Six Cures for the Crisis
The Course and Phases of the World Economic Depression. By Professor Ohlin. (Allen and Unwin. 6s.) Trade Depression and the Way Out. By R. G. Hawtrey. (Longmans Green. 2s. 6d.) Causes and Cures of Unemployment. By Sir William B. Beveridge. (Longmans Green. 2s. 6d.) Poverty in Plenty. By J. A. Hobson. (Allen and Unwin. 2s. 8d.)
the crisis of our long and painful economic sickness, here are six physicians offering their advice ; three of them are specialists, and three, those genial general practitioners with a bed-side manner who, even if they do little else, put the patient in a right frame of mind for recovery.
Professor Ohlin, in preparing his description and analysis of post-War economic developments leading to the world depression, has drawn upon the resources of the League of Nations and consulted the economic research organizations of fifteen countries. His book, published by the League, is another of those excellent realistic interpretations of con- temporary world economics upon which Geneva is to be most heartily complimented. Those seriously interested will find both up-to-date facts and figures (the volume appears to have gone to press at the beginning of September) and an analysis which seems to owe much to Geneva's position of vantage for wide observation and unprejudiced thinking. The book is too " meaty " for even the briefest summary, but it may be mentioned that the world depression of the last two years is shown to be due to a long-continued and cumulating series of maladjustments, among the most important of which are the maladjustments between the prices of things—the price of labour, the cost of living, retail and wholesale prices. These are phenomena of the process which is conveniently known as " deflation," but which is not quite so simple as it is generally thought to be.
Mr. Hawtrey puts practically all the blame on the mis- management of credit, which has led to severe deflation. He explains that the world is suffering from a slump in effective demand, which restricts production, whereby incomes are diminished, so that demand is still further restricted, and so on. This is the vicious circle of deflation, which could only be broken by the action of the banks in increasing their lending and so increasing purchasing power and demand. Production would thereby be stimulated, incomes would then increase, and demand be still further improved ; we should have entered upon the vicious circle of inflation. For lending by the banks, or credit, says Mr. Hawtrey, is inherently unstable, and it is upon credit that the capitalistic economic system as we know it is based. He does not suggest that the present economic system is, therefore, inherently unstable too. Probably that is because he holds that the Central Banks of the world can control the volume of credit. Credit has been mismanaged since the War ; partly because the policies of London and New York have often been at variance, partly because of a change in London bank-rate practice, which now gives less attention to the volume of internal bank credit than to the maintenance of foreign short-time balances in London. It may be remarked that this policy of borrowing " short " and enabling the money market to re-lend abroad to debtors who cannot pay on demand, has been very largely instrumental in putting us in the position where a flight of confidence and a run on sterling finds us, though solvent, unable to pay twenty shillings in the gold pound. So it has been mismanagement with a vengeance ! The only remedy for the world slump and Great Britain's post-War difficulties which Mr. Hawtrey thinks would be
effective is an expansion of bank credit. He rejects the abandonment of the gold standard ; tariffs and public works are only effective in so far as they transfer depression from one country to another. He prefers to raise prices by expand. ing bank credit rather than reduce wages to meet the low level of prices due to deflation ; he devastatingly disposes of the policy of wage reduction by comparing it to Greek moving the piano up to the music stool instead of the music stool to the piano.
Sir William Beveridge's broadcast lectures on unemploy- ment, now published in book form, provide an excellent brief authoritative account of what was recently our most pressing problem. In so far as unemployment was increased by the world depression, Sir William, like Mr. Hawtrey, puts the blame on credit. In considering our special difficulty, our hard core of post-War unemployment, he blames the rigidity of money wages in the face of falling prices. Preoccupied with our position as an exporting country in a world whose price-level we cannot control (though Mr. Hawtrey thinks we could influence it if we would), Sir William is troubled about our high wages costs. Yet he surely falls into a non sequitur in extending his argument to " a simpler case, where foreign trade does not enter at all." But Sir William has no real sympathy with crimping and cutting, for in his last chapter he admits that " to accept lowering of wages as the main way to bring back prosperity to British industry is almost a contradiction in terms. It is certainly a confession of defeat." And so he urges us to reduce costs, as in America, by increasing pro- ductivity. In fact, since he wrote, we have reduced them by going off the gold standard.
Now let us consider our physicians with the bed-side manner. Mr. Hartley Withers is a man of generous sym- pathies, seeing some reason in every man's point of view ; he is used to things as they are and does not want to see them changed. His comment on each part of our economic mechanism is in effect the same : " This is how, under the existing system, it works ; on the whole it works very well ; there are, of course, some disadvantages ; but they are not very important ; therefore the existing system is a good one." To overcome our economic difficulties we should combat political bad temper and the economically injurious lack of confidence which it causes. Those who desire a simpler treatment will enjoy Everybody's Business.
In his account of the world economic, crisis Dr. Einzig is briefer, more precise, as well-meaning and no more pro- found ; he pins his hope and faith in more economic co-opera- tion—not, of course, a mere business of grocery stores, but co-operation on a grand scale between capital and labour, lenders and borrowers, consumers and producers, and even between the Bank of France and the Bank of England !
Mr. J. A. Hobson's theory of under-consumption is well known, and was recently reviewed in these columns. His latest book is strongly influenced by his discipleship of Mr. Tawney. The thesis he develops is that our main economic troubles are of a distinctively moral origin. Economic values, and therefore incomes, are socially deter- mined ; the economic motive itself is immoral ; production for needs should be organized on a less selfish incentive, as are to a considerable degree even to-day the Civil Service and the nursing profession. One of our physicians, in fact, turns out to be a clergyman. He is none the less worth our attention : moral forces have powerfully influenced the economic world in the past, as Mr. Tawney has shown ;
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