2016/02 | LEM Working Paper Series | ||||||||||||||||
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Hawtrey, Austerity, and the ‘Treasury View’, 1918-25 |
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Clara Elisabetta Mattei |
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Keywords | |||||||||||||||||
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Ralph Hawtrey, Austerity, Treasury View, Interwar Years, Deflation, Savings
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JEL Classifications | |||||||||||||||||
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N44, N14, B13, B41
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Abstract | |||||||||||||||||
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In Great Britain the seven years following WWI were marked by rigorous
austerity policies. From 1918 to 1925 the main objectives were budget
cuts and monetary deflation. Certainly, being the central department
for financial policies, the British Treasury had decisive authority in
setting such economic agenda. In particular, the official who had the
greatest weight with chancellors of the Exchequer was the Controller
of Finance, Basil P. Blackett (1917-1922), followed by Sir Otto
Niemeyer (1922-1927). Their papers in the Treasury files reveal that
the economist Ralph Hawtrey was the primary source of economic
knowledge for Blackett and especially for Niemeyer. This work proves
that Hawtrey's original economic theory provided solid theoretical
justifications for the austerity policies. Hawtrian economics refined
and strengthened the economic stance of the senior officials of the
British Treasury. This study draws on Hawtrey's most important
scientific works together with his press articles and copious Treasury
papers to unravel the conceptual building blocks of Hawtrey's
austerity doctrine. It emerges that his policy prescriptions ensued
directly from his economic model. Hawtrey advocated monetary
stabilization through the management of the bank rate, budgetary
rigor, and rejection of public investment, all of which became widely
established goals among other orthodox economic institutions, from the
Bank of England to the League of Nations. This paper reveals that, in
the early post WWI years, economic theory had clear operative force on
policymaking.
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