Macmillan Committee facts for kids

The Macmillan Committee, officially known as the Committee on Finance and Industry, was a special group formed by the British government. This happened in 1929, right after the 1929 stock market crash. The main goal of the committee was to figure out why the economy in the United Kingdom was struggling so much.

The committee was officially created by an order from the government. Its job was to see if the way banks and money worked at the time was helping or hurting British businesses and trade. A Scottish lawyer named Hugh Pattison Macmillan was chosen to lead the group. Even though he wasn't an expert in economics, he mostly let the other members do the talking. Other important members included Ernest Bevin, John Maynard Keynes, and Reginald McKenna.

What the Committee Did

The Macmillan Committee listened to many important economists of the time. They heard ideas from people like Arthur Cecil Pigou and Lionel Robbins about how to solve unemployment.

The committee mostly agreed with the "Treasury view." This was the government's idea that spending a lot of money on big public projects wasn't the best way to fix the economy. However, some key members, including John Maynard Keynes and Ernest Bevin, signed an extra note (called Addendum 1). This note suggested that the government should start big public projects and control imports.

Still, the committee insisted that the main goal of money policies should be to keep the value of British money steady compared to other countries' money. They thought this was more important than preventing money problems or keeping prices stable.

The committee shared all its findings and suggestions in a document called the Report of Committee on Finance and Industry. Most people just called it the Macmillan Report. It was published in 1931.

Keynes's Influence and Recommendations

The Macmillan Report was a place where the famous economist John Maynard Keynes could challenge the "Treasury View" – the government's main economic idea. Keynes wrote most of the report himself.

The report suggested several ideas that came from Keynes. These included:

• Making the Bank of England owned by the government (called nationalization).
• Having the government get more involved in controlling international trade.

A historian named Charles Loch Mowat said these ideas were "careful" ones. He also noted that by the time the report came out, events were moving so fast that some of the suggestions were already a bit behind the times. Not all members of the committee agreed on everything, and some even disagreed with the main findings. Their different opinions were included in extra sections of the report.

The "Macmillan Gap"

The report also pointed out something important: the connection between British banks and British businesses wasn't as strong as it was in countries like Germany or the United States. This led to a new term: the "Macmillan Gap".

Many people in Britain felt that their banks weren't doing enough to help their industries. Banks had a tough job balancing what their depositors (people who put money in the bank) wanted and what their debtors (businesses who borrowed money) needed.

• Depositors wanted high interest rates and to be able to get their money back quickly.
• Businesses wanted loans with low interest rates that they wouldn't have to pay back too fast.

It was also riskier and more expensive for banks to lend smaller amounts of money. This made it harder for small businesses to get the loans they needed. Even though the report only spent a small part talking about this problem, the "Macmillan Gap" became the most remembered part of the report.

It was also one of the few suggestions that actually led to action. Because of the committee's idea, a new organization was created to help small businesses get money: the Industrial and Commercial Finance Corporation.

After the Report

Everyone on the committee, even those who signed Addendum 1, agreed that keeping the exchange rate (the value of British money compared to other currencies) steady was the most important thing.

However, just two months after the report was published, the UK stopped using the Gold Standard. This meant the value of British money immediately dropped by 2% and continued to fall for the next year.

Images for kids

• Hugh Pattison Macmillan, Baron Macmillan.jpg

  Hugh Pattison Macmillan, the committee's chairman.

• Ernest Bevin.jpg

  Ernest Bevin, a trade union leader and committee member.

• 

  John Maynard Keynes, a famous economist and key author of the report.