THERE is no longer that air of unreality in the discussions of British economic questions which characterized the first two postwar years. Sir Stafford Cripps in his recent surveys gave a blunt warning of possible economic catastrophe. The adoption of the Marshall Plan has for the moment obviated the terrible necessity of cutting imports and thus causing general dislocation and large-scale unemployment, a contingency which would have threatened all efforts at Western European reconstruction. But the consecutive drafts upon American goodwill clearly cannot be repeated indefinitely. Such a failure as the Anglo-American loan agreement must not be permitted to recur. A searching analysis of the British crisis is vitally important.
One of its most serious aspects is the effect on American public opinion of the criticism which attributes Europe's malaise to planning and inflation. Should an attempt be made to treat the problem by monetary panaceas -- devaluation and the like -- devastating social and political consequences could not be avoided; only by creating mass unemployment could Europe's international payments be balanced on a basis of free-market economics. This would involve hardship, if not starvation, and would have unforeseeable social and political consequences.
In this paper it will be argued that: 1, some of the current criticism of the British Government ignores the most important factors determining the position of the country, and obscures great achievements; 2, the relative failure to grapple with the British economic problem is due partly to the British Government's refusal to accept the wider implications for Britain of the consequences of the war (an attitude of which the critics of the Government were even more guilty) and partly to the unwillingness of the Government to implement fully its own principles; 3, in particular, the implications of full employment were imperfectly realized, in that certain controls were prematurely relaxed and, in consequence, production and investment did not expand at the required rate; 4, the real crisis of European and even more of British reconstruction has not yet arrived, and that it
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