MR. KEYNES'S PLAN
T is this grave difference between preparations 1 for the fighting services and for economic war— that in the one case the Government has at its disposal a Navy, Army and Air Force directed by men whose pro- fession is war ; in the other it has no trained staff for whom economic warfare has been a life study. There- fore, unless it is to be content to rely upon rule of thumb—and that is out of the question when we are fighting an enemy which has devoted years of study to the economics of war--it must make up for lost time by enlisting the help of economists outside the Govern- ment service ; it must study plans of campaign which may be submitted by authoritative economists in the same spirit in which it would study an improved aero- plane by a successful designer.
Mr. Maynard Keynes has all the qualifications for high staff work in the sphere of economic warfare. He has the necessary knowledge, daring and broad under- standing ; and he has produced a plan worked out in great detail for the financing of the war. In an article on another page Mr. Seebohm Rowntree outlines its main proposals, and expresses the belief that they will meet with general approval. Mr. Keynes's revised and elaborated scheme has this advantage from the point of view of the Government: it starts from the point at which the Government has already arrived—the necessity of saving, of cutting down consumption, of avoiding rises in prices and ultimate inflation. One Minister after another has been emphasising this necessity. Only this week Mr. Hudson reiterated the doctrine that rich and poor must contribute alike and be willing to make sacrifices. Sir John Simon, recognising the danger from rising prices, has already provided large sums for the desirable object of stabilising prices—a measure which was wise if adopted as the preliminary to a plan for reducing expenditure on consumption, but without such a plan worse than useless, since in itself it gives a subsidy in aid of greater consumption. Sir John Simon has not yet announced what his own plan may be. Here, to his hand, is Mr. Keynes's.
In the long run, assuming that the country is work- ing at its maximum productive capacity, Mr. Keynes insists that there will be no question of greater or lesser consumption of goods—so much will be required for the war, and what is left over will be a fixed amount of goods available for consumption. His scheme, there- fore, is not one for reducing consumption, since there will be no possibility of increasing it when the war effort is at its height, but for avoiding inflation through ever-rising prices, and for distributing the post-war advantage which, under inflation, would go to the profiteer alone. Under his system of deferred pay- ments, or compulsory savings (which would apply to all incomes above a fixed minimum, including incomes of less than £5 a week) the worker will get as much in goods for his smaller wage as he would with a higher wage when prices have risen, and in addition his deferred earnings will entitle him to repayment after the war.
There is one possibility which Mr. Keynes has not discussed, though it is an important consideration which really strengthens his case. His argument rests on the position of this country when production has reached its maximum both for war purposes and for private consumption ; and he assumes that the war will take a certain fixed amount of this, and that the residue is what is available for private consumption--in other words, that the needs of war determine the amount left over for consumption, not the private consumption which prescribes the amount available for war. That is surely not quite correct, as is shown by the fact that he prescribes a fixed " iron ration " as a minimum which must go to consumers. It might conceivably happen that workers might insist on a larger share of the total output of the country for private consumption, and in so doing restrict the output of war necessities, and diminish the prospect of victory. In so far as his scheme prevents this limitation of war output it serves the cause of victory even from the narrowest military point of view.
But this consideration is perhaps implicit in his plan for family allowances, which in one aspect is a device for enabling every family to have enough, but in another prevents workers without families from having, for immediate consumption, more than enough. This second condition is essential to the scheme. Deferred payments for additional work are offered in lieu of present payments with no other object than the with- holding of increased consuming power during the war. For that reason Mr. Rowntree's argument against the universal family allowance (the allowance for a wife and each child), that it might be " used as an argument for keeping wages down," seems to miss the mark, for surely the deferred payment is offered for just this purpose—to prevent present wages from rising and so prevent excess consumption. From the experimental point of view there is doubtless much to be said for the gradualism of Mr. Rowntree's plan, under which allowances would be confined to dependent children " in excess of three, or possibly two, in a family." But such a limitation would not save money, since it would presumably involve raising the basic wage; and if once we accept the radical change in principle, that present wage payments are to be adjusted to needs, in broad justice it is better to go the whole way and apply the principle thoroughly, taking every dependent person into account. This may be a revolution. But the principle is in any case revolutionary, whether applied in part or in whole.
Mr. Keynes's proposals are drastic. They require that the Government should bring the nation face to face with the necessity of immediate sacrifice. No trade union leader who is at pains to understand his argument can say that he has weighted the sacrifice against the poor. Their consumption, under his scheme, will not diminish, whereas that of the classes with more than Ls a week will be cut down to the tune of at least £350,000,000 a year. He admits frankly that his plan " uses the opportunity of war finance to effect a con. siderable re-distribution of incomes in the direction of greater equality." It will raise problems of hard cases— those of persons, for example, with fixed liabilities— which would have to be provided for to avert frequent bankruptcies. But those are minor points. Mr. Keynes has put up a reasoned scheme for avoiding the disaster of inflation. It has received so much authoritative back- ing, and it deals with perils so imminent, that the Government ought to give it no less attention than they would give to the urgent report of a Royal Commission,
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