ABSTRACT
The experience of high and prolonged unemployment, and all the poverty and deprivation that went with it, cast a long shadow over what John Maynard Keynes’s christened ‘Classical economics’. According to Keynes, the Classical theory of the labour market depended on two postulates, which together entailed that the economy was at full employment. The Treasury and more orthodox economists were convinced that Keynes underestimated the role that domestic and international confidence could play in underminmg his policies. Any fiscal stabilization policy requires speed of action to be effective and thus for it to have been realized would have necessitated the setting-up of a central body with widespread powers to co-ordinate and control investment plans. As the Treasury was far from convinced of the efficacy of the Keynesian medicine, there was an understandable reluctance to establish any such body, with its massive repercussions on the make-up of British politics and government.
