The Cause and a remedy



In the month of February last the writer of the following articles was a guest at a dinner party in London at which several well-known financiers and merchants were present.  The conversation soon turned upon the question of the country's industrial paralysis and each member was asked to express his opinion as to the cause and to suggest a remedy.  The first speaker, a merchant, said that periods of trade depression and unemployment are the result of natural laws and have occurred every 10 or 12 years for the past century and are unavoidable.  Another quoted with approval the statement of the Prime Minister that the crisis is the result of the war and that unemployment is inevitable and irremediable.  A third member, a financier, said that our troubles were the direct consequence of currency inflation and the creation of paper money.  He added, “ If we had stuck to gold, all these difficulties might have been avoided.”  His remedy was to return to the gold-standard.  A fourth attributed the cause to the unreasonable demands of labour.

“ We must first reduce wages,” he said, “ and so bring about a fall in prices if we are to escape from the present morass into which the Government has driven us by its foolish panderings to labour”!  A fifth member held the Government responsible by reason of their having retained so many restrictions upon trade since peace was declared.  “ Free and unrestricted trade,” he added, “ is the only remedy.”

One or two remaining members agreed with one or other of the opinions already given. The writer’s turn came last and he expressed himself as being in entire disagreement with every member present.  Not one of the reasons so far urged for our industrial woes would stand even the most superficial investigation, and consequently the remedies suggested were not only worthless but foolish.  To begin with, for at least 15 months after the war had ended the country enjoyed a period of great industrial activity and trade prosperity.  The war left the world with a vast shortage of goods of every description and consequently no sooner had the guns ceased firing than orders began pouring in from every quarter of the globe.  Factories were rapidly converted from the manufacture of war munitions to that of life-sustaining commodities, and extensions were soon made to cope with the extraordinary demand.  Hundreds of thousands of men from our demobilised armies were absorbed into the various industries.  New enterprises sprang into existence and the demand for money and credit for productive work grew proportionately.  Every condition favourable to a long period of prosperity existed.

In spite of the foolish bonded-debt policy which our Government—under the influence of the Treasury officials and the professional money-lending classes,—had adopted throughout the war, Great Britain emerged from the conflict far wealthier so far as her productive ability and facilities are concerned than when she entered upon the great struggle.  And it only required a comparatively short period, say ten years, of this prosperity which had then started to enable her to rid herself entirely of her national debt.  Now if there were any truth in the opinions just expressed such as the war having been the cause of the present trade slump, or natural laws, or the demands of labour, or trade restrictions, or an inflated currency, why did these so-called causes which existed in 1919 and 1920 fail to operate until about the beginning of last summer ?  Why were they dormant for over 15 months ?  Such flimsy reasons wouldn’t satisfy the curiosity of a child.

But now let us see what happened just about 12 months ago, viz., March 1920.  After this brief period of prosperity the country was  startled by the sudden announcement be the Chancellor of the Exchequer (Mr. Austen Chamberlain) that the Government had “set its heart upon gradually deflating the currency” and he called upon the bankers to assist him in restricting credit.  The bank rate was advanced to 7 per cent. and the game of squeezing industry for the benefit of bond-holders and money-lenders commenced.  It was no mere coincidence that the trade slump started the very day this amazing speech of the Chancellor was published.  Realising that this deflation policy meant the slaughter of all values, the destruction of all enterprise, a drastic fall in prices and wholesale bankruptcy, the country took alarm and played for safety.  No one cares to buy goods on a falling market.  Orders began to be cancelled !  Stocks were offered at prices below cost.  The public demand commenced to slacken ! Many workmen were put on short time whilst thousands more were discharged.  And with the decrease in wages the public ability to buy goods also decreased.  The idea that a policy of this nature could be undertaken without a disaster to trade and industry, that deflation might be proceeded with so gradually as to do the country no harm, could only emanate from a mind wholly ignorant of trade, commerce and history !

The writer maintained that industrial and social conditions would necessarily grow worse until this policy of credit contraction was reversed.  He ventured to call attention to the numerous warnings he had sounded in the daily and weekly press and in various pamphlets and books published during and since the war as to the dangers of attempting to contract the currency after peace was declared.  Many similar warnings have also been uttered, notably by Lord Milner in the House of Lords, by Lord Leverhulme and by Mr. McKenna, the Chairman of the London Joint City and Midland Bank, and others.  In spite of these warnings the Chancellor and his Treasury officials, aided by the Bank of England, persisted in their mad course of raising the Bank rate and contracting the money and credit supplies with the terrible results we are now witnessing.  Bankruptcies have increased more than 100 per cent. over those of 1919, whilst unemployment has risen to the incredible number of 3,000,000 !  The Coal Strike—the direct result of wages dispute and therefore of the Government’s dear-money policy—is further evidence of the ruin wrought !

In short, we are now beginning to experience a repetition of that terrible period following the Napoleonic Wars commencing about 1820 and culminating in the “ hungry forties ” for which Lord Liverpool, Sir Robert Peel and his chief adviser, Lord Overstone (Chairman of Lloyds Bank) were—by reason of their currency deflation policy—directly responsible.

Precisely the same results are being experienced in the United States and from a similar policy of currency contraction for which certain financiers of German and Hebrew origin are said to be the authors.  According to the Manufacturers Record (a widely read American Trade Journal) this currency contraction has thrown out of employment some 4 million operatives and has cost the American people over 6,000,000,000 during the year of 1920 alone !  The writer’s estimate of the appalling losses which this country has experienced directly as the result of Mr. Austen Chamberlain’s policy for the past year is equivalent to 1/6th of the estimated wealth of this country in January 1920 which then stood at 30,000.000,000 !  Hence the loss stands at fully 5,000,000,000 !  Now let us look at the other side of the question !  The German Government refused to enslave their people during or since the war by borrowing from the world’s money-lenders to the extent and in the manner our Government have done.  They used and are still using their own national credit in the form of paper money instead of borrowing the credit of others, and, they were not afraid of meeting the usurers bogey – inflation !  What have been the results ?  Although they suffered a terrible military defeat and are compelled to pay a war indemnity, they are to-day the most prosperous industrial nation in Europe.  They have escaped the ruinous interest charges with which we and France are burdened !  Their factories are running full time and they have but a very small percentage of unemployed—far, far less than any of the allied nations.  Their industries are earning fabulous profits.  They realise by experience that their cheap currency gives them an enormous advantage in trade competition over their rivals who are still deluded by the gold-standard dear-currency theories !  Hence they are capturing the world’s markets as fast as their factories are able to turn out the goods.  In short, whilst our orthodox Economists, financiers and Government officials are doing their best to strangle British enterprise by reviving their old and exploded financial theories, our sworn foe is invaing our markets, capturing our trade and that of our allies by adopting the very policy our orthodox Economists have condemned as impracticable and ruinous !

In regard to periods of trade stagnation and unemployment, the writer said that not only was there a remedy but he considered the mere assertion that these evils were “unavoidable and irremediable,” was a disgrace to the Government that made it and ought to be sufficient to disqualify every member for ever holding a public office again.  Political, social and economic events are the results of political, social and economic causes and there is no need or excuse for attempting to lay the blame for these evils upon Providence or Natural laws.  Precisely the same assertions were made by the religious bigots of the middle ages regarding diseases with which whole communities were occasionally destroyed.  These were all said to be visitations of an angry Providence and unavoidable until a number of intelligent men began to investigate the nature of these diseases and trace their origin.

After further discussion the writer was finally challenged by his opponents to furnish a remedy for unemployment and industrial depression.  Hence these articles which recently appeared in the weekly trade supplement of the London Times.  At the request of very many of the Times readers and through the kindness of the Times Publishing Co. and of the Editor of the Times Trade Supplement they are now reproduced together with the criticism of the Times City Editor.

These articles constitute the third set of a series on trade and finance contributed by the writer during and since the war.  The first articles appeared “in Land and Water” during the year 1916 and were published the following year under the title of “ Trade Fallacies ” by Messrs. King & Son.  The second set appeared in the Times Trade Supplement in 1918 and 1919 and were republished together with a criticism by Mr. Hartley Withers (Editor of the Economist) last year by Messrs. Dolby Bros. (Stamford) under the title of “Money Problems.”  In addition to the above series in 1918 “ A Fraudulent Standard ” (which is an exposure of the fraud underlying the so-called “ gold-standard”) was also published by Messrs. King & Son, (London) and “A Criticism of the First Report of the Currency Committee presided over by Lord Cunliffe” (Dolby Bros.) appeared the same year.

These writings, which have entailed a vast amount of labour and considerable expense to one whose normal working hours are and have been for years fully taken up with inventions and engineering work of an absorbing character, were undertaken solely from a desire to save England especially, and the world generally from the dangers and perils with which we are now encompassed, and against which the writer has been warning the Government and the public in the writings above mentioned as well as in scores of letters to the press, in magazine articles and at numerous public meetings throughout the country for the past 6 or 7 years. Blinded by ignorance and conceit the Government has persisted in its ruinous course of wanton extravagance, crushing taxation and currency deflation – a three-fold policy which if continued would bankrupt any Empire even if it comprised the wealth of the world !  The British public are beginning to experience the truth of the statement made by the writer in 1916 that of our two greatest dangers—the one being our foreign foe, Germany, and the other our governing permanent officials—the latter would eventually prove to be the more costly and dangerous !  “ A state can be laid low just as effectively by wrong ideas as by an invading army ” says Lord Inchcape.  “There is ” he adds, “ no agency of destruction known to the chemists that is half as fornidable as the T.N.T. of bad economics.”  And since the advent of the present Coalition Government we have been deluged with “ bad economics.”  One of the most deplorable results of the Government’s financial policy, which the writer foretold in 1917 would happen, is the abandonment one by one of all the reconstruction plans recommended and promised by the Government during the war !  Just sow there is an agitation on foot for including a course of elementary economics in our ordinary public school education.  This is very desirable provided the course is based upon facts and not as is now the case in most of our Colleges and Schools of Economics upon fiction.  Our present plight is directly traceable to our orthodox economic Professors and their teachings.  It was a Cambridge Professor who urged the adoption of the high bank rate which has proved so terribly disastrous to our trade by adding to the costs of production, by restricting credit and killing enterprise.  It was a London University Professor who added to the gaiety of nations by seriously proposing to prosecute the Chancellor of the Exchequer for issuing our one pound Treasury notes because they were of less value than the gold contained in the sovereign !

We are now reaping the fruits of the policy advised by the Cunliffe Currency Committee, by Professor Pigou, by Mr. Basil Blackett of the Treasury Dept., by Sir John Anderson, formerly of the Inland Revenue Dept., by the Governors of the Bank of England, by the City Editors of the Times, the Daily Mail, and the Morning Post, and all the other advocates of dear money !  The ruinous advice tendered by these gentlemen is the product of our orthodox school teachings.  As for the public generally, to them Economics is like their religion.  They take it on faith, believing in the authority of their teachers, viz., the Financial Editors of their daily papers.

If there is one truth which experience has taught the industrial world more than any other, it is that a dear scarce currency is disastrous to trade whilst a cheap currency limited only by needs of commerce, is advantageous.  The orthodox school has in its criticisms of these articles, declared itself bankrupt.  It has nothing to offer as a remedy or preventative for these economic disasters.  One has only to read the replies of the Times City Editor in this discussion and that of Mr. Hartley Withers in “Money Problems” — both acknowledged “ authorities ” — to realise that there is nothing to hope for from their school of thought.  But a solution to the riddle must be found or else civilisation will perish !  The really amazing feature in these discussions is the fact that there is apparently no desire on the part of the orthodox school to find a remedy for our present evils.  On the contrary they make it a principle to denounce, ignore or throw contempt upon any proposed remedy.  Representing merely the interests of the moneylending classes who are quite satisfied with a system under which they reap enormous profits regardless of whether trade is good or bad, and by which in times of panic the Government protect them and throw all the risk on the public’s shoulders, there is no reason why they should advocate any change.  But a change is inevitable.  Our present situation is transitional and we shall witness shortly either a radical change of policy or a complete collapse !

In setting forth Major Douglas’ plan as a remedy for unemployment I was influenced by what struck me as its remarkable simplicity and its avoidance of anything approaching disorder, class warfare or revolution.  This scheme is founded upon justice and common sense.  And although it differs in certain details from what I have hitherto advocated, fundamentally we are entirely in accord with one another.  The present world’s unrest has been traced by certain writers to a cunning and deep laid conspiracy hatched by a society dominated by certain German Jews.  If such a society exists and such a conspiracy has been started, no better or quicker method for secering control of the world’s wealth and of enslaving mankind could possibly be conceived than that of securing control of the world’s credit.  And in order to achieve this, all that is necessary is to re-impose the gold-standard upon civilisation.  The greater proportion of the world’s gold-stocks are already in the hands of Jewish financiers and this naturally gives them supreme control of credit and therefore of trade and industry.

One event which is well worth noticing is the fact that the deflation policy which is responsible for the great wave of industrial depression is wholly confined to the allied and English speaking countries !  Surely this is something more than a mere coincidence !

In conclusion it is only fair to say that since the publication of these articles, all the members present at the dinner referred to, at which the writer was challenged to furnish a solution of this great problem, have written acknowledging that they consider the terms of their challenge have now been fully satisfied.


Stamford, Lincs.,
     May 20th, 1921.