Hawtrey, Austerity, and the “Treasury View,” 1918 to 1925

Abstract

Ralph G. Hawtrey was not a man of the backwaters. Through the parallel study of Treasury files and Hawtrey’s scholarly publications, this work reveals his direct influence upon the most commanding minds of the Treasury and the Bank of England, the two institutions that, after WWI, shared primary responsibility over the British austerity agenda. After the war, Hawtrey advocated drastic budgetary and monetary rigor in the name of price stabilization. From 1922, Hawtrey admitted the need to decrease the bank rate; yet he remained an adamant supporter of the gold standard, insisting on its maintenance even if it required further monetary revaluation. Hawtrey’s policy prescriptions stemmed directly from his economic model. The “crowding-out argument,” the centrality of credit and of savings, together with the operational priority of technocratic institutions, were essential theoretical underpinnings of Hawtrey’s agenda: implementing the so-called Treasury view.

Ralph Hawtrey: A forgotten pioneer of macroeconomics

“…In her recent book, Clara Mattei (2022) argues that the fiscal and monetary austerity imposed on Britain after World War I to restore the gold standard at the pre-war parity became a model for austerity policies imposed by Mussolini when he took control of the Italian state in 1922. In her book and earlier articles, Mattei (2018aMattei ( , 2018b identifies Hawtrey as the éminence grise behind the austerity policies supposedly necessary to restore convertibility at the prewar parity. Mattei's ideological position is plainly left of centre, and her attempt to link British austerity policies during the 1920s with the rise of fascism in Italy supports her ideological predispositions.…”

“…In an earlier discussion of Hawtrey's views, Mattei (2018a, p. 485) quotes a passage from a 1925 memorandum (‘Currency and Bank Rate’) in which Hawtrey attributes persistently high British unemployment to the raising of Bank rate since 1923 from 3 per cent to 5 per cent:…”