Relief and Reconstruction Plan Toshiaki Hirai Sophia University, Tokyo

Relief and Reconstruction Plan

Toshiaki Hirai

Sophia University, Tokyo

1.  Introduction

This paper is concerned with documenting John Maynard Keynes’s evolving views up to the 1940s on how to deal with the ‘relief problem’, being the problem of providing monetary and material aid to countries whose economies are devastated by war. A major focus of the paper is establishing Keynes’s stance on providing relief to the war ravaged countries of Western Europe immediately after the Second World War in order to enhance their long-term post-war reconstruction. The paper is also concerned with throwing light on the major motivation underlying Keynes’s position on relief policy mainly with respect to the ongoing role of the British Empire in the face of a changing international order. In this regard, Keynes’s views on the relief problem may shed some light on his international politics and whether he can be usefully characterized as a nationalist, internationalist or an imperialist. It is indeed argued in the paper that Keynes’s strenuous efforts in drawing up plans for post-war reconstruction in the 1940s were designed to maintain Britain’s influence on a footing with the United States. This insight into Keynes’s international political stance has not been accounted for by Moggridge (1992), Skidelsky (2000) and Markwell (2006) in their considerations of this subject. Besides Keynes’s contributions, the paper provides a valuable account of how the great powers tackled the relief problem, throwing considerable light on the initial stage of the relief plan for war ravaged Western Europe, including the Marshall Plan.

The argument is organized as follows. Section 2 includes a brief survey of Keynes’s activities in international politics up to 1940. In section 3, Keynes’s wide-ranging activities as a policy advisor in the 1940s is outlined. In section 4 the initial stage of the relief problem is explained, and sections 5-7 examine in detail how Keynes proposed different plans in response to changing circumstances. In section 8, Keynes’s response to the United Nations Relief and Reconstruction Administration (UNRRA) under the leadership of the United State is described, while his attitude toward the Crown Colonies is examined in section 9. In section 10 the conclusion considers the outcome of the relief program actually implemented in Western Europe by reference to Keynes’s position.

2.  Keynes’s Stance in International Politics Summarized

In order to understand Keynes’s political stance in the 1940s we must first take a glance at the kind of ideas he had been putting forward in the field of international politics up to 1940, although this amounts to only a small part of his activities.

Firstly, during the First World War Keynes was promoted to head of Section A of Treasury, which had been set up to manage its international finance. Wartime Britain was placed under considerable financial strain. In order to continue the war, it was crucial to obtain a loan from the American Administration. Keynes played a central role in the tough and complicated negotiations. Through personal experience, he came to understand that not only military but also financial supremacy had shifted irreversibly from Great Britain to the USA.

Secondly, in Chapter 7 of The Economic Consequences of the Peace, titled ‘Remedies’, Keynes put forward bold ideas on the reconstruction of Europe after the First World War. They reveal a courageous policy planner. Aside from proposing to cancel all war debts, involving the abandonment of 2 billion pounds for the USA and 0.9 billion pounds for the UK, Keynes offered a plan for the international economic system. It broadly consisted of the following: (i) a reorganization of the Coal Commission into a cooperative system for supplying and allocating coal throughout all of Europe; (ii) the foundation of a free trade union in Europe inclusive of the UK; and (iii) an international loan for the rebirth of Europe which would be used to obtain food and materials from the USA for post-war relief in Europe as well as a ‘Guarantee Fund’, established by contributions of the member countries of the League of Nations and employed for a general reorganization of currency.¹ These proposals represent the prototype of various plans for the international economic systems which Keynes put forward 20 years later (see section 3 below).

Thirdly, in the A Tract on Monetary Reform (1923), Keynes explicitly criticized the return to the Gold Standard. It should be noted that Keynes argument rested not only on theoretical grounds, but also in relation to American supremacy as well:

　　  … gold now stands at an ‘artificial’ value, the future course of which almost entirely depends on the policy of the Federal Reserve Board of the United States (TMR, pp.134-5).

    

He proposed an alternative to the gold standard back by pound sterling in which the United States as well as Great Britain ‘aim at the stability of the commodity value of the dollar rather than at stability of the gold value of the dollar, and to effect the former if necessary by varying the gold value of the dollar’ ² (TMR, p. 158).

Fourthly, in A Treatise on Money (1930) Keynes argued that under the Gold Standard in order to stabilize the price level in the short run as well as long run the cooperation of different national central banks was required. However in practice central bank coordination was very difficult. As an alternative Keynes argued that the future ideal currency should be controlled by a supranational institute, limiting gold to a symbolic status even though it might be used as an international standard, anticipating the later role of the gold standard in the Bretton Woods system after World War II.³ This idea led to Keynes’s famous ‘International Clearing Union’ Plan.

3.  Keynes’s Activities as Policy Advisor in the 1940s

In July 1940 the Chancellor of the Exchequer’s Consultative Councilwas set up ‘to help and advise the Chancellor on special problems arising from war conditions’⁴ . Keynes accepted membership of the Council. This was the first time since 1919 that he had any formal connection with the Treasury. In August Keynes ‘took a further step into the Treasury: he received a room in the building’⁵. This was to see Keynes becoming deeply involved in Treasury matters, although he continued to act as an unpaid adviser to the Chancellor. Thereafter he was to be engaged on a range of important assignments, which can be classified into three categories.

The first category of assignments concerns external war finance and the balance of payments crisis. As is well known Keynes played a key role in the negotiations with the United States over lend-lease arrangements as well as the balance of payments crisis, which became serious due to the announcement by President Truman of the immediate termination of Lend Lease on 17 August and was to culminate in the Anglo-American Financial Agreement of December 1945⁶. Faced with the overwhelming powers of the USA in both military and financial terms, he worked as a hard-bitten negotiator, set on defending and maintaining the British Empire.

The second category concerned the shaping of the post-war world economic order. In this connection, Keynes’s great ability to design international economic systems emerged. Certainly his most important and celebrated achievement was in the establishment of a new international monetary system, notwithstanding his plan for an ‘International Clearing Union’ was not adopted. Besides this important contribution, Keynes’ formulated proposals concerning the relief-reconstruction problem, the commodity problem⁷, commercial policy, the reparations issue and so forth. In all these matters Keynes negotiated with the United States as the chief British representative. A question that begs itself is:   on what principles did Keynes devise these plans? The answer in short is that they were based on different principles, according to the nature of the problem concerned. We will take up three cases to illustrate this point: the commodity problem, the international monetary system and the relief problem.

  In the case of the commodity problem, Keynes designed international organizations named the ‘Commod Control’ and the ‘General Council for Commod Controls’ ― organizations for buffer stock operations, the purpose of which was to stabilize the short-term prices of various primary commodities while allowing for gradual changes in the long-term prices, and to ensure due income to the producers concerned. The fundamental principle on which the buffer stock plan was based was his view of the market economy as clearly emerges in The End of Laissez-Faire (1926): if left to the law of supply and demand the market economy cannot attain an optimum allocation of resources. He believed that the aversion to buffer stock implicit in a competitive market system gave rise to violent fluctuations in prices, to avoid which some sort of international organization dealing with buffer stock was required ― an international version of Vice-President Wallace’s ‘ever-normal granary’.

 In the case of the international monetary system, Keynes put forward the ‘International Clearing Union’, being a multilateral clearing system for all foreign exchange transactions among national central banks⁸. For this purpose an international organization named the ‘Clearing Union’ was to be set up, each country holding an account there. Every international transaction was to be recorded in the account of the nation concerned in terms of ‘bancor’, an international currency used only for international transactions. The Clearing Union would be endowed with credit creating capacity (each nation should fix the exchange rate in terms of bancor).

 

The most innovative part of this plan was that the bancor would occupy a position as international currency instead of gold, which would lose its position as international currency, while all the existing currencies such as the dollar and pound sterling would remain as local currencies. The foreign exchange markets would disappear and credit be created in accordance with the economic growth of the world economy. The idea was that international financial transactions would be concentrated on the Clearing Union, while international transactions of goods and services were to be left to the free activities of private firms. Keynes described the Clearing Union plan as an international version of a system that is taken for granted in domestic banking. The basic principle upon which the Clearing Union plan was to be based was an international monetary system which, if needed, could increase or decrease the amount of international currency so that deflationary or inflationary trends in the world economy could be cancelled out, and world trade could grow accordingly. Keynes expressed the view that each government should pursue prosperity and stability for its own economy by means of economic policy. He continued to criticize the Gold Standard because it would deprive governments of this degree of discretion, as is clearly seen in the Tract and the General Theory. In all his plans for the international monetary system there is no doubt that Keynes was wary of the emerging economic power of the United States. This is evident for example in the Tract where he explicitly stated that a return to the Gold Standard meant no more than the de facto US Standard in which the bancor was to be an international currency independent of the US dollar⁹.

 In the case of the relief problem, Keynes proposed the ‘Central Relief and

Reconstruction Fund’ (CRRF), the task of which was to manage a joint fund comprised of money donations or contributions in kind from various countries. The basic principle behind the CRRF was to create an ideal international organization to distribute commodities, efficiently and with humanitarian criteria, among countries in need of relief. In this respect the Fund was to be regarded as an economic organization. As will be explained later, however, due to developments in the UK situation Keynes’s stance underwent dramatic change.

 

The third category of assignments concerns the formation of the post-war domestic order. In this category Keynes was particularly involved in problems of employment and social security. With regard to Keynes’s views on employment as set out in the General Theory, they finally won over in the controversy with the Treasury and got through to the government, bearing fruit as The White Paper on Employment (1944).¹⁰ Regarding social security policy, Keynes contributed in no small degree to getting the Beveridge Plan implemented.¹¹

4．The Initial Situation Surrounding the Relief Problem

  At the outbreak of World War II, Britain made a desperate effort to prevent strategic commodities from falling into enemy hands. To achieve this objective it was necessary to buy up large quantities of primary commodities, as a result of which the U.K. later found itself in possession of excessive stockpiles. It was because of this state of affairs that the relief and commodity problems initially came to be discussed in tandem. To cope with this situation, a ‘Ministerial Sub-Committee on Export Surpluses’ was set up in July 1940 to discuss what measures ─ restriction of production, purchase and storage, destruction, etc. ─ should be adopted ‘to deal with surpluses in producing countries of commodities which should be denied to the enemy by our blockade’ (JMK.27, p. 3). It was when the Prime Minister stated in August 1940 that Britain should be committed to ‘a policy of building up stocks of food and raw materials for post-war relief purposes’ (JMK.27, p. 3) that the surplus commodity problem came to be bound up with the post-war relief problem.

  The Sub-Committee recommended that Britain ‘should purchase, with or without American help, £200 million pounds in surplus commodities, linking the purchase with the goal of restricting or regulating future production’ (JMK.27, p. 3). In November 1940, on the basis of this recommendation, Frederick Leith-Ross¹² was appointed to represent Britain in the necessary negotiations. At the same time, Keynes became the Treasury representative on the official committee set up to advise him.

  Initially Keynes believed that ‘if this is [to be] anything at all it [must be] a world scheme of the greatest possible post-war significance, which the United States, if they understood it, would want to be very much in at the first row’ (JMK.27, p. 5). He insisted that any plan should be drawn up in complete collaboration with the U.S. and that it should be based on the principle(s?) of internationalism.

  In November 1940, Leith-Ross suggested that any plan concerning the problem of surpluses should have the following three objectives: to accumulate commodities in preparation for post-war relief initiatives; to relieve producing countries suffering from the collapse of their markets due to the war; to put production adjustment into effect for the purpose of preventing the re-emergence of surplus commodities during the war, and the occurrence of disequilibrium after the war.

Keynes whole-heartedly agreed that these objectives should form the basis of any plan for dealing with the surplus commodities problem. In December 1940 he recommended that commercial firms be set up, part of the capital of which should be raised in the relevant producing country. At the same time, he stressed the importance of gathering and analyzing data (especially price data) on the surplus commodities. In this connection, in February 1941 he advised that the U.K. should not purchase surpluses unless they could be had at a price at least 10 per cent below the yearly average in the lowest year of recent years. Examining the buying prices of various commodities, he reached the conclusion that the prices the U.K. had until then been paying had been too high. He put this policy before the official committee on 19 February 1941, which accepted it more or less as it stood. It should be noted that this proposal took into account the fact that Britain’s financial position was then rapidly deteriorating.

  In the spring of 1941, Keynes was involved in the Anglo-American negotiations on wheat and cotton.¹³ Two points concerning these negotiations are worth mentioning. One is Keynes’s doubt concerning the American proposal for export quotas. The other concerns the problem of how the United States could rectify her position as an unstable creditor country. Regarding the latter, Keynes saw three alternatives for the United States: to become a trustworthy international lender;  to increase imports; or to reduce exports. However, he also saw that each of these would be very difficult to implement in practice.

  On a visit to Washington in May 1941, Keynes discussed the surplus problem with Dean Acheson, Assistant Secretary of State. Keynes took this opportunity to set out his thoughts on the problems that could be anticipated to arise after the war. His ideas, with which Acheson was in accord to a degree well beyond his expectations, included: an outline of a post-war relief and reconstruction program for Europe (this could be said to represent, in embryo, a blueprint for the Central Relief and Reconstruction Fund¹⁴; see Section 2 below); and a conception of the ‘ever-normal granary’¹⁵ as a comprehensive plan for the unification of primary commodity prices throughout the world. Keynes believed that the accumulation of commodity surpluses which was developing throughout the world could be turned to advantage in the task of putting Europe back on its feet once the war was over. In other words, the solution of the commodity problem could assist in the solution of the relief problem.

  Evidently, then, in mid-1941 there was acknowledged agreement between Keynes, Leith-Ross, and the U.S. Government on the issues of post-war relief and surplus commodities. Before proceeding to examine how discussion of the relief problem was to progress subsequently, we should take note of the fact that Keynes’s proposals, although expressed in terms suggesting a spirit of internationalism, were distinctly not in conflict with the protection of British interests.¹⁶ Where the British interests and internationalist ideals coincide, the internationalist aspect is stressed in his proposals; but where they conflict, the interests of the British Empire invariably take precedence. In this respect Keynes was a champion of the British Empire as well as a realist. It is in the course of the discussions on the relief problem that this feature appears unquestionably manifest.¹⁷

5.  The ‘Central Relief and Reconstruction Fund’ (CRRF) Plan

The plan Keynes had sketched out to Acheson was succeeded by a proposal to carry out relief operations through establishment of a Central Relief and Reconstruction Fund. This was set out in the ‘Treasury Memorandum on Financial Framework of Post-war European Relief’ of 24 October 1941 (JMK.27, pp. 46-51; hereafter the ‘CRRF Plan’ or the ‘Keynes Plan’, for Keynes was its chief author).

  The central idea of the Keynes Plan was that the CRRF should operate a joint fund comprised of money donations or contributions in kind from many countries. The basic principles of the CRRF were as follows: it should be responsible for collecting and distributing all required relief materials (it should be authorized to buy the commodities required at fair prices from any country); it should determine, on the basis of some appropriate principle yet to be established, the proportion of the relief materials which a country should receive gratis or should be liable to pay.

  All transactions were to be booked in the joint fund. To allow the CRRF to estimate the scale of transactions, the following conditions were proposed: the CRRF should request allied governments to produce lists of their requirements, while at the same time taking the enemy countries, France and China into account; the CRRF should make estimates of the quantities of commodities available to it; the CRRF should investigate the financial position of each of the countries concerned, knowledge of which would be prerequisite for equitably determining the proportions in which assistance should be granted free of charge or made payable.

 Keynes considered the CRRF, conceived as above, greatly superior to the idea of having various countries giving relief in kind separately, and sincerely wished to see it set up. He argued that establishing the CRRF would obviate the need for making separate financial arrangements for each commodity, whilst the alternative idea would result in the distribution of commodities becoming a messy affair, due to the absence of any necessary correspondence between the commodity quantities available and an appropriate financial burden.¹⁸

  At first lacking ‘[a] picture of the whole scene’ ― lack of which Keynes thought is likely to lead to disaster¹⁹ ― it appears that Leith-Ross came to form his own ideas through discussion with Keynes. In a letter to Keynes dated 20 November 1941 (JMK.27, pp. 55-56), Leith-Ross advocated the establishment of an international relief organization not dissimilar to the CRRF (hereafter the ‘Leith-Ross Plan’), as an alternative to the Keynes Plan.

 Subsequently discussion arose concerning the relative merits of the two plans. The Keynes Plan and the Leith-Ross Plan were alike in seeing the establishment of some form of central relief organization as the cornerstone of post-war relief operations. The Leith-Ross Plan also envisaged having various countries make contributions to a central organization, on the basis of which the organization was to determine the extent to which the relief materials provided to various countries should be regarded as gifts or as payable items. The point of difference at this stage, in fact, lay less in any difference of principle than in the pace at which each plan should be implemented. This comes out clearly in some remarks Keynes made on particular points of the Leith-Ross Plan in a letter dated 2 December 1941 (JMK.27, pp. 56-59): On the organizational structure in the Leith-Ross Plan ― an American chairman, a British vice-chairman, various divisions and so forth ― Keynes remarks that at this stage it is far more important to forge consensus on the general principles of the organization than to fix the precise details; the Leith-Ross Plan stresses that contributions should be made in cash and the contributions of Britain and the U.S. should be made in the ratio of 1 to 2. In Keynes’s view, to specify a concrete figure was not only premature, but would also risk distorting future negotiations; the Leith-Ross Plan emphasizes that the main primary commodities should be secured in quantities as large as possible. Keynes remarks that, at the present stage of the war, such an attempt would be pointless;  the Leith-Ross Plan advocates a flexible extension of Lend-Lease, and suggests that, should the relief organization function ineffectively, some adjustment might be required. Keynes remarks that, as this would require separate negotiations with each of the countries concerned, it would be inconsistent with the original plan of joint finance.

  We can safely say that at this point Keynes was firmly committed to the CRRF Plan. Nevertheless, he abandoned it shortly after, adopting the idea of ‘a flexible extension of Lend-Lease’ instead. As a result of this, the differences between the Keynes Plan and the Leith-Ross Plan came to have no significance.

6.  Keynes’s Changing Position

  Keynes’s letter to Waley of 4 February 1942 reveals the magnitude of his change of mind.²⁰ He points out that as Britain’s balance of trade will inevitably come up against severe difficulties after the war, it will almost certainly be impossible for Britain to contribute to a central fund without borrowing from abroad. For this reason, the CRRF Plan, which he had so far championed, should be scrapped. He goes on to argue that Britain should be extremely wary of committing herself to any fixed monetary or gift contributions, and that what matters most now is not to discuss the best method of financial support, with which Leith-Ross is so absorbed, but to determine how organization of relief should be arranged. A letter to Hugh Dalton, the President of the Board of Trade, from Kingsley Wood, the Chancellor, was then drawn up by the Treasury. First drafted by David Waley and Hubert Henderson, subsequently revised by Hopkins, and finally completed by Keynes, the letter (hereafter the ‘Wood Paper’) was sent to Dalton on 1 May 1942. In the Wood Paper, the Treasury’s former support for the CRRF Plan is withdrawn, and instead the desirability of having Lend-Lease continued is stressed.²¹

  The argument offered in the Wood Paper is as follows. Britain’s balance of payments position is already serious and will inevitably worsen in the immediate post-war period. Furthermore, her commodity stocks will unavoidably undergo severe depletion. Faced with this, far from being in a position to give aid to others, Britain will by force of necessity become an aid-receiving nation. The CRRF Plan would be difficult to implement because the facts on which the plan was based have ceased to exist. What Britain should now aim at is to persuade the United States to continue the Lend-Lease system and to ask Canada²² for similar treatment:

I am now disposed to think that what we should aim at is that the United States should continue the lend-lease system to cover post-war supplies to those countries (which will probably include ourselves) which are unable to pay in gold and dollars, and that Canada and perhaps other producing countries should also agree to make their goods available on gift, or terms similar to those of lend lease, until the countries of Europe are in a position to resume their export trade on a scale sufficient to pay for their needs in cash. It seems reasonable to hope that the United States and Canada might agree to this, both for general political reasons and in order to maintain their exports of agricultural produce and other commodities (JMK.27, p. 64).

  That Treasury policy changed in recognition of Britain’s increasingly adverse balance of payments situation and rapid depletion of commodity stocks is beyond doubt. The CRRF plan took for granted that Britain would end the war in surplus, going so far as for the CRRF to be authorized to investigate the financial position of the countries expected to need aid. By contrast, the Wood Paper reckoned Britain among the countries in which supplies would be running short by the end of the war (while the U.S., India and various other countries were expected to be in surplus).

... the United States possesses resources available for post-war relief with which ours bear no comparison. Moreover, within the British Commonwealth it is probable that we alone will end the war with substantially reduced international resources, and that India and the Dominions will emerge with a position which is either substantially unchanged or greatly improved  (JMK.27, p. 62).

  In other words, the great change in the situation concerning the post-war relief problem, apart from the prolongation of the war (the Pacific War broke out in December 1941), occurred not in America or the British Dominions, but in Britain itself. The Wood Paper is explicit on this point, stating candidly why an extension of the Lend-Lease system should be considered superior to the CRRF Plan:

Under the [CRRF] plan we, in common with all other countries asking for assistance, would have to go before the [relief] council and give figures of our gold and foreign exchange resources in order to prove that we cannot pay cash for what we need; and I think we should try to avoid being placed in this position (JMK.27, p. 65).

  The CRRF Plan had aimed at creating a central agency to collect commodities from abundant countries and distribute them to needy countries, so that it clearly had an internationalist flavor. The Treasury abandoned this plan primarily on account of the rapid deterioration in Britain’s position, adopting instead the more pragmatic, less idealistic, line of getting Lend-Lease (which had come into being as the inevitable result of the prolongation of the war and entry of the U.S. into it) continued. Nationalistic considerations are unmistakably present here. Nevertheless, we can still find indication of the hope of reconciling these concerns with the need for more general post-war financial arrangements:

In truth the problem seems to me to merge into the much larger question of general financial arrangements after the war for the rehabilitation of countries that are short of external resources, which will include both Russia and ourselves no less than the ‘relief’ countries. We shall do well to see it from the very outset in this larger perspective. For it can no longer be isolated and treated as a special problem in the way that might have seemed possible in the early days of the war (JMK.27, p. 66).

  It is important to bear in mind that by this time the nature of the confrontation between the Treasury and the Board of Trade had completely changed. Up to this point, the difference between the two had centered around the pace of implementation demanded by two otherwise similar rival plans. But now the difference widened as the Treasury ditched the CRRF Plan altogether in favor of getting Lend-Lease extended, while the Board stuck to its initial ideas, i.e. the Leith-Ross Plan.

  Dalton responded to the Wood Paper in a letter of 13 May 1942 (hereafter the ‘Dalton Paper’). Following Moggridge (JMK.27, p. 66, fn.1), we can identify seven points worth noting in the letter:

Britain should pool post-war supplies with Allied Governments through an international organization; supply arrangements should be coordinated;  Britain should, subject to replacement, make non-essential stocks available temporarily to the relief organization; Britain would maintain rationing until other countries were provided for; British post-war requirements should be subject to the same examination as those of other countries; Britain should do everything possible to re-provision Allied territories after their liberation and  Britain should be willing to contribute to relief when the time came on the principle that she would do all that was possible in the way of assistance.

  With regard to the Dalton Paper, Keynes, in his letter to Waley of 1 June 1942 (JMK.27, pp. 67-70), warned that, as circumstances rendered accurate forecasting impossible, it would be dangerous to undertake such a comprehensive commitment. He suggested that the Chancellor should draw the Ministers’ attention to the dangers involved in any strong commitment to the rationing system and the re-supply of foodstuff to the Allied territories. As proposed, rationing reflected an impractical and unfeasible altruism. It would be unfair to speak of re-supplying the Allied territories with foodstuff since this would raise hopes which it would, due to the escalation of the war, prove impossible to fulfill. He also pointed out the dangers involved in proposing a ‘joint account’ for supplies, which would mean leaving the decision as to what would be a reasonable volume of imports to an outside authority²³, and the failure of the Dalton Paper to clarify that the proposals were restricted to foodstuff only and did not apply to raw materials. Not to include this restriction would pose a serious obstacle to the development of exports, for ‘[i]t would mean that we might be deprived of supplies necessary for exports just at the moment when the development of exports is essential to our national life’(JMK.27, p. 69). It should also be clarified, he argued, that even if Britain should have the ability to give aid, it would be within limits depending on the amount of aid she could receive from the United States and other countries.

  These suggestions formed the basis of the Chancellor’s note which was submitted to the Committee on Reconstruction Problems.²⁴

  The confrontation between the two ministries ― by implication between Keynes and Leith-Ross ― persisted thereafter. Thus we find Keynes commenting on Leith-Ross’s new proposal in his letter to Dunnett and others of 18 November 1942 (JMK.27, pp. 73-79). It is worth noting his points in order of importance. To begin with, the new Leith-Ross plan argued for the discipline of ‘a genuine pooling of supplies ― inclusive of not only food but also raw materials’. According to Keynes, this showed a terrible intellectual disorder - ‘a confusion of mind because it entirely ignores the special problems of a country like ourselves which, unless it is to go on living permanently on charity, must develop its exports’ (JMK.27, p. 75)²⁵ - and would represent a level of international communism far beyond anything the public could possibly accept. Then the rationing system proposed by the new plan presupposed complete equality of treatment to such an extent as would cause serious political problems. Moreover, the new plan had been drawn up without taking into consideration the reality of Britain’s position. For example, it allowed commodities in stock to be used in the immediate post-war period without securing American guarantees in advance, and overlooked the fact that most shipping in surplus in the world would belong to the U.S. while Britain would have no such surplus. Finally, Leith-Ross was inclined to assign a strong position even to the small countries in terms of representation on the Anglo-American Boards.

  The kernel of Keynes’s criticism of the new Leith-Ross Plan was that it was based on an extreme egalitarianism, amounting to international communism, which completely neglected Britain’s economic reality. By contrast, Keynes distinguished between three categories of countries ― non-relief, relief, and ex-enemy. A different principle of distribution ought to be applied to the countries in each category. Britain should aim at receiving commodities only on a loan basis (not as gifts), and supporting herself after a short recovery period facilitated by the Lend-Lease.²⁶ In Keynes’s view, adopting the Leith-Ross line could only be disastrous for Britain:

Sir F. Leith-Ross has produced so devastating a document because he in effect imposes on this poor country [Britain] all the burdens, obligations and limitations of being simultaneously a relief and a non-relief country (JMK.27, pp. 78-79).

7.  Keynes’s Compromise

  On 6 January 1943 Keynes sent a paper to the Chancellor and Leith-Ross. Entitled ‘Finance of Post-war Relief’ (JMK.27, pp. 79-86); it became an official Treasury paper after some revision. In tone the paper can be said to represent a compromise between the rival approaches to the relief problem, for while it took a fundamentally pragmatic line that Britain should press for a continuation of Lend-Lease, it also suggested that the ‘Combined Boards’²⁷, an existing organization, should play a role in the organization of relief. It partially preserved the spirit of internationalism which the CRRF Plan had embodied.

  The paper advocated the implementation of relief along the general lines of the ‘War Arrangements’ which were already in effect. Distinction was made between the physical side and financial sides of operations .

 The Combined Boards were to be responsible for the physical side. Taking ‘efficiency’ into consideration, the Combined Boards should determine the best sources of relief materials, coordinating relief demands with the civilian requirements of the rest of the world.

On the other hand, the financial side was to be determined on the basis of some appropriate financial arrangement between a given supplying country and the corresponding recipient country. It was to be decided on the basis of an individual arrangement whether supplies were to be payable, in accordance with some criterion yet to be decided, acceptance of which on the part of the U.S. was indispensable. The question of payment should also be decided on the principle that relief should leave no debt behind.

 Keynes saw several advantages in this plan: it was the only efficient method to make relief supplies swiftly available given the restrictions on resources; it did not deprive Britain of eligibility for Lend-Lease; as there was no central organization endowed with fixed resources, such as CRRF would have been, there could arise no situation in which Britain would be burdened with premature debts.

  In a way the role envisioned for the Combined Boards was little more than that of an advisory body, for although the plan seemed to grant the Combined Boards considerable authority, the final decisions were always left to the countries giving supplies. Keynes pointed out, however, that under this plan, Britain, as a recipient of foodstuff and raw materials, would remain vulnerable to the decisions of an outside distributive authority, i.e. the Combined Boards. This gravamen was essentially the same as that of the above-mentioned second objection to the Dalton Paper ─ the danger of leaving decisions on commodities to an organization beyond Britain’s control.

  Here again we feel the weight of British interests in Keynes’s thinking. When Britain was expected to be in possession of surplus commodities, Keynes advanced the distinctly internationalist CRRF Plan. But once he realized how Britain’s position was worsening, he turned against it, and remained suspicious of even the Combined Boards, fearing control by an outside organization.

                              

8.  Keynes’s Response to UNRRA

  Not long after these exchanges the relief problem came to be discussed under the leadership of Harry White²⁸, Assistant Secretary of the Treasury of the United States, in consequence of which the United Nations Relief and Reconstruction Administration (UNRRA) was established in November 1943 at a 44-nation conference at the White House. The task was to provide economic relief to Europe after the War, and to rescue the refugees. More than 70 percent of UNRRA’s fund was provided by the American Government. This meant that initiative on the relief problem was put under the US. 

Keynes’s response to UNRRA changed over time, tracing a winding path. Although he went on calling it a ‘chimera’, around September 1943 he began to approach the idea more favorably. He commented on the ‘White Plan’ in a memorandum of 17 September to Ronald Campbell and R. Law entitled ‘Finance of European Relief’ (JMK.27, pp. 90-92), in which he referred to several of the plan’s tenets, noting that irrespective of whether free or payable, all supplies should be given to recipient countries along with invoices expressed in value, and should be dealt with on a commercial basis as soon as possible. In the case of gifts, supplying countries should withdraw the amount involved from the contributions to relief finance. All this found Keynes in agreement. Prices should be inclusive of freight charges, for which supplying countries should pay, and Keynes judged that, financially speaking, this would be advantageous to Britain. The plan aimed at establishing the principle that loans made by a given country should be used by the recipient country only for the commodities specified, or for payment within, the loaner country (i.e., all loans should be tied), and Keynes remarked that the U.S. Administration would thus be able to use their funds to provide for cash purchases outside the United States. The standard of contributing one percent of national income to UNRRA was to be established, and here Keynes commented that if this were agreed to, the U.S. Administration would obtain a stronghold in negotiations with the Congress.

  Here we see Keynes displaying a positive attitude towards the White Plan which laid the groundwork for UNRRA. It was not until the beginning of 1945 that he next had occasion to comment on the relief organization. This time, however, he was highly critical of UNRRA, complaining that it was completely betraying the role it had initially been set up to play. His letter to Wilfrid Eady of 3 January 1945, for example, expressed the determined wish to see it dissolved.

The really right thing to do is to liquidate UNRRA and thus release our contribution to them, which in spite of its size, looks most unlikely to pull its weight. So far UNRRA is the world’s greatest flop, and I see little likelihood of its recovering’ (JMK.27, pp. 94-95).

He deemd that the best option for Britain now would be:

to carry on with the present military basis in the very small number of non-paying non-enemy countries and persuade the U.S.A. to revise the terms of this to UNRRA proportions, which, if UNRRA appropriation was to be released would be very easy for them. Through the disappointment with UNRRA we have been led along a path of nonsense. The sooner we take any opportunity to retrace our steps ... the better (JMK.27, p. 95).

  The words ‘present military basis ... non-enemy countries’ appear to indicate Lend-Lease. Keynes suggested that Britain should seek to return to the status quo ante through the dissolution of UNRRA, endeavor to get Lend-Lease continued in certain countries, and try to get the U.S. to improve the terms of Lend-Lease by making use of contributions which had so far gone to UNRRA.

  There can be no doubt that Keynes sincerely wished to see these hopes fulfilled. Not much later (in his letter to Eady dated 21 February 1945), however, we find him advocating fundamental reform of UNRRA with regard to function and leadership, rather than complete dissolution. In the same letter we again find him discussing the relief problem from an internationalist perspective:

When we first began to talk about UNRRA, we assumed that it would be a genuine international body covering the whole of the above²⁹, though, of course, not giving more to ex-enemies than was appropriate. I cannot see that there can be any other durable solution except reviving this plan (JMK.27, p. 98).

  In 1946 Keynes gave up the hope of reforming UNRRA, and returned again to the idea of (gradual) abolition. This is evident, for example, in ‘Post-UNRRA Relief’ (JMK.27, pp. 100-103), a paper dated 14 February 1946 which he sent to Waley. For our purposes it is instructive to note two points concerning this paper. Firstly, the relief isssue was regarded as appropriate for discussion between the U.S. and Britain only. Other countries should not be invited to participate in the discussions. Secondly, the issue was discussed from the point of view of how Britain, now lacking sufficient resources to give relief assistance, could most wisely participate in the relief effort.

The next step in the argument would be to limit narrowly the list of countries which look likely to be fairly strong candidates for post-UNRRA relief. I think most of us agree that these are Italy, Austria and Greece.... But I am inclined to think that the only hope is along very much the lines that you obviously have in mind, namely, that Italy and Austria should become American responsibilities, whilst we, if necessary, should take any responsibility we can manage for Greece (JMK.27, pp. 100-101).

 

As it turned out, UNRRA’s liquidation was determined in August 1946 (the dissolution was made in 1949).³⁰

9.  Keynes and British Interests

  We have already seen that British interests were a clearly discernible element in Keynes’s thinking on the relief problem. They loom even larger in his letter to Eady of 3 January 1945 on ‘UNRRA and British Liberated Territories in the Far East’ (JMK.27, pp. 93-95). Here Keynes rejected the idea that Britain should get loans from the U.S. in order to reconstruct the Crown Colonies in the Far East, on the grounds that there would be a great danger that the Americans would demand, in return, that the Colonies be put into trusteeship:

I particularly dislike the idea of having to borrow from the U.S. Government for the purpose of rehabilitation in Burma and the Crown Colonies. Unless we are successful in merging this in our general requirements without making any specific request, there will be a considerable risk of this giving rise to the demand for a quid pro quo in the shape of what the President calls trusteeship. This is very near the surface of American policy and is especially dear to the President (JMK.27, p. 93).

  Keynes’s overriding concern here was plainly maintenance of the Empire. Provision of relief to the Colonies must be the responsibility of the British Empire, which ought not to let other countries interfere. Unless UNRRA relief, which would be included in ‘general requirements’, could be obtained, Britain should not comply with any request from UNRRA for an increase in contributions. Otherwise she would be faced with the necessity of directly responding to demands from the Colonies. Keynes also stressed that the relief provided to the Colonies ought to be given not by Britain alone, but by the Empire as a whole. This should be accomplished by establishing an ‘Empire Pool’ to which not only the Dominions, but also the other Crown Colonies (India in the case of Burma, and Hong Kong in the case of Malaya) should contribute. He said: ‘We cannot carry all these burdens unaided, and it will only lead in the end to humiliation if we try to. The balances of the Crown Colonies are so colossal that we ought to seek some contribution from them. The most seemly way of doing this would be to get them to make a fairly handsome contribution to the needs of their less fortunate brethren’.³¹

  No effort must be spared in finding a solution to the problem of relief and reconstruction of the British Colonies in the Far East within the British Empire. Here we see Keynes, with his passionate commitment to the British Empire³², struggling to protect the vested interests of a weakened Britain from the ambitions of an unprecedentedly powerful United States.³³

  Keynes took the maintenance of the British Empire for granted. We have no evidence that Keynes criticized the British Empire or, more generally, Imperialism³⁴ as a political system. To this extent he was in fact an imperialist. We might say that Keynes stood on the same line as James Mill did.

10.  Conclusion

One might indeed ask: to what extent was Keynes a nationalist, an internationalist, and an imperialist? This is no simple question, and to some extent it has to do with the position of the UK in world politics. For a British citizen, loving the nation meant being a nationalist, an internationalist and an imperialist. It might, however, be inappropriate to take Keynes in these terms. All we can say is that, as is evident from the above examination of Keynes’s attempts to tackle the relief problem, Keynes made great efforts towards reconstruction of the post-war world, drawing up an elaborate design, while also seeking to keep the British Empire’s position in world politics³⁵ ─ somehow or other ─ on an equal footing with the US, under the disadvantageous circumstances that the British Empire desperately needed financial and military support from the US. Keynes labored over international plans in a spirit of internationalism as far as possible, but sought in any case to defend the British Empire from the colossal powers of the US by means of sophisticated contrivances. In this sense Keynes was an architect of the international order as well as a defender of the British Empire.³⁶

  In terms of economic performance, the US had already clearly surpassed the UK by the beginning of the 20th century. However, even in the 1930s the US adhered to its traditional isolationist policy, which created a queer phenomenon in the inter-war period — the US had the power to control the international order but lacked the will, while the UK had the will to control it but lacked the money. It should be noted that this phenomenon left some room for the UK to play a centrifugal role in world politics. However, after the Second World War broke out, the situation in which the UK found itself went on deteriorating. Acceptance of the Lend Lease, and agreement on Article VII epitomized the dominance or hegemony of the US powers. Such were the circumstances in which Keynes heroically battled on for the UK.

  The development of Keynes’s stance on the post-war relief problem followed a convoluted course. When he first put forward the CRRF Plan, there was manifestly broad agreement between himself, Leith-Ross, and the U.S. Government. Around February 1942, however, Keynes’s thinking altered considerably. He now perceived the necessity of a change of tack³⁷, foreseeing that Britain’s post-war balance of trade situation would be likely to be grim, and Britain would be unable to make the contributions required by the CRRF Plan without borrowing from abroad. For this reason he abandoned the CRRF Plan in favor of a pragmatic effort to try to get Lend-Lease continued. Faced with the grim reality of the situation in which Britain found herself, Keynes responded in a way revealing the weight of the British interests, one consequence of which was confrontation with Leith-Ross. Keynes’s next move was to put forward a compromise plan which maintained the pragmatic approach to Lend-Lease whilst also retaining a degree of internationalism in the form of the role assigned to the Combined Boards. This, after some revision, became the official plan of the Treasury; From around the end of 1943 on, however, the relief issue was to be placed and addressed under the leadership of Harry White of the United States. Keynes abandoned the internationalist ideals embraced in his initial proposals when these ceased to coincide with British interests. In the final stage he was able to do little more than criticize UNRRA from the sidelines.

  Keynes occupied a powerful position in the United Kingdom as a policy maker. Within the British Empire his authority and influence stood secure. On the wider, international front, however, he repeatedly suffered setbacks in pursuit of his aims. With Britain militarily and economically exhausted, and the US providing huge amounts of munitions and goods through the Lend-Lease system, it is not surprising that Keynes’s plans should have been foiled.

  Thus on the one hand Keynes witnessed the success of his ‘New Liberalism’ – the mid-way path between liberalism and socialism³⁸ ― and his employment policy through the influence exerted by the General Theory, while on the other he saw the virtual demise of the British Empire. It was in his last testimony immediately before his death that Keynes pointed out the danger the United Kingdom risked in assuming the benevolence of the Big Powers in ‘Political and Military Expenditure Overseas’³⁹, while expressing strong confidence in the international competitiveness of British industries in ‘Random Reflections from a Visit to USA’.⁴⁰

The following two accounts are, respectively, what occurred after Keynes’s death and an ‘if’ story. In the end, it was under the Marshall Plan (the ‘European Recovery Program’), which took effect in 1948, that relief (and reconstruction) was carried out. Loans were systematically allocated by the Economic Cooperation Administration (ECA) of the U.S. through the Organization for European Economic Cooperation (OEEC).⁴¹ In the US-occupied territories, GARIOA-EROA was set up on the basis of American loans.⁴² Roused from complacency by the onset of the Cold War, the U.S., which even in the immediate post-war period had been extremely reluctant to get involved in European affairs, became ─ well aware of the role it was taking on ─ the leader of the West in the new international order from 1949 on. The world in which Britain, now suffering from a hugely adverse balance of payments and massive war debts, could have assumed leadership was no more. It was, in fact, Britain that was to receive the largest share of the Marshall Plan. How would Keynes have acted if he had lived long enough to see the development of the Marshall Plan? In a word, the Marshall Plan, which made a great contribution to the path leading up to the EU⁴³, might be regarded as an amalgamation of Keynes’s ideas expressed in his Economic Consequences of the Peace (see Section 1 (1)) and CRRF). ⁴⁴ He would probably have endorsed the Marshall Plan, the principal architects of which were Clayton and Acheson; they were on good terms with Keynes, and led the planning and management of OEEC (remember that it was Bevin, Foreign Secretary of the Attlee Government, UK, who led the initiative on the European side). This seems clear enough.

What remains uncertain, however, is how he would have dealt with the other aspect – the position of the UK in the power politics of the world. To what extent would he have reacted to the elements recognizable in the Marshall Plan ― scant or no consideration for the UK as the British Empire? Taking the subsequent story – the deteriorating situation of the UK, the emergence of the two hegemons (USA and USSR), the Suez Crisis – into account, he could not have done anything to save the British Empire from the disintegration to be seen during the Macmillan Government. Confronting this situation together with de Gaulle’s opposition to UK participation in the EEC, how would he and could he have felt and acted? The question is destined to remain unanswered.  

We will conclude our paper by saying that, from the point of view of world politics, Keynes was an architect of the international order as well as a defender of the British Empire (hence the title of the present paper), although from the perspective of social philosophy he was a champion of the ‘New Liberalism’ ⁴⁵. As an individual, he remained a Moorean and an exponent of Bloomsbury culture.

* The present paper is a greatly revised version of the ones read at the HES annual meeting at York University, Canada (June 2008) and the ESHET annual meeting at Bogazici University, Turkey (May 2011). I would also appreciate anonymous referees’ useful suggestions.

Notes

  1  It should be noted that in November 1919 ‘Keynes proposed an international currency to facilitate international trade, possibly created under League auspices’

(Markwell, 2006, p.93), although he did not mention it in The Economic Consequences of the Peace. 

2  It was in 1945 that Hayek submitted the paper dealing with ‘commodity reserve currency system’ to the EJ, to which Keynes added a short note critical in tone. See JMK.26, pp.34-36 and 39-40.

  3  See The Treatise, Chapter 38.  

4  Moggridge (1992, p. 636).

  5  Moggridge (1992, p. 638).

  6  The key document concerned is Keynes’s memorandum ‘Overseas Financial Policy in Stage III’ (May 1945. JMK.24, pp.256-295), for which see Carabelli=Cedrini (2010) as well as note 36 below. The American principal negotiator leading up to the Anglo-American Financial Agreement was William Clayton, Undersecretary of Economic Affairs at the State Department, for which see JMK.24, Ch.4, ‘The Loan Negotiations’. Clayton, who  was to be the ‘intellectual architect of the [Marshall] Plan’. In his March 5, 1946, memorandum, Clayton insisted that ‘[we] must go all out in this world game … Assistance should take the form not only of financial aid, but of technical and administrative assistance’ (from Behrman, 2007, p.54).

7  See Hirai (2000, Chapter 5). See also Hirai (ESHET in 2009) and (HES in 2010).

8  The Keynes Plan can be traced back to H. Schacht’s idea expressed in 1929.

See Cesarano (2006, p.136).

9  Keynes always hoped to see the UK on equal footing with the US while Harry White, whose International Stabilization Fund was to be accepted as a new international monetary system, was very hostile to British imperialism and Nazism, hoping for ‘a social-democratic United States, a planned international economy and a US-Soviet condominium to guarantee the peace’ (Skidelsky, 2000, p.242). Turnell (2002) interprets Keynes’s Clearing Union as a ‘truly liberal adjunct’ to his ‘realism’ in the sense of E.H. Carr, which he came to embrace in the 1930s. 

  10  See Hirai (2003, Appendix 2).

  11  See Hirai (2003, Appendix 3). See also Hirai (HES in 2011).

12  Leith-Ross visited Japan in 1935 seeking to persuade the Japanese government to take a cooperative position on the aid to China problem but in vain due to the Army’s opposition. See Imamura (1948, pp.237-238) and Tsushima (1962, pp.252-257).

13  The International Wheat Agreement was concluded in 1949. This was to be superseded by the Wheat Trade Articles of the International Grain Agreement concluded in 1967.

14  It should be noted that Acheson together with Clayton was to be a principal architect of the Marshall Plan, as is seen in his famous address of 1947 in Cleveland insisting that ‘a coordinated European economy … was a fundamental objective’ (from Behrman, 2007, p.58).

15  See Hirai (2000, Section 1 of Chapter 5).

16  In his contributions to the formation of the post-war world, Keynes persistently endeavored to create circumstances which would allow Britain to play as great a leadership role as possible. Inevitably, of course, the views of the U.S. would predominate in the shaping of the post-war world order. It was Keynes who perceived this most bitterly, and it was on him that it weighed most heavily. As representative of the U.K. in many negotiations with the U.S., including those on the Anglo-American Mutual Aid Agreement of February 1942 and on the international monetary system, Keynes constantly took pains to secure Britain’s influence as much as possible.

  17  In contrast to the relief problem, in which supplying countries can be clearly separated from receiving countries, in the case of the commodity problem it is possible to maintain an internationalist standpoint, irrespective of change in the situation of one’s own country, without serious sacrifice, the aim being merely stabilization of commodity prices.

  18  If we accept the intention Keynes expresses here at face value, then it is difficult to understand subsequent developments. For, as shown later, he came to reject this plan when Britain’s financial position rapidly deteriorated.

  19  In his letter to Waley of 19 September 1941, Keynes disagrees with Leith-Ross, saying: ‘The worst and most muddled and most expensive and most inefficient solution would be to allow ourselves to be tackled by each commodity and each Ally separately without any picture of the whole scene, with Sir Frederick Leith-Ross busy and insistent to give away as much as possible and to make sure that our contribution shall be as large and the contribution of others as small as he can maneuver to make them’ (JMK.27, p. 45).

  20  The main reason for this change is that the forecast that Britain would end the war with primary commodities in surplus crumbled around the end of 1941. Keynes had noticed that far from holding surpluses, Britain was sure to suffer from serious depletion of many commodities, in consequence of which she would surely suffer from an adverse balance of payments. Keynes’s change of mind led to a change in Treasury policy, where he had taken on the leading role in matters of policy and theory.

  21  According to the Lend-Lease Act (March 1941), the U.S. would supply munitions to the Allies with payment to be discussed later. Keynes played a central role in the negotiations, one result of which was the Anglo-American Mutual Aid Agreement (February 1942. For the ample material concerned, see JMK.23). In the negotiations, it was Acheson who represented the American side, for which JMK.23, pp.171-178. Article VII (see p.175) of the Agreement which includes ‘discrimination’ became a hot issue, for it indicates that the U.S. would ask the UK to abandon the system of Imperial Preferences. Keynes tried to make compromise by the UK gradually abating ‘the extent of the Imperial Preferences in practice without abandoning them in principle’ (see JMK.23, pp.203-204). This shows a final power struggle between the two Great Powers.

 The Lend-Lease was later extended to other countries, including the Soviet Union. Harry White and Lauchlin Currie were very earnest about applying it to the Soviet Union (see Skidelsky, 2000, p.243), both disliking British imperialism. 

 The British Empire received 30 billion dollars (65 percent: munitions; 10 percent: shipping; 25 percent: food and a wide range of goods. See Sayers, 1956, p. 546), of which only 6 billion dollars were repaid. During the period from 1941 to the first half of 1945 the British Empire got munitions worth 20.7 billion dollars from the United States: 3.2 billion dollars in the form of purchase and 17.5 billion dollars in the form of lend-lease (see Sayers, 1956, p. 551). For Lend-Lease, see Sayers (1956, Chapter 13, ‘The Lend-Lease Tangle’).

  22  In January 1942 Canada agreed to provide the United Kingdom with the ‘billion dollar gift’. See Sayers (1956, p. 343).

  23  Evidently, Keynes rejected the CRRF Plan on the grounds that it would deprive Britain of her right of discretion.

  24  Wood, K. (Chancellor of the Exchequer), ‘Post-War Relief Policy’, 2 June 1942 (No.87, Department of Economics Library, Univ. of Tokyo). The rival plan was Dalton, H. (President of the Board of Trade), ‘Post-War Relief Policy’, 22 May 1942 (No.86). The Committee was held on 3 June.
  25  The passage is followed by ‘The principle suggested would mean that we could have no raw materials for export trade until, e.g., Poland has been put in an entirely similar position’.

  26  See JMK.27, p. 78.

  27  This was set up by Britain and the United States alone. The Combined Boards were to act with more authority in UNRRA than those in Keynes’s plan here. The Boards as composed of Britain and the United States alone concerned Canada, which claimed participation in such international organization. See Sayers (1956, p. 348).

  28  White is famous above all as the main architect of the IMF. For his activities in the 1930s at Harvard see Laidler and Sandilands (2002).

29

gaoryibility-Mantel-Debreu ‘The whole of the above’ suggests twelve items with which the relief problem was faced. These are listed under Keynes’s assessments:

  I. Items for which UNRRA does nothing:

(a) Items utterly unresolved: Relief in Germany; Relief in Austria; Relief in

Italy after the end of the military period; Relief in Italy after the exhaustion of the present limit of the amount for the military period; and The Balkans during the military period after the limit has been reached.

(b) Item which has escaped UNRRA’s control because its purpose was suspected to be policing the countries concerned: The paying Western Allies. 

(c) Item which UNRRA is not asked to undertake: relief in liberated British

territories in the Far East.

(d) Item still in the future: relief in other Far eastern territories

.

  II. Items which UNRRA either undertakes or is committed to undertake:

     (a) Item which UNRRA undertakes to some extent, but not satisfactorily: Refugees and displaced persons.

    (b) Item which UNRRA undertakes in theory: sanitation and health services.

(c) Item which UNRRA is committed to undertake: the Balkans after the

military period.

(d) Item for which UNRRA is expected to do something: relief in Poland and other territories under Russian occupation.

  30  UNRRA was headed by a Director-General, and governed by a Council composed of all states and a Central Committee composed of the US, UK, China and the USSR). UNRRA had a serious problem in relation to Russia’s influence on Eastern and Central Europe (see Behrman, 2007, p.51). Its functions were transferred to United Nations institutes such as the International Refugee Organization, the UNICEF.

  31  See JMK.27, p. 94.

  32  Skidelsky (1983, p. 91) states that ‘throughout his [Keynes’s] life he assumed the Empire as a fact of life and never showed the slightest interest in discarding it. ... He never much deviated from the view that ... it was better to have Englishmen running the world than foreigners’.

  33  This is also seen in ‘Overseas Financial Policy in Stage III’ (May 1945. JMK.24, pp.256-295) in which he appeals to how ‘in [loan] negotiation [with the USA] should both feel and appear sufficiently independent only to accept arrangements that we deem acceptable’ (p.257).

  34  In passing, item ‘Imperialism’ is not to be found in JMK.30. 

  35  Imperialism has two facets. There is the will to expand territorial boundaries as much as possible and there is the will to defend the territory once occupied. If Keynes was indeed an imperialist, it was in the latter respect (as, so to speak, a ‘defensive imperialist’). In the interwar years, albeit with weakened position, the British Empire remained the dominant player in world politics.

  36  His stance on the Munich Agreement (September 1938) shows this feature quite strikingly as well. See ‘A Positive Peace Programme’ (The New Statesman and Nation, 25 March 1938) in which constitution of a ‘European League’ is advocated (JMK.28, p.100) and ‘Mr Chamberlain’s Foreign Policy’ (The New Statesman and Nation, 8 October 1938), in which he refers to ‘[t]he attraction of this politik to ourselves is obvious. Our sea-power and our overseas Empire remain for the present unchallenged …’ (JMK.28, p.126).

37  The outbreak of the Pacific War, and the occupation of Southeast Asia by Japan at about this time radically changed the global situation. Britain’s colonies in Southeast Asia fell to the Japanese Army. The U.S. declared itself at war with Japan, as a result of which American influence among the Allied countries became the decisive factor in all considerations regarding the future world order.

 38  He advocated ‘New Liberalism’. However, his political activities took a convoluted path, reflecting the political situation then reigning in the UK. For this, see Dostaler (2007, Ch.4).

39  JMK.27, pp. 465-481.

40  JMK.27, pp. 482-487.

41  The law concerned is the Foreign Assistance Act of 1948. The total sum of aid to the OEEC composed of 15 countries amounted to 13 billion dollars, 89 percent of which was gratis. Although it ended in 1951, it was the starting point of the long road which led eventually to the European Union.

  42  The total sum of aid from 1946 to 1951 reached 1.8 billion dollars. 1.3  was gratis, and 0.5 was repaid.

43  It seems unfair to regard the Marshall Plan as the victory of capitalism over communism, for the Marshall Plan itself was based on elaborate planning, not leaving everything to the free working of the market and the free activities of enterprises. It is true that the Marshall Plan granted room for the market and enterprises, but it was subject to the great international design. Hubbard=Duggan (2009) regards the Marshall Plan as a ‘business model’ – a sort of software setting the poorer nations on track for prosperity. The business model here is, in my view, an international design for promoting business, different from laissez-faire capitalism.    

44  According to Markwell (2006, p.267) no direct evidence can be found, though the ideas which influenced the Marshall Plan were in the air.

45 Let us consider Keynes’s contemporaries in terms of politics and social philosophy. Hawtrey disliked and criticized Imperialism from an ethical point of view, saying that it rested on ‘false ends’. His unpublished book, Right Policy, deals with Imperialism in various places. The key concept with regard to the world view for Hawtrey was the ‘Balance of Powers’. A world comprising independent states might be described as a kind of ‘International Anarchy’, which cannot bring about peace. He emphasized the importance of ‘Peaceful Coexistence’ through the concert of Great Powers (cf. Right Policy, p.522). Leonard Woolf, who advocated an idea of the international government for the Labour Party, criticized Imperialism. ‘In many ways [Leonard] assumed Hobson’s mantle as Britain’s foremost anti-imperialist theorist’ (Wilson, 2003, p.83). E.M. Forster, who expressed his attitude with ‘two cheers for democracy’, disliked the existence of power.

It should be noted, however, that as far as social philosophy is concerned the four distinguished economists of the Cambridge School — Keynes, Pigou, Robertson and Hawtrey — tended to concur, all taking a critical attitude towards capitalistic society as it stands, deeming it in need of being rectified.

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