What Happened Last Time
Studies in British Financial Policy 1914-1925. By E. V. Morgan (Macmillan. 28s.) Studies in British Financial Policy 1914-1925. By E. V. Morgan (Macmillan. 28s.) HISTORY never quite repeats itself ; there are no laboratory experi ments, nor even astronomical observations, in the social sciences From time to time, however, some enormous rough parallel arise: from which it is possible to extract evidence about cause and effect to isolate an overwhelmingly important single factor and see how in effect is modified by others. An obvious case in point is the economic stress and backwash of major war. 1914-18 was not 1939-45 , 1952, seven years after VJ Day, is not the same as 1925, seven yean after the Armistice. Still, the enormous rough parallel is there, s fruitful field of investigation and comparison for the economic historian.
Like Professor Pigou, whose Aspects of British Economic History, published five years ago, covered part of his chronological ground Professor Morgan leaves the comparative side of the study to othere. Studies in British Financial:, Policy, 1914-1925, is a meticulously detailed blend of narrative and analysis, sometimes of day-by-day minuteness, as in the illuminating first chapter describing the first impact of war on the City, sometimes forming a commentary on a wealth of statistical matter, sometimes tracing the development of a sequence of special measures in a particular field, sometimes collating contemporary reports and opinions. Of the four parts into which the book is divided, the first deals with the financial crisis of August, 1914, and the growth and effect of war-time financial controls ; the second with Government finance, including a study of the distri- bution between different types of holder of the magnified National Debt ; the third with money, credit, prices and banking policy and the fourth with international finance and the balance of payments.
Much of the information here given is completely new ; as a contribution to the available stock of sheer factual knowledge Professor Morgan's datalrom among the unpublished records of the City and the Treasury rank with Professor Pigou's unveiling of the long-secret " Z8 " departmental reports on man-power. Much more is new in the sense that it has never before been reduced to manageable form ; one may cite the massive table showing the course of London exchange rates on the principal foreign centres from January, 1915, to December, 1925. Professor Morgan's aim, as modestly described on the dust-jacket, is " to fill in a number of gaps in the financial record of this important period." He has produced what is, and will no doubt long remain, the source-book for all students of Britain's first war and post-war economy.
Certain general ideas do, however, inevitably emerge. One does, after all, learn from history. So the early chapters show ; World War II brought no repetition of the error, understandable enough in an unprecedented situation, of trusting the market-system to do its job in a siege economy. The same can be said of the study of war- time finance and the course of prices ; experience did prove a teacher. The record of the post-war years is, from this point of view, more ambiguous. Certain lessons were learned ; if you dynamite your apparatus of physical controls in the presence of strong inflationary pressure, you will get an old-fashioned price boom, and after that, unless you are prepared to let the currency and the exchange go to pieces altogether, a thoroughly nasty slump. If, confronted with a slump, you insist on running large budget surpluses, you will make that slump worse. If you try to behave, in the international field, in just the same way when your net creditor position on short term has become a net debtor position, you will have trouble with the exchanges. The lessons were learned and—with the added impetus of Socialist ideology and Keynesian theory behind them—acted on when 1945 reproduced so many of the problems of 1918. There was no immediate post-war price-boom, and no slump either in production, prices or employment. The graphs of 1939-52 follow a completely different course from those of 1914-25. It would be rash, however, to claim that they illustrate a clear contrast of uninformed folly and enlightened wisdom. The mistakes of 1919 and after came out, painfully enough, in the wash ; those of 1946 and after remain dyed into the fabric. Moreover, after 1919 the rough parallel gets even rougher. Suppose that World War I had been financed by Lease-Lend and followed by the equivalent of the Washington Loans and Marshall Aid ; suppose, on the other hand, that Britain in the 'fifties were enjoying the terms of trade, and the still-plump cushion of foreign-investment income, which she enjoyed in the 'twenties ; suppose that 1924-5 had been years of rearmament and not-so-cold war . . . It will be more possible to estimate the importance of these differences when some devoted historian has produced for World War II a documentation at once as rich and as manageable as this. HONOR CROON.
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