Finance—Public and Private
Industry and Finance.—i.
A READER of the Spectator propounds -the following conundrum. He says : " An increasin number of people appear to believe that there is a very close 'connexion between trade depression_ and unemployment and credit or finance. I think you would be doing a public service in writing something in the Spectator columns to elucidate the subject. What, precisely and in detail, is meant by the ' Gold Standard ' to-day ? " It is good, adds my correspondent, " to have your -assurance that the issue of all the credit required by industry ' need not imperil the Gold Standard,' but is this indispensable credit being issued ? There would seem to be many questions which might advantageously be cleared by the suggested public inquiry into credit policy."
A CONTROVERSIAL SUBJECT.
I can scarcely hope within the space of two short articles to deal fully with the points raised by this correspondent. Because, however, I know that he is only expressing the thoughts of many other inquirers, I will gladly endeavour to deal with some of the points raised, although I am aware that to do so may be to open a highly controversial subject. Moreover, it may be that the subject will not be one of general interest to readers of the Spectator, and if I should deal with the subject' raised by my correspondent 'in elementary rather than in scientific fashion, it will not be because I am not anxious to get to close quarters with the problem, but because I want to be clearly under- stood by those who may not have studied the subject very closely.
IS TRADE DEPRESSED ?
. I will begin by referring to the subject of industrial depression itself, and for this reason. If we have Presently to deal with the question of how far industrial or trade depression is connected with monetary or credit policy, we shall do well to understand the extent and 'character of the depression. It is, I think, common ground that it would be wrong to affirm that industrial depression exists all over the country. The great prosperity of many industries and the great advance in bankers' loans to trade are sufficient testimony to that fact. Nor can the figures of unemployment be altogether counted as evidence of universal or exceptional trade depression throughout the country, for the reason that, although the present total is above the pre-War figure, the actual number of people employed is probably as great, if not greater, than at any time in our history, the explanation being that female labour is now engaged to an extent unknown previous to 1914.
WHERE DEPRESSION RULES.
: On the other hand, there can be no queition that in some of what are known as the key industries of the country, such, for example, as coal, iron and steel, cotton, and even in railways and shipping, the expression " industrial depression " may fairly be applied, and its effects are seen in our export trade.
And now we are getting near to the crux of the problem raised by my correspondent. We have seen that for the most part the term ' depression " is not applicable to industrial activity generally. In the case of those industries, however, where it is applicable, is the explana- ",tion to be found in the Gold Standard and in credit and monetary policy, or is it to be sought in other directions ?
COTTON TROUBLES.
It is always helpful when dealing with an admittedly *complicated problem to simplify matters, as far as possible, by endeavouring to discover certain points which are clear as to be almost indisputable and then to see if it is necessary to seek for still other points and explana- tions: Before, therefore, we even turn to the question Of whether depresion ' in -the"key ixidti.stfies' is to be accounted for in any way by the Gold Standard or by credit and monetary policy, let us see if there are some other manifest causes of the depression which cannot be challenged. Let us take the cotton industry as an example. Is it or is it not a fact that quite apart from any question of monetary policy, that industry was severely hit, first, by the effect of the War upon foreign purchases of cotton, and, after the War, by increased foreign competition, especially by Egyptian and some other Eastern countries ? Moreover, is it or is it not a fact that depression in the cotton manufacturing industry, with all its effects upon employment, was partly caused by the premature boom in 1920, when company after company was bought up at fabulous prices, and refloated in public companies hopelessly over-capitalized ? If that be so, then we seem to have causes so directly affecting this particular industry as to make an inquiry into other causes such , as credit and the Gold Standard almost superfluous.
IRON AND STEEL.
Again, if we turn to iron and steel, is it not a fact that these industries, after temporary prosperity, found their arrangements completely out of gear owing to the after-effects of the War with its reduction in armament and shipbuilding orders, to say nothing of the disturbances created by foreign competition arising out of the Treaty of Versailles developments as affecting the iron industry on the Continent ? And both in the coal and transport industry, is it not a fact that uneconomic conditions both as regards wages and hours of working have resulted in conditions which have produced a policy of unnecessarily high prices with small production, when all the require- ments of the situation, including foreign competition, called out for more intensive working and production to meet the changed position of the country resulting not from any question of monetary policy but from the economic losses sustained through the War ? How far, for example, can the losses recently sustained by concerns such as Armstrongs be attributed to monetary policy, and how far to unsound management which has since received attention ?
There are also two other points to which attention may be drawn before inquiring at close quarters into the precise effect produced upon industry by the Gold Standard and the monetary policy. How comes it that, if the depression in certain key industries is to be very directly connected with credit and monetary policy, those who are responsible leaders in those indus- tries make fevS, if any, complaints of their troubles being connected with the Gold Standard or with monetary or credit policy ? It is true that general assertions oii the matter are made by certain financial and economic writers, and also that the organization known as the Federation Of British Industries has formulated state- ments on those lines and has even presented a memor- andum to the Chancellor of the Exchequer on the subject, but the industries themselves, which should be fully alive to the causes of the trouble, rarely, if ever, make assertions of that character. The other point is this. How comes it that many other industries, where there is active employment and great prosperity, flourish undiir this same monetary and credit policy, while we know also that in stable Foreign Exchanges and in prices of securities we have reaped very definite advantages from the Gold Standard and our monetary policy as it exists to-day / Next week I will hope to deal more fully, however, with the part actually played in industry by the Gold Standard and by monetary and credit policy. All that I have been concerned to show this week is that them are very definite causes responsible for depression in certain of our key industries other than those which have any kind of connexion with money and credit.
ARTHUR W. KIDDY.
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