Macmillan Committee
Encyclopedia
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 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
, Lord Bradbury, R. H. Brand, T. E. Gregory, John Maynard Keynes
, and Reginald McKenna
. The committee published its findings and recommendations in the Report of Committee on Finance and Industry, or more simply, the Macmillan Report, in 1931.
The Macmillan Report "served as a venue in which J. M. Keynes challenged the 'Treasury View
'", according to economist Friedrich von Hayek. The report was largely authored by Keynes, and it recommended several Keynesian
policies such as nationalization
of the Bank of England
and government regulation of international trade
. Historian Charles Loch Mowat 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.
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". 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
s and liquidity, and their debtor
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. 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: the Industrial and Commercial Finance Corporation
.
Great Depression in the United Kingdom
The Great Depression in the United Kingdom, also known as the Great Slump, was a period of national economic downturn in the 1930s, which had its origins in the global Great Depression...
. 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
Hugh Macmillan, Baron Macmillan
Hugh Pattison Macmillan, Baron Macmillan GCVO PC was a Scottish judge.The son of the Revd Hugh Macmillan, he was educated at Collegiate School, Greenock, at the University of Edinburgh and the University of Glasgow...
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
Ernest Bevin was a British trade union leader and Labour politician. He served as general secretary of the powerful Transport and General Workers' Union from 1922 to 1945, as Minister of Labour in the war-time coalition government, and as Foreign Secretary in the post-war Labour Government.-Early...
, Lord Bradbury, R. H. Brand, T. E. Gregory, John Maynard Keynes
John Maynard Keynes
John Maynard Keynes, Baron Keynes of Tilton, CB FBA , was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments...
, and Reginald McKenna
Reginald McKenna
Reginald McKenna was a British banker and Liberal politician. He notably served as Home Secretary and Chancellor of the Exchequer during the premiership of H. H. Asquith.-Background and education:...
. The committee published its findings and recommendations in the Report of Committee on Finance and Industry, or more simply, the Macmillan Report, in 1931.
The Macmillan Report "served as a venue in which J. M. Keynes challenged the 'Treasury View
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 view was most famously advanced in the 1930s by the staff...
'", according to economist Friedrich von Hayek. The report was largely authored by Keynes, and it recommended several Keynesian
Keynesian economics
Keynesian economics is a school of macroeconomic thought based on the ideas of 20th-century English economist John Maynard Keynes.Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and, therefore, advocates active policy responses by the...
policies such as nationalization
Nationalization
Nationalisation, also spelled nationalization, is the process of taking an industry or assets into government ownership by a national government or state. Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being...
of the Bank of England
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, it is the second oldest central bank in the world...
and government regulation of international trade
Economic interventionism
Economic interventionism is an action taken by a government in a market economy or market-oriented mixed economy, beyond the basic regulation of fraud and enforcement of contracts, in an effort to affect its own economy...
. Historian Charles Loch Mowat 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.
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". 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
Deposit account
A deposit account is a current account, savings account, or other type of bank account, at a banking institution that allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the...
, who desired high interest rate
Interest rate
An interest rate is the rate at which interest is paid by a borrower for the use of money that they borrow from a lender. For example, a small company borrows capital from a bank to buy new assets for their business, and in return the lender receives interest at a predetermined interest rate for...
s and liquidity, and their debtor
Debtor
A debtor is an entity that owes a debt to someone else. The entity may be an individual, a firm, a government, a company or other legal person. The counterparty is called a creditor...
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. 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: the Industrial and Commercial Finance Corporation
3i
3i Group plc is a multinational private equity and venture capital company headquartered in London, United Kingdom. It has offices in 13 countries across Asia, Europe and the Americas and had total assets under management of £12.7 billion as at 31 March 2011...
.
External links
- The Macmillan Report, a short summary of its main points, Open LibraryOpen LibraryOpen Library is an online project intended to create “one web page for every book ever published”. Open Library is a project of the non-profit Internet Archive and has been funded in part by a grant from the California State Library and the Kahle/Austin Foundation.-Books for the blind and...
. - Committee on Finance and Industry Report, June 1931 Addendum, Macmillan Report, ScribdScribdScribd is a Web 2.0 based document-sharing website which allows users to post documents of various formats, and embed them into a web page using its iPaper format. Scribd was founded by Trip Adler, Tikhon Bernstam, and Jared Friedman in 2006...
.