812. Harrod to J. M. Keynes , 20 August 1938 [a]

[Answered by 817 ]

from Christ Church, Oxford [b]

20 August 1938 [1]

Dear Maynard

I was authorized by a vote of Section F to express our great gratitude to you for having written a paper for our meeting [2] and our sincere hope that you will make a speedy and complete recovery.

Shove read your paper very well and clearly. [3] There were expressions from numerous members that your proposal is a valuable one and should be pressed.

I give you the following rather miscellaneous selection of points of criticism that were made.

1. If the Exchange Account was known to be disposing of gold in exchange for commodities, that might seriously undermine the prestige of gold and lead to another gold scare with deleterious consequences.

2. Since producers never think prices high enough, there might be strong pressure brought to bear upon the gov[ernmen]t to prevent any sales whatever.

3. The London port dues are exorbitantly high by comparison with those of other ports, and this point would have to be tackled if the scheme was to be effective.

4. Reports of visible stocks are apt to have a deleterious effect on speculation, because visible stocks are often high at the same time that stocks in hand of commodities embodying the material in a processed or semi-processed form are low, and vice versa. We need a new definition of stocks, and the publication of figures which would include the raw materials embodied in stocks of processed and semi-processed goods.

5. Other countries would follow suit. By your own argument the financial burden would not be too great.

6. Dominions might be reluctant to part with supplies. E.g. Canada and wheat. (i) Work in connexion with the elevators is a main source of employment in certain stricken provinces. (ii) They would not like to relinquish the power which holding the supply gives them to release it at what they think is the best moment. Negotiations between our govt. and dominion governments might lead to unfortunate friction.

7. There are large invisible stocks. The conversion of these into visible stocks might have a severely depressing effect and still further discourage the willingness to hold stocks.

8. Speculators who hold stocks look to price gains which are large in relation to carrying costs. Furthermore it is a strategic advantage to them to keep their stocks invisible. They would not sacrifice this for the sake of a saving of 10% p. a. [4]

I am afraid these notes are rather scrappy. But the discussions on these occasions are always rather scrappy.

May I add my own thanks to those of the Section. Your paper was very well attended and has helped to make the meeting a success.



  1. 1. The letter may be misdated, as on 21 August Harrod announced to Keynes that he would have written shortly concerning Keynes's paper before the British Association: see letter 814 , [jump to page] .

    2. J. M. Keynes, "The Policy of Government Storage of Foodstuffs and Raw Materials", Economic Journal, September 1938; also in Keynes, Collected Writings, vol. XXI, pp. 456-70.

    3. Keynes had asked Shove to read the paper: see letter 806 , [jump to page] .

    4. Replying to Shove, who reported of the debate in terms very similar to Harrod, Keynes commented as follows:

    • I have had some notes on the discussion from Roy as well as from you. Some of the points are quite sound, and there are, of course, lots of technical difficulties to overcome. But there is no necessity to embark on the scheme in its entirety at once. The problems can be tackled one by one. The most obvious thing to do at the moment is, I should have thought, to enter into arrangements with the Canadian Government for the storage in this country of the large quantities of wheat which they have already committed themselves to purchase from their farmers this season. I am writing letters to Inskip and Oliver Stanley. But Salter tells me that their sole job is to make a pretence of doing something, whilst being careful in practice to do the least possible. The trouble is not that we are governed by conservatives--I am a conservative myself--but that we are governed by boobies.

    Shove's report of the debate (dated 20 August 1938) and Keynes's comment in reply (23 August 1938) are found in JMK PS/6/247-50. Keynes's letters to Inskip (Minister for Coordination of Defence) and Stanley (President of the Board of Trade) are published in Keynes, Collected Writings, vol. XXI, pp. 470-74.

    1. a. ALS, three pages, in JMK PS/6/251-53.

      b. On King's College letterhead.

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