TOPICS OF TIIE DAY
PLAIN THOUGHTS ON CURRENCY, CREDIT, AND GOLD
I.
DOES not Carlyle somewhere offer us the general advice to go to bed and reconsider ourselves ? Assuredly the business community and also our Governors and Legislators ought to do so in the matter of the raising of the Bank Rate, the Gold Standard, the Gold Reserve, and the Free Market in Gold, and last but not least, Mr. Snowden's indeterminate and alarming speech in the house of Commons. It is evident that our rulers do not know exactly what they want, or how they propose to find out what they want, or what they will do when they know. All they seem certain of is that they want to go back to something they call a Free Gold Market. That, they appear to say, will give an enhanced value to " sterling " —to our legal tender, to that in which the law says we can pay our debts and fulfil our money contracts. Yet as far as the plain man, uninstructed in the ways of business, can see, the City people very nearly got what they wanted in the matter of Parity without raising the Bank Rate. They turned from it, however, with a kind of loathing, or, at any rate, disdain. Because it had not come in what they consider the legitimate way, i.e., through the proper ritual, through the proper spell- binding incantation of " a Free Market in Gold," &c., it was dust and ashes. The talk by the great pundits in the commercial columns of the Press reminds one, indeed, of the German Professor of Music who had to admit that a certain tenor sang beautifully. The singing was, however, in his opinion, all wrong and could give I to pleasure, ought, indeed, to be strongly condemned, because " he does not produce the voice in a legitimate manner." Parity, apparently, is no good unless produced in a legitimate manner. Reached by a mere improve- ment in our credit throughout the world's markets, it is something too painful even to be explained. And then the legitimate method of a higher Bank Rate was applied and ended in disappointment.
In view of all these doubts and difficulties, can we wonder if the patient is inclined to take the bit, or perhaps one ought to say in this context the thermometer, be- tween his teeth and try to find out for himself what is the matter ? The Government is apparently most un- willing to give us that inquiry into the Gold Standard, Gold Reserve, Contraction and Expansion of Credit, and the nature of Legal Tender, for which we and others have asked as a preliminary to so tremendous a step as the return to the Free Gold Market and all its terrible possi- bilities in the way of checking the revival of industry. Let us, then, trl for ourselves to see what is the nature of our present troubles and dangers and in what direction common sense and reason would indicate a remedy. We shall no doubt be arraigned for undertaking an inquiry which it will be alleged we have no right to make and which is " above our competence " ; but the matter is so serious and the darkness so great that we feel that sonic effort to strike a match is necessary.
What is wrong with our industrial world ? What is the cause of mankind's malaise ? Could there. he a more disheartening situation than that which we are called upon to face ? There is a universal lack of the things that men desire—too little food, too little clothing, too few houses, too few gardens, too little tobacco, too few pleasures, too few of all the things which man requires for his mAterial comfort. There is, in a word, a condition of scarcity, and consequently poverty, for the mass of mankind who were not born ascetics and have not pro- fessed and called themselves hermits. If this scarcity were due to there being not enough man power in the world to produce a sufficiency of goods, the evil would appear to be without a remedy. We should be at the end of our tether. But a lack of man power to produce: is not the trouble. The difficulty is to get the men who are ready and able to work set on work. This means that there is no absolute or essential scarcity such as occurs when there has been a destruction of the crops by frost, or flood, or locusts, or enemy action, or when pestilence Las made it impossible to find men enough to till the fields. The modern problem, the new social disease of unemployment—in old days what men wanted was bread, not work—is due to no material failure. The workers stand ready. The Plant of Production was never so elaborate or so efficient. All the raw stuff of industry is waiting to be won. The wheels of industrial machinery will revolve the moment the word is given. But the word is not given. Yet there is so patent, so pathetically urgent a demand for its proclamation I The world is starving in the midst of potential plenty. Indeed, under modern conditions things are really worse than this. We have added to the curse of unemploy- ment the tragic paradox of over-production. Thousands of tons of the things demanded by mankind, things for which the need is abundantly plain, are made, or can be made at call ; but there is no way of getting them into the hands of the people who want them. In other words, they cannot be sold. The circuit is broken. To put it in another way, we are face to face with a situation such as arises when thirsty men on an island cannot get fresh water because they have no boat with which to cross over to the mainland and its streams.
Can history help us here ? What of the past ? Unrest, revolution, misery, panic, have always marked epochs in which there was an insufficiency of the media of exchange. When, however, by some happy accident new goldfields have been discovered, and there has been a resulting increase in the media of Exchange, the relief has been automatic and immediate. It is true that too sudden and too vast a production of new gold has in the past upset the balance of the world's trade and caused trouble and confusion, but we must no more conclude from this that an increase in the media of Exchange is dangerous than we conclude that food is to be avoided because to eat to a surfeit is a very dan- gerous way of taking nourishment.
But how and why is this ? is the bewildered cry of mankind. You cannot eat gold or silver. Why, then, has a scarcity of these metals such bad results ? The answer is one which, properly grasped, provides the key of the situation, both economic and social. You cannot eat gold, but it has become a necessary (though, no doubt, . only a temporary necessary) because mankind has agreed to make out of it the rolling-stock of Exchange. Gold at present plays a part in the mechanism of trade which is analogous to that'of trucks in industry. Unless you have sufficient trucks with which to get your goods away, you might just as well have never made them. That is what every manufacturer knows. It is of no use to manufacture or grow food if you have to leave your product piled up in warehouses far away from the would-be consumer. Unfottunately mankind as a whole have come to believe that no truck can be safely used as the rolling-stock of Exchange and Finance unless it has a large amount of gold in its composition—say one- fourth. When, as at present, however, the new gold taken every year out of the earth is much less than the demand for new gold caused by a population yearly increasing in numbers and also in the capacity to exchange, the position tends to become tragic. It is impossible to obtain enough twenty-five per cent. gold trucks to get the goods away. And so we get what is so strangely called Over-production and Unemployment. Over-pro- duction is the Opposite Number to Scarcity ; yet " nothing doing " is the cry because there is not enough rolling-stock to unite Demand and Supply in an Economic Marriage ! The blessed union cannot be accomplished because there is a failure in the supply of gold rings !
Why should not the world use other forms of rolling- stock when the need is so imperious ? It has done so, and will continue in the future to do so, but, unfortunately, only slowly and timidly. Once it was considered neces- sary to make the rolling-stock required for barter of nothing but gold. Now only about one-fourth of gold is required. The other three-fourths of the material used in building a truck is " Credit." The problem of Credit must, however, be reserved for next week.
Previous page
