the
reduction of unemployment"90. Thirdly, regarding the multiplier principle, hecompletely denied it. Based on Richard Kahn's multiplier, Keynes used the idea tosupport public works in the draft of the report in the Committee of Economists

88

Henderson [1935] p.154.
Henderson [1936b] p.166.
90
Henderson [1936b] p.166.
89

31

(1930). Henderson opposed this immediately91, and played a role so as to make thecommittee break up. His standpoint did not change in 1933 nor even in 1944:
I think that the beneficial repercussions of [public works] ... would probably
be fully as great as you claim. Nonetheless, I don't like the approach of the Kahn
calculations ... (CW21 p.164)92
This doctrine as formulated is far too static ... It ignores the vital time
factor. Behind the doctrine there is the important element of truth that trade
movements, both boom and slump, are cumulative. But it is of the essence of the
problem that these cumulative forces take time ... (Henderson [1944] p.320)
6-3

Cutting of the link

Let us summarise Henderson's assertion after 1930. The major reason why
he seemed to divert from his past position was to classify the unemployment issue
into the transfer problem. Today, this is named "structural unemployment"93. It istrue that the possibility has remained that discretionary public works is surely
effective in cyclical unemployment. However, this was not a main problem of theUnited Kingdom, though the return to gold was one of the factors of the export
depression94. By setting up three classes of unemployment, Henderson severely
confined the range of unemployment on which public works had an effect.
Additionally, he pointed out that the defects overwhelmed the advantages of public
works itself. The most noteworthy defect was the adverse effect on financial
deficits. Public works also led to increasing import trade, consequently turning out
to deteriorate balance of payments. Both expected increased taxation and fragilityof the exchange position discouraged the business community. Public works were
not effective, had a large time-lag, and only replaced private investment. The

91

Howson and Winch [1977] p.69.
A letter to Keynes, 28 February 1933.
93
The minimum unemployment corresponds to the frictional plus the voluntary one in present
92

terms.
94

See Henderson [1944] p.318.
32advantage he shared with Keynes by 1929 had also faded away. Some ideas also
disappeared, the idea of utilising fiscal resources from idle balance, savings of theunemployment insurance, and diversion from funds abroad. Future tax increase
became inevitable, because it was only covered in present financial deficit (publicbonds). The multiplier was refused owing to static and unrealistic respects.
Finally, general cumulative effect was restricted in the case that prices did not rise.
As for current recognition and countermeasures, the above-mentioned link had
been perfectly broken in pieces. Now the unemployment problem was loosely
connected with public works. Compared with a few positive points, there were
overwhelmingly negative ones. In addition, criticism of an erred monetary policy
disappeared. It could be judged that a macroeconomic scope such as general
cumulative impulse was out of sight and that microeconomic eyes were generating,in which the difficulty lay in a change of occupation in every industry and region.
This microeconomic perspective, however, was already present in
Henderson's writings before 1929. That is to say, this perspective was born notafter, but before 1929. The next question then, is why his emphasis has shifted.
Past studies emphasised his experience of public service. It is one interpretationthat he came to recognise the administrative difficulty of public works. We willshow in the next section whether or not it is fair to understand his conversion on
the grounds of this reasoning exclusively.
Section 7 The unemployment allowance
First of all, we write a conclusion of this section. The reason why Hendersoncame to oppose public works was the adverse effect of financial deficits. Anotherreason was that he opposed increased social security expenditure, especiallythrough an unemployment allowance. This is why he emphasised the importance ofbudget deficits both practically and ideally. In order to verify the above conclusion,
we will put it forward as a hypothesis: since the middle stage in the1920s, there
had been his fear of the "dole" type expenditure. However, the establishment of
the Labour Party administration in June 1929 turned his fear into a warning.
Consequentially, the event filled him with strong distrust, which finally made his

33economic thought divert. It is necessary to examine the two stages of his
conversion around January 1930.
7-1

From scepticism to unemployment allowance

Indeed, the fear of an increase in social security expenditure (especially throughan unemployment allowance) already existed before 1930.
Henderson
particularly opposed the current qualification to receive unemployment. He thoughtthat it was not until one paid the insurance premium fully that he or she had a rightto receive the insurance benefits. Let us examine his statements from 1925 and1929.
One of his earliest scepticisms was laid out in a leading article, "diagnosis andremedy" (9 May 1925), which criticised Churchill's budget bill. Henderson statedthat:
At the present time industry has to pay, through insurance contributions, notonly for the benefits which are rightly on a contributory basis, but also for
uncovenanted unemployment benefit. ... It really is ... a "dole" and there is no
justification, even in principle, for throwing this charge mainly on industry. ...
these insurance contributions ... tend in the direction of aggravating
unemployment. (Henderson [1925b] pp.20-21)
It is a bad tax which damages industry. This sentence expressed his scepticism
towards the unemployment allowance and his warning against deficit finance.
Let us explain "uncovenanted unemployment benefit" as quoted above. In the
Unemployment Insurance Act of 1920, three benefit conditions were defined.
Firstly, one qualified for benefit only if one had paid at least twelve weeks
contributions. This was the first statute. Secondly, one would have a right toreceive one week's salary if one had paid six weeks contributions. This was the"one in six" rule. Thirdly, annual benefits were limited to a maximum period offifteen weeks. However, the first statute had been loosened by the successive postwar cabinets. Part of this easing process was the introduction of "uncovenanted

34

unemployment benefit". This was payment to people who did not formallyqualify for benefit. Of course, payment was not made unreservedly. The person
was required to take two tests. The first revealed the income of a household. The
second was the "genuinely-seeking-work test". It was a test revealing whether he or
she had seriously carried out a job search. The first test became unnecessary from
April 1928. The second was also abolished in March 1930, after the Labour
administration founded the investigation committee in July 1929, and amended the
Act on the basis of its advice95.
In the context of criticism of the Conservative Party administration,
Henderson wrote a revision of the Unemployment Insurance Act in March 1919.
The Baldwin Cabinet accepted an estimation of the Blanesburgh Committee
without criticism. They assumed that the level of unemployment might
immediately return to normal without any efforts. He criticised it as follows:
They introduced the "thirty contributions" rule in the Unemployment
Insurance Act on the strength of this assumption; and even now they have only
postponed the operation of this rule for a single year. They are allowing the
Unemployment Fund to pile up debt ... In short, Ministers still affect to believethat unemployment may fall to normal proportions within a single year.
(Henderson [1929i] p.903)
The "thirty contributions" rule meant the entitlement to unemployment benefit. The
unemployed qualified for benefit thanks to over thirty contributions. The post-war
cabinets, however, did not enforce this rule strictly. For example, the rules changed
to thirty contributions in a period longer than a year, less than thirty contributions
within a year, and so on. If trade got better by itself, even such an easing process
had no effect. Nonetheless, the administration had not provided any effective
remedies for unemployment. The rate of unemployment was therefore high, and the
Unemployment Fund accumulated debts.
7-2 The establishment of the Labour Party administration
95

This paragraph is much indebted to Ohsawa [1986] pp.269-172.
35

Henderson's economic thought was forced to change drastically when the
Labour administration was established in June 1929. In order to investigate thechange that led to estrangement, it is useful and necessary to divide it into twostages: from June 1929 to January 1930, and afterwards.
In the first stage, we will study a leading article, "the problems of the new
government". This paper was announced just after the general election and thefoundation of the new administration on 8 June 1929.
the Labour Party has committed itself definitely to raising the level of
unemployment pay ... / Now we do not know whether a general raising of
unemployment benefits will be popular or not. We are sure that it represents athoroughly wrong policy ... It is immeasurably better to spend money on training
the unemployed and absorbing them in useful work than on increasing the dole.
(Henderson [1929r] p.328)
Note that increasing unemployment benefits was strongly criticised as "athoroughly wrong policy". These statements stemmed from his deep distrust of theLabour Party and of a system which gave unemployment benefits without requiring
self-help. According to Henderson, the previous Labour Government (1924) had
achieved an increase in unemployment benefits, which were stabilised at that level.
However, Labour was again planning to raise the level of benefits under a catchy
but old slogan, "Work or Maintenance."
His fear of increased taxation first manifested itself in "How much taxation"(20 July 1929). Labour's policy "would entail an immense increase in the national
expenditure, and a correspondingly immense increase in the level of taxation"96.
The adverse effects of increased taxation were especially felt in the business
community. One of the effects was a general state of apprehension to see money
go out of Great Britain. The policy should eventually result in "flight from thepound"97. In fact, this was not an opposition to "increasing expenditure on a96
97

Henderson [1929w] p.526.
Henderson [1929w] p.527.
36

moderate scale for clearly desirable purposes". However, beyond the scale of £20
to £40 millions, the scale of £100 to £200 millions that the present cabinet plannedto spend was not admissible for him. In short, in this article Henderson worried
about the Government expenditure plan which drastically exceeded an appropriate
scale.
The problem of unemployment benefit payment was taken up several times inleading articles. In "the coming deficit" (23 November 1929), he opposed themodification of the genuinely-seeking-work clause, and predicted that "there will
be a huge deficit on the current financial year"98. In "the limits of insularsocialism" (30 November 1929), he criticised the Labour Party for being under theillusion that tax revenue was infinite. It was dangerous to believe that Labour wasable to accomplish the twofold policy of graduated tax payment on the one hand,
and the provision of social services on the other. The reason was that an increasein the rate of graduated tax would give people a powerful motive for the practice ofevading and avoiding tax. In other words, people could send their money abroad aswell as move abroad to escape taxation. "The national income is reduced thereby"99.
Labour should "modify the ideas about future social expenditure"100. In "the revoltof the commons" (14 December 1929), the problem of easier entitlement tounemployment benefits was again discussed. The financial situation in 1929 was
different from that in 1924. In 1924, it was possible for the Treasury to sanction
new investment plans, thanks to huge automatic reductions of war expenditure.
Today, on the other hand, new expenditure only means the burden of new taxation.
"Every millions spent on unemployment benefit increases the difficulty of finding
money for other purposes, however constructive or urgent"101.
"The other purposes" were still large-scale capital expenditure programmes. In
June 1929102, Henderson's focus was on an adequate programme for roads as wellas railways. It was not merely the distribution of existing jobs. In July, he98Henderson [1929ab] p.274, italics in original.
Henderson [1929ac] p.36.
100
Henderson [1929ac] p.37.
101
Henderson [1929ad] p.502.
102"The background of trade and prices" (29 June 1929), Henderson [1929t].
99

37

denounced the Treasury View's "confusions of thought"103. In October, he pointed
out new economic situations which confronted the United Kingdom. On the one
hand, high money rates were needed for Britain to be an international financial
centre. On the other hand, national development was also necessary. "A large-scale
capital programme, promoted by the State, supplies the readiest means ofreconciling these two objectives"104. The enforcement of the plan was urgent. The
country needed all kinds of plans on all kinds of railways, roads, housing, and soon. In January 1930, he summarised his assertions as follows:
It remains true ... that a vigorous policy of national development is one ofour great needs ... / But the time has gone by when we can safely indulge in
expenditure of the "dole" type. (Henderson [1930a] p.503)
From the statements mentioned above, we can summarise his thoughts from June
1929 to January 1930 in a few sentences: under the Labour Party administration,
there was further easing of entitlement to benefits. This policy was quite
unproductive, and deficits only piled up. Instead, as well as his claim before thegeneral election, the most important and urgent action was to carry out a largescale capital plan. Our analysis shows that at this stage (the first step), the national
development programme and his fear of budget deficit were almost equallyimportant and compatible with each other in Henderson's thought --- although,strictly speaking, there could be a contradiction between the two elements.
7-3

Qualitative alteration after 1930

At the second stage, however, the fear of budget deficit grew, and it eventually
resulted in the abandonment of capital plans. This time, Henderson had again
started work as a government official. Now we will first focus on discussions in

103"Can Mr. Thomas conquer unemployment?" (27 July 1929), Henderson [1929x]p.555.

104"Unemployment, Thomas, and the Bank" (12 October 1929), Henderson [1929z] p.39.
38

the "Committee of the Economic Outlook"105, which was one of the subcommittees of the Economic Advisory Council. According to him106, a large-scale
capital plan surely entailed the belief among businessmen that increased taxation
would result from it. Regardless of whether this plan succeeded or not, one must
worry about the dangerous situation created by financial deficit. He said in his
letter to Keynes:
Essentially my position is that I am scared by the Budget position quite
apart from whether capital programmes are pushed forward or not, and I want toforce your attention to that question. (CW20 p.362)107
It seems to me extraordinarily dangerous. The cost of unemployment pay ismounting up very rapidly, much more so than the numbers of unemployed. The
whole system of unemployment benefit under last year's Act shows signs ofdeveloping into a scandal of the grand order. (CW20 p.362)
Note the expression "last year's Act". This referred to Labour's bill easing
entitlement to benefit. Henderson was badly shocked by this easing process.
In July and September, the question was further examined. According to "thepresent unemployment" in July, minimum unemployment consisted of a job search,seasonal and daily variations, interruptions in the continuity of work, and workpeople of poor industrial quality. Ironically, the system of unemployment insurance
tended to increase unemployment itself. The reasons were that temporary breaks
which would not have been recognised as unemployment before now entitledpeople to receive benefit, and that such people as married women, who had
withdrawn from the job market, could "register and draw benefits as
unemployed"108. Thus, unemployment figures swelled. As it turned out, "Budget

105

Keynes as chairman, Henderson as secretary. The committee was founded in February 1930,

and gave reports by May. See Howson and Winch [1977] p.356.
106

A letter to Keynes, 30 May 1939, CW20 p.359.
A letter to Keynes, 5 June 1930.
108
Henderson [1930c] pp.56-57.
107

39

deficits and consequential increased taxation may enter into the vicious circle"109.
In September, according to a memorandum circulated to the Committee of
Economists - which was one of the special sub-committees of the
Economic Advisory Council, Henderson drew attention to both the heavier burdenof public debt and the fact that direct taxation was much higher than in othercountries110. The memorandum, "the background of the problem", said:
I am strongly of the opinion that the broad question of the present system of
unemployment pay is one which we ought not to neglect ... It represents aphenomenon essentially new ... (Henderson [1930d] p.70)
Again, note the phrase "a phenomenon essentially new". This surely meant that,during the last year or so, he had rapidly become afraid of an accumulation ofunemployment pay.
This standpoint did not change until his final years. We will quote somestatements from 1931 and 1944. In the context of his comment on the May
Committee111's report in 1931, he recommended "considerable cuts inunemployment benefit"112. Afterwards, Henderson discussed the post-war
economic policy with Keynes; they were in the process of publishing a White
Paper on the Employment Policy.
But it is a dangerous exaggeration to suppose that full employment or"aggregate demand" can be maintained by the instrument of financial
profligacy ... Under conditions of great external weakness, such as we must

109

Henderson [1930c] p.59.
Henderson [1930d] p.68.
111
The Committee on National Expenditure recommended that the Government drastically cut
110unemployment benefit and the salaries of public officers. As well as the report of the Macmillan
Committee, the May report made the financial and monetary situations in Britain open to
everyone. Ironically, this information forced the gold standard to stop in June 1930 due tooutflow in gold.
112

Henderson [1931a] p.77.
40

expect, the more probable result of such a policy would be a currency collapse.
(Henderson [1944] pp.317-318)
This is an excerpt from the paper "Lord Keynes and employment policy" (1944). In
short, budget deficit was not desirable for four reasons. Firstly, "the deficits may
easily become very large" 113. Secondly, "as a remedy for unemployment, the policy
is fundamentally inappropriate"114. If productive resources were left unused, "thatindicates a defect of economic organisation, not of financial policy"115. Thirdly, theeffects of the policy were much more limited than expected, because theunemployed were localised in specific areas, and because increasing the flow ofeffective demand in general was ineffective. Fourthly, from the latter half of the
1930s, Henderson also became more and more interested in the population
problem116. The growing figure of old age pensioners was one of Britain's main
problems. Accordingly, the cost of the social services would grow rapidly117.
At the second stage, Henderson abandoned capital plans at last. The weak
points of public works in the 1940s were his strong fear of budget deficit or, strictly
speaking, of the rising cost of unemployment payment. What can be said at least isthat the fear was so powerful that the attractiveness of capital plans disappeared
after 1929. For that reason, we can assert that the direct clue to "treachery" in
Henderson's economic thought was the establishment of the Labour Party
administration in June 1929. However, the problem remained. What made him hate
the indiscreet unemployment allowance?
7-4

Henderson's objection to the idea

As we have discussed above, his anxiety about budget deficit did not date113

Henderson [1944] p.322.
Henderson [1944] p.322.
115
Henderson [1944] p.322.
116
The clue is his research visit to the West Indies. See Debenham [1953] p.45.
114

117

See Worwick [1953] p.76. For details of the Royal Commission on Population, see Winter[1990].
41

back to 1930, but to the time when he was chief editor of the Nation. If his fear
was not attributable to his diversion from Keynes around 1930, what should we
identify as the basic cause of his fear? It is necessary here to read Inheritance andInequality: A practical Proposal (1926) and "the principle of the Beveridge plan"(August 1942). The former is a pamphlet which should be called Henderson's
only academic book. The latter is a paper in which he and Keynes discussed
drafts of the famous Beveridge Report (1942). Although both writings have neverbeen examined before, they suggest how he viewed "equality".
As suggested by the title Inheritance and Inequality, Henderson paid attention
to inequality in the distribution of wealth. Workers were always under the shadowof unemployment and unsanitary housing conditions. It is true that nineteenth
century liberalism had made splendid achievements in many fields. On the other
hand, economic inequality became dominant and prevailing. Inequality in thepresent distribution of wealth was so great that it could not be justified from theviewpoint of democracy and social justice. If we are to build up a good andharmonious society, "we can not afford to neglect the unequal distribution of
wealth"118. The pre-war Liberal administrations recognised this question, andachieved some kind of social legislation and administrative reform, such as Old
Age Pensions, Unemployment and Health Insurance, and Trade Boards. "But it was
no part of that idea to diminish inequality as such"119. For the purpose of increased
revenue, indeed, it tended in that direction in practice. However, it did not mean aplanned decrease of inequality as an idea. It was not due to social services but toarmaments that led to death duties and the supertax. The latter being a system ofgraduated tax imposed on the higher part of ones income, in addition to ordinary
income tax.
The idea was to make the poor, especially the very poor, richer; not to makethe rich, not even the very rich, poorer. (Henderson [1926a] p.6)
For Henderson, the means to reduce inequality was not Nationalisation, such as the118
119

Henderson [1926a] p.6.
Henderson [1926a] p.7.
42

Labour Party claimed. Instead, he advocated practical death duties.
This citation clarifies the fact that Henderson preferred the "taxation type"120
to the "social security type". The former was a solution which took extremely richpeople to pieces in view of redistribution. The latter was a means which let thepoor become richer. As discussed in Section 5-1, in a leading article "economy ordevelopment" (July 1927), he judged121 that it was a baseless belief that industry
was badly damaged by heavy taxation. Even before 1929, he consistently disliked
the dole type; that is, social services.
As economic adviser to the Treasury, Henderson entirely disagreed with thefamous "Beveridge plan"122, whose goals were to achieve the "abolition of want"
and to secure the minimum income for people as a whole. In contrast, Keynes
thought this plan "a vast constructive reform of real importance"123. Thus, he tried
to let the drafts be revised again and again to make it less costly. At the same time,
he tried to persuade politicians and bureaucrats to accept and approve the plan.
What then caused the two to be divided in this respect?
Most of all, Henderson disagreed with Clause 4 (adequacy of benefit) of thesix features in the plan. It is possible to summarise the principle of this plan into
the following six points. Firstly, flat rate of subsistence benefit. Secondly, flat rateof contribution. Thirdly, unified social insurance. Fourthly, adequacy of benefit.
Fifthly, comprehensiveness. Sixthly, classification. For Beveridge, each individual
had a right to enjoy the minimum income. Furthermore, the State had a duty toguarantee the right. Therefore, there was no necessity to give any types of themeans test, that is to say, the tests to check people's wealth and income in order togive appropriate benefits as was done since the Poor Law. It was simply because
each person, however high or low an income he or she had, was given the same
benefit as one's right. Henderson severely criticised this idea. To be sure, theprinciple of "abolition of want" was estimable. The six features, however, wereincompatible with the goal of the Beveridge plan. A means test was associated with120

Except for taxation on ordinary industry (i.e. employment tax).
Henderson [1927b] p.567.
122
The formal title is Social Insurance and Allied Services (1942).
123
CW27 p.204.
121

43

the method, however unpopular it was. Likewise, the idea of abolition of wantthrough the redistribution of income was related to the result. For him, the twoideas were fundamentally similar, and two sides of the same fact.
If we are to redistribute income more fairly or more equally, we must first
ascertain how much different people have. This implies an inquiry into means.
(Henderson [1942] p.194)
To secure the minimum income in turn meant that the State must not give the upper
level of it. A means test was inevitable for that reason124.
Henderson also opposed Clause 5 (comprehensiveness). It indicated theprinciple in which the social insurance system covered the whole nation.
However, the extension of social insurance would cause new administrative
difficulties125.
For example, since "interruption of earnings" varied fromoccupation to occupation, a clear-cut definition could not be applied to every
occupation. The benefits proposed by the plan were too small for the more higherincome people in particular to cover their contingencies. Instead, they relied onvoluntary insurance and personal savings. Burden and benefit varied between
classes in society. It "seems unrealistic to proceed as though these differences did
not exist"126. In brief, the comprehensiveness principle did not fit the facts ofsocial life, and increased the new administrative difficulties.
In short, Henderson criticised the point that all six features contradicted --- orwere independent of --- the principle of abolition of want. He concluded that it
would cost more127 and would do otherwise.
Judging from Inheritance and Inequality and "the principle of the Beveridge
plan", we notice his extreme scepticism about the "dole type Welfare State". Herethe term "dole type Welfare State" can be defined for now as the social security
system that dated from the Liberal Reform in the beginning of the twentieth124

See Henderson [1942] p.196.
See Henderson [1942] p.201.
126
Henderson [1942] p.205.
127
See Henderson [1942] p.208.
125

44

century, and has developed into the Beveridge plan as its summit. The original
system only included a limited old age pension or unemployment and healthinsurance. Now, in the 1940s, the comprehensive social insurance system wasunder deliberation in Parliament. The whole nation had one's own right to theminimum income on the grounds that the system has the principle of flat rate ofboth subsistence benefit and contribution. According to Henderson, such social
security treats a nation uniformly, though one's income and wealth could differ aswell as it gives rights (benefits) indiscreetly. There is no duty that is a price of right.
As examples of duties, those with higher-incomes must depend on voluntary
insurance and personal savings, and a nation must have taken a means test to
ascertain how he or she differs from the minimum income. Both cases show aminimum of self-responsibility. Additionally, to eradicate want, enormous new
administrative difficulties were also anticipated. Besides, comprehensive benefits
needed an enormous national budget. The Beveridge plan (the dole type WelfareState), Henderson claims, leads to dissipation both for an individual and for a State.
Based on such economic thought or ideas, he has continuously given warnings ofthe adverse effect of budget deficits.
The final question then, is what was the ideal economy for Henderson?
Section 8 The entrepreneur-in-chief
Finally, we will investigate Henderson's economic thought directly. Let us
examine three fields: economics, price mechanism, and managed economy.
8-1 Abstraction of economics
As Harrod rightly stated, "he was not interested in the more abstractdevelopments of economic theory"128. This was reflected well in "the state of
economics" (October 1930). The application of scientific methods to economic
phenomena must involve three processes: firstly, the extraction of generalisations
from gathering facts. Secondly, the testing of the assumptions on the basis of a
128

Harrod [1953] p.61.
45

wider range of facts. Thirdly, the reconstruction of the revised generalisations. In
short, the scientific methods needed "study, hypothesis, verification"129.
Nevertheless, economics did not develop at that point. According to him, this waspartly due to the philosophical and logical characteristics, and partly due to theinevitable association with politics. He said at the beginning of his paper:
The most conspicuous defect of the present state of economics is the lack ofadequate contact between the work of theoretical analysis on the one hand andrealistic study on the other. (Henderson [1931b] p.78)
In recent years, both camps have developed rapidly. Nonetheless, theoretical
economists are only concerned with a highly abstract logical system. They pay
special attention not to generalisations of the fact but to logical possibilities as abase of analysis. Moreover, some economists stick fast to an old-fashioned doctrine.
Others intend to rebel against the authority130. Both will, Henderson asserted, beeasily influenced by polemical emotions which weaken the soul of scientificinquiry. During a dispute, advocates and opponents would do better to enlist the
co-operation of others, not hold fast to their own doctrine. It is necessary toorganise research institutes131, to define the terms clearly, and to investigate on thebasis of the available facts.
The above attitude did not even change in "Lord Keynes and employment
policy" (March 1944).
Such [abstract economic] analysis cannot justify sweeping conclusions
upon the concrete problems of the actual economic world. ... it can prove
nothing ... In my opinion these [Keynes'] doctrines are unhistorical,
unimaginative, and unscientific. (Henderson [1944] pp.316-317)

129
130

See Henderson [1931b] p.78.
See Henderson [1931b] p.79. He seems to predict Keynes' rebellion in 1936 against "theClassics".
131

Later in Oxford, he himself organised a research group. See Harrod [1953] p.60.
46

From this passage, we can tell that Henderson denied all extreme abstraction of
economics, including Keynes's theory. He was not only blaming the General
Theory, but also criticising a whole trend of economics. We can add his distrust of
economics to the reasons why he "diverted" from his previous position.
8-2 The price mechanism
Next, let us examine his paper "controls and the price system" (March 1950)
concerning the price mechanism, which was written during his final years.
Henderson expressed doubts on two sides:
The forces of the price system are too indirect, too erratic, too slow, and too
week to accomplish large readjustments by themselves. Controls are much more
immediately effective. (Henderson [1950] p.419)
Of course, the effect of controls diminishes if the forces of price are in the opposite
direction. Controls and the price mechanism are not then alternatives, but to be
used "in harmonious combination"132. Organised speculation before 1914 was said
to stabilise the forces of the price system. It was simply because equilibrium andgeneral confidence existed.
However, after the 1920s, when confidence
disappeared and serious disequilibrium appeared, "speculation serves to intensify
instability, and to accentuate price movements, sometimes to the point of chaos"133.
Though the price mechanism is weak in this respect, "controls have many
disadvantages"134. Execution involves much time and labour in the government
authorities and even in business. Controls also involve uncertainty, delay, andcrude and clumsy instruments. It is no use expecting more elaborate controls withtime. The reason why we need controls is merely that "the alternative of no control
132
133

Henderson [1950] p.419.
This recognition is very similar to that of Keynes. In fact, as Worswick [1953] stated, "This isodd, since that mode of thinking seems very suited to focusing attention upon questions of
disequilibrium" (Worswick [1953] p.71).
134

Henderson [1950] p.421.
47

would be worse"135. Eventually, it is desirable to avoid both unnecessary controls
and purely private (market) forces.
Beyond that, his original thought on the price mechanism is shown in "thefunction of exchange rates" (January 1949). Here Henderson argued that freeexchange-rate flexibility did not serve equilibrium of balance of payment.
Adversely, foreign exchange rates must remain fixed:
The true function of exchange rates is to provide a constant factor roundwhich the more variable elements may move, and by reference to which they canbe adjusted; in other words, to provide a focus of stability in an orderly pricesystem. (Henderson [1949] p.373)
For him, something fixed is needed for the price system. In the pre-1914 era, it was
the gold-standard system. The confidence and stability that the fixation of
exchange rates gave, caused the splendid development of economic life. "Theeconomic failure of the inter-war period was due less to the imperfections of themonetary system"136. Rather, it was owing to the policies. The authorities relied on
and supported the price system too much. That power is too small to readjust
resources. His special position is at last revealed here. Except for the one point,
free forces (i.e. the market mechanism) are indispensable for the economy to work
well. However, the focus point (for example, the gold standard) is also necessary.
The fixed point stabilises the system as a whole. What then builds confidence?
8-3

Managed economy

Finally, we will show that his standpoint on the necessity of discretionary
policies has been consistent from the 1920s to the 1940s. In 1926 he judged:"There are many weaknesses in the present organisation of our industrial system,and there is much that might be done by a deliberate policy of industrial

135
136

Henderson [1950] p.421.
Henderson [1949] p.376.
48

reconstruction to remove those weaknesses"137. In 1935 he realised that public
works are inevitable because an economic function of the State has been enlarged.
In 1949 "deliberate policy ... is not only indispensable for the time being, but willremain indispensable in my judgement for many years to come"138. Let us pay
attention to his words in 1944 in particular:
In order to secure full and steady employment, it is the economic laissezfaire rather than the financial orthodoxy that chiefly needs to be altered. The
latter calls only for minor modifications; the former for more radical changes.
(Henderson [1944] p.318, italics in original)This is his declaration of rejecting laissez-faire. However, that does not mean that itis desirable to thoughtlessly seek public works by budget deficits. Rather, it meansother discretionary policies139 are indispensable. If so, how should the government
demonstrate the deliberate policies?
There is an answer, imperfect though is it, in "note on the problem of
maintaining employment" (May 1943). Henderson concludes with confidence that
there will be no cyclical unemployment in the post-war period140. Thus he opposed
Keynes' plan of strengthening capital goods. Since capital goods had been
excessive during the War, it was most urgent that productive resources should bediverted to consumer goods. It was essential for maintaining full employment in
the long run to balance the proportion between the two goods141. This transition
involved a great difficulty. It was so difficult that what was needed was to "let theState place the orders"142. The State acts as if she was a wholesale dealer to take"the risks of accumulating unsold stocks"143. Furthermore, Henderson considered137

Henderson [1926a] p.9.
Henderson [1949] p.375.
139
Faith Henderson named it "the idea of a 'controlled economy'" (F. Henderson [1953] p.27).
138

140

Henderson [1943] p.221.
Henderson [1943] p.222.
142
Henderson [1943] p.230.
143
Henderson [1943] p.230. Note the other paper, "the government's decision" (20 April 1929).
14149

other roles:
it was suggested that the State should assume ... the role of a wholesale
dealer. But this phrase does not bring out the essential idea. What I reallysuggest is that the State should assume the role of entrepreneur-in-chief,
directing the flow of productive resources to the employments in which they canbest serve human needs. In our economic system at present that post is vacant. ...
/ ... Might we not conceivably find a modus vivendi for the next decade or so inan arrangement under which the State would fill the vacant post of entrepreneurin-chief ... (Henderson [1943] p.234)
Perhaps employment, like happiness, will come most readily when it is notsought for for its own sake. The real problem is to use our productive powers tosecure the greatest human welfare. ... Let us think in terms of organising anddirecting our productive resources, so as to meet these changing needs; and weshall be less likely to waste them. (Henderson [1943] pp.234-235)
It is not useful to believe that maintaining employment should be our sole or our
first objective. Rather, we should pay attention to the new role of managing theflow of productive resources. Inducing the flow will lie in consumer goods andservices, not in capital goods as Keynes asserted. The State organises and manages
the usage of productive resources, and lets the usage meet the human welfare. The
state as entrepreneur-in-chief can generate confidence. Confidence stabilises the
economic world. This is a new role of the government. Interestingly, Keynes
quoted the above two paragraphs and ended his own paper, stating that they "seemto me to embody much wisdom"144. This fact suggests that they share the same
economic thought in common, at least regarding the role of the government as awhole. In other words, we can conclude that they shared the idea of a managed"The Government, in short, has became, in effect, an entrepreneur on an enormous scale; and theinfluence of its policy ... on the trend of trade is correspondingly enormous" (Henderson [1929l]
p.67, italics in original).
144

CW27 p.324.
50

economy, --- though in the concrete direction of management, for example,
consumer goods or capital goods, they differed from one other.
Section 9

Conclusion

We want to arrive at the conclusion in the form of answers to the twoquestions raised in Section 1. The first point is whether or not Henderson shared
Keynes's views, and whether their work can be referred to as co-operative research.
The second point is when, why, and to what extent they were divided if theconversion on the side of Henderson existed. Attached to this second point, we will
investigate whether the main reason for their estrangement derived solely from
Henderson's experience of public service after 1930.
Firstly, before 1929, their differences were hidden by the influence of"Keynes' optimism", though we cannot tell whether it was intentional or
unconscious. In the sense that the differences did not become tangible, we cansafely conclude that they held the same views in common. Here "Keynes'
optimism" means a claim that the transfer problem could be overcome throughnational development programmes. To explain further, there was a belief that the"transfer problem", the lack mobility of labour between each industry or eachregion, could be overcome by the "capital expenditure plans", meaning a stimulusof macroeconomic aggregate demand. As long as this belief remained, Henderson
supported promotion of the large-scale capital expenditure in the Yellow Book
(1928) and in the joint article "Lloyd George" (1929). We note here that in "Lloyd
George" there is no clear-cut claim of the fundamental cause of unemployment.
Keynes' emphasis lay in the "failure of the post-war monetary policy", whereas
Henderson's point is found in "downfall of the export industry". We can infer thatin "Lloyd George" the true cause of unemployment is obscure, on the grounds oftheir hesitation in having the differences revealed. As a result, they easily accepted
a theory of the link which connected three elements: a bad monetary policy (failureof the policy), the unemployment problem (current recognition), and a national
development programme (solution).
Secondly, when and why did Henderson lose this conviction? It is because

51after the general election, he rapidly came to recognise the danger of budget deficit,
and realised that there was no surplus in the budget to finance capital programmes.
The word "recognise" is used here to indicate that his sense of crisis, which until
then had been concealed, was revealed at last. In the first phase (from June 1929 toJanuary 1930), however, he enthusiastically continued to advocate the large-scale
capital plan, in spite of a sense of crisis. Nevertheless, in the second period (afterJanuary 1930), he gave up pointing out the three merits of the capital plan: indirect
employment, general spin-off benefit, and diverting financial resources from idle
savings at home. That is to say, the basis (effectiveness of the capital plan) which
supports the above optimism had been overturned from the foundation.
Thereupon, the link connecting the three elements was cut. The reason for thishas two levels.
Firstly, the cost of actual social security (especiallyunemployment allowance) swelled rapidly after 1919. The fear of increased costalready existed, even in the middle of the 1920s. Soon after the Labour Party
administration commenced in June 1929, the fear turned to a warning. Secondly, hedisliked the "dole" type of social security. The basis of the dole is that benefits are
given to the whole nation as a right. There is no self-responsibility principle herethat one must pay contributions to meet one's own benefits. Henderson thoroughly
and consistently opposed this. For instance, in 1925 he did not accept"uncovenanted unemployment benefit". In 1926 he preferred enlargement of death
duties and the supertax, to that of social services which Labour liked. It is because
he preferred a means to redistribute the wealth and income of the rich, rather than
measures to make the poor richer. Immediately after the general election of 1929,
he strongly opposed the Labour pledge to increase unemployment allowance.
What is immediately apparent here is that even before 1930, Henderson
already had a sense of crisis over the increased cost of social security. In thissense, it is a misleading inference that his "treachery" is attributed only to his
experience of being a government official. Instead, it was important that
entitlement to benefit was further relaxed after the Labour Cabinet formed in June
1929. It is true that the position of policy advisor to the Treasury seemed tofacilitate access to financial issues, both in human relations and in data. It is anindisputable factor of his "treachery" that Henderson became secretary and/or52

member of the Economic Advisory Council in January 1930. However, it is ofrestrictive importance, in the sense that the event caused him to recall his old doubt
about the dole type Welfare State, and resulted in crushing Keynes' optimism.
Therefore, we can regard his experience of public service as one of thestrengthening factors of his "treachery".
All this may be enough to explain when they arrived at different points, bothin theory and in thought: one of the possible answers is "just after the generalelection in June 1929". Henderson stood as a Liberal candidate, only to be a failure.
This shock might have been sufficient to cool his enthusiasm for realising the
proposals in the Yellow Book. Similarly, regarding Keynes, who also faced thedownfall of the Liberal Party, this "marked the end of Keynes' active life as a party
politician"145. Nevertheless, even after facing the same experience, they still foundtheir own way apart from one another. On the one hand, Henderson abandoned his
position as a spokesman for the Liberal Party, and was on the inside of thegovernment. As a "policy advisor", he continued to hold the negative view of theBeveridge type Welfare State. On the other hand, in order to establish the general
theory of employment, Keynes at first began to persuade his colleagues andeconomists146. He linked macroeconomic discretionary policy with the social
security system without difficulty. Their contrast is exaggerated by contrary
approaches to the theory. One separating from the theory, the other constructing a
new one. For Henderson, the first shocking impact was not the Economic
Advisory Council, but a defeat in the general election.
Did they, then, remain completely divided in thought? The answer is no. A
clue to the answer is Henderson's concept of "entrepreneur-in-chief'. They bothregard "the automatic adjustment mechanism in economy", whose nucleus is theprice mechanism, as extremely powerless. It is discretionary policy that is a
supplement to this power, though that is not a complete substitution. There issurely a difference between the two, whether the force is suitable for capital goods
at first (public works) or for consumer goods such as utility articles (order as awholesaler dealer). Moreover, let us use the term "Modern Welfare State" to refer
145
146

Harrod [1982(1951)] p.396.
See Moggridge [1992] p.506.
53

to a mixture of the Beveridge type social security system and the Keynes typemanaged economy. Admittedly, Henderson showed a doubt about the former idea,
while Keynes approved of a blend of the two systems. Nonetheless, both share thebasic idea of controlling and managing productive resources for the sake of humanwelfare. They entrust leadership, under which both the unemployment problem andthe transfer problem should be solved, to Government. We can conclude that they
have worked together to establish the idea of a managed economy, that is,"economy must be appropriately managed".
Let us enumerate the new points in this paper. Previous studies have paid little
attention to these. Firstly, we assert that, before 1929, Henderson and Keynes
shared the same logical steps: three elements (bad monetary policy, theunemployment problem, and the capital plan) are naturally joined into one ring.
Secondly, we should consider primarily the impact of the general election in June
1929, and secondarily the impact of his inauguration as secretary in the Economic
Advisory Council in January 1930. Thirdly, we can claim that the fears andwarnings of Henderson stem from his consistent doubt about the dole type WelfareState. Fourthly, we can arrive at the conclusion that they share the same idea,"managed economy", on the grounds of the concept of "entrepreneur-in-chief".
It is difficult to judge their collaboration and division appropriately, unless wetrace Henderson's basic idea. Eventually, Keynes takes the long route to theGeneral Theory, confirming the distance between his previous colleagues such as D.
H. Robertson, R. G. Hawtrey147, and H. D. Henderson, with whom he once hadmuch closer relationships.

Acknowledgements
I would like to thank Sir Nicholas Henderson, one of Sir Hubert Henderson's
sons and a copyright holder, for allowing me (22 September 1999) to cite
documents from the Henderson Papers at Nuffield College, Oxford. I am alsoindebted to Nuffield College Library staff, and especially Mrs. Eleanor Vallis, the147

For further details on Hawtrey and Keynes, see Komine [1994].
54

Archive Assistant. My thanks are also due to the Public Records Office, London,
for letting me consult government documents.
The quotations from the Nation and Athenaeum are from the Institute of
Economic Research's microfilm, Hitotsubashi University, Tokyo, except for
leading articles which were reprinted in Clay [1955].
My colleagues Hiroyuki Shimodaira (Yamagata University), Hidetaka Ohara(Meiji University), and Atsuyuki Naito (Hitotsubashi University) helped me incollecting some of my references. I benefited greatly from reading an earlier
version of this paper in the annual conference of the Society for the History of
Economic Thought at Kumamoto Gakuen University, Kumamoto on 6 November
1999. I wish to express my gratitude to Professor Takashi Negishi (Aoyama Gakuin
University), who was the coordinator of my report to the conference, and also to
the attendants.
I am, of course, entirely responsible for any errors.

References(A) Unpublished Sources
A-1 The Henderson Papers, Nuffield college, Oxford
Box 1 : Reports of Committees, EAC(H), EAC(PR), EAC(SC)Box 10: Papers on Keynes
Box 21: Correspondence 1922-30, correspondence about edition of Keynes's complete
works, Album of cutting from Economist and few letters.

A-2 Public Record Office, London
CAB 58: Committee of Civil Research and Economic Advisory Council.
CAB 58/145: Committee on Economic Outlook, 1930.
CAB 58/151: Committee on Economists, 1930.
CAB 58/154: Committee on Unemployment Benefit, 1930.
T 175: Treasury, Hopkins Papers.
T 175/43: Statement of the Government in connection with Unemployment, 1930.
T 175/50: Industrial Reconstruction Scheme, 1930.

55

(B)Published Sources
B-1 Henderson's original writings
Clay, H. [1955] (ed.) The Inter-war Years and other papers: a selection from thewritings of Hubert Douglas Henderson, Oxford: Claredon Press, 1955.
Henderson, H. D. [1922a] Supply and Demand; with an introduction by J.M. Keynes,(Economic and social history of the World War ; British series), Oxford :Clarendon Press, 1922.
Henderson, H. D. [1922b]

The Cotton Control Board, Oxford: Clarendon Press, 1922.

Henderson, H. D. [1923a]"Editorial foreword," The Nation and Athenaeum , 5 May,in Clay [1955], pp.1-4.
Henderson, H. D. [1923b]"Monetary policy," The Nation and Athenaeum , 14 July, in

Clay [1955], pp.5-8.
Henderson, H. D. [1925a]"Will unemployment increase ?," The Nation andAthenaeum , 4 April, in Clay [1955], pp.13-17.
Henderson, H. D. [1925b]"Diagnosis and remedy ," The Nation and Athenaeum , 9

May, in Clay [1955], pp.18-22.
Henderson, H. D. [1926a] Inheritance and Inequality : a practical proposal, (The new
way series ; 15), London : The Daily News ltd., 1926.
Henderson, H. D. [1926b]"The economic trend," The Nation and Athenaeum, 6November. in Clay [1955], pp.23-27.
Henderson, H. D. [1926c]"The new industrial revolution," The Nation andAthenaeum , 27 November. in Clay [1955], pp.28-32.
Henderson, H. D. [1927a]"The industrial transition," The Nation and Athenaeum , 23

July, pp.566-567.
Henderson, H. D. [1927b]"Economy or development?," The Nation and Athenaeum ,30 July, pp.538-539.
Henderson, H. D. [1929a]"The conversion to national development," The Nation andAthenaeum , 26 January, pp.574-575.
Henderson, H. D. [1929b]"Liberalism and Labour," The Nation and Athenaeum , 2

February, pp.606-607.
Henderson, H. D. [1929c]"Mr. Churchill's flesh creeps," The Nation andAthenaeum , 16 February, pp.678-679.

56

Henderson, H. D. [1929d]"The objections to capital expenditure," The Nation andAthenaeum , 23 February, pp.710-711.
Henderson, H. D. [1929e]"The slum, the taxpayer, and the unemployed," The Nation

and Athenaeum , 2 March, pp.742-743.
Henderson, H. D. [1929f]"Mr. Lloyd George and his pledge," The Nation andAthenaeum , 9 March, pp.774-775.
Henderson, H. D. [1929g]"The issue," The Nation and Athenaeum , 16 March,

pp.830-831.
Henderson, H. D. [1929h]"Unemployment fallacies in the open," The Nation andAthenaeum , 23 March, pp.870-871.
Henderson, H. D. [1929i]"The political transformation," The Nation andAthenaeum , 30 March, pp.902-903.
Henderson, H. D. [1929j]"Ninepence for nothing," The Nation and Athenaeum , 6

April, pp.6-7.
Henderson, H. D. [1929k]"Mr. Churchill's secret," The Nation and Athenaeum , 13

April, pp.34-35.
Henderson, H. D. [1929l]"The Government's decision," The Nation andAthenaeum , 20 April, pp.66-67.
Henderson, H. D. [1929m]"Is there any unemployment ?," The Nation andAthenaeum , 4 May, pp.150-151.
Henderson, H. D. [1929n]"The new sort of White Paper," The Nation andAthenaeum , 18 May, pp.226-227.
Henderson, H. D. [1929o]"The election campaign," The Nation and Athenaeum , 25May, pp.262-263.
Henderson, H. D. [1929p]"Questionnaires to candidates," The Nation andAthenaeum , 1 June, pp.294-295.
Henderson, H. D. [1929q]"The general election and the Liberal Party," The Nation

and Athenaeum , 8 June, pp.326-327.
Henderson, H. D. [1929r]"The problems of the new government," The Nation andAthenaeum , 8 June, pp.295-296.
Henderson, H. D. [1929s]"The new ministry," The Nation and Athenaeum , 15 June,

pp.358-359.

57

Henderson, H. D. [1929t]"The background of trade and prices," The Nation andAthenaeum , 29 June, pp.422-423.
Henderson, H. D. [1929u]"A cautious beginning," The Nation and Athenaeum , 6

July, pp.466-467.
Henderson, H. D. [1929v]"The school age and unemployment," The Nation andAthenaeum , 13 July, pp.498-499.
Henderson, H. D. [1929w]"How much taxation ?," The Nation andAthenaeum , 20 July, pp.526-527.
Henderson, H. D. [1929x]"Can Mr. Thomas conquer unemployment ?," The Nation

and Athenaeum , 27 July, pp.554-555.
Henderson, H. D. [1929y]"The return to politics," The Nation and Athenaeum , 5

October, pp.6-7.
Henderson, H. D. [1929z]"Unemployment, Mr. Thomas, and the Bank," The Nation

and Athenaeum , 12 October, pp.38-39.
Henderson, H. D. [1929aa]"The Wall Street collapse," The Nation and Athenaeum , 2

November, pp.162-163.
Henderson, H. D. [1929ab]"The coming deficit," The Nation and Athenaeum , 23

November, pp.274-275.
Henderson, H. D. [1929ac]"The limits of insular socialism," The Nation andAthenaeum , 30 November. in Clay [1955], pp.33-38.
Henderson, H. D. [1929ad]"The revolt of the commons," The Nation andAthenaeum , 14 December, pp.390-391.
Henderson, H. D. [1930a]"The Labour Party and expenditure," The Nation

and Athenaeum , 11 January, pp.502-503.
Henderson, H. D. [1930b]"Our heresy," The Nation and Athenaeum , 18 January. in

Clay [1955], pp.56-60.
Henderson, H. D. [1930c]"The present unemployment," 10 July. in Clay [1955],

pp.56-60.
Henderson, H. D. [1930d]"The Background of the problem," 18 September. in Clay

[1955], pp.66-70.
Henderson, H. D. [1931a]"The economy report," 7 August. in Clay [1955], pp.71-77.

Henderson, H. D. [1931b]"The state of economics," 14 October. in Clay [1955],

58

pp.78-80.
Henderson, H. D. [1931c]"Internal credit policy --and international," 27 October. in

Clay [1955], pp.81-86.
Henderson, H. D. [1935]"Do we want public works ?," 11 May. in Clay [1955],

pp.151-160.
Henderson, H. D. [1936a]"Mr. Keynes's attack on economists,"

The Spectator,

vol.156, no5616, 14 February, 1936.
Henderson, H. D. [1936b] "Mr. Keynes's theories," 2 May. in Clay [1955], pp.161-177.
Henderson, H. D. [1942]"The principles of the Beveridge Plan," 4 August. in Clay

[1955], pp.191-208.
Henderson, H. D. [1943]"Notes on the problem of maintaining employment," 20May. in Clay [1955], pp.220-235.
Henderson, H. D. [1944]"Lord Keynes and employment policy," 1 March. in Clay

[1955], pp.316-326.
Henderson, H. D. [1949]"The function of exchange rates," Oxford Economic Papers,

January. in Clay [1955], pp.357-376.
Henderson, H. D. [1950]"Controls and the price system," The Herbert Lecture, 14

March. in Clay [1955], pp.413-424.

B-2 Keynes' original writings
The Collected Writings of John Maynard Keynes, London: Macmillan Cambridge
University Press for the Royal Economic Society 1971~1989
CW4 A Tract on Monetary Reform, 1971(1923).
CW5 A Treatise on Money Ⅰ: The Pure Theory of Money, 1971(1930).
CW6 A Treatise on Money Ⅱ: The Applied Theory of Money, 1971(1930).
CW7 The General Theory of Employment, Interest and Money, 1973(1936).
CW9 Essays in Persuasion, 1972(1931).
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・ The Economic Consequences of Mr Churchill, pp.207-230, 1925
CW19 Activities 1922-1929: The Return to Gold and Industrial Policy, 1981

59

・”Bank Rate at Four Per Cent”, The Nation and Athenaeum, 14 July
1923, pp.100-103.
・”Mr J. M. Keynes’s Speech”, a conference in London, the League of
Nations Union, 25-27 March 1924, pp.182-193.
・”Does Employment Need a Drastic Remedy ?”, The Nation andAthenaeum, 24 May 1924,

pp.219-223.

・”A Drastic Remedy for Unemployment: Reply to Critics”, The
Nation and Athenaeum, 7 June 1924,

pp.225-231.

・ Evidence for the Committee on the Currency and Bank of England,meeting held in the Treasury on Friday 11 July 1924 at 10:30 a.m.,
pp.239-261.
・”The Bank Rate”, The Nation and Athenaeum, 7 March 1925,
pp.333-337.
・”The Bank Rate: Five-and-a-half Per Cent”, The Nation andAthenaeum, 16 February 1929, pp.796-800.
・”Mr Lloyd Gorge’s Pledge”, The Evening Standard, 19 March 1929,
pp.804-808.
・”A Cure for Unemployment”, The Evening Standard, 19 April 1929,
pp.808-812.
・”The Treasury Contribution to the White Paper”, The Nation andAthenaeum, 18 May 1929,

pp.819-824.

CW20 Activities 1929-1931: Rethinking Employment and Unemployment
Policies, 1981.
・ Private Evidence for Committee on Finance and Industry, 20/21/28
February 1930, 6/7 March 1930, pp.38-157.
・”The Industrial Crisis”, The Nation and Athenaeum, 10 May 1930,
pp.345-349.
・ A Memo to Norman, 22 May 1930, pp.350-356.
・”Economic Advisory Council, Committee of Economists, Draft
Report, 6 October 1930, pp.443-448.
CW21 Activities 1931-1939: World Crises and Policies in Britain andAmerica, 1982.

60

・ Notes on the Currency Question, 16 November 1931, pp.16-28.
・”The Monetary Policy of the Labour Party”, The New Statesman
and Nation, 17 & 24 September 1932, pp.128-137.
・”Can We Co-operate with America ?”, The Daily Mail, 27 June
1933, pp.264-268.
・”The Future of the Foreign Exchanges”, Lloyds Bank Monthly
Review, October 1935, pp.360-369.
・ Government Loan Policy and the Rate of Interest, 27 May 1939,
pp.534-546.
CW22 Activities 1939-1945: Internal War Finance, 1979.
CW27 Activities 1940-1946: Shaping the Post-War World: Employment
and Commodities, 1980.
・ Chapter 4"The Beveridge Report," pp.203-263.

・ Chapter 5"Employment Policy," pp.264-419.

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Clarke, P. [1988] The Keynesian Revolution in the Making 1924-1936, Oxford:
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63