357. Harrod to J. E. Meade , 7 June 1934 [a]

Christ Church, Oxford #

7 June 1934

Dear James

This [1] seems very good. I am not quite sure what the present position is about Municipal loans. [2] Does the gov[ernmen]t. give any sort of guarantee for local loans? Your text implies that it does not. You are probably right, but I am not quite certain of the position. If you are not, Hargreaves would probably know. [3]

I do not know how much responsibility I have as a member of the "committee of economists". [4] I am prepared to sponsor it as a workmanlike & reasonable document. But suppose a member of the Bureau asked--who is your committee and asked me whether I would stand for the whole as it stands at present, I should still have a certain difficulty.

I dont press this point, because I take it that the personal responsibility is not so great as this. [5] But suppose the view is taken that it is, I must mention that while [section] [b] V may be right I am not altogether sure. [6]

My position would be expressed if instead of the first sentence of para 2 on p. 28. you wrote: "It appears then that there is a strong case for the complete control of foreign lending by the Economic Authority." [7]   1 And on p. 30 (c). To begin:--"If the arguments of Section V are regarded as cogent, further powers are required for the Government, in order to secure control over the volume of foreign lending. It cannot be predicted in advance whether the substantial policy outlined in (a) and (b) could be successfully operated without these further powers. It is possible that it would. In view of the opposite possibility, however, the Government should be fore-armed with the following plan for securing control over foreign lending to be put into operation either at the outset or as soon as it became clear that speculative transfers of funds abroad were prejudicing the success of the internal policy." [9] 2

A small point. On p. 31. (d) the word "force" is rather unsavoury. How about "to ensure that exporters, ... sell ..." [10]

Then on p. 29. Ought there not to be another short paragraph to cover persons with claims on foreign currencies, arising otherwise than thro investment or export (other invisible). [11] And, correspondingly, a few extra words in p. 31 (d). [12]



  1. 1. Harrod refers to a memorandum on "The Exchange Policy of a Socialist Government" drafted by Meade for the New Fabian Research Bureau (NFRB). Of this, two versions survive among the papers of James Meade, while a third one must have existed. A first TS draft, undated, is located in MP 2/7(94-129); it bears autograph corrections in three hands: Meade's own, Harrod's and Redvers Opie's (see also Opie to Meade, 10 June 1934, in MP 2/7(93), with comments on Harrod's suggestions). Harrod proposed three alterations or additions to the original draft, which eventually were integrated in the final version, except for a few minor changes. The final version is dated 19 June 1934, and is located in MP 2/7(151-64); this is printed in The Collected Papers of James Meade, volume III: International Economics, edited by S. Howson, London: Unwin Hyman, 1988, pp. 11-26. The pagination to which Harrod refers in this letter, however, is different from both the surviving drafts, and probably refers to an intermediate version incorporating the major changes suggested by the readers of the first draft.

    The first of Harrod's suggested changes regarded section I. While Meade had originally proposed that "The Bank of England should be socialised, the present owners of the Bank's capital being compensated with fixed interest stock at a figure representing the full market value of their stock" (old draft, pp. 4-5), Harrod's formulation avoided reference to socialization. The suggested alteration was incorporated in the final version, on pp. 13-14 of Meade's Collected Papers (the whole of paragraph (i); Harrod's Ms in MP 2/7/98-99). On the socialization of the central bank see, however, Harrod's paper read at the NFRB's Week-end Conference on the Socialisation of Banking, held jointly with the Society for Socialist Inquiry and Propaganda ("Central Banking", here reproduced as essay 8 ).

    Harrod's second proposed alteration was a re-statement of Meade's formulation of the comparative costs principle (p. 20 of the old draft). The change is incorporated in the final version, on pp. 20-21 of Meade's Collected Papers, from "This result is achieved" to the end of the paragraph. (Harrod's Ms is in MP 2/7/116).

    The third suggested change to the first draft consisted in the insertion of two paragraphs on the causes of, and remedies to, the fluctuations of foreign lending: these are printed on pp. 22-23 of Meade's Collected Papers, from "It must be understood ..." to "... foreign exchange rates." Harrod's Ms in Meade 2/7/122.

    2. In the section on "Internal Financial Policy", the measures suggested to "achieve and maintain a high level of employment" were not addressed only to the central government and private industries, but also to municipalities. These should be encouraged, through low interest rates and via the control and push of a National Investment Board, to undertake capital development (Meade, "The Exchange Policy of a Socialist Government", in Collected Papers, pp. 11-12; on the later development of Meade's suggestion see N. Thompson, Political Economy and the Labour Party. The Economics of Democratic Socialism, 1884-1995, London: University College Press, 1996, pp. 115-16). These passages were not altered from the preliminary to the final versions.

    3. Eric Lyde Hargreaves.

    4. "The Exchange Policy of a Socialist Government" was originally meant to result from the collective effort of a number of economists in Oxford willing to work for the New Fabian Research Bureau on the international economic and financial relations during the transition to socialism: Meade was invited to co-ordinate such a group by Radice, the secretary of the NFRB, in November 1932 (see letter 272 , [jump to page] , and letter 294 R). This idea was launched approximately at the same time at which Dalton had invited Meade to send him the results of the discussions among a group of Oxford economists on how to deal with financial panic (see letter 272 , [jump to page] ). The result of the latter was a "Proposals on the Control of a Financial Panic", which was "prepared by a group of Oxford Economists who are member of the Party": J. E. Meade, L. M. Fraser, E. L. Hargreaves, R. F. Bretherton, Harrod, R. L. Hall, Redvers Opie, and E. M. Hugh-Jones. The surviving evidence regarding "The Exchange Policy of a Socialist Government", however, suggests that the paper was drafted by Meade and commented upon by Harrod and Redvers Opie (see note 1 to this letter); the memorandum was eventually signed by Meade alone.

    Harrod further collaborated with Meade on NFRB memoranda by commenting upon "Outline of Economic Policy for a Labour Government" in April 1935: see letter 447 .

    5. The policy of the New Fabian Research Bureau was that "only the author or the committee doing the research was to be held responsible for the views expressed". This avoided the difficulty of having resolutions or proposals adopted as an official position by the Bureau or by the Labour Party (E. F. Durbin, New Jerusalems. The Labour Party and the Economics of Democratic Socialism, 1985, p. 116).

    6. Section V is dedicated to the "Control of Capital Movements": Meade, Collected Papers, pp. 21-25.

    7. The sentence "We see then that fairly complete control of foreign lending should be the aim of the Government" on p. 27 of the older draft was changed as suggested by Harrod (Meade, Collected Papers, p. 24).

    8. Redvers Opie was sent both Harrod's letter and suggested alterations, and commented upon them in a letter to Meade dated 10 June 1934; this is filed in MP 2/7(93).

    9. In the final version (Meade, Collected Papers, p. 25), the passage proposed by Harrod introduces and complements the existing paragraph on p. 29 of the older draft.

    10. The passage of the old draft ran as follows: "The Government must have power to force exporters, whether these are private individuals or controlled industries, to sell to it [the authorized institution] at the official rate all the foreign currencies which they obtain in payment for exported goods" (p. 30); Harrod's amendment was accepted (Meade, Collected Papers, p. 26).

    11. Following Harrod's advice, a paragraph covering the case of those who have claims to foreign currencies was added (Meade, Collected Papers, last paragraph of p. 24).

    12. The passage was not changed (Meade, Collected Papers, p. 26).

    1. a. ALS, three pages on two leaves, in MP 2/7(91-92).

      b. The word does not appear in the Ms.

1. I don't see the difference, unless we mean the reader to insert "but we do not agree with it" or "we are doubtful about its validity" R O [Redvers Opie's note in the margin [8] ].

2. This is a welcome change. We become less dogmatic, in keeping with the note of doubt expressed above [Redvers Opie's note in the margin].

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