Finance & Industry: Our educated politicians

In an interview published in the Observer (8.1.61) the banker Lord Brand, asked if he thought that academic economists do more good than harm, replied that they are extremely valuable. He claimed that through the studies of Keynes and other economists knowledge has grown and this “has altered the whole picture of economic life”. Possibly because Lord Brand would hesitate to claim that economic life has altered particularly (“I do not think we have an easy time ahead of us in the next year or so”) he went on to blame the politicians for not accepting the good advice of the economists.

He recalled the reparations chaos after the first world war, when the politicians (backed however by 3 out of their 7 banking economic advisers) insisted on exacting impossible reparations from Germany. Lord Brand says: “It was clearly mad at the time to those who would, and could, see, and were prepared to act accordingly. But the people who had control of policy could not see”.

He singles out Lloyd George—”Like most statesmen of the day, he knew little or nothing of finance”—yet Lloyd George had been Chancellor of the Exchequer. But it appears, according to Lord Brand, that Lloyd George insisted on the mad policy because he had boasted of squeezing Germany “till the pip squeaked” and dared not back down for fear of losing political support among voters as blind as he was.

But in the second world war the statesmen appear not to have changed much. Lord Brand tells how Churchill and Roosevelt, on the advice of Morganthau, Secretary of the U.S. Treasury and with the agreement of Lord Cherwell (a “highly intelligent” man) adopted a plan to reduce Germany to a purely agricultural country. Lord Cherwell’s defence of his action was that the British Government wanted a loan from America and acceptance of this fantastic plan would make it easier to get the loan.

Capitalism 1961
Lord Brand’s complacency about the altered picture of economic life reads oddly in face of the motor car slump and the looming difficulties facing international trade and currencies. The years between the wars were spent creating currency collapse in one country after another and then laboriously re-establishing stable currencies. After World War II it was all supposed to be different but now Professor Meade is warning of the drastic remedies that he thinks may be necessary because of America’s loss of gold, so he proposes that the dollar and the pound should be cut adrift from their existing link with gold.

The Guardian in an editorial (3.1.61) remarks “Undoubtedly a period of chaos would follow. Professor Meade feels sure that stability would return at a new level of exchange rates within six months. Perhaps so; but in the process the structure of the International Monetary Fund, one of the greatest achievements of international collaboration in our generation would have been laid in ruins “.

One prospect seen by the Guardian is that “soon the Russian rouble might be the only major currency with a fixed gold parity “.

This seems ironical to the Guardian but only because they persist against all evidence in believing that Russia is not a great capitalist power, but something else.

Flood Havoc in China
Through floods and storms China is threatened with what may be a catastrophic fall of food supplies. In a Socialist world such an event would be met by movement of supplies from elsewhere. But under capitalism a different set of values rules. America, Canada and other countries have masses of food they cannot sell profitably. The Times (20.12.60) reported that in the four chief exporting countries America, Canada, Argentina and Australia, “the end-of-season carry-over on July 31 next are expected to reach the unprecedented total of 60,400,000 tons, a rise of 7,500,000 tons on the year”.

So what problem can there be? But capitalist trade and rivalries create problems. The American government when it wanted to give wheat away or sell it cheaply met opposition from the other exporting countries, who feared this would reduce world prices and cut into their own sales. Secondly there are those who on political grounds would object to help being given to China, and according to Mr. Cyril Osborne, M.P., who was recently in Peking, there are politicians in that country who reply that the Chinese people “would rather starve than eat American food or accept American charity”. (Daily Telegraph, 3.1.61). (The starving might give a different answer).

According to Reynolds News (1.1.61) projected Canadian sales of their surplus to China are likely to meet with objections from the American government.

In the meantime the American food stocks are being nibbled at by the recently increased numbers of unemployed :

“In September 3,200,000 Americans were given food from the surplus supplies held by the government”. (Guardian 2.1.61).

Speculating in Misery
Under the heading “It’s an ill Wind” the Financial Times (9.1.61) had the following:

“Americans, by their law, may not trade with Communist China. But no law stops them speculating on the effects of China’s misfortunes, and for the past week they have been rushing to do just that. Scene of their operations is the Chicago soybean (spelt this way in America) market, biggest commodity futures market in the world.
The present bout of speculation in soyabeans and their products began three months ago, as reports of crop disaster began to seep through from China, only big soya-bean producer apart from America itself. People in the trade saw then that if the usual Chinese exports did not reach Europe, American beans and oil would have to go instead. So they put their money on a rise in the market.”