I want to speak against the proposal to carry this Appropriation Bill for the chief reason that the Government have not so far indicated to this House that they have any appreciation of the problems which confront this country in connection with its trade and that, through lack of appreciation, they have failed to indicate or to provide any plan for meeting difficulties which, I think to the mind of everybody, except apparently those in the Government, threaten this country.
Last week I endeavoured to draw attention to one or two aspects of the trading situation on the international scale as I saw it, and the matter is important enough for me to return to it from a somewhat different aspect to-day. When I did attempt to draw attention to this matter last week the mildest thing said about me from the Government Benches was that my remarks were mischievous and malicious and the other comment that flowed was that I was trying to do as much damage as possible. I am endeavouring to do damage to self-complacency undoubtedly. I should like to rouse people to even an appreciation of what is recognised as a difficulty by most people who have looked into this matter here and which has certainly aroused considerable anxiety amongst people, friends of ours abroad, who have inquired into this matter and have written or spoken on it.
Last week I called attention to the fact that a return which I got on Wednesday, 4th July, revealed a very disquieting position. I asked, first, if any attention had been paid to that; and, secondly, what plans had been made to meet the position disclosed by the figures as displayed to me. In the main, the item to which I want to draw attention is the last column in the reply to my question of 4th July of this year. I asked what was the balance of trade, that is to say, so far as the years other than the war years were concerned, what was the excess of imports into this country over the exports out of this country. I find that, from 1924 to 1932, the average deficit on visible trade was something short of £16,000,000. One finds on looking at the new series of statistical information got ready on what is described as the balance of payment that the greater part of that £16,000,000 was made up of dividends on foreign investments and some sort of remittance and pensions, and, in early days, the Sweepstake money entered into it.
In any event, there is the situation that in visible trade we were down by £16,000,000; in other words, if we had to pay by exports for all the goods we require, we should in those years have had to lop off £16,000,000 from the amount we brought in. I am starting off on the assumption, which may be argued against, that what we brought in was necessary to maintain a particular standard of living in this country. I think it is regarded as axiomatic that there are only two or three ways in which people can trade overseas.
You either export your own goods to the country from which you want other goods, or else you export gold if you have it, or else you draw on the reserves which you had previously accumulated. If you are going to maintain the level of imports, and if you are importing more than the goods you export, there is no other way to meet the deficit except in those three ways—you try to increase your exports, you ship gold, or you draw on foreign investments. It is possible of course to reduce imports. We will see whether that is going to be attempted.
We are faced with this position, that if we had not piled up an accumulation of assets on the other side we should either have had to reduce our imports by £16,000,000 in the years from 1924 to 1932, or else we should have had to increase our exports by that figure. Since the war started, it is clear from this table that the British—it is they who control the matter, and the Minister for Local Government rather rejoiced in that the other day—have put us in this position, that they have simply allowed us to get in overseas trade from themselves or other people more or less the equivalent of what we sent them. As a matter of fact, in the last four years they have taken from us £3,000,000 of goods more than what they gave back to us either from their own stores or gave back to us by assisting us to get from foreign countries goods which they purchased for us or goods which they allowed us to purchase by cashing-in some of their own hard currencies to our benefit.
The British, of course, have very much the same problem facing them. I take the calculation made by the special correspondent of the London Times on 2nd October, 1944. It is an article headed: “Making Both Ends Meet,” with the sub-heading “Britain's Balance of Payments after the War,” and a further sub-heading: “A Problem of Readjustment”. After giving very good authority, this emerges from the two columns I have here. They set out the retained imports for the years, 1936, 1937 and 1938. They are somewhere in the neighbourhood of £900,000,000. They show the exports which the British used to pay for those imports, and they show that they met only about half the cost of what they imported.
They go on to show that the rest was made up by dividends from various investments, shipping income, and income from other services. Then they go on to point out that instead of having, as they once had, credits, investments, to the extent of some £3,000,000,000 or £4,000,000,000 on which they drew to make up for this deficit they had now swerved entirely in the opposite direction; they now owe somewhere between £3,000,000,000 and £4,000,000,000. It is a change from the old favourable point when they could have an unfavourable balance of visible items to the extent of some £3,000,000,000 or £4,000,000,000 in the year and finance it out of shipping or insurance or various other items. One of the phrases they use is: "Taking all these factors together we see a potential deterioration in Britain's balance of payments which might amount to £450,000,000." The situation they find themselves in is that their volume of exports has gone down in the last couple of years to one-third the volume pre-war. If they have to double their old time volume of exports, it means that they have to get their exports climbed up to a point six times in volume what they are exporting at the moment. That is a considerable task—six times the volume if they get back to 1938 or 1939 prices. If they do not, the situation varies in very much the same way— they pay a little more in the one case and get a little more in the other. They have to get a six-fold multiplication of their present trade. We have got to find £15,000,000. They have to find £500,000,000. They have to get a new £500,000,000 added to the old £500,000,000 they used to export. Our £15,000,000 is a small figure compared with that, but relative to our strength from the point of view of exports it is considerable. If we take the Taoiseach's old calculation that the British Empire money power, trading power, income, everything, was in the neighbourhood of 66 to 1 as compared with us, then our £15,000,000 adds up to £990,000,000. Therefore, relative to the British figures, we are faced with finding exports surplus to what we used to have to the extent of, in round figures, £1,000,000,000. In actual fact, it is £15,000,000, but relative to our poor resources it amounts to that considerable figure.
I have quotations here from any number of people, but I do not intend to quote more than a few of them for the purpose of verifying my argument. The British Chancellor of the Exchequer goes to various important places; he goes, say, to the Canadian Club, and he goes elsewhere. He is applauded in England for doing something which is required in the interests of the English people when he shows them the magnitude of this task that lies before them. He is applauded for acting as a proper Chancellor of the Exchequer ought to do. In fact any criticism I find of him is that he has not revealed the whole situation. If a Deputy attempts to do the same things here, he is described as malicious and mischievous, and accused of attempting to do damage to the country. The British Chancellor of the Exchequer has gone out of his way to make speeches. Other people have made them also. I only want to bring their names in for the sake of showing that this is not something I have imagined. This is something which responsible and intelligent people are saying very seriously and in a great mood of responsibility to their own people about their new situation. I have an early quotation here from a newspaper. It is from the Financial Editor who writes in the Sunday Times. He was at one time financial editor of the London Times. As far back as July, 1944, he said:—
"Some salutary if sombre pronouncements have been made recently concerning the tremendous burden imposed on this country by the war. Lord Keynes affirmed to the Monetary Conference at Bretton Woods that the United Kingdom had been greatly impoverished while other countries had been considerably enriched at our expense".
Continuing, this responsible editor said:—
"Mr. Bevin, employing a term rather more picturesque than precise, has bluntly declared that we are broke".
Anybody who made use of that expression here would be accused of being malicious and trying to do harm to the country. I continue the quotation:—
"These pronouncements are salutary when put in contrast with the complacent and not infrequent assumption that an expanding economy after the war will take care of everything".
He points out in this article that an old-time credit balance of £3,000,000,000 had changed over at that point to an adverse balance of £3,000,000,000, and was likely to go further. This editor goes on to say:—
"Up to the end of 1943, £760,000,000 of private monetary capital, which should have gone into renewals and replacements of physical capital, was diverted into war production—that is to say, physical capital in this country has been run down to that extent. £545,000,000 had, up to the same date, been dispersed in compensation for war damage, and it is certain that this was not the full tale of the loss from this cause".
Over there, it is regarded as salutary to say that the country is broke, and that a problem of such magnitude exists—that £760,000,000 which should have gone into renewals and replacements had gone into war production, and that they had piled up an amazing debt from war damage.
The British Chancellor of the Exchequer, addressing the Canadian Club in London on the 3rd July this year, talked about what he described as "the serious topics of great concern to us all", and said that:
"Of all the problems that face the Chancellor of the Exchequer over the next five years or so, there is none so serious as that of the external economic position of this country. You will have realised what a strain this country has carried and for how long. We have put in all that we have; we have gone almost to the limit of our physical and economic strength."
He said later:
"We have great responsibilities, a great burden to take up and we shall not flinch or waver in this task."
He went on:
"We are going to be terribly short of dollars in the years immediately after the war for the purchase of goods and products from the North American continent."
He said that "at one time they were down, reckoning as they did in millions of pounds, to a single figure for liquid cash reserves"—so that instead of having £3,000,000,000 they had something less than £10,000,000. He said, and I presume this is the reason why we have been unable to get any purchases here from the non-sterling countries—"that the various countries in the sterling area would turn over to us their net dollar earnings". They were able to eke that out in such a way that they were able to get certain purchases from the hard currency countries. He said:
"We have incurred an enormous financial indebtedness in sterling to a large number of countries."
Later, he said:
"You will see that with overseas indebtedness several times the amount of our liquid reserves we have to be very cautious."
He then spoke about "anxieties of fact and of event", and went on to say:—
"Because the balance of our economic power at the moment is delicate we cannot afford to push it about from both sides in the hope that after the oscillations are completed it will still be found in balance."
A few days later he spoke in this way, at an Independence Day luncheon at the Dorchester, to the United States people there:—
"You will emerge from the struggle in which we are still engaged with your economic strength unimpaired. How different is our case. We emerge from the struggle with a gravely distorted economy, with an enormous burden of external debt and a balance of payments problem such as we have never before had to face."
Later he said:—
"I have been interested to see that rumours have gained currency to the effect that we (England) have been asking for a sum of three or five or seven billion dollars."
He denied that that demand had been made, although some financial journals did not entirely accept his denial. He went on to say:—
"We are an essential element in the economy of Europe and of the wide area of the British Commonwealth, and the whole world will be poorer if we cannot play our part in the tasks of reconstruction."
Mr. Norman Crump, financial editor of the Sunday Times, says that:—
"If we (England) suffer exchange stringency during the immediate post-war years we may be forced to fall back upon a semi-closed economy within the sterling area even although that would be against our wishes and would be detrimental to our standard of living."
And later, he says:—
"Our immediate duty is to state that our position and the size of our present gold and dollar reserves is only one among many relevant facts."
He emphasises there the fact of letting the public know what the situation is.
Mr. Schwartz, one of the foremost economists in England, writing in The Observer for the 24th June says, speaking about America giving Britain some aid:—
"American investment here would take the form of an official loan between the two Governments, but it is probable that the Government here (that is the Government in England) conscious of the huge outstanding obligations embodied in the still unfunded sterling balances would be chary of such a transaction."
I stress that because it is quite clear that what the British intend to do is to fund all these sterling balances that have accumulated against them during the war. It is almost a certainty they will do that if they take account of what their economists say about the necessity of funding these debts. In the light of that I ask what the Government here are doing in connection with what the situation then must be. Clearly we are going to be short by £15,000,000 of necessary imports. In that situation we must do one of two things: we must produce more exports to balance that or tighten our belts by more rationing and further restrictions.
Before I leave that I want to deal with the question of sterling, which has been bandied about the House a good deal. I thought it wise to look for a definition of sterling, and I suggest this definition to the new Minister for Finance. I saw a letter in the newspapers signed by the well-known signature of "Bradbury". The letter was headed "Lord Bradbury's views on the £". In that letter he said that he had often been asked the question: "What is a £ sterling", and continued:—
"Finding my inability to answer it rather humiliating, I have addressed the same question to almost everyone I have met who I thought might know. The best reply I have been able to get is that it is ‘a promise by the chief cashier of the Bank of England to pay at some date which the British Parliament may hereafter determine whatever that Parliament in its wisdom may direct him to pay'."
What we have, therefore, is a promise by the chief cashier of the Bank of England to pay out, at whatever date the British Government tell him, whatever sum the British Government tell him, for each £ sterling that we have accumulated. We can have that definition of sterling while we are looking for further definition in the dictionary of what our political status is. Yet the Government here seem to be quite satisfied that we should go on sending more goods to England than we are getting from her, and should go on piling up more promises by the chief cashier of the Bank of England to liquidate them at some unspecified date in the future. Ordinarily one likes to know when a debt is to be met and by what means, but here we are content to go along accumulating a lot of these things, which are undated as far as the time of payment is concerned, and worse than that, not definitely filled in as far as the amount which will be paid in future liquidation of the sum or goods that we are giving.
However, that is the situation we have run into. The Minister said "No" to-night because he does not know the difference. I doubt if he is so elementary in his knowledge as all that. He wanted to know what about the time there was rather a fall in our sterling assets. I do not remember that. People here went out of their way to build up sterling assets. As regards sterling or international currency, it is not very long since—about the year 1943—it became quite clear to people who were trying to prospect a little bit into the future that sterling had lost its old international exchange value and that, even from the angle of Britain, payment was undoubtedly going to be deferred as far as the time of payment was concerned and that she was going to be very limited in the amount of money that would be got when the payment came to be made.
After the speech I made in the Dáil last week I was handed a copy of a magazine called The World Review. It is not a publication that I happen to buy. But my attention was directed to an article in it by a well-known economist named Peter Drucker, who has written a number of books and who is one of the foremost economists writing on the other side. He is speaking in an article on The Outcome of Bretton Woods Conference and says:—
"Even before 1939, this investment income had been shrinking; and just as an individual in such a position dips into his capital, England had been selling her overseas investments at a rapid rate. During the present war, these overseas investments have been sold out completely; moreover, England has run up a substantial debt owed to countries which, only five years ago, were in debt to England. Quite apart from the obligations of lend-lease themselves, England, formerly the world's creditor, now owes something like 12,000,000,000 dollars to her former debtors, especially to British India, the British Dominions and Argentina.
This sum, in itself, creates quite a problem of international economics. At present, it is ‘frozen'; that is, the owners — British India, the Dominions and Argentina — can neither buy goods with it in England nor withdraw it. These 12,000,000,000 dollars which England owes all over the world—mostly for raw materials and food delivery during the present war—are likely to become a permanent loan, very much against the wishes of the owners who need the money for the purchase of industrial goods, especially American goods.
Much more important, however: England in the future will no longer have investment income with which to make good her deficit in the balance of trade. Therefore, the £ sterling will probably be as abundant in the world of to-morrow as the dollar will be scarce. Just as all nations will scramble to obtain dollars, so all nations will try to unload £s sterling — with the same disastrous consequences for international currency stability".
