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Activities 1914 1919 The Treasury and Versailles 2nd ed.
Edition Keynes Digital Instant Download
Author(s): Keynes, John Maynard
ISBN(s): 9781139524179, 1139524178
Edition: 2nd ed.
File Details: PDF, 25.27 MB
Year: 2012
Language: english
the collected writings of
J O H N M AY NA R D K E Y N E S
Managing Editors:
Professor Austin Robinson and Professor Donald Moggridge
John Maynard Keynes (1883–1946) was without doubt one of the most influ-
ential thinkers of the twentieth century. His work revolutionised the theory
and practice of modern economics. It has had a profound impact on the
way economics is taught and written, and on economic policy, around the
world. The Collected Writings of John Maynard Keynes, published in full in
electronic and paperback format for the first time, makes available in thirty
volumes all of Keynes’s published books and articles. This includes writings
from his time in the India Office and Treasury, correspondence in which he
developed his ideas in discussion with fellow economists and correspondence
relating to public affairs. Arguments about Keynes’s work have continued
long beyond his lifetime, but his ideas remain central to any understanding of
modern economics, and a point of departure from which each new generation
of economists draws inspiration.
From 1915, when Keynes joined the Treasury, until he resigned in 1919
during the Versailles Conference, he carried a rapidly increasing load of
responsibility. This volume prints all the principal papers and memoranda
he wrote during those years, and throws new light on the crises of inter-allied
financial relations and the near exhaustion of British financial resources. It
contains also his contributions to the early thinking in the Treasury about
post-war reparations and inter-allied debts. It ends with his correspondence,
official and private, from Paris, as he saw his hopes of a wise settlement
vanishing. This is a necessary companion to The Economic Consequences of
the Peace (Vol. II in this series).
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THE COLLECTED WRITINGS OF
JOHN MAYNARD KEYNES
VO LU M E X V I
ACTIVITIES 1914–1919
T H E T REAS URY AND VERSAILLES
edited by
ELIZABETH JOHNSON
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© The Royal Economic Society 1971, 2013
www.cambridge.org
Information on this title: www.cambridge.org/9781107633773
A catalogue record for this publication is available from the British Library
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CONTENTS
General introduction page vii
Index 481
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GENERAL INTRODUCTION
This new standard edition of The Collected Writings of John
Maynard Keynes forms the memorial to him of the Royal Eco-
nomic Society. He devoted a very large share of his busy life to
the Society. In 1911, at the age of twenty-eight, he became editor
of the Economic Journal in succession to Edgeworth; two years
later he was made secretary as well. He held these offices
without intermittence until almost the end of his life. Edgeworth,
it is true, returned to help him with the editorship from 1919 to
1925; Macgregor took Edgeworth's place until 1934, when
Austin Robinson succeeded him and continued to assist Keynes
down to 1945. But through all these years Keynes himself carried
the major responsibility and made the principal decisions about
the articles that were to appear in the Economic Journal, without
any break save for one or two issues when he was seriously ill in
1937. It was only a few months before his death at Easter 1946
that he was elected president and handed over his editorship to
Roy Harrod and the secretaryship to Austin Robinson.
In his dual capacity of editor and secretary Keynes played a
major part in framing the policies of the Royal Economic
Society. It was very largely due to him that some of the major
publishing activities of the Society—Sraffa's edition of Ricardo,
Stark's edition of the economic writings of Bentham, and
Guillebaud's edition of Marshall, as well as a number of earlier
publications in the 1930s—were initiated.
When Keynes died in 1946 it was natural that the Royal
Economic Society should wish to commemorate him. It was
perhaps equally natural that the Society chose to commemorate
him by producing an edition of his collected works. Keynes
himself had always taken a joy in fine printing, and the Society,
with the help of Messrs Macmillan as publishers and the Cam-
bridge University Press as printers, has been anxious to give
Keynes's writings a permanent form that is wholly worthy of him.
vii
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GENERAL INTRODUCTION
The present edition will publish as much as is possible of his
work in the field of economics. It will not include any private
and personal correspondence or publish letters in the possession
of his family. The edition is concerned, that is to say, with
Keynes as an economist.
Keynes's writings fall into five broad categories. First there
are the books which he wrote and published as books. Second
there are collections of articles and pamphlets which he himself
made during his lifetime {Essays in Persuasion and Essays in
Biography). Third, there is a very considerable volume of
published but uncollected writings—articles written for news-
papers, letters to newspapers, articles in journals that have not
been included in his two volumes of collections, and various
pamphlets. Fourth, there are a few hitherto unpublished
writings. Fifth, there is correspondence with economists and
concerned with economics or public affairs.
This series will attempt to publish a complete record of
Keynes's serious writing as an economist. It is the intention to
publish almost completely the whole of the first four categories
listed above. The only exceptions are a few syndicated articles
where Keynes wrote almost the same material for publication in
different newspapers or in different countries, with minor and
unimportant variations. In these cases, this series will publish
one only of the variations, choosing the most interesting.
The publication of Keynes's economic correspondence must
inevitably be selective. In the day of the typewriter and the filing
cabinet and particularly in the case of so active and busy a man,
to publish every scrap of paper that he may have dictated about
some unimportant or ephemeral matter is impossible. We are
aiming to collect and publish as much as possible, however, of
the correspondence in which Keynes developed his own ideas in
argument with his fellow economists, as well as the more signi-
ficant correspondence at times when Keynes was in the middle
of public affairs.
Apart from his published books, the main sources available to
viii
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GENERAL INTRODUCTION
those preparing this series have been two. First, Keynes in his
will made Richard Kahn his executor and responsible for his
economic papers. They have been placed in the Marshall Library
of the University of Cambridge and have been available for this
edition. Until 1914 Keynes did not have a secretary and his
earliest papers are in the main limited to drafts of important
letters that he made in his own handwriting and retained. At
that stage most of the correspondence that we possess is repre-
sented by what he received rather than by what he wrote. During
the war years of 1914-18 Keynes was serving in the Treasury.
With the opening of the 1914-18 records, many of the papers
that he wrote have become available. From 1919 onwards,
throughout the rest of his life, Keynes had the help of a secretary
—for many years Mrs Stevens. Thus for the last twenty-five years
of his working life we have in most cases the carbon copies of his
own letters as well as the originals of the letters that he received.
There were, of course, occasions during this period on
which Keynes wrote himself in his own handwriting. In some of
these cases, with the help of his correspondents, we have been
able to collect the whole of both sides of some important inter-
change and we have been anxious, in justice to both correspon-
dents, to see that both sides of the correspondence are published
in full.
The second main source of information has been a group of
scrapbooks kept over a very long period of years by Keynes's
mother, Florence Keynes, wife of Neville Keynes. From 1919
onwards these scrapbooks contain almost the whole of Maynard
Keynes's more ephemeral writing, his letters to newspapers and
a great deal of material which enables one to see not only what he
wrote, but the reaction of others to his writing. Without these
very carefully kept scrapbooks the task of any editor or bio-
grapher of Keynes would have been immensely more difficult.
The plan of the edition, as at present intended, is this. It
will total twenty-four volumes. Of these, the first eight will be
Keynes's published books from Indian Currency and Finance, in
ix
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GENERAL INTRODUCTION
1913, to the General Theory in 1936, with the addition of his
Treatise on Probability. There will next follow, as vols. ix and x,
Essays in Persuasion and Essays in Biography, representing
Keynes's own collections of articles. Essays in Persuasion will
differ from the original printing in two respects; it will contain
the full texts of the articles or pamphlets included in it and not
(as in the original printing) abbreviated versions of these articles,
and it will have added one or two later articles which are of
exactly the same character as those included by Keynes in his
original collection. In the case of Essays in Biography, we shall
add various other biographical studies that Keynes wrote
throughout his life.
There will follow three volumes, xi to xm, of economic articles
and correspondence, and one volume, xiv, of social, political and
literary writings. We shall include in these volumes such part of
Keynes's economic correspondence as is closely associated with
the articles that are printed in them.
The further nine volumes, as we estimate at present, will deal
with Keynes's Activities during the years from the beginning of
his public life in 1905 until his death. In each of the periods into
which we propose to divide this material, the volume concerned
will publish his more ephemeral writings, all of it hitherto un-
collected, his correspondence relating to these activities, and
such other material and correspondence as is necessary to the
understanding of Keynes's activities. The first four of these
volumes are being edited by Elizabeth Johnson; the later
volumes will be the responsibility of Donald Moggridge. It is
their task to trace and interpret Keynes's activities sufficiently
to make the material fully intelligible to a later generation.
Until this work has progressed further, it is not possible to say
with exactitude whether this material will be distributed, as we
now think, over nine volumes, or whether it will need to be
spread over a further volume or volumes. There will be a final
volume of bibliography and index.
Those responsible for this edition have been: Lord Kahn, both
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GENERAL INTRODUCTION
as Lord Keynes's executor and as a long and intimate friend of
Lord Keynes, able to help in the interpreting of much that would
otherwise be misunderstood; Sir Roy Harrod as the author of his
biography; Austin Robinson as Keynes's co-editor on the Eco-
nomic Journal and successor as secretary of the Royal Economic
Society. The main editorial tasks in the first four of these
volumes have been carried by Elizabeth Johnson. She has
been assisted at different times by Jane Thistlethwaite, Mrs
McDonald, who was originally responsible for the systematic
ordering of the files of the Keynes papers, Judith Masterman
and Susan Wilsher, who in turn have worked with Mrs Johnson
on the papers.
XI
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EDITORIAL FOREWORD
This volume, together with volume xv, form the first of a
group of nine or more which will make available Keynes's
more ephemeral writings, his letters and contributions to the
newspapers, his memoranda while employed in the India Office
and in the Treasury in two wars, and such correspondence as
is directly related to the events about which he is writing or
is necessary to the understanding of the documents that are
published.
For his published contributions to the press, the main source
is the series of scrapbooks which, as explained in the General
Introduction, his mother indefatigably maintained throughout
his working life. (Keynes, knowing that she was doing this,
helped by sending her copies of all he published.) For the periods
in Whitehall, first in the India Office and subsequently in the
Treasury, dependence has been primarily on the files that are
now available in the Public Record Office. In some cases, how-
ever, Keynes had himself retained an earlier draft of a memo-
randum that he had written. Almost all of the correspondence that
is here published is among his surviving papers. At points the
diaries of John Neville Keynes—Maynard Keynes's father—
serve to illuminate Keynes's thoughts or state of mind at impor-
tant moments.
This volume, like that which precedes it, has aimed to publish
as much as possible of Keynes's writing of the period covered.
In this early period there was none of the duplication in his
contributions to the press, syndicated in different parts of the
world, that sometimes is to be found in his later years. For the
two Civil Service periods it has been necessary to be somewhat
more selective and to confine publication to what is both clearly
Keynes's work and of more than routine interest. During the
later war years, for example, he wrote at intervals appreciations
of the position regarding inter-allied finance, rehearsing much
xui
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EDITORIAL FOREWORD
the same arguments about much the same problems in the light
of progressively changing figures. We have selected for publica-
tion those examples of such memoranda which best illustrate a
particular problem or best show his analytical handling of them.
It has been necessary, in order to make this material intelligible
to a generation which did not live through the events and to
whom the participants are unknown names, to provide a minimum
of factual background. It has been sought to ntake this back-
ground information sufficient for clarity, but neither obtrusive
nor argumentative. The purpose has been to provide the reader
with the material from which to make his own judgement of
Keynes rather than to attempt to impose the judgements of the
editors.
No reader, we think, can fail to be impressed by the immensely
detailed mastery which, as revealed in volume xv, Keynes had
achieved as a very young man of all the many ramifications of
Indian finance. This capacity for mastery of detail remained
with him through life. He was never content with a merely
superficial understanding of the broad essentials of a problem.
We suspect that a reader will find it equally fascinating to
contrast Keynes's analysis of the economic problems of war as
set out in some of his Treasury memoranda or other discussions
of war finance of 1914-18 with the analysis that he developed
twenty-five years later in How to Pay for the War. Finally,
one sees here vividly through his own eyes and in his own
words his agonies of despair as a rational handling of the
problems of reparations became irretrievably frustrated by
political ineptitude.
xiv
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NOTE TO THE READER
In this and subsequent volumes, in general all of Keynes's own
writings are printed in larger type. All introductory matter and
all writings by others than Keynes are printed in smaller type.
The only exception to this general rule is that occasional short
quotations from a letter from Keynes to his parents or to a
friend, used in introductory passages to clarify a situation, are
treated as introductory matter and are printed in the smaller
type.
Most of Keynes's letters included in this and other volumes
are reprinted from the carbon copies that remain among his
papers. In most cases he has added his initials to the carbon in
the familiar form in which he signed to all his friends. We have
no means of knowing whether the top copy, sent to the recipient
of the letter, carried a more formal signature.
xv
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PART I
THE TREASURY
IN THE WAR YEARS
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Chapter i
THE EARLY STAGES, 1914-1915
' I was in the Treasury throughout the war and all the money we either
lent or borrowed passed through my hands'—so Keynes, speaking in 1923,
airily described his wartime duties. He hardly exaggerated, as he was directly
concerned with the strategy of financing Britain's war expenditure and that
of her allies, and finally took charge of a division of his own responsible for
all of Britain's inter-allied financial arrangements.
He kept a mass of minutes, memoranda, first and second drafts, reports
and printed papers documenting this period of his life. By itself, however, the
material is incomplete and inconclusive. The records of the Treasury and
the Cabinet Office, now made available at the Public Record Office, help in
large measure to fill in the gaps and reveal a remarkably influential role for
a man between the ages of 31 and 36.
When Keynes entered the Treasury it was a comparatively small group,
and the war still seemed a small war. At first he had many jobs, but as the
war went on Britain's financial involvement mushroomed, and this national
burden became his particular care. The following section does not provide an
exhaustive account of his work. The papers reproduced have been chosen to
show the different kinds of things that he was doing and his manner of doing
them. They are interesting for the light that they throw on his development
as an economist or on the similarities and differences in his thinking at this
stage and in later years.
Keynes officially joined the Treasury in January 1915, but he made an
earlier unorthodox foray into events in the first days of the war. Basil
Blackett, who had returned to the Treasury after the report of the Chamber-
lain Commission, wrote to him 1 August:
I tried to get hold of you yesterday and to-day but found you were not
in town. I wanted to pick your brains for your country's benefit and
thought you might enjoy the process. If by any chance you could spare
time to see me on Monday I should be grateful, but I fear the decisions
will all have been taken by then. The joint stock banks have made absolute
fools of themselves and behaved very badly.
Keynes lost no time; he arrived in Whitehall the next day, Sunday, after
riding down from Cambridge in the side-car of the motor cycle of his
brother-in-law, A. V. Hill.
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THE TREASURY IN THE WAR YEARS
British banking was in a state of transition. For the past decade or so the
joint stock banks had been accumulating large reserves of gold, and their
London clearing house was beginning to replace the Bank of England as the
central banking institution. Inspired by Sir Edward Holden—whose views on
gold Keynes had criticised (JMK, vol. xv, pp. 88-90)—the banks argued
that the gold reserves were too small in relation to the volume of British
business and to the large hoards being amassed by other countries. They
thought that the government should take more responsibility for maintaining
the gold reserves, and in particular should keep a reserve against the claims
of government savings bank depositors.
Early in 1914 this criticism became a demand for a public inquiry.
Blackett had been given the task of writing the memorandum embodying the
Treasury view, and had sent his paper to Keynes. Keynes's comments, in a
letter dated 24 June 1914, with one exception consisted of points of detail.
(For example, when Blackett remarked that' so enlightened an economist as
Stanley Jevons' had subscribed to the theory that commercial crises recurred
under the influence of sunspots, Keynes observed: ' I am inclined to think
there may still be something in Jevons' sunspot theory. At any rate it is not
altogether derisory.')
In the last four paragraphs of the letter, however, Keynes took up the
question of government responsibility, which was the central problem that
the banks posed for the Treasury in their demand for reform. How far did
the commercial banker's special interest in maintaining high gold reserves
for the benefit of his own financial safety coincide with the interest of the
general community, and to what extent should he expect the government to
protect his interest at the public expense ? Blackett was inclined to think that
the bankers expected too much.
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