Monetary Keynesianism before Keynes? The January 1932 Harvard memorandum on anti-depression policies

Abstract

A spotlight was directed by Laidler and Sandilands (2002) on the neglected 1932 Harvard memorandum (by Lauchlin Currie, Paul Theodore Ellsworth and Harry Dexter White). They interpret the memorandum as advocating fiscal inflationism as opposed to Keynesian fiscalism in tackling the Great Depression. While the former involves the creation of new money, the latter can operate independently of new money. This paper goes beyond this interpretation of the memorandum and argues the following: (i) the memorandum emphasises recovery in a manner which does not lose sight of secular growth; (ii) it does not take an isolationist position on the US depression but views it as a part of the broader international calamity; (iii) the memorandum appears at odds with the post-1936 notion of the liquidity trap and the consequent ineffectiveness of monetary policy and (iv) is aware of the various intricacies involved in expanding the money supply. In brief, the memorandum is an elegant piece of writing which displays a good understanding of the nuts and bolts of the money-supply process.