MONETARY POLICY

HC Deb 10 May 1944 vol 399 cc1969-2046

Question again proposed, That this House considers that the Statement of Principles contained in Cmd. 6519 provides a suitable foundation for further international consultation with a view to improved monetary co-operation after the war.

Mr. Graham White

I was about to observe that whether we are wasting our time to-day in discussing these principles put before us as a basis for consideration, and whether we have, in fact, been wasting the great amount of time we have given to the consideration of post-war plans, really depends solely on whether or not the democracies working together in this war are capable of carrying forward into the peace, making a sustained effort over a considerable period of time, that co-operation which has governed our transactions for the prosecution of the war. The democracies will have failed utterly, and will have lost the war, if they cannot carry forward such a spirit. It is unthinkable that, having established such a remarkable standard of conduct in our international financial relations, we should go back to the miserable and "beggar-my-neighbour" policy of the twenties and thirties. I was much heartened by the speech made during the last few days by the Director of Lend-Lease in America in which he said that, what ever might happen to Lend-Lease itself, the one thing essential was that the spirit of it should go forward into the peace. We are wasting our time if we think we can do anything by discussing these arrangements unless that spirit can come into play.

I am afraid that my observations have rather dealt with matters outside the scheme than with the details of the scheme itself. I think that, on the whole, the details are relatively unimportant at this stage, but that this is the time when Parliament should indicate those matters upon which it has misgivings or doubts and any matters to which it is definitely opposed. I well remember saying in a previous discussion that the scheme which would have the best, or the only, chance of dealing with success with the problem would be the scheme which makes the least demand on the domestic concerns of a member country. These particular principles which we are now considering are infinitely better in that respect than either of the original proposals which we considered some six months ago. There is much greater latitude. We may differ on whether or not they are sufficient in the matter of the arrangement to be made for adjustments of exchange. In the previous arrangements which we have to consider, there was no latitude of that kind.

It has been suggested, in the course of the Debate, that, if we accept principles of this kind and order, we shall be tying ourselves more securely up to gold than we were under the older regime, that it is better to be on the Gold Standard, as we were in 1930, because, at least, we could come off it without any preliminaries at all. I cannot compete with those who take this view. It is useful to consider these schemes, not with a pessimistic outlook, but by concentrating on the methods to be employed. These are matters which we have got to take into account. Naturally, they are matters which we shall want to be assured of with regard to the management of the Fund and with regard to its effect upon those arrangements which have stood the test of time in relation to the sterling area. We may like to think that the scheme will be sufficiently elastic to include some arrangement such as that completed between the Belgian and Dutch Governments, which is not incompatible with the arrangements on the organisation of a fund of this character. Therefore, I commend this Motion, and I have little doubt that it will be adopted. Some of the doubts and fears are expressed in the Amendment before the House. If I understand it rightly, I have little sympathy with the Amendment of the hon. Member for Lowestoft (Mr. Loftus), who seems to think that it is possible, by unilateral or one-sided action, to shelter oneself from adversity arising from action abroad covered by the imposition of duties and tariffs and the like. I should have thought that anybody who studied the history of the last 20 years at least gained this lesson, that prosperity is indivisible; and that no country, by its own arrangements, can contract out of the world disasters which have passed over us.

I am known to be an enemy of slogans, first, because they are a substitute for thought, and, secondly, because the best slogans—the ones which make the greatest appeal to the emotions—make the least contribution to the solution of any practical problem which happens to be in hand. I am bound to confess, however, that there is one slogan that I would like to see the people of this country adopt, "No more Foreign Affairs." There should be no more foreign affairs in the sense that, in future, all our affairs, both political and economic, must, in some sense, be foreign affairs. There are very few transactions, both in the political and economic field, which do not take into account the result on the economy at the world at large. That would be a useful slogan. It would help to inculcate that attitude of mind, which I think is right, that the purpose of this country, and the increasing purpose of the United States of America, is to realise that the days of isolation have gone and that we must co-operate, not merely for our own needs, but for the prosperity of the world. It is because I believe in these principles, whereby the wishes and the wider policies of the countries of the world may be brought into effect, and work more smoothly, that I support the Motion now before the House.

Mr. Hely-Hutchinson (Hastings)

To speak with condensation on this very wide subject is something which almost passes the wit of man. I feel like quoting something which was said by that much-abused individual, who until recently was Governor of the Bank of England, Mr. Montagu Norman, at a public dinner some years ago, when trade balances, barriers to international trade, were under discussion, including tariffs, quotas, subsidies, shipping and navigation laws and the like. Mr. Norman got up and said to his audience: All this is too much for me. I only know that if there is confidence, and, therefore, credit, trade will flow over or under, round or through any barriers that were ever created. Whereupon, when this was cabled over to America, the New York Stock Exchange fell ten points, for the brokers and their clients argued if all this was too much for Montagu Norman, it must be too much for them, and so they sold all their stocks.

I do not regard this plan as a deep laid plot of the Americans to keep up the value of their gold or to unload it on the world. I am a little doubtful in my own mind—and here I am very much surprised to find myself somewhat in agreement with something which the hon. Member for Ipswich (Mr. Stokes) said—of the extent to which discussion on post-war international monetary machinery is necessary at this time. Or, rather, I would put it in a different way. If there is to be a discussion of this problem now, the emphasis should not be so much on the machinery as upon the life and facts of foreign trade. It is more important to decide whether, than how to do things. Once one has made up one's mind to do things, there is little difficulty about machinery. The great difficulty after the war, will be to decide whether and, if so, to whom, money shall be lent—or perhaps even given. That is much more important than deciding how the transaction shall be carried out.

Anybody who considers the problems of international trade, immediately or very soon finds himself wishing that there might be such a thing as an international currency. This problem is brought very forcibly to mind—in miniature, but very forcibly and with great intensity—if one happens to travel about the world in an aeroplane. It has recently been my lot to travel, in a short space of time, 20,000 miles in an aeroplane, and in the course of that time to visit 12 different countries, each owing allegiance to a different sovereignty, with the result that I returned from my journey having in my pockets the "chicken-feed" of no less than 12 different currencies. To keep one's head and one's sense of values in those circumstances, even when engaged in such simple problems as paying for one's board and lodging, needs the mind of a Keynes and the patience of a Job. Therefore it is natural that the first efforts of the experts seemed to be directed towards trying to evolve what is really a philosopher's stone—an international currency and their first productions, with their "bancors" and "unitas," reflected these attempts. Yet on any conceivable definition of national sovereignty, and of currency, an international currency is in itself an impossibility. For a currency can only run as far as the King's Writ runs and therefore an international currency, as long as there are nations, is never going to be any more effective than a League of Nations can be.

The earlier editions of this plan tended to move in the direction of international currency, and I am glad to see that the present plan, at least abandons that. But the new plan has raised something very different. While it does not, absolutely rigidly, link the currencies of the member currencies to gold, it certainly would not be overstating the case to say that the new plan recognises the existence of gold to a much greater extent than either of the original plans. It is to that aspect, and that aspect alone of the new plan, that I would like to direct attention. It might be said that the new plan has regurgitated the Gold Standard; and ever since Lord Keynes was good enough to put the subject of economics within the reach of the public mind, the Gold Standard has been a subject on which all, even the most simple of us, have views. That thoughtful periodical "The Times," in a recent leading article, was chewing the cud on this problem and stated—as I think with some force—that to most minds the Gold Standard was either a bogy or a fetish; and added that there was really no reason why it should be either.

We might direct for a moment a little attention to what lies behind this. It is worth notice that every time yet another country says "Off with its head" to the Gold Standard, up goes the price of gold another notch. That may not be a reason for accepting the Gold Standard but it suggests that however clever and logical we may be about the inherent uselessness of gold—for we cannot eat it nor wear it nor live in it—however clever or logical we may be about it, there, nevertheless, remain numerous people in the world, very simple no doubt, who do like that attractive yellow stuff and are determined to get some of it if they can. That is a political fact which we must recognise; and that is what makes it the easiest medium for settling international balances. While it is true that no currency can cross the border of another country for the settlement of a debt, nevertheless, gold requires no passport in crossing frontiers. It is so popular. It writes its own credentials as it goes, and for various other reasons which are very well known to the House, it is from many points of view the most convenient ultimate method of settling international balances.

But there are two main causes of the gold hunger which are worth looking at. One is something which appeals with far greater force to the subtle minds of the east than it does to our more logical western minds. Under conditions of democracy and equal suffrage, there can be only one direction in which a fiduciary currency can move in the long run, and that is downwards. For equal suffrage always causes taxation to approach its effective limits, and politicians in a democracy must always keep in the background that subtle form of taxation which nobody quite realises is going on, which is a depreciating currency. Gold has been described as a policeman for politicians, and speaking for a moment not as a business man but as a politician, I must say that I object to being brought up short by the constable, just when I am beginning to outrun him.

Another cause of the gold hunger is the practice of central banks—and this practice is really a corollary of Gresham's Law that bad currency drives out good and sends it underground—of hoarding gold and keeping it out of circulation. The whole theory and practice of deposit banking is summed up in the story of the old lady in the financial panic of 1907 in New York who had 100,000 dollars in a bank on which there was a run. She went down to Wall Street and asked to see the president of the bank and when she saw him she said; "Mr. President, I have 100,000 dollars in your bank. If you have the money, you can keep it. But if you haven't got it, I want it right here and now." That is all there is to deposit banking.

What is it that has caused Turkey to use her new-found prosperity of the last few years to accumulate over 150 tons of gold? While the two most powerful nations in international trade—England and America—fix the official price for gold at 168s. in London and what is more or less equivalent, at 34 or 35 dollars in New York, how is it that for a considerable period of time gold has been selling freely on the Bombay market at the equivalent of 328s. an ounce? And it is not merely a black market. We, ourselves, are supplying the gold for that purpose. We are doing it consciously with a view to trying to relieve the pressure of inflation. And so I would like to ask a question with reference to this plan. I see that under Clause IX, paragraph 1, it is laid down that one of the obligations of member countries will be not to buy gold at a price which exceeds the agreed parity of its currency by more than the prescribed margin and not to sell gold at a price which falls below the agreed parity by more than a prescribed margin. Does that mean that we have to give up the delectable practice of buying gold in South Africa at 168s. an ounce and selling a small part of it on the Bombay market at 328s. an ounce? Surely that is one of the plums we might hope to keep for ourselves.

In considering the Gold Standard, we might look back to what was the main influence on the facility of international trade in the golden Victorian age. There was no international currency then but sterling was freely convertible into gold and nobody anywhere in the world doubted the ability or the intention of the Bank of England to implement its promise to give gold instead of sterling. Therefore sterling behaved like a sort of international currency and went across the borders of countries with almost the same freedom as gold enjoys. But to those who regard the Gold Standard as a bogy, I would say there is no fear that we shall ever go back to the Gold Standard, and to those is who regard it as a fetish, I would say that they had better forget about it, because there is no chance that we shall ever go back to it. As it seems to me, about the only country which could go back to the Gold Standard, because it is strong enough both within and without to resist pressure, might be Russia; and we have to be rather careful that we do not suddenly find Russia back on the Gold Standard and trade transactions between Hong Kong and Valparaiso being settled by drafts on Moscow.

But there is one other shortcoming of the plan to which I would like to draw attention and, in connection therewith, to make an unorthodox suggestion. I do not know what will happen to me in the City when I show my face there tomorrow, after making an unorthodox suggestion in public. This plan makes no mention of any substance other than gold. Whether a central bank is, technically, privately-owned, or whether it is owned by the Government of the country which it serves, there is no doubt that the reserve of a central bank does, in fact, constitute a national reserve. And it is a national reserve not only for banking purposes but also against war. That is one of the reasons why countries like to store up a certain amount of that acceptable metal gold, because it is useful in case of emergency. In America at the present moment, there is something of the order of 500,000,000 ounces of gold, worth at the official price something like £4,000,000,000. One per cent. of those 500,000,000 ounces, that is to say 5,000,000 ounces, has about the same value as 700,000 tons of copper. Suppose America was suddenly confronted with war. Would she rather have 5,000,000 ounces of gold or 700,000 tons of copper? Thinking in those terms, the mind goes on to aluminium, magnesium, tin—

Mr. Maggay (Gateshead)

Wolfram?

Mr. Hely-Hutchinson

Certainly, in small quantities. I would not even sneeze at pepper except that I might offend the susceptibilities of some of my Armenian friends in the City. One might also conceive the thought of other commodities of a more perishable nature which could be turned over in the same way as the laundry, which, when it comes back each week is put at the back of the shelf, so as to rotate the stock.

The question I would like to pose, when this problem goes back to the experts for consideration, is, What would be the effect if, say, gradually we built up to per cent. or 20 per cent. of the reserves of the central banks of the member countries or alternatively, 10 per cent. or 20 per cent. of the reserve of the new central fund, to consist of commodities other than gold? I hope these words may possibly trickle across the Atlantic and there receive some expert consideration, because America and perhaps Russia are about the only two countries which are really in a position to do anything about this. I would like to state my conviction that we shall make a great step forward, almost a leap forward, in the theory and practice of central banking, if we can get away from the purely monetary conception of reserves and think about those reserves more in terms of the great staple and basic commodities. I am quite aware that what I am adumbrating is really another form of Pharaoh's dream of the seven fat kine and the seven lean kine, which was so obligingly interpreted by Joseph. I hope the same fate may not befall me as befell Joseph, for if my memory serves me right, Pharaoh put Joseph in the saddle and made him carry out in practice his interpretation of the dream. One might be inclined to say with Mr. Norman, if one were offered a job which practically involved being Chancellor of the Exchequer, President of the Board of Trade, and Minister of Economics at the same time, that "all this is too much for me."

I would like to support the very noncommittal Motion before the House because I think it desirable that these matters should be thought upon still more by the experts. The Motion commits us to nothing, and the Amendment standing in the name of the hon. Member for Lowestoft (Mr. Loftus), which I hope also will be considered, seeks to make sure that we shall not even be committed to that nothing. In these terms, I beg to support the Motion before the House.

Mr. Shinwell (Seaham)

My hon. Friend the Member for Hastings (Mr. Hely-Hutchinson) will forgive me if I fail to follow his witty and interesting disquisition on the gold position. It is a commodity with which I have a very slight acquaintance. When he referred to the subject of copper, that seemed to me to be rather more familiar, but I was particularly interested in his final observation which was, as I understood it, that whatever advantages could be derived from this proposal we should not commit ourselves to them but speak with the utmost reserve.

Having listened to the best part of this Debate, I have reached this conclusion; it is quite impossible for my right hon. Friend the Chancellor of the Exchequer to say, when this Debate is concluded, that the House is behind the experts' agreement. I think we are bound to reach such a conclusion. I could understand the Government making a proposal that we might refer the subject to a Select Committee, when it might be possible to consult and examine—if not crossexamine—the experts on all sides; when, after a protracted period of deliberation, analysis and examination, such a Committee might find it possible to reach some definite conclusion. When, however, as we have seen and heard, the sponsors of the Motion in their able and interesting speeches, ask us to accept the agreement without any evidence of enthusiasm on their part, with a remarkably lukewarm attitude and considerable reservation, then it seems to me that my right hon. Friend is not empowered to say to the opposite numbers concerned, "The House of Commons desires this Government to proceed towards further consultation"—much less acceptance of the principles embodied in the agreement.

It has been suggested that this is more or less a Debate on currency, on the international exchange rate, on balance of payments and, in fact, on the financial mechanism which is essential in order to facilitate trade. I hope hon. Members will forgive me if I enter a caveat at once. To me it is impossible to consider currency mechanism associated with international trade in vacuo, and when my right hon. and gallant Friend who moved the Motion says that the House is in no way committed, either on the subject of trade discrimination, Imperial Preference, or bulk purchase, it seems to me—and I speak with diffidence on such an intricate subject—that once we accept the principle embodied in this proposal—which to my mind is the principle of non-discrimination—it is going to be exceedingly difficult, when we come to consider trading and commercial arrangements to depart from that principle of non-discrimination.

I suggest to hon. Members that we are putting the cart before the horse. If it had been possible, in the course of this Debate, to hear a considered statement from the Chancellor of the Exchequer, or from the President of the Board of Trade on a proposed trading agreement of an international character, and, in particular—I hope hon. Members will not mind my saying this—how far the American market was likely to be made available for manufactured goods from this country and elsewhere, and how far America in spite of her vast resources, financial and industrial, to say nothing of potential, was prepared to adopt an internal and international policy which provided for full employment in that country, thus absorbing the greater bulk of her production and adopting an import surplus policy instead of an export surplus policy —if I say we had preceded the discussion on monetary matters by considerations of that kind, clarifying the fundamental issues which underlie currency arrangements, then we might have been prepared to commit ourselves even to this so-called innocuous proposal. We have done nothing of the sort.

May I direct the attention of hon. Members to what I regard as the two fundamental considerations? The first is the one I have just mentioned—American resources. The second is the bargaining capacity of the great British market. We will take the British market first. As see it, what we are proposing to do, is to throw away the obvious benefits in international trade by the bargaining advantage of the British market, for the dubious benefit of using resources of the pool, in the event of the need for currency, up to a maximum of about £80,000,000 annually. I understand that £80,000,000 is the approximate figure. It is negligible alongside the drain on our resources, bi-laterally with the United States of America. We shall have to import to a much greater degree than ever before, not because we want to import for the sake of importing, but because, in the endeavour to rehabilitate our trade and to pursue a policy of expansion, of production and of full employment—those are our objectives—we must import raw materials. Many of those raw materials are in the United States of America. If we are to draw on the resources of the United States of America through imports, the obverse side of the picture is that we must export to pay for them.

The question is: How are we to pay? Out of our financial resources? Our financial resources are not in the same category as those of the United States of America. We shall not be a creditor country after the war. America will be the great creditor country, and we have to consider our position, not so much in relation to other countries, but vis-a-vis the United States of America. What is the position of the United States? Something has been said about currencies becoming scarce through the operation of this Fund and it has been suggested that if currencies become scarce, certain proposals can be adopted by the member States associated with this Fund to correct the disequilibrium. But, in fact, that is not the way it is going to work in practice.

I venture to make a suggestion as to how it will work. It can work out in one or two ways or, perhaps, both. The United States of America need not increase the supply of dollars in the Fund. The United States has power—there is nothing in the scheme to prevent it—either to lend and make this country more of a debtor country and thus adding to our burdens in the future, making it more necessary for us to export, or attempt to export to markets which are not available as, for example, the United States of America markets, or alternatively, and this is the danger point as I see it, the United States may, if dollars are scarce and not available to us for our purposes, advise us to dispose of the remainder of our overseas and Empire investments in order to obtain the necessary dollars. What is in this scheme to prevent that? There is no obligation on the United States, in relation to this agreement, to increase the supply of dollars in the pool. I repeat that she can adopt either of the two other devices and both of them are dangerous to the future trade and financial position of this country.

I want to ask the Chancellor of the Exchequer this question to begin with. Is there the remotest prospect of the United States reducing her tariff barriers to allow British goods to enter her market? It is a fair questioin. We have to export our goods somewhere. I venture to give the answer myself. There is not the remotest prospect—there may be some lowering or raising of barriers according to the circumstances—and therefore we have to find markets elsewhere for our goods. Where are we to find those markets? Is there anything in this scheme to facilitate trade with other countries? Already it has been suggested that the Argentine propose to remain outside the scope of this agreement, and, indeed, they do not need to come in because of their foreign reserves. They can avail themselves of those reserves. So, in order to find markets for our exports, we have to adopt other devices. What other devices? They are precisely the devices referred to my by right hon. and gallant Friend the Member for Kelvingrove (Lieut.-Colonel Elliot) in the interesting speech he made on the Budget Debate, and, to some extent, in his speech to-day, and that makes it all the more amazing to me that he should have sponsored this Motion. I direct the attention of the House to some of my right hon. and gallant Friend's observations. He said, speaking of the need for an export of goods from this country, and at a very high rate: I do not believe that that points to a helter skelter scramble of Free Trade. It points to a system of high organisation of bulk purchases, trade agreements, what you will. Then he goes on to say: In such circumstances, it is impossible for us really to expect that we can agree with those who wish to sweep away the barriers, and to produce again the international scramble which, heaven knows, had no very beautiful results in the past. Then he said: People say that the greatest thing that the United States can do is to produce an export surplus. I say that, in the long run, the greatest thing that the United States can do is to become so prosperous that it wishes to buy goods from all the rest of the world."—[OFFFICIL REPORT, 27th April, 1944; col. 1033, Vol.399.] Very wise words. There is nothing in this agreement which is likely to facilitate proceedings of that kind. My right hon. and gallant Friend said this provided a "permanent way." But a permanent way is of no value at all unless you decide to travel. To provide a "permanent way" without deciding on the terms and nature of foreign trade in this modern world, particularly the kind of world we envisage when this war is over and the transition period comes to an end, seems to me a most absurd proceeding.

I want to apply the test by asking my right hon. and gallant Friend one or two questions. I presume, as I have already indicated, that our principal objective is to promote a policy of trade expansion and to promote full employment. Do not trade expansion and full employment depend on planning? Is it possible to expect any expansion of British trade without deciding on a plan and, if we are to plan, what do we mean? I shall tell hon. Members what I think a plan does mean. It means that this country, because of its needs and because of its huge market, and, again, because it desires full employment, should be able at any time, irrespective of any international consideration, financial or otherwise, to enter into reciprocal agreements with any country. That is a plan, and, indeed, there is no plan outside it. Of course, I know if the whole of the countries of the world could come together, and decide about the use of international resources in the true spirit of international co-operation, and decide on full employment, if they decided that this country was to produce this commodity and that country that commodity, and that certain countries were to produce primary goods and other countries manufactured goods—if that were all determined in advance, that kind of plan would be excellent. But does anybody believe that it is practical or likely to emerge for a long time? Of course not. And, in the absence of an international plan, which is the basis of international co-operation, we must be free to enter into our own arrangements.

My hon. Friend the Member for East Birkenhead (Mr. Graham White) said he did not indulge in slogans and then proceeded to say "We must demand international co-operation." What is that but a slogan? What does it mean? You can talk about the need for international co-operation until you are black in the face, but you have to get down to practical things, such as how are you going to trade and what is your objective and purpose in trade? International co-operation has got to be worked out, and, at the moment, it has not been worked out. It is an ideal, and a very desirable ideal and we should cling to it with all the power and strength at our command, and never abandon it. In the meantime, we have to look around and see where we can sell our goods and where we can buy our goods. That is the sine qua non of a decent standard of living for our people.

It has been suggested that there is nothing in this principle to prevent us proceeding with our reciprocal arrangements or bulk purchase or preference. We shall see. But, before I proceed, let me say this to Members of the Conservative Party. I can understand the Liberal Party supporting this, because it is a return to the Manchester school of economics. It is going back 70 years, and I can understand that. It is laissez faire. The party behind me no longer believe in laissez faire. [Interruption.] The hon. Member for West Islington (Mr. Montague) can speak for himself. He has already abandoned hope and I can do nothing for him. But certainly this party, by and large, no longer believe in a higgledy piggledy Free Trade which was never Free Trade in fact. They believe in planned trade, orderly trade, bulk purchase. What about the Conservatives? Are they going to abandon Imperial Preference? Are they going to say to New Zealand: "We could have made an arrangement with you, a trade agreement with you. We could buy your butter and ask you to accept all that we can produce in the way of electric light bulbs. We could make such an agreement but that is preference, that is discrimination, and other countries might object." Do we intend to allow that to happen? Hon. Members may say it is not implicit in this Agreement, but I say it is.

Lieut.-Colonel Elliot

How does the hon. Member explain the specific reference in the White Paper, that the document is understood by experts to mean that it does not, either now or in the future, interfere with the old-established ties and arrangements which the sterling areas have made with each other?

Mr. Shinwell

The right hon. and gallant Gentleman gave the answer himself. He divided the scheme into two parts—the short-term and the long-term aspect.

Lieut.-Colonel Elliot

I was anxious that the hon. Member should address himself to the fact that the proviso applied not merely to the short-term but to the long-term aspect.

Mr. Shinwell

My answer is that if one reads the scheme carefully, one detects serious contradictions. Indeed, hon. Members have referred to some of those contradictions. But I shall not take my stand on that at all. If you accept the principle of non-discrimination in relation to international exchange, it is bound to affect the position when you come to make reciprocal trading agreements which are, essentially and fundamentally, based on discrimination. You cannot have non- discrimination in relation to the balance of payments and discrimination in relation to trade. If somebody can prove that you can, I shall be glad to hear about it.

Lieut.-Colonel Elliot

That is what the White Paper says and what experts say the White Paper means, and I would rather take my stand on what the experts say it means, than on what the hon. Member says he thinks the experts ought to mean.

Mr. Shinwell

There have been various interpretations as to what the experts mean and there has been a great deal of discussion in the Press recently as to what the experts mean, and, also, in the House to-day, yet we have not had a clear answer. I think a great deal of further examination is required on this point. At any rate, I am entitled, in the interests of the future of British trade, to pose this question, a most important question: Is there anything in this scheme, either in its short-term or long-term aspects, that will prevent this country for purposes of development, expansion and full employment from promoting reciprocal trading agreements with other countries? I think we ought to have a very clear and definite answer to that before we can accept the principles involved in this White Paper.

Now I come to an equally important question—the effect on the sterling area. It has been suggested that this does not affect the sterling area position, and I preface what I am about to say by this observation: In a period of crisis and depression the sterling area position was of great advantage to this country. There is no doubt about that. The sterling area position was not telescoped by the countries associated with the Empire. Other countries were included, the Western European nations. Incidentally—although this is of great importance this is not the time to discuss it—we must not ignore the position of these Western European countries in the future in association with ourselves in terms of trade. I want to ask whether this plan proposes to withhold from the sterling balances, accumulated during the war in this country, the right to transfer or conversion? At present we have in this country very large sterling balances probably amounting to £2,000,000,000. A point comes in here, which much affects this agreement and it is: Have those sterling balances to be, in some way, utilised if we find ourselves short of a particular currency in the Fund? I am not sure, but the United States of America may say, "You are not entitled to utilise the Fund for the purposes of dollars, until you have disposed of the sterling balances in your country." They may do that, I cannot say, but at any rate it seems to me that the creation of this Fund would prevent us, or a member country, from using sterling balances for the purposes of capital export, namely, for expansion purposes.

Take the case of Australia. Suppose Australia has £100,000,000 sterling balance in this country and decides, out of that amount, to invest in one of the Colonies. We have been interested in this project of the Dominion countries concerning themselves in Colonial expansion. Suppose they do that. Are the precluded from engaging in an expansionist policy? If they are, or if the credit balances are in any way interfered with, then the obvious course the Chancellor and the Treasury have to take is to block those balances at once, to fund them and to pay the interest on them. That may create a serious situation as between ourselves and Dominion countries.

I come to my final point. One of the purposes of this scheme is to sweeten relations between ourselves and other countries, particularly the United States of America. That is the purpose of international co-operation at any level, in any sphere. It may well be—and I ask the Chancellor to pay particular attention to this—that when the time comes to implement this Agreement, we shall find that because it is to our disadvantage we must withdraw. It is no use ruling that out, because it is in the Agreement. Indeed, it is one of the escape clauses. There are several escape ladders. Why so many in a scheme of this kind? Those who promoted the scheme were not, it seems, very sure of themselves. You want escape ladders only in the case of fire or panic. They must have had that in contemplation. It may be necessary, for some reason or other, to withdraw from the scheme and leave the United States in the lurch. Nothing would be more calculated to embitter relations than that. Let us not forget what happened some years ago when Lord Baldwin, then Mr. Baldwin, went to the United States and concluded a debt settlement which was never implemented. That created deep displeasure in the United States; indeed, the legacy remained during this war. Let us be extremely careful that we take no step that is calculated to incur even greater displeasure in the future.

I understand that the conception underlying this Motion is that, whether this Agreement be good or bad, it requires further analysis and examination; that we must indicate our reservations on this, that and the other; that we must be careful to safeguard our trade and financial position in the future and, as has been pointed out, that the transitional period will be so prolonged that it will be many years before the scheme is actually implemented. If that is the underlying conception behind this motion, then this House has no right to accept the principles that are involved. But what the House can do is to say to the Chancellor, because we are not sure about it, because there are doubts, because there are strong reservations which are based on facts and not merely on suspicion, "Go on with your discussions, but please understand that not only the House of Commons but the whole country—for its trading future and standard of life of our people are at stake—wants to be assured that, before you finally commit this House you will come back to us and give us a further opportunity for examination."

If I had my way I would, frankly, reject these proposals. I have never voted against the Government on a Motion of Confidence, but if they had made this a Motion of Confidence then, with the greatest delight, I would have voted against them. I do not want to see this country commit suicide; if it proposes to do that, it will do it without any encouragement from me. I want it to be placed on record for the future that I, at least, did my best to oppose it. But if the Government are determined to proceed, I beg them to be exceedingly careful. It is not a question of playing into the hands of the United States because the United States has also got her problems and will have them in the future. But I am not sure that this is the way out for the United States. Her way out is the way out for us—promote a policy of full employment, in reciprocal agreements wherever you can, and then, on that basis promote international co-operation. Let the Government go ahead, but let them be careful, because if, as a result of this Agreement, we are let down, it will not be this House of Commons that will suffer so much, or even the people of this country; it will be the whole civilised world.

Sir George Schuster (Walsall)

In some ways I feel rather sorry to be following my hon. Friend the Member for Seaham (Mr. Shinwell) since he covered a great deal of the ground I intended to cover and approached this subject very much in the way which I myself had intended. I find myself in agreement with him in his point of view that we cannot usefully commit ourselves to any Motion or scheme which really means anything, until we have gone very much further in settling the underlying arrangements affecting trade and general policy. I want to say something about this, raising, perhaps, rather different aspects from those raised by my hon. Friend. I would not, however, go quite so far as he has gone in his pessimistic appreciation of the attitude of the House. I feel, like him, in a great difficulty about being asked to vote on a Motion in connection with this White Paper, but I think I can honestly express approval for the continuation of discussions which aim at the purposes which are set out in Paragraph 1 of the White Paper. I think he will find that all those purposes are purposes which he himself would support. Where I feel doubt is whether what follows in subsequent paragraphs represents arrangements suitable to achieve those purposes. Therefore, if I express my approval of the Paper it will be on that distinct understanding.

The hon. Gentleman said he had reached a conclusion. I too had been trying to form one and had been asking myself what sort of message the Chancellor would understand he had received from the House of Commons on the matter. It has been rather a blurred message. In some ways that is natural. We are a lay assembly. We cannot discuss the technical details of the scheme as experts. But we can and should express our views on broad issues, as the hon. Gentleman has just done. Therefore, although it may be elementary, I think it worth while to sum up what appear to be the main broad principles which I believe the House and the people of the country support.

First and foremost there is the strong feeling, which has already been referred to by several speakers, that the people of this country are not going to tie themselves, willingly, to any rigid external standard, whether gold or anything else, which is going to make it impossible for them to carry out the domestic policy which they think right—full employment, a rising standard of living and stable purchasing power for our own currency. At the same time, I think one can say that the people of this country are in favour of some form of international co-operation. But if international co-operation is to be anything more than what I think the Home Secretary once described as a nice after-dinner phrase, it must mean that we must accept certain rules and be bound by them. I ask myself, Are those two attitudes inconsistent? Are we honest about it? I think we are, and the answer is that we are ready to be committed to rules, but only if, first, we are satisfied as to the game that is going to be played and, secondly, satisfied that the other parties to the arrangements are also going to abide by the rules. That is a statement that we ought to make quite clearly to the United States.

That brings me to the matters of uncertainty to which the hon. Gentleman referred. My right hon. and gallant Friend the Member for Kelvingrove (Lieut.-Colonel Elliot) talked in analogies. Let me follow his example, although, as he said, they are always a bit misleading. I have talked of a game, and this scheme really does no more than provide for the counters for the "game." I ask myself, What is this game of international trade that we are going to play? Is it going to be a game of poker? Or a game of beggar-my-neighbour? Or perhaps a game of "happy families"? We do not know. For myself, I know that I want it to be a game in which the parties are not all seeking to get the better of each other and a game in which all the cards are on the table. But, of course, it is much more serious than a game. Nor is it only a matter of international trade. There must be harmonious international co-operation over a wide field of internal policies as well. I think we ought to be very careful when we are talking of this matter not to get our vision too narrow.

Here I should like to interject one idea, and it has a bearing on what the hon. Gentleman said about possible agreements with groups of other nations. If we are thinking of regional agreements in terms of trading agreements, which are intended to create self-sufficient; autarchic economic regions, then we are embarking on a very dangerous course which is only one degree less evil than Hitler's idea of an autarchic German economy. But if we are thinking of regional grouping in the sense of economic and social policy arrangements between groups of countries which stand at comparable stages of social advance, and whose economic interests can fit in together—if we are thinking in terms that there should be groups of such countries which agree to follow parallel lines for raising standards of living and other matters of domestic policy and which enter into trading agreements together, but who regard themselves as completely free and ready to deal with other countries outside the group as well, then I think that is a very fruitful and virtuous idea and one to which we ought to give our earnest attention.

But, whether we have regional agreements or world agreements, let us be clear about one thing, that we cannot ourselves be useful members of any group unless we put our own house in order and unless we create domestic stability. And here I want to say very definitely to the Government that it is not fair to ask us to discuss world plans like this until they have given us a much clearer idea of the shape of things to come as regards their own economic policy. Many of us have been asking for chances to discuss quite small things about planning at home—planning our towns, for example. When we ask for that, we are told it is premature. And I feel in this position. I am told it is premature to plan Walsall, yet I am asked to express my views to-day on a plan for the whole world. That is a contrast which shows up the illogicality of the position. I feel we must ask questions and that we have a right to answers. What are the Government's plans going to be for full employment? How can we discuss a currency agreement of this kind unless we know what sort of freedom it will be necessary to preserve in our monetary policy in order to make good our plans for full employment? Again, how do the Government visualise our overseas trade position? Is it true, as is now often being said, that in order to maintain the volume of our pre-war imports we shall have to increase our exports by 50 per cent.? Do the Govern- ment regard that as a practicable objective—something which it is at all likely we can attain? If they do not so regard it, what are the consequences? May we not be forced to adopt a policy of selective control of imports? Can you work a selective control of imports without some control of exchange? If for the sake of our own international solvency we are forced into courses of this kind, will they be consistent with the terms of this Convention? These are questions which we must ask, realities which we must keep before our minds. We may have to face them.

On all these grounds I feel that, with possibilities of that kind hanging over us, it is difficult to give approval to any kind of definite international monetary scheme. We must know more about the foundations of our own situation. That is our job. We have to know what our position is going to be. We cannot talk honestly to the United States unless we know it. But we are also entitled to ask something about their plans. They have their difficulties, as we have ours. Their difficulties are those of a surplus country, whereas ours are the difficulties of a so-called deficit country. What is going to be their position? Their resources of productivity are such that they can maintain a very high standard of living for all their people with a very large proportion of their industrial population unemployed. Some put it at 20,000,000. They like us will want full employment, and that will mean a vast surplus capacity.

How are they going to utilise that surplus capacity? Will they use it to build up their own standard of living, to increase their leisure, shorten their working hours and so on? Or are they going to pour out a vast flow of industrial products on to the rest of the world, countries whose products they will not take in return: These are questions which we must ask? I do not look at the United States position quite in the same way as the hon. Member for Seaham does. I do not believe that even if they knock all their tariff walls down they will find it very easy to import greatly increased quantities of British goods. It is not a mere question of good will. The economic positions of the two countries do not fit in together in that way. You cannot get away from realities of that kind. And there is one more thing to say on this general position. These policies are poli- cies which affect not only our two countries, but the whole world. Therefore these are not matters which should be settled merely by conversations between this country and the United States.

I turn from these general observations to the details of the plan. I have no time to say much about those, but, frankly, it has filled me with many misgivings. I find it difficult to understand many of its phrases. There are several important lacunae. The whole question of management, for example, is left out. And there are many ambiguities. Let me take one of them as an illustration. There has been some discussion about the extent to which these arrangements may limit our power to carry on our Empire economic policy. In the introduction explaining Clause X (2) it is stated that during the transition period the maintenance by members of the sterling area of the arrangements now in force between them is allowed. Then the passage goes on to say that, in the final period, that is to say when free convertibility has been accepted, the scheme is not intended to interfere with the traditional ties and other arrangements between members of the sterling area and London. I ask myself what is the difference in significance between the arrangements now in force between members of the sterling area which are to apply in the transition period and the traditional ties and other arrangements be-between members of the sterling area and London which are to apply in the final stage. Apparently they are intended to mean something different, but I cannot see where the difference comes in. And there are many ambiguities of this kind in the document and phrases which I find almost impossible to construe. That makes me unwilling to give general approval to the plan because I feel that there are things lying behind the words which we, as ordinary members of the lay public, really do not understand.

Let me turn to another point. This whole plan rests on it being possible to make distinctions between capital and current transactions. I submit that, in practice, if you attempt to control exchange transactions it is extremely diffi- cult, in fact almost impossible, to draw the line between capital and current transactions. Then I feel that that is an element of unreality in the scheme. Anyone is free to go out over night. That is quoted as one of the advantages. But surely the standard is reduced pretty low if we have to command a scheme by pointing out how many ways there are of getting out of it. I dislike this position. We, in this country, would feel ourselves morally bound. We respect our moral obligation. But will the other parties do the same?

I should like to proceed, having been rather critical, to a positive statement summing up the sort of things which I feel we ought to put as Members of the House before the Chancellor of the Exchequer. Firstly, then, I should like to make it clear that we must enter into no scheme which hampers our liberty to pursue our domestic plans for full employment, for stable prices and for an expansionist policy. Second, that we do want international collaboration with countries who undertake parallel policies and with whom we can get a balanced position. We are prepared to accept obligations if others will too. Third, that any scheme must take full account of the realities; it must take account of our own strengths and weaknesses and of America's difficulties and strengths. Let us be frank on these matters, and have all the cards on the table. I should like to have no sort of misunderstanding as to our attitude towards our friends on the other side of the Atlantic. Fourth, that, when an agreement is made, it should, as far as possible, lay down a code of conduct rather than precise regulations, and it must be so planned that the whole tendency is expansive rather than restrictive. There are ways in which that can be accomplished. Fifth, we cannot settle everything at once. There is great value—and this is an element on which I support the plan—in setting up machinery for permanent, continuous consultation between the various countries which will collaborate in the plan.

Then, I come to a sixth point that seems to me of vital importance. In all that is said on behalf of His Majesty's Government in the United Kingdom I want to know that we have first taken counsel with His Majesty's Governments in the various Dominions and in India. I should like to say to the Chancellor, let us not advance a step further in the discussion of this plan or any other plan until we know that there have been full discussions with the Dominions and India.

Sir Irving Albery (Gravesend)

When this Debate was announced, I asked the Chancellor whether the House would be in possession of the opinions of the Dominions before the Debate took place. The hon. Member has raised an important point, and I hope that we shall have some information on the subject.

Sir G. Schuster

I am glad to have my hon. Friend's support. Of course, I know that there have been some discussions, but this is one of the points on which I feel that we as Members of the House have been kept in the dark. Take the way in which the scheme was announced to the Press. One heard on the wireless that experts of 33 countries had agreed. I put it to my right hon. Friend that that was a misleading statement. According to all I have been able to discover, about what has happened, it is not fair to say that other Governments have dealt with this matter in the same way as our Government, and the United States Government have. I want to underline the point as strongly as I can and to ask whether we are to have the sort of currency policy discussions that we had with the Dominions and India at Ottawa, and in the World Economic Conference of the following year. I was myself a delegate at both these conferences, and I know the value of our discussions. I want to get the honest and plain opinion of the representatives of the Dominions and especially of India on these matters.

Lastly, I would like to go one step further. The hon. Member for Seaham has spoken about the Western European democracies. I feel that their interests are much the same as ours in this matter. I want to feel that we are in close association with them. I do not want to see any group built up hostile to the United States. Far from it. But I do want to see the Commonwealth as a group working together with these peoples, whose ideals and social standards are so closely akin to ours, and whose economic position fits in with our own in so many ways. This is a point of great significance. I would ask the House to reflect on the fact that those events in the history of this country that have redounded to our credit and enabled us to play a great part in the world, have always been the occasions when we have served as a rallying point for the weaker countries. We are now looking forward to a period when there will be one country—the United States—of dominating economic strength. I respect their ideals and I believe that they mean to use that strength in a way that will help the world. But the fact that it will be a dominating force cannot be ignored. I want to feel that we in this country will be the rallying point of the small countries and that we will help to preserve their individuality, their liberty and all the rich diversity of their civilisations. Therefore, I hope that there will be close discussion on this plan, not only with the Dominions, but with the Western European democracies, before we go a step further.

My final word is this. If we know what our own position is, if we know what the Government's economic policy is, if we know that we really have with us, heart and soul, the Dominions and those other countries who are so closely akin to us in their needs and ideals, then we can enter into a discussion of international economic and monetary plans of a far more realistic and definite nature than anything that stands in this White Paper That is the sort of plan I want to see. To such a plan I could give my unreserved approval.

Mr. Hammersley

On a point of Order. The matters under discussion are of great importance. The Government have already moved to increase the time available for the Debate by one hour. There is a Motion on the Order Paper in the name of my hon. Friends and myself which, apparently, will not be considered because the time is too short. I want to ask whether, if the Government are agreeable, it will be possible to increase the time available by a further hour.

Mr. Deputy-Speaker (Major Milner)

I am afraid that it is not competent for the House, which has already come to a decision on the matter after due notice, to extend the sitting for a further hour.

Mr. Benson (Chesterfield)

Some doubts have been expressed as to how far this Motion is likely to carry us. I would remind hon. Members of the closing words of "Major Barbara," in which the heroine says to the hero, "Never mind, go on talking." That is all that this Motion says to the experts. It does not commit the House to anything. I am perfectly willing to bind myself to that kind of advice. I listened with great interest to the speech of the hon. Gentleman the Member for Walsall (Sir G. Schuster). I think that he rather minimised the importance of this discussion when he said that we could not fruitfully discuss currency until we had discussed a large number of other things. That may be true, but we cannot fruitfully discuss a large number of other things until we have discussed currency.

Sir G. Schuster

May I clear up a misunderstanding? I think that the discussions up to this point have been important and that valuable work has been done. My point is that we have reached the stage from which we can go no further until we know more about other questions.

Mr. Benson

I agree, and I hope that the Government will draw from the hon. Gentleman's speech the moral that we want a lot more discussion and that we have to discuss international matters, currency, trade and other things far more frequently in future than we have in the past. The hon. Gentleman the Member for Seaham (Mr. Shinwell) condemned the scheme root and branch, for the simple reason that it did not solve every one of our problems. Of course it does not. The scheme does not aim at solving every one of our problems. It is a narrow, limited scheme dealing only with currency machinery. The House is not asked to approve even the proposals in the White Paper. It merely asks for further discussion, so that we may once again express our opinion on the extent to which the experts have developed their ideas.

Mr. Craven-Ellis (Southampton)

Perhaps I might remind the hon. Member that it goes a bit further than that. Let us get this point quite clear. It says that the statement of principles provides a suitable foundation.

Mr. Benson

For further conversations.

Mr. Craven-Ellis

Yes, but the principles there must be accepted if we accept the foundation.

Mr. Benson

The most fruitful thing for this House to do is not so much to discuss the details of the scheme but to indicate to the Government what we feel is necessary in the post-war world so that, with their experts, they may devise some scheme which will suit the attitude of the House and fulfil what the House feels is requisite.

Listening to the Debate, I have felt a great deal more comfortable about the attitude of the House than I did 12 months ago, when I was a solitary voice crying in the wilderness against the dangers of fixed exchanges. There is a very different feeling now on that point and on other points as well, and that is why I think that the discussion in this House and in the country, arising out of this White Paper, is likely to be of immense value. When the White Paper was published, and I read it, I did what probably every other Member did. I asked myself how its proposals were likely to affect my pet hopes and my pet fears. That is how we shall really judge these currency schemes and other schemes; how they are likely to affect what we expect, for good or for ill, to happen in the future. We all have our hopes and our fears in these matters. What are our hopes, and how far are currency schemes likely to affect them? What are the dangers? How far are these proposals likely to safeguard us against them?

If the House will allow me, I want to get away from the rather general, theoretical discussion and bring the discussion down to realities and to actual facts. Viewing the future, and that period when the scheme, or any other currency scheme, is likely to be working in its entirety, over and beyond the period of change and restriction, we must realise that the major danger to world security lies with the United States. The productive capacity of the United States is colossal. Not only that, but the whole industrial system and the whole outlook of the country, are based on rampant individualism. Speaking broadly, they are ideologically where we were somewhere about the 1890's. In addition to this explosive situation, America has developed during the war a very high wages structures. High wages may carry on through the period of lend-lease and the period when the world is short of everything, but, taking everything that we can now see into consideration in relation to the United States, sooner or later there is a very great danger of an immense, world-wide industrial crisis starting in that country. That is one of the dangers that we certainly must anticipate, and if possible safeguard ourselves against it.

I would remind the House of what happened in 1929. The impact of the slump, which started in the United States, upon the outside world was shattering. In 1929 the United States had made available something like 6,500,000,000 dollars to the outside world. In 1932 they made available only 1,500,000,000 dollars, a decline of 5,000,000,000 dollars of purchasing power for the outside world. A good deal of that decline arose from the cessation of the policy of foreign loans. Loans from the United States to the rest of the world amounted in 1928 to 1,600,000,000 dollars. By 1932 that figure had shrunk to 100,000,000 dollars, and on balance the United States actually an importer of long-term capital owing to amortisation and repayment. The breakdown of this loan system was even more disastrous for the world than the contraction of current trade.

If we have to face a world slump arising in the United States after this war, there is no question, unless we take steps to mitigate the effects, but that 1929–31 will re-enact itself. And unfortunately one sees the pattern already growing up, ready to repeat itself. There is the enormous increase in the productive capacity of the United States. There is the inevitable need for high exports, for the whole structure of American industry is developing, and will continue to develop, along lines which will necessitate very large loans from the United States to the rest of the world.

It is implicit in the present policy of Lend-Lease that Lend-Lease will have to be carried into the immediate post-war world. There is the establishment of the Import-export Bank by the United States Government, the purpose of which is to facilitate capital exports. There is still another factor, the very large dollar reserves which are held in the United States, arising from the vast import of gold and currency into the United States in the thirties, due to the flight from Europe, on account of political developments. Some thousands of millions of dollars were de- posited at short notice there, and they will no doubt be repatriated. The whole set-up for post-war American industry will be dependent upon very high capital exports, and foreign loans. In 1929–31 the world was entirely unprepared for a world slump and for the sudden cessation of American loans, as well as for the catastrophic decrease in American purchases. American imports have always been a very steady fraction of their national income; that national income fell by more than 50 per cent. in those years, and with it their imports.

The hon. Member for East Birkenhead (Mr. G. White) said that it was impossible for this country to contract out of world disaster. It may be impossible but there is no reason why we should not try. I suggest that one contribution we can make to world stability after the war will be the development and the co-ordination of a sterling area with a policy of price stability. I think that is the greatest safeguard that can be offered to the world against world slumps in the future, and I think it is possible to do it within the scope of an international currency scheme, even a scheme more or less like the one outlined in the White Paper. That is perhaps the greatest contribution we can make to the future of world trade. The sterling area is, I think, particularly suitable as an experiment for a larger area than one nation, for the development and maintenance of stability, first of all because as compared with the United States there is not one single country in the sterling area that is likely to go to such extremes, none of them have the same productive capacity, none of them are quite so individualistic. Secondly, and perhaps more important still, we have in the countries of the sterling area—and by that I am including the larger sterling area, the Scandinavian and other countries—countries with a far greater power of combating slumps than anything the United States or the extra-sterling area countries possess.

Everybody here is agreed, I think, that any anti-slump activities must arise from Government action. There must be expansion of Government purchases if slump comes in this country. Most certainly it will be Government action that will be clamoured for. We must not forget that it was in Sweden that the theory of Government activity to counteract slumps was first adumbrated. In the United States an entirely different policy and entirely different outlook subsists. No one tried more valiantly than did Mr. Roosevelt by pump priming, but what happened? American big business was so hostile to State action, so hostile to the New Deal, that probably for every man that President Roosevelt put into employment by Government action big business knocked two out. Yet in this country and many sterling area countries, Government action seems to be the only possible antidote to slump conditions and deflation. Both in this country and in the Scandinavian countries there is no question but that a Government lead will be not merely welcomed by industry but demanded. The reaction of industry in the sterling area or in the major countries of the sterling area, will be fundamentally different from what it was in the United States. The result is we are in a fortunate position to counteract slumps.

I think we have to develop a new technique depending on co-operation in a large number of countries in price stability and trade expansion, particularly for the purpose of countering any contraction or slump that comes from elsewhere. That will be a much more difficult problem than merely maintaining price stability in one country only. I have no doubt that by expansion and Government action we can maintain price stability in face of any slump in this one country, but to maintain it over a very large area of the world's surface, the sterling area, will be, as I say, more difficult. It will require the development of a new technique. If we can succeed in developing that technique it will be one of the biggest contributions to world stability and full employment there is. We can do that because we have a similar social outlook. We have also a similar social policy, a social policy which finds its most complete form in the Beveridge Report. Throughout the sterling area social security has been developed to a far greater extent than in the United States, and social security can be a great element in the maintenance of trade stability and of price stability.

Now I think we must recognise that an essential factor in the maintenance of a sterling area stability in face of a world slump, one essential factor at any rate, is the power to depreciate sterling. I do not suggest that there should be wild depreciation but sufficient to maintain stable prices and purchasing power parity. Here I think it is essential we should make it perfectly clear to the United States and the world that our first concern will be price stability. It must be made clear, because invariably there is a curious reaction in countries to the depreciation of the currency of another country. A fall in prices in another country is not regarded as being so heinous as the depreciation of its currency.

There is a phrase in the White Paper referring to "fundamental disequilibrium." That sounds a very excellent safeguard but it is evidently dependent on who decides what is fundamental disequilibrium. Everything depends on whether the country that wishes to depreciate can persuade the managers of the Fund that they are entitled to depreciate. I suggest we make it perfectly clear that so far as this country and the sterling area is concerned fundamental disequilibrium means when our prices start to fall. The idea must be made clear, because we shall have to depreciate if we are to throw our weight and the weight of the sterling area against world deflation. We shall have to depreciate just at that time when the United States is feeling the pinch, when its markets are contracting, and when it and other countries which are experiencing contracting markets will fight bitterly against any depreciation of sterling. It is no use going into any international currency agreement unless we make our position perfectly clear beforehand, because once trouble starts it will be far too late for us to announce a policy of depreciation.

There will always be a dispute as to whether the conditions have been fulfilled. What we have to make clear, before we can enter into any agreement, is that for this country, and I hope for the sterling area as a whole, the fundamental stability is not the stability of exchange rates, but the stability of prices. Then, I hope that, powerful as the United States is industrially, immensely important as is its share in the world economic organisation, if we can succeed in developing a technique of stability inside the sterling area, we shall have something not hostile to, or aimed against, the United States, but something which will act as a counter- balance to the instability which is a characteristic of the United States, and which will help the United States in helping the world.

Mr. Loftus (Lowestoft)

Mr. Speaker decided not to call my Amendment, and I would say, with all respect, that I welcome that decision, as the Amendment would undoubtedly have narrowed the discussion. Before dealing with the White Paper, I would like to speak about something on which I think all Members are unanimous. We are agreed that the proposals in the White Paper are a very great improvement upon the original White-Morgenthau proposals. But that is not very high commendation, because those White-Morgenthau proposals would have chastised us with scorpions where the old Gold Standard chastised us with whips. My hon. Friend the Member for Chesterfield (Mr. Benson) said that the great thing which we must have was stability of prices. He placed that first, before stability of exchange rates. In the rest of my speech I propose to deal entirely with the contents of the White Paper. It emphasises, on page 5, that the desirable aim to be generally accepted by all Members is the free convertibility of its currency. That means that all the currencies must be freely convertible at a fixed exchange rate, subject to certain safeguards, with which I will deal later. Let hon. Members consider what that means. I will quote the statement of the professor of economics at Sydney University: The maintenance of a fixed exchange rate on London (or New York) involves actions similar to that which the Central Banks must adopt to protect the Gold Standard. That is by Professor Mills, of Sydney University. Let us cast our minds back to those terrible years 1929–31, when we had millions of people out of employment here, when prices were going down and down, and firms were going into bankruptcy. The cause was our endeavour to keep on parity with the United States dollar. We deflated and deflated, and deflated, in our attempt to do so. That attempt to keep on parity involved, as it always must do, first, that the Government lost control of the internal price level and of interest rates, and industry was forced to reduce costs, and, then, that employers had the terrible alternative of cutting down wages and discharging men or of going into bankruptcy. That was due entirely to trying to keep on parity of fixed exchanges with the United States dollar. Are we going through that experience again? We had a slight touch of deflation in this country in 1937, because in 1936 we made a Tripartite Agreement between the franc, the dollar and the pound; and when America unwisely deflated for six months in 1936–37 we had also to deflate here.

I may be told that we have got safeguards. The first safeguard is that we can devalue by 10 per cent., after consulting the Fund but without the consent of the Fund. Let us see what that is worth. Look back to what happened in 1931. Let hon. Members assume that this scheme was in working order in 1931. In that desperate crisis one could have devalued under this scheme only by in per cent. without the consent of the Fund. Would that have been enough? We did actually devalue by 25 to 30 per cent. on our own responsibility, without asking the consent of anyone; and with what result? Immediately employment rose; immediately home trade rose; immediately export trade rose. But under this scheme, if it had been in operation, we could not have done so. My hon. Friend the Member for East Birkenhead (Mr. G. White), with reference to my Amendment, used the phrase, "prosperity is one and indivisible," having previously remarked that he was not going to use slogans. In 1930 depression, depression and misery and unemployment were one and indivisible, and it was only when we divided the sterling group from the dollar area that we broke the encircling strangulation and depression in this country. Surely that means that the White Paper scheme is really a more rigid form of the Gold Standard than we had in 1925, because in 1931, under the so-called Gold Standard of 1925, we devalued by 25 to 30 per cent. without seeking the consent of anyone.

Lieut.-Colonel Elliot

Surely we then departed from the 1925 scheme entirely. It is not fair to say that we devalued under the Gold Standard Act, 1925. It was not done on the Gold Standard; it was done by getting off the Gold Standard.

Mr. Loftus

I entirely agree. Apparently, I did not make myself clear. Take the second safeguard. Under Clause IV, Sub-section (3), we can devalue by more than 10 per cent. if we get the consent of the Fund and if, in the words of the White Paper, It is essential to correct a fundamental dis-equilibrium. Can any hon. Gentleman explain what that vague phrase means? Surely it could have been better worded. I suggest it should read "If it is essential to correct a continuing adverse balance of trade"—I think that would be an uncertain safeguard. Then the third safeguard is that we can leave the Fund without notice. Does anyone believe that that is a real safeguard?

Mr. Stokes

No.

Mr. Loftus

Albania could; Guatemala could. Could we possibly do so without the most grave political repercussions? "Facilis des census Averno est; Sed revocare gradum, superasque evadere ad auras, Hoc opus, hic labor est." That is from Virgil's "Æneid," Book Six. It may be roughly translated: It is easy enough to go down the road to hell, but to retrace one's steps—there is the supreme difficulty. I want to turn to the question of exchange control, because I believe that, without rigid exchange control, we cannot control the outflow of capital, and, if we cannot control that, we cannot control the internal price level or the external trade of this country. An international standard, with uncontrolled exchange, is not compatible with full national self-government, either in industrial or social policy. One newspaper has criticised my Amendment as being economic nationalism. I would defend myself against that charge in the words of a very prominent economist as follows: "Let finance be primarily national." The author of those words—the name on the cover of the book—is Maynard Keynes. Let me also quote this from the "Economist" in 1938: The supreme object of economic policy must be to maintain its"— that is the home market's— purchasing power. I think that is a defence of the attitude I take up on this matter. To continue on the subject of exchange restrictions, Clause 5 (1) provides that a member may not use the Fund's resources to meet a large or sustained outflow of capital … but this provision is not intended to prevent the use of the Fund's resources for capital transactions of a reasonable amount required for the expansion of exports or in the ordinary course of trade, banking or other business. I would like to know what the words "other business" mean. Does it allow the speculation by British subjects in the New York Stock Exchange? If we do not get cast-iron exchange restriction, capital will find its way abroad from this country. In 1939, at the beginning of the war, we tried only restricting capital movement overseas, and we lost any amount of badly needed dollars. It was not until 1940, when we had restrictions over commercial transactions as a whole, that we stopped the outflow of capital from this country. If there is this outflow of capital for speculation on Wall Street, what would happen? There must be in this country, a tendency towards rising interest rates. There must be pressure on the sterling exchange. Then I think we come to the point of having to request the further devaluation of sterling. If we are not allowed to do this, we shall have to indulge in deflationary measures to protect sterling.

Viscount Hinchingbrooke (Dorset, South)

Surely, before we came to that, we should have reimposed an embargo on speculation in Wall Street?

Mr. Loftus

I will come to that in one moment. First, I would like to ask the Chancellor certain questions about Clause V, which I think would clearly be of interest to the public generally if they could be answered. Would a member State have the right to exercise control over the transfer of capital funds abroad for any of the three following purposes? (1) Exchange speculation. Are we going to allow that? [HON. MEMBERS: "No."] (2) Obtaining higher interest rates in foreign markets than could be got in the home market. If you allow that, you must force up interest rates at home. (3) Exporting private wealth for political means. This was done in many countries in the past. There was the flight of the franc, and there was the flight of the pound to New York before this war. But there is another question which I must ask the Chancellor and which I think is yet more important. Would a member State have the right to exercise control over foreign investments within its own borders? Let us consider what happens under Clause 6, when the dollar is declared a scarce currency and advice is given as to the course to be followed. We assume that the managers of the Fund are all wise impartial people—a large assumption. If a currency is scarce, there has to be rationing; as the right hon. and gallant Member for Kelvingrove (Lieut.-Colonel Elliot) said, there would be almost an economic blockade of America. But America is not going to submit to that. Obviously, the answer of America will be, "I must provide my customers with purchasing power." It will not have free admittance of goods so that we can obtain dollars thereby, but, of a country like this, a good customer, it will say, I must somehow provide them with purchasing power—with dollars." It can do so by lending and investing here. As my hon. Friend the Member for Seaham (Mr. Shinwell) said, by investing in our British fixed assets, our industrial securities and so on, it may purchase a large proportion of our assets. Indeed, this country may, in the course of time, suffer as Ireland did from all the economic evils consequent upon absentee landlords.

Lieut.-Colonel Elliot

A very interesting point, but what happens if the absentee landlord refuses to withdraw any of his rent?

Mr. Loftus

I did not gather the right hon. and gallant Member's point.

Lieut.-Colonel Elliot

The hon. Member says the arrangement is to pour money in here and never to take any of it out. Surely, here is the danger of the absentee landlord. This is suggesting a new type of landlord who never admits any money into the country to equal the interest which he has taken out. I would like to study very closely whether that is going to be a disadvantage.

Mr. Loftus

The technique of the large scale creditor nation in the 19th century is well known. He refuses to take interest in goods, or only takes part of the interest in goods, and he forces the unfortunate debtor to get more and more into debt. Mr. Emil Davies, who is a well known authority, has said—I think I can quote the exact phrase: By and large the debtor nations pay interest on their loans in so far as creditors keep on lending them the money to do so.'

Lieut.-Colonel Elliot

That is the very reason why my hon. Friend and myself considered that certain aspects of foreign countries are not so advantageous to the lending of money as are supposed to be. If I lend free of interest I do not consider that I am lending money to people but that I am giving money to people. Whether that is good or bad is a thing that I would like to consider.

Mr. Loftus

My right hon. and gallant Friend said "not as advantageous to the lending country." Fifteen years ago in newspapers and in my published books, I was advocating that to the best of my ability.

Lieut.-Colonel Elliot

Exactly, and I say we are in agreement up to that point, and I do not understand why my hon. Friend has gone back.

Mr. Loftus

After that interruption I resume my examination of the White Paper and will turn to Clause IX (2). The member country is not to allow exchange transactions in its markets in currencies of other members outside the prescribed range based on agreed parities. I would like to ask my right hon. Friend the Chancellor of the Exchequer what that means. Does it not mean that if sterling depreciates on the foreign exchange market in New York under this Clause, there is an obligation on the American authorities to support it by buying sterling and thereby American authorities will accumulate considerable sterling balances? In Clause III (5) we come across a sentence of extraordinary obscurity: So long as a member country is entitled to buy another member's currency from the Fund in exchange for its own currency, it shall be prepared to buy its own currency from that member with that member's currency. I cannot believe that the author of that charmingly lucid book "The Economic Consequences of the Peace Treaty" wrote that sentence. What, again, does that mean? I take it to mean that if sterling depreciates in New York the United States authorities acquire sterling balances. If for instance it tends to depreciate through British speculation on the Stock Exchange in New York the American authorities support it and accumulate sterling balances. I take it under this Clause that the British authorities are under an obligation to redeem these sterling balances with gold or with dollars from the Fund. We have to provide dollars at official exchange rates not only for genuine commercial transactions but for the outflow of capital due to British speculation on the Stock Exchange in New York. That is as I read it.

I know that many other hon. Members are desirous of speaking and I will draw my remarks to an end. My view as to the monetary policy which we should adopt was expressed some ten years ago in the Parliament of the Commonwealth of Australia by the then Commonwealth Treasurer in introducing the Budget of 1933 in these words: I would only alter one phrase, and where he uses the words "the United Kingdom" I would use the words "New York." Whatever the United Kingdom may decide to do in this respect, it is important that we should retain our own right to fix our monetary unit at a point which is consistent with our own price level at the appropriate time. I agree with the remarks made by various hon. Members about the necessity for collaboration after the war with the United States of America. I believe that in that collaboration lies a large part of the hopes of mankind. I would sacrifice much, I would sacrifice almost anything, to secure that arrangement. The one thing I would not sacrifice is control by the British Government of the volume of purchasing power in the hands of our people. The one thing I would not sacrifice is our freedom in external trade, especially with our own Dominions. The world is weary of the old financial system. The primary producers of the world to-day are nervous of going back again to the terrible times of deflation when the value of their produce was cut down by one-half in a couple of years. The industrial producers are nervous again of deflation, of the ruination of their customers overseas and of unemployment. The whole world to-day is waiting for a lead from this country for a saner and healthier economic and monetary system than we have had hithertofore—a system which will be based on the fact that the exporting country is paid in the currency of the importer and must either directly or multi-laterally take the goods of the importing country in exchange for its exports. The world does not want to go back to the 19th century or between-the-wars systems when external trade, instead of being a healthy, mutually advantageous interchange of goods became a fierce struggle for power, a struggle for large favourable balances, for getting debtor nations deeper and deeper into debt. That is what we do not want.

The world looks to us for a lead and let us make no mistake. If these plans are adopted, if there are fatal essential defects in the plans which involve going back to the old methods of slump and boom, and of periodic deflation to maintain fixed exchanges, then indeed we may abandon all hopes we now hold of building up a better social life in this country and of establishing peace among all mankind.

Mr. G. Strauss (Lambeth, North)

All of us will have been moved by the speech of the hon. Member for Lowestoft (Mr. Loftus) and I personally agree very much with what he said. I think that he would say, as have all other Members who have spoken, that it is desirable that the negotiations among the experts should continue in the hope that something better will emerge than the White Paper which we have before us to-day. Certainly we can all be free to vote with a clear conscience for this Motion, particularly since we have been told it commits us to nothing at all. I wish to state my view of the White Paper. I believe that if it is carried out without serious and important Amendments and qualifications, it will be disastrous to world trade, to the prosperity of this country and to Anglo-American relationship. It is highly desirable that we should have the utmost co-operation in economic affairs with the United States. That is one thing. It is quite a different thing to bind ourselves to the United States with chains that are likely to become burdensome and possibly intolerable. If we do that, and our shackles become too heavy to be borne by one party or the other, the net result is likely to be not an increase of goodwill between the two countries but an increase of ill-will. Therefore, we have to be very careful indeed about any agreement which binds our affairs with those of the United States for the sake of Anglo-American relationships.

My objections to the proposals in the White Paper concern themselves not so much with the machinery but with the three objectives set out on Page 6, which I think will be highly undesirable in the world that will emerge after the war and for a very long time after, not just during a short transitional period. Those objectives are: to promote exchange stability; to bring about the establish- ment of multilateral payment arrangements; and the elimination of foreign exchange restrictions. I want to say a word or two about all three, but first I would like to draw attention to this fact, that all three of those objectives which we are told now are so desirable were, in fact, in existence in 1929 and did not prevent the major slump of that year; in fact, many of them facilitated the slump and made it very much worse.

A word, first, about exchange stability. In the slump of 1929 imports into the United States fell by about 30 per cent. Later, during the course of the slump, they fell by 70 per cent. and, because the rest of the world was tied to America by exchange stability, the imports into the rest of the world fell by 57 per cent., nearly as much as in the United States. That situation became quite intolerable. Various countries went off the Gold Standard, there was much greater freedom of foreign exchange, and consequently, when the second slump developed in the United States in 1937, and the imports into that country fell by 36.4 per cent., we found that the rest of the world was very little affected. Indeed the import of goods into the rest of the world only fell by 10 per cent. It is possible, therefore, if we do not have exchange stability, to cushion ourselves very considerably from depressions which happen elsewhere in the world.

I do not agree at all with the statement of the hon. Member for East Birkenhead (Mr. G. White) that prosperity is indivisible. We find that is not true at all. Russia, for example, was completely cushioned off from the rest of the world and one found that industrial developments in one part of the world in the way of booms and slumps did not affect Russia at all. It is quite possible for us in this country to cushion ourselves very considerably from industrial slumps and depressions in other parts of the world, and particularly in the United States, if we are not shackled by exchange rates. I know perfectly well that the White Paper suggests that not only have we this 10 per cent. latitude but, under certain circumstances, we have escape clauses. I do not want to repeat arguments used by other hon. Members because I have not much time; I only want to say that I agree completely with the reading given by them that those escape clauses are, in fact, quite useless, and that once we subscribe our name to this agreement we are bound within a 10 per cent. limit to the exchange rates originally laid down. That would he all right if we could be confident that slumps and chaotic economic conditions which have occurred in the United States in the past will not occur again, but we have no reason to believe that. On the contrary, we have every reason to fear that they will happen again.

At the moment, in the United States all ideas of national control are taboo. The New Deal is exceedingly unpopular. Free enterprise is the cry. Free enterprise has been accepted by all parties in the United States, and if free enterprise means anything, as experience has shown us, it means freedom to slide freely into slumps and financial crises, restrictions and economic chaos. If one looks at this question dispassionately it would appear there is every probability that during the next 10 or 15 years there will be these financial dislocations in the United States. I cannot see the sense of this country shackling itself to those disturbances. It is all very well to say that it would be a good thing for all the world to walk in step in economic matters. Of course it would; but is it such fun if we have to walk in step up the peaks of the booms and down the valleys of the slumps? It would be much better, if it were possible—and it is possible—for this and other countries to walk on level ground and not be shackled to countries where depressions are likely to occur.

The second objective which I think would have very serious effects on postwar international reconstruction is the establishment of multilateral payment facilities, and the implication which I think every hon. Member has read into it is that this means that, in point of fact, we are debarred from entering into reciprocal agreements as a nation with other nations. Comments have been made about the effect of such restrictions on Empire agreements, the sterling area, and so on. I want to add one point. It may be very desirable, if we want to see the rehabilitation of Europe, for this and maybe other countries to make reciprocal agreements with certain European countries—

Mr. Boothby (Aberdeen and Kincardine, Eastern)

Is the hon. Member talking about currency agreements or trade agreements? There is a difference between the two and he refers to reciprocal agreements.

Mr. Strauss

I am referring to paragraph 5 which says: To assist the establishment of multilateral payments facilities on current transactions among member countries …

Mr. Boothby

That is currency.

Mr. Strauss

Yes. I read that in the same way as other hon. Members who have spoken. I take it to mean that it will debar us from entering into bilateral financial agreements with other countries. It will be impossible for this country as a nation to enter into a bilateral agreement with another nation in Europe designed to aid the rehabilitation of that country.

The last point is the elimination of foreign exchange restrictions. I do not see how it is possible for us in this country to plan our affairs to restore prosperity here unless we have exchange restriction. This White Paper says very clearly and definitely that it is to be the object of all the nations who agree to it to get rid of their foreign exchange restrictions as quickly as possible. How can we plan our economy, how can we plan prosperity in this country, unless we have effective control of our own resources in this country and of foreign trade—internal and external trade? It seems to me quite impossible. If there are to be no exchange restrictions, as suggested in the White Paper, then any individual in this country will be free to buy goods abroad—maybe luxury goods—and import them into this country; or use the available currency of this country for the purchase of goods from abroad, when it should be used in the national interest for some national purpose under national control.

The Chancellor of the Exchequer (Sir John Anderson)

Is not the hon. Member omitting some words: exchange restrictions which hamper the growth of world trade.

Mr. Strauss

That is perfectly true, but if the Chancellor will look at the White Paper, I think it is on page 10, he will see that it is to be the objective of the countries which subscribe to this Agreement to eliminate their present exchange controls I maintain that the exchange controls which we have had in operation during the war in this country, and which have been essential for the purposes of war, will be equally essential for the purposes of peace. If we are to relax those exchange controls it will be quite impossible for us to plan our resources and develop our trade.

Sir Alfred Beit (St. Pancras, South-East)

Surely the controls will be much less necessary when we are able to export again. They are imposed now on account of our lack of exports. Is not that so?

Mr. Strauss

I think control is equally desirable under those circumstances. I believe that effective exchange control, under the management of the Government, operated for the purposes of the national benefit, will be essential. In countries with completely free enterprise economic conditions minimum exchange restrictions throughout the world may be desirable; but in this country, if we are to control our affairs at all, we must have efficient and watertight exchange control in the hands of the Government.

To sum up, I believe that the objectives of this White Paper would considerably hamper the re-establishment of international trade after the war, would put this country into very serious difficulties indeed if a trade depression developed in the United States at any time—as I fear it is likely to do—and would hamper us in controlling our own economic destiny by carefully devised plans under the aegis of the Government. Without such control of our own resources and affairs I do not believe it is possible to get prosperity for our people and, therefore, I think the House should say to the Chancellor that while we want him to carry on negotiations in the hope of getting something very much better, there are fundamental defects in this White Paper, serious disadvantages, which make it, as it stands, wholly unacceptable to this country.

Mr. Spearman (Scarborough)

I would like to refer to the speech made by the hon. Member for Seaham (Mr. Shinwell). I never miss one of his speeches, if I can help it; I always admire them, but I generally disagree with them and to-day was no exception. The hon. Member said he thought we were putting the cart before the horse, but I entirely disagree. I would, however, admit that it is rather a small horse and that we may have to bring other horses along to help before we can get the cart very far. But this is the first step towards creating the framework in which we can develop world trade. This plan boils down to an attempt to show how we shall be able to buy in one market and sell in another. Our requirements come from all over the world, and unless we are to lower our standard of living a lot, I believe that we must sell wherever we can, in order to be able to get those requirements. The hon. Member for Seaham also said, I think, that we had a very valuable weapon in our home market. I suggest that after the war, when we are no longer a creditor nation, when we have lost a large amount of our foreign and Dominion investments, when we have nothing with which to pay except our own manufactured goods, it may be a good deal more difficult for us to buy than to sell. Therefore, if we are to get the imports which are essential to us, we have to sell wherever we can and apply the earnings we get, to pay for what we buy wherever we buy.

If it were possible for us to supply ourselves entirely within the British Empire, then our course would be easier, but that is not so. We have to face the fact that the Empire is not self-contained. The year before the war, our exports to the British Empire were just under £250,000,000; our exports to foreign countries were just under £300,000,000. If the British Empire took nothing at all from any foreign country and took nothing at all from any other member of the British Empire except ourselves, it still, on its pre-war position, could not take enough from this country to take all the exports we have to sell.

Viscount Hinchingbrooke

My hon. Friend said that the British Empire was not self-contained and then went on to give figures of trade before the war. Does he mean that there is not a whole range of raw materials, geologically, within the Empire?

Mr. Spearman

I will not pursue that point now, because I have not the time, but we cannot expect the Empire to refuse all foreign goods. For instance, before the war Canada sold more goods to America than she did to this country. We have, roughly, three possible alternatives. The first is reversion to gold or some rigid standard, but I hope and believe that we are all so convinced that that would be a disaster than one need not waste time in discussing it further. The second is a plan something on the lines of the plan we are now discussing and the third is bilateral agreements.

I would like to say something about the plan now under discussion. It seems to me that what it really does is to afford a breathing space; it does not aim at completely stable prices, but provides the means of an orderly adjustment for those countries whose costs of production have got out of line with each other. It provides a sort of cushion. We are not irrevocably committed to anything. It is rather like a rule of the road. If one offends against that rule, he is not summoned but, it is made clear, that if everybody adheres to it, we shall all get on much better. The second point I should like to make concerns the pressure that it brings to bear on the creditor country. A creditor country which hoards, as has so often happened in the past, is just as much to blame for international dislocation as an improvident debtor. This scheme provides mechanism by which a nation enters it knowing well in advance that if she does not spend in imports all the proceeds of her exports, or invest her surplus outside her country, there will be discrimination against her and it will be entirely her responsibility that a barrier will be put up against her. That seems to me to be a very great advantage.

As far as I can see it, Clause X is a complete safeguard to us during the transition period. Our position is going to be a very weak one; our export trade has of necessity to come down to a very low level. When Lease-Lend ends, and we have not yet built up our export trade, we shall be in a very difficult position indeed and shall depend very much on the help and co-operation of the United States. I feel that when one remembers that the reason why we are weak is because as the Chancellor said in his Budget speech "We are in this war with all we have got," we can rely upon great consideration and help from other countries, but I think we can only rely upon that, provided we act in good faith.

I hope the Chancellor will give us two assurances. The first is that, if this plan is adopted, full use is made of Clause X and we do not precipitate ourselves into these arrangements too early, but, equally, that they are an objective for which we strive all we can and from which we do not deviate at all. Failing a plan of this sort, we must fall back upon bi-lateral agreements, so much beloved by our Central European economic experts, who have been such skilful propagandists for them. Their misplaced ingenuity rather reminds me of a Heath Robinson drawing. There are many objections to bi-lateral agreements but I want to refer only to two. First, it seems to me that to set up a system of regional arrangements which will cause antagonism and conflict is madness after our experience in the past. Surely it must be our job to try to make the cake of world trade as large as we possibly can, rather than try to snatch temporary security by seizing a piece of it. The second objection to bi-lateral agreements is that they put an immense responsibility upon the Government, which, I think, is quite unsuitable in a democratic country. I do not believe that even our Governments have shown themselves so infallible in their judgment and so absolutely impervious to pressure from those who shout loudest, that they are capable of undertaking those responsibilities. If we adopted them we should take a long step towards totalitarianism.

There has been a good deal of criticism of this White Paper. It is easy enough to see the difficulties in a complicated plan like this, but what are the alternatives? I should like to make two suggestions to the critics. First, may it not be that, if we do not take this, we shall suffer for it very much indeed? Secondly, what is the price that we are going to pay? I suggest that if we adopt this plan and it fails, as indeed it may do, we shall not be much worse off than if we had never tried it. To me it is rather like, "Heads we win and tails we do not lose." I warmly support the plan. I believe it provides an instrument of international government in economic affairs, which may save us, in the future from all that appalling waste and dissipation of wealth from which we suffered and on which the Nazi regime throve in the interwar period.

Mr. Boothby (Aberdeen & Kincardine, Eastern)

The speech to which we have just listened is the first which has given a whole-hearted welcome to the proposals now before us. I think my hon. Friend is the authentic voice of the City; but I suggest that he is also an echo from the past. I do not think we are likely to solve the problems of the twentieth century by applying the economic doctrines of the nineteenth, to which he seems so anxious to return. Apart from his speech, the scheme has been pretty roughly handled in this Debate. I think it unfortunate that the whole problem of post-war international trade and economic organisation should have been dealt with primarily, and in the first instance, from the standpoint of currency.

I have always held the view that other things were much more important, and that it is because we have started off on the wrong foot that we find ourselves in something of a mess to-day. I should have thought the 1933 World Economic Conference would have been a warning to us. We tried to tackle the international economic problem from the standpoint of currency then, and a great fiasco it was. However, the professional economists were bent on this currency discussion. They would have it; and, now that they see the road that they are being invited to tread, some of them are getting rather queasy about where we are going to get to next. Even professional economists have some unhappy memories; of 1925, for example, when they put us back on an international Gold Standard at the pre-war parity of exchange. With one notable exception—Lord Keynes—they were all in it; and the Treasury and the Bank of England were in it up to the neck. The results of that experiment were simple, but hardly encouraging—the worst industrial upheaval we have ever had, the worst unemployment we have ever had, a ruined agriculture, a crippled export trade, and the real burden of our National Debt doubled in the course of five years—not a bad effort for one executive act. I can imagine the most ardent professional economist being somewhat apprehensive about committing us to the same sort of thing again.

Then came the New York stock market crash of 1929. It is worth while running over these things, because the warnings of the past should be a guide to the future. Tied to Wall Street, we were towed under by Wall Street. It was American foreign lending upon which the whole flimsy structure of post-war laissez faire capitalism, so dear to the heart of my hon. Friend, was erected.

Mr. Spearman

The most effective opponent of going back to the Gold Standard is not completely dissociated from these proposals. Is the hon. Member suggesting that he has changed his mind?

Mr. Boothby

I may say a few words about Lord Keynes later if my hon. Friend will allow me now to develop my argument. It was, as I say, American foreign lending on which the whole structure of our economic system was founded after the last war. It was a flimsy structure; and when American lending stopped, it collapsed. Between 1929 and 1931 the supply of dollars for international use fell by 5,000,000,000, or 68 per cent. Imagine the effect of this on the world economy as a whole. We were all dragged to the depths of an economic depression without parallel in history. One of the results of that was Hitler, who climbed to power on the backs of 6,000,000 German unemployed. What we have to remember today, in considering this scheme, is that that was an American generated disaster, not a British disaster; and that we had deliberately deprived ourselves in 1925 of the power to protect ourselves from its dire consequences. I think the House is almost unanimous that, whatever else is allowed to happen, that must never be allowed to happen again.

There is really a fundamental issue involved in the discussion to-day. It is the issue between those who think of wealth in terms of goods and services, and those who think of it in terms of money. That was brought home to me strongly by the speech of my hon. Friend the Member for Scarborough (Mr. Spearman), who, when talking about the Empire not being self-contained, dealt with the question entirely in terms of the money-trade of the Empire before the war. He never thought of how much copper or lead or wheat there was in the Empire; and what we should do about it. He was thinking solely in terms of millions of pounds of exports and imports. That represents a fundamental divergence of view. I am in the former category; I am a goods man. I do not believe that money has, or should have, a separate and independent value of its own. I do not believe that money should be the pivot around which the whole economy, national and international, should revolve. It is no more, and no less, than a convenient medium for exchanging goods and services, and measuring their value. I further believe that there should be enough of it to facilitate the flow of production, exchange and consumption of goods, at a level sufficient to absorb the available factors of production throughout the world. Money is not petrol; it is oil; but without oil the machine is apt to seize up. I am on record in this matter, because in a Debate on 9th May, 1932, I said: The machinery has seized owing to the lack of lubricating oil; and the first thing the Government ought to do, by hook or by crook, is to oil the machine; and that can only be done by expanding credit. I would inflate until I had restored domestic prices to the level of 1928. Can the Chancellor deny that this is feasible? Then I would regulate credit to keep the value of sterling stable in terms not of foreign exchanges but of commodities."—[OFFICIAL REPORT, 9th May, 1932; col. 1638, Vol. 265.] In my view, international currency stabilisation can be achieved only on the basis of a durable peace, an expansionist policy deliberately pursued by the participating countries, a sound commercial policy, and a productive international investment policy. We are not at the moment in sight of any one of these things. I therefore think that these currency discussions are premature, and that in embarking on them we have put the cart, not before one horse, but before at least four extremely important horses. What I think we should have been talking about in Washington during all these months are, first, a Red Cross policy for assistance to the suffering peoples off Europe when the war is over; and, second, the recommendations of the Hot Springs Conference. In other words, coming back to my fundamental argument about goods versus money, we should have been talking about the essentials of human existence—food, clothing and shelter—and not about money, even when it is gold. What we should be talking about in London to-day is inter-Imperial trade, and the reconstitution of the sterling area.

That being said, it would, obviously, be an enormous advantage if competitive exchange depreciation as between nations could be avoided after the war; and if some arrangement could be made whereby the money earned by selling goods to one country could be spent in purchasing the products of another. We cannot have the chaos of fluctuating exchanges, accom- panied by world-wide speculation in currencies, when the war is over. And we certainly do not want a revival of what I would call "Schachtism," involving currency manipulation of every sort or kind. If this is to be avoided exchange rates will have to be fixed in any event, and maintained by Government-operated controls. It was done after 1931, and it will in any case have to be done again.

What we must preserve at all costs—and this, I think, has been brought out clearly in the Debate—is, first, our right to pursue a policy of internal expansion designed to achieve full employment; second, our right to conclude any trade agreements, including bilateral agreements and bulk purchase, that we wish. Upon that point, more than any other, the House requires some assurance from the Chancellor of the Exchequer. And thirdly, we must retain control over our domestic rate of interest. My hon. Friend the Member for Seaham (Mr. Shinwell), in his interesting speech, which, I think, met the approval of a large number of Members who had the pleasure of listening to it, referred to some of the ideals of the Socialist Party. If the Tory Party is to play the part after the war which I think it should, it will have to base its policy on three things—full employment, a prosperous agriculture, and Imperial development. These are the three fundamental planks on which, in the long run, the Tory Party will stand or fall. If it falls down on any one of those planks, it will be done. We have therefore to watch these proposals very carefully, and see that nothing is done that might prevent us carrying out a policy designed to achieve these three objectives.

I do not think that the pound can ever be rigidly linked with the dollar. If once again we fix the external value of the pound beyond our own control at a level which bears no relation to our wage and social policies, we can say "Goodbye" for ever, or until there is another smashup, to any prospect of full employment, of social security, of a prosperous agriculture, or of Imperial development. This policy also involves the control of imports, and of the export of capital. If we barter away the principle of Imperial Preference in pursuit of what I regard as the obsolete doctrines of Free Tade and laissez faire, we shall cease to be a world Power, and in the long run we shall cease to be even a great Power. Moreover, if we were to do that, I think we should endanger peace, for I do not think the world would long tolerate the overwhelming concentrations of industrial wealth, and therefore of military power, which uncontrolled, multilateral trade would inevitably bring about. To believe that we can revert to uncontrolled multilateral trade is a dangerous illusion. Modern productive capacity imposes its own limitations, and unless it is wisely directed it can produce chaos.

On the last point, the control of interest rates in this country, and the necessity of cheap money, upon which a policy of social reconstruction largely depends, I will content myself with quoting a sentence from a speech by Lord Keynes: Unless the aggregate of the new investments which individuals are free to make over-seas is kept within the amount which our favourable trade balance is capable of looking after, we lose control over the domestic rate of interest. That means quite simply that we must maintain control over the export of capital from this country.

How does this scheme emerge from these tests? I think it right to be fair, and to say not as badly as might have been feared. Do not let us over-estimate the proposals that are now before us. They are not so very far-reaching. They merely provide a liquid fund for the conduct of international trade; but they carry certain very dangerous implications, against which we ought to be on our guard.

They admit—and it is a substantial admission to get from the United States—the need for flexible exchange rates, and they positively encourage control over the export of capital. They do not explicitly prohibit regional, or even bilateral or bulk-purchase trade agreements, although the bias is naturally in favour of multilateral trade. I would ask the Financial Secretary to the Treasury to bring to the notice of the Chancellor of the Exchequer a point here which I believe is of vital importance. What exactly is the implication of these proposals upon our trade policy in the future? To what extent will they limit us in coming to direct bilateral trade agreements with other countries, particularly in the British Empire, and in the sterling area? To what extent will they prevent us from discriminating, so far as trade is concerned? Because we must discrminate, if we are to survive. This scheme further accepts the principle that discrimination should be applied against surplus as well as against deficit countries where disequilibrium exists. I would only say that it is important to have got the United States to come along as far as that. It also takes account of domestic, social or political policies.

There are a large number of escape clauses. Personally, I do not find this fact so tremendously encouraging, because you escape from something you do not like. If you do not get into it in the first instance, the necessity for escape need not arise. It seems to me that there must have been a lot of apprehension lurking at the back of the minds of these great experts in Washington when they decided on these innumerable escape clauses. They tell us how we may get out of these engagements altogether if the thin; really goes cock-eyed. Presumably it is to reassure people that they are not being finally trapped, and that they can escape from this structure that is being erected. That gives me rather an uneasy feeling.

The scheme says that the growth of international trade contributes to a high level of employment. I do not think that is at all true. Trade is simply the mutually advantageous exchange of goods, and it has nothing to do with employment, one way or the other. [HON. MEMBERS: "Oh!"] No, not particularly; and not so far as toe world is concerned. Trade does not necessarily lead to an all-over increase of employment; and although an export surplus may transfer unemployment from one country to another it does not necessarily increase the total volume of world employment. Development of backward countries is a different matter, but a mere increase in the exchange of goods between countries, although it may improve the standard of living and facilitate the international division of labour, does not necessarily involve an increase in all-over employment in the countries concerned.

Mr. Colegate (The Wrekin)

How can the standard of living be increased by the methods suggested by the hon. Member, as he admits, without increasing the general level of employment throughout the area?

Mr. Boothby

It varies in respect of different countries. Assume that there are two countries, A and B, which are on full employment. I say that an exchange of goods between those countries does nothing more than raise the standard of living in them. Suppose they are only half employed. Exchange of goods may increase the standard of living slightly by enabling them to purchase certain goods more cheaply; but it will not necessarily increase the volume of employment in these countries. If an export surplus is built up in one country against another it increases the volume of employment in the exporting country; but at the expense of the importing country.

Mr. Vernon Bartlett (Bridgwater)

Is it not a fact that, in the competition to export at all costs, you may increase unemployment at home as we did with our own agricultural industry?

Mr. Boothby

In some cases that is certainly so. I do not think that international trade is a panacea for unemployment—but I do not want to press the point unduly.

The scheme then contemplates a transitional period of only three years from the establishment of the Fund. When I read that I rubbed my eyes, and I asked myself what kind of a world those expert economists thought they were living in. To suggest that the transitional period, before the necessary adjustments have been made, will last only three years, is to my mind, to live at least in a fool's paradise. We shall be very lucky if we get through the major dislocations caused by this world war in 15 years, let alone three years. The suggestion is a preposterous one. The two methods by which it is proposed to maintain equilibrium under the scheme are the devaluation of weak, and the rationing of strong, currencies. For technical reasons I doubt the efficacy of all-round devaluation of the currencies of deficit countries, in slump conditions after the war. The conditions of 1931 were exceptional. With regard to the rationing of scarce currencies, it must be borne in mind that this applies only to the supplies available in the Fund. There will be quite a lot of dollar-surplus countries which will have no need to cut their imports.

The aim apparently is to force the United States to lend money when they have built up a surplus. But it really is an illusion to suppose that in international lending is to be found the ultimate solution for serious disequilibrium on current trading account. I do not think the answer to that problem is international lending, which is foxing the issue. The real answer is a balance of exports against imports. This suggestion is an attempt to escape that issue. Short or medium-term credits for the execution of particular projects or contracts are, in themselves, highly desirable; but I do not think it is desirable that, in the modern world, private interests in any one country should either seek, or obtain, a permanent controlling interest in the fixed assets of any other country. That is what long-term lending by private interests, if encouraged to too great an extent, will involve. I do not want to see the United States owning half the equities of this country.

Sir A. Beit

Does the hon. Member think that this country is to be criticised in this respect for what it did in the 19th century?

Mr. Boothby

Yes, and I think perfectly rightly and justifiably. The owners of Mexican and Brazilian tramways and all the rest of it are suffering at the present moment because of what we did then. When I think of the amount of money we lost in South America alone—[An HON. MEMBER: "Gained"]—they may have gained, but not us—I repeat that it is undesirable from every point of view that the fixed assets of one country should be owned by private persons in any other country; and I do not change my opinion.

Mr. Astor (Fulham, East)

In the Empire, too?

Mr. Boothby

Yes. I have never heard it maintained, and I do not think that the hon. Member would contemplate it with equanimity, that there should be a long-term lending policy on the part of the United States which would enable them to buy a very large part of the fixed assets, and equities of this country. I do not think it would be desirable, in the long run, for the United States; and, from our point of view, it might lead to very great international trouble in the long run. The development of backward deficit countries is an entirely different matter. In that case, loans will have to be made on long term to Governments. I regard an International Investment Board as an essential part of any international currency scheme that is to work. Long-term loans by an International Investment Board to the Governments of the countries concerned are quite a different matter.

I come finally to the question of gold. That has been referred to a great deal in the House to-day. I was reading the other day a speech by a right hon. Gentleman in this House on 21st April, 1932, in which he said: Is the progress of the human race in this age of almost terrifying expansion to be arbitrarily barred and regulated by fortuitous discoveries of gold mines here and there or by the extent to which we can persuade the existing cornerers and hoarders of gold to put their hoards again into the common stock? Are we to be told that human civilisation and society would have been impossible if gold had not happened to be an element in the composition of the globe? These are absurdities; but they are becoming dangerous and deadly absurdities. They have only to be asserted long enough, they have only to be left ungrapplied with long enough, to endanger the capitalist and credit system upon which the liberties and enjoyments and prosperity, in my belief, of the vast masses depend. I therefore point to this evil and to the search for the methods of remedying it as the first, the second and the third of all the problems which should command and rivet our thoughts." [OFFICIAL REPORT, 21st April, 1932; cols. 1662–1663, Vol. 264.]

Lieut.-Colonel Elliot

The hon Member will remember further that in that speech the right hon. Gentleman the present Prime Minister, whose eloquence we all admire, suggested as a remedy for all these very things co-operation between this country and America.

Mr. Boothby

I am not arguing about that. I am only quoting a speech made by the present Prime Minister with which I find myself in agreement. If a visitor from Mars visited this globe to-day he would think it a very peculiar place. First of all he would find a whole lot of us trying to blow each other up. But, as a subsidiary and very entertaining side-show, he would surely find it odd to see men in South Africa burrowing under the ground, bringing up gold, making it into little blocks, putting them on to trains, unloading them at the ports, putting them into ships, unloading them again, and burying them once more under ground in the vaults of Kentucky. Nobody seeing them, nobody using them—no use to anyone at all. The value of the gold mined in 1938 was equivalent to the total value of all the other metals which are of use to humanity in the whole world. [Interruption.] This plan does propose to go back to gold. It makes gold the basis of international credit.

I think it is too much to ask the United States to agree to the demonetisation of gold. If I owned £4,000,000,000 worth of gold I should be very reluctant to agree to its demonetisation. But if gold is to be he basis of international credit let there be enough of it to finance the production and trade of the world on an expanding basis. One of the main criticisms of this scheme is that, unlike the original Keynes scheme, it does not provide enough international money. I think that the price of gold should be fixed by the sterling countries high enough to ensure that the annual production is sufficient to take care of whatever export surplus the United States may wish to have. Then we can really get going, if they will take the gold at that price. If the price is raised high enough to look after their export surplus, that will have an expansionist effect on the trade of the world. The basic problem is not how to write up debt, but how to write it off with the least harm to humanity. I believe that the price of gold, if we are to make gold the basis of international credit, will be a matter of vital importance, and should be given very serious consideration. If the sterling countries have the power to fix the price of gold sufficiently high, we may be able to devise a scheme which will lead to an expansion of trade and commerce and the production of goods all over the world.

About the Fund itself we know very little. We have not been told what the quotas are to be. We do not know exactly about the voting power. We do not know what the price of gold is to be. There exists as yet no comprehensive scheme for the relief and rehabilitation of the countries which have been devastated by the war. There is no scheme for long-term international investment, which I believe to be essential to any international currency scheme. We have no assurance that the United States intend to pursue a policy of deliberate economic expansion. We do rot even know clearly what our own policy is to be. I honestly think that before we tell the United States how we think they ought to rebuild the world we should be able to tell Lord Astor how we think he ought to rebuild Plymouth. Suddenly to ask the House of Commons to approve some vast international scheme before we have evolved an internal economic policy for ourselves is asking us to bite off a bit more than we can chew.

Unless and until we know more about these vital questions it would be madness, in my view, to tie ourselves up in any hard and fast currency scheme. This Motion does nothing more than it says. There was a letter from Dr. Balogh in the "The Times" to-day which said that if the House passed this it would be committing itself to all kinds of things. I suggest that that is stuff and nonsense. What the House is doing is, subject to a lot of provisos, and many have been suggested, to say that the Government can go on talking. It would be the height of discourtesy to say to one of our Allies, to whom we owe so much, on the eve of great offensive operations, "No. We will stop talking altogether. We are not going to consider the question of international economic co-operation with you at all." If the United States will cooperate with us in pursuit of an internal policy of expansion, and an external policy of functional international organisation, the path to high general levels of income and world trade will be open; and we shall enjoy a prosperity that we have never known. If they will not do that, we shall have to make our own contribution to the solution of the world's economic problems; and we must retain the power to do so. That is what we ought to tell them explicitly.

The Chancellor will, I hope, make clear in his reply that we are committed to nothing more than further discussion; and that he will not come back with any cut-and-dried scheme and say "Take it or leave it. That has been accepted by us." I hope that any scheme that is worked out will be very different from the proposals in this White Paper; and that it will be submitted to this house for ratification before final approval. This Debate has made it perfectly plain that the House is not in a mood to accept these proposals out of hand; and that the Government cannot go ahead and fix things up on these terms. The solution of the modern world economic problem is to be found in the application of the same principle to the international as to the national field, namely, an increase of effective demand by making the means of payment generally available to purchase the abundance which modern science and machinery have placed at our disposal. Economic policy should be nothing more than the technical means of achieving political ends—the most important of which is full employment in a free society. The remedy for depression is expansion. That is what we must get home to the United States; because in that single sentence lies the key to future world prosperity.

Sir I. Albery

I want to ask the hon. Member if he remembers that he put his name to the Motion, part of which reads: … provides a suitable foundation for further international consultation. …' Could he say if he thought that any part of his speech would support that expression of opinion?

Mr. Pethiek-Lawrence (Edinburgh, East)

The House has listened to a most interesting Debate which has dealt pretty broadly with the most important subject under review, and each one of us can only contribute a certain viewpoint on this matter. I shall endeavour, in speaking at this stage, to put before the House certain general aspects to which I hope the Chancellor of the Exchequer will be able to direct his attention when he comes to reply. In view of the speech made by my hon. Friend the Member for East Aberdeen (Mr. Boothby) it might be worth while if I read the Motion to the House before I commence my speech: That this House considers that the Statement of Principles contained in Cmd. 6519 provides a suitable foundation for further international consultation with a view to improved monetary co-operation after the war. The speeches that have been delivered have been, more or less according to the speaker, favourable to the actual scheme in the White Paper, but I think nearly everyone who has spoken—perhaps not my hon. Friend the Member for Seaham (Mr. Shinwell)—considers that this Motion should be carried, and I think the Chancellor of the Exchequer may take it that the Motion represents the general consensus of opinion of this House.

There are three considerations to which I think the House should devote itself in taking this matter under review. The first consists of the general principles by which the country should be guided in its approach to this problem. The second consideration is, What are the mechanical details of this scheme contained in the White Paper, which has been agreed, up to the expert level, between us and the United States primarily, and, to a certain extent, by a number of other nations? The third consideration is, How will the plan work out in practice if it is put into operation? So far as the general principles are concerned, I think the public are in a position to have views and to express them, and to have their views listened to. When I say "the public," I mean not only the public of this country, but, in fact, the public of the whole world, because they are intimately affected by any decision that may be reached. So far as the mechanical details of this scheme are concerned, I think the general public can hardly be expected to have formed any views at all, and Members of Parliament can reach conclusions themselves only if they have studied the White Paper very carefully and, possibly, if they are assisted by expert opinion. When we come to the third consideration, of how this scheme will work out if it is put into operation, I suggest that none of us here, with the possible exception of the Chancellor of the Exchequer—and I see that he shakes his head—and none of the experts, can feel at all sure how it is going to work out in practice. I think that hardly anyone except the historians of the future will be able to judge what it will be like.

I think we are all agreed about general principles. We want to see a healthy international trade promoted. We want, as my hon. Friend the Member for East Aberdeen said, an expansionist policy, and I think that the great majority of people recognise the need for co-operation. But this scheme is a banking and exchange question, and no scheme of banking can create international trade. It may help to foster it, but it cannot create it; and, in its broad sense, cannot even foster it. The business of a banking system is to provide channels through which a stabilised international trade can work. The promotion of the trade must rest with other people. The only thing that might happen is that the banking system might check and hinder its development. Not only does it not concern itself with international trade, but it does not even make the channel for the promotion of big capital development, because this scheme is concerned with what bankers call short-term credit, and not with long-term credit. The long-term credit for the promotion of capital de- velopment has to be provided by entirely different means. The means which are contemplated in this scheme are far too small: they will be far too quickly used up if they are diverted from their proper channels of providing short-term credit for carrying nations over temporary disequilibria into the realms of big-term lending, which are necessary for meeting the large disequilibria in payments between one country and another. No banking system can create expansion: the only thing that banking systems in the past have sometimes done is to check expansion. Therefore, we cannot look to this scheme for any positive proposals for creating an expansionist economy. We have to make quite sure that there are no proposals in the scheme which will have the disastrous effect of bringing expansion to an end, and substituting restriction.

When we come to the point about co-operation, we have to remember that co-operation necessarily involves certain risks. What those risks are in the case of this particular scheme I will mention presently. For the moment I want only to make this point: that, whatever may be the risks involved in co-operation, there are also very grave risks in non-co-operation; and if we are not to have co-operation, we may be driven to a form of non-co-operation which may be much more serious and which may land us in grave danger. The main risk of non-co-operation in this matter of international trade is that, instead of getting to multilateral trade we may go back to bilateral trade, and what really it would be, bilateral barter. I am against bilateral barter; and it would he a very dangerous thing if we were forced back into that position. Therefore, I come with a favourable mind to the question of cooperation, not in order that we may, as it were, give a bun to a bear of some other country with which we want to keep on good terms, but because I think we should get our quid pro quo in co-operation, and if we have to give something, we may get from our colleague nation something of value to us in return. In my opinion, those are considerations which will weigh with people in general terms.

When we come to the present scheme, we have to contrast it, in the first place, with the two schemes that were before us a year ago. There were then what were popularly known as the Keynes scheme and the White scheme. I have seen it stated in the Press—I am not sure that it has been said in this Debate—that this new scheme is, in some way, a compromise between the two. That is not my view. I regard this scheme as being essentially different from either of those two schemes. In some respects it does lie between them, but in some respects it lies outside both of them. In my view, it is a great advance on either, and I shall endeavour presently to show why.

The points that arise on the scheme itself are, first and foremost, the question of gold. I have been unorthodox, according to the view of the orthodox of years gone by, on the matter of gold. I took an adverse view about the return to gold—I think it was in 1925—when the present Prime Minister, as he afterwards admitted against his better judgment, brought us back on the gold system. I was against it then, and that has been my position, and I was rather intrigued when I went to a very distinguished dinner party somewhere, I think, in Park Lane, at which Sir Henry Strakosch, who will be known to many hon. Members as a very great financier, said: In gold we have trusted; By gold we are busted. I am bound to say that that colloquial phrase was not very far from the truth, and I was very much interested to hear from the hon. Member for Hastings (Mr. Hely-Hutchinson) that he was getting near to the view that, instead of having a Gold Standard, we should have what I call a "basket of goods standard" in its place, because that is a matter which many of us have thought about for a long time past. Therefore, the first question we have to ask ourselves with regard to this scheme—and it is a question which is asked by everyone, not only in this House, but all over the country and, I think, all over the world—is: Does this scheme bring us back, and bring the world back, on to a gold basis? I think it is rather difficult to answer "Yes" or "No" to that question. It certainly goes a long way to taking us back to a gold basis, but it does not go to anything like the extent of carrying us back to the old Gold Standard that used to reign in the days gone by. It does introduce gold into the picture, but the extent to which it reintroduces gold is one about which, I am bound to say, after reading the Paper three times, I do not feel too sure. Therefore, I say that it is one of the matters which has to be dealt with in any further conversation which, as suggested in this Motion, the Chancellor of the Exchequer may have in future.

It is not enough merely to consider whether we are going to be tied to gold. The question which is also exercising the minds of large numbers of people is: How far are we going to tie our economy to the economy of our great partner, the United States? It may well be that, in many ways, it would be a great advantage to have the two countries marching forward together. But, supposing that, in the United States, the history of the years that are to follow repeats the history of the years gone by, in the last half century? If we are, in any very specific sense, tied to the economy and the finance and monetary values of the United States, we may find ourselves forced into the same terrific fluctuations which they have had in the United States. There is actual fear that, in too rigidly binding ourselves to that country, we should involve ourselves in those fluctuations. What we have to consider is this. Supposing we do not enter into this Agreement, supposing we do not have any currency arrangements with the United States, shall we be able to escape the influence of these fluctuations? We have not been able to do so in the past, and the question arises whether these arrangements will make it more easy for us to isolate ourselves from the United States, or drag us more closely in. Another question is whether the Agreement will help to damp down these oscillations which are so dangerous to trade and commerce. I am inclined to think that some of the provisions of this scheme are so contrived as to damp down these oscillations. If that is so, the fact that we are united to the United States in some way, though it may make us a little more liable to their influence, may be an advantage to us in getting us a little more on a steady basis.

We have then to ask ourselves the further question: Are we becoming liable to an international dictatorship, as has been remarked by one speaker in the Debate? Not very much is said in the White Paper as to the nature of the management of this international Fund. We know that it is to be according to quotas, but there is no definite statement what the quotas will be. We do not know what proportion of votes will be held by the United States, by us, or by the different parts of the British Commonwealth and by other countries. We are, at the present moment, rather in the dark. We may imagine a management of the Fund which could become a very great dictator.

When I was at the Treasury, as Financial Secretary, Lord Snowden, as he afterwards became, was ill for part of the time and was absent from duty. At that time, the Bank for International Settlements was being formed, and I had, to sonic extent, to decide what view our representative should take when he was present at the inauguration of that Bank. I had always been very strongly in favour of an international organisation for banking, but, when I came close up to it, I realised that there was also a very grave danger involved. I may say that it was thought at that time that the Bank for International Settlements might be a very much greater world force than it afterwards became. I had thought, up to then, of the Bank of England as a separate thing, apart from this House and unrepresented in this House—a Bank of England as an entirely separate organisation, not responsible to Parliament, but able to influence British affairs to a more important extent than even the Government of the country. If we set up in Switzerland a Bank for International Settlements, in which our own Bank of England was to have only a small voice, and if we had practically no voice in the conduct of the Bank of England, I realised that this Bank for International Settlements might become a Frankenstein monster over which we should have no control and which might easily dominate the affairs of this country and of the whole world, without hon. Members of this House having any say in the matter. Therefore, when it conies to the question of setting up another great body like this Fund, I think we have to be very careful how the Fund is to be controlled, and what share we are to have in that control.

I am tempted to think of another illustration. Over the week-end I have been reading a book about the Dinosauris, and I find that these were very large animals roaming over the earth some scores of millions of years ago. The most important and overpowering of these animals was called the Tyrannosaurus Rex, and he seems to have been a very large and powerful animal because if he stood on a tennis court, his nose would poke through one side of the wiring of the court, while his tail would be poking through the wiring on the other side. He roamed the world and everything else had to give way to his desires. I can conceive the management of a great Fund that might become a regular Tyrannosaurus Rex to us for all the rest of our lives. We might find our whole activities limited by the intentions and rules of that Fund. There is the danger against which we have to watch.

We found that the sterling bloc which was established after we had gone off gold was very valuable, I would not like to say institution, but apparatus, which certainly served a very good purpose. It helped our recovery, and was helpful not only to the people of this country but to the people of other lands at the same time. We are all exceedingly anxious that the creation of this monetary mechanism should not mean the dispersal and destruction of this sterling area which has produced such good results. I understand it is claimed that under the White Paper that will not be the result, but that is a matter which is not very clear from the precise reading of the White Paper itself.

What are the advantages of this scheme we are discussing and what are its risks and dangers? The first advantage—and it is essential—is that it brings into being again, multilateral clearing as against hi-lateral clearing, which was the principle of a good part of the inter-war years. The second great point, which is very important, is that for the first time, as I see it, in the history of the world, there is an apparatus for bringing pressure to bear on a creditor. Hitherto any failure to balance payments has always been laid at the door of the debtor. Now for the first time it is going to be partly laid at the door of the creditor nations, and that is a step forward in the right direction, which I count as one of the very important parts of these proposals for the Fund.

We have to remember, particularly in these financial matters, that the shadow of possible coming events is cast before. The provision to which I am referring is the possible rationing of the currency of a great creditor nation when that currency is getting short in the Fund. With rationing of creditor nations' currency, other nations are able to make discriminating provisions; and the export of the country's goods is going to be a very unpleasant business for creditor nations. That being so, when there seems to be a prospect of that happening, people in a position to know and to conduct their country's affairs will try to avert that definite step of rationing their country's currency. I think that that is a very good and a desirable thing contained in this proposal, which I do not think has really existed in anything like that form before, though it was mentioned in the Keynes plan a year ago, and, to a much smaller extent, in what is known as the White plan.

Finally, and rather a more vague feature, this scheme means that there will be a concern in the minds of the other countries of the world, jointly and severally, in the misfortunes of any individual country. We have talked rather glibly in times gone by, saying that no country can suffer without other countries suffering at the same time. Here, for the first time, there will be a definite material recognition of that fact and that, I certainly regard as a very useful thing.

Weighing it all up, I think the House will probably come to the same conclusion as I have done. It is, first, that there is a grave risk in doing nothing, in avoiding co-operation and going back to bilateral trade, and secondly to a scramble, where the world is not particularly interested in the misfortune of any individual country. At the same time, there are grave risks in any scheme, and there are certain grave risks still unresolved in the present scheme. It depends very much, not only upon the final or larger details the Chancellor, if he carries out the spirit of this Motion, gets into the final draft, but upon the whole spirit which permeates the mechanism of the proposal when it comes to work. Therefore, it is of great importance that he should prosecute his inquiries and should make it quite clear that it would be disastrous if we got tied up to gold; that it would be disastrous if a board of management, either incompetent or unwise or one-sided, were to rule this Fund, and that he will have to use his judgment and his action in preventing these things from coming into being.

I do not go as far as my hon. Friend the Member for Seaham in objecting to the scheme. I think he went too far in his criticism. We have to go forward, but with caution, because of the uncertainty. As I said at the beginning, I do not think that anybody, certainly not the general public and not Members of this House, and not even the experts, can be quite certain how the thing is going to work out, and because of that the escape Clauses are of very great importance. In so far as there is an escape Clause by which, after a further discussion with the managers of the Fund, we can move the rate of exchange even further than the to per cent.—though I think it is most undesirable to keep altering it—the fact that you have the power to make those alterations enables accommodation to be made. People say that if you do not make accommodation you drive them into the alternative, which is taking some drastic step. The fact that you have those possibilities while still a member of the Fund, and, in the background, the possibility of going out of the scheme altogether when you find it imperative to do so, is a very great advantage.

Finally, I want to ask the Chancellor this question. As I see it, our only obligation if the scheme is carried out and we enter it, is that we will try to make this scheme work, but, of course, if we were in any sense morally pledged to stay in the scheme and to sink with it, that would be a most disastrous thing. I think it is essential that the Chancellor of the Exchequer should make it perfectly clear to-day. Of course he cannot bind his successors, but he can state in this House at the present time the spirit in which he enters it: first of all, that he is not bound by the scheme as it is and that he is only using it as a basis for further consideration; secondly, if and when the scheme comes into operation, he will work it in the spirit of the Debate in this House and with the remarks I have made, that he will not under any circumstances regard our commitment to the scheme as so rigid, or as such a moral obligation upon his country, that future Chancellors of the Exchequer would hesitate to free themselves from its shackles if it were dragging this country or the world down into disaster.

The Chancellor of the Exchequer (Sir John Anderson)

I believe most hon. Members will agree that we have had a very useful Debate on a most important topic. The Debate is one which had been persistently asked for by hon. Members. It has not been forced prematurely on the House of Commons by the Government, as my hon. Friend the Member for Walsall (Sir G. Schuster) seemed at one point rather to be suggesting.

Sir G. Schuster

No, no.

Sir J. Anderson

Well, I thought the hon. Member suggested that it was a little unfair, at this stage, to ask the House to express an opinion on something which was only past—as he undoubtedly was right in saying—of a complex of measures designed to promote our interests in the post-war world. I have myself, on more than one occasion, given the House an assurance that the Government would come to this Debate without any commitment. I hope no hon. Member anywhere in the House thinks that that assurance has not been most fully redeemed. Before coming to certain specific matters of detail in connection with the scheme, there are two general observations I should like to make. The first is that I think we all owe a very great debt of gratitude to those who have collaborated in the working out of this plan. An immense amount of time and thought and care and effort on the part, not only of our own people, but of the experts and representatives of other Governments, has gone to the framing of what I might call the third edition of our currency plans. As I have said, I think we owe them all a very great debt of gratitude, whatever may be the ultimate outcome of our deliberations.

The second observation of a general character I want to make is this. This is indeed, as many hon. Members have said in the course of the Debate, a matter demanding the most careful examination on the part of all of us, because the financial and economic future not only of the United Kingdom, but of the whole Commonwealth, may well depend upon how we direct ourselves in regard to these matters. Before I proceed to comment on some of the main aspects of the plan, there are a few points upon which information has been sought by speakers in the debate which perhaps I had better get out of the way first.

A question was raised by my right hon. and gallant Friend the Member for Kelvingrove (Lieut.-Colonel Elliot) and also by the right hon. Gentleman who has just sat down in regard to the voting arrangements contemplated in the plan. They are not set out in the plan, and hon. Members are undoubtedly at a disadvantage in estimating the working of the plan in the absence of precise information on that point. I can tell the House this, that the general idea accepted by our friends in the United States and ourselves—when I say "ourselves" I mean the experts who worked on the plan—is that voting power should run parallel with quotas, and that the voting power of the United States and the voting power of the British Commonwealth should be, for practical purposes, equal. That is the idea running through this plan. It has been brought out quite clearly in discussions between our experts and the experts on the other side of the Atlantic, and I am glad to be able to make that point perfectly clear. The voting power of the United States and of the Commonwealth would probably work out in each case at something like 20 per cent. or 25 per cent. of the total, though it depends on the actual quotas and there is some disagreement as to the quotas of some of the smaller countries. That is my understanding of that point.

There is another matter on which the White Paper gives inadequate information and that is in regard to the arrangements for management of the Fund. This is a most vital matter, as my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) very justly pointed out. There is indeed need, in my opinion, for further and closer discussion in regard to the arrangements for management, if we go on with the plan, and not only with the arrangements for management but the location of the offices of the Fund and so on. Our experts on this side have the conception of a general council of men of very high standing, with alternates who could take their part at periodical meetings but, at the same time, an element of executive management with a certain security of tenure composed of people chosen for their known freedom from prejudice or bias, and for their expert knowledge.

Mr. Stokes

By whom?

Sir J. Anderson

They would be chosen, of course, by the representatives of the nations forming the general directorate of the Fund. That is the general idea but it needs to be very much more closely worked out.

Then the question was put by my hon. Friend the Member for Kidderminster (Sir J. Wardlaw-Milne) as to where the currencies, in which the Fund is to deal, will be held. He rightly conjectured that they are to be held in the central banks of the various countries. In fact, the Fund will be banking with those central banks. My hon. Friend also asked whether the United States could, for example, under this plan, pay their quota fully in gold. As I understand the matter the answer is, "Yes." My hon. Friend also asked how Clause III (7, b) is to be interpreted. As hon. Members know, the Fund is to be made up in the main of national currencies, with a proportion of gold, and the intention of the Fund is to provide a means of strengthening those currencies. Therefore, in the circumstances it seemed reasonable that if a member State possesses gold in large quantities the management of the Fund should be entitled to require of that State that it should put a proportion of its gold at the disposal of the Fund for the strengthening of the currencies of the State. Another question my hon. Friend asked was whether the scheme enabled one nation to discharge its duty to another by giving that other nation a claim on its own money, or, in other words, a claim on its exports. The answer is undoubtedly, "Yes." The main purpose of this scheme is to secure that result.

Sir J. Wardlaw-Milne

How does that square with the right of any nation to provide 100 per cent. in gold?

Sir J. Anderson

I do not think there is any inconsistency. Gold is a valuable commodity and there is no doubt whatever that it would be readily disposable. [An HON. MEMBER: "You have not got it."] We have some. I would now like to say something about the right of members to withdraw, a right on which my right hon. Friend the Member for East Edinburgh dwelt at some length in his speech. Provision for that right, I understand, was introduced into the scheme primarily because it was held that no purpose could be served by attempting to hold people in the Fund against their will. It was felt that small nations would be more likely to come into this scheme if they felt that in the last resort they had the right to withdraw. It was also considered that having the right to withdraw in certain cases—indeed the discretion—would protect, to some extent, the members of the Fund against any tendency on the part of the management to be unreasonable.

Before I pass from this question I would like to say two other things. First, I can readily give my right hon. Friend opposite the assurance for which he asked, that it would not be, in the view of the Government, right to take up an attitude now which would deprive a member country of the advantage of this right to withdraw. We are not proposing to create a situation in which it would be possible to charge a country with having wrecked a great scheme by withdrawing, if the circumstances of withdrawal were such as are contemplated in this scheme. The second thing is in regard to the suggestion which my right hon. and gallant Friend the Member for Kelvingrove was disposed to throw out, namely, that it might be possible, perhaps, to find what I might call an intermediate sanction between accepting the dictates of the management of the Fund, however distasteful, and clearing out. I think it may well be that some modification of the plan could be devised which would enable a member State to remain in the Fund, although it had taken action which the management of the Fund, for the time being, were not prepared to approve.

I pass now to the question of scarce currencies. My right hon. Friend opposite was quite right in regarding as severe the provision in the scheme for enforcing the obligations which properly fall upon creditor States by providing various sanctions, where such a State fails to discharge those obligations. It was felt that the sanctions provided in the scheme were of a very severe character, that they were probably so severe that a State whose currency was becoming scarce would, in practice, take measures to relieve the situation which was developing before the question of enforcing the sanctions provided by the scheme had become of practical importance. That is the view which the framers of the scheme took, and my desire is for put the House in possession of any explanation I can in regard to provisions of the scheme upon which comments have been made. I would like to say something about a question which has engaged the minds of many Members—how far this scheme involves States that may enter the plan in a return to the Gold Standard. I believe there is no foundation for the view that this scheme in any way involves a return to the Gold Standard. Certainly, the attitude of His Majesty's present Government would be one of the most vehement opposition to any suggestion that we should go back to the Gold Standard.

Let me try to explain, as briefly and as simply as possible, why I think the view I have indicated is the right view. Hon. Members will perhaps forgive me if I begin by a rather elementary statement of what I understand by the term "Gold Standard." The classical view of the Gold Standard is, I believe, that of a currency which is self-regulating being fixed by law at a certain parity of gold, and being kept between what are called specie points by a free movement of gold in and out. That was the old, orthodox Gold Standard monetary system which we had in this country up to the outbreak of the last war. We have seen variants of that system. In particular, in our own case, between 1925 and 1931 we had a Gold Standard which was not self-regulating but which was so managed that it was kept between the specie points on a fixed parity with gold. What this plan contemplates is that, instead of a fixed parity, there should be a recognised machinery for the adjustment of the rates of exchange of the several countries in relation to other currencies, including the United States currency, which is based on gold and, therefore, the scheme provides for regulating the parity of national currencies in the last resort with gold, but it is not a question of clamping the national currency to gold. It is a question of keeping national currencies in relation to gold by what we might describe as an adjustable link. They are kept in relation, but the link which joins them is a variable one and the scheme is designed to facilitate the adjustment of exchange rates where fundamental disequilibrium of exchange has arisen.

I should like to explain what I understand—I may perhaps be wrong—by fundamental disequilibrium. I do not mean, as I think my hon. Friend the Member for Lowestoft (Mr. Loftus) indicated, merely a disequilibrium in the balance of payments. What I understand by a fundamental disequilibrium for this purpose is where the relationship of currencies one to another has got out of harmony with the respective values of those currencies in terms of goods and services. In those circumstances the management of the Fund is enjoined to facilitate adjustment of the par value. The right hon. Gentleman opposite was right in saying that one of the objects of the Fund, as set out in page 6 of the Statement of Principles, is to damp down temporary disturbances affecting exchange rates.

May I say a word about the position of what we know as the sterling area in this connection. I have said more than once that the Government would not be disposed to favour any plan which was likely to interfere in any way with the relationship between the different States which have been in association with one another under what we understand by the sterling area arrangement. We adhere quite firmly to that. We have made it absolutely clear, in the discussions on the other side of the Atlantic, that that is our position. I can say now that the technical representatives of the Dominion Governments who were engaged in discussions a few weeks ago in this country with our representatives were unanimously agreed that there was no reason to expect that the long-term objectives of these monetary proposals would be in any way detrimental to the maintenance and strengthening of the relations between the countries forming the sterling area. What I have said in that regard applies also to other countries which have looked to this country.

Another matter to which hon. Members obviously attach great importance is the bearing of this on the policy of full employment, to which the Government, with the support I am sure of Members in all quarters, stands pledged. Any danger to the policy of full employment from external influences would presumably arise either from our inability to sell a sufficient volume of exports to pay for the food and raw materials requisite for full employment or as the result of fluctuations in employment in the export industry as a consequence of violent fluctuations in external demand. The arrangements under discussion are designed to help the full employment policy in both those respects, because one of the main purposes of the plan is to prevent, or at least to mitigate, violent fluctuations in external demand and, in addition to the specific measures contemplated, the Fund will provide a platform where, in the event of difficulties, the best co-operative means of escape from those difficulties can be discussed by representatives of the countries concerned. In the section of the plan dealing with the purposes and the policies of the Fund it is expressly stated that the Fund will be guided in all its decisions by the purpose of shortening the periods and lessening the degree of disequilibrium in the international balance of payments of member countries. It is also expressly provided in the Statement of Principles that the Fund shall not be entitled to call in question, in dealing with any applications which may be made, the domestic policy followed by the country concerned.

I should like to deal now with some of the points made by those who have taken part in the Debate. I should like first to deal with the powerful speech of the hon. Member for Seaham (Mr. Shin-well). I thought that towards the end of his speech he adopted a rather minatory attitude towards me, but that was probably for rhetorical purposes. I am doing nothing but presenting to the House a plan drawn up by experts, which hon. Members have expressed a very keen desire to debate, and I am now engaged in explaining certain points arising in connection with that plan. The hon. Gentleman—this ran right through his speech—asked himself a series of questions. What is the prospect of America lowering her trade barriers? What is the use, he asked, taking a metaphor from my right hon. and gallant Friend the Member for Kelvingrove of a permanent way if there is no desire to travel? American imports will be necessary to us. How are we to pay for them? Incidentally, in that connection I thought he inadvertently raised an argument in favour of the multi-lateral approach of this scheme rather than the bi-lateral. May I remind hon. Members of the origin of these plans that are now being worked out, not only this one, but other plans that have been under discussion? It all goes back to Article 7 of the Mutual Aid Agreement. Perhaps hon. Members will allow me to quote a few passages from that Article, which was accepted by His Majesty's Government. It runs: In the final determination of the benefits to be provided to the United States of America by the Government of the United Kingdom in return for aid furnished … the terms and conditions thereof shall be such as not to burden commerce between the two countries, but to promote mutually advantageous economic relations between them and the betterment of world-wide economic relations. To that end, they shall include provision for agreed action by the United States of America and the United Kingdom, open to participation by all other countries of like mind, directed to the extension, by appropriate international and domestic measures"— this is very relevant to the question of expansionist policy on which stress has been laid— of production, employment, and the exchange and consumption of goods, which are the material foundations of the liberty and welfare of all people; to the elimination of all forms of discriminatory treatment in international commerce, and to the reduction of tariffs and other trade barriers, and, in general, to the attainment of all the economic objectives set forth in the Joint Declaration"— that is, the Atlantic Charter. Then it went on: At an early convenient date conversations shall be begun between the two Governments with a view to determining, in the light of governing economic conditions, the best means of attaining the above-stated objectives by their own agreed action and of seeking the agreed action of other like-minded Governments. It is important that in any Debate on this or any other of the plans that have been under consideration, this document should be kept in view. As the Prime Minister made clear in the recent Commonwealth Debate in the House, before this Agreement was formally entered into between our two Governments, the understanding was clearly established between us that this contained no obligation on our part to get rid of Imperial Preference in consideration of the Lease-Lend facilities that have been put at our disposal. I have not the slightest doubt that those who have been engaged in discussions with representatives of the British Treasury on the other side of the Atlantic have been handling this matter with the most complete good faith and with the intention of securing, as far as possible, the objectives set out in the passage from which I have quoted. Of that I have no sort of doubt whatever. There is no reason to see in this plan any deep or dark design to get the better of this country in these matters.

My hon. Friend the Member for Walsall, to whose speech I have already made one or two references, stressed his view that it was bound to be extremely difficult to assess the value and importance of a plan of this kind unless there was at the same time available to Members all the other schemes and plans which, together with this, will form the basis of a comprehensive economic system for the postwar world. I quite recognise the difficulty, but I can assure my hon. Friend that we have to proceed in these matters by stages. This currency plan is a general plan which must form part of the foundation for any scheme concerned with our external relations, and it seemed to me not unreasonable that we should get ahead as rapidly as we could in working out the technical details of a plan of this kind while leaving any final commitment of principle to stand over until we have looked at the picture as a whole.

Mr. Shinwell

It is a vast picture.

Sir J. Anderson

My hon. Friend asked a question. He asked whether we think that an increase of 5o per cent. in our exports—whether in money value or in quantity—will, in fact, be practicable. The answer is that His Majesty's Government intend to work for that objective, and that they do not regard it as in any way unattainable, in their co-operative effort. In the earlier part of my speech I dealt with the question about management which my hon. Friend raised.

The hon. Member for North Lambeth (Mr. G. Strauss), who is, I think, not in his place, expressed his disagreement, rather to my surprise, with three of the items in the statement of objectives on page 6 of this Paper. I did not think that he did full justice to what is set out in the Paper. I intervened to point out that, when he referred to the elimination of foreign exchange restrictions, he omitted the very important words which follow "restrictions," and which are: which hamper the growth of world trade. When he expressed his strong objection to exchange stability, I thought he was interpreting exchange stability as. if it meant exchange rigidity, which, of course, is not what the plan means, and is, in fact, what the plan is designed to avoid.

I come now to certain points with which I have not dealt, in the speech of my right hon. Friend the Member for East Edinburgh. I found myself, speaking personally, very largely in agreement with what he said. He clearly favours strongly the multilateral approach, as contrasted with the bilateral. That is my view, always provided that there is nothing in the plan which will prevent us from entering into reciprocal trade agreements with other countries or groups of countries, either in the monetary or in the economic field. I say quite categorically to the House that, in considering this plan, we considered it—we have made it clear to the representatives of the United States—subject to that stipulation. Only if that understanding can be given effect to, shall we be prepared to enter into it.

No one could attach more importance than I do to the maintenance of our traditional relations with countries which have stood by us in the past and which, I know, are eager to stand by us in the future. I did not quite agree with my right hon. Friend when he expressed the view that this matter takes us a long way —I think that is what he said—or goes a long way, towards gold.

Of course the scheme recognises gold as a valuable commodity and as the basis of important world currencies, notably of dollars. We cannot get away from that. We cannot suggest to the United States that they should abandon their gold basis. I say quite frankly to the House that it is very important, and it is going to be very important in our further examination of this plan, or any development of this plan, that every possible care should be taken to guard against any tendency in the working out of the plan to favour a currency just because it rests on gold rather than a currency like sterling, which rests on what most of us would regard, I am sure, as an equally stable foundation of good repute and standard of probity in those responsible for the management of sterling currency. There will be a gold measure but not a fixed gold measure. There must be. How can we engage in international trade unless we have a rate of Exchange? In any circumstances you must have a rate of exchange between sterling and dollars, and if dollars are on gold quite obviously there must be a parity between sterling and gold.

My right hon. Friend asked me how far is this going to tie us to the United States. We want to be in friendly collaboration with the United States, but we do not want to be in a position in which if unhappily some disaster befell the United States we should similarly have to go down and suffer in common with them; we do not want to be tied in that way. But we do believe that by having international relations in this monetary field we shall in practice greatly lessen the risk of disasters occurring, as we know they occurred for reasons with which many of us are familiar, during the inter-war period. There is no doubt at all that in these matters there are, and must always be, many factors of doubt and uncertainty. I ask, as my right hon. Friend opposite asked, if we have no scheme in this country, what is the alternative? Should we be better off? I think the answer to that is certainly, no. We ought to go on, I believe hon. Members in all quarters of the House take the view we ought to go on, with these discussions. I think myself that in various respects the scheme can be adjusted and improved. I am sure it is most important that we should enlarge the range of discussions in a way in which they have not yet been enlarged and bring in the representatives of other nations. I was not responsible for the statement about the number of nations' experts who have been consulted.

Mr. Boothby

Also the subjects.

Sir J. Andersen

Quite so. As to formal consultation, I think we should proceed. The Government are in no way committed with regard to this scheme. The Government do not propose to enter into any commitments at this stage. What they would propose to do if this Motion is carried, as I believe it will be, is to pursue discussions with the view, as stated in the Motion, of arriving at international monetary arrangements. I think we shall be fortified in the further stages through which this matter must pass by the Debate that has taken place to-day, and that we shall advance with the good will of the House towards what has been described as a free fertile economic policy for the post-war world.

Question put, and agreed to.

Resolved: That this House considers that the Statement of Principles contained in CMD. 6519 provides a suitable foundation for further international consultation with a view to improved monetary co-operation after the war.