HL Deb 23 May 1944 vol 131 cc834-83

LORD ADDISON moved to resolve, 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 noble Lord said: My Lords, I am sure you will welcome a discussion on the matter of first-rate importance that is referred to in the Motion standing in my name. It cannot, I think, be denied by any of us who have any view at all of the post-war situation that an international agreement on monetary policy is a necessity if it can be arrived at, and nothing that will be said in this discussion will do anything, I hope, to place difficulties in the way of those who are in charge of the negotiations. On the contrary, so far as I am concerned, though I do not in the least pretend to expert knowledge on this subject, I shall content myself with asking a number of questions in an entirely constructive and helpful spirit, questions which I think represent some of the misgivings which should, in the highest interest, be allayed as far as possible. I am sure your Lordships will want to discuss this all-important matter in an entirely constructive and friendly spirit.

We have the advantage in this House of having among us the distinguished Lord who took a very active part in this discussion, and I am sure I for one look forward with anxiety and great interest to what he has to tell us on the subject, because this is really the first concrete effort at international co-operation on a large scale in the economic field. I should be glad if the noble Lord, Lord Keynes, when he comes to speak, can tell us wherein the particular scheme that is now before us differs from the scheme for which he himself was responsible or, at all events, to which his name was attached a year or so ago. His scheme, so far as I understood it, possessed certain very great attractions in respect of its elasticity. With regard to the particular scheme that is before us, I should be glad if the noble Lord could tell us something about the British quota in the Fund. So far as one can calculate it, it appears to be inadequate, and it is evident that it is of first-class importance that our export trade after the war should if possible be increased as compared with the pre-war figures, and we must have a scheme that will encourage expansion.

For instance, take Imperial transactions. Some of us have urged for a long time that there should be large-scale purchases with a view to introducing a certain stability of price. The noble Lord, Lord Woolton, has been responsible as Minister of Food for large-scale purchases in the Dominions, and it would be, I think, against the best interests of the world if anything in this new scheme prevented the British Government, or anyone on their behalf, entering in future into large-scale operations, say, with the Dominions and involving, say, large-scale purchases of food, covering perhaps a term of years at a stabilized price. I should be glad if the noble Lord could tell us how the scheme now before us would operate in regard to transactions of that character. It appears to me that it might limit their possibilities, but I should be glad to be reassured on that subject. Another important feature of post-war policy clearly must be a finance policy that will promote full employment so far as possible, and therefore there must be a sufficient measure of independence in our own finance policy that will not be interfered with, or at all events prevented, by the operations of the Fund. I should be glad if the noble Lord could tell us something about that too.

Then we were assured by the Chancellor of the Exchequer in another place the other day—and I must say that I for one rejoiced to read his statement—that on no account was this country contemplating going back to the gold standard. To me that was one of the best pieces of news we have had for a long time. In this particular scheme, however, it appears that the value of the exchange will, in fact, be related to gold, and I should be very glad if the noble Lord could tell us something about that; because if the rate of exchange is to be determined with some relation to gold, I do not quite understand how we shall be as independent under that scheme—I was going to say fetish—as one would like to be. I confess that, entirely apart from this discussion, I have never been convinced that to dig gold out of the ground in South Africa and to bury it refined in a cellar in the United States is, in fact, adding to the wealth of the world. It may be that I am so ignorant that I do not appreciate that there is some advantage in the process. However, I put that on one side.

I should be glad if the noble Lord would tell us something as to how the value of exchange is to be determined and by whom. Perhaps it would be useful, too, if we could be told something as to how the Fund is to be managed. I suppose the different nations will appoint their representatives on the management hoard or whatever it is called. I should be glad to know to whom the managers will be responsible, how national policy with regard to the Fund will be maintained or, at all events, promoted through the management of the Fund, and what power will the managers possess apart from any directions which may be given to them by the Governments which appoint them. One can see that an international organization of this kind appointed by the different nations to manage this Fund will become inevitably an exceedingly powerful organization.

I for my part can never get away from the horrid memories of the years from 1929 to 1935 during which the management of our fate, nationally, was largely in the control of the Central Bank. I am quite sure that it is essential in the future that national control of the major matters of finance policy should remain within the Government of the country, and must not be the business of any semi-independent private corporation. I should be glad if the noble Lord can tell us how national policy in that regard can be made effective through the organization which is proposed. On that, I may say that nothing that is suggested here as to the control of the Government of the day over major policies of finance would, or need, interfere in the least with the operation of joint stock concerns or in any way jeopardize or interfere with their relations with their own customers. What we are discussing is the control of finance policy and the operation of our Central Bank organization. It is very important that we should have a little guidance as to how national policy can still be made effective and whether we are creating an organization which can, so to say, dictate policies to the different nations which contribute to its building up. It is that kind of anxiety which a good discussion will help to allay. In any case these are entirely friendly questions, voicing as they do the anxieties of some.

All I would say is that it is our duty to do everything we can to support those who are trying to bring about an international organization that will deal with these matters because it is essential to the future. We must have, too, if we can create it, an international monetary organization which will not only discourage national isolationism but will, on the contrary, encourage development throughout the world, devote itself to lifting up the standard of people everywhere, thereby providing the surest basis of all for regular employment, and at the same time helping to abate those discontents which in the long run, in times past, have done so much to undermine the foundations of peace. The importance of this matter cannot be better stated than it was by Mr. Cordell Hull last Friday, when he said it was so important that we should agree upon a major control and direction of our international monetary organizations for these purposes for without it, he said, the structure of international security would be threatened with collapse as a result of economic disorder. That seems to me to be a very moderate statement of an undoubted truth, and it is with a view to getting further light on these complicated but vital matters that I beg to move.

Moved, to resolve, 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.—(Lord Addison.)


My Lords, it is almost exactly a year since the proposals for a Clearing Union were discussed in your Lordships' House. I hope to persuade your Lordships that the year has not been ill-spent. There were, it is true, certain features of elegance, clarity and logic in the Clearing Union plan which have disappeared. And this, by me at least, is to be much regretted. As a result, however, there is no longer any need for a new-fangled international monetary unit. Your Lordships will remember how little any of us liked the names proposed—bancor, unitas, dolphin, bezant, daric and heaven knows what. Some of your Lordships were good enough to join in the search for something better. I recall a story of a country parish in the last century where they were accustomed to give their children Biblical names—Amos, Ezekiel, Obadiah and so forth. Needing a name for a dog, after a long and vain search of the Scriptures they called the dog "Moreover." We hit on no such happy solution, with the result that it has been the dog that died. The loss of the dog we need not too much regret, though I still think that it was a more thoroughbred animal than what has now come out from a mixed marriage of ideas. Yet, perhaps, as sometimes occurs, this dog of mixed origin is a sturdier and more serviceable animal and will prove not less loyal and faithful to the purposes for which it has been bred.

I commend the new plan to your Lordships as being, in some important respects (to which I will return later), a considerable improvement on either of its parents. I like this new plan and I believe that it will work to our advantage. Your Lordships will not wish me to enter into too much technical detail. I can best occupy the time available by examining the major benefits this country may hope to gain from the plan; and whether there are adequate safeguards against possible disadvantages. We shall emerge from this war, having won a more solid victory over our enemies, a more enduring friendship from our Allies, and a deeper respect from the world at large, than perhaps at any time in our history. The victory, the friendship, and the respect will have been won, because, in spite of faint-hearted preparations, we have sacrificed every precaution for the future in the interests of immediate strength with a fanatical single-mindedness which has had few parallels. But the full price of this has still to be paid. I wish that this was more generally appreciated in the country than it is. In thus waging the war without counting the ultimate cost we—and we alone of the United Nations—have burdened ourselves with a weight of deferred indebtedness to other countries beneath which we shall stagger. We have already given to the common cause all, and more than all, that we can afford. It follows that we must examine any financial plan to make sure that it will help us to carry our burdens and not add to them. No one is more deeply convinced of this than I am. I make no complaint, therefore, that those to whom the details of the scheme are new and difficult, should scrutinize them with anxious concern.

What, then, are these major advantages that I hope from the plan to the advantage of this country? First, it is clearly recognized and agreed that, during the post-war transitional period of uncertain duration, we are entitled to retain any of those war-time restrictions, and special arrangements with the sterling area and others which are helpful to us, without being open to the charge of acting contrary to any general engagements into which we have entered. Having this assurance, we can make our plans for the most difficult days which will follow the war, knowing where we stand and without risk of giving grounds of offence. This is a great gain—and one of the respects in which the new plan is much superior to either of its predecessors, which did not clearly set forth any similar safeguards.

Second, when this period is over and we are again strong enough to live year by year on our own resources, we can look forward to trading in a world of national currencies which are inter-convertible. For a great commercial nation like ourselves this is indispensable for full prosperity. Sterling itself, in due course, must obviously become, once again, generally convertible. For, without this, London must necessarily lose its international position, and the arrangements in particular of the sterling area would fall to pieces. To suppose that a system of bilateral and barter agreements, with no one who owns sterling knowing just what he can do with it—to suppose that this is the best way of encouraging the Dominions to centre their financial systems on London, seems to me pretty near frenzy. As a technique of little Englandism, adopted as a last resort when all else has failed us, with this small country driven to autarchy, keeping itself to itself in a harsh and unfriendly world, it might make more sense. But those who talk this way, in the expectation that the rest of the Commonwealth will throw in their lot on these lines and cut their free commercial relations with the rest of the world, can have very little idea how this Empire has grown or by what means it can be sustained.

So far from an international plan endangering the long tradition by which most Empire countries, and many other countries, too, have centred their financial systems in London, the plan is, in my judgment, an indispensable means of maintaining this tradition. With our own resources so greatly impaired and encumbered, it is only if sterling is firmly placed in an international setting that the necessary confidence in it can be sustained. Indeed, even during the transitional period, it will be our policy, I hope, steadily to develop the field within which sterling is freely available as rapidly as we can manage. Now if our own goal is, as it surely must be, the general inter-convertibility of sterling with other currencies, it must obviously be to our trading advantage that the same obtains elsewhere, so that we can sell our exports in one country and freely spend the proceeds in any other. It is a great gain to us in particular, that other countries in the world should agree to refrain from those discriminatory exchange practices which we ourselves have never adopted in times of peace but from which in the recent past our traders have suffered greatly at the hands of others. My noble friend Lord Addison has asked whether such an arrangement could be operated in such a way that certain markets might be closed to British exports. I can firmly assure him that none of the monetary proposals will do so provided that, if we find ourselves with currencies in a foreign country which we do not choose to spend in that country, we can then freely remit them somewhere else to buy goods in another country. There is no compulsion on us, and if we choose to come to a particular bargain in the country where we have resources, then that is entirely at our discretion.

Third, the wheels of trade are to be oiled by what is, in effect, a great addition to the world's stock of monetary reserves, distributed, moreover, in a reasonable way. The quotas are not so large as under the Clearing Union, and Lord Addison drew attention to that. But they are substantial and can be increased subsequently if the need is shown. The aggregate for the world is put provisionally at £2,500,000,000. Our own share of this—for ourselves and the Crown Colonies which, I may mention, are treated for all purposes as a part of the British monetary system (in itself a useful acknowledgement)—is £325,000,000, a sum which may easily double, or more than double, the reserves which we shall otherwise hold at the end of the transitional period. The separate quotas of the rest of the sterling area will make a further large addition to this. Who is so confident of the future that he will wish to throw away so comfortable a supplementary aid in time of trouble? Do the critics think it preferable, if the winds of the trade cycle blow, to diminish our demand for imports by increasing unemployment at home, rather than meet the emergency out of this Fund which will be expressly provided for such temporary purposes?

I emphasize that such is the purpose of the quotas. They are not intended as daily food for us or any other country to live upon during the reconstruction or afterwards. Provision for that belongs to another chapter of international co-operation, upon which we shall embark shortly unless you discourage us unduly about this one. The quotas for drawing on the Fund's resources are an iron ration to tide over temporary emergencies of one kind or another. Perhaps this is the best reply I can make to Lord Addison's doubts whether our quota is large enough. It is obviously not large enough for us to live upon during the reconstruction period. But this is not its purpose. Pending further experience, it is, in my judgment, large enough for the purposes for which it is intended.

There is another advantage to which I would draw your Lordships' special attention. A proper share of responsibility for maintaining equilibrium in the balance of international payments is squarely placed on the creditor countries. This is one of the major improvements in the new plan. The Americans, who are the most likely to be affected by this, have, of their own free will and honest purpose, offered us a far-reaching formula of protection against a recurrence of the main cause of deflation during the inter-war years—namely, the draining of reserves out of the rest of the world to pay a country which was obstinately lending and exporting on a scale immensely greater than it was lending and importing. Under Clause VI of the plan a country engages itself, in effect, to prevent such a situation from arising again, by promising, should it fail, to release other countries from any obligation to take its exports, or, if taken, to pay for them. I cannot imagine that this sanction would ever be allowed to come into effect. If by no other means, than by lending, the creditor country will always have to find a way to square the account on imperative grounds of its own self-interest. For it will no longer be entitled to square the account by squeezing gold out of the rest of us. Here we have a voluntary undertaking, genuinely offered in the spirit both of a good neighbour and, I should add, of enlightened self-interest, not to allow a repetition of a chain of events which between the wars did more than any other single factor to destroy the world's economic balance and to prepare a seed-bed for foul growths. This is a tremendous extension of international co-operation to good ends. I pray your Lordships to pay heed to its importance.

Fifth, the plan sets up an international institution with substantial rights and duties to preserve orderly arrangements in matters such as exchange rates which are two-ended and affect both parties alike, which can also serve as a place of regular discussion between responsible authorities to find ways to escape those many unforeseeable dangers which the future holds. The noble Lord, Lord Addison, asks how the Fund is to be managed. Admittedly this is not yet worked out in the necessary detail and it was right that he should stress the point. But three points which may help him are fairly clear. This is an organization between Governments, in which Central Banks only appear as the instrument and agent of their Government. The voting power of the British Commonwealth and that of the United States are expected to be approximately equal. The management will be in three tiers—a body of expert, whole-time officials who will be responsible for the routine; a small board of management which will make all decisions of policy subject to any over-riding instructions from the Assembly, an Assembly of all the member Governments meeting less often and retaining a supervisory, but not an executive, control. That is perhaps even a little better than appears.

Here are five advantages of major importance. The proposals go far beyond what, even a short time ago, anyone could have conceived of as a possible basis of general international agreement. What alternative is open to us which gives comparable aid, or better, more hopeful opportunities for the future? I have considerable confidence that something very like this plan will be in fact adopted, if only on account of the plain demerits of the alternative of rejection. You can talk against this plan, so long as it is a matter of talking—saying in the same breath that it goes too far and that it does not go far enough, that it is too rigid to be safe and that it is too loose to be worth anything. But it would require great fool-hardiness to reject it, much more fool-hardiness than is to be found in this wise, intuitive country.

Therefore, for these manifold and substantial benefits I commend the monetary proposals to your Lordships. Nevertheless, before you will give them your confidence, you will wish to consider whether, in return, we are surrendering anything which is vital for the ordering of our domestic affairs in the manner we intend for the future. My Lords, the experience of the years before the war has led most of us, though some of us late in the day, to certain firm conclusions. Three, in particular, are highly relevant to this discussion. We are determined that, in future, the external value of sterling shall conform to its internal value as set by our own domestic policies, and not the other way round. Secondly, we intend to retain control of our domestic rate of interest, so that we can keep it as low as suits our own purposes, without interference from the ebb and flow of international capital movements or flights of hot money. Thirdly, whilst we intend to prevent inflation at home, we will not accept deflation at the dictate of influences from outside. In other words, we abjure the instruments of bank rate and credit contraction operating through the increase of unemployment as a means of forcing our domestic economy into line with external factors.

Have those responsible for the monetary proposals been sufficiently careful to preserve these principles from the possibility of interference? I hope your Lordships will trust me not to have turned my back on all I have fought for. To establish those three principles which I have just stated has been my main task for the last twenty years. Sometimes almost alone, in popular articles in the Press, in pamphlets, in dozens of letters to The Times, in text books, in enormous and obscure treatises I have spent my strength to persuade my countrymen and the world at large to change their traditional doctrines and, by taking better thought, to remove the curse of unemployment. Was it not I, when many of to-day's iconoclasts were still worshippers of the Calf, who wrote that "Gold is a barbarous relic"? Am I so faithless, so forgetful, so senile that, at the very moment of the triumph of these ideas when, with gathering momentum, Governments, Parliaments, banks, the Press, the public, and even economists, have at last accepted the new doctrines, I go off to help forge new chains to hold us fast in the old dungeon? I trust, my Lords, that you will not believe it.

Let me take first the less prominent of the two issues which arise in this connexion—namely, our power to control the domestic rate of interest so as to secure cheap money. Not merely as a feature of the transition, but as a permanent arrangement, the plan accords to every member Government the explicit right to control all capital movements. What used to be a heresy is now endorsed as orthodox. In my own judgment, countries which avail themselves of this right may find it necessary to scrutinize all transactions, so as to prevent evasion of capital regulations. Provided that the innocent, current transactions are let through, there is nothing in the plan to prevent this. In fact, it is encouraged. It follows that our right to control the domestic capital market is secured on firmer foundations than ever before, and is formally accepted as a proper part of agreed international arrangements.

The question, however, which has recently been given chief prominence is whether we are in any sense returning to the disabilities of the former gold standard, relief from which we have rightly learnt to prize so highly. If I have any authority to pronounce on what is and what is not the essence and meaning of a gold standard, I should say that this plan is the exact opposite of it. The plan in its relation to gold is, indeed, very close to proposals which I advocated in vain as the right alternative when I was bitterly opposing this country's return to gold. The gold standard, as I understand it, means a system under which the external value of a national currency is rigidly tied to a fixed quantity of gold which can only honourably be broken under force majeure; and it involves a financial policy which compels the internal value of the domestic currency to conform to this external value as fixed in terms of gold. On the other hand, the use of gold merely as a convenient common denominator by means of which the relative values of national currencies—these being free to change—are expressed from time to time, is obviously quite another matter.

My noble friend Lord Addison asks who fixes the value of gold. If he means, as I assume he does, the sterling value of gold, it is we ourselves who fix it initially in consultation with the Fund; and this value is subject to change at any time on our initiative, changes in excess of 10 per cent. requiring the approval of the Fund, which must not withhold approval if our domestic equilibrium requires it. There must be some price for gold; and so long as gold is used as a monetary reserve it is most advisable that the current rates of exchange and the relative values of gold in different currencies should correspond. The only alternative to this would be the complete demonetization of gold. I am not aware that anyone has proposed that. For it is only common sense as things are to-day to continue to make use of gold and its prestige as a means of settling international accounts. To demonetize gold would obviously be highly objectionable to the British Commonwealth and to Russia as the main producers, and to the United States and the Western Allies as the main holders of it. Surely no one disputes that? On the other hand, in this country we have already dethroned gold as the fixed standard of value. The plan not merely confirms the dethronement but approves it by expressly providing that it is the duty of the Fund to alter the gold value of any currency if it is shown that this will be serviceable to equilibrium.

In fact, the plan introduces in this respect an epoch-making innovation in an international instrument, the object of which is to lay down sound and orthodox principles. For instead of maintaining the principle that the internal value of a national currency should conform to a prescribed de jure external value, it provides that its external value should be altered if necessary so as to conform to whatever de facto internal value results from domestic policies, which themselves shall be immune from criticism by the Fund. Indeed, it is made the duty of the Fund to approve changes which will have this effect. That is why I say that these proposals are the exact opposite of the gold standard. They lay down by international agreement the essence of the new doctrine, far removed from the old orthodoxy. If they do so in terms as inoffensive as possible to the former faith, need we complain?

No, my Lords, in recommending these proposals I do not blot a page already written. I am trying to help w rite a new page. Public opinion is now converted to a new model, and I believe a much improved model, of domestic policy. That battle is all but won. Yet a not less difficult task still remains—namely, to organize an international setting within which the new domestic policies can occupy a comfortable place. Therefore, it is above all as providing an international framework for the new ideas and the new techniques associated with the policy of full employment that these proposals are not least to be welcomed.

Last week my noble friend Lord Bennett asked what assumptions the experts might be making about other phases of international agreement. I do not believe that the soundness of these foundations depends very much on the details of the superstructure. If the rest of the issues to be discussed are wisely settled, the task of the Monetary Fund will be rendered easier. But if we gain less assistance from other measures than we now hope, an agreed machinery of adjustment on the monetary side will be all the more necessary. I am certain that this is not a case of putting the cart before the horse. I think it most unlikely that fuller knowledge about future commercial policy would in itself make it necessary to alter any clause whatever in the proposals now before your Lordships' House. But if the noble Viscount meant that these proprosals need supplementing in other directions, no one could agree with him more than I do. In particular, it is urgent that we should seek agreement about setting up an international investment institution to provide funds for reconstruction and afterwards. It is precisely because there is so much to do in the way of international collaboration in the economic field that it would be so disastrous to discourage this first attempt, or to meet it in a carping, suspicious or cynical mood.

The noble Lord, Lord Addison, has called the attention of your Lordships to the striking statement made by Mr. Hull in connexion with the National Foreign Trade Week in the United States, and I am very glad that he did so. This statement is important as showing that the policy of the United States Administration on various issues of political and economic preparation forms a connected whole. I am certain that the people of this country are of the same mind as Mr. Hull, and I have complete confidence that he on his side will seek to implement the details with disinterestedness and generosity. If the experts of the American and British Treasuries have pursued the monetary discussions with more ardour, with a clearer purpose and, I think, with more success so far than has yet proved possible with other associated matters, need we restrain them? If, however, there is a general feeling, as I think that there is, that discussion on other matters should be expedited, so that we may have a complete picture before us, I hope that your Lordships will enforce this conclusion in no uncertain terms. I myself have never supposed that in the final outcome the monetary proposals should stand by themselves.

It is on this note of emphasizing the importance of furthering all genuine efforts directed towards international agreement in the economic field that I should wish to end my contribution to this debate. The proposals which are before your Lordships are the result of the collaboration of many minds and the fruit of the collective wisdom of the experts of many nations. I have spent many days and weeks in the past year in the company of experts of this country, of the Dominions, of our European Allies and of the United States; and in the light of some past experience I affirm that these discussions have been without exception a model of what such gatherings should be—objective, understanding, without waste of time or expense of temper. I dare to speak for the much abused so-called experts. I even venture sometimes to prefer them, without intending any disrespect, to politicians. The common love of truth, bred of a scientific habit of mind, is the closest of bonds between the representatives of divers nations.

I wish I could draw back the veil of anonymity and give their due to the individuals of the most notable group with which I have ever been associated, covering half the nations of the world, who from prolonged and difficult consultations, each with their own interests to protect, have emerged, as we all of us know and feel in our hearts, a band of brothers. I should like to pay a particular tribute to the representatives of the United States Treasury and the State Department and the Federal Reserve Board in Washington, whose genuine and ready consideration for the difficulties of others, and whose idealistic and unflagging pursuit of a better international order, made possible so great a measure of agreement. I at any rate have come out from a year thus spent greatly encouraged, encouraged beyond all previous hope and expectation, about the possibility of just and honour- able and practical economic arrangements between nations.

Do not discourage us. Perhaps we are laying the first brick, though it may be a colourless one, in a great edifice. If indeed it is our purpose to draw back from international co-operation and to pursue an altogether different order of ideas, the sooner that this is made clear the better; but that, I believe, is the policy of only a small minority, and for my part I am convinced that we cannot on those terms remain a Great Power and the mother of a Commonwealth. If, on the other hand, such is not our purpose, let us clear our minds of excessive doubts and suspicions and go forward cautiously, by all means, but with the intention of reaching agreement.


My Lords, it is a happy but for me a formidable coincidence that it tell to me a year ago to be the speaker immediately following my noble friend Lord Keynes. On that occasion I was the spokesman of your Lordships' House, for my noble friend was making his maiden speech. I would refer to the words which I used on that occasion when I said, speaking for your Lordships, that we knew that Lord Keynes would illumine and embellish his future contributions to our discussions with the same clarity of argument and the same grace of phrase as in the speech which he had just then made. You will agree with me that that prophecy has been fully justified to-day. I believe that, just as I was the spokesman of your Lordships a year ago in congratulating and thanking Lord Keynes, so you will desire me to do so to-day.

This is, however, a formidable coincidence, because I approach this subject from a different position from that of my noble friends Lord Addison and Lord Keynes. Lord Addison, with long years of profound experience behind him, has put to Lord Keynes certain key questions designed to elucidate the technicalities of the position and Lord Keynes has spoken with all the authority that he rightly enjoys in a matter of this consequence. I am no economist. I have a great regard for economists, but I am no economist myself. I am rather one of those to whom Lord Keynes referred in the closing passages of his speech, in contrast to economists, as politicians; and I wish to address your Lordships' House from the standpoint of a layman, from the standpoint of the man in the street, who has done his best, knowing that this is a matter of great moment, to understand what it is all about and to present to your Lordships the results of that consideration.

As a layman, I should say that an expert monetary scheme of this kind can have only one purpose: it is a technical means for securing a very great and practical human end. The one question which I ask myself as a layman, therefore, in looking at a plan of this sort, is this: What is this going to mean in terms of trade and employment and standards of living? That is what matters most. Finance exists for trade, not trade for finance. Whilst I do not approve very much of the practice of asking your Lordships to be allowed to refer to previous speeches in this House, I should like to recall one passage which expresses what I mean as well as I can express it, a passage from the speech which I made in the debate to which I have just referred: …monetary management … is not a conjuring trick, it is a process … it cannot make possible what is physic ally impracticable"— but it can and must make possible all that is physically practicable.

The main virtue of the Keynes plan last year was that it did take this as its theme. It was deliberately contrived to develop policies of expansion. Under it every country cut its coat according to the full size of its cloth. Now that Keynes plan has been merged in this Allied plan, and some of the noble Lord, Lord Keynes's brilliantly contrived provisions for expanding world credit facilities by means of overdrafts have gone in deference to other views. I personally regret it, and from what Lord Keynes said earlier I gather that he regrets it too. He pointed out that this plan has the advantage of being an agreed plan. It is an attempt agreed to by the experts of thirty-four different countries. What an extraordinary thing but what a magnificent achievement it is that so many experts, representing such diverse interests and with such different traditions, should have come together and have been able to produce a plan such as this with substantial agreement.

Here is this plan to restore multilateral trade by the technical means of multilateral clearing, so that all nations may be able to trade freely with one another, so that all nations may be able to take full and unfettered advantage of the gains to be got from the international division of labour. The noble Lord, Lord Keynes, put that very well the other day when he said that the purpose is that any country should be enabled to use the proceeds of its sales abroad to make purchases in any other country. We in Britain have much the most of all nations to gain by this freedom. If this scheme is sufficient, the needs of the nation can be satisfied from the places where they can best be supplied, and goods can be sold in the places where they are most needed. This will indeed be a very different picture from the self-sufficient policies of mere barter to which so many countries succumbed during the years between the wars. So on those grounds I welcome this plan. I welcome it, too, because it proposes to do something that has not been effectively done in world exchange for a generation—not since 1914. In the old uneasy days between the wars, when balances of payments between nations got out of line, the onus of putting things right fell, as the noble Lord, Lord Keynes, has pointed out, on the countries in debt. They were compelled to cut down their trade all round and to cut down their employment at home. So slumps and depressions became products of export from one country to another, and the effects of world financial derangement tended always at these times to become worldwide restrictions and world-wide distress.

In this plan there is machinery for bringing pressure to bear upon the creditor countries, the trading nations who persist in selling more than they buy or lend. In this plan, if they do this in the future, they can be pulled up short. The supply of their currency in the hands of other countries will become scarce, and those countries will then he given an explicit right to cut down their purchases from this persistent creditor without cutting them down from other countries. Creditors will be under pressure. They will have both a practical and a moral obligation to find ways and means either of buying more foreign goods or—which is almost equally effective—of lending more, that is investing more, in the development of other countries. I must admit, and indeed Lord Keynes made it clear, that not everybody is agreed about all this. Broadly speaking, there have been three quite different views among experts since this plan was first published a few weeks ago. One school of economists say that so far from being helpful to the growth of world trade, this plan will be restrictive. Another and more sober school of economists say that it will be neither restrictionist nor expansionist, but neutral in its effects on world trade. This school contends that it all depends, not on the international monetary arrangements reached, but on the actual trade agreements that may be made, the trade agreements which are now I believe under active international discussion. I must say that I for my part agree with this view inasmuch as I believe, as I said a year ago, that this is at bottom a problem of exchange rather than of the exchanges.

The third view, which is stressed by Sir John Anderson, the Chancellor of the Exchequer, and my noble friend Lord Keynes, says frankly that there is nothing in this monetary plan to stand in the way of any trade arrangements between nations or groups of nations that may be needed to maintain and extend the volume of world commerce. If I understood him rightly, my noble friend Lord Keynes specifically repeated that this afternoon. Let me interpolate here what it seems to me that this freedom to make trade arrangements means and what it does not mean—what it cannot mean. When the Chancellor of the Exchequer first gave his reassurances in answer to his critics in another place he was taken by them to mean that our hands would remain absolutely free to make whatever trade or currency arrangements we chose to make. But no international arrangement could possibly mean this; it would not be an agreement at all, and we should not be debating it here. Actually it seemed to be pretty clear what the Chancellor did mean, and if I understand him aright, it has been made clearer since by his mentor, Lord Keynes. I confess I was a little taken aback by a very powerful leading article in The Times this morning, and I want to know whether I have correctly appreciated the position, as I believe I have. Perhaps the noble and learned Viscount on the Woolsack, when he comes to reply to this debate, will be able to say whether I am correct or not. I thought—I still think—that what the Chancellor of the Exchequer meant was that we should be free in both currency and trade matters during the transition period, and I welcome that assurance very much.

The abnormal currency balances that will exist when the war stops—currency balances which have arisen because of the war-time distortions of trade—need special machinery to work them off, but without prejudice to later principles. Today there are already sterling balances in London amounting to nearly £1,500,000,000, mostly due to India, and they my very well reach more than £2,000,000,000 sterling by the time the war ends, more than half Indian. We must be free to work off these balances in our own way before we shoulder our normal long-term obligations, because if we do not no long-term plan for equilibrium can work. Then again I think the Chancellor mentioned that we have not yet entered into any trade commitments at all, and I gather from what Lord Keynes said, that that is correct, even though they may be, and I believe are, under contemplation and discussion now, and we shall, of course, have entered into currency commitments for the period after the transition period. The obligation is, briefly, to secure that all currencies are freely interchangeable, any one into any other. It is only by this freedom of convertibility to which Lord Keynes referred that we can get that desirable freedom to use the proceeds of our sales in one place for making purchases in another, the freedom that we must have to live and trade well.

It would be quite wrong to dismiss entirely the fears that have been expressed in certain quarters. Broadly they are as follows. Some say that the proposed Fund is rot big enough to finance expansionist trade policies, that it is not big enough to make it possible every time there is disequilibrium in the balance of payments to secure that the rectification is made by increasing trade on the side of the creditor instead of decreasing it on the side of the debtor. The original Keynes idea of an international institution to create international credit, and to lend it out on overdraft to deficit countries for the expansion of their trade, has been rejected, and as I said I personally regret it. We do need—and perhaps we shall have them—definite assurances that the facilities of the Fund will be big enough and that, in particular, its supply of dollars will be large enough to prevent its operation from being, in fact, a brake on the wheel of world trade. Perhaps the noble and learned Viscount, whom I have apprised of the questions I am putting, will be good enough to refer to some of these matters when he comes to reply. Almost certainly this exchange plan needs two additions and, if I understand Lord Keynes aright, I do not think he will dissent. It needs the essential supplement of large-scale international investment plans so that the funds of the surplus countries may nevertheless fertilize the rest of the world; and it needs the addition of some agreed and effective emergency scheme for the transition between war and peace, perhaps a standstill before the big plan starts, so that by this means the abnormal war-time balances will be worked off and a position attained which will be balanceable when the transition comes to an end.

The second fear is that the mutual money and trade arrangements that already exist between groups of nations such as those of the sterling area will be endangered, that the principle of nondiscrimination between the trade of one country and the trade of another which is implicit in this whole scheme means that we and other countries may have to forgo the right to make constructive reciprocal arrangements with, say, Commonwealth, Empire, or European countries. It is well that these fears should be stated. I think that Lord Keynes has done something specifically to allay this particular fear in what he said this afternoon. Nothing should be ruled out which may add to the total world trade and world employment. I speak as an unrepentant believer in expansionist policies. I have only been a follower, in as far as I have understood him, of my noble friend Lord Keynes. Finance is a servant, not a master. The only requirement of money is that there should be enough of it to make all that is physically possible actual, to turn the possible into a fact.

It is due to the critics that we should state and appreciate the fears that they have expressed, but need we be afraid? There are good reasons why we should not be. There is, first of all the fact I have already mentioned that this is a plan for multilateral trade, for trading on the widest possible basis over the widest possible area without any financial impediments. I speak not only as a believer in expansionism, but also as a believer in multilateralism. I believe—and it is the experience of Britain for a century—that this is the method by which the most world trade can be done with the maximum of benefit to all concerned. It is certainly the way in which we, in our present economic position, can look to sell most. We must have multi-cornered trading so that we sell goods to non-American countries with dollar surpluses in order to get dollars with which to buy American goods. We must have the utmost degree of convertibility. But I agree—and I gather from what Lord Keynes said that this is his opinion—that if this turns out to be no more than a pretence of multilateral trading, in return for which we have to give up the reality of extending regional trade, then we shall indeed be grasping at a shadow and foregoing the substance. Is it likely to be so? Even the most cautious and sceptical of critics have been shaken in their scepticism by the forthright statements and reassurances of the Chancellor of the Exchequer, and they will be equally reassured by the equally forthright statement made by Lord Keynes to-day.

What we want to know, however, is whether there is anything in this plan that will prevent the full and efficient employment of all the resources of all the countries with which we have special ties—the countries of the Empire, the Commonwealth, and Europe? What does the Chancellor of the Exchequer say? He says there is nothing in the plan to prevent reciprocal arrangements from being made with other countries or other groups of countries in either the monetary or the economic field. That seems definite and explicit enough and Lord Keynes seemed to underline that to-day. The Chancellor of the Exchequer says further that there is nothing in the scheme to prevent one country from giving another country a prior claim upon its exports. Lord Keynes referred to that with great clarity and emphasis as well. If I understand it aright, it means that there is nothing in the scheme to prevent us from making long-term purchase agreements with other countries in order to stabilize their employment and our trade at the highest possible level. That is what I understand Lord Keynes and the Chancellor of the Exchequer alike to say and to mean. There is nothing in the scheme to prevent us from entering into large-scale and long-term development projects with other countries or groups of countries provided our obligation to keep our currency convertible in normal conditions is carried out. If that is true, as I believe, it seems fair enough, and it is explicit enough denial of the worst fears that have been expressed. So, on balance, we may feel tolerably reassured.

I put the need for multilateral trading rather than bilateral barter or policies of national self-sufficiency very high indeed. I put equally high, for both political and economic reasons, the essential desirability, if at all possible, of an agreement in all world trade matters with the United States of America. It is worth while devoting great efforts to that. I believe that if the present trade talks with the United States are pursued in the spirit of the Chancellor of the Exchequer's assurances and those of Lord Keynes the result will be the kind of flexible and expansionist system that we and the world need.

But I must finish on a word of caution as well as one of satisfaction and welcome. It is essential that whatever trade agreement is made should be made in this spirit of flexibility and expansion. If it is not, if we and the United States continue to pursue after the war the same shortsighted policies that we so often pursued before the war, then the critics will prove to have been right. If on the one hand we come back to the restrictive practices of the Ottawa Agreements, or if on the other hand they continue with their old policy of trying to maintain the ever-increasing export surplus without buying or lending sufficient to balance matters, then this plan will work restrictively—and disastrously. In other words, this plan is in that sense neutral. It does not prohibit the steady expansion of trade, it does not command it, and whether there will be steady expansion depends, in my view, on this. It depends on the trade agreements that are now being devised, which are a matter of exchange, not of the exchanges; it depends on the resumption and organization of large-scale and steady world investments, and on there being a transitional scheme for the abnormal problems of the relief and emer- gency period. But it depends fundamentally upon the will and ability of all the nations to pursue at home policies of full employment. A last word. The ultimate test is not the technical perfection or the technical niceties of this plan or that plan. The ultimate test is the volume of trade and employment actually provided. It is the standard of living made possible to us and to others. It is the provision of food, homes, jobs.


My Lords, I shall not require many moments to voice the approval which I am very anxious to give to the monetary plan which has been put forward this afternoon in very clear and eloquent terms by Lord Keynes. I think myself it is important not to follow too closely the lines of the last speaker in placing upon tare shoulders of the monetary plan under Lord Keynes all the other burdens of international trade agreement which fail to be settled in the post-war period. This plan is a plan for dealing with money, and I think it is an effective plan for that purpose. Of course if the rest of the world pursues a policy of economic madness, no monetary plan, and no other plan either, could possibly withstand the full burden of a great mass of international folly. There is a lot to be said for Lord Keynes's original scheme and I grieve with him in lamenting the loss of Ids dog. As an old master of hounds I feel he had at one time almost a pack, so many different names were suggested to serve his purpose. In fact, if I remember rightly, the noble Viscount who presides over the House suggested the word "moneta" amongst many others as a suitable name. But the dog has gone and the plan is slightly changed. I am not, however, too much discouraged because I think that time and experience may well show that that plan as it was put forward in the first place had advantages which the present plan has not got. But this may well bring us together to form an international monetary standard which everyone will be prepared to accept.

It is no use in an imperfect world, when one is making slow progress, to hope that everything will be clone at once. That we have got as far as we have at the present stage in this report is, I think, a very great step forward. And I am surprised that there should be any other welcome to Lord Keynes after his return from America and a year's hard work, than that of congratulation and praise in his having achieved an extraordinarily difficult task and brought together so many different countries to agree to such sensible proposals. We may look back with great regret over the whole history of the last twenty-five years and wonder what it might not have been if these proposals, sensible as they are, had been brought forward at the end of the last war and carried into practice instead of what we have actually been through. Lord Keynes was here and was eloquent then. And he had as much knowledge as he has to-day of the fundamentals of the problem with which he set himself to deal. As he said this afternoon, he has spent a lifetime fighting the restrictive effects of the gold standard, and to me it is quite amazing to hear people coming forward at this stage to accuse him of trying to tie us to the gold standard system.

I suppose political criticism is a valuable thing at all times. But it seems to me to have been stretched to its absolute limit in the type of criticism that has been brought forward against the plan we have before us to-day. It is true that at other times in the name of internationalism ridiculous things have been done. But if the people who are going to manage the plan and if the various countries concerned in it set about it with the same energy to defeat the purposes of the plan, it will very likely go under, but that does not necessarily mean it is a bad plan because no plan in the world can with-stand extensive sabotage by those whose duty it is to operate it. All the same, I do not see any reason why we should look forward to anything of that sort taking place. On the contrary, I think the mere fact that thirty-four nations have been prepared to join together shows there is a sufficient number of sufficiently important nations who will try to make it worth while and will succeed. We may find there will be some who will be recalcitrant and difficult, but if the major industrial nations of the world band together, I think we shall find that what we have before us now is a perfectly natural evolution of the monetary system that we have been using in past generations.

One has seen the whole progress of the banking system of this country develop until we had the bankers clearing-house system, which is the keynote of all we do here, and we now have a system something like it for the world at large. I do not think there is any reason why one should expect it not to work, unless we get into the type of difficulty which I mentioned just now and which really would mean that no system of any kind could be expected to work. This country, therefore, naturally has to consider what kind of steps it would take in the face of a major collapse. Well, if the thing gets into a hopeless tangle there is provision for withdrawal. Now comes in what we have been considering—namely, whether we should be forced into a bilateral instead of a multilateral system, and whether we shall need to adopt all sorts of restrictive measures, by no means those which we should first be most likely to adopt but others which we might be forced to adopt for our protection.

There is one other point which I think worth mentioning before I sit down. The noble Lord, Lord Keynes, said the burdens which we had assumed during this war would make us stagger during the first period after the war. Of course he is right and I think all will agree with him on that point. But it would not be right to overlook the fact that with the fearful destruction which war brings there is a commensurate balance in the extraordinary development of technique throughout the world, not in this country only but in every country of the world. It gives a greater opportunity for recovering than I think mast of us suspect. During the welter of destruction there have been developments of technique of all sorts and kinds and their use will give us a better chance to get civilization going again. Moreover, that advance of technique will be the very thing that will enable us to recover from the great burdens the noble Lord mentioned that will have to be faced in the immediate postwar period.

In the immediate post-Napoleonic period no one could understand how we could ever recover from the debts incurred in the wars of Napoleon, but by the time of the South African war the Napoleonic debts had become infinitely small. Some idea of what will occur may perhaps be found by using as a measuring stick the horse power per man in existence in the country at the time of the Napoleonic wars as compared with the opening of the century. That gives one some measure of the technical advance. It is that technical advance which will enable us to recover from the fearful burden we have assumed and enable us to obtain a measure of that full employment which has been stressed as such an important element in post-war policy. I am convinced there is nothing in this plan which can possibly restrict our domestic industrial development or commercial development. It is a plan for which, in your Lordships' House and in the country, we ought to be very grateful to my noble friend Lord Keynes and those experts who have worked with him. We should be very grateful for it and we should accept it in the warmest possible terms.


My Lords, the subject we are discussing this afternoon is the statement of principles contained in Command Paper 6519. I do not think there is any one of your Lordships who would not approve of those principles as principles, but when one comes to consider the modus operandi of putting those principles into effect, one must be cautious before approving of the application of any such principles. I do not propose to quote this afternoon from the speech of our present Prime Minister, because in the debate on a Motion of this sort in another place within the last week that speech was quoted at length by two honourable members, but unless the Prime Minister has entirely changed his opinion he cannot possibly, as I see it, lend his support to approval of the carrying out of the principles laid down in this White Paper.

I carried the White Paper in my pocket for a long time and I sought advice from many quarters. I could not quite reconcile the statements in the White Paper. They seem to me contradictory as well as extremely badly drafted. Evidently the statement did not emanate from the pen of the noble Lord, Lord Keynes. I have sat as a pupil, and a very humble pupil, at the footstool of Lord Keynes ever since he removed himself from obscurity some twenty odd years ago and published The Economic Consequences of the Peace. The present Chancellor of the Exchequer has been pressed very hard in another place to disclose the identity of the experts who produced this Command Paper. He has refused to disclose their identity because he says it is tradi- tionally incorrect so to do, but I think my noble friend Lord Keynes will perhaps forgive me if I assume that he is one of those experts. If that is so, I beg him to emerge again from behind the curtain of secrecy and obscurity and give us his really frank views, with no special pleading, upon the economic consequences of the White Paper. That I am sure would be as revolutionary and refreshing as was the contribution he made in discussing the disastrous course that was proposed and followed in regard to reparations after the close of the last war.

I have read this White Paper and I find that roughly one-quarter—a little more—is given up to explanatory notes. When I read them I said "Well, I presume this is just a substitution of Tweedledum and Tweedledee," calling the noble Lord's plan, which he expounded to your Lordships' House a year ago, ether Tweedledum or Tweedledee as you please. There is a difference, and personally I prefer Tweedledum. I agree with the noble Lord, Lord Nathan, in preferring the original plan to a return to the gold standard. I want to be realistic. As I listened to the speech of the noble Lord this afternoon, and in particular to his peroration when he said, "Please do not discourage these experts, do not turn their plans down, because we may be laying the foundation stone of a new order," I wondered where the new order came from. It has a very strong taste of the place from which the League of Nations originated some twenty odd years ago. I wonder, if it is accepted in the same way as the League of Nations was accepted, whether the father of the plan will not renounce his offspring in the same way as the League of Nations was set on one side.

The noble Lord, Lord Keynes, stated that the new-fangled expression for international currency, "bancor" or "unitas," had been dropped, but he did not stress the, fact that he was resurrecting the very old-fangled, flyblown End disgraced gold standard. That, however, is the alternative to the new-fangled plans of "unitas" and "bancor." If you regard the White Paper realistically, it is quite futile to say that it does not mean a return to the gold standard. If words have any meaning- the White Paper cannot mean anything else. In the Joint Statement by Experts on the Establishment of an International Monetary Fund, Clause II (3) says: The obligatory gold subscription of a member country shall be fixed at 25 per cent. of its subscription (quota) or 10 per cent. of its holdings of gold and gold-convertible exchange, whichever is smaller. That is pretty clear. It has to be gold. Perhaps the noble and learned Viscount who replies would tell me how much we have to put up to find 10 per cent. in gold or gold-convertible exchange.

What is the British holding in such securities and where are they coming from? Looking at the statement of the Bank of England Issue Department I find we have less than a quarter of a million in gold. If we are to take the proportion of the total holding explained to us this afternoon, I presume we have to go out and acquire gold, giving goods for it at twice the rate we had to give when we went back to the gold standard in 1925—twice the rate because, using it as a measure of value, gold to-day in terms of sterling, is twice as expensive as in 1925. Exactly what is meant by gold-convertible securities I am at a loss to Know. That is one of my shortcomings, and perhaps the noble and learned Viscount will tell me.

There was a time, I know, when an English bank-note was convertible into gold, when a dollar-note was convertible into gold, when the bank-notes of most of the civilized Western powers, at any rate, were convertible into gold, but there is not a bank-note in the world to-day of any consequence that is convertible into gold. So it would perhaps be interesting to know what is a gold-convertible security. Clause III of the Paper, by paragraphs 5 and 6, deals with the ways and means whereby paper currencies shall be converted into gold. Clause IV completes the picture and stipulates that the par values of members currencies shall be expressed in gold, and it presumes thereby, and only thereby, to set up an international parity of values based upon the price of gold. The parity of values cannot be acquired in any other way. That is the old gold standard.




Forgive me; if it depends on the price of gold—the old gold standard. Details of the working of it may be different, but on questions of detail this White Paper conceals more than it betrays. The old gold standard was evolved by one nation after the other stipulating on its own behalf over a period of years, and had its own selected members. For example, just as we said we would buy gold at a certain sterling price, France said she would buy for so many francs per ounce, Germany said she would buy for so many marks, and America said she would buy for so many dollars; and it was by means of that gold standard, by that gold measure—and only by that means—that we were enabled to achieve parity of international currencies. Now we are proposing that we should be able to do it after twelve months' work by 33 experts producing a document of this character, and set ourselves up to control—and it must resolve itself into an autocratic control—the trade and business of the world, determined on the values of gold. That is what it amounts to.

Gold was spoken of by the Chancellor of the Exchequer in another place last week, when the subject was being discussed, as a very valuable commodity, and he excused its use because it was a valuable commodity. May we reflect on this question: Upon what intrinsic value as a commodity does gold rest? I venture to think it is very little indeed. It will be found that in this there is perhaps something comparable with the situation when silver coinage was abandoned. Up to the time of the abandonment of silver coinage in the 'eighties it was rated as against gold at the rate of 16 to 1. When it had to take its place in the markets of the world and respond to the conditions of supply and demand it sank. To-day it has sunk to such a level that the equivalent values work out at about 80 to 1. When an artificial price and value were put upon it its relation to gold was 16 to 1.

I ask the noble Viscount what in his opinion would be the value of gold if it were not for its use as a yardstick alone. Is it not thoroughly uneconomic to spend money to dig a thing out of a hole in one part of the earth merely to deposit it in another hole somewhere else—something which is not to be put to any use but as a simple yardstick, a very expensive yardstick. I cannot see why this White Paper plan could not succeed without the use of gold. As I have said, gold is merely a yardstick. You might just as well, if you like, take the term dollar, the term bancor, the term unitas, or any other term, and, by international agreement such as is presumed in this particular case here, make a piece of paper—a piece of paper with a common name commonly accepted—a measure of value. Really gold has very little intrinsic value compared with paper. I think that as a matter of real practice we should much prefer paper—that is paper as paper—to gold if we had to choose between one and the other.

I would like now to read to you what the Prime Minister, than whom there is no greater living speaker or writer in our language, said in 1932 on the subject of America and our relations with America. After recommending what we are all trying to achieve now and what we all desire, he said that we should strive to have a common understanding with the United States. Then he went on to say: Therefore I say that His Majesty's Government should address themselves urgently to the Government of the United States, and they need not be afraid in so worthy a cause of encountering a rebuff. I may be told that we cannot talk to the United States of America because they are busy about their election; that we do not know who is going to govern the United States; that we do not know whether they have at this moment the inherent capacity to make an arrangement and carry it through. We may have to wait for many critical months, and we may find after that that no agreement is possible. All right, do your best, but, if nothing can be done there, let us fall back upon what I must regard as the minor step, the second best, which, nevertheless, may prove a highly practical policy and may become the means of our economic salvation. Let us fall back on what I will call the magnificent congregation of sterling communities. Let us make the best of that in default of a better. That was the advice of our present Prime Minister when he was not a Minister. He was then a private Member of Parliament and he was advising the Government of the day.

He had had to make a confession regarding one of the greatest mistakes of his life—I am afraid I think the very greatest so far as this country's prosperity was concerned. He confessed that in succumbing to expert advice in 1925 he had done a wrong thing. His advice here is to take what we have got, to become rulers in our own house. I am sure there is no salvation to be found in any return to the gold standard or the conditions prevailing when the gold standard worked satisfactorily. We certainly do not want in our own country to return to the conditions of sweated labour, child labour and so on, so that we can build up a great creditor position abroad by exporting more than we import and so that we can, according to one estimate at least, lose £4,000,000,000 in bad debts abroad, money which is really taken out of the pockets of our people here at home. I think that we should bear in mind the Fifth Point of the Atlantic Charter, which states that it is the desire to bring about the fullest collaboration between all nations in the economic field, with the object of securing for all improved labour standards, economic advancement, and social security. That, I think, should be our object. That can be achieved without any use of gold at all, and without the use of any other commodity, because the use of any commodity at all is a malpractice if it is going to be employed as a yardstick for measuring all other values. I think that if we accept the Motion in the terms in which it has been put to us to-day—namely, that we agree with the principles set forth in paragraph I of the White Paper—there will be no objection, but we should enter a caveat against accepting everything in the White Paper which comes after that.


My Lords, I rise to support to the utmost of my ability the Motion which is before your Lordships' House, and I want to go a little further than that and to express my most cordial approval of the general principles which are enunciated in the White Paper. I find myself differing in toto from my noble friend Lord Perry, and I think that, feeling as he does, the only logical thing for him to do is to insist on dividing against this Motion. I rather hope that the noble Lord will do that, because I think that it will reveal the strength of opinion in your Lordships' House in favour not only of the Motion but also of the general principles of this scheme.

I think that this White Paper gives us very great hope for the future. The first hopeful point to which I would call attention is the solitary one which my noble friend Lord Perry found himself able to approve. It is No. 2 in the statement of principles, and it says that the object of the Fund is: To facilitate the expansion and balanced growth of international trade and to contribute in this way to the maintenance of a high level of employment and real income, which must be a primary objective of economic policy. I find that encouraging because I think that it has now become obvious that our greatest object in our internal policy is that of the attainment of full employment. We have arrived at that conclusion after twenty-five difficult years since the last war, and what I like about this scheme is that it seems to show in every clause evidence of a desire to bring the monetary machine under control so as to serve that object of full employment. Full employment is not only our interest, but a common interest of ourselves, of all the Associated and United Nations, and of the whole world. It is a great thing to have discovered a common interest for which we can all work by international means. That, I think, illustrates the advance which has been made since we found ourselves in the same sort of position at the end of the last war. My noble friend Lord Keynes gave your Lordships a brief account of his own personal history and struggles in this matter, and nothing could illustrate better the progress which we have made in knowledge of economic affairs than this consensus of opinion that full employment is not only our aim but the common aim of all the world. Therein I find enormous hope for the future.

The second point which I find very hopeful is referred to in paragraph (9) of the Explanatory Notes, and given effect to in the details of the scheme. It is the willingness of the nation which is likely to be the greatest creditor nation after the war to discuss the problem when a currency becomes scarce and to take steps to prevent the consequences of which we have already had experience. I read the debate in another place, and I was greatly impressed by the remark of the Chancellor of the Exchequer, that he felt convinced that the great creditor country would take measures to relieve the situation before action by the Fund became necessary. My noble friend Lord Keynes made a remark much to the same effect. What a tremendous advance that is over our past difficulties, to find the United States prepared to put such a provision as that into a scheme to which they expressed themselves as willing to adhere!

I think that there are four objections which would be conclusive against this scheme if they could be established, and it is right that we should consider them and make quite certain that we are going to be safeguarded against them. I say at once that if the scheme involved a return to the old, rigid gold standard, that would be a sufficient reason to condemn it. I should not have thought it necessary to spend a moment on that, after the explanation which we have had from my noble friend Lord Keynes, but for the speech delivered by my noble friend Lord Perry. Frankly, in the light of Lord Keynes's speech, I thought that that was one of the most amazing speeches which I have ever heard in your Lordships' House. To begin with, Lord Perry said that the White Paper was contradictory and badly drafted. I think he said that it was not written in English. Perhaps it has been written in American. What a wonderful thing it would be if it had been written in American by an American! That would be one of the greatest recommendations that the scheme could possibly have.

The noble Lord, I thought, built a wholly imaginary case of the dangers which we should incur in backing this scheme. He said that it was not different from the old gold standard. The noble Lord, Lord Keynes, spent ten minutes in proving to your Lordships that the new arrangements, so far from anchoring our internal conditions to other people's conditions through the medium of gold, specifically provided for the adjustment through this scheme of our domestic situation so that we could preserve our own standard of living.


My Lords, I should like to say that I was speaking of the international position, and not of our domestic conditions at all.


My Lords, I thought that the noble Lord's objection to the scheme was that our domestic situation would suffer because we ran the risk of having to adjust it to international conditions. If that is not it, I do not understand what the noble Lord's objection is. The noble Lord said that apart from being a yardstick gold had no intrinsic value. I differ from him entirely. Gold always has had a great intrinsic value ever since the days of the Pharaohs, when they used to cover their images with gold. Gold always has had an attraction for people, and I think it is entirely a fallacy to say gold has no intrinsic value. Where I agree with the noble Lord is that we should, if we were sufficiently educated, use bits of paper just as well as bits of gold, and it is one of the objects of this scheme to bring that happy state of affairs about. But in order to use bits of paper as a medium of exchange, you have to have confidence in the bits of paper; and it is because confidence has been destroyed that a scheme like this is necessary to try to get us back to a happy state of affairs where we shall all have confidence in one another's currency. Then paper will do perfectly well, and it will not be necessary even to have the remote link which there is with gold in the present scheme. As a matter of fact as long as you have the position in the United States, with their great stock of gold, and as long as you have a dollar-sterling rate, you must have a link with gold. You cannot help it. It is a variable link under the scheme, but you cannot help having a link as long as the Americans have got the gold under the present conditions, and as long as there is trade between Great Britain and America, which involves a dollar-sterling rate. But you have no more of a rigid link under this scheme than you had in pre-war days, days after we had left the gold standard. That is the first objection. I entirely agree with the noble Lord that if it is a return to the gold standard we will have none of it, but I do not believe it is a return to a rigid standard, which clamps our currency down to gold.

The second point which would be an objection to this scheme would be if it involved loss of control ever our own internal purchasing power. The control of internal purchasing power is the most potent weapon which our Treasury can have to influence the trade cycle—control over boom and slump—and there must be absolute control, so as to remain masters in our own house of the volume of our own internal purchasing power. I do not think anybody, at all events not to-day in this House, has suggested that there is any danger of that. Thirdly—and this is a point which we have to examine with great care—if this scheme debarred us from reciprocal trade arrangements within the Empire, then I think we should have to ask for some modification, or be quite clear where we are. As this is a point on which I think there is a good deal of uneasiness, I want to look at it rather carefully. Various pronouncements have been made. The Chancellor of the Exchequer in another place was fairly specific about it. He said: There is nothing in the scheme to interfere with the continuance of sterling area arrangements. And he said again: There is nothing to prevent the continuance of the same close monetary and economic arrangements between this country and the Dominions as in the past. Well, that is pretty specific. The noble Lord, Lord Keynes, himself in a letter in The Times the other day said that after the transitional period, members of the Fund undertake to refrain from bilateral agreements which would restrict availability of foreign-owned funds arising out of current transactions. And he added this: In other words, we shall all be free, having sold our exports in one country, to spend the proceeds in any other country. That is the point that I wanted to be quite satisfied about. It has been referred to by more than one noble Lord to-day.

The noble Lord, Lord Addison, referred to the bulk purchase of food. In passing, I would like to refer to a point made by the noble Lord, Lord Nathan, in regard to abnormal war balances, and I would remind him that there is in the scheme a saving clause for abnormal war balances after the transitional period. I think he thought the saving clause was limited to the transitional period. In point of fact in the scheme the saving clause for abnormal war balances does apply even after the transitional period. But the apprehensions which have been aroused are that, for instance, there might be a desire to do a big trade deal between this country, and we will say, New Zealand. I well remember at the time of the slump, when New Zealand was having great difficulty in sending enough of her exports at the reduced prices to pay for her obligations over here, New Zealand said to this country: "We will give you an undertaking to purchase with the sterling resulting from our butter the whole of the manufactures you chose to sell." It was very difficult for us to give that undertaking. I do not think we were ever able to. But it is conceivable that New Zealand might want to say to us: "We will make very large shipments of butter to the United Kingdom, and in return you will send us manufactured goods to the equivalent value." I have some slight difficulty in reconciling the right to adopt an arrangement of that sort with the very sweeping definition which my noble friend opposite has given us, because it does seem to me that if the sterling proceeds of that big bulk purchase of New Zealand butter are earmarked for United Kingdom sellers of manufactures, that cannot be said to leave New Zealand free to spend the proceeds of her butter money where she likes.


By her own free will. I said that a country, having sold its exports anywhere, was free to spend the money resulting from those exports anywhere. In the case of both countries it must be of their own free will.


Yes, but having of their own free will entered into such an agreement, does not it limit the possibility of other nations being similarly free? Lord Keynes's letter to The Times put it the other way round, but I think I could best illustrate the point by a quotation of what he said to-day. He said: "We desire to sell in one country and buy in another, therefore it is important to us that others should refrain from discriminatory trade practices."


"Exchange practices" were the words I used.


Discriminatory exchange practices. But is it possible to distinguish between my proposal and allocating definitely a block of currency for one particular purpose? The noble Lord said if we buy ourselves with currency and we do not want to sell there, we can spend it elsewhere.


The distinction is whether it is voluntary. If it is blocked it is not voluntary.


I am very much obliged for the explanation, which I think may go some way to relieve the anxiety of those who really do see a danger to our Imperial trade on this particular point. I should like to reecho the plea that was made by my noble friend opposite for encouragement to the experts. I do not think it is much use saying, as I think my noble friend Lord Perry did, that the Americans would not enter into any such engagement. Perhaps my noble friend did not say it, but those who back their sterling area ideas, I think, are setting up an isolationism, or tending towards an isolationism, of sterling which in its way will be just as inimical to world progress as would the isolationism for which all of us are so-ready to blame our friends on the other side of the Atlantic. There must be co-operation and there must be give and take. My countrymen are sometimes accused of interpreting give and take as "You give and I take." If we are going to continue these negotiations in that spirit then the prospect is grim indeed. I would most earnestly suggest that, having satisfied ourselves that the bogies which have been raised are non-existent—and I am perfectly certain my noble friend Lord Perry, with the greatest good faith in the world, is raising a bogy—then do let us go forward with the intention of encouraging our experts to do what my noble friend Lord Keynes has already told us they are doing, to work together with the sincere intention of finding a workable scheme for the benefit of all concerned.

I am convinced that on the other side of the Atlantic there is no desire to find some deep dark design, as the Chancellor of the Exchequer said in the other place, to get the better of us. There is a sincere desire to work with us. When I hear our experts blamed and our Prime Minister blamed for giving way in every direction to the Americans, it makes me feel rather happy because I know how many Americans there are who are telling the President that he is being led up the garden path by the British Prime Minister. I suppose nobody can express the obligation which we are under to the United States for Lease-Lend. I believe that the United States of America realize the obligation that they are under to this country for our contribution to the common cause which, I suppose, we have the right to think has been more comprehensive than that of any one else. If we can get mutual understanding on these matters, therein lies the only hope for a future which will be better than the past. I must say also that one of the most hopeful features of this proposal, as was announced a day or two ago, possibly at the time it was published, is that it has secured the adherence of the experts of Soviet Russia. Between the three of us—the United States of America, Soviet Russia, and ourselves—cordial co-operation, not in the spirit of hucksters but in the spirit of partners, is what is necessary for the future of the world.


My Lords, after the authoritative and illuminating speech which was delivered by my noble friend Lord Keynes earlier in the debate your Lordships will not expect from a Government speaker—a politician and no expert, though I am not myself aware why the two things should necessarily be opposed!—any additional light to be thrown on what is a difficult subject. But I would remind your Lordships of the nature of the Resolution which has been moved. If ever there was a moderately phrased Resolution, it is this one. We are invited to say that the statement of principles contained in this White Paper "provides a suitable foundation for further international consultation with a view to improved monetary co-operation after the war."

I suppose that improved monetary co-operation after the war is the desire of everyone. It is only a portion—it may only be a small fraction—of the international arrangements which will be needed, and I certainly agreed with my noble friend Lord Melchett when he said that he did not think it would be right to put upon this particular proposal the responsibility for carrying out the vast range of international co-operative plans dealing with trade and other things, political as well as economical, which, for all I know, in point of absolute importance, stand at least equal to the proposals contained in this document. I am not ranging these different matters in any order of importance. It so happens that this document has come forward, not indeed in its final form, but in sufficient detail and with sufficient precision for us to be invited to say whether we wish the international conversations to be continued on the basis of what has already been achieved. That is the matter on which your Lordships will shortly decide, and I have a few observations which I wish to offer to the House before the matter is put to the vote.

I take it that the broad purpose of the scheme in this new White Paper is the same as that of the scheme a year ago. It has been interesting to all of us to observe the deft and amusing phrases in which my noble friend Lord Keynes explained that, whatever might have been the attractions of the object of his notice twelve months ago, he had come to the conclusion on the whole that this was, after all, a better substitute. It would be wrong to charge him with fickleness. I understand the explanation very largely is that it is the same lady, but in different clothes. It is true that the garments of the present lady are not perhaps so abundant as everyone could wish. Lord Nathan raised the question as to whether the total sum mentioned would prove to be enough to serve the purposes designed. It may be not, but that is all of a piece with the austerity of the President of the Board of Trade in providing necessary clothing. I do not say that the two schemes are the same. I do not know enough of the technical side of the subject to be sure, but my own feeling is that they are not exactly the same though they are very closely related. In this House I am glad to think it is still permitted, on occasion, to indulge in a Latin quotation. Your Lordships may remember how the Roman poet describes the sea nymphs who all had a common mother by saying that they did not, in fact, look exactly like one another, but they were not really different-looking either, which is just what sisters ought to be: "Facies non omnibus una, Nec diversa tamen; qualem decet esse sororum." Of these two beautiful sisters, I gather on reflection my noble friend Lord Keynes prefers the younger. What is the principal effect of the two schemes? What is the main object which they have? I take it to be this. I take it, as indeed was just said by the noble Lord, Lord Balfour of Burleigh, that really the primary object is to secure as far as possible that there shall be free multilateral exchange and that there shall not continue to be all sorts of obstacles raised with which in recent years before the war we had become familiar and which resulted, for example, in those who bought things from a country like Germany finding that they could not make a free use of the exchange they had acquired but had to use it in that country, sometimes only under most rigorous conditions, so that sometimes that country went to the length of stipulating the actual goods they should be allowed to take in exchange. As I think has been pointed out, our own country and Commonwealth need this facility of multilateral exchange probably more than any great trading community in the world, because it so happens that the things which we produce and which we want to sell to people are constantly being sold to another community whose own products we do not want to buy, and therefore we must have the facility to use through the medium of third countries the credit which we have earned in order to pay for whatever we want to buy in any country in the world. That is my understanding of the last scheme and it is my understanding of the present scheme, and I approach the whole thing from that point of view.

Now, my Lords, not being myself an expert but having done my best to study this matter, as I did a year ago, I willingly concede the great superiority of experts in the debate in many respects—and in fact I think in all respects, except one. That is, I think, that they know so much about the subject—and they have been in it from the beginning—that they have a slight tendency even in their clearest explanatory passages, to assume that the rest of us know more about it than we really do. I have in my own mind endeavoured to construct an exposition which I will, with great respect, offer to the House. It is admittedly very much more simple and elementary than that which we have heard from highly qualified speakers this afternoon. It seems to me the matter may be approached in the simplest terms like these.

After the war, by common consent, the re-establishment of our trade prosperity largely depends on our export trade. I do not think there is any difference upon that proposition. Now what would be the ideal conditions from the point of view of currency if you had a large international trade? Well, the ideal situation would be that every currency should stand towards every other currency in a natural, unchanging relation of value, that time should go on and always there would be a natural, automatic par of exchange, with no changing conditions that could give rise to difficulty. If that were so everybody would be pleased—that is to say, everybody except the dealers in foreign exchange. International trade could be planned with complete confidence and carried out without any anxiety that exchanges might alter and that values might change between night and morning. That situation, which I have ventured to call ideal, is, of course, an impossibility. It cannot work out like that. In the future as in the past the currency of a particular country may be put under severe strain. To give only one example, the strain arising from the disequilibrium between imports and exports. The practical question then comes to be, how is that strain to be relieved? Can we devise for the future a better monetary machine to relieve that strain than we have had to use in the past?

Consider what has been the method that has been common in the past. Hitherto, generally speaking, the distressed country, the country whose currency is under this strain, has endeavoured to relieve itself by unilateral action. It has devalued its own currency. It has taken various steps to try and restore the balance, which may involve the blocking of imports and other grave steps. That is the method that has constantly been followed in cases of difficulty between the two wars. Consider the case of France. I have extracted one or two figures. In 1920, 220 francs went to the pound. M. Poincare made a great effort to pull it up, and he had, I think, pulled it up to 124. In 1934 it was 76 francs to the pound and in 1936, as I very well remember, we had news at the Treasury that francs had been devalued to 105. How can international trade be developed and go steadily on to the mutual advantage of both parties if the length of the measuring rod—that is all it is—is like a piece of elastic which you can pull out or push in as you please?

There is a further observation. This old system which wrought so much havoc is a system in which one country whose exchange is in question has taken some violent step, as though it would change the exchange value of its own currency without affecting other people. But every change in value that is put on a currency for international purposes operates at both ends. Consequently this old system, like the French depreciation, did serious injury to the trade of other people. Some of your Lordships may remember, for example—I think my noble friend Lord Barnby will—that when the French made the last change to which I have referred they immediately struck at the trade in the West Riding of Yorkshire.


With disastrous results on unemployment.


That being the old system, I will endeavour to put what is now proposed. If I have followed it at all rightly—and I am very much under correction and instruction—I say the essence of the present scheme is to provide means by which exchanges may, as far as possible, be maintained and further that when changes are needed those changes should take place after an opportunity for international consultation through, or with the assistance of, a permanent international instrument. The Fund created in this White Paper might give the distressed country the use of resources which might enable it to avoid restrictive measures, which would otherwise be inevitable. If I have understood the matter at all, it is the attempt to move from what I have described as the conditions before the war to a new and international system that is involved here. The essence of the thing is that we should recognize that these fluctuations in exchange rates which are bound to occur from time to time, often from perfectly legitimate causes, should not be at the decision of a particular country, provoking in return, it may be, a wholly unjustified beggar-my-neighbour attitude in another country, but that, as far as possible, we should limit these oscillations by having a fund which will be available to assist a distressed country up to a point, and, on the other hand, having an international and permanent institution which would be able to investigate the facts and use its powers of advice and delay, thereby directly promoting opportunities for freer international trade. I have detained your Lordships to put the matter in that way because, as it seems to me, that is an elementary way of putting it, but I hope not too far away from the truth.

There is an objection raised. It has been voiced in this debate in the most downright form by my noble friend Lord Perry. It was mentioned earlier in the debate by my noble friend Lord Addison in the form rather of a question than a challenge. Lord Addison asked Lord Keynes to explain whether it was not the fact that the value of exchange in the future under this plan would be determined in relation to gold, and whether that did not involve some danger of approaching a return to the gold standard. My noble friend Lord Perry, with his customary straightforwardness, made a much bolder assertion, and I hope he will not mind if I say that it was an assertion which seemed to beg the question. At any rate he said he much preferred the original plan to returning to the gold standard. May I offer respectfully to the House and to my noble friend a few observations on this subject? It is a subject that interests a great many people and, when it is asked whether a plan of this sort does not involve a return to gold, some explanation of the nature of a gold standard is important for people outside, as well as inside, your Lordships' House.

Speaking on the subject with humility, for I think it is a difficult subject, what I notice is that some people—I do not mean in your Lordships' House—talk about returning to the gold standard as if it was as simple an operation as returning to drink. It is really necessary to remember what happened. When we went off gold in 1931 something happened internally and something also happened externally. Internally the operation was this. The operation which amounted to abandoning the gold standard was an Act of Parliament which put an end to the obligation of the Bank of England to give gold coin in return for bank notes or to buy gold at a fixed price in sterling. That was the internal operation. It is quite certain that nothing in this new scheme touches that. But there is, of course, a second aspect of the gold standard which may be more important. I think it can be correctly stated in this way. The normal gold standard was a firm understanding, approaching almost a moral contract, that changes in the gold value of our currency would not be made except in very abnormal circumstances and under force majeure. It therefore is, as I think the noble Lord, Lord Keynes, pointed out, a principle, a rule of conduct, which is directed to secure rigidity. It is designed to hold things in a relation which cannot be changed.

If I have at all succeeded in what I have already said, it will be plain to your Lordships, as indeed the debate will have shown, that this new Fund is not aiming at rigidity. It is aiming at elasticity; it is aiming at an adjustment, an orderly adjustment, under the ægis of an international Fund, when adjustment is required. You require that kind of resilience if you are going to keep currencies in good relation to one another. In this respect the preservation of a good currency is like a good swing at the game of golf. If you anchor yourself too rigidly, if you fix every bone and muscle in your body and then try to hit the ball you will not hit it very far and you are extremely likely, occasionally, to miss it altogether. That is not to say that a golfer's swing is a wreckless swagger round the course; it is a most carefully controlled mechanism, but it is a mechanism which recognizes that you have to allow for change to suit circumstances, to suit the ground, to suit, it may be, the capacity of the player. Exactly the same is true, if I understand it rightly, of the new proposal. There is really nothing in the point, as far as I can see, that the new scheme is a return to the gold standard.

My noble friend Lord Perry desired to prove his assertion by two references to the White Paper, and I will deal with them. First, let me be perfectly sure that I have the right references. I understand one of the references was to paragraph II (3) and the other was to paragraph IV (1). The first I will read, as Lord Perry read it. He thought it meant we were going back to gold. The paragraph reads: The obligatory gold subscription of a member country shall be fixed at 25 per cent. of its subscription (quota) or 10 per cent. of its holdings of gold and gold convertible exchange, whichever is smaller. Then my noble friend asked me the question—interesting but indiscreet—"but has the country got as much gold as that?" As much gold as what? Let us suppose we had no gold at all—which is far from being the case—then 10 per cent. of that would be nothing. Ten per cent. of nothing is nothing all the world over. If we were short of the necessary subscription we should only have to produce 10 per cent. of our gold, and having no gold we could not produce anything. That I think is well within the capacity of all of us, whether experts or politicians. Then my noble friend asked what is meant by "gold-convertible exchange." Is that a very difficult question to answer? What is an American dollar? I should have thought that was convertible.


Will the noble and learned Viscount pardon me for interrupting? I deliberately asked that question and I am told that the American dollar is not convertible any more than our bank note is convertible.


I was not aware of that.


I had that on the best authority.


Be that as it may, it does not seem to make any difference.


May I say that the American experts believed the dollar was convertible? I have not checked the accuracy of their view.


That seems to show the need for further discussion. The same point arises and it is quite conclusive that if there was no gold-convertible exchange in rerun natura 10 per cent. of it would not come to very much. That, I think, is all that need be said about the first of the quotations. The second quotation was from paragraph IV.


If the noble and learned Viscount will forgive me, may I be permitted to ask this? It is to be in gold or gold-convertible exchange. In the hypothesis—the extreme hypothesis—which the Lord Chancellor has put before us, he has assumed that the people of the country have no gold. Will they still come under the Fund?


Yes, I certainly think so. While I have no authority to disclose the position of our gold account, I wish to make it quite plain that I do not accept the proposition that we have not got any. I was limiting myself to the much simpler proposition that 10 per cent. of no gold is no gold. While Lord Keynes was speaking I gathered that he affirmed that the limited size of any country's holding in gold is not necessarily a disqualification from becoming a member of the Fund.

I will not delay the House to discuss whether the feeling of having gold gives more gratification than that of paper. Lord Perry, I think, said that he preferred paper. All I can say is that when I played myself in as Captain of St. Andrews Golf Club, the caddy on whom I bestowed the customary sovereign seemed to value it a great deal more than a Scottish paper pound. The other passage in the White Paper which Lord Perry thought had a bearing on this was the provision in IV that: The par value of a member's currency shall be agreed with the Fund when it is admitted to membership and shall be expressed in terms of gold. Is not there a danger of a little confusion here? To express currencies in terms of gold has nothing to do with returning to the gold standard, has it? If you are going to compare various currencies you must have some common measure by which you can state their comparative values, and I find it rather difficult to think that the reference to gold here is to anything but a convenient common denominator. If you desired to state the respective weights of all the animals in the Zoo, I suppose you might state them in terms of the weight of the elephant, and that is all that is being done when you say that the various currencies of the world shall be expressed in terms of gold. It means simply that you are using gold as your measuring stick, and it is a very convenient thing to do. It is a good solid, stiff measuring stick, but by using it as such you are not returning to the gold standard in any sense at all.

You could achieve the same result perfectly well by stating all the exchanges of the world in terms of sterling, or dollars, or anything else you like. But it is very convenient to take a measuring rod that is well known, and in view of the fact that this is an international agreement it is not very surprising that we should agree that for the purpose of measuring the comparative relations of currencies the measuring stick shall be gold. It might, of course, quite well be any other standard you chose to adopt. All this has nothing to do with going back to the gold standard or anything of that kind. On the contrary, as I think my noble friend Lord Keynes made plain, if you have a scheme in which you contemplate the possibility of changes in the exchange value of a country's currency which are to be arrived at as a result of consultation and after all proper influences have been brought to bear, you are providing for adjustments of value according to circumstances, as distinct from tying a currency rigidly to a particular ratio. That is my understanding, supported by Lord Keynes, and I would in- vite your Lordships' House to consider whether that is not the right view.

In conclusion I would say that several of us have tried, in the course of this afternoon's interesting debate, to sum up fairly the advantages to be derived from a scheme of this sort. I have put them down under four heads. If you take this scheme, and understand it, there seem to me to be—leaving out technicalities—four principles involved which are of great value. The first is this. The scheme contains the principle of the establishment and maintenance of a reasonable stability in the exchanges, so that both seller and buyer may know the value to be put upon the goods which they are dealing in; so that the goods may be sold with owners and buyers knowing their real value. Undoubtedly, the scheme means that, and so far it must be welcomed by a great commercial community like ours.

The second principle is that the scheme contains provision for the orderly adjustment of the exchanges, not for their rigidity; for adjustment and re-adjustment where it is really necessary instead of leaving a country to alter the value for itself. It will not be left to any country to make adjustments without consideration of others, possibly for illegitimate reasons. Your Lordships will, perhaps, have in mind what I ventured to sketch as our experience between the wars, and you will see what an enormous gain that will be if we can succeed. There is not to be a disorderly scramble, but orderly adjustment of the exchanges, and it is to take place not because one country decides on it without consideration for other countries, but because there is opportunity for consultation and co-operation. When a country takes steps to change its rate of exchange, as France did over and over again between the wars, the operation affects other countries. All exchange modification produces results at both ends. Therefore, while we shall have to consent, it may be, from time to time to adjustment in exchange rates, it will be far better that these adjustments should take place after due international notice and consultation.

Thirdly comes the provision of temporary financial assistance for a country which finds itself in a situation of emergency because of a serious adverse balance of payments. That is a situation which has tempted a country suddenly to play tricks with its exchange. Such a country may be tempted to adopt desperate remedies. It may stop imports or block balances in its efforts to keep itself afloat, and each of these things manifestly is an obstacle to international trade. If, therefore, you have an international mechanism which will for the time being relieve such a country in its difficulties and render this desperate course avoidable, that is a piece of international monetary co-operation which surely will be generally approved.

The fourth and final principle of great value in this scheme is that these principles and practices which we have been considering should be given effect to through an international monetary institution. Consider the advantages of such an institution. The argument is much the same as the argument for other international institutions, which my noble friend Lord Cecil of Chelwood has often put with such great force. If you have an international monetary institution, it is a forum for consultation. I do not say that it can impose its will on every country. It cannot, and this scheme does not suggest that it can; but it is a forum for consultation between the various monetary authorities. It will be able—and this is a very important point—to ascertain and to pronounce impartially on the real facts. If in the British Treasury you have word that in so many days' time some foreign country is going to make a serious change in the valuation of its currency for exchange purposes, and it seems to you that the reasons given for that change are not adequate, it is a great step forward to be able to say that the situation should be examined by an impartial international body. Such a body will exert its influence to secure common standards and to prevent, or at least severely discourage, action in the monetary field which may be purely selfish. There have been cases in which sudden tricks have been played with exchange for a purely selfish national purpose, and at the same time the maximum damage done to international trade.

I do not think that what I have said is exaggerated. It certainly does not proceed from any desire to press this particular scheme above any other. I can quite understand the sentiments of Lord Perry, who said that he preferred the earlier one, and I think that there was a certain note in the speech of the noble Lord, Lord Keynes, which suggested that, after all, there was a good deal to be said for the elder sister. But we have to deal with things as they are, and can anyone hesitate when this Resolution is put forward in these terms. The Resolution invites us to encourage these people to go on with their discussions, in view of the fact that they have reached the point which they have. Who is going to take the responsibility of saying No? Of course, if you do not believe in any form of international co-operation—if nationalism goes to that length—then by all means say No; but if you feel, as surely every well-instructed Englishman must feel, that, whatever may be said in other fields, in this field international co-operation is the only way of safety and progress, I think it follows necessarily that your Lordships will accept Lord Addison's proposition.

The Government have not said and do not say that they approve all that is contained in this document, nor have they committed themselves to its terms. What we do say is that this matter has been examined with the greatest skill and diligence by a remarkable assortment of people representing many countries, and that we should be betraying our trust, in our view, most lamentably if we did not urge that, on the basis of what has already been published and agreed, the discussions should go on. I trust that your Lordships will accept the Resolution unanimously.


My Lords, I would merely express the hope that the last sentence of the noble and learned Lord Chancellor's speech will be given effect to forthwith.

On Question, Motion agreed to.