Henry Clay, economist

Adapted from Henry Clay’s entry in the Oxford Dictionary of National Biography (Jewkes and Jewkes: 2004) for an article I have written on Clay’s incomparable introductory text, Economics: an Introduction for the General Reader, which I have described as the best introductory text ever written. Only those sections related to his work as an economist have been included. The text while truncated is exactly as found. It is the Clay who I well know from his text, and it is interesting to find that, given how similar we are, I may be properly categorised as a Gladstonian Liberal. Strangely, that very much makes me a conservative in modern times.

Clay, Sir Henry (1883–1954), economist, was born on 9 May 1883. He went as a scholar to University College, Oxford, [graduating] in 1902. Between 1909 and 1917 he lectured for the Workers’ Educational Association under the university extension scheme, an experience that led to the writing of Economics: an Introduction for the General Reader (1916; 2nd edn, 1942). The book had great success, especially in Great Britain and the United States, and, by reason of its clarity and real-world examples, broadened public interest in economic matters.

In 1922 Clay became the Stanley Jevons professor of political economy at Manchester. In 1927 Clay asked to exchange his chair for the new professorship of social economics. He perceived that applied economics could be strengthened by closer regular contacts between economists and business people.

Clay was not a foremost economic theorist. Indeed, he often expressed doubts about the value of much of the theorizing then in fashion. As he told Edwin Cannan, another leading economist who shared his structural diagnosis of Britain’s industrial problems, he always felt that as a Professor of Economics I was a fraud … My reading of English economics has been scrappy … I don’t know enough mathematics to follow our Cambridge friends, however suspicious I may be of their results; and I cannot suppress my interest in current political and social questions sufficiently to stick to any one part of the field of economics and so do some serious work on it.

In 1930 Clay resigned his chair to join the Bank of England. Clay’s shrewd advice and his knack of getting on with people, especially with Montagu Norman, led to his appointment in 1933 [at the very trough of the Great Depression] as economic adviser to the governor of the Bank of England. Clay and Norman shared the opinion that, necessary as was a proper budgetary and monetary framework, financial ingenuity by governments in the form of large-scale loan-financed public works did not offer a long-term solution to the problems of British industry. They believed that the solution lay more on the supply side, where widespread inefficiencies in the use of capital and labour resulted in high costs and low productivity, problems that were being addressed by the bank in its promotion of industrial rationalization.

Clay’s writings from his first and famous book in 1916 to the papers unfinished at his death show the main lines of his thinking unbroken. He was in many ways a Gladstonian Liberal, believing that private enterprise was the most efficient form of organizing production, that the liberty of the individual would be endangered by the continued growth of government, and that Britain should maintain its historic internationalism in its economic policies. His views diverged from the main stream of contemporary Liberal economic thought in at least two ways: in his doubts about the practical results of the Keynesian solution to unemployment or more especially of the views of some of Keynes’s disciples; secondly, concerning industrial monopoly. Clay was not prepared to agree that a competitive system would inevitably degenerate into monopoly unless safeguarded by the state: anti-monopoly legislation in his view was unnecessary, inexpedient, and inequitable.

Although in later years he became something of a man of affairs, he retained the habits and enthusiasms of the scholar; nor might he be mistaken for anything else. He could never resist a second-hand bookshelf and he collected a large library, which included many bargains.

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