This was a Britain suffering from
a major slump
what are your own retrospective reflections on the slump in the thirties
on economic policy
on the behaviour or success, or failure of the national government
well there
has to take
further you know the great misfortune
I think was the
attempt to
return to gold
at the old parities in nineteen twenty
which in a sense was quite unnecessary because
As I was pointing out at the time
when I came to England but too late
David Ricardo had argued a hundred years before that he would never advise a government
to restore a currency deprecated by thirty percent to its
former power
if a single English economist had
recalled this and quoted it
the fight against the return at the former parity might have
been won
but Keynes used the opportunity to
protest against the return to gold in any form
though unfortunately it was done in the return at the former parity
and Keynes was
convinced by
that stage
perhaps as a fact correctly
that
with the strength British trade unions had achieved
you could no longer hope
to maintain
aggregate demand
at a constant value of money
and he hoped that by
a gradual
and slow
decrease in the value of money you could overcome the resistance of
rigid wages
well that was the situation I found
which led me in a
conflict with Keynes and most of my
years in England I was....
No, No! I can’t say that, the first ten years
from then the situation became even
more peculiar
Keynes became largely responsible for British monetary policy but at the same time…
this is during the war?
this is during the war yes
but at the same time
he was the one who would
resist inflation at the time
and so having been criticising Keynes during the thirties
I refrained from doing so because I wanted him to keep in power because the alternative
would have been even worse
but why do you think that the general theory
which came out in thirty six
and with which
you disagreed and many other economistse why did it
have such an enormous influence
well I wish I knew I was puzzled by it at the time, in fact
I did not believe it would succeed so much so
that while I’d spent a year
analysing in great detail
he’s earlier book the Treatise on Money
and then only to hear from him by the time the second part of my criticism was published
“oh I no longer believe in all that”
I did not want to invest
more effort in criticising the general theory who's
success is still a puzzle to me
because it reverted to a very
primitive idea which had been clearly
refuted in the nineteenth century
that there is a single relation between
the demand -
aggregate demand for final products and employment
so much so that Leslie Steven in
the eighteen eighties had pointed out The test of a good economist is that he
does not
make that particular mistake
well Keynes
revived it and gave a plausible explanation and
I should add that he did not succeed while he lived
but when he died he was suddenly raised to
sainthood
but Keynes
might not have approved of the Keynianism which came to dominate policy.. Well I am sure he wouldn’t
in fact I can positively say so
the very last time I
saw him
about six weeks before his death
I was meeting him at the.. I was still having
dining rights at Kings College
and I was there for a weekend
and talked to him after dinner and asked him whether he wasn’t alarmed
by what his pupils naming two
who I won’t name now
were doing agitating for more
expansion
when in fact the danger clearly was
inflation
he completely agreed with me
and assured me
my theory was frightfully important in the nineteen thirties when the question was of
combating deflation
trust me
if inflation ever becomes a danger
I am going to turn public opinion around like this
six weeks later he was dead and couldn’t do it
I think he would have been fighting the inflationary policy