The Marshallians: Keynes and the Circus

It is arguable whether Maynard Keynes was a development economist according to today’s terminology. Indeed, as Toye (2006) observes, Keynes’s premature death in 1946 meant that he barely witnessed the ‘official’ post-war birth of the subject as it is defined today. He was widely considered to be a monetary economist (Hicks 1983), not especially interested in growth theory or underdeveloped countries (Patinkin 1984). Nevertheless, it has been observed that ‘“Keynesian economics” has a great deal to do with the emergence of development economics...[even if] Keynes himself was little concerned with the problem of economic development’ (Johnson 1976: 15). Keynes’s indirect contributions to the formative years of the subject can in this sense be considered substantial, even ‘pervasive’ (Chakravarty 1997: 69). We can contextualise Keynes’s work within the setting of an increasingly chaotic British Empire prevailing during his time, along with the Great Depression. Keynes exerted a considerable influence on his disciples at Cambridge, most notably the Circus. Many of them directly contributed to ideas in political economy and development economics, including Joan and Austin Robinson, and James Meade. Keynes was also influenced by Marshall’s idealistic and optimistic outlook, as demonstrated in Economic Possibilities for Our Grandchildren (1930) and picked up the Malthusian reins in his non-mathematical macroeconomic approach to addressing economic issues affecting human well-being as they manifest in real life.

During Keynes’s lifetime, intellectual thought on the progress of humanity was focused not only on the problems of the day (including the Great Depression) in Western Europe, but also included the narrative of overseas expansion and New Imperialism. The Cambridge tradition, by this point under Marshall’s leadership, was contributing to the education of those who wished to work to improve human progress and economic well-being both at home and overseas. The history of economic thinking on human progress in political economy (which was by now poised to bore development economics as a separate subject) was chiefly concentrated on economic stagnation, colonial impact, and in particular the future course of economic development in India. The Cambridge outlook on colonialism was ‘benign’ (Tahir 1990: Summary) and was occupied with paving an industrialising path for India to help bring about modernisation and capitalism. Debates in the Faculty concerned aspects of dependency and imperialism, which continue even today. For instance, alongside Austin Robinson, Joan Robinson took part in a 1920s debate on resource transfer between British India and the Princely states, producing a report, The British Crown and the Indian States (1928). Other than the obvious personal influences of Marshall and Pigou upon Keynes as his Tutors, Tahir (1990: Paper 2) draws parallels between Keynes and Marshall along with Morison: the three had some personal connection with India, which informed their writings in different ways: As noted, Marshall lectured Indian civil service trainees at Oxford, Keynes worked briefly at the India Office in London, while Morison had actual experience of the Indian economy and society. Tahir remarks, ‘All of them took British India for India’ (ibid.: 37).

As he freely admitted, Keynes’s interest in India was chiefly monetary (Keynes 1913 [1971]). He never visited India (nor any other developing nation, apart from holidays to Morocco and Egypt), despite the fact that he drew from his experiences in the administrative management of India as an underdeveloped colony. His innovative theories and rationale on the gold standard and central banking in Indian Currency and Finance, for instance, were inspired by the time he spent at the India Office (1906-1908) and his service to various government committees and commissions on Indian currency (Chandavarkar 1986). Skidelsky (1983) highlights that in the benign Cambridge tradition of analysing the colonies, Keynes took little interest in the ‘human and moral implications of imperial rule or whether the British were exploiting the Indians’ (ibid.: 176) and instead focused on the practical monetary policy problems facing British India.^[1] He presented the first demonstration that separate countries require separate institutional models depending on socioeconomic needs, rejecting the Bank of England as an insufficient model for what would be the State Bank of India, as Indian progress also required provision for direct credit, remittances, and rediscount facilities to promote industry and agriculture.

Optimistic insights are to be found in Economics Possibilities for Our Grandchildren (1930), in which Keynes highlights population, civil peace, emphasis on science and technology, and observing the margins of production and consumption as key factors in the progress of human society for the generations. However, this aside, Keynes’s direct intellectual influence on development economics was somewhat intangible and occurred more subtly through the Circus and others who applied Keynesian concepts from The General Theory and A Treatise on Money to the challenge of optimising the process of progress and development in Britain and overseas. This included, for example, consumer welfare in the concept of liquidity preference and credit rationing, the optimistic multiplier concept of ever-increasing optimal growth, Joan Robinson’s notion of disguised unemployment as an indicator of economic potential and dignity in the labour force, Kaldorian ideas of growth, income and technical progress, and the growth models developed by Harrod and Domar (Pasinetti 2007). These concepts were largely applicable to Britain, as an industrialised nation with different problems of employment based on technical progress, an established financial sector, and limited propensity for, say, gold hoarding. Nevertheless, the Cambridge Keynesians enjoyed substantial influence in the world of international development economics as it was emerging.

To analyse in depth the contributions of the Cambridge Circus and Post- Keynesians to development economics would require a separate chapter or two. We choose in this chapter to present a snapshot of the work of Keynesian disciple, Joan Robinson, who not only retrieved Keynesian concepts and brought a more moral stance to them, but also had practical experience in the colonies (or today, the developing world). It remains difficult to find research material on India in the 1920s and 1930s. It is therefore fortunate that we have some research for this period through the efforts of Marshall, Joan Robinson, and Austin Robinson as well as Pervez Tahir, who completed a PhD at Cambridge in 1990 with the title ‘Some Aspects of Development and Underdevelopment: Critical Perspectives on Joan Robinson’. Joan and Austin had lived in the then Indian Princely state of Gwalior and participated in the controversy over the question of the division of resources between Gwalior and the Government of India. While in Gwalior, Austin wrote drafts of a memorandum covering the major applied economics topics found in Part II of the Economics Tripos, which Joan contributed to through discussion and possible minor revisions. In this sense, there can be no doubt that both Joan and Austin developed an active interest in India’s economic problems during their stay in Gwalior.

Joan Robinson displayed a relative lack of interest in applied or empirical work during her professional career. Theory was her domain (Harcourt 1984: 652). Nevertheless, Tahir pronounces her as being distinct from ‘the company of those economists who.Thad little experience of underdeveloped economies’ (Tahir 1990: 13), and she can be associated with the minor tradition of those who looked to these economies to understand the nature of global capitalism (Cohen and Harcourt 2003). In her and Austin Robinson’s contribution to The British Crown and the Indian States, she presented ‘a realistic, non-Keynesian view of unemployment in the underdeveloped countries, an emphasis on the population problem, optimism about export prospects under international co-operative arrangements ... [S]he tended to overemphasize the role of the state’ (Tahir 1990: Summary). In this sense, Joan Robinson embodied the trail of thinking as it emerged from Malthusian, Marshallian, and Keynesian ideas on how humanity might optimally progress, taking these ideas into a new industrial and global dimension. Giving importance to industrialisation, taking active measures for capital accumulation, and the role of a hard state, the Robinsons (like the other Post-Keynesians) drove the idea of human development as a phenomenon of optimisation and aspira- tion^[2] rather than a steady-state process under natural law.

• [1] Nevertheless, his sense of justice emerged in his ardent support of India’s case at the IMF conference atBretton Woods in arguing that it was unthinkable that the country’s relatively large sterling balances(accumulated by British wartime debt to India) should be the price of instituting independence and selfgovernment in India (Chandavarkar 1986).
• [2] We can tie this idea of optimisation and aspiration to the work of the Cambridge School ofHistoriography, for which economic historians including the likes of R. Robinson, Gallagher, Cain, andHopkins used regional and pluralist perspectives to examine post-colonial development.