The "Treasury View" on Public Works and Employment in the Interwar Period

Abstract

Few economic doctrines have been apparently so fully discredited in the lifetime of those who held them as the of I929 that very little additional employment and no permanent employment can in fact and as a general rule be created by loan-financed public works. 1 The view, based as it was mainly on a belief that government would tend to 'crowd out' private investment, even though about IO per cent of the insured labour force was unemployed at the time, seemed absurd in the light of the new insights provided by J. M. Keynes's General Theory of Employment, Interest and Money in I936. For Joan Robinson, one of the economists closely associated with the Keynesian Revolution, the Treasury's arguments in I929 were simple and laughable.2 A. J. Youngson, on the other hand, writing at the end of the I950s, thought that what the Treasury view really was is something of a mystery, but he believed that the Treasury made a culpable omission in leaving the multiplier effect of public works out of account when estimating their effects on unemployment.3 These early judgements were necessarily based upon the Treasury's published statements, but since the I970S researchers have uncovered much more evidence of Treasury thinking. An earlier article in this series of Surveys and Speculations rightly drew attention to the dangers of uncritical use of evidence from the state papers now in the Public Record Office,4 but at least we now