We expect to have these interruptions from hon. Members opposite when they have things thrown at them which are unpalatable, and, no doubt, as the evening goes on, we shall get more of them.
I want to look at this whole problem. We are confronted with the question of the balance of payments, and with the fact that this year we are faced with an export deficiency which the Government are finding it difficult to bridge. At a later stage, I want to come to the question of how the Government are going to bridge this gap. We have been told that the deficiency at the present time is due to the policy of Socialism. I remember, back in 1932, the then Conservative Chancellor of the Exchequer trying to justify the tariff policy of the late Mr. Neville Chamberlain by suggesting that we had to have tariffs in order to balance our payments, because we were in a bad position in those days. I suggest to this House that ever since 1913 we have been in a bad position in regard to the balance of payments, and that it is a long-standing problem which has confronted this country for 25 years, and which the Tory Governments in the past would never face. Their policy of tariffs and Imperial Preference provided no lasting solution to the problem.
Prior to 1913, this country was able to buy whatever it wanted with its exports and its other services, without relying in any way on the interest from its overseas investments. At that time, our overseas investments were always reinvested, and led to more exports. The first world war made it necessary to sell a portion of our overseas investments. I would like to remind the House, in view of what my right hon. Friend the Prime Minister said this afternoon, that we recovered from that position within five years of the 1914–18 war. We had as many overseas investments in 1927 as in 1914. We recovered from that position, but at no time from 1920 to 1939 was this country able to pay for its imports with its exports and services. Each year, we had to draw on the interest from our overseas investments. The House should be reminded, because it seems to be important, that for three years before the 1939 war we had an adverse balance of payments which would have required about a 20 per cent. increase in exports to put it right. We are told by the hon. Member for Oxford that this adverse balance of payments is due to the policy of Socialism. No doubt the hon. Gentleman was referring to the Socialism of the late Mr. Neville Chamberlain and of the Tory Government in the years 1937, 1938 and 1939. Why is it that we had a deficiency in our balance of payments in those years, even taking into account the whole of the interest on our overseas investments? I am afraid the suggestion of the hon. Member for Oxford is just a little too shoddy.
This is where I wish to say a few words of criticism of the Government. The problem with which we are confronted today would have had to be faced by any Government. We are not in this crisis because of the war, although the Bill with which we shall have to deal in the next few days says that we are. The war merely accentuated the situation. If there had been no war, we would have had a crisis of this kind, though of not such a large dimension. [Interruption.] The hon. Member for Oxford laughs, and one expects him to laugh when he hears a few reasonable arguments with respect to this problem. I wish to detain the House for a few moments to deal with the points which have been put before us by the Prime Minister, and I wish to say how completely disappointed I am with the way in which he has faced the problems, as indeed a lot of us on this side of the House are disappointed. The magnitude of the problem does not appear to be recognised. We are not concerned so much with short-term remedies, necessary though they are—and I appreciate the difficulties of the Chancellor—but we are greatly concerned to see that a long-term policy is formulated based on what is a correct diagnosis of the position. We must get our foundation right. If we felt that the long-term policy was right, we would put up with any sacrifices of a short-term nature.
So much of the discussion has proceeded on the basis that our balance of payments is out of equilibrium. We are told by the Prime Minister that we are going to try to balance the position between the Old and the New World. That is something which we will never see happen. The world has changed. I wish to direct the attention of the President of the Board of Trade to this problem, in the hope that he will deal with it when he replies. The whole argument which has been put forward in the last two years has been on the basis of multilateral trade, of increasing international trade and getting rid of trade barriers, with all of which we agree in the main. But if one takes one's mind back to the time of the American Loan, one remembers the speech which the late Lord Keynes made in another place when he argued the whole position and said that our policy was one of getting back to multilateral trade. I will not weary the House by quoting the speech, but I would like to refer to two points in it. He said in that speech, and later in an article in an economic journal:
Putting one thing together with another, and after pondering all these figures, may not one feel himself justified in concluding that the chances of the dollar becoming dangerously scarce in the course of the next five to ten years are not very high? I found some American authorities thinking it at least as likely that America will lose gold in the early future as that she will gain a significant quantity. Indeed, the contrary view is so widely held, on the basis (I believe) of mere impression, that it would be a surprising thing if it turns out right.
Perhaps one may be left for the moment to form his own judgment, in the light of the above, of the most probable order of magnitude of the American favourable balance of visible trade in the post-war environment. An average of $2 to $3 billion a year over a period of years beginning in 1947 looks to me fully high on the basis of present expectation.
Who will argue now we are not short of
dollars? And he said that if we assessed the export surplus of America on an average of two or three billion dollars, we would be putting it high—he said "fully high"—on the basis of present expectations. Yet it is obvious that we are going to face an export surplus this year, not of two billion dollars but 12 billion dollars.
For two years, with obvious sincerity and an enormous amount of energy the President of the Board of Trade has made an attempt to get back to the field of international trade as we knew it in the old days, on the grounds that we are a country whose life blood depends on international trade. If that is so, our life is ebbing slowly to its close. We are living in an entirely changed world. Though international trade has been increasing over the last 30 years, international trade in manfactures, which is what this country is interested in, has been going down. We are confronted today with the request to increase exports by 160 per cent. in the last six months of next year, on the basis of 1938 exports. But of our exports in 1938, 25 per cent. were in certain raw materials, coal and other things of that sort, which, I think, it is common opinion to say, we shall not be able to export this year or next. Therefore, we are going to rely entirely on exports of manufactures, which means that the target of 160 is an export target of 200 per cent. of 1938 in manufactures.
I do ask the Government to think of this thing, and to realise that that is completely impossible. It is impossible for two reasons, if only for two The first is that the production of manufactures over the world in the last 30 years has gone up 100 per cent.—it has doubled, roughly—but trade in manufactures in the last 30 years has not gone up at all, and, in point of fact, it has gone down and in the last six or seven years, in the main industrial countries of the world, of which this is one, it has gone down 20 per cent. since 1913. If that is the trend, surely we have got to realise that, because of tariffs, because of the industrialisation in other countries, and the increased production of manufacturing industries in different parts of the world, the mutual advantage which comes from international trade in manufactures becomes smaller.
So we have the position today that while trade in raw materials and in food is going up—and we see that all the time: the production of food and raw materials in the last 30 years has probably gone up about 50 per cent. although the trade in them has gone up by 25 per cent.—in manufactures, on which we depend for an increase in our exports, there has been a trend, towards a reduction, since 1913, particularly since 1930. It is a trend which the Tory Government in 1929 and 1931 tried to put right by tariffs and other things—by the Ottawa Agreement, and other things of that kind—but they did not right it. I am not raising this in any party sense at the moment. I am trying to get down to the fundamental economic problem, which is this. We are faced today by the fact that the development of the 20th century is very different from that of the latter part of the 19th century, that international trade is not today as it was in the 19th century, when we were the workshop of the world. By the end of that century we could afford to buy a lot of imports, process them, and export them; but we are confronted today with the fact that the quantity of the things we ourselves import and export as manufactures will not ever even get back to the level of 1929. I doubt really if world trade in manufactures will get back to the 1929 level—so where is our increase? The whole tendency in world trade of manufactures is downward.
If this is so—and I ask the Government to take up this argument—but if that is so, we are facing a problem which is a very different one from that raised by the hon. Member for Oxford, which was the problem of Socialism. It is not that at all. We are producing today only a tenth of the world's manufactures as against three-tenths at the end of the last century, and we are exporting today only one fifth of the world's manufactures as against two fifths at the end of the last century. We are in an entirely different position, largely because of the rise of America.
I do not want to weary the House with details of the enormous extent to which American production has increased. I get very weary of hearing hon. Members talking of soft and hard currency areas. There would be no problem of that kind if America put into the world sufficient dollars. We were never a big exporter to America. We never sent more than 6 per cent. of our production to the United States. But when I hear the right hon. Gentleman the Member for West Bristol say we must be independent of America, I wonder what he looks at and thinks of. Does he not realise that our exports have for the last 20 years always gone exactly the same way as the national income of the United States? Not because we are big exporters to America, but because we sell goods to countries which have already sold goods to the United States and got dollars in that way. Until those dollars are made available in different parts of the world we are not going to get back to the position we were in before the war. Hon. Gentlemen opposite shake their heads, but surely these are the facts? Surely the United States bought rubber and other goods from Malaya and we were able to export to Malaya and get dollars in return? We have never relied on exports to America to buy raw materials elsewhere The convertibility we are worrying about is only a problem because other countries of the world are short of dollars. This is not, as the Prime Minister tried to suggest this afternoon, due to the war, because the countries who are short of dollars and who are controlling their dollars today are countries like the Argentine, Mexico, Canada and Sweden, to mention only a few on the list who have dealt with this problem recently.
In this fifth decade of the twentieth century we are in a position in which American production, trade and investment is so great that her export surplus today is the best part of 12 billion dollars: Her export surplus is twice her total exports in 1938; her production today is four times what it was in 1938. It is ludicrous to talk of multilateral trade. Russia plays no part in world trade; America dominates three-quarters of world trade, and there are left only a number of small nations who can never stand up to that unless we have Lend Lease, and "that sort of thing again. During the five war years 30 billion dollars were given away to the world, and, therefore, things went on. I put it to the House that since 1929, the year of a great economic crisis, no country in the world, except Germany, has ever recovered from that crisis; no country ever got back to its production or trade in volume or value, apart from Germany, except during the war period.