ABSTRACT
This chapter focuses on the theoretical foundations of the Treasury view, and the impact of Treasury thinking on policy during the 1930s. The Treasury view has been interpreted as deriving from classical economics with its implicit (Ricardian) assumption of full employment and a fixed fund of savings. The Treasury’s case was founded upon the difficulties of the staple industries, where approximately one-half of the insured unemployed were concentrated. The atmosphere following the 1926 General Strike was not conducive to an attack upon real wage resistance. The reasons for the Treasury’s dismissal of Keynes’s contention that a public works programme gained additional justification from its positive social rate of return should by now be clear. The operative forces were rather less theoretical developments or Keynes’s influence than the interaction of changing political and economic circumstances occasioned by the finance and management of the rearmament programme.
