My hon. Friend says "Nonsense." He often says that, but usually, six months later, he comes to the truth.
The lesson, I repeat, is that by trying to do too much we disrupted our economy and we also dislocated our own defence programme. It is not only a problem for this nation; it is a problem for the whole free world. Today we have an intensification of the unbalance between the United States and Europe. An underlying chronic crisis was made a desperate crisis as a result of Atlantic rearmament. What is the good of the Foreign Secretary going to Lisbon and making his glorious, optimistic speeches about everything being fine when, a week later, France is without a Government, and the talk of the French Government having £1,400 million to spend on defence is just "my eye"?
We have to face the facts. Without international control of raw materials, the biggest and the wealthiest Power will draw the raw materials to it and will pay the prices which no one else can afford. The rich get richer and the poor get poorer, internationally and inside each community. So we are faced internationally with a world inflation which forces up our import prices and still further unbalances our own economy.
Let us turn to the internal effect of this 12 months of re-armament. I think none of us appreciated, when we did not oppose the £4,700 million defence programme, or when we acquiesced in it, what the effect of injecting so much defence expenditure into a fully employed economy was going to be. I suggest to the Prime Minister that if he had injected a similar programme into the 1938 economy it could have been absorbed very easily indeed, for in 1938 there were two million unemployed and there were raw materials piled up waiting to be used. There was, then, almost no limit to the recuperative effect of re-armament upon our economy.
Unfortunately—if I may say so—we have had six years of a successful Labour Government maintaining full employment. [Laughter.] I repeat that: unfortunately, we have had six years of full employment; so that when we inject defence into the economy it produces maximum dislocation. My own view is that we could have undertaken the programme we set ourselves only if we had been prepared to transform our economy into a full wartime economy, if we had been prepared to accept direction of labour, if we had been prepared to accept direction of capital, if we had been prepared to accept physical control of every raw material, if we had been prepared to re-introduce rationing to ensure fair shares of short consumer goods, and to re-introduce utility; in other words, if we had re-created a complete war economy, then I have no doubt we could have made a good effort internally to absorb the defence programme, even though the raw material crisis might have proved fatal to the effort.
From the internal point of view, we have either to accept a complete war economy or to accept that as long as we do not have a war economy, then the amount of re-armament we shall be able to complete without wrecking ourselves will be far below the minimum demanded by the Chiefs of Staff and by the Americans, who, of course, do not understand the working of a fully-employed economy such as ours, for they have never had one. That is the first lesson—that we must calculate our defence in terms of full employment; and that means much less armaments than most people imagined a year ago.
The second lesson is the only lesson which the Prime Minister bothered to give us this evening. He made it quite clear in his speech that the imminence of war, which was the major premise of our re-armament programme in January, 1951, has receded today, and, therefore, that the whole basis upon which we gave armaments an over-riding priority has been knocked out. We must now re-think our armaments programme, not in terms of an imminent war as the main danger, but in terms of the imminent bankruptcy of the free world, outside the U.S.A., as the immediate danger which we have to face.
The issue today is not whether we should be for or against cuts in the re-armament programme. Everybody has agreed to cuts. They have done so because it was physically impossible to carry out the programme. Six months from now they will be agreeing to cuts all over again, when we have failed to carry out this programme—with disastrous consequences. The issue today is: How much should we cut? The Prime Minister was not very candid about the proposed cuts. The "Economist" was a great deal more candid this week: it pointed out that 35 per cent. of the increased re-armament planned by the Labour Government has been cut back this year and that the re-armament train is now proceeding at 20 miles-an-hour instead of 30 miles-an-hour.
That is an immense cut which proves that the Prime Minister does not regard war as imminent at all. It confirms the fact which has already been shown by the decision to run down stockpiles. We have a Tory Government who reduce the stockpile of timber and reduce the stockpile of food, who run down the re-armament programme by 35 per cent. of the planned increase. That has disproved the major premise on which the whole programme of the Labour Government was based.
We must, therefore, say to ourselves that the issue is not whether we continue the programme of 1951 into 1952. The question is: What re-armament can we afford in 1952 in an entirely new situation created by an economic crisis so severe that the French economy and the French political system of democracy are on the point of collapse, and when hon. and right hon. Gentlemen opposite are spending their time lecturing the country that there will be nothing left in the gold reserve by September and that there will be mass unemployment? Those are not my words; they come from official Government spokesmen.
It was an official Government spokesman who warned us that the flight from the £ has not been halted by the Tories, and that there was still no confidence in the £ and that there are only five months' gold reserve if all this goes on as it is at present. In that situation, in a situation in which an economic crisis hits this country, the House has to decide whether to have over £1,400 million spent on the most inflationary thing we can spend it on—armaments.
I am not saying that we should have no arms. I am asking the House to consider, perfectly objectively, what is the very maximum we can afford without utterly destroying our economy. Again, I should like to quote the "Economist." Goodness knows, it is not what is called a "Bevanite" paper. It had an article this week with a headline with which I say I do not quite agree; it goes too far for me. It runs, "Security Second." Then the "Economist" says:
re-armament must be cut for the sake of exports. There is no choice. A bankrupt Britain cannot be safe or contribute to the safety of others when the need is so pressing. National solvency must rank before military security.
This is a nine months' too late convert—the "Economist"—but the Bevanites will accept him all the same.
I know that we shall have the objection from the other side, "We have made all the cuts. What are you complaining about? We have made a 35 per cent. cut." What I am complaining about is that the cuts are cuts of targets; the cuts are cuts of paper blueprints. But the proposal before us is actually an increase of expenditure over last year—and that after 12 months during which we are on the way to destroying the whole economy through re-armament. In the second year of the defence plan we increase the armaments burden on this country despite the lessons of the first year.
What I want to discuss is whether that is the right thing to do. It is agreed by the Prime Minister that we are in "dire economic peril." We must, therefore, now consider armaments as only one of the priorities. Yes, we must try to get what defence we can, but we must consider defence measured against three other priorities: national solvency, national independence, and the fabric of the Welfare State. I say that all four must be considered together in this debate, and we must ask ourselves how we can balance these four so as to get through this critical year. Therefore, I suggest that the House must address itself, in this debate, to this balance of priorities instead of listening to an exchange of bouquets between those who are responsible for getting us into this position.
We must apply to the re-armament programme the three tests I have mentioned: (1) Is it compatible with national solvency this year? (2) Does it mean undermining the rebuilding of the last six years? (3) Will it threaten our national independence? I want to say a word briefly about each. First, as to solvency. The Prime Minister admitted, in his vague way, "Oh, yes, we have made a bit of a change. We have shifted the balance of raw material supply from armaments to exports." I am glad he agrees with the maxim that it is practically impossible for us to increase arms production this year and to increase exports. Why is it impossible? Because textiles, which it was expected last year would fill the trade gap, have not had much of a market abroad. The engineering industry must be our main exporting industry while, at the same time, it is our main armaments industry.
Hon. Members on the other side challenge this. Let them look at the appalling confusion created in the motor industry by the results of the attempt to inject too much arms into it too quickly. The results are that we are getting fewer arms and no motorcars—or I should say fewer motorcars and no armaments. If he admits that it is not possible to increase both arms and exports, I ask the Prime Minister: "Which does he choose—motorcars or exports?" That is the question. Because if he chooses arms we shall be insolvent. How are we to earn our way in the engineering industry?
"Oh," somebody will say, "I will tell you what. Let us double the size of the industry. Let us double it so that we have enough engineering plant for arms and for exports." That is what the Americans do. They have the two-track way: one armaments track and the other the civil consumption track. But this defence plan does not enable us to have that. It cuts down capital investment and prevents us from increasing the plant.
Let me give the House some figures. In 1951 the United States of America had a capital investment, in machinery and plant alone, of £3,800 million, and we had £300 million. I want to know, if this goes on—as we are now told it is going on for four years—where will our industry be after four years? Capital investment cut to the bone; our actual exports cut down at the precise time when German and Japanese competition is coming.
I am willing to be generous, but we destroyed our economy entirely in the last war, and had to rebuild it from scratch. Are we to rebuild it in the cold war, and, if so, how are we to do it? What will happen when the re-armament programme is over? The factories will be outdated; our markets lost. Shall we take American charity? Is that what the answer is? Is that solvency? If it is not, what is the answer? We are heading straight for national insolvency. Every economist knows it, and part of the reason is the attempt to pile this year an increased burden of arms production on the engineering industry, a burden which it cannot conceivably take without wrecking its export earning capacity.