Britain's Declining Role in World Trade

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IN ANY attempt to form an opinion of future changes some concept of normality is an intellectual necessity. For men of my generation, men born before 1890, there is an almost irresistible tendency to take as normal the position in the twenty years before 1914. This is especially the case when one considers a subject like that here discussed -- the economic position of the United Kingdom. We are apt to think of the First World War as a disturbing influence; of the difficulties of the inter-war period as marking the abnormality of that period; of the late war as another disturbance! After the first war, British economic policy was directed to getting back as quickly as possible to prewar arrangements -- as by the return to free trade and the gold standard. I think I discern signs, not only in the United Kingdom but in America as well, that the same undefined but not uninfluential concept of normality is widely held today. I myself now believe any return to pre-1914 conditions to be wildly improbable. I believe that the pre-1914 epoch, far from being normal, was a unique experience in the economic life of the race in historic times, a sort of golden age which no one now living will ever see again. If I am wrong in attributing to others the fallacy of which I used to be guilty, it may still be worth while to glance at the characteristics of this past age, and to examine the effects of two world wars upon it, before attempting to frame a conception of the economic future we have to face.

The economic policy and arrangements of the United Kingdom in the twenty years before 1914 were unique. At no other time and in no other country have these essential characteristics been reproduced together. To take the most obvious: there was almost complete free trade, complete freedom of transfer of funds, an immediately available gold reserve of only 30,000,000 to 40,000,000 pounds sterling; and yet there was a confidence in the stability of the sterling exchanges which we have never enjoyed since 1914. Such unrestricted freedom points to underlying conditions which have since been lost -- a fundamental equilibrium in the trade and financial relations between the chief countries of the world; a degree of confidence in the maintenance of that equilibrium which it is hard to realize today; a strength in the United Kingdom's economic relations with other countries which is also now only a memory...