569. H. D. Henderson to Harrod , 4 June 1936 [a]

[The exchange continues at 573 ]

14, Upper Park Road, London #

4 June 1936

My dear Harrod,

Apart from issues too large in character for it to be helpful to raise them at this stage, I have really very few points beyond those I mentioned to you the other day. On pp. 142 and 143 you instance a tendency towards greater obsolescence of machinery and diminished durability of durable consumption goods as a factor tending to diminish the effective demand for savings. [1] This is only true on the assumption that not only businesses but private individuals set aside from their incomes amortization funds sufficient to replace the durable goods when worn out; but this is clearly untrue of private individuals, and in practice I should have thought that if houses wear out more rapidly this will make an increased drain on the savings people think they are making. On p. 145 you suggest that "the magnitude of recent recessions" is attributable to the fact that "net investment in the modern affluent world is so much higher than it used to be". [2] Of course various other factors have been at work which help to account for the magnitude of the slump following 1929: first, the group of post-war complications, e.g. reparations, inter-allied debts, and the distorted balance of international payments resulting from the war; secondly, a tendency towards persistent relative over-supply of agricultural products. These pre-existing conditions were mainly responsible for the fact that the slump when it came led on to an international financial and monetary crisis which has entailed a quasi-permanent curtailment of the volume of international trade. You are not of course dealing with factors of this kind, but at various stages of your argument I think you want to allow for the possibility that these may be very important influences. Too much of your argument for my taste rests on the assumption that the severity of the slump virtually proves the importance of the chronic deep-seated tendencies to disequilibrium on which you lay stress.

This comes near raising one of the unhelpful large issues, though I think you can meet the point by a few qualifying phrases. But there are certain more specific connections in which I think you ought to allow more than you do for the new tendency towards a persistent over-supply of primary products. When, for example, you beat restriction schemes on the head you fail to allow for the possibility that there may be a real problem there as between agriculturalists and the rest of the community. (See, for example, pp. 303 and 304.) [3]

I think I made most of my other points in conversation; but generally I am left with an uneasy feeling in regard to the tone in which you advance your proposals of policy. As I see it, what you are doing in effect is to build up on the basis of an essentially abstract argument practical proposals of a highly eccentric and heretical character. The abstract argument necessarily involves in effect assumptions as to facts every one of which is open to dispute. In other words, your conclusions can only be appropriately of a tentative character, and some of your incidental sniffs at the practical man whether in business or in administration (see, for example, p. 304) don't seem to me therefore quite in place. I don't mean that you insult him; but you use phrases implying that he is demonstrably wrong-headed.

Yours ever,

H. D. Henderson

R. F. Harrod, Esq., Christ Church, Oxford.

  1. 1. Harrod, The Trade Cycle ( 1936:8 ), p. 103.

    2. Harrod, The Trade Cycle ( 1936:8 ), p. 105.

    3. These passages, which were later amended (see letter 573 , [jump to page] ), could not be identified. A comparison with the pagination of Meade's copy suggests that they could have been eliminated altogether: p. 300 of the Ms, in fact, corresponds to p. 231 of the book (see note 6 to letter 553 ), which concludes at p. 232.

    1. a. TLS with autograph additions, two pages on two numbered leaves, in HP IV-480-484.


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