The Macmillan Committee, officially known as the Committee on Finance and Industry, was a committee, composed mostly of economists, formed by the British government after the

1929 stock market crash The Wall Street Crash of 1929, also known as the Great Crash, was a major American stock market crash that occurred in the autumn of 1929. It started in September and ended late in October, when share prices on the New York Stock Exchange colla ...

to determine the root causes of the depressed economy of the United Kingdom. The Macmillan Committee was formed in 1929 by Royal Command 3897, and it was tasked with determining whether the contemporary banking and financial system was helping or hindering British trade and industry. Scottish lawyer Hugh Pattison Macmillan was named as its chairman, although due to his lack of economic or financial expertise, he largely "remained in the background". Other members of the committee included

Ernest Bevin Ernest Bevin (9 March 1881 – 14 April 1951) was a British statesman, trade union leader, and Labour Party (UK), Labour Party politician. He co-founded and served as General Secretary of the powerful Transport and General Workers' Union in th ...

, Lord Bradbury, R. H. Brand,

Theodore Gregory Sir Theodore Emmanuel Gugenheim Gregory (10 September 1890 – 24 December 1970) was a British economist. Theodore Gregory was born in London on 10 September 1890. Gregory was educated at Dame Alice Owen's School in Islington. He attended the ...

John Maynard Keynes John Maynard Keynes, 1st Baron Keynes, ( ; 5 June 1883 – 21 April 1946), was an English economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originally trained in ...

, and

Reginald McKenna Reginald McKenna (6 July 1863 – 6 September 1943) was a British banker and Liberal politician. His first Cabinet post under Henry Campbell-Bannerman was as President of the Board of Education, after which he served as First Lord of the Admir ...

Charles Loch Mowat Charles Loch Mowat (4 October 1911 – 23 June 1970) was a British-born American historian. Biography Mowat was educated at Marlborough College and St John's College, Oxford. John Ramsden (ed.), ''The Oxford Companion to Twentieth Century ...

''Britain Between the Wars: 1918-1940''
pp. 260–261,

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, 1978, . The committee took evidence from many leading economists of the day, such as

Arthur Cecil Pigou Arthur Cecil Pigou (; 18 November 1877 – 7 March 1959) was an English economist. As a teacher and builder of the School of Economics at the University of Cambridge, he trained and influenced many Cambridge economists who went on to take chair ...

, D. H. Robertson and

Lionel Robbins Lionel Charles Robbins, Baron Robbins, (22 November 1898 – 15 May 1984) was a British economist, and prominent member of the economics department at the London School of Economics (LSE). He is known for his leadership at LSE, his proposed de ...

, on the subject of unemployment. It decided in favour of the so-called Treasury view that expenditure on public works was not the answer, in spite of the signing of Addendum 1 by some of its leading members. This addendum, which was signed by Keynes, A.A.G. Tullock, J. Frater Taylor, Sir T. Allen,

and R. McKenna, advocated a programme of public works and import restrictions. However the committee insisted that monetary policy should be concerned with 'the maintenance of the parity of the foreign exchanges before the avoidance of the credit cycle and the stability of the price level.' The committee published its findings and recommendations in the Report of Committee on Finance and Industry, or more simply, the Macmillan Report, in 1931. Friedrich A. von Hayek, ''

The Road to Serfdom ''The Road to Serfdom'' (German: ''Der Weg zur Knechtschaft'') is a book written between 1940 and 1943 by Austrian-British economist and philosopher Friedrich Hayek. Since its publication in 1944, ''The Road to Serfdom'' has been popular among ...

'', pp. 66–67,

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, 1944. The Macmillan Report "served as a venue in which J. M. Keynes challenged the '

Treasury View In macroeconomics, particularly in the history of economic thought, the Treasury view is the assertion that fiscal policy has ''no'' effect on the total amount of economic activity and unemployment, even during times of economic recession. This ...

'", according to economist

Friedrich von Hayek Friedrich August von Hayek ( , ; 8 May 189923 March 1992), often referred to by his initials F. A. Hayek, was an Austrian–British economist, legal theorist and philosopher who is best known for his defense of classical liberalism. Hayek ...

. The report was largely authored by Keynes, and it recommended several

Keynesian Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output an ...

policies such as

nationalization Nationalization (nationalisation in British English) is the process of transforming privately-owned assets into public assets by bringing them under the public ownership of a national government or state. Nationalization usually refers to p ...

of the

Bank of England The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694 to act as the English Government's banker, and still one of the bankers for the Government o ...

and government regulation of international trade. Historian

characterized these recommendations as "cautious" and said that, by the time of its publication, they "had been almost overtaken by events". Its members disagreed on some points and one member dissented on its findings. These opinions and reservations were included in the report's extensive addenda. J. C. Stamp
The Report of the Macmillan Committee
''

The Economic Journal ''The Economic Journal'' is a peer-reviewed academic journal of economics published on behalf of the Royal Economic Society by Oxford University Press. The journal was established in 1891 and publishes papers from all areas of economics.The edito ...

'', pp. 424–435, Vol. 41, No. 163, September 1931. The report also asserted that "the relations between the British financial world and British industry ... have never been so close as" those respective relationships in Germany and those in the United States. From this conclusion arose the term the "Macmillan Gap".Chris Wrigley
''A Companion to Early Twentieth-Century Britain''
pp. 250-251,

Wiley-Blackwell Wiley-Blackwell is an international scientific, technical, medical, and scholarly publishing business of John Wiley & Sons. It was formed by the merger of John Wiley & Sons Global Scientific, Technical, and Medical business with Blackwell Publish ...

, 2003, . As such, many Britons felt that their banks were failing their industrial base. This view did not consider the balance that banking institutions needed to strike between their depositors, who desired high

interest rate An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, t ...

s and

liquidity Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include: * Market liquidity, the ease with which an asset can be sold * Accounting liquidity, the ability to meet cash obligations when due * Liq ...

, and their

debtor A debtor or debitor is a legal entity (legal person) that owes a debt to another entity. The entity may be an individual, a firm, a government, a company or other legal person. The counterparty is called a creditor. When the counterpart of this ...

s, that is, those in industry, who desired low-interest loans that could not be recalled quickly. Investments of relatively small amounts of money were riskier and more costly for lenders, which put small businesses seeking loans at a disadvantage.W. A. Thomas
''The Finance of British Industry 1918–1976''
pp. 117–118,

, 2006, . While the report dedicated only 300 words to such a disparity, the term Macmillan Gap is the most enduring part of the report. It was also one of the few recommendations which were acted upon. In response to the committee's suggestion, an institution was created to finance small businesses:Raymond Frost
''The Macmillan Gap 1931-53''
Oxford Economic Papers,

Oxford University Press Oxford University Press (OUP) is the university press of the University of Oxford. It is the largest university press in the world, and its printing history dates back to the 1480s. Having been officially granted the legal right to print book ...

, p. 1. the Industrial and Commercial Finance Corporation. M. M. Postan
''An Economic History of Western Europe: 1945-1964''
p. 122,

, 2006, . The maintenance of the exchange rate was agreed to be the first priority by all, including the signatories of Addendum 1. Two months after the report was published the UK came off the

Gold Standard A gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold. The gold standard was the basis for the international monetary system from the 1870s to the early 1920s, and from th ...

and the exchange rate depreciated immediately by 2% and continued downwards for 12 months.

References

{{reflist, 2

External links

''The Macmillan Report, a short summary of its main points''

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.
Committee on Finance and Industry Report, June 1931 Addendum, Macmillan Report

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