THE New Zealand Herald AND DAILY SOUTHERN CROSS THURSDAY, JANUARY 30, 1930. BANKING AND INDUSTRY.

New Zealand Herald, Volume LXVII, Issue 20476, 30 January 1930, Page 10

THE New Zealand Herald AND DAILY SOUTHERN CROSS THURSDAY, JANUARY 30, 1930. BANKING AND INDUSTRY.

The appointment by the Bank of England of Professor Henry Clay, of Manchester University, to organise and direct research in connection with its extended policy of co-opera-tion in industrial reorganisation is significant for several reasons. The association of an economist with a movement designed in the last resort to result in practical business operations is a new development for the City of London. It is comparable with the growing liaison between the scientist of the laboratory and industry. On that analogy it is a perfectly natural move, novel only because the world of business and finance has been slower than industry to recognise the possible value, in a practical way, of work done for purely scientific ends. That Professor Henry Clay should be the economist selected is especially interesting. The new policy in the Bank of England is linked in the cable messages with a statement made recently by Mr. J. H. Thomas, in which it was suggested that the City of London, and especially the banks, might do more to assist in the reorganisation of industry for the conquest of unemployment. It is more likely that both Mr. Thomas and the Bank of England went to the same source for inspiration, that source being a book published last year by Professor Clay. In it will be found a review, from a new angle, expressed in arresting terms, of the relations between the London world of finance and British industry. Professor Clay discusses what bankers and financiers could (Jo for British industry, and advances his own idea of the alternative if they fail to attempt this. It is this second line of reasoning that makes his argument compel attention. He says, in effect, that if the City of London does not seize the opportunity, the failure of private enterprise which the Socialist makes the basis of his case will in fact be visible, and State action, intervention in industry on an extensive scale, will be the consequence. Though recent years have seen a considerable migration of British industry southward, the Midlands and the North are historically, and to a large extent even now, the main fields of industrial activity. The City of London is, of course, the financial centre of Great Britain, of the Empire, and of a great part of the civilised world. Yet, according to Professor Clay, there is a great gulf between London and the industrial North. The City was never called upon to finance industry there. It was begun by provincial capitalists, carried on and expanded with its own profits. The merchant bankers of London have been chiefly concerned in financing commerce, especially foreign commerce. "In consequence a manufacturer from Lancashire or Yorkshire would hardly know where to go in London for financial accommodation or how to set about obtaining it. The London financier is expert in judging the credit of Balkan principalities, Argentine municipalities, South African mining propositions, or Australian irrigation schemes. He is accustomed to finding money for all of them, has studied them thoroughly, and walks without hesitation among their many complications. He has not given the same attention to industrial conditions in his own country, and, consequently, is not so familiar with them. This paradoxical position is not so pronounced now as it was before the war, says Professor Clay, because the newer industries have been to a greater extent .financed by the City of London. This feature, though he does not say so, is possibly associated with the migration south, to which reference has already been made. A beginning having been made, Professor Clay believes the gulf between London and industrial England will be more completely bridged in the future. The banks, with widespread interests, will form one connection. Other financial interests will have to concern themselves more with home industry, if only in defence of the investments they have already made. In this situation he sees an opportunity for both depressed industry and for the City of London. Meantime, in the opinion of Professor Clay, b.y the aloofness from industry which remains partially characteristic of the City, it is failing to perform those functions for which it is specially adapted. The criticism of economic propositions and {he direction of, capital into channels where it can be most profitably employed are two things most natural to issuing houses. These things are essential for the reorganisation of depressed industries. The industrialists are not themselves trained for the work. | Since, therefore, the London capital j market has not done more to study j the needs and possibilities of the | depressed areas, it is not pulling its j full weight in a time of economic I difficulty. Another count ' in the j indictment found by Professor Clay j is that continued depression has noti been accompanied by a shortage of j liquid funds, such as has been wit- j nessed in France and Germany, i Great Britain has shown a steady accumulation of capital without it having any apparent effect on the employment situation. Discussing this situation, making full allowance for the recent growth of capital issues, he suggests they have been for the financing of new and speculative enterprises rather than for "any considered and scientific attempt to adapt the capital structure the established industries of the country to the changed conditions of the post-war world." If the issuing houses do not do these things, private enterprise has no other agency for doing it. In default of private enterprise, by which he- means the City of London, attempting the work, Professor Clay argues that the State must do it, must provide the capital, the expert guidance, and the measure of compulsion needed to assure -the effective reorganisa-

tion of industry to conquer depression and relieve unemployment. It would be just as legitimate, he suggests, as the exercise of the powers the Trade Facilities Act confers, as financing development work in the non-self-governing colonies, or as spending millions in placing settlers overseas. His main point is that while the State could do this, and might eventually be compelled to embai'k on a policy to embrace such operations, the issuing houses could do it just as well, and could apply to industry all the pressure needed to ensure thorough reorganisation. In view of this exposition by Professor Clay of what the banks and houses of issue have not done, but might do, it is significant to find him engaged, in an expert capacity, to advise in just such work, by the greatest of the banks.