THRICE since the end of hostilities have English exchange difficulties assumed the character of a world crisis. The first came when Lend-Lease was ended and it became clear that the United Kingdom could not maintain even the meager civilian existence of wartime without continued assistance. The United States then extended a large credit, "to assist the United Kingdom to meet transitional postwar deficits in its current balance of payments, to help the United Kingdom to maintain adequate reserves of gold and dollars and to assist the Government of the United Kingdom to assume the obligations of multilateral trade." The second crisis came in August 1947, when in accordance with the terms of this credit the Government of the United Kingdom proceeded to remove all restrictions on payments and transfers of sterling for current transactions, and the pressure on reserves was such that the experiment was hastily suspended. And the third crisis occurred in September last, when the drain on diminished British reserves forced the United Kingdom against all the declarations of the Chancellor of the Exchequer, to devalue the pound on the dollar, and to draw down with the pound most of the other currencies of the world.
The crises have all been concerned immediately and primarily with the machinery of international payments. They have been precipitated by Britain's inability to meet, in gold or dollars, an adverse balance with countries which insist on such payments; and as a result the British Government has been unable to allow the unrestricted transferability of sterling earned by one country in payments to other countries. Before examining this difficulty, however, we must look in rather more detail at the occasion and form of exchange control. This at least can be claimed for it--that it is the outcome of the pressure of experience, and a reflection neither of the ideological prejudices of the government in power nor of the momentary fashion of academic economics.
In the year and a half preceding devaluation in September 1949, the United
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