BRITAIN'S ECONOMIC DEFENSES

...No private businessman could be expected to take such a risk, and hence it is the state which must step in to take up the slack before a depression develops...

...In any case, publicopinion in Britain today would not permit vast amounts of capital to be poured into projects mainly of secondary importance, when so much needs to he done to modernize Britain's productive apparatus...

...It thus becomes possible for the Governnieiil to frame investment policies for a large portion of British industry...

...They are confident that an American depression, beginning with a crash on Wall Street, will not provoke a financial panic here...

...Therefore, in spite of their confidence in their precautionary measures, the leaders of British Labour are hoping and praying that Americans can manage their economic affairs without disaster...

...She is looking for them first in the British Commonwealth and the Empire...

...Moreover, within the Western countries, the local Communist parties would grow rapidly in strength, as a contrast developed between steady progress in the East, and instability and insecurity in the West...

...It is much easier to arrest the downward drift when it is just starting than after it has acquired real momentum...

...During boom tunes, the Government can restrain the expenditures of publicly owned industries on new capital investment...

...That lesson was learned from the last depression, and the British government will merely forbid the transfer of capital...

...It would not have been possible for a pre-war British Government to invest sufficiently, for its channels of investment were then largely limited to "public works...

...In addition to negotiating long-term bulk contracts for food, she is directly promoting vast new agricultural developments in Africa and Australia...

...shortages of raw materials will mean jerky and hence inefficient production...

...For, from the economists' point of view, it is precisely at the beginning of a depression that businessmen should step up their investment in new factories and machinery, rather- than cut it down...

...Depressions can no longi r "leapfrog" in this simple manner...

...Seeing recession headlines from America, British businessmen might lose confidence in the future...

...They felt it essential to create a public sector of the economy large enough to serve us a balance wheel, and to damp down the violent fluctuations which have characterized capitalism in the past...

...This is a danger the backroom boys of British Labour have always in mind, and now they are taking •another good look at Britain's economic defenses...

...American holders of British securities, hardpressed at home, would have dumped their holdings on the British market in order to obtain funds to cover thenobligations...

...She m seeking to persuade her Western European neighbors, in particular France, to produce less of the luxuries Britain can no longer afford, and more of the necessities she so urgently requires...

...And (economic necessity overi iding politics) she is making more anil more long term arrangements with Eastern Europe...

...The workers in these fields will have to be shifted promptly to production for the home market...

...The result of all the massive readjustments involved will be a severe hock to the economy, even if (as the experts hope and believe) large-scale unemployment is avoided...

...Nor is this a temporary state of affairs, which will come to an end when general convertibility of currencies is reestablished...

...II would do no good for Americans to sell their British holdings in London, for the pounds sterling they obtained could not be converted into dollars...

...Costs and prices will rise, and standards of living inevitably fall...

...painful adjustments to make...

...On the other hand ome other raw materials, such us steel and wool, may become super-abundant, because the markets for export prod* nets made of those items will have vanished...

...People will be working at jobs for which they lack training and experience...

...For it gives the Government that prompt and positive means of action which, in a crisis, will be essential to the nation's welfare...

...This Might of 'hot money'' from London, Paris, and all the other exchanges of Europe, would have set off financial panics everywhere...

...Labour's experts point out that, in view of these possibilities, the nationalization program, habitually denounced by the editors of 'DieEconomist as "irrelevant," becomes very relevant indeed...

...Since she will be earning even fewer dollara than she is now, it will become difficult to buy raw materials such as cotton and wood, which come largely from hard currency areas...

...The propaganda of the Communists will lose most of it...

...compelling force, and the moderate parties will gain strength...

...Hence, in less than four years, they have brought electricity, gas, transportation, and the coal mines' intc public ownership, and the steel industry will soon follow...

...If the American economy can be definitely stabilized (and even Professor Varga now concceds the possibility that it may) a new tide of hope and confidence will flow in the Western world...

...In pre-war days, one of the first results of a collapse of American stock market values would have been to set olf a floodtide of selling in Condon...

...The depression will spread rapidly to those countries, particularly in tho Western Hemisphere, whose economies are closely associated with that of the United States, and British exports to these markets will fall as well...

...Layoffs in the building and machine tool trades would follow...

...But this would he very difficult in an economy largely privately owned and controlled...

...Britain's markets in the United States, largely restricted to luxuries, will be virtually wiped out...

...Vet it would be cpiite impractical for a British Government simply to hand over vast sums of money to private enterprise for invest inc nt purpose s. 3 it * LABOUR PARTY leaders had ir iiiinil such considerations when they framed then nationalization policies...

...Any European government, whatever its politietal views, would be forced into this orientation in economic self-defense...

...Families whose breadwinners were out of work would cut down on their purchases, and clothing and other consumer goods industries would be drawn into the downward spiral.' A chain of events which began with a loss of confidence among private businessmen would end with millions of workers walking the streets in a. vain search for jobs...

...If there is a real American crash, however, the prospects for the survival of Western democracy will be doubtful indeed...

...An end to the price inflation, which has boosted the cost of food and raw material imports and threatened Britain with economic strangulation, will be welcome...

...No modern government— and certainly not the British government—is going to stand irilv bv and see its economy ruined by a flight of foreign capital...

...A SECOND DANGER is a psychological one...

...No matter how weli she insulated herself against the economic effects of an American slump, Britain would be all too likely to be caught in the political backwash...

...In the recent five-year pact with Britain, the Polish Government is undertaking to shape a large part of its agricultural program to British needs, even to raising and feeding Polish pigs to produce the exact type of bacon the Britisher prefers for his breakfast...

...But what if the American economy does not stop at readjustment, and plunges headlong into a slump...

...NEVERTHELESS, there will tx...

...An American depression would inevitably drive Britain and the other Western European countries into closer association with the planned economics of the Russian sphere...

...They might hasten to cancel any plans they may have made for the building of new factories and the extension and re-equipment of old ones with necessary machinery...

...IT IS NO WONDER that Britain is seeking feverishly to develop sources of food and raw materials as well as markets for her manufacturers, which are free from the vagaries of the dollar...

...Plans for needed developments can he prepared in advance, and can be put into operation the instant a tendency towards a slump is observed...