FRIDAY, MAY 1, 1936 HEAD OFFICE: 110-111, Fleet St., London, E.C.4. (Central 6264-5) BRANCH OFFICES : 11, Albert Square, Manchester. (Blackfriars 1067)
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Monetary , Orthodoxy
There are some subjects on which one has only to express an opinion of one's own to be written down as a crank. One of them is the interpretation of the Apocalypse. Another is the monetary system. And the reason must be admitted; they have in point of fact been the happy hunting grounds of cranks.
Nevertheless there is room for fresh thinking upon both. Almost all the countries with a highly developed monetary system have been passing through a succession of economic slumps and crises. That fact is not in itself proof that the principles of the system need overhauling, for the economic and political consequences of the world war have been so catastrophic that, in the absence of evidence to the contrary, it would be arguable that difficult monetary conditions do no more than register these reactions. But among the economic disorders of our time are some that have every appearance of being very definitely connected with the workings of the monetary system and of being their consequence rather than their cause.
One of these is the continuance of mass unemployment even when there is in other respects some industrial recovery, as in the U.S.A. and Great Britain. Statesmanship has been confronted with the choice between condemning millions of citizens, who are willing and able to work, to drag out indefinitely a wretched existence on the edge of starvation or crushing industry still further by maintaining them on a decent allowance. But when there is no shortage of raw materials industry ought to be able either to use their labour or else support them adequately without using their labour. An inability to do either cannot be in the nature of things, and there is a strong presumption that it is due to a fault in -the mechanism of the exchange of goods and services, that is to say, the monetary system.
Similarly, the paradox of want and malnutrition in the midst of abundance and the artificial restriction of supplies is certainly not one to be accepted passively as a natural catastrophe to which monetary policy must docilely conform. It is plainly an artificial situation due to faulty arrangements for the circulation of purchasing power and it is the business of monetary policy to put it right.
Technical and Moral Flaws So long, therefore, as such things exist, it is idle to point to the balancing of budgets as a sufficient triumph and to think that the monetary system can be immune from discussion and criticism and from the suspicion that there are both technical and moral flaws in its working.
But here we must guard ourselves against a possible misunderstanding. When we speak of moral flaws we are not referring to the supposed malignant conspiracy that some attribute to the hidden powers of high finance. So far as we know, those who deal in money, like those who deal in goods, are simply looking after their own business interests in accordance with the accepted code of business morality. Similarly, when we speak of technical flaws we are not asserting that professional financiers do not know their own business as they conceive it.
The ground on which we think their proceedings are legitimately open to question is quite different. It is that their professional outlook and interests pursued according to the accepted business code do not necessarily coincide with the interests of society, in which they hold a key position. ' After all, if it were a
matter, say, of fixing an agricultural tariff, it would not be unreservedly handed over to the farmers, not because farmers are believed to be in a conspiracy against the nation, nor because they cannot raise live-stock and corn, but because in a fallen world the economic welfare of the nation as a whole cannot safely be handed over to any one economic group.
But those who deal in money have been given the prerogative of shaping not only the monetary policy of the nation, but the very doctrines on which monetary policy is based; so that even when they are supposed to be co-operating with, say, the Treasury, they are dealing with those who have been trained to regard the professional standpoint as having a universal validity.
A Strange Position
It is a strange position, entirely reversing the true one, which is that monetary policy should be framed so as to serve all sections of the economic community, producers of goods, traders and consumers as well as dealers in money, and the professional skill of the latter utilised in carrying it out.
And this order of things, which is accepted as a matter of course in most other departments of policy, is especially needed in the monetary department, where it is rejected. For monetary control is both all-pervading and centralised in a unique degree, giving the despotic power of which the present Pope has spoken.
Moreover, private professional control has the specific tendency to put the interests of lenders before those of either producers or consumers, reserving to them the creation of money, lest it should become unlendable, not from malice but simply because it is the professional's busines to lend. And it is only in certain circumstances that the interests of lenders and of the community as a whole coincide.
There need, therefore, be no accusations of perversity on either side when the citizen, confronted with highly unnatural economic disorders, asks the powers of finance for an account of their stewardship or seeks ways of bringing their operations more into conformity with the general need. And the path of wisdom even for conservatives lies, not in burking discussion but in frankly allowing that what have for long been treated as monetary axioms have by force of circumstances been made open questions. The result of treating them as too sacred for discussion has been to frighten off the more cautious critics and leave the field to the " wild men" who have no respect even for arithmetic. It is a short-sighted policy whose possible consequences are beginning to show themselves in America and the Dominions.
England And Egypt
The death of King Fuad has come at a critical moment in the history of his country.
The late King may be said to have spent his life fighting for the independence of his country, yet he realised that it in the long run depended upon friendly and indeed intimate relations with Great Britain. He, therefore, kept in check the extremist policy of the nationalists or Wafdists.
To-day the Egyptian question has been clouded over by the ambitions of Italy, and it is mere self-deception not to recognise that it is Mussolini's ambition to rule over the Mediterranean, the key to which lies in the Suez Canal and Egypt.
Whether the Duce, after his expensive efforts in Abyssinia, is in a position at once to follow up his success by military or diplomatic action is another question. But the death of Egypt's shrewd king and his replacement by a Council of Regency will surely provide Italy with opportunities • for strengthening her ultimate plans.
At the moment a treaty that is to place Anglo-Egyptian relations upon a new and permahent footing is in process of being negotiated. It is imperative that this treaty should prove a success, not only from Britain's point of view, but from Egypt's also.
Britain's only concern is the maintenance of her communications with the East, and her ultimate choice will lie between trusting those communications to Egyptian or Italian hands.
It is no time for standing on rights or straining after details of prestige, but for far-seeing statesmanship which can distinguish the petty from the vital issues at stake, not only for this country, but for the world.