Australia
Offered the opportunity in 1937 to be a Visiting Lecturer for two terms at the University of Melbourne, Clark jumped at the chance. It would allow him to see where his father had first made his fortune.
Clark had gone out to Australia on sabbatical and was expected to return to Cambridge in October 1938. Australia, however, got in the way; Clark became enchanted by the great southern land. The presence of a world-famous economist there attracted keen interest. Inevitably, he was soon offered a highly paid job within the Queensland Civil Service as State Statistician, Financial Adviser to the Treasury and Director of the Bureau of Industry. It was, he told Keynes, ‘too remarkable an opportunity for putting economics into practice... I believe you yourself would have thought twice before rejecting an opportunity like that for putting some of your conclusions into practice' (Keynes 1983: 801). Taking the position meant turning his back on Britain, although Clark never expressed misgivings about the career switch. He had always fancied himself an economic scientist, not a theorist, ‘content steadily to lay stone on stone in building the structure of ordered knowledge' (Clark 1940: viii). In any case, the purpose of economics is to improve the lot of mankind. Another reason why Clark plumped for Australia was because, as Hugh Dalton had rather pointedly reminded told him ‘Cambridge.treated you like a helot' (Dalton to Clark, 19 March 1938, CCP, BC, UO) and that Keynes ‘should have wangled you a Fellowship and not merely treated you as a statistical convenience' (Dalton to Clark, 28 January 1938, CCP, BC, UO). In Cambridge, news of Clark's defection was a ‘bombshell' with ‘realistic research' dealt ‘a severe blow' (Robertson to Clark, 26 June 1938, CCP, FL, UQ). Clark continued to explain to Keynes the reasons for the switch; Queensland was a socialist state and apart from the weather, salary and lifestyle, Clark had a young family to care for. Nor were his official duties there as burdensome as they sounded. Indeed, his time in Brisbane would see a remarkable profusion of high- powered research flowing from his pen.Meanwhile, the economic performance of the Soviet Union had been a source of fascination for socialists everywhere and Clark, who was vehemently anti-communist, was no exception. He had looked over Soviet economic statistics on the long voyage out to Australia after reading Michael Polanyi's (1935) article on the subject. Clark finished a long journal article and sent it to Keynes for comment. Keynes replied that was Clark's ‘best effort so far in making bricks without straw' but cautioned that ‘some of your orders of magnitude might not turn out right', given the secrecy of the Soviet state. Keynes added that, ‘There must necessarily always remain a considerable doubt about the accuracy of the data' (Keynes to Clark, 23 July 1938, CCP, FL, UQ). It was published by Macmillan as a slim volume entitled A Critique of Russian Statistics (Clark 1939).
His second major undertaking during this period was The Conditions of Economic Progress (Clark 1940). The title was a derivative of Alfred Marshall's intended volume, Progress: Its Economic Conditions. In terms of personal effort and ingenuity, this was Clark's most definitive work. There were to be three editions, each completely revised. Phyllis Deane (1958: 371) said that the later versions were ‘Essentially...the same book... [T]he framework of the first edition [had been] expanded by the addition of the miscellaneous ideas, notes and tables [needed to keep] the original results up to date'.
The book opened up a whole new vista of applied economics about the determinants of growth and material progress and why there were differing rates of growth for the thirty economies under Clark's microscope. He described it as ‘a comparative study of the investigations which have been made in all the principal countries into national income, and economic factors bearing upon national income' (Clark 1940: vii).
Paul Douglas (1941: 444) acknowledged its epic sweep, describing it as ‘a tour-de-force of statistical economics'. Lionel Robbins considered it one of the ‘great books of this century' (Clark to Marjorie Clark, 20 November 1947, Clark family letters) while John Hicks (1951: 3) described it as ‘the most ambitious book on economics that had ever been written' in the sense that it took the world and all history as its province.In the preface, Clark spelt out how he approached economics while also attacking the antics of his English counterparts. He felt that their preference for the theoretical rather than the scientific approach to economics was futile: ‘It would be laughable, were it not tragic, to watch the stream of books and articles, attempting to solve the exceptionally complex problems of present- day economics by theoretical arguments, often without a single reference to the observed facts of the situation' (Clark 1940: viii). For Clark, economic research could only be done by ‘the careful systemisation of all observable facts, the framing of hypotheses from these facts, prediction of fresh conclusions on the basis of these hypotheses, and the testing of these conclusions against further observable facts' (ibid.: vii-viii). These controversial passages were deleted from later editions because of the impetus in economics research towards empiricism. This had been triggered by the Second World War but also by the gathering realisation that the post-war challenge for economists was to address long-run problems of production, accumulation and growth (see Clark: 1951b: vii).
Clark wanted to demonstrate the long-term conditions necessary for a country to achieve material progress, which he equated with an improvement in economic welfare. Technically, the main achievement of The Conditions of Economic Progress was to compute the relative value of money in different countries or, more strictly, to establish the comparative real income per capita in thirty countries in terms of an artificial currency unit of constant purchasing power.
As such, Clark was the first economist to present comparable estimates of real income across countries. He also used real income per head as a form of differentiation. This allowed Heinz Arndt (1979: 122) to compliment him for presenting convincing statistical evidence that revealed a ‘gap' between rich and poor countries. Indeed, Clark discovered astonishing differences between levels of real income, revealing that the world was still ‘a wretchedly poor place' (Clark 1940: 2), with the living standards of most of the planet's population inadequate; only a few industrialised countries—America, Britain, Germany, France and Germany—produced the bulk of global output. Most of the world's economies were underdeveloped, meaning that, even if all productive resources were employed, there would still be widespread poverty. He conceded, too, that overpopulation in a poor agricultural country could be quite ‘disadvantageous' (ibid.: 6).For Clark, the major cause of global poverty was a lack of capital expended on machinery, knowledge and skills and accessing natural resources (see Plimsoll 1941: 108). The wider ambit given to capital showed that Clark was reassessing its role in economic growth. Looking at what he called “The Morphology of Economic Growth” (Clark 1940: Chapter 10), Clark confirmed Sir William Petty's generalisation that, with economic progress, agriculture showed a relative decline in employment and national output as manufacturing grew more quickly. Eventually, manufacturing would be supplanted by the rise of the services sector. This evolving sectoral balance reflected the degree of development and maturity of an economy. The reallocation of the factors of production within the economy related to the interplay of both price and income elasticities for the products of all three sectors, together with the respective labour productivity for each sector. No doubt inspired by his earlier work with Allyn Young, Clark also found that large-scale production plants did not increase output per head; this was determined more by the relative rate of growth of the industry as a whole.
In short, there was no tendency towards an optimum size of plant; in fact, increasing returns to scale could well be associated with a declining average size of the plant. Young spoke more of the cost savings to be made by the ‘increasing specialisation and subdivision of processes' (Arndt 1992: 120). While big economies could prosper from this, so too could smaller economies which engaged in international trade by specialising in a number of manufactures or services.Despite its grand ambition and leap into a new form of economic analysis, The Conditions of Economic Progress was something of a disappointment when it came to presentation, analytical punch and reasoning (see Maddison 2004). Reviewers fretted at its disorderly and fragmented nature, a paucity of headings, the maze of tables, and with the lack of an index and bibliography. While applauding it as a pioneering effort, Erwin Rothbarth (1941: 120) found Clark's book ‘annoying' in its presentation, ambition and a ‘certain vagueness as to its purpose' (ibid.)—whether it was a handbook of national income statistics or a treatise on the nature of economic progress.
Clark's third major undertaking during this period, The Economics of 1960 (Clark 1942), again saw him taking the world as his oyster. More formally, his intention was to project how economic affairs may look by 1960. It would cover ‘the most probable course of world populations, industrial development, prices, capital movements and interest rates' (ibid.: ix). For his part, Jan Tinbergen hailed it as a ‘milestone in the development of econometrics' (Tinbergen to Clark, 15 January 1947, CCP, FL, UQ).
Clark predicted that, after the war, the terms of trade would turn in favour of primary producing countries. This argument went against some of the findings in The Conditions of Economic Progress. Clark's new prophecy was predicated on the belief that there would be an increased supply of manufactures on world markets as the old industrialised economies rebuilt their economies.
At the same time, Clark foreshadowed the industrialisation of countries such as China, Japan and India which would starve their rural sectors of capital and labour. This would amplify the oversupply of manufactures and, at the same time, exacerbate the shortage of primary products.The other argument underlying Clark's findings was his view that the immediate post-war years would be a period of capital hunger. The capital accumulation by developed and developing economies alike meant that most nations would enjoy sustained full employment during the post-war period. Put another way, Clark was arguing that economic progress advances in long- run cycles rather than being interrupted by trade cycles and political and social upheavals. This was a heartening prognosis: there would be no secular stagnation, but rather a period of economic optimism with abundant capital and trade flows. This expansion was based on Clark adopting Kondratieff's theory of cycles. He adorned it with movements in investment, population, trade and the terms of trade. Clark posited that there were cycles of overinvestment and under-investment, each spanning around 25 years, resulting in alternating periods of capital hunger and capital satiation. The post-war global economy was set for a period of reconstruction especially after the destruction caused by conflict. There would be a resumption of trade and investment accompanied by a big shift towards manufacturing as labour flowed to secondary and tertiary sectors. However, Clark was criticised for his grand long-run supply-side vision, along with his faith in economic determinism; there was no room in his analysis for the trade cycle or for macroeconomic policy (see Rosenstein-Rodan 1942: 544).
Notwithstanding criticism of his work, Clark was made a Fellow of the Econometric Society in 1944 in recognition of his pioneering statistical and empirical research. The year after, he contributed an article to Econometrica on the ideal size of cities (see Clark 1945a), a subject that had intrigued him since working with Carr-Saunders. Clark argued that the principal function of a city was the provision of the full range of services, including commercial, educational and cultural facilities as well as sheltered manufacturing such as food processing and construction materials, all of which are dependent upon an effective transport system. He then went on to claim that, on commercial criteria, a city need be no larger than 150,000 residents and certainly not any larger than 200,000, if car ownership was considered. Clark had found that municipal costs rose quickly once population approached big city levels. He informed Keynes of this ‘drastic conclusion' about the ideal size of a city, arguing that this could justify spending ‘a lot of money on redistributing the population to smaller towns'. However, he continued that ‘the planners seem intent upon re-building the big cities in all their glory' (Clark to Keynes, 10 January 1945, Royal Economic Society Papers, LSE (RESP, LSE hereafter)). Clark had always held an antipathy towards urban conurbations given his attraction to distributism. As a distributionist, he favoured the decentralisation in all things, including industry, population and even political power. It was a philosophy that would continue to infuse his social and economic outlook.
Consistent with this philosophy against bureaucratism and concentrations of political power was an article that appeared in the Economic Journal in 1945. Entitled “Public Finance and Change in the Value of Money”, Clark (1945b) argued that there was a natural tax threshold of 25% of national income and that attempts to tax beyond that would result in inflation. If the State tried to extract more than this, an inflationary process would be triggered which made the whole exercise self-defeating. Keynes had alluded to this tendency in the 1920s when talking about the depreciation of the French franc (see Harrod 1951: 374). It was a Queensland Premier who sparked the idea in Clark's mind about how mooted post-war expenditures on welfare meant unprecedented tax burdens in the future. Later, Clark furnished a proof in the form of a letter, with Keynes supporting his line of thinking, saying how he was strongly ‘disposed to agree (that) 25 per cent taxation is about the limit of what is easily borne' (Keynes to Clark, 9 March 1945, RESP, LSE).
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