SELF-HELP BY BRITAIN

Press, Volume LXXXV, Issue 25903, 8 September 1949, Page 5

SELF-HELP BY BRITAIN

OXFORD PROFESSOR’S VIEWS ECONOMIC ADJUSTMENTS SUGGESTED (Special Co trespondent N.Z.P.A.) (Rec. 8 p.m.) LONDON, SepteitiW 7. The idea that the Btitfeh European peoples could expect to cohtinue to be subsidised by the American people was preposterous, said Sir liubert Henderson, professor of political economy at Oxford University, in an address to the summer school of the Institute of Bankers. “When such suggestions are mingled, as they often are, with censorious Criticisms of the backwardness of the American economy by the standards of our welfare State, there is a cool impudence about them which cah hardly predispose the Americans to do more to help Us,” said Sir Hubert Henderson. “It is true that the grdwth of American productivity has raised problems of adjustment which have helped to render obsolete Some of the trading methods and philosophies which served Britain well throughout the nineteenth century, but the idea that this high American productivity is fundamentally injurious to Britain and Europe is untrue. Export-Import Balance “Britain must maintain a radically different balance between her exports and her imports than she did in the u93o’s. She must have either a much larger export trade or a much smaller import trade, or a combination of the two.

“There must be a change in the opposite direction in the import-export balance of the United States. America must either import more, export less, or both.

“It is also becoming clear that the trade of both countries must be fundamentally affected by these adjustments. If the American people import more or export less, it follows that they must consume more goods at home. The rate of their home consumption must increase to the extent of the change in their import-export balance, plus the growth of their production; otherwise, supply will tend to exceed demand, leading to a trade depression and a waste of production power.” Discussing adjustments which would be necessary in Britain, Sir Hubert Henderson said Britain’s large deficit in the balance of external payments Carried with it the corollarj r that the country must spend less on current consumption and home investment than would otherwise be feasible. Unfortunately. the fall in public expenditure from its war-time peak had given place to a new. large and continuing increase. Inflation continued in Britain, though it had ceased nearly everywhere else, at any rate outside the sterling area. “Continuance of Inflation” “We really cannot afford a continuance of inflation now that the sellers’ markets have given way to buyers’ markets in the outside world,” continued Sir Hubert Henderson. “If British goods remain far dearer than those of competing countries, our export trade will decline steadily, and the deficit in our balance of payments will widen.”. Sir Hubert Henderson said it was an illusion to suppose that ah easy way out of the difficulty could be found by lowering the exchange rates of sterling. By increasing the prices of imported goods, this might well lead to a vicious spiral of rising wages, rising prices, and further exchange depreciation. “It has become all too probable that devaluation will be necessary,” he said. “That makes it all the more important to end our internal inflation soon, for it is vital to end it first.” After referring to the “phenomenal” increase in British public expenditure. Sir Hubert Henderson said: “We are beginning to pay the penalty for the modernist contempt for the traditional principles of sound finance. Britain’s aim must not only be to reduce its expenditure, but also to increase the proportion of its imports drawn from other than hard currency countries.” Bilateralism Defended The implementation of the Havana Charter could only increase Britain’s economic difficulties, whereas an extension. rather than a curtailment, of the system of bilateral pacts should enlarge the non-American sources of supply for many commodities. To reduce the dependence of Europe upon supplies from the American Continent was one of the basic adjustments that must be made.

It was essential to develop alternative sources of supply, and long-term contracts or similar arrangements by which farmers in the Dominions or elsewhere could be given some assurance about the ! prices their produce would earn, seemed to be a fundamentally appropriate means of achieving these ends, added Sir Hubert Henderson. The Americans objected to this, but while this attitude was no doubt natural because of American exporting interests, it was also unreasonable.