Orders of the Day — Economic Policy

Part of the debate – in the House of Commons on 3rd February 1943.

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Photo of Sir George Schuster Sir George Schuster , Walsall

I think we all owe a debt of gratitude to the noble Lord the Member for Horsham (Earl Winterton) for taking the initiative in putting this Motion on the Order Paper. I am certainly not one of those who think that the war is all over bar the shouting, but none the less it is not too early to start our Debates on the topics covered by the Motion. I think we are also very grateful—I am, at any rate—to my right hon. Friend the Chancellor of the Exchequer for his speech yesterday. I thought it was an admirable statement, and I am exceedingly glad that he had the opportunity to make such a statement. But I would like to add—and I am sure my right hon. Friend will not take it amiss—that his speech represented "the last word" in the type of speech which I would describe as a Second Reading Debate speech. We have got, after this Debate, to get on to the next stage, and what we have to consider is how we can get down to the consideration of the problems in more concrete form and get much closer to grips with the actual tasks that have to be carried out. It is indeed a very serious matter for the consideration of hon. Members and of the Government how we are to continue the realistic discussion of these wide economic problems. I venture to recall to the attention of the House a passage from an earlier address by my right hon. Friend the Prime Minister on this very matter—the Romanes lecture at Oxford in 1930—which I have quoted before in the House, but which I think bears repetition. My right hon. Friend said: It must be observed that economic problems, unlike political issues, cannot be solved by any expression, however vehement, of the national will, but only by taking the right action. Yon cannot cure cancer by a majority. What is wanted is a remedy. He went on to say: It would seem, therefore, that if new light is to be thrown on this grave and clamant problem— he was talking about the economic crisis at that time— it must, in the first instance, receive examination through a non-political body free altogether from party exigencies and composed of persons possessing special qualifications in economic matters. Parliament, therefore, would be well advised to create such a body subordinate to itself and assist its deliberations to the utmost. I do not know exactly how effect can be given to that general idea, but before I close my remarks, I shall venture to make a suggestion. The question of machinery, of how we are to consider these matters, is of very great importance.

There is one feature in this Debate which has certainly given me satisfaction. In one of the leading Sunday journals this week, I read an appreciation of the position in Parliament which said that a division was growing up in the House with reference to the Beveridge scheme and other generous social policies between the Mr. Cans and the Mr. Can'ts. I had intended to say I range myself unhesitatingly on the side of the Mr. Cans; but such a declaration of faith is hardly necessary, since I do not think any hon, Member who has spoken in the Debate so far has taken up the position of Mr. Can't. I think the general tone of the Debate has been, as I think it is right it should have been, that what we have to do is not to consider whether we are to have generous social policies, but by what means we are to make it possible for us to give effect to these ideas.

I will pass from these general observations to the main topic of the Motion. As the hon. Member for Chesterfield (Mr. Benson) said, it is impossible to cover the whole subject in a single speech. I must leave out much that I should like to say. I do not, for example, intend to follow up what my right hon. Friend the Member for South-West Bethnal Green (Sir Percy Harris) said in his challenge to the banking system. All I will say is that it is my humble belief that if the matter is inquired into it will be found that, in the relations between the Treasury and the Bank of England and through the Bank of England with the big banks, the Government have been able to devise in this imperfect world about as perfect a system for working this part of our financial machinery as could be found—a system in fact by which the Government make the best of both worlds, since they can get their own policy carried out whenever they want to, while, if they want to put the responsibility on to somebody else, they are perfectly free to do so. I do not want to talk about monetary policy, except to utter one word of warning. My right hon. Friend the Chancellor of the Exchequer, in a recent speech prior to this Debate, used an expression to the effect that we have kept away the disease of inflation. I would like to put it to my right hon. Friend in another way. He has been able to suppress the symptoms of the disease but he has, in the present situation, all the make-up for a very dangerous inflationary movement unless the Government are very wise after the war. I think that what my right hon. Friend said yesterday showed that he appreciates that danger.

But, in spite of dangers and great difficulties ahead, I feel that we can face the future with courage, and I would like to quote the well-known remark of Adam Smith when, in answer to a gloomy friend in the City, who foresaw national ruin, as men in the City very often have done during the last 150 years, he said, "Sir, there is an awful lot of ruin in a nation." That is right, provided it is one nation, and not two nations, as Disraeli saw them, or not a nation, as my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) said yesterday, in which there are two halves, one rich and one poor. It must be a united nation and it must be a nation which is working hard.

The keynote of all that I want to say to-day is that really we have two main tasks. The first is to make the people of this country understand the truth about the economic situation and convince them that everything depends on achieving the right kind of production, and the second is to make it clear to them beyond a shadow of doubt that the total product of the country's labour will be divided fairly and in the national interest. Looking back to the past, I think one may have reason for optimism. If any prophet in 1913 had ventured to prophesy what the state of this country would be 20 years hence, he would have been told that we could not survive it. Just take a few of the things which he would have had to forecast—the National Debt rising from £700,000,000 to £8,000,000,000, and the service on that debt increasing from £24,500,000 to a peak of £378,000,000; our expenditure on social services going up from about £62,000,000 to something like £500,000,000; our export trade being reduced in total from about one-third of the net industrial output to something not much more than one-seventh; our cotton piece-good exports reduced from over 7,000,000,000 yards to 3,000,000,000 yards; our coal exports from 73,000,000 tons to 39,000,000 tons, and so on. If anyone had painted that picture to the public, I have no doubt we should all have said, "We cannot survive it." And yet, 20 years later, what did we find? The national credit of the country higher than ever before and, according to all the standards—health, housing, food consumption, small savers' investments, expenditure on amenities and amusements—the nation was far more prosperous than 20 years before, and the process was going on.

But there were two great blots: first, the misery of mass unemployment, and secondly, the friction and disequilibrium in international trade that had the effect of preventing all countries from realising the full benefit of the technical advances in production that had been achieved and also undoubtedly was one of the contributory causes that led to the present war. We have much to learn from the past in encouragement, but also much to learn in warnings. We were very lucky in some ways in those years between the wars in the relatively high prices we were able to obtain for our exports compared with the very cheap prices at which we were able to buy imports, and whether we were wise in letting that relative price level remain, in the interests of the world, is a question that deserves consideration. But the two lessons which we must chiefly learn are the value of international co-operation and the absolute necessity for taking measures to prevent mass unemployment. It is quite clear, in general terms, what we need. We need maximum production of the right kind. That means producing the kind of goods that we want for ourselves, and that we can sell abroad, and—this is of vital importance—keeping the right balance between goods produced for consumption and capital goods for investment. We need to achieve that measure of production, and for that it is also quite clear what are the main requisites—good work by the rank and file, good management, true co-operation between management and workers based on a fair share of the product to the workers; full use of scientific research; wise directive control from the Government; and lastly, international co-operation.

The Motion concerns itself chiefly with things which the Government should do, and therefore, in what I have to say I propose to concentrate on that, much as I should like to talk of some of the other things. I would say that the main tasks of the Government are to exercise regulative control so as to avoid mass unemployment, to see that the country takes its place in international economic co-operation, and to handle what I would describe as the strategy of international trade. I want to know that the Government appreciate those main tasks. As regards mass unemployment, we have had a good deal of discussion about that, and several hon. Members have referred to what I regard as a very excellent study on the subject which was recently published in a pamphlet issued by Lever Bros. I think we ought to welcome that warmly as a serious and most valuable attempt to get to close grips with the actual problem Most of what has been said in this Debate and the general approach in that pamphlet has dealt with mass unemployment created by cyclical trade fluctuations. But that is only one of the causes. If the Government concentrate on that alone, I think they will be missing some of the main things that have to be attended to.

In the years between the two wars, of course this country and other countries experienced the booms and slumps of trade cycles, but underneath all that there were two other very important factors. There were, first, the terrific dislocations caused by the war to the British industries chiefly dependent on export trade. No treatment of the kind advocated for cyclical trade fluctuations, which I might describe as medical treatment, will cure the evil from which this country mainly suffered between the two wars—the complete loss of some of our main export markets. That required surgical handling. If hon. Members look back over the figures of employment—and they deserve serious study—they will find that if one takes coalmining, textiles, general engineering and shipbuilding, between the years 1923 and 1934—taking the last year before rearmament came into effect—something like 1,200,000 men were deprived of their expectation of employment in those industries and had either to hang about as unemployed or find employment elsewhere. That was a terrific factor in our situation. We may have dislocations of that kind to deal with after this war, and although they will be of a different nature, we must be prepared to deal with them.

Another very important thing to be taken into account is that it so happened that the beginning of the last war coincided with a period which I might describe as a change in the economic life of the world. The easy period of expansive development, based on the growth of the population in industrial countries and territorial expansion, had come to an end, and we had reached a period when, if we were to go on progressing in production for human needs, we had to turn over to the more difficult task of what might be described as intensive development. I would commend to the attention of the House a very interesting article on that subject which appeared in "The Times" on 27th November, 1942, by Sir Harold Hartley and also to the League of Nations publications to which he makes reference, particularly the Report on the Problem of Raw Materials published in 1937. I cannot cover that subject fully now, but I do want to emphasise that we must not be satisfied only with considering measures for dealing with cyclical trade fluctuations. We have to think much more deeply than that. If I might take a medical analogy, I would say that if we think only of cyclical trade fluctuations, it would be rather like dealing with a patient who suffers from rheumatic affections and treating him for the effects of these and forgetting that at the same time the poor fellow has a broken leg and is also undergoing one of the major changes of life which is seriously affecting his general constitution. These last two factors have to be taken into account. I should like to know from the Government that they have these two things in mind.

Now I want to turn to another point closely connected with what I have been saying. We have heard in many recent Debates what I imagine to be really the common view of the House now, which is that financial considerations must take a second place and that we must look rather for a broad economic policy; that a narrow annual budget outlook and the argument of the "empty till" are all out of date. Lord Keynes has written of the "humbug of finance." I accept the implications of these phrases; but they must not be swallowed blindly. The right hon. Gentleman the Member for South-West Bethnal Green (Sir P. Harris) quoted with approval the doctrine that finance is now a servant. That is right too, but it has also been well said that if finance is a servant, we have to see that we treat that servant properly. There are in fact some fundamental truths underlying the old rules of thumb about "making both ends meet," and we must not forget them. What I am leading up to is this: If we are going to forsake the narrow path of financial orthodoxy or the tenets of Gladstonian finance, and range at will over the wide spaces of "economic" policy, it is of the most vital importance that we should have good guides to lead us, and that those guides should either have a reliable map of the economic territory or at least a knowledge of its landmarks, skill to recognise its dangerous bogs and courage to call a halt and keep the nation out of them. There are indeed many temptations and dangers if you depart from that narrow way. Therefore I was particularly glad to hear what my right hon. Friend said about the Government's statistical records. Many of us have pleaded often in the past for a fuller and more enlightening statistical recording system. I need not, in view of the Chancellor's pledge, repeat that plea. But there are two things to add. First, we need not only good statistical records but interpretation of those records—the development of a technique which will make the public understand the truth that underlies them. Secondly, it is not enough only for us to improve our British system. I want to have some uniform system devised which can be adopted by other countries, so that all countries may keep their statistical records on the same basis. That would open the way to a great increase in the value of all the excellent work that has been done by the League of Nations and the Bank for International Settlements in compiling pictures of the economic structure of the world. I do hope, therefore, that the Government will take that up.

But all these things will take some time to develop and I want to urge something more concrete and immediate. There is enough material available, both in our own records, and especially in the United States, where they have recently devoted a great deal of attention to getting together full data on their economic structure, and also in the reports compiled by the League of Nations, to make it possible to prepare a fairly reliable picture of the world's economic structure. I want to urge then as a preliminary to settling both national and international economic policy that the Government should now arrange for the preparation and publication of a factual, study of the British economic structure and of the significance of its various parts. That will have to cover not only our internal system, but the ramifications of our connections with the rest of the world. It must be a strictly objective study, but it must be complete, showing the various parts in their right proportion, so that you can look at the picture and say, "If we want this, we cannot have that," or "It will have that effect." To have a complete picture is all-important since the controversies that arise on economic subjects either within a country and between one country and another, arise largely because particular groups of people see only one part of the picture. I am convinced that, if the public in each country were to see the picture as a whole, we should have a much better chance not only of agreement on our economic policy at home but also of international economic co-operation. I fully recognise that to prepare such a report is an extremely difficult task. The difficulty of selection, cutting out baffling detail and yet showing the true picture can only be overcome by a man of real genius. I want therefore to suggest to the Government that they should appoint Lord Keynes as a rapporteur to the nation or to Parliament on the economic structure of the country.

I want to impress the House with the need for having the picture put before us clearly. We are all so woolly about these things when we discuss them. Let me give two illustrations. How many members who speak as experts, and talk of the importance of our export trade, could say what proportion of our net industrial output is represented by our exports?