Treasury and Subordinate Departments.

Part of Orders of the Day — Supply. – in the House of Commons at on 4 July 1934.

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Photo of Mr Pierse Loftus Mr Pierse Loftus , Lowestoft

In recent years, money has not been convertible into gold. In former years, whenever a crisis came and people wished to convert into gold, the system had to be suspended. It was suspended five times in the last 100 years. It was, therefore, a fair weather system. When you did not want to convert money into gold you could, and when you wanted to convert you could not. The Government intervened and the national credit was used. I suggest that the use of national credit might perhaps not be reserved only for periods of emergency. As regards the use of gold as a regulator of international exchanges, the point that we have to bear in mind to-day is that, however gold is used, international exchanges are not regulated by international trade. The movements in the value of the pound to-day are not caused by international trade; they are caused by a vast mass of international capital which is floating about the world. If people in the United States get the least bit frightened about the future of their country, they buy pounds, and, in the same way, people in France buy pounds; or, if they get the least bit frightened about the future of this country, they buy francs. You have this vast block of international capital chasing round the money markets of the world, and that is what regulates the international prices of money.

I submit to the Committee that it is really rather an absurd system that the value of the pound in international markets should not be regulated by international trade, but should depend upon whether some prominent citizens either in Paris or in the United States are in a panic about their own Government or their own future—not ours. I suggest also that the classical theory of the working of the Gold Standard requires that a nation which acquires gold should inflate its currency, thus raising prices and enabling other nations to under-sell it in its own markets. Are any of the nations likely to do that? On the other hand, a nation that loses gold must contract its currency and force down prices, to the ruin of its industries.

I submit that there are three conditions all of which are necessary for the successful working of an international gold standard. In the first place, a country losing gold must be willing and able to make a general reduction of costs, including wages. Is any country in that position to-day? Secondly, it must have available markets for additional exports. Is that the position with any country today? Thirdly, a country receiving gold must let it flow out again when the conditions again demand it. I do not think that any country will allow that. Therefore, I suggest that an international gold standard is impracticable; and not only is it impracticable, but the use of a gold standard must involve periodical deflation, and deflation, as my hon. Friend the Member for East Aberdeen has said, involves immense loss and immense misery. Recurring depressions are absolutely necessary to the successful functioning of a gold standard, and I would remind the Committee that my right hon. Friend the Member for Tamworth (Sir A. Steel-Maitland) warned the House in very strong language, such as I dare not use, that, unless we iron out these depressions, unless we have a money system that will prevent another depression following another boom, the whole capitalistic system involving private property will be in danger. My right hon. Friend used stronger words than I dare use. I submit that the Gold Standard cannot be restored, and that we have to face the alternatives. Therefore, I plead with His Majesty's Government that we should have an inquiry, not only into monetary policy, but into the monetary system of this country and of the world. As regards the personnel of such an inquiry, it was well set out in a leading article in "The Times" in November, 1932. That article said: The problem which is now perplexing mankind is to discover by what flaw or flaws in our system it has come about that the world, never better equipped with knowledge and machinery to produce all its needs, is forced to see so much of that knowledge and machinery lying idle while millions of willing workers are unemployed and "in want. The professed authorities on these questions have expressed many conflicting opinions and have given such contradictory advice that the best hope of success seems, indeed, to lie in candid examination of the facts by men not professing to be experts, and consequently unhampered by preconceived theories. It goes on: The situation of the world to-day is a challenge to world statesmanship, a challenge which statesmen must take up for themselves. It is impossible to shift the responsibility upon the experts, who differ so fundamentally among themselves over both the diagnosis and the appropriate remedy for the world's economic sickness. That leading article is a strong and urgent plea for a monetary inquiry, and it points out the type of inquiry that is required. As regards the objective of such a policy, I would suggest that it was set forth in the words of a prominent individual some two years ago more clearly than in any other words that I have read. He said: The potential output of existing means of production is far greater than ever before. If all employable labour were employed for a reasonable number of hours per week, the world would have have at its disposal a volume of commodities and services that would enable the entire population to live on a higher level of comfort and well-being than has ever been contemplated in the rosiest dreams of the social reformer. The urgent task of the world is to bring consumption and production into proper relationship—not a simple, not an easy, but quite a possible task. The problem is one of distribution. Money must function as an efficient token, as a means for the exchange of goods and services. Another principle is that money should reflect the facts of production and distribution; and, above all, money must allow the full productive resources of a country to be used to supply potential demand.

There are many schemes before the world to-day. I have not time to go into them, and will not weary the Committee by doing so, but I suggest that they should all be inquired into, and particularly the very clear scheme put forward by the London Chamber of Commerce, on which lectures have been given upstairs. That scheme, which represents the official policy of the London Chamber of Commerce, involves the rejection of the Gold Standard. It involves the rejection of trading for debts and gold. It proposes that international exchanges should be stabilised, starting within the British Empire, including Scandinavia; that trading should be for goods; and that there should be a monopoly for each central bank of the purchase and sale of foreign currency. If we sell to any foreign country and get paid in foreign currency, that is a demand on that country for goods and services, and we have to utilise it. In the same way, if any foreign country buys from us and receives pounds, it has to receive payment in British goods and services. I suggest that that would do away with all the evils of international indebtedness and all the present fear of Japanese competition and the future fear of German competition.

There is also the remarkable report issued by the Southampton Chamber of Commerce, and there are the proposals which have been put forward by leading industrialists such as Lord Melchett and others; there is the Gessel Scheme, which has been tried in some places, and there are other schemes such as the Doulgas Scheme which is attracting increasing attention, not only in this country, but in our Dominions, in the United States, and in Japan. I believe that, if His Majesty's Government would announce in due course that they were prepared to set up an inquiry into the monetary system and into monetary policy, they would be astonished at the flame of enthusiasm that they would arouse throughout the country, especially among the younger people. They are not satisfied with world conditions as they are to-day; they are not satisfied with any policy of going back to 1924 or 1914; they feel that the productive capacity of the world is immense, but that it is not being utilised owing to the defects in the monetary system, which should facilitate the exchange of goods and services all over the world. The young people are demanding that this inquiry should be undertaken. I can assure the Committee that within the next year or two we shall hear that demand made to an increasing extent in every constituency, and, if it is not satisfied, many young people, in their despair, may turn to the crude policies of Fascism or Communism.

There are many of us who defend the institution of private property because we believe that it answers to some essential need in the soul of man. We believe that, were it abolished, you could not retain liberty, you could not have that variety, that individuality, which is essential to human progress. But we recognise that we are fighting in defence of private property on two fronts. On the one hand, there is the Socialist and Communist attack, and, on the other hand, we recognise that there are certain tendencies in finance to-day which are evil and which are destructive of property, and, above all, of the moderate property owner. We see the concentration of wealth and power in fewer and ever fewer hands. As we go round the countryside we see the parks which we have inherited from the past, and which should be the priceless heritage of our children, being driven by an undiscriminating system of taxation into the hands of the speculative builder. That is a national heritage which is being lost. Again we see in the countryside where 20 small towns were dependent upon one factory but where people connected with big business by threats or persuasion have forced the small factory into a large combine. This results in the factory being closed down, and we see the town to-day devastated and the surrounding countryside depressed.

We know the effect which, as my hon. Friend the Member for East Aberdeen has pointed out, deflation has had upon our people; and we know also that to-day the economic problem is linked with the political problem. In Yugoslavia you have revolutionary discontent. Why? There is deflation. In Italy under the surface there is revolutionary discontent, Why? Deflation. In France, riots and revolutionary discontent. Why? Deflation. What was that bloody business in Germany the other day caused by but the pressure of deflation constantly driving down the standard of living? That was the main cause. We see these tendencies. To us who defend private property it is almost immaterial whether the world of the future is governed by international Socialism or international finance, because to the vast mass of the people the result will be the same—a servile state, organised, regimented herds, the people devoid of all variety and individuality, with machine work and machine pleasures, a people incapable of progress but capable of regression into a kind of mechanised barbarism, a barbarism worse than any before, because it will be without faith and without hope and without the real joy and zest of life.