Abstract
During their lives and careers, both Marshall and Keynes visited the United States and expressed views on American capitalism. Marshall visited the US in 1875, before the advent of the trust question, and then followed the development of the American industrial world, on which he gave his final word in Industry and Trade. Meanwhile, Keynes had begun to develop his own personal relationship with America, which became very close after his visits during the 1930s, when Keynes began to invest in Wall Street on a large scale. In this paper, we argue that there is “a family resemblance” in Marshall’s and Keynes’s views on America, as they shared a common appreciation of American trusts, weighting the advantages of a large industrial organization more than the loss of competitive edge. In 1875, Marshall was struck by the deliberateness and adaptability of the American people, and even though he expressed some scepticism about the future of trusts and big business during the 1890s, his confidence in the leaders of American industry and their dynamism resurfaced in Industry and Trade, where he described the leaders of big business in America as inspired by the same spirit of innovation he had observed in 1875. The ideas that Keynes expressed about Roosevelt and the New Deal, and his choices as an investor in the US market during the 1930s, seem to reflect a similar view. While we see no direct link connecting Keynes’s views on America during the 1930s with his apprenticeship with Marshall in 1905, we see this latter episode as the starting point of a longer process, in which Keynes could observe the evolution of Marshall’s opinions on America, possibly being influenced by it.
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Notes
- 1.
“[America] is a country where minorities get precious little quarter; and to my astonishment I find myself looking back to England again as a land of liberty”, he wrote to Edwin Cannan (quoted in Moggridge 1992: 277).
- 2.
See Accominotti and Chambers (2016: 363–65): “In general, he was long the US dollar in this period, but in 1921, 1922 and 1924 he briefly adopted a short dollar position…In 1932–1939 Keynes mainly traded US dollar, French franc and Dutch guilder …[alternating] between short and long positions in these three currencies. Having shorted the dollar in October 1932–February 1933, he closed his position on 2 March 1933, just eight days before the suspension of the US dollar’s gold standard in the following months. Believing the depreciation following the suspension of gold convertibility to be overdone, he went long the dollar between April 1933 and June 1933 only to see the currency continue to depreciate. Thereafter, he consistently adopted a short dollar position, which reached its peak in December 1936.”
- 3.
Walter Case was the president and director of Case, Pomeroy & Co., Inc. in New York and Keynes’s main financial connection in the USA.
- 4.
The Appendix of Chambers and Kabiri (2016) lists all the people Keynes met during his visits to the US; among the people he met in 1931, there were mainly bankers and investment advisors; in 1934, they were mainly government officials and politicians. In both occasions, fewer were industrialists and economists.
- 5.
A public holding utility was a corporation formed for the express purpose of controlling other corporations by the ownership of a majority of their voting capital stock. “Holding companies were established through the process of pyramiding. i.e. interposing one or more sub-holding companies between the holding companies and the operating companies. At the bottom of the pyramid would be the operating utilities, which were actually generating and distributing electricity. Control of the operating company was gained by the holding companies which through various methods were able to purchase a controlling interest in the operating companies. These holding companies in turn were bought by other holding companies until many ‘levels’ were added to the holding companies’ structure.” See Public Utility Holding Company Act of 1935: 1935–1992. Energy Information Administration, Washington, DC, 1993). Moreover, “Holding company founders generated value by managing and capitalizing their operating subsidiaries effectively and by participating in the profits by owning shares in the holding companies. Holding companies therefore only sold shares as a way of financing their operating businesses so that they could operate at the optimal scale. The primary goal of the people who built holding companies, in other words, was operating profit, and they sold securities merely as a means to this end” (Morley 2012: 13–14).
- 6.
There were in particular seven utilities, whose shares (mostly preferred) Keynes held for longer periods, and six of them (American Power and Light, National Power and Light, International Hydro-Electric System, Electric Power and Light, Central States Electric and Commonwealth and Southern) were operating in the production of electric and hydro-electric power.
- 7.
Beaudreau (2016) argued that Keynes in his criticism showed neither understanding nor appreciation of the role of technological change in business cycles; Sheila Dow (2016) rebuked that “argument against the NIRA was that priority should be given to recovery … which required measures to encourage investment and output, which would in turn bring about the higher wages and prices (and money supply) which were sought from reform. He argued that the reform measures of the NIRA applied in a recession might actually impede investment and output. But he did not reject the reform measures outright”.
- 8.
Walter W. Stewart, a former professor of economics at Amherst College and Economic Adviser to the Bank of England, had long been a partner in Case, Pomeroy and Co. and remained in touch with Keynes after Case’s death.
- 9.
On Keynes’s position on the organization of the utility sector in the post-war in UK, see CWK XXII: 461–69.
- 10.
In the 1920s, Keynes had been involved in three investment companies organized by Osvald T. Falk in UK: the A.D Investment Trust (July 1921), the P.R. Finance Company (January 1923) and the Independent Investment Company (January 1924) (Moggridge in CWK XII: 30).
- 11.
“The different management styles of British and American investment trust managers reflected a different attitude to investment. By the 1920s, Americans were happy to invest in equities and expected fund managers to seek to achieve capital gain through leverage, market timing and ‘expert’ stock selection. In the UK, retail investors preferred the security of fixed-interest securities and were content with a relatively low return in the form of income yield in return for safety through a conservative approach to reserves and an emphasis on a relatively passive investment strategy” (Rutterford 2009: 181).
- 12.
“Franklin Roosevelt created the Temporary National Economic Committee (TNEC) to study the concentration of economic power in the United States. This study was conducted by the Federal Trade Commission, the SEC, and the Department of Justice. Joseph O’Mahoney, a senator from Wyoming, was the chairman of the committee. TNEC investigated monopolies and other anticompetitive restrictions, which it was thought had caused the economic contraction in 1937 and 1938” (Markham 2002: 244–45).
- 13.
On MacGregor see Cristiano (2011).
- 14.
For a detailed account, see Prendergast (1992).
- 15.
Of course, joint-stock companies had a much more simplified governance than investment trusts or holding companies, but the point of the separation between management and ownership is general and applies in all these cases.
- 16.
As his wife would report, Marshall “used to say ‘he never spent his money so well’. It was not so much what he learnt there as that he got to know what things he wanted to learn. He was able to see the coming supremacy of the U.S., to know its causes and the direction it would take” (Mary Paley Marshall’s notes to Walter Scott, quoted in Groenewegen 1995: 193; see also CWK X: 175–76).
- 17.
- 18.
See also Marshall (1923: 141–46).
- 19.
As Keynes wrote in his obituary of Marshall, “[Industry and Trade] represents the fruits of Marshall’s learning and ripe wisdom on a host of different matters. The book is a mine rather than a railway - like the Principles, a thing to quarry in and search for buried treasure. Like the Principles, again, it appears to be an easy book; yet it is more likely, I believe, to be useful to one who knows something already than to a beginner” (CWK X: 228–29).
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Cristiano, C., Marcuzzo, M.C. (2021). Industrial Leadership, Market Power and Long-Term Performance: Marshall’s and Keynes’s Appreciation of American Trusts. In: Caldari, K., Dardi, M., Medema, S.G. (eds) Marshall and the Marshallian Heritage. Palgrave Studies in the History of Economic Thought. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-53032-7_9
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