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Henry Judd

As British Negotiators Come to Washington –

U.S. Wants Solution to Dollar Crisis
by Hard Squeeze on Workers

(12 September 1949)

From Labor Action, Vol. 13 No. 37, 12 September 1949, pp. 1 & 4.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

Negotiations among America, England and Canada over the British financial crisis were begun this week. It is clear that much more than economic difficulties involving England are at stake; yet, at the same time, it is clear that no real, long-range solution will be found.

At the best, stop-gap methods to alleviate the tension of the present situation will be undertaken. Discussions on underlying problems will actually be more important (it is difficult to imagine men like Bevin, Cripps and Acheson participating in purely technical financial discussions), even though no immediate proposals are likely to occur.

It is easy to become involved in a mesh of statistical evidence and financial complexity in describing the causes of Britain’s crisis (which is hardly new), but actually it is a simple matter. One might best express it in the following way:

A vast, top-heavy and disproportionate share of this world’s wealth, in terms of production, old, resources, raw materials, markets, etc., has found its way into the hands of capitalist America. American capitalism is draining the rest of the world dry with its monopolistic grasp of trade, commerce and business. This process has gone on largely at the expense of England, former world leader, and that nation is, from an economic standpoint, on the verge of bankruptcy and collapse.

Can’t Dump the British

But other American interests, basically political and strategic in nature, make it impossible for American imperialism to permit such a collapse whose consequences would be far more serious than the price of further loans and donations. This is why the vulgar and disgraceful kind of reactionary/anti-British talk which has filled the American press for weeks (a typical expression of vicious arrogance and chauvinism which earns the increasingly unpopular reputation held by America throughout the world) cannot be taken too seriously, insofar as its having any influence on reality is concerned.

America can no more afford to “dump the British” – much as our most reactionary circles would like to – than Britain’s equally narrow and chauvinistic circles can afford to listen to the John Bull isolationist doctrine of a Lord Beaverbrook. These circles in both nations represent respectively the most provincial and backward strata of both nations.

In an immediate sense, the crisis of England is due to the famous “shortage of dollars.” Before the war, England had an annual deficit in trade amounting to $700 million, in dollar shortage. This deficit, however, was overcome by empire earnings which more than made up for it. A favorable trade balance between England and its numerous colonies, dominions, etc., could overcome the unfavorable balance between England and the United States. But this has vanished.

The reality now is not only that these nations remaining within the orbit of the empire (a more or less formal relationship) have their own unfavorable trade balance (i.e., dollar shortage) in relationship to America – this is particularly true of India and South Africa – but the additional fact that England herself has now an unfavorable balance with both the United States and her colonies, dominions, etc.

The whole process has been reversed and England is bleeding at both ends now. This is the heart of the crisis, in economic terms.

Harder Work, More Austerity

All efforts to close up the dollar gap have not only failed but actually made matters worse. The gap at this moment, is widening and literally draining England of its remaining capital resources. These reserves are vanishing at the rate of $300 million per month, and an estimated shortage of $1½ billion is predicted for 1949. And this in face of the fact that (1) America has loaned $6 billion since the end of the war, if we include outright loans, Marshall Plan aid, etc.; (2) English business and export trade have revived amazingly and are well above pre-war levels.

The fact is that the harder the British people have worked, the more “austerity” they have accepted, the worse off has become their situation! What is the explanation for this fantastic fact?

It does not lie in one particular source (which is the reason why there is no one drastic solution to the problem) but in a multitude of complex factors all of which form a part of the reactionary system of economic and trade relationships existing in our capitalist world. It is the fettering, crushing and hampering of the free flow of trade and commerce which is primarily responsible for the British crisis.

Britain must export vast quantities of food and raw materials. These come chiefly from the United States and Canada. Britain seeks to earn the money for this import trade by its counter-balancing export trade. But no nation has dollars, except the United States. And the United States, with its vast production and its surpluses of everything (particularly at the moment, with a decline in business) will not buy from England. Exports from England to America have declined catastrophically, and are running 30 per cent below last year.

How, then, can England get dollars to lessen its dollar shortage, if American capitalism is obliged to place every conceivable hindrance in the way of trade? The same process, of course, holds true for all of Europe, but England is most vulnerable. This is the explanation of the immediate crisis. The remarks of various officials, notably Paul Hoffman, to the effect that England should increase its exports to America are shamefully hypocritical, as they well know.

What do the British propose? They have their long-range proposals, as well as proposals which one might describe as being purely nationalistic and “British.” Little or nothing will come of these, because the American spokesmen are solely guided by American economic and imperial concerns.

Britain would like to see its war debts, which amount to over $12 billion to the “sterling area” (India, South Africa, Canada, etc.) renegotiated by the United States and either liquidated or greatly reduced. This would take the steady pressure off England proper and stimulate trade with the empire area which has been steadily taken over by the United States. Britain would like the United States to raise, the price of gold, an artificial measure for strengthening the value of whatever reserves still are in the hands of the British government. And Britain would like America to expand its stockpiling of raw materials (particularly rubber from Malaya), in order to stimulate general empire trading.

Close to Knife’s Edge

It should be noted that the British representatives really have no long-range proposals or solutions worthy of the name. Conservative politicians that they are, to whom the broad concepts of socialist economic planning an’d training are utopian, dreams, they limit their proposals to immediate stop-gap measures (a new loan), or half-way suggestions which do not go beyond the framework of world capitalist economy.

The United States leaders, on the other hand, have an entirely reactionary approach to the problem, both in an immediate and long-range sense. To them, it is primarily a business problem in which they have advanced money to some shaky entrepreneur who now desires still more capital as a prop.

And like any good banker, they with to see that the business concern to which they are advancing loans is to be run according to their ideas. Careful expenditures, no waste, and above all, no competition! Britain must compete on the world market, to be sure, but not where the United States is! Production costs must be lowered by an increase in labor’s productivity.

How? That is the headache of Britain’s Labor government. There must be a cut in the costs of “government,” which means a cut in expenditures by the new British “welfare state” with its numerous social measures, nationalized medicine, etc. Expenditures for any new nationalization of industry must be halted. A debtor must be forced to live close to the knife’s edge – that is sound pawnbroker policy!

Furthermore, sterling or the pound (now valued at $4.03 per pound) must be devalued to approximately its current black-market rate on the Swiss market, which is $2.90 per pound. The effects of such a devaluation are obvious, and we can understand why the British resist this demand. It would instantly raise prices and costs in England itself, and put her at a still greater disadvantage in competing with America for foreign trade.

Election in the Balance

It would lead to still greater austerity and lower living standards in England, and would really be a first-rate disaster for the British masses who would find themselves in an inflationary position. For America, it would make infinitely easier its drive to break up the closed sterling area, and take away whatever trade remains there for England.

It is easy enough to see how reactionary and cynical is America’s position. Faced with the general decline of its empire, a decline in its world trade, a very high price structure due to its low productivity, old-fashioned machinery, etc., the position of Britain as a nation is pathetic indeed. The Labor government is facing a bitter struggle for electoral survival, and its yielding to American demands might easily mean the difference between victory and defeat in the 1950 elections. It cannot cut wages, devalue the pound, lower imports, speed up labor, etc. (which is the American program for it), without creating immense resentment.

What, then, shall it do as it begins to negotiate with its wealthy oppressor who says, in effect: It’s up, to you to do the proposing! We’ll listen to you, but don’t suggest anything we don’t want to hear!

This is the situation, and we shall see how it develops.

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