The Financial and Economic Situation. By W. Tudor Davies. NO apology, I think, is needed for a return to a comment on the vexed question of the gold standard on account of the wide- spread misunderstanding which prevails concerning its effect. What actually happened when we returned to the gold standard is a ques- tion often asked. It amounts to this-that by artificially reverting to the gold standard when actually the pound was still ten per cent. short of full value we have added just that percentage to the cost of our industrial products. This in- creased cost of our products to be exported has accentuated our difficulties in the world's markets. Of course, the return to gold has one big advan- tage. We require less wherewith to meet our American debt payments. This is counter- balanced by the fact that the taxpayer has less to meet his internal obligations. The Chancel- lor's decision to resume gold payments was in keeping with Britain's traditional policy in finance-namely to wipe off as soon as possible all external indebtedness. Of course, this has not always been, regardless of the burden it placed upon the citizen. It may be that the Chancellor of the Exchequer is placing rather too heavy a burden upon the present generation and relieving posterity too much. The grant of a subsidy to the coal industry is only a truce in the unfortunate struggle between capital and labour. To many it appears only as the acute phase of a general depression extending over our export industries. In the attempt at diagnosis of our industrial and economic diseases one realises that we are still in the period of post- war lassitude and in the position of a debtor in- stead of a creditor nation. We have also stressed the question of finance instead of paying equal attention to our industrial situation for the both are inter-dependant, though historically the latter preceded the former. Since 1920 we have had alternate periods of deflation and inflation but the latest period of deflation has brought heavier consequences in the matter of trade depression and unemployment than was anticipated. We have looked the dollar in the face but has the price paid been too heavy. Coupled with the determination to bring the dollar-sterling exchange to parity has been the fixed idea of bringing prices down. The problem is how to bring prices and wages down simul- taneously. What the workers object to is that the attempt to lower wages is made before an endeavour to reduce the cost of living or in other words prices. Already two steps which will go far to ease the Situation have been taken. Firstly, the embargo on foreign loans is being gradually lifted and secondly there is a greater endeavour to free our finance from the shackles of American influence, of which the recent lowering of the bank rate is evidence. Easier credit must be the slogan for the next twelve months and a further reduction of the bank rate would be most salutary or as it has been put-" absolutely readiness of the State and the banking system to take any reasonable form of business risk. In a word, the present restriction and caution must give place to elas- ticity and courage." In addition the inflow of gold has compelled the Bank and the Treasury to review the situation and the first remedy of the reduction of the Bank rate has been quickly applied. In the long run the right policy of facing up to the situation has been pursued. The trouble lies in the tremendous difficulties in which industry and trade (both employers and employed) have to endure. Can they weather the storm is the question? The Government has undertaken to carry out an economy campaign and a new "Axe Commit- tee, consisting of such eminent men as Lords Colwyn, Bradbury, and Chalmers, has been in- stituted to find ways and means of economy in the Services. The pressure of taxation is felt in every walk of life. We are the heaviest taxed nation in the world. The amount per head in taxes has risen in eleven years from £ 3 11s. to £ 15 18s. Government expenditure has risen from less than 200 millions to nearly 800 millions. The premium we pay for our national safety has in- creased since pre-war days. Mr. Philip Snowden has done a national service by calling the attention of the United States of America to the fact that the restoration of the gold standard gives at least a moral claim to Great Britain on America for a reconsideration of our debt to that-country. When the question of the settlement of the debts of France and Italy to Great Britain and the United States comes up for definite consideration the matter of scaling down these debts, in accordance with the fall in prices and the rise in the purchasing power of gold since 1918, will no doubt be raised. In that event, it is only fair to ask that any concession which may be made to France and Italy should be extended to the British debt to America. But failing that, and assuming that the present funding arrange- ment with America must stand on the terms settled two years ago, we may ask whether there is any step which could be taken by Great Britain, within the terms of the bond, which would relieve the burden of her annual to the United States." During the last months there has been much discussion with regard to the financial facilities offered to British trade, both internal and exter- nal. It has been contended that the existing bankers do not use sufficient imagination in assist- ing trade in fresh markets that they are prin-
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