INASMUCH as we have it on the authority of a
prominent politician that banking is an “' easy " professions it may seem out of place that any time should be given to a con- sideration of banking problems. It might be supposed that the business being so easy and lucrative, the first Banking and Insurance Supplement issued 'by the Spectator would mainly consist of a record of colossal banking profits with indications of the great results to be obtained in the future. Needless to say, however, that the picture drawn by the imaginative politician was a fanciful one, and- in this and succeeding Supplements some of the articles will deal with the difficult post-War problems with which banking and insurance experts are confronted, and upon the successful solution of which depends not merely the prosperity of their own particular institutions, but the welfare and prosperity of the country as a, whole.
It is a privilege in this first Banking and Insurance Supplement to be able to publish some personal reminis- cences or that doyen 'of the banking' world, Sir Felix Schuster. His recollections, extending as they do over half-a-century, will. be read with interest not only by his fellow-bankers, but by financial- circles in all parts- of the world. Mr. Hartley Withers deals with "-Freedom and Progress in Banking," while the important article by Mr. R. G. Hawtrey, of the Treasury, on " Credit and `Prices," appearing in. a Banking Supplement, is an indication- in itself-of the wide character of the post-War problems with which bankers to-day are confronted. In the Insurance World, also, it is the aim of the Banking and Insurance Supplement to deal with those matters -of "immediate and general interest to. insurance circles and to the- general public rather than to present a mere statistical comparison of-the results of individual conipanies; As in bitnking so in ifisntrinee, the -War and the post-War period' have brought their own special experiences, and-probahly there was never greater interest- on the part of the general public in the question of 'insurance in all its ramifications than there is to-day. - • . During the period of the War, it was frequently asserted that there would' be unique. Opportunities for the study of ecOnoiriid. history in the making. Certainly the War and post-War exPeriences weie, of a 'character which probed to the depths all previous theories of inter- :national- finance, the -working of the foreign exchanges 'and eretlit. and eurreney -systems• both local arid inter- national. In so far as the events of recent years have -served' to • concentrate serious attention upon matters which, after all, concern the welfare of each individual -of' the community, nothing but good. can result. Nor is it at all regrettable: that; as regards these- !natters, 'there should be a general desire to. know the why and -the wherefore of things. As in theology, so in banking and finance,-there -has-been -rather a-tendency in' the past 40 surround' iloso‘ subjects with' unnecessary mystery.. When the wheels of international credit' were running smoothly,_ and when our financial and trade position gave , us command of the exchanges, it was easy enough to affirm belief in the gold standard and our banking system as the foundation of financial prosperity. Four years of war, how- ever, with an overwhelming trade balance in favour of the United States, have so disturbed the working of the pre-War system, that it is scarcely, surprising there should be a tendency to re-examine those systems in the light of the War experience and present-day conditions, and that those who, are disposed to' criticize them should not be content simply with the assurance that they 'worked well in pre-War times, but should- require some- thing like scientific demonstrations of their suitability for present conditions. In short, it is incumbent upon those who maintain their belief in old systems to give good reason for the faith that is in them.
But while the challenging of old faiths and formulas maybe a healthy sign, in so far as it denotes an awakened intelligent interest in our post-War economic problems, it is very necessary to distinguish between the kind of criticism that is current; for it is- rather mixed and not• always of a scientific or even impartial character. Only 'a- few years- back, a prominent ex-Cabinet Minister had a „goad' deal to say in urging our bankers OR to more " venturesome " banking. In some quarters his advice was taken far too seriously and the results were costly. Nor 4- there, any need, I think, to pay overmuch con- sideration to those who write and speak as though our high banking traditions, extending over many gener- ations, counted for nought. Some of these critics,have even suggested that mental power is lacking on the part of our modern bankers to master the financial and economic problems of the hour. Such an attitude at once discredits the critic, for due acknowledgment of what has been accomplished by past systems, however imperfect, would seem to be a pre-requisite for presenting us with new- plans. That criticism of banking facilities should frequently come from traders and commercial circles is natural, and' within its limits it is healthy, though it becomes mischievous I- think when it ceases to be criticism and becomes mere propaganda, sometimes of a political character. For there is 'the sense of danger lest the prime responsibility of the banker to the depositor should be weakened. It may, in theory, sound well that the moneys deposited by the British.public should be used-freely in stimulating British trade. . When, however, John Smith deposits his money in a bank, he is not thinking at all about promoting trade, but about placing. his money where he can be sure of its safety and of its ultimate prompt repayment on demand. It will be no consolation to Smith if his loses his deposit to be told that it has been lost in a good cause, and that some great industrial enterprise has been financed for a time at low rates with• his deposits, or that to experiment in stabilizing price levels the old' weapon of dearer money rates has- not been applied in time to prevent an unsound banking position.
In reaffirming this, prime responsibility of the banker to, the depositor, I am aware that. I am only repeating a- familiar and self-evident truth, but I am not at all sure in these days when the banker is assailed by so many criticisms and- theories on the part of those who would - teach him his business, that there may not be some danger of the truth- falling a little 'into-the background, And that would be a pity, because it so happens that, after all, it is placing the safety of the -depositor first and foremost which ensures sound banking, 'and it is- sound banking which, in the long run, best ministers to industrial prosperity. Of the many problems-which the War period has brought to the banks, none perhaps is. more complex than the after, effects of .inflation both of credit and of currenci; referred tb in Mr: Withers' article, and which, for the most part, was forced. upon the banks by the extent th which the Government over-borrowed when there shoulli have been heavier taxation, In the matter of high War 'wages; toot the Government in munitions and othet -departments were the worst Offenders, Setting in motioti -forces which embarrass the industrial situation to-day. 'No one knows better than the banker- that if industry is tb revive on sound-lines, if our manufacturing activities ar to compete with other nations, and if it is to be possible to finance a really big trade movement on a reasonable price level, there must be an enlargement and a cheapening of production,. not necessarily through lower wages, but through an abandonment of Trade Union restrictions which" cramp output andefficieney. These are some of the practical problems which confront bankers, and not all the cheap money in the world nor credit expansion can Meet the situation if the forces which banking resources are designed to aid and stimulate are hopelessly disorganized. Rather should there be close co-operation and united effort between banker and trader, compelling the attention of the country to the necessity for cheapened mass production if either our home or our export trade is to revive. Our banks are always More ready to finance home than foreign enterprise, but what is to be the position if, because Of cheaper production and a readiness to work harder and to live more simply, Germany or any other foreign country can afford to borrow funds here to finance its manufacturers, while our home industries, though able to borrow on the same or lower terms, cannot do so at a profit because of labour and other conditions ? Is the
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