FINANCE-PUBLIC & PRIVATE.
[BY OUR CITY EDITOR.]
UNEMPLOYMENT. - [To the Editor of the SPECTATOR.] SIR,—Disappointment at the failure of the Labour ' Government to deal in any satisfactory manner with the problem of unemployment is not confined to the unem- ployed. The City views with- profound concern the nature of the palliatives which -the Government is pre- 'pared to apply. Fortunately, the absurd scheme for extending the doles to children seems to have been scotched for the moment by an indignant House of Commons, but, what with the wider application of the doles in other directions and the extraordinary subsidies to be given in the matter of the housing schemes, it looks as though so long as there is a shilling in the Exchequer, -the one profession likely to receive most State support is that of unemployment itself. - And now, to add to the complexities and dangers of • the situation, we have Mr. J. M. Keynes in the Nation• last week proposing the most extraordinary remedies for dealing with the situation ; remedies which, very rightly, he himself describes as "drastic." Mr. Keynes seems suddenly to have become impressed by the fact that our prosperity in the nineteenth century owed very much to the railway boom in its first half, beginning at home • and extending abroad, and to the immense building activity of its latter -half;"- - Enainoured by these recol- lections, Mr. Keynes suggests that there should be a huge extension of the Trade Facilities Act with the object of setting various enterprises in motion. Just what enter- prises are to be set in motion Mr. Keynes does not explain. but he does not hesitate to indicate the next step and boldly recommends that "the Chancellor of the Exchequer should devote his Sinking Fund and his surplus resources, not to redeeming old debts with the result of driving the national savings to find a foreign outlet, but to replacing unproductive debt by productive debt. ..The Treasury should not shrink from promoting expenditure up to (say) £100,000,000 a year on the construction of capital works at Home, enlisting in various ways the aid of private genius, tempera- ment and skill."
It will be seen, therefore, that the amount suggested by Mr. Keynes for new outlays is more than double the amount of the Sinking Fund itself—very much mire, because, as Mr. Keynes knows, out of the £45,060,006 of the Sinking -Fund, some few millions, at all events, are specifically attached to certain loans and could :not, be suspended without breach of contract with the bond- holders. Moreover, just what he means by preventing our savings from' finding a foreign outlet and replacing unproductive debt by productive debt, the City fails to comprehend. It has always been reckoned, at all events, in Free Trade circles that our foreign loans have proved the - greatest stimulus to our foreign trade, while, 'although it is true that the National . Debt jimn • one sense unproductive inasmuch as it was raised for War purposes, not only do these loans constitute a basis of credit, but the dividends on the debt form part of the purchasing power of the community.
, There 'are two main reasons, however, why the City regrets Mr. Keynes's -latest recommendations. The first is that no one knows better than he the extent to which our present economic difficulties are due to past inflation, and that his latest proposals would probably involve a renewal of such inflation, while by invading the Sinking Fund the national credit would suffer and hopes of permanently reducing annual expenditure on the Debt service through conversion operations would be propor- tionately reduced. Quite the best part of Mr. Snowden's Budget was his very clear recognition and acknowledg- ment of that great principle. • • The second reason, however, why Mr. Keynes's proposals are disliked in the City is that so far from going to the root of the causes of unemployment, they even tend to , aggravate the situation. _ It is one thing to be entirely sympathetic with the deserving- unemployed, and it is quite another to refuse to recognize those causes of `the evil for which Labour is directly responsible. Plilin speaking to Capital may be required, but it is useless if there is not also to be plain speaking to Labour. .
Last week in the House of Commons when dealing with the problem of unemployment, the Labour Minister complained that the Labour Government had beeh com- pletely hampered by the prejudice which had been created in advance, of their taking office, certain- news- papers having predicted that ruin must follow. He forgot, however, to add that the Labour propaganda against Capital before taking office was in itself of a character to. Warrant grave apprehensions and that it was the bankers of -London who gave Labour its chalice by expressing in public their conviction that in aceepting the responsibilities of office, the Labour Government might be trusted not to abuse their position.
There are, in truth, two factors, somewhat overlapping, which have ministered largely to the problems of to-day. One is the prolonged defiance of the law of an economic wage, aggravated by restricted output. The other is the war which has been waged on Capital, and which, with its disregard of foreign competition, has been largely respon- sible for a -lack of confidence, and has contributed to trade depression and unemployment. Presently, - as Mr. Keynes quite.truly remarks, we may be threatined with new disturbances in the shape of German competi- tion, and, therefore, it is felt in the City that there is all the more need for facing stern economic facts. Having regard to the great ,fact of the War, there may be justifi- cation for many of the relief measures, such as the appli- cation of the Trade Facilities Act and even, within reason, of the dole itself, but that must not blind us to the enor- mous danger Of depending upon these palliatives for permanent relief. Nor must there be lack of courage in expressing home truths to Labour. There is a limit to which the situation can be met -by relief works and inflation, and there are some home truths which can be the situation has become more menacing.—I am, Sir, not only of economic, but even of sound social principles, expressed with greater safety and with greater chances of success to-day, than when through a continued disregard,
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