§ What shall we do with it? Let us, first of all, by way of preliminary digression, address ourselves to the burning question of whether national prosperity can be restored or enhanced by the Government borrowing money and spending it on making more work. The orthodox Treasury view, and after all British finance has long been regarded as a model to many countries, is that when the Government borrow in the money market it becomes a new competitor with industry and engrosses to itself resources which would otherwise have been employed by private enterprise, and in the process it raises the rent of money to all who have need of it. This orthodox view holds, therefore, that a special, even perhaps a double, responsibility rests upon the State when it decides to enter the money market as a rival to the ordinary life and trade of the country. The onus is laid upon the Government to prove either that the need is paramount as in the case of national safety being in danger; or that the work is necessary, and would not be otherwise undertaken; or that the spending of the money by the Government would produce more beneficial results than if it had been left available for trade and industry. No absolute rule can be laid down, but each case must be judged upon its merits and in the prevailing circumstances. We ourselves have certainly not followed any absolute rule. On the contrary, in our desire to induce a speedier return to prosperity and to diminish unemployment we have, during the last five years, ventured upon very heavy capital outlay. We have set on foot and carried into effect of far-reaching and carefully considered programmes of housing, roads, telephones and agricultural development. The expenditure provided for these purposes, either from revenue or from loans raised on Government credit during the past four years, amounts in round figures 54 to £260,000,000. In addition, we have implemented guarantees under the Trade Facilities Act and provided new guarantees for colonial development schemes for a further £40,000,000. We have already carried through a scheme for the re-organisation of electricity supplies at an estimated cost of £40,000,000 or £50,000,000.
§ 5.0 p.m.
§ The total development expenditure of the present Government during their period of office already exceeds £300,000,000, and there is a further £50,000,000 of commitments in sight. These figures do not include the expenditure, principally on housing and roads, undertaken by the local authorities on the basis of Government grants, which probably fall little short of another £100,000,000. It seems only a very little while ago that we were actually being scolded and criticised from both sides of the House for an extravagant use of cash and credit upon schemes like beet sugar, trade facilities and subsidies in any form. Nevertheless we have pursued the even tenor of our way, and during the course of the present Parliament we have spent, or caused to be spent, or undertaken to spend in cash or credit, over £400,000,000. I believe this great sum has on the whole not been unwisely invested and that much of it will return to us after many days and that we have a better island to live in than we had before. The point I am coming to is that for the purpose of curing unemployment the results have certainly been disappointing. They are, in fact, so meagre as to lend considerable colour to the orthodox Treasury doctrine which has steadfastly held that, whatever might be the political or social advantages, very little additional employment and no permanent additional employment can in fact and as a general rule be created by State borrowing and State expenditure. I am not trying to draw too rigid a line and our own practice does not entitle me to do so, for we have drawn very largely on capital account. I can express my own personal view best of all by a simple illustration which is familiar to all our minds, that of the Boat Race, where the full life-energy and power of the crews must be exerted. There is always an opportunity to the one side or the other to make a spurt, and, if the 55 spurt is judiciously timed and wisely used, it may bring a definite advantage. It may gain a favourable position upon the river, it may possibly even secure a victory. But a spurt is only a draft in an intense form upon the total life-energy of the crew; it exhausts them to a formidable degree; and, if it fails, they are worse off than if they had simply rowed steadily on. Moreover, the race in which we are rowing is not one which has any definite ending. It goes on and on, for reach after reach, and no one can tell at what point any definite advantage can be registered. Certainly, in these conditions, the greatest possible care and deliberation should be used before ordering a spurt from a crew so hard pressed, and nothing would be more foolish, more wrong, more wanton, than for a stroke to make an exhausting spurt, not on any sound calculation of winning the race, but just for the purpose of giving the crowd on Barnes Bridge, under which he was about to pass, something to shout at. I think that all of us will be agreed upon that, or very nearly all of us.
That brings me back, oddly enough, to the proposal of the right hon. Gentleman the Member for Carnarvon Boroughs to spend £200,000,000 mainly on road construction, in addition to the already heavy programme of road and other developments which, of course, is going forward and increasing year by year. The plan of forcing road construction to such an extravagant pitch in a country which already has the best roads in the world, and which is already spending more on its roads than any country in Europe, would, I am sure, not only be of no real or lasting advantage as a remedy for unemployment, but would be positively and gravely injurious to the national welfare. This opinion does not rest only on argument or on belief. Curiously enough, as has lately been pointed out, an almost similar mistake was made 80 or 90 years ago in the frenzied enthusiasm with which the railways were promoted. In the railway construction boom round about 1845, great loans were raised for the rapid building of railways, and armies of men were employed in their construction. The demand for steel rails and rolling stock promised a most vigorous stimulus to other trades; hope and courage were high. But what happened? According to Cunningham's
"Growth of English Industry and Commerce," a standard authority, speedy trade depression and financial crisis ensued, from which it took the country several years to recover. Cunningham says, in Volume II, page 828:
The period of commercial depression was chiefly due to the vigour with which railway enterprise was taken up, and the fact that the ordinary course of commercial transactions was dislocated. In the autumn of 1845, 2,069 miles of railway were opened, with a capital of £64,000,000 odd, while 3,543 miles of railway were in progress, involving capital amounting to £74,500,000. Of course, there was no immediate return on this large amount of capital; it was for the time absolutely sunk; the investment of so much money in forms not immediately productive had the result of injuring many branches of industries and depressing commerce. In so far as the wealth devoted to railway enterprise was withdrawn from circulation in the form of wares, the effects were for the time being disastrous. The proprietors had less means available to purchase goods. Capitalists found their sales diminished; they were unable to replace their stock of materials or to continue to pay wages, until their stores of finished goods were realised; and a general stagnation resulted.
Of course, in the long run, the new railways were the foundation of a new era of prosperity, but that prosperity would have come just as surely, and probably more quickly, if we had maintained a steady methodical progress, and if, let me observe—and this is a point to be noted—the vast canal system, embodying the labours of half a century, had not been incontinently scrapped and sacrificed and ruined for the sake of overdoing a new idea. We ought, I think, to try to learn from the teachings of experience; we ought not, for the sake of a frantic development of roads, to disturb and dislocate the normal productive life of the nation, or strike a precipitate State-subsidised blow at our superb system of railways, in which more than £1,200,000,000 of capital has been sunk, and by which more than 600,000 men get their daily bread.