[To the Editor of the SPECTATOR.] SIR,—The unemployed have reason
to be grateful for your article of October 20, as there is no hope for them so long as the Government, by means of a high Bank Rate and a policy of deflation, persist in depressing trade when it needs every possible stimulus. The so-called "unemployment proposals" of the Government are little better than mere illusions which will probably not affect the sum total of unemployment to any appreciable degree. The beginning of every winter produces a fresh crop of such proposals, and the passage of every winter witnesses their complete failure to affect the situation. Here are the Trade Union unemployment per- centages for the autumn and winter months of 1922-3 :- October .. .. 14.0 January .. 13.7 November .. 14.2 February .. 13.1 December .. 14.0 March .. .. 12.3 The figures provide no evidence that the action of the
Government minimized the gravity of unemployment in any degree, and we shall probably see more unemployment at Christmas than we have now. Under our present financial and credit arrangements, what is gained by the measures of the Government in one direction is counteracted by a diminution of credits in other directions. The "practical proposals" put forward by the Labour Party from time to time are as futile as the proposals of the Government, because, like the latter, they ignore the cause of unemployment and every principle underlying the problem.
The whole question might be illustrated for the benefit of your readers by the operation known as "gambling in futures" on the Cotton Exchange. The " bull " is a person who buys because he believes that prices will rise. The " bear " is a person who sells because he believes that prices will fall. The rule is, buy on a rising market and sell on a falling market. If the " bear" sells to the "bull," say, a thousand bales of cotton at a fixed price to be delivered in three months' time, the " bear " will profit if prices fall in the meantime, while the " bull " will profit if they rise. Sometimes the danger of a fall converts the " bulls " into "bears." They sell in order to cover themselves, and then we get a panic ; but it is clear that if all the operators are " bears " who are eager to sell and unwilling to buy, no business can be done.
The trouble with British trade at present is that all our business men are "bears." They are eager to sell but fear to buy, because they dread a fall. in prices ; and this results, not from the state of foreign markets or from the state of the foreign exchanges, but from the disastrous losses in which they have been involved by the deflation policy of the Government, a high Bank Rate, and the threat of a still higher rate in the near future. Trade can only revive when our business men are converted from " bears " into " bulls " —from pessimists into optimists. This can only be achieved by assuring them of the future stability of prices, or, in other words, by reducing the Bank Rate and abandoning the policy of deflation.
But this is not enough. Hope and confidence have been so thoroughly shattered by the suicidal policy of the past few years that it will take several more years to revive under normal conditions, even if the policy of deflation be definitely abandoned. With a million and a-half of unemployed we need more swift and effective action. This can be provided by following a policy of inflation until the unemployed are practically all absorbed and then stabilizing prices at the higher level. The policy of inflation can be made immediately effective by the Government initiating works of public utility and paying for them by fresh issues of Treasury notes, thus giving the necessary stimulus to prices.—! am, Sir, &c.,
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