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Cooking the Books: Back to the 1930s?

During the spat last December between Britain and France about which government most deserved to lose its triple-A credit rating (It was the French rating that was eventually lost.) Christine Lagarde, the head of the IMF, urged Europe’s leaders to solve the Eurozone crisis, commenting: “If that doesn’t happen the risk is that of retraction, rising protectionism, isolation. This is exactly what happened in the Thirties and what followed was not something we are all looking forward to (Times, 16 December).

Writing later in the Times (27 December) Stephan King, the HSBC’s group chief economists made a similar point: “The global economy has plenty of faults but increased isolationism will only make things worse. We don’t want to sleepwalk back to the 1930s.”

So, what did happen in the 1930s? Here are some quotes from “Background of the War 1939-1945”, a chapter taken from our 1950 pamphlet, The Socialist Party and War.

The Times (22 January 1936) reported on a speech to the Japanese parliament by the Foreign Minister Hirota: “After referring to restrictive measures of various kinds on world trade, Mr. Hirota continued :– ‘To a modern nation, particularly such as our own, with a vast population but meagre natural resources, the assurance of a source of raw materials and of a market for finished products is a condition of prime necessity to its economic existence.’”

The Economist (5 November 1938), in an article entitled “Germany’s Trade Offensive”, wrote: “The probability must, therefore, be faced that Germany’s efforts to expand her trade will affect British trade more in the future than in the past … Britain’s need of imports is greater than that of any other first-class Power, and our earnings are already barely enough to pay for our imports. Any substantial encroachment on our markets would directly limit our access to the raw materials and foodstuffs we need.”

The Economist was objecting to Germany’s policy of export subsidies, dumping, currency controls and bulk buying and commended the British government’s retaliation of buying up the whole Rumanian wheat crop. To which a German economic periodical Wirtschaftsring replied by accusing Britain of “attempting to throttle Germany’s trade with Eastern Europe and of encircling her in economic fields” (Daily Telegraph, 13 September 1938).

In a speech in Warsaw on 21 March 1939 Robert Hudson, Britain’s Secretary of Overseas Trade, declared:
“We are not going to give up any markets to anyone … Great Britain is strong enough to fight for markets abroad. Britain is definitely going to take a greater interest in Eastern Europe” (News Chronicle March 1939).

When in September of that year Germany invaded Poland, so expanding its control in Eastern Europe, Britain together with France declared war on Germany and the second world war in a generation was on.

We don’t suppose that another world war starting in Europe is what Lagarde had in mind; more probably she was thinking of a break-up of the EU and a return to national protectionist measures. We are now four years into a depression which some are speculating could last for another ten. If that happens we could well see movements supporting nationalist, isolationist and protectionist measures move out from the margins and into the mainstream, as in the 1930s. Hopefully – and alternatively – it would lead to a growth of a movement for a world community without frontiers based on the world’s resources being the common heritage of all.