HL Deb 13 June 1934 vol 92 cc1052-78

LORD STRABOLGI had the following Notice on the Paper:—To call attention to the growing opinion that defects in the principles governing the issue and recall of money and credit are primarily responsible for continued economic distress in a world which has never been so well equipped to provide for all material needs; and to move to resolve, That His Majesty's Government do institute an immediate investigation of the monetary system apart from its administrative machinery, with terms of reference sufficiently wide to permit full inquiry into its principles and proposals for its modification; and to move for Papers.

The noble Lord said: My Lords, I think your Lordships will be aware that there is a widespread feeling that such an inquiry as I advocate in the Notice I have placed on the Paper should be held and that the necessary Committee should be appointed by His Majesty's Government. I may cite, for example, the long drawn-out, though interesting, correspondence that appeared in The Times earlier this year which drew letters from people in all walks of life and of all kinds of opinion. Evidently there was a very strong consensus of opinion among the writers of those letters that some inquiry such as I advocate is called for. People generally are very puzzled by the present state of affairs in the world. It appears that there is what is called over-production. That is, there is a tremendous abundance of every kind of material wealth, of every kind of raw material and foodstuff, while manufactured goods are now produced, or can be produced, in immense quantities. At the same time there is the greatest difficulty in disposing of this so-called surplus set up by that state of affairs. We find great want, penury, poverty, hunger existing, and in many countries the standard of life of vast masses of people is below the level of subsistence.

The old explanations, I think, will not meet the case; I think there will be general agreement there. None of the old explanations—the load of debts, international and internal, or that wars or tariffs are the cause of the trouble, or that it is caused by human failures, or the stupidities of Governments, or the wickedness of mankind—will account for this extraordinary state of affairs. I think the suggestion I put forward to your Lordships, that this inquiry should be held, is for those reasons very widely supported, and I will cite one or two instances showing the extent and the depth of the support. The London Chamber of Commerce, for example, has very strongly supported a thoroughgoing inquiry into the whole financial and monetary system. So have the Southampton Chamber of Commerce and the Manchester Chamber of Commerce.

In another place the Order Paper bears a suggested new clause for the Finance Bill in the name of the honourable Member for East Edinburgh, Mr. Mason, calling for an inquiry, which is in these terms: There shall be set up a committee of inquiry on monetary policy, the members of which shall be appointed by the Treasury, which will make recommendations and report to the House of Commons.

That is supported by the right honourable Member for Ripon, Major Hills, a former Financial Secretary to the Treasury, and by a number of other honourable Members of all Parties in another place. An Amendment to that proposed new clause has been handed in by the honourable Member for Southampton, Mr. Craven-Ellis, calling for the setting up of a Select Committee of this House to enquire into the basic principles upon which the present monetary system is founded, both in its national and international aspects, and to make recommendations and report to the House of Commons.

That Amendment was supported by no fewer than sixty-four members of all Parties in the House of Commons, including fifty-three Conservatives. Your Lordships will observe that the terms of my Motion are practically the same as the terms of that Amendment by Mr. Craven-Ellis.

Your Lordships will observe as I continue with my few remarks that I am not raising at all the question of the gold standard—whether we should return to it, whether we should have departed from it, whether it would be possible to re-establish it. I am not raising that matter at all. I do not even question the efficiency of the former gold standard as worked before the War. But, my Lords, we must face facts, and the fact is that all save a few countries are now off gold, and not even the most optimistic believers in the gold standard claim that there is a prospect of an early return to that system. Furthermore, I do not raise this matter in any Party spirit at all. This is a question that cuts across Parties, and I would suggest that those who wish to preserve or reform or underpin the present system of private enterprise should support the Motion.

This problem of over-production or under-consumption faces the Government of every industrialised nation. So far the only solution for it has been war. I do not suggest that wars are deliberately started to consume surplus goods. I do not make that suggestion at all, but I do submit to your Lordships that to-day wars may ensue out of the struggle for markets to which surplus products can be exported. Before this present age of abundance the tribes and nations of the world fought each other for lands on which to grow corn or to graze their cattle, or for mines. In other words, they fought for territory for productive purposes. To-day there is a danger that the nations may be driven into fighting for lands and territories, not for production purposes, but for the control of markets in order to consume their surplus, while all the time each nation has within its. own borders a great potential market of its own, if only we can in some way find means of enabling the people to consume what they produce.

Speaking for myself I make no secret of the fact—it would indeed be useless if I tried to make a secret of it—that I believe that the present system is doomed. I may be wrong, of course; but I will be content if we can even make the present abundance available. In this Motion and in these remarks which I venture to submit to your Lordships' House I am not attacking the capitalist system; in fact, I am not attacking anyone. We are in this state of affairs which has arisen gradually, and I am seeking to find some means of escape. The capitalist system has a great deal to its credit, and it has this to its credit, that combined with man's invéntive genius we have solved the problem of production. We can produce everything that we require—everything for civilised life. There is no shortage of any single commodity. I might now say that there is a shortage of water, but that could have been avoided by foresight and imagination. That is the only commodity of which we are short—not of gold. There is ample gold in the world for manufacturing and technical purposes, and there is a shortage of gold only as backing for currency. But I am purposely not raising the gold question at all to-day.

Now, may I quote two figures which are produced by the very admirable statistical department of the Federal Reserve Bank of New York. The keeping of economic statistics in the United States is, I believe it will be agreed, rather in advance of our own. It has become a real science, and the statistics collected, particularly by the Federal Reserve banking system, are accepted by economists everywhere. In 1865 the world's production of goods was valued at 7,693,000,000 dollars. In 1929, the last year before the very serious depression from which we are now suffering, this had increased to 46,500,000,000 dollars. That is, of course, an enormous increase of the productive capacity of the world, and this despite the modern tendency, which is not a new tendency, to limit production in all fields by so-called "planning." To cite an example, although it is against me, the last Coal Mines Act, introduced by the last Government, was a deliberate attempt to prevent the so-called over-production of coal. That system of limiting production is widely practised by trusts, combines and cartels, national and international, but in spite of short time working, and a succession of great slumps and deliberate damping down of production, there has been that tremendous increase in the productive capacity of the world, and it could be much more.

If I may quote one striking example, before the advent of the internal combustion engine and the motor vehicle the catchment area of the Canadian Pacific Railway was ten miles on either side; that is to say, throughout the prairies land for ten miles on either side of the railway was favourably situated for farming. The farmer with his horse-drawn wagon could carry his crops to the railway. Now, to-day, with the motor lorry, the catchment area is a hundred miles on each side of the track. The same change applies to the great railways in the United States, the Argentine, Rumania, and other wheat producing countries, so that you have a tremendously increased area where it pays, or should pay, to grow wheat. The result is that you have a great surplus of wheat which even this terrible drought in many countries has not shortened. On the other hand, you have vast numbers of people in all countries who are suffering extreme poverty and hunger.

This state of affairs has produced an extraordinary confusion of policies. In the United States, for example, the President, whose very gallant efforts I am sure all of your Lordships must admire, a man of tremendous energy and courage, is threatening with punishment employers who resist price raising; but in Germany the Nazi Government is threatening employers who actually raise prices. There you have two great countries, great industrial countries, in one of which the policy of raising prices, and in the other the policy of cutting down prices, is being pursued. In the United States of America we see, also, great efforts being made artificially to cut down production. The cotton farmers are paid a heavy subsidy not to grow more than a certain amount of cotton, in fact, to leave their fields fallow, and they are using the money to buy expensive fertilisers to increase the yield of the fields that they are allowed to till.

There has been in the United States a large scale destruction of cereals and fruit, and by this policy of destruction of wealth millions of young pigs also have been slaughtered in that country. All your Lordships are aware of the remarkable case of the Brazilian Government. By order of the Brazilian Government 3,050 million lbs. of coffee will be destroyed—an amount which is equal to more than the average world consumption of coffee. Since 1931 the Brazilian Government has destroyed over 23,000,000 bags of coffee, and the world's consumption last year was 22,000,000 bags. While we have this great productive power on the one hand, and great efforts to prevent it from functioning even more efficiently on the other, there is this vast consuming power of the great masses of the people. I am taking the long view, and I am certain that this problem will be solved, because the potential consuming power of the world's population is incalculable. For instance, there are 400,000,000 people in China, and the average income of that industrious, gifted and ancient race is £3 a year. In British India, with its 230,000,000 of people, the average income is £6 a year. There are also, of course, millions of Africans, who when they get the opportunity are very glad to enjoy a higher standard of living, and constitute a potential market. We have also within our own borders a great population who would be very glad to enjoy a higher standard of living, and to consume more, if they had the necessary purchasing power.

I will, if I may, quote to your Lordships a very ancient fable of Egypt. There is a tradition in Egypt that in the early ages the ear of corn grew the whole length of the stalk down to the ground, but man in his foolishness wasted the bounty of the fields, and the Almighty punished mankind by reducing the ear of corn to its present length. Are we quite sure that if we continue to destroy wealth and curtail production in this way, while there are so much want and hunger in the world, some visitation will not beset us? It looked at one time as if the present drought would make for a serious shortage of cereals in the world, and we are not clear of that danger yet.

It may be said that we have had one report on finance and currency from the valuable Committee that sat under the Chairmanship of Mr. Macmillan, as he then was, now Lord Macmillan. The members of that Committee were appointed by the last Government. They made very valuable findings, including such proposals as the need for providing cheap capital for small, sound businesses, and the principal proposal that commodity prices should be raised, which is the policy adopted by the Government, according to Lord Stanhope in his speech on a related subject last week. The Macmillan Committee, however, were dealing with an entirely different set of conditions, and they stated that they were precluded from considering the problem outside the then existing system. At that time we were on the gold standard, and most other countries were also; and nobody thought that we were going off the gold standard when that Committee was appointed in 1929. Now the conditions are so different that I think there is a case for the appointment of another Committee, with regard to the nature of which I will say a word in a moment.

I have quoted cases of the restriction of production or the destruction of agri- cultural produce and wealth in other countries, notably the United States, but the policy is also carried out in this country. We are all aware of the rubber restriction schemes, the tea restriction schemes, and the tin restriction scheme in our various producing Colonies, organised in London in conjunction with other countries producing rubber, tea or tin as the case may be. I have already mentioned the Coal Mines Act; and every year large quantities of fish which men have risked their lives to catch in the seas are destroyed or else turned into manure in order to keep the market from collapsing. The same thing is done now in some cases with fruit: whole cargoes of fresh fruit have been dumped into the sea at Liverpool.

At the World Economic Conference we deliberately embarked on a policy of restricting wheat production by international and official action, and the noble Earl, Lord Stanhope, who, I understand, is to be good enough to reply to me, in the debate in your Lordships' House on June 6 last referred to the considered policy of His Majesty's Government which they are deliberately pursuing to meet the present difficulties. May I quote the noble Earl's remarks, somewhat shortened: There are three ways of obtaining an equilibrium in prices … and the third is by an increase in prices brought about by concerted action between the various countries in their monetary and credit policy, and also by attacking the problem from another angle and reaching agreement for the regulation of output of primary commodities. The third policy is the one which has been followed by His Majesty's Government.

We, therefore, have the admission—which, of course, was unnecessary because it is well known—that the policy of His Majesty's Government is simply to raise commodity prices by the so-called planning of output, the restriction of output. I suggest that this policy is not succeeding, and is not likely to succeed, and that instead of considerably restricting output in this way by international action or by national action—it does not matter which—we should attack it from yet another angle—namely, by seeing whether it is not possible to increase the consuming power of the people. I believe it is not impossible to increase consuming power to balance production and that it can be done through a reform of the monetary system.

Your Lordships will have noticed that while I was careful to make no attack on the capitalist system, and indeed to praise its achievements, I am also making no attack on bankers as such. I do not desire, nor would it in my opinion be just, simply to attack the bankers. I think our bankers, working within the present system, are probably the most honest in the world. They certainly have a very high character for integrity, and most of them, I am sure, are men of public spirit, and they do their very best. I have had the honour of discussing this subject with many of the most important bankers in this country, and I find them just as bewildered as I confess I sometimes am. They do their best within the four corners of the system that they have been taught to utilise. I am not, therefore, asking for any fresh inquiry into the workings of the banking system, but only for an inquiry into the monetary system itself which the banks work.

So far I have confined myself to attempting to describe the present situation. What are the causes of it? I am not going to venture on to such dangerous territory, except to say this. Many reasons are given. I have quoted some of the reasons usually put forward, such as international debts, tariffs, and human wickedness, which alone will not explain the present state of affairs. But is it true that it is impossible under the present monetary system for industry to generate purchasing power at the same rate that it generates costs? I think that is a question that needs answering and to which I suggest an inquiry should be directed to finding an answer. If that is so, does it follow that under the present system the total purchasing power distributed in the form of salaries, wages, profits, dividends—everything that goes into the pockets of the people, whether investors or wage-earners—can never be enough to purchase the goods produced? In other words, is there really an inherent defect in the present monetary system? If there is this defect, and if it is not put right, then I submit that no real economic recovery is possible.

I submit that there are sufficient grounds for inquiry by the strongest independent Committee available. It has been suggested to me by one of your Lordships that this House itself could man such a Committee. Of course it could; I entirely agree. In fact, a House of Lords Committee might be preferable to any other, because at any rate it would be free of an electioneering anxiety. It may be said: "Oh, the experts all differ from one another." Well, yes, the experts do differ from one another. I make a present of that to those who oppose the demand for an inquiry. But I am not suggesting a Committee of experts. I should like to see a Committee of men of affairs and independent judgment, and the function of the experts would be to give evidence. Then it may be said: "Ah, yes, but such an inquiry might do harm by unsettling the public mind or by alarming the business community just at a time when we are showing signs, or we can see signs, of an economic recovery. "Well, I do not see why it should, but, even so, are we quite certain that the present apparent beginnings of recovery are real, and that recovery will last? No one can say that for certain, but supposing another deep sag of depression were to come into the curve of commerce and employment then the outlook would be very dark. I believe this problem exists and that we as a nation should be doing what we can to try to find a solution for it. In that spirit I move the Motion which stands in my name.

Moved to resolve, That His Majesty's Government do institute an immediate investigation of the monetary system apart from its administrative machinery, with terms of reference sufficiently wide to permit full inquiry into its principles and proposals for its modification.—(Lord Strabolgi.)


My Lords, I feel obliged to say that I do not altogether agree with the views expressed by the noble Lord opposite. I do not think that in informed quarters there is a "growing opinion" at the present time that there are basic defects in our monetary system. All that is wrong, in my opinion at all events, is that the great new credit nation—I refer, of course, to the United States of America—has not yet realised that she cannot collect interest or principal from foreign debtors except by way of goods or services. The gold standard, I think your Lordships will agree, worked reasonably well when we were virtually the only great creditor nation in the world and when we were willing to accept goods in payment of interest. I realise that there may be a good deal of uneasiness in connection with this matter in uninformed quarters, and possibly such an investigation as is proposed by the noble Lord might tend to allay that uneasiness, and for that reason I do not propose to oppose this Motion.

I would like just to add this. The noble Lord referred to certain schemes which were put forward by the London Chamber of Commerce and by the Southampton Chamber of Commerce. During the time when it was my privilege to be President of the Association of Chambers of Commerce, which is an Association of all the chambers of commerce throughout the country, we examined the schemes both of the London Chamber of Commerce and the Southampton Chamber of Commerce, and we were not able to see eye to eye with them. I think, as the noble Lord referred to that, it is well for me to say that the chambers of commerce as a whole did not find themselves in agreement either with the London Chamber of Commerce, or the Southampton Chamber of Commerce.


My Lords, I suppose there never was a better illustration of the fact that if only enough people say tae same thing often enough it will be believed than the proposition which the noble Lord has put before us to-day. Let us go back a few decades and examine the history of the case. Up to 1908 the monetary standard worked fairly well in all big countries. Budgets were balanced without serious difficulty; taxes were low; sufficient confidence reigned to persuade people to save money to reinvest in industry; working men got wages approximately equal to the value of their work; there were hardly any subsidies; the only subsidy of importance was a quite moderate subsidy for education. Soon all this was changed. For long politicians had been telling the voters that if they wanted more money the simplest thing in the world was to vote the money of the rich into their own Pockets. In the Parliaments in which the Liberal Party dug its own grave this principle was put into operation. At a rapidly increasing pace, soon to be further accelerated by the events of the War, law after law was passed transferrring as free gifts great blocks of money from the rich to the general body of voters.

Unfortunately, the apostles of the redistribution of wealth by taxation overlooked one vital point connected with the use to which this money was to be put. We heard a great deal about the improved health of the nation, more leisure, more contentment, more intelligent interest in the domestic arrangements of film stars, the magnificent dividends that the companies pay who supply the people of this country with cheap cigarettes, and so on. We heard next to nothing about any arrangements for maintaining or increasing our powers of production which had formerly been achieved by the money invested by the rich. This money was now simply transferred to the poor with the deliberate object of its being used for non-reproductive purposes on such things as better food, better clothes, better education, if you like, but on things which, once used or consumed, left behind no material object of value. It was, after all, nothing but our old friend, "living on capital," in a slightly new guise. All this, of course, was enthusiastically approved of by an electorate incapable at any time of intelligent thinking and deliberately misled by politicians of all Parties.

I need not go through the subsequent steps of our descent from moderate prosperity to bankruptcy, which is the real name for our position to-day. The facts are that the whole of the working classes of this country, in spite of so-called cuts which are mere flea-bites in comparison with former mountainous increases, are at the present time receiving and spending more than they are producing; that the difference is being found out of the accumulated riches of the past; that these riches are rapidly being dissipated; and that, short of a sudden and complete change to-economic sanity, of which no sign is at present visible, there is no prospect whatever of the avoidance of complete economic collapse. That monetary dislocation has followed such a condition of affairs is in no way surprising, but to accept the suggestion that our troubles can be put right by enquiring into one of their consequences while their cause is ignored appears to me likely to make confusion only worse confounded.


My Lords, I listened with great interest to the speech of the noble-Lord who introduced this subject, and he gave us some very valuable statistics as to the extent of production and the effect it had had on our economic system. He is anxious, I understand, to have an inquiry into the monetary system, connected, I suppose, only with this country, because he did not deal with the international question. He has told us that in certain circles with which he is familiar there is a strong and growing demand for such an inquiry. I am afraid I do not move in those circles, because I have not heard those strong expressions of opinion. On the contrary, the circles, either financial or commercial, in which I do move hold quite a different view, I am sorry to say, from that put forward so eloquently by the noble Lord opposite. I dare say it was my own slowness of comprehension, but I was not quite certain of the exact inquiry intended by the noble Lord. He says on the Paper that he wishes "an immediate investigation of the monetary system apart from its administrative machinery." I am very glad I am not likely to be Chairman of the Committee that is to make that inquiry, because it would be extremely difficult to separate an inquiry of that kind as regards credit and so on from the authorities and machinery by which it is administered.

But this proposal to concentrate our attention on the monetary side of our difficulties is really, I think, harking back to an old proposition put forward by associates of the noble Lord at a previous period. I do not of course in the least believe that our difficulties are mainly due to purely monetary questions, but it will be remembered, and I think the noble Lord will remember, that quite a short number of years ago—not more than three or four years ago—we were told that what was wanted was "cheap money."We were told that if we got cheap money everything would go right, and there was at that time a very unwise and rather foolish attack on the bankers who were supposed not to be acting according to the traditions of ordinary business men—that is to say, according to the laws of supply and demand—but for some reason were charging unnecessarily high rates for the loans they made. After that, there was a period of very cheap money indeed—I might call it dirt-cheap money—but it was obvious that that did not cure the position at all. Indeed, it is now recognised that cheap money is not the cause of bad trade, it is the result of bad trade, because it is so difficult for the bankers to find people credit-worthy to whom to lend money.

The noble Lord in his economic researches gave us a very interesting picture of that over-production in certain realms with which we are so very familiar. In contra-distinction to him, I think there is a great deal to be said for this limitation of output because, after all, when you have a state of the market in which a little more so reduces prices that nobody makes any profits, nothing could be more discouraging to production. The noble Lord spoke of the great efforts made in some countries, the United States and elsewhere, to reduce production, and told us of the great difficulties to be faced. The difficulties, of course, are enormous. The difficulties are extremely great in one's own country or in any country, internally, because it is so difficult to get all the manufacturers and business people engaged in a particular industry to agree to come into an arrangement by which to limit production. There are generally a few people outside who decline to enter into it. It is obviously fifty times more difficult when you get it on the international scale. We have seen recently some of the difficulties which have confronted the Wheat Conference. There they have been trying to give a quota or portion of a quota of wheat production to the different great wheat producing countries, and they meet and break up, and meet again. What happens generally is this. Some rumour or report of what is going on in different countries as to the production of wheat affects the whole question; there is to be more or less wheat as the case may be; and everybody wants to reconsider the quota and get a larger share if they can of the quota.

I admit that the difficulties are enormous. Still that is one method by which you can approach the question. If the noble Lord's premises were true, and if you could certainly get an enormous increase of purchasing power in India and China and elsewhere, nothing would be more attractive than that, but, unfortunately, these things do not happen in this world. Such things can only be done very slowly. The noble Lord referred to the enormous facility of production in these days, and suggested that the goods produced could easily be consumed if purchasing power could be increased. That may be so in some lines of goods, but in wheat the probability is that it could not, because in wheat, unless you do limit it, you can produce enough all over the world to swamp the consuming power of the whole world, even if the consumption of bread was far more widely spread than at the present time. I mean by that that the areas all over the world which are capable of wheat production are so large that unless you have some limitation of them you can always overload the market. I think, therefore, that causes of that kind are far more dominant than any question of mere monetary machinery. After all, the monetary system is only the machinery of trade, it is not trade itself, and it is very easy to lay too much stress upon it.

The noble Lord said he did not wish to discuss the international question of exchanges or the attempt to stabilise exchanges. I think, if I may say so, he is perfectly right. We know why it was that the World Economic Conference failed last year, and the situation is not very much better now. We do not yet know what will be the position of the United States as regards the devaluation of the dollar, whether the dollar is going to be further devalued or whether it is going to be stabilised at about the present price in relation to gold. Therefore the situation is regards an international arrangement or consultation seems to be very little better than it was last year, and I am afraid we must put that consideration outside the case.

I can hardly believe, though the situation has changed since the Macmillan Report, that it has changed so substantially that the information which we have in that most valuable Report is useless. That certainly is not so, and I cannot myself form any clear idea of what special advantage would be obtained by an examination on the lines suggested. At the same time I do feel that any announcement by the Government that they were going to set up a Committee of that kind to enquire again into the monetary machinery would have a rather unfortunate effect on what is, I hope, an improving situation in trade. Therefore, though I quite recognise the ability with which the noble Lord has put this ques- tion before your Lordships, I hope the Government will not accede to his request. I do not know what the mind of the Government is on the subject. The noble Earl who will reply has carefully concealed his emotion during the course of the debate, but I trust that he will not accept the Motion of the noble Lord, and that he will leave us to go on, at any rate a little longer, with our present monetary system, even though the capitalist system may be in those dangerous and unfortunate circumstances which have been alluded to by the noble Lord opposite.


My Lords, I was somewhat puzzled when I saw the noble Lord's Motion on the Paper. I wondered which of the many different devices he was going to suggest to your Lordships' House. As your Lordships know, a great many solutions have been suggested for the monetary problem—bimetallism and many others—and at last I thought I discovered in the closing sentences of the noble Lord's speech the reason for his Motion. I find he is a Greenshirt, and that is why my noble friend Lord Peel has not come across the same views. I understand that he, at any rate, does not wear either a green shirt or a black shirt or anything but a shirt of normal colour. The Greenshirt represents, of course, the policy put forward by Major Douglas, which is called the Douglas social credit scheme.

The noble Lord opposite was quite right in saying that the Macmillan Committee had already gone very fully into the whole of this question. As he knows, it was a Committee that was set up by the Government of which he was a supporter. But in one thing at any rate he was incorrect. He stated that it was debarred by its terms of reference from going into any question of this country going off the gold standard. The terms of reference I have in front of me, and perhaps the House will allow me to read them: To enquire into banking, finance and credit, paying regard to the factors both internal and international which govern their operation, and to make recommendations calculated to enable these agencies to promote the development of trade and commerce and the employment of labour. In other words, they were by no means precluded from suggesting that this country should leave the gold standard, and, in fact, if your Lordships look at the Report, you will see that in part they enquired into the matter to see what the effect would be of going off the gold standard. Therefore, although it is quite true to say that the Committee sat under different conditions from those which a Committee would sit under now, the situation is in many respects identically the same, and a new Committee would, moreover have to traverse the same ground as the Macmillan Committee if it began to enquire into these matters again.

In some respects, as I have said, there is a change, and the change is for the worse, because, as my noble friend Lord Peel has stated, the international situation is certainly no better, and the question of stability of exchanges and the control of prices is, if anything, more difficult than it was at the time when the Macmillan Committee sat. But there have been other Reports as well as the Macmillan Report. There have been the Reports of the League of Nations Gold Delegation, and the Preparatory Commission of the World Economic Conference. I rather think that noble Lords opposite are inclined to say that the proposals put forward by His Majesty's Government at the Economic Conference were platitudes. I am prepared to admit they are but it by no means follows that because a thing is a platitude it is therefore followed. It is a platitude to say that you inspire confidence in your business management when you are able to pay your way, but that is a platitude which, unfortunately for them, the Labour Government did not follow prior to 1931. They did not pay their way, and as a result there was a loss of credit which, as the noble Lord opposite stated on the last occasion, meant an avalanche of short-term credits rushing out of the country in order to find a safer place elsewhere.

What would be the result of a new inquiry? As I have said, you would again traverse the same ground, and all that might happen would be that you would get a new summary of information which is already in everybody's possession. There has been a vast number of schemes put forward. I think my noble friend Lord Desborough as a bimetallist would certainly put forward his. But how would you form your Committee? The noble Lord opposite says he should have men of wide business interests instead of experts. Quite so, but the experts would then be called to give evidence before the business men. They would then come to the conclusion that these business men, men of wide experience, were all either hide-bound in their views because they prefer the present system to any new one or were fanatical in wanting changes where changes were unwise. He referred to the Motion put forward in another place as an Amendment to the Finance Bill. I think as a matter of fact it could not be discussed.


It was not selected.


I understood that it was ruled out of order, but it comes to the same thing. If the noble Lord looks at the names of the members who backed the appeal for an inquiry I think he will find that there would probably have been six separate reports in the names of six separate members who backed the proposal. One of them is certainly in favour of returning at once to the gold standard. Others have very different views from that. In other words, as my noble friend Earl Peel said, we should merely disturb the public and we should get reports, so far as they were general and approved by the whole Committee, similar to that which I have before me—the Macmillan Report—or we should have a variety of minority reports putting forward this scheme and that scheme. We should be no further forward than we are at present.

The Government feel that there would be no advantage in having a new inquiry. As I ventured to tell your Lordships the other day, it is the business of the Government to keep these matters in mind and consider them with the utmost care and as the result of that consideration they have come to a definite decision as to the best policy at present for this country. That is to attempt to raise wholesale prices relative to cost and in particular in regard to primary products. In the view of the Government there is no short cut by any monetary change to enable this country to get back to prosperity. It has got to be a long business. It can only be done when those who produce, and particularly those who produce primary products, are able to do so at a profit. The noble Lord referred to the Douglas scheme, the Greenshirt scheme.

I would remind him that that scheme was put before the Macmillan Committee. Major Douglas himself gave evidence, but the Committee apparently did not think it of sufficient importance to refer to it in their Report.


I am sure the noble Earl does not want to misrepresent me. I did not put forward the Douglas remedy at all. The Douglas cause I referred to, but not the remedy.


I understood the noble Lord to put forward a similar scheme. He said: "Is it true that it is possible that industry raises an income insufficient to purchase its goods?" That is the Douglas inquiry.


That is the Douglas complaint.


If that is the complaint and if that is true it is obvious that from the earliest days industry would have steadily waned and got less than the small beginnings from which it started. Obviously if there was no sufficient amount raised by industry by its wages and salaries and so on to purchase its goods the goods would have been unsaleable and industry would have shrunk until it died out. That is untrue because, as we all know, industry has steadily increased. I do not wish to go at any length into the Douglas scheme because the noble Lord says he did not support it, but I think he will agree that to say, as Major Douglas on occasion does, that they have not actually paid in wages a sufficient sum and that therefore credit must be found also elsewhere, is utterly untenable. For instance, raw products bought by one industry are often the finished article of another industry and therefore have been already counted in the way of wages, salaries and so forth. If this theory were true, as I have said, industry would have shrunk instead of increasing as it has done in fact.

The short answer which I have to give to the noble Lord opposite is that His Majesty's Government, although they realise that progress in this country is slow, still feel that the monetary system as it exists in this country is better than any system which has been found and tried in any other. They are not prepared to reverse it nor do they think it worth while to have an inquiry. They have considered the matter very fully, and they have had the advantage of a great many Reports from Committees and all sorts of people which they keep in mind. So far they are satisfied that the monetary system as worked in this country is the best that can be found at present and they see no advantage in having an inquiry. I therefore must resist the Motion.


My Lords, on this occasion the noble Earl who usually replies for the Government on financial and credit and exchange problems has omitted the usual depreciation with which he debits himself. He has an engaging modesty and usually tells your Lordships' House that these matters are too difficult for him. In fact he told us so only last week. Far be it from me to decry modesty in any politician—it is not a commodity in which they deal largely—but I think the noble Earl, if I may say so, scarcely does himself justice. I venture to suggest that he is rather too humble. I have crossed swords with him on several occasions in these debates and if it is any satisfaction to him I will give him a certificate that he is quite able to look after himself. I hope he will cease misrepresenting himself as a sort of financial Simple Simon. He says he knows very little about these difficult problems. Well, as a matter of fact nobody knows very much about them. Experience has proved that. That is the first justification I give for the Motion of my noble friend Lord Strabolgi.

I think Lord Strabolgi has done well to put this Motion on the Paper. He put forward a very reasoned case and a very moderate ease. He did not specifically advocate any particular scheme. I do not know why the Douglas scheme should be fastened upon him. I did not understand him to support the scheme. The noble Earl surely knows perfectly well that the Douglas scheme is not entirely a new kind of thing. The Douglas scheme merely brings to a head in a certain way certain principles which have been in the minds of persons interested in currency problems for generations. My noble friend did not support the scheme and he cannot be accused, if it be an accusation, of wearing a green shirt.

I think the reply of the Government this afternoon is disappointing. It is not sufficient for the noble Earl to say we have had the Macmillan Report and there is nothing more to be said. As my noble friend pointed out, circumstances have changed very materially since the time of the Macmillan Report. We all want as much information as we can possibly get about the position in which we find ourselves and particularly in regard to monetary matters. It may well be that monetary matters are really the key to the whole problem. The main contention which I would venture very briefly to put before your Lordships this afternoon in support of the Motion of my noble friend, having heard the Government reply, is that experience unfortunately in the past, experience since the War, experience of the last ten or fifteen years, has definitely proved that the experts who were supposed to know about these things and to advise the Government and particularly the Bank of England, have been wrong. That is the contention which I put forward. I know that it is almost sacrilege in your Lordships' House to suggest that the Bank of England and the various experts who advise the Government and the Chancellor of the Exchequer do not know everything about financial mysteries, but I say that experience has proved that in the main the policy of the Bank of England, in conjunction with the Treasury, acting upon expert advice, has been proved to be wrong. That being the case, there is, it seems to me, a very strong argument for all the inquiries that we can get, so that they may do better in future. That is the broad contention which I put forward.

I think the noble Earl, Lord Peel, referred to bankers, and my noble friend Lord Strabolgi said that he was not attacking bankers. Let me say in the first place that bankers are not all agreed; there is a very wide difference indeed between the views of Mr. Montagu Norman and those of Mr. McKenna. The noble Earl knows that perfectly well. It is a very important matter, and it is a matter which has never been properly brought out. I do attack the policy of Mr. Montagu Norman and of the Bank of England—its long policy of deflation, and the return to the gold standard in 1925. I remember that the noble Earl, so impressed, as it seemed to me, by the degree of criticism which I had put into certain observations of mine in regard to Mr. Montagu Norman, once suggested That perhaps I wanted Mr. Montagu Norman's position myself. I can assure the noble Earl that I have no such ambition; I have plenty of other things to do. All I will say is that if I had had that position, I should be sorry for the country if I had not done better for it than Mr. Montagu Norman has done.


My Lords, may I remind the noble Lord that Mr. Montagu Norman has been re-elected every year as Governor of the Bank of England by those who know a good deal about financial matters in the City?


Because the directors of the Bank of England of course agree with him, speaking broadly. The point is that I think it is absolutely certain that the economic historian of the future will mark down as a wrong policy and as a disastrous policy the policy of deflation and the return to the gold standard in 1925, both of which were strongly pressed by the Bank of England. I say deliberately that those two policies, deflation and the return to the gold standard in 1925, were important contributory factors in the economic crisis of 1931. The noble Earl, I know, like all those who support the National Government, blames the Labour Party for the economic crisis of 1931. What I will say about that is this. The Labour Party could have perfectly well handled the financial situation at that time and could have done what was necessary to balance the Budget if it had had fair treatment, but when it had practically the whole of the Press of the country, and especially The Times, decrying it day by day, weakening the confidence of foreign investors in Great Britain, is it surprising that balances were being withdrawn? We could have grappled with the situation. perfectly well.

The noble Earl has used a phrase—and this is common form, as the lawyers say—to the effect that the Labour Party brought the country to the verge of bankruptcy. You will find that in the address of practically every Unionist candidate. They might get a rubber stamp for it, and just stamp it on. As a matter of fact, the economic historian will not say that; he will take a very different view. I put this to the noble Earl: if it was the Labour Party which was responsible for the condition of affairs in this country in August, 1931, was it the Hoover Gov- ernment in the United States, one of the most conservative Governments which that country has ever known, which was responsible for the condition of the United States when Hoover went out of office, when nearly every bank in the United States was closed? Let us have fair treatment of these things. Everybody knows that we have been in the midst of a world crisis of unparalleled gravity and dimensions.


Perhaps they ought to have had Mr. Montagu Norman to advise them.


If I may say so with great respect to the noble Earl, I do not think that that is his most felicitous interruption. What did Mr. Churchill say? Mr. Churchill was the Chancellor of the Exchequer who, acting on expert advice, or rather on that of Mr. Montagu Norman, went back to the gold standard in 1925. What happened? In 1931 we went off the gold standard, and in 1932, a few months afterwards, Mr. Churchill in effect recanted. He said that he had been advised this, that and the other, and he took the responsibility for having accepted the advice but he said that in effect it was wrong. That is the point. When you have an ex-Chancellor of the Exchequer saying the advice that he received was wrong—and that is in effect what it came to—I say that that is a serious state of things.

Then take another Chancellor of the Exchequer. I am putting these points forward to show how much knowledge is needed on these matters and how important it is to have an inquiry. Take Lord Snowden—Mr. Philip Snowden as he then was—the darling of the National Government until they got to know him a little better. What did Mr. Snowden say in September, 1931, a few days before we went off the gold standard? He made a speech on the wireless which in the events which afterwards occurred has made him supremely ridiculous. On this question of the gold standard Mr. Snowden tried to scare the country. What did he say on the wireless? After having quoted an alarming speech delivered by Mr. Runciman the night before about his experiences in Germany during the inflationary period, Mr. Snowden, then the Chancellor of the Exchequer, said for the information of the country: That is what going off the gold standard means, and this is a menace to which British money has been alarmingly exposed in recent weeks. He also said that owing to the depreciation of the franc the capital and the interest of British holders in French War Loan had been reduced by four-fifths, and he added: Had we gone off the gold standard, wages, pensions, and all incomes would have followed that course. A few days afterwards, my Lords, we went off the gold standard, and this Chancellor of the Exchequer was proved to be absolutely and entirely wrong, because in the few days following our going off the gold standard nearly everybody was saying what a good thing it was, and that we must be very careful not to go back again.

Now the noble Earl asks, why do we not follow the advice of Mr. Montagu Norman, who has been the great protagonist of the gold standard? I say that if an ex-Chancellor of the Exchequer has to say in the House of Commons that the advice which he received was wrong, and if another Chancellor of the Exchequer on the wireless makes a speech which in a few days is absolutely falsified, nobody needs inquiry and nobody needs information on these currency matters more than the present Government. Therefore they ought not, as I think, to turn down the Motion in the way in which they have done so. It is quite true that Mr. Neville Chamberlain is very cautious in his observations about the gold standard, and he has not given much encouragement to those people with a lust for gold who want to go back to the gold standard. I am not an admirer of Mr. Neville Chamberlain, but on the rare occasions when I can say a word in his favour I do not mind doing so. It is true that he, perhaps because he was in industry and knows about both industry and finance, is very chary of giving encouragement to this idea of returning to the gold standard. I say that what has happened in the past has made it perfectly clear that much more knowledge of these matters is needed, and that it is no sufficient reply for the Government to say: "We have got the Macmillan Report."

The Macmillan Report was issued long before we went off the gold standard, and the Macmillan Report did not really deal with the question whether we should or should not be on the gold standard. It dealt with other problems. The Macmillan Report is really past history. It is not exciting the slightest attention; the Government do not take the smallest notice of it. It is quite time that they had a new inquiry, an inquiry of their own, and perhaps they might pay more attention to that. There is all the more reason for this inquiry because the Government have in principle no objection to inquiries. They have them by the dozen—all kinds of inquiries. It is well known that there is nothing that the Prime Minister loves more than an inquiry. They stave off things. Your Lordships will remember the slogan in the days of the Labour Government: "An inquiry a day keeps the crisis away." There is no objection to an inquiry so far as the Government are concerned, and there is no objection in principle on their part to the general policy of trying to raise or stabilise prices. The noble Earl has said that again to-day.

Lord Strabolgi referred to the third method of "obtaining an equilibrium in prices," of which the noble Earl spoke last week—namely: by an increase in prices brought about by concerted action between the various countries in their monetary and credit policy, and also by attacking the problem from another angle and Teaching agreements for the regulation of output of primary commodities. It was very interesting to me to know that the Government had a policy of concerted action with the various countries in their monetary and credit policy. Does the noble Earl literally mean that? That they are trying by international measure to arrive at some better equilibrium? As I understood it, that was one of the objects of the World Economic Conference, which came to a disastrous end. It is said to have been merely held up, but everybody knows that that Conference is as dead as Queen Anne.

What is the Government's concerted action between the various countries? It is true that the second part of what the noble Earl said is being attempted—namely, "by attacking the problem from another angle and reaching agreement for the regulation of output of primary commodities." The unfortunate thing is that the mentality of the Government does not seem able to go further than the restriction of production, thus producing a sort of artificial scarcity. Why have they never devoted their minds and energies to the much better policy of stimulating and increasing demand? The extraordinary thing is that the Government have never properly appraised the importance of increasing demand and have not realised the possibilities of an expansionist policy. That is what is wanted.

The noble Earl, Lord Peel, made a very astonishing statement about wheat. He said there would always be a market for all the wheat that could be consumed, and, on the other hand, as I understood him, that as much wheat could readily be produced as would be consumed. I have always felt that the wheat position will never get materially better until much more is consumed by the vast populations of India and China, and if their productive capacity can be improved, and their purchasing power increased, then you may be nearer a solution of this very difficult wheat problem which confronts the world. But I would submit to the noble Earl, with great respect, that it will be a very long time before all the wheat growing areas in the world can be growing to their full capacity and the position on the other side equated.

I have put forward the main reasons which I think should have led the Government to give a more favourable reply to this Motion of my noble friend, because we need a well-conceived policy of increased demand and expansion. The monetary system has a big part to play. That at any rate is the case that I put forward. I find that among currency experts you do not as a rule find two having the same view, and so I am just speaking for myself. We want to know more about the matter, and it would be a great blessing in particular if the Government could know a little more about it. They seem to be perfectly happy, but I regard the reply of the noble Earl as sterile and negative. According to him we have got the best monetary system that civilisation ever did or could evolve, and nothing more can be needed than to go on with it under those who have proved to be wrong in the past. No reasons have been given for not having this inquiry. The Government have had dozens of inquiries, most of them useless, and yet they will not have this one inquiry which might prove to be more important than all the rest put together.


My Lords, I thank the House for allowing me to discuss this Motion, and I thank my noble friend, and other noble Lords who have spoken, especially my noble friend behind me for his support. I thank the noble Earl, Lord Stanhope, also for his reply, which I must say was what I expected. I will with your Lordships' leave just comment on two statements made by the noble Earl. I do not want to misrepresent the position with regard to the Macmillan Committee's inquiry, nor do I think I fell into error, because the Committee do say that they felt themselves precluded from discussing a currency system outside the then existing gold standard. In any case, as the noble Earl behind me and other noble Lords have said, the Macmillan Committee thoroughly investigated the banking system as such, and in answer to Lord Peel, I would say that such an inquiry is not required again and I only wanted the monetary system itself inquired into. The noble Earl, Lord Stanhope, says the present monetary system is excellent, and he informs us that the Government intend to maintain the status quo. I wonder if the noble Earl saw this gem from the speech of an eminent Canadian banker last night at the Canadian Club dinner, reported in The Times: the speaker stated that status quo was, in the words of a coloured minister of religion, "the Latin for sitting in the mess you are in." The noble Earl thinks the present system is excellent.


I said it was better than that of any other country.


The only trouble is, literally speaking, that it does not deliver the goods. The basic fact that you cannot get away from is that we are unable to-day to consume what we produce, and at the same time you have widespread and terrible poverty. That is the system which the noble Earl is satisfied with, because it is better than that of any other country. It is the same as most other countries, and it has certain defects which I suggest should be enquired into. I am sorry therefore that the Government have made this answer. I have spoken on this subject on many platforms, and in another place many times, and I got so tired of being asked what I suggest as a remedy, that I wrote a book on the subject, and I am going to send a copy of it to the noble Earl if he will do me the honour of glancing through it. In that little book I put forward my suggested remedies for the present crisis. I did not trouble your Lordships on this occasion by putting forward any proposals of my own at all, but I contented myself with describing the present situation and referring to one of the alleged causes. I do not intend to press my Motion, but I must answer one remark of the noble Earl. He said the trouble was that the Labour Government did not pay its way. The Labour Government did pay its way, and the present Government is not paying its way. We paid America and you are not. I beg leave to withdraw my Motion.

Motion, by leave, withdrawn.