"THE foundations of the United Kingdom's normal economic life are a high degree of industrial specialization, a substantial dependence upon imported foodstuffs and raw materials, and the maintenance of a volume of export trade and of other sources of foreign exchange earnings adequate to pay for those imports." This statement, taken from the United Kingdom official publication, "Statistical Material Presented During the Washington Negotiations" in December 1945 may be trite, but its fundamental importance is not thereby diminished. In the immediate future, the deficit on Britain's balance of payments on current account presents one of her most formidable problems, and it is understandable that economic policy should be preoccupied with the internal and external adjustments which can be made in the British economy adequate to restore equilibrium. But this ought not to obscure the fact that a transitional period must lead to something; the solutions adopted for immediate problems are bound to affect the future situation.

This fact underlay much of the controversy in Britain about the American loan. The main purpose of the loan is, of course, to assist Britain's balance of payments problem in the transition period. To the United States, believing that a multilateral commercial system is the best long-term objective, it was not unreasonable that another "important purpose" of the loan should be "to promote the development of multilateral trade and facilitate its resumption," and that for Britain this should mean membership in the International Monetary Fund and participation in discussions on commercial policy. To the isolationists in Britain, who consider that bilateralism is either necessary or desirable (if not both), these conditions of the loan are sufficient to vitiate its main purpose.

In an article in FOREIGN AFFAIRS,[i] Sir Henry Clay has examined, in a setting of long-term trends, some of the factors in Britain's international economic position. Though not himself espousing the isolationist cause, the general tenor of his analysis is against the practicability or desirability of British participation in a multilateral system. Full justice cannot be done to his argument here, but to summarize, "the economic policy and arrangements of the United Kingdom in the twenty years before 1914 were unique," based on conditions which were bound to prove transitory, and the difficulties of the inter-war years were as much the result of adaptation to changed underlying conditions as of the disturbance caused by the First World War. "A long-term tendency for foreign trade to become relatively less important is not improbable," and once the disturbances of the last war have been resolved, "the transition will be completed from the unique economy based on world trade and world finance . . . to the normal conditions of every other mature economy -- a condition in which a protected home market is the basis of enterprise, and foreign trade is confined mainly to the export of surpluses and the import of commodities which it is not practicable to produce at home." Nor is it necessary "to repine over this change;" "the economic problem with which the present generation is preoccupied is the problem of security;" "employment, not cheapness [is] the first aim of economic policy," and it is in the achievement of this aim that "a country like England or America" can make its best contribution to international trade and to the welfare of other countries.

A short criticism of Sir Henry's case is that it seems too optimistic in its assessment of Britain's prospects of regaining a high standard of living in the sort of world which is envisaged, and too pessimistic in its view that this sort of world is inevitable. A world in which imports consist of "commodities which it is not practicable to produce at home," in which "the potentialities of technical science" are exploited to the full, comes dangerously near to what Professor D. H. Robertson calls "the Economics of War, [in which] the subtleties of Comparative Advantage become a foolish irrelevance. A must grow, not what he is most fitted to grow, but what will save most shipping space. B must make, not what he is most fitted to make, but what can be made most easily out of local sawdust and mud."[ii] To believe that Britain could maintain her standard of living in these conditions is a dangerous illusion, not to be dispelled by a reference to "security" or "full employment." That the "present generation is preoccupied with the problem of security" may be true; it may also be unfortunate. A little more attention to the classical economic problem of the standard of living might save us from some of the more extreme proposals put forward in the name of security and full employment. This is not, of course, to deny that "to regularize the flow of production and income" must henceforth be one of the primary aims of government. But we are not yet sufficiently rich to be able to ignore the fact that "regular" does not necessarily mean "bigger," and that for Britain at least some forms of attaining "security" and full employment might entail poverty rather than opulence. Nor is it intended to deny that probably the greatest contribution which the United States could make to world economic well-being would be to keep herself free from depressions. It is undoubtedly true that plans for maintaining full employment in a country which is heavily dependent on foreign trade could be seriously upset by external changes, and that there are here grounds for anxiety about Britain's position. This does not, however, abolish her dependence on imports for a high standard of life. It only makes the problem more difficult.

The official estimate is that Britain will have to increase her volume of exports by 75 percent over prewar if she is to get the imports needed to maintain the standard of living and achieve equilibrium in the balance of payments. This, of course, is necessarily a highly provisional estimate, which could be falsified by many factors, the terms of trade among them. "Such an increase is not impossible," writes Sir Henry, "but it will require a different world as well as a different Britain." It is a curious irony that many of those in Britain who most ardently advocate planning of the national economy, who fervently preach the inevitability of "conscious control," at the same time assume that international economic relations are governed by autonomous changes, and that the only realistic policy is to accept the inevitable. It would be unfair to attribute this view to Sir Henry. But he does interpret the commercial policies of the inter-war period as being largely inevitable developments, attempts at adjustment to the changed underlying conditions. Britain, it is true, made an attempt to get back to the pre-1914 world, but was not herself strong enough to reestablish the old order and eventually had to fall into line; her gesture, though heroic, was perhaps ill-advised. This is one view of the history of that epoch; another is that the commercial policies were chiefly makeshift expedients to meet transient difficulties, that they were often maladroit in achieving even their immediate aims and generally disastrous in their long-term effects and in their powers of self-perpetuation and proliferation. If the latter view is the more correct, then the reëstablishment of a freer multilateral system is a wholly legitimate objective.

It is, however, often asserted that Britain is likely to be worse off, and her position more precarious, as a participant in a multilateral system than if she resorts to bilateralism. Sir Henry Clay inclines toward this view -- however much bilateral arrangements may be frowned on, "the underlying influence of the dependence of the overseas producer on the British market is not removed" by their elimination. Nor, it can be added, is the dependence of the British standard of living on imports from overseas; it is at least possible that this would prove the more potent factor in an over-all series of bilateral bargains. Without discussing the matter in detail (the weight of evidence seems to be against the benefits of bilateralism), there seems to be here another strange irony, though again Sir Henry Clay's view is more moderate. Apart from the desire to avoid the disturbing influence of external changes on Britain's economy, bilateralism is sought as a means of enabling Britain to export where otherwise she would fail. Although it is partly justified in terms of overcoming restrictions imposed by other countries, there is also a strong bias toward believing that British industry is too weak and inefficient to be able to hold its own in foreign markets without the "support" of trade agreements. Those who are most vociferous in proclaiming the decadence of British industry are also the most vigorous advocates of prosperity and plenty through full employment in semi-autarchy.


The recovery of British exports in the first year after the war has been in some ways remarkable. Revival from the low wartime level (in 1943 the volume of exports was 29 percent of 1938) did not start until toward the middle of 1945, and at first proceeded slowly. By the second quarter of 1946, however, the volume was 97.6 percent of prewar, and in July it was 120 percent. Government policy has, however, put exports in a specially favored position; they have had the best of the reconversion of production from war to peace, leaving the British consumer to make do with anything left over. Moreover, industry is still in the first stage of reconversion; in broad terms, from production of warlike stores to peaceful products within the same industries and factories. The greater part of the more difficult change, the transfer of labor from industries swollen during the war to those which were denuded, has yet to be achieved, though it is in process.

With certain relatively minor exceptions (e.g. pottery) the increase in exports has been most marked in metals and chemicals. Thus, in the second quarter of 1946, the volume of exports of non-ferrous metals and their manufactures was 217 percent of the 1938 level, and of electrical goods and apparatus 160 percent. At the other extreme, the volume of exports of cotton goods was 41 percent and of coal only 13 percent of the 1938 level. Sir Henry Clay speaks of British exports as though they must consist almost entirely of coal and cotton; and on this basis some pessimism would be justified. But it was not true even in the inter-war years; in 1938, coal and cotton accounted for 19 percent of British exports by value, as against machinery and electrical goods at 15 percent, and vehicles at 10 percent. The character of the British export trade (and of British industry) was undergoing important changes, and although expansion of the newer exports was inadequate to compensate for the decline in the older staples, much had happened by 1939. The war has in some ways accelerated the readjustment between declining and expanding industries, and the present export figures are in accord with the desired trend.

Ability to export at the present time of intense world demand is not, of course, evidence of long-term competitive strength. This is a matter of the relative efficiency of British industries. Absence of data makes it difficult to assess even the present efficiency of British industry. Forecast of the future is virtually impossible. Nevertheless it is necessary to dispel the widespread misapprehension, which exerts a powerful influence on opinion, that British industry is relatively extremely inefficient. Perhaps a warning should be issued that this kind of self-denigration should not be taken too seriously; so far as Britain's industrial prospects are concerned it has been going on since at least the 1870's. The recent burst of criticism is matched in its intensity by the inadequacy of the evidence on which it is based. At a time when the critics were lamenting that British industry consisted of a "chaotic" collection of inefficient firms, industrialists were producing, at short notice, large quantities of some of the finest weapons used in the war, under conditions of almost incredible difficulty, and at costs which appear to compare favorably with those of producers in the United States. This does not, of course, prove that British industry was efficient, but it might at least have made the critics pause. They were, however, misled by certain widely-publicized international comparisons. For example, the Report of the Cotton Textile Mission to the United States, of April 1944, showed that in the production of coarse and medium yarns, output per man-hour in British mills was about 30 to 40 percent less than in American mills. This, however, is a severely limited comparison which by itself means very little; it refers to only one stage of the productive process in two industries organized on entirely different systems. One of the reasons for the difference is, of course, that the American industry uses much more capital equipment per worker; if this is taken into account the disparity of costs between the two industries becomes much less marked. A corrective is provided by the report of the Working Party set up by the President of the Board of Trade to investigate the position of the cotton industry.[iii] On the data presented, the general conclusion (put forward by the employer-members and the independent members apart from the chairman) that reëquipment at the present time would be speculative, in that total costs under a new scheme would not be appreciably below existing prime costs, seems reasonable.

It is also significant that the other three Working Parties which have so far reported -- for pottery, hosiery, and boots and shoes -- give much the same result. The report on boots and shoes does, it is true, quote the familiar statistics to show that output per man-hour in British factories is about one-half of that in the United States; yet it makes no attempt to reconcile this with statements such as that "despite production costs which are higher than in Britain, the U.S.A. women's cheap fashion shoe industry. . . ." In general, it finds that there are no "striking and far-reaching economies that could be made by reorganization." In all these reports there is nothing to suggest the conditions of general inefficiency so glibly depicted by the critics.

Efficiency depends upon a multitude of complex factors, with varying significance over a period of time, and the only real test is one of experience and not speculation -- the ability to meet foreign competition. The result in future cannot be forecast with certainty; but at least it is not yet clear that Britain has reached that stage where she should throw away the chance of reestablishing the one system which can provide her again with a high standard of living because she is too weak to participate.

Whatever the final outcome, the next few years will be dominated by the stresses and strains resulting from the war and the change from war to peace. Some of the elements in the present situation will now be examined.


The shortage of manpower, and its maldistribution for the needs of peace, are of overriding importance in the immediate situation. During the war, the total numbers employed (including those in the Armed Forces) were increased by about 3,750,000, or 20 percent over 1939. With the end of the war, and consequent cuts in munitions programs, a slackening of the stringent controls over labor, and a weakening of the patriotic motive, the wartime increase soon melted away, and by June 1946 total employment was only 600,000 above June 1939. It is not to be expected that the employed population in the future will be much above that of 1939.

The war, of course, also saw a large-scale diversion of manpower. The Armed Forces and their supply absorbed 10 percent of Britain's manpower in June 1939; at mid-1943 (near the peak of mobilization) they absorbed 46 percent and still had 42 percent by the end of the war. Since then there has been a substantial fall, but, on present plans, this direct war sector will not have reverted to prewar numbers until the end of 1946. Employment in certain essential industries and services (coal mining, agriculture, transport, government) had to be largely maintained, or even increased, and the manpower needs of the Armed Forces and the munitions industries were met in considerable degree by transfer of workers from civilian manufacturing, building, and the various commercial and other services. In all, these gave up over 4,000,000 workers, or some 40 percent of their prewar labor force. The result was that by the end of the war there was an enormous pent-up demand for goods (and housing) at a time when the numbers employed in the civilian sector were well below prewar. Employment in manufacturing for the civilian market had almost reached the June 1939 level by mid-1946 (but this, of course, did not mean prewar standards of consumption), while the labor force in building was being fairly rapidly restored (but it will be several years before the wartime arrears of building can be made good).

With the completion of demobilization from the Forces and of the cuts in the munitions programs, about 1,000,000 workers will have been made available for the civilian sector in the second half of 1946. To restore civilian manufacturing, the building industry, and the various services to their prewar numbers would, however, require about 1,500,000 more workers than they had at mid-1946. This allows nothing for a further expansion of exports (which is necessary), of government service (which is possible), of agriculture, or of the public utilities. At best, some sectors will continue to go short.

During the war there was comprehensive direct control over labor, involving the mobilization of virtually the whole population. But this was regarded as an undesirable wartime necessity, and not much of it remains. If a certain distribution of manpower is desired and the use of wartime powers of conscription is not possible, the alternative is to use the wage incentive. This is one of the two aspects (the other will be discussed later) of the demand, recently vociferous, for a "wage policy." It is argued that many of the industries which are most acutely short of manpower have relatively low wage levels and inferior conditions, and that until wages are raised and conditions improved it will be impossible to attract labor to them. Lower wage levels and inferior conditions are not, however, the only difficulties. Some industries (e.g. cotton) were declining before the war; as a result they recruited few juveniles and the outbreak of war found them with a labor force above average age, and this was accentuated by the war. An influx of "green" labor would not now solve their problems; they need particular kinds of skill -- the young men and women who would have been trained in the past 15 years if there had been no depression and no war.

Moreover, this solution does little to help the general manpower shortage. Although higher wages in these industries might attract into industry local pools of unused manpower, the implied assumption behind making some industries relatively more attractive is that labor will be diverted from elsewhere. This remedy, therefore, might fall into the category of an expedient which has to be indefinitely extended, and the effect consequently dispersed, however much the original intention may be to assist a small number of industries of most immediate importance. In any case, an increase in wages in one industry usually provides an incentive to trade unions in other industries to make new demands, and, provided free collective bargaining is to remain, it would seem impossible to isolate one group of industries as suitable for increased wages and leave the rest of industry outside. Effective intervention would, moreover, far transcend the immediate field of wage-fixing. On the one hand, the weakening of collective bargaining would create new problems of industrial relations; on the other, there would presumably be a new government responsibility for the maintenance of the profitability of industry (particularly where prices are already subject to control).

On balance it seems that wage policy designed to bring about a redistribution of manpower would achieve less success and raise more difficulties than its advocates realize. Although some desirable changes might be stimulated with official encouragement, there is no easy solution, and the necessary adjustments will take time to accomplish.

The second aspect of wage policy is in some ways inconsistent with the first; it arises from the desire to prevent inflation. Here it is necessary to go back a little. In March 1941, the government announced its intention of preventing, by means of subsidies, the cost-of-living index from rising more than 30 percent above prewar, and urged moderation on the trade unions in asking for increases in wages (the Ministry of Labor cost-of-living index was then 28 percent and the index of wage rates 20 percent above September 1939). The policy had only limited success. The cost-of-living index was stabilized, but the wage rate index continued to rise, not continuously, but with spurts and periods of quiescence. At the end of the war the cost-of-living index was 32 percent above 1939, the wage rate index 51 percent up, and average weekly earnings had increased by 80 percent. With the reversion to more normal hours of work, and consequent loss of earnings, there came demands for increased wage rates; by July 1946, the increase in the cost-of-living index was 32 percent and in the wage rate index 61 percent. Meanwhile, with the inflation of costs, expenditure on subsidies to keep down the cost of living was rising and in February 1946 was at the rate of £370,000,000 a year.

This is not the place to judge the stabilization policy; it may be remarked that financial policy as a whole has at least resulted in a much milder overt inflation in Britain than most other countries have experienced. But the present situation is potentially inflationary; and a stabilization policy which keeps a cost-of-living index stable with increasing subsidies while wages go on rising is the vicious spiral in another form.

To recognize a danger does not, however, give the answer to the problem. Those who shout most loudly for a wage policy are most reticent about what that policy should be; they confine their efforts to stating the obvious danger of inflation. As suggested above, government intervention to control (or "influence") wages -- even though an appropriate and effective method could be devised -- would raise as many problems as it solved. The present danger is not so great that some risks cannot be taken; the other controls are doing their work, and we are still far from repeating the experience of 1919-20. It is still too near the end of the war to judge how long present conditions will last before the elements of danger begin to be liquidated.

It is also too soon to assess the significance of the industrial unrest of the past year. This has added to Britain's difficulties; but it has received publicity out of all proportion to its intrinsic importance. A great deal of unrest was to be expected; again it has so far been less marked than it was in 1918-1920, though there are differences of form and apparently of motive. If Britain can pass through the transition period with no greater industrial disturbance of this kind than has so far occurred, she can be considered fortunate.


The discussion of manpower has so far been in terms of numbers of workers. This, of course, is only part of the story; it is necessary to consider also the amount of work which those workers do and the productivity of that work.

A striking example can be found in coal mining -- partly because the various elements are more easily measured than in most other industries. Taking weekly averages, between 1939 and 1945 the total volume of output fell by more than 24 percent. The labor force, however, declined by only 8 percent. The difference is explained by a fall in the hours worked (from 5.15 to 4.73 shifts per week, or 9 percent) and by a fall in average output per manshift of about 13 percent. There were, of course, valid reasons for this -- e.g. the increasing average age of the workers, wartime strain and privations, shortages of certain supplies -- but it remains the essential feature of Britain's coal crisis.

The amount of work can be roughly measured by weekly hours. The war, of course, saw an increase over the whole of industry; in July 1943, average weekly hours for men were 52.9, against 47.7 in October 1938. After July 1943, there appears to have been a decline, and since the end of the war a rapid reversion to prewar hours, or less.

The immediate reaction after the war (and one which was perfectly understandable) was a desire to work less hard. Beyond this, however, has been the organized trade union demand for a 40-hour week (compared with the prewar normal week of 47 or 48 hours) without any loss of weekly earnings. It is impossible to assess how far this demand will be seriously pressed in view of the present situation and the government appeals to people to work harder. It is perhaps significant that in several recently-negotiated agreements the basic week has been fixed below the prewar level. It is hardly to be expected that longer hours of work will compensate for the shortage of numbers.

It is an article of faith (at least in public) of the trade unions that a reduction in hours of work can be made good by increased productivity, so that neither total output need suffer nor costs be increased. To achieve this result, reliance is placed mostly on improved organization, increased mechanization and "new" methods of production. It may well be that, over a period of time, improved industrial technique and more mechanization will give increased productivity. But the proviso "over a period of time" is vital.

The view that a great increase in productivity is possible, without much delay, is largely based on the remarkable achievements of the munitions industries during the war. There is here, however, some confusion of thought; the enormous savings in costs which occur when the manufacture of, say, a particular type of aircraft moves from the prototype stage to mass production is not by any means the same thing as increased productivity of output as a whole. Yet it is this kind of change which is often used to demonstrate the potentialities of industry. Nevertheless, the war did provide a stimulus to new methods of production, and opened up new possibilities in the economy of resources. It is not to be expected, however, that this experience, which was largely concentrated in the engineering industries, can be applied quickly to industry generally.

At present three other legacies of the war almost certainly outweigh any benefits from increased knowledge of organization and technique. The first is that workers are on the average less efficient than they were before the war. Those who remained in industry are tired after six years of exceptional effort under difficult conditions. Many who have been in the Forces have lost some of their skill, and will need time to regain it.

Secondly, there is a shortage of factory capacity arising from the curtailment of building and losses from air raids. While it would be untrue to say that lack of factory capacity has been a general bottleneck, it has almost certainly limited the speed of reconversion and placed obstacles in the way of making the best of the other resources which are available.

Thirdly, there is deterioration of capital equipment resulting from the deliberate wartime policy of deferring all but the most vital repairs and maintenance. It is officially estimated that industrial disinvestment (excluding war damage) from 1940 to 1944 amounted to £885,000,000, perhaps one-tenth of the industrial equipment of the country. It is hardly surprising that many industrialists are anxious to undertake some reëquipment. The main limiting factor is found in the industries which have to produce the equipment, where the capacity is far below the needs, and the gap cannot be filled by imports. In so far as "new methods" and "improved organization" depend upon increased mechanization, therefore, it will be some time before any substantial benefits can be derived from their application.

It remains to be seen how great those benefits will be over the system as a whole. Substitution of capital for labor may be desirable simply because the latter has become relatively scarce and more costly. This is one part of the present situation in Britain. In addition to the technical developments offering possibilities of economy, but which could not be exploited during the war, there is also the manpower shortage, with a big rise in wage rates and a continuing upward pressure. It is undoubted that much of the demand for reëquipment arises for this second reason, and although it would be an exaggeration to regard the condition as one in which industry must run as fast as it can in order to stay in the same place, it would be equally false to believe that reëquipment will yield sweeping over-all economies.

Finally, compared with 1939, both in the building and engineering industries (and, of course, in certain other industries) a larger labor force, with its associated equipment, must be held back from producing houses and consumption goods if, within the next few years, the capital losses of war are to be made good and then a higher degree of mechanization reached. This is another additional call on Britain's limited resources. The benefit to the standard of living to be derived from increased productivity belongs therefore to tomorrow and not to today.


With the major exception of coal, in the long run the availability of raw materials is largely a question of imports, and therefore another facet of our main problem. During the war, the most rigid economies, together with substitution of less scarce for more scarce materials, were enforced by shortage of shipping and lack of supplies in non-enemy countries. Now the situation in shipping is much easier, world supplies of most materials are becoming more adequate, and the limiting factor is the need to restrict imports on grounds of the balance of payments. The situation is therefore easier -- the limits are less absolute -- and it would be misleading to regard shortage of materials as an important bottleneck. With some exceptions, materials can be provided where the manpower is available to use them. Shortages at a stage of production higher than the basic materials (e.g. foundry products, building materials) are the result of lack of manpower and not of basic materials.

There is, however, one general aspect which may be of some importance. The use of materials is still subject to fairly comprehensive controls, and however well these may be administered, there is an inherent danger that they cannot be sufficiently flexible to allow the most rapid and most efficient adjustment of industry. Thus, for example, allocation to producers on the basis of some past period is not always the best possible guide to present need or potentiality. Though adjustments can be made, it does not follow that they always are, and in any case they take time. This is not to say that control should now be abandoned; but it should be recognized that it has its disadvantages.

Shortage of coal continues to be a leading issue. This is partly because it bears hardly on the domestic consumer; but forecasts for the later months of 1946 suggest that it may also result in stoppage of factories more widespread than any which has so far occurred. Moreover, there has been a considerable rise in price, with bigger increases in wages (which comprise the major item in costs) than in other industries. While the immediate position is indeed serious, the long-run importance of this matter is often exaggerated. Though the cost of coal will no doubt continue to be a significant item for certain parts of the economy, the days of Britain's dependence on cheap coal as a source of power have been over for some time. Moreover, costs have risen in other countries, and it is highly improbable that the coal situation will be more than a minor factor in competitive strength. And with new possibilities on the horizon the danger is not that the nationalized industry will exploit the consumer by higher prices, but that too much (subsidized) investment will be put into the industry in an endeavour to make it more "efficient."


Economic prophecy is always hazardous. Even in times of apparently steady development, the exact situation at a given time ahead cannot be forecast with any degree of certainty. In times of major upheaval, any attempt at close forecasting is futile. We need to be content with dissection of the various elements in the existing situation; although this can provide some guide to future possibilities and therefore has its bearing on economic policy, it does not attempt to predict what the final outcome will be.

Our review of the present situation in Britain may seem to have dwelt almost entirely on the various difficulties in the way of recovery of the economy to the point of providing unaided a high standard of living comparable to that of 1939. This has been deliberate; a period of readjustment is a period of difficulties, and they cannot be ignored. But this should not obscure the extent to which readjustment has successfully occurred. In spite of all the difficulties, the recovery of exports is proceeding. Internally, though the general manpower shortage is a major factor and specific shortages still delay full recovery, in little over a year the major part of the resorting of six years of distortion has been achieved. This is more rapid, and has been less painful, than the comparable process after 1918, when there was the added assistance of inflation.

Moreover, the past year has seen a noticeable lessening of many difficulties. It is too soon to say whether this improvement will continue; perhaps in the first stages it was more or less inevitable. If the experience of 1918 is any guide, then some of the concomitants of a period of intense unsettlement (e.g. industrial unrest) have so far barely shown themselves; it does not, of course, follow that the former experience must be repeated. There is, moreover, the new factor of the loan from the United States, which will provide great assistance in meeting some of the more immediate difficulties. At least it is too soon to decide that Britain will not be able to make those "internal and external adjustments . . . adequate to restore equilibrium" within the transition period of three to five years.

Finally, to return to where we started, Britain's competitive strength in export markets depends on her relative position. Other countries have their troubles and difficulties of adjustment; so far as it is possible for an observer in Britain to judge, the strains to which she is subject are at least not appreciably greater than those elsewhere.

[i] Henry Clay, "Britain's Declining Rôle in World Trade," FOREIGN AFFAIRS, April 1946.

[ii] In case it should be argued that there is a big gap between moderate isolationism (if such a thing can exist) and the economics of war, it may be noted that Sir Henry, while stating that "there is a limit to the possible contraction of a country's foreign trade" (it is not, on his argument, apparent why this should be so), considers it "not obvious that the limit [for Britain] had been reached in 1939," and "the war revealed possibilities of adaptation that were unexpected" (my italics). Let it be said that Sir Henry's is a moderate view.

[iii] Working parties, consisting of representatives of the employers and of the workers, with independent members, one of whom was chairman, were established for various industries late in 1945 and are now reporting.

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  • S. R. DENNISON, Fellow of Gonville and Caius College, Cambridge, and University Lecturer in Economics; served in the Economic Section of the War Cabinet Secretariat, 1940-1946
  • More By S. R. Dennison