Bankers and Industry The " MacMillan " Inquiry Ix October,

1929, the Chancellor of the Exchequer, Mr. Philip Snowden, announced in the House of Commons the intention of the Government to appoint a committee to enquire into--the Banking, Finance and Credit Systems, and in the following month the official announcement was made. Of the composition of -the Committee and of the Terms of Reference. The impetus for the formation of this Committee was generally supposed to come from some of the extremists of the Labour Party, and it was also generally assumed that the Enquiry was of some For even at that time industry was, and had been for a prolonged period, greatly depressed, and the Terms of Reference given to the Committee were as follows : " To enquire into -Banking,- Finance and - Credit, paying regard to the factoni, both internal and international, which govern their Operations ; - and to make recommendations primarily for the relief of induitries, and calculated to enable those agencies to promote the development of trade and commerce and -the employ- ment of labour."

It will be -seen, therefore, that in these. Terms of Refer- ence there was a very direct suggestion that the- Enquiry along these lines was likely to bring about recommenda- tions calculated to afford relief to the unemployinent problem: Nevertheless, and notwithstanding the fact that the unemployment problem has become more serious every day, the Committee has been sitting for over a year and-at-present there are-no signs of the publication of a Report. The Committee was a thoroughly repre- sentative one, and in view of the lengthy period which has elapsed since its formation, it may be well, perhaps, to recall the names of the members :

Mr. H. P. MacMillan, K.C., Chairman, formerly Lord Advocate for Scotland, and chairman of several important committees, including that on Street Offences, now Lord MacMillan.

Sir Thomas Allen, Chairman of the Co-operative 'Wholesale Society.

Mr. Ernest Bevin, Secretary of the Transport and General Workers' Union.

Lord Bradbury, formerly Joint Permanent Secretary to the Treasury.

Mr. R. H. Brand, a Director of Lloyds Bank.

Professor Gregory, Professor of Banking in the University of London.

Mr. J. M. Keynes, well-known economist.

Mr. Lennox Lee, a prominent figure in the Cotten Textile Industry. Mr. Cecil Lubbock, a Director of the Bank of England.

Mr. Reginald McKenna, Chairman of the Midland Bank.

Mr. J. T. W. Newbold, Labour Research Worker and Lecturer. He was at one time a Communist M.P., but resigned from that party.

Sir Walter Raine, a North-East Coast Coal Exporter.

REPRESENTATIVE EXPERTS.

But while the Committee with Lord MacMillan as Chairman was a thoroughly representative one, it was felt at the time that some of the members had already committed themselves to such extreme views of a varying character that it would be remarkable if anything like a Unanimous Report -could be produced. It may be therefore, that the composition of the Committee accounts to some extent for the delay in producing the Report, though it is only fair to say that the number of witnesses who have been examined seems to have been very large. As is only right and proper on such occasions, the views of the Committee and the possible character of the Report remain a profound secret, and in what follows it must not be supposed that I am endeavouring in any way to forecast the findings . of the Committee, for, quite apart from the impropriety of such action, it would be an impossibility for me to do so. In view, however, of the general course of events during the period which has elapsed since the Committee was appointed, I am inclined to recall some of the views which were expressed more than a year ago when the movement first took shape.

MONEY RATES AND TRADE.

The first observation I would make is that among the influences prompting Labour extremists to investigate the relations of banks to industry was the fact that money rates here and elsewhere were then at a high level ; and although the main reason for the high. rates—namely, the conditions in the United States—was clearly revealed, Labour was possessed with the idea that it was the high money rates which were keeping our trade back, and that somehow or other they might be avoided so far as this country was concerned. Those conversant with the facts knew perfectly well that the high money rates played an infinitesimal part in the trade depression here, and, further, that'one of the main causes of trade depression in Great Britain was that which was also responsible in part for the high Bank Rate, namely, our inability to compete with other countries, owing to' our high costs of production. This increased the unfavourable trade balance which a high Bank Rate was called in to protect.

CHEAP MONEY BUT POOR TRADE.

During the period that the Committee has been sitting, however, there have been some interesting developments which have their bearing on the arguments put forward in favour of the appointment of the Enquiry. Money rates have come down with a rush and Bank rates and Money Market rates here and all over the world are at the lowest level for many years. So far, however, from this ease in money and plethora in credit facilities having stimulated trade, we know that the very reverse has been the experience, and slowly but surely it has- been revealed that circumstances such as the huge outlays by the Exchequer, the lag in retail prices behind the fall in wholesale prices, and the impair- ment of confidence have proved to be far more powerful factors. in preventing a .trade revival than any factor connected with the relations between banks and industry.

CREDIT FACILITIES.

Moreover, the events of the past fifteen months have also thrown considerable light upon the assertion so freely made in the months just before the formation of the MacMillan Committee that, quite apart from interest charges, trade was suffering from a lack of credit facilities. As a matter of fact, events of the past year or two have made it sufficiently plain that any errors committed by the banks in the matter of granting credit facilities have been in the direction of excessive lending rather than of undue contraction. Moreover, while no doubt this excessive lending— sometimes unwise lending—can in some measure be traced to undue competition between the banks, I believe it would be true to say that the tendency towards excessive lending can be traced back, very largely, to the two years following the War when, under the direct influence and stimulus of Cabinet Ministers, bankers were urged to be more " venturesome " in their business and to push a trade revival. It was uncalled-for advice, of an unwise character, and had a good deal to do with the continued inflation and the premature trade boom of 1920—a boom which did far more to hoist prices of commodities to absurdly high levels than it did to increase the real trade prosperity of the country. Assuming, therefore, that the MacMillan Committee has made a full investigation, the city is far more inclined to anticipate comments on excessive leading as the result of competition and other influences than it is disposed to anticipate a plea for greater trade facilities.

THE STATE AND BANKING.

There is, of course, no system—banking or commerical —which is so perfect as to be incapable of improvement, and any sound suggestions from the MacMillan Com- mittee calculated to improve our existing system will obtain no warmer welcome than from banking and financial circles themselves. On the other hand, however, I must confess to some feeling of trepidation lest one of the few sound industries in the country—banking—should suffer through any attempt on the part of political bureaucracy to make interferences such as those which have been made in some industries of the country, and with the most disastrous results.

.BANKERS AND THE EXCHANGES.. _ ,

There can, I think, be no doubt whatever that the success of our banking and financial operations and the retention of our great preAtige in those respects during years when many of our industries have been declining and Britain's commercial prestige has weakened is largely due to the fact that up to the present banking, has been fairly free of State interferences and restrictions. Throughout the past :ten years, when, by reasons of strikes, Trade Union restrictions and a host of other causes, our trade has suffered and the visible adverse trade balance as increased, we should have been in a bad position as regards the Foreign Exchanges if there had not been determination on the part of the financial authorities to return to the Gold Standard, a deter- mination which, together with the well-known soundness of our banking system and the ability of those con- trolling it, kept up the credit of the. London Money Market. The Socialists have challenged most of the, commercial activities of the country and have succeeded in crippling them severely, and there can be no question that it is the desire of Socialist leaders, directly or in- directly, to obtain control over the country's credit resources. Were those efforts to become successful, the outlook would indeed be a serious one - but I cannot help hoping that when the MacMillan Report is issued it may be found to have served the purpose of demon- strating that, so far from our industries having suffered at the hands of the banking community, the debt owed by industry to the banking system is a great one, extend- ing over a long period.

FURTHER INVESTIGATIONS.

If, however, it should happen that the Committee's investigation fails to reveal any vital connexion between the industrial depression and banking methods and facilities, it will be interesting to see whether there is any disposition on the part of the Government to pursue further the policy of investigation into the causes of trade depression in this country, because whatever may be said about world trade depression, the fact cannot be too clearly recognized that, not only is the depression in this country more pro- nounced than elsewhere, but that it has extended over a much longer period. Published figures abundantly show that, previous to the commencement of the world depres- sion, we were failing to secure our share in the world's trade.

There is, of course, a Royal Commission now sitting to consider the question of the dole " system, and I suggest that an enquiry might very profitably be held into the precise effect of Trade Union regulations upon our industrial activities, while another enquiry might be made with advantage into the causes of the great lag in the movements in retail prices as compared with wholesale. This latter problem is, of course, closely related to the many problems of labour, because one explanation of the lag in retail prices is to be found in the great part played by Labour in the manufactured article and also in the article as it is finally served over the counter.

Curiously enough, however, it is those who are most intimately concerned with a revival in industrial activities in the country who seem to be very little concerned in in- vestigating these matters. In any general world revival of trade the great banking institutions, with their inter- national connexions, would be bound to reap a certain amount of advantage. Not necessarily, however, would a similar advantage accrue to all the wage-earners of this country because we know that in recent years we have had a great army of unemployed, even when world trade was satisfactory. Yet it is the bankers who haye been foremost in endeavouring to direct attention to the necessity for probing the true causes of our trade depression and, at the recent annual general meetings, scarcely a chairman failed to deal faithfully with this Vital matter. If at the demands of Labour the banking system has, as it were, to stand its . trial, ,surely the many interests, besides those of Labour, affected by the prolonged industrial depression have a right to insist that investigation should extend to any and every direction until the main causes of our troubles are