Public Investment Programs in the Interwar
Period: Pre-Keynesian, Proto-Keynesian,
and Keynesian Perspectives
From its inception in 1919, the ILO conducted extensive international research on economic and social conditions. The purpose of this chapter is to document the history of the rich vein of economic thought and policy advice on public investment programs that was proffered in ILO publications through the 1920s and 1930s, and supplemented by the work of economists at the LON. Many ILO member countries attempted to use countercyclical public works policies to maintain employment during the interwar years. These policies were monitored and compared by the ILO in the light of developments in the economic analysis of public expenditure over the period. Indeed, in perspicacious research reports, ILO economists anticipated some important developments in economic thought later to be recognized as essentially “Keynesian. ” They were quick to seize on the latest work in economics which helped them formulate policy responses to international unemployment, with public works enjoying prominence.
Our account of the ILO perspective as it developed over the period under review is given impetus by a neglected remark in J. M. Keynes's General Theory which was made with direct reference to the achievements of ILO researchers. A feature of Keynes's policy recommendations arising from the theoretical apparatus of the General Theory was the operation of an active public sector investment program:
[A] national investment programme directed to an optimum level of domestic employment … is twice blessed in the sense that it helps ourselves and our neighbours at the same time. And it is the simultaneous pursuit of these policies by all countries together which is capable of restoring economic health and strength internationally, whether we measure it by the level of domestic employment or by the volume of international trade (Keynes 1936:349).