Welsh Journals

The Financial & Economic Situation. By W. Tudor Davies. HERE is some heart-searching taking place con- cerning the effects of the gold standard upon our trade and commerce. The recent Board of Trade Returns afford clear evidence of a rush of imports to avoid the re-imposition of the McKenna Duties. Our exports of British produce and goods of all sorts have considerably declined. British pro- ducers really receive little encouragement from the fact that our entrepot trade has considerably increased. The contrast of monthly trade returns recently help us to gauge the effects of the appreciation of the pound sterling and the resumption of gold payments, announced by the Chancellor of the Exchequer on April 28. It does seem that the appreciation of the pound sterling has tended to encourage imports and to discourage exports. Perhaps the greatest effect of the resumption of gold payments by this country lies in the fact that it has iixed the policy of other nations. In many re- spects it can be compared to the resumption of gold payments by the Bank of England in 1821, six years after the ending of the Napoleonic Wars and twenty- four years after the opening of the struggle had caused suspension of gold payments. Britain's notable career as the monetary centre of the world dates from the year 1821, but the circumstances for recovery ought to be even more propitious in these days than then. England then struggled alone, but now she has the co- operation of America. There are some, however, who believe this to be a disadvantage. The gold-resumption declaration has been considered by some authorities as too precipitate. It was imagined that the programme would contemplate either post- ponement of the gold-resumption until the statute restricting use of gold on export should expire at the end of 1925, or else would fix a date in the early autumn. But Mr. Churchill willed it otherwise. And we are now beginning to feel the first effects of the declaration. People the world over are asking the question what will the tangible consequences to Great Britain's own financial and economic position. The embargo placed upon foreign loans is having its effect by restricting our exports and increasing our imports. It may be proved to our satisfaction that the loss on visible trade is more than met by the income derived from invisible exports, but the question is how long will this bridge of invisible exports span the stream of the value of the goods we bring in against those we send out. Up to the present we have been able to square the account with the consequent improve- ment in sterling as against other currencies. But the time may indeed come when we shall have to pay for this excess of imports with more gold than we can afford. This will be a very disturbing event. Until a solution of the difficulty of increasing our exports is found the future of our country is seriously im- perilled. There are two facts which compel us to take heart. The first is that France has at last balanced her budget —a fact which is bound to have a salutary effect upon our financial problems. Secondly, there has been an [Contributions in prose or poetry are invited from readers. These should be addressed to the Editor, Welsh Outlook, Newtown, and in every instance accompanied by a stamped addressed envelope.] unexpectedly large influx of gold which brings the total net influx since the restoration of the gold standard up to £ 5,635,000. This gold arrived at a most opportune time to meet the demands for the internal trade which has been very active of late on account of the demand for overdrafts. Furthermore, it minimises the prospect of the necessity of a further rise in the Bank rate. One school of thought argues that the decline in exports is not due to the resumption of the gold standard, but is largely a question of production. The Committee on Industry and Trade, presided over by Sir Arthur Balfour, emphasises that-" The future development of British trade and industry is intimately bound up with the general restoration of the economic health and prosperity of the countries with which we trade. To promote the restoration of that general economic health, rather than to cripple the power of particular competitors by impeding their recovery, should be the immediate object of British commercial policy "­which in effect means the opening up of trade with Russia and a great advertising campaign in those countries which hitherto have purchased little, if any, of our British manufactures. Mr. Reginald McKenna, writing in the Midland Bank Review, urges the removal of the embargo on overseas loans. He points out that the object of the restriction on foreign loans was to relieve sterling of any check from this particular cause on its rise towards parity with the dollar and thus to facilitate the return to the gold standard. Inasmuch as the gold standard itself acts as a regulator of international movements of capital it is thought that overseas loans should be helped rather than retarded. Mr. Winston Churchill has taken up the cudgels in defence of the gold standard. The widespread mis- givings, he said that, as a result of the return to the gold standard, there would be a large export of gold from this country and a consequent severe tightening of money rates had not been realised. His remedy for our present difficulties was sumed up in a sentence Work, thrift, enterprise, effort, co-operation, science. We have done it before we can do it again. In that spirit alone shall we prosper and survive." Mr. Churchill appears to be completely out of touch with the realities of the situation. What is the use of talking about work when there is little to do, and of thrift when the London season this year was attended with inordinate waste of money. It is true that there is room for both enterprise and co-operation in our industrial and commercial affairs. The whole trouble lies in the fact that the wholesale prices of our commodities still range about fifteen per cent. above the world prices in spite of the cuts that have already been made in wages and the closing down of less efficient plants. While this disparity in whole- sale prices exists the foreign traders who have credits here do not, if they can help it, take British goods in exchange for the raw materials or manufactures which they have exported to us. It is better for them to take our gold or accumulate their credits until the time arrives when our prices will be lower. It does seem that both employers and employed must find ways and means of enabling our goods to be offered abroad at the world prices.