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John Palmer

Britain in Balance

(October 1973)

From International Socialism (1st series), No. 63, Mid-October 1973, p. 31.
Transcribed by Christian Høgsbjerg.
Marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

Britain in Balance: The Myth of Failure
W.A.P. Manser
Pelican 50p.

THE ONSET of the economic crisis of western capitalism in recent years has given birth to a whole new school of establishment economics, best described as ‘the eccentrics’. Mr Manser, economic advisor to the City merchant bankers, Baring Brothers, is a fully paid up member of the school. Mr Manser is worried about the pernicious effect which the balance of payments has had on British economic growth (or more accurately the lack of growth in the post war years). His is a novel solution; if one shuts one’s eyes and thinks hard enough it should disappear.

Mr Manser’s basic point is that deficits in the balance of payments are not real – they are just a figment of the fevered imaginations of politicians and blinkered economists. He makes the justifiable point that people confuse payments and foreign trade, and that in its history Britain has very rarely recorded a trade surplus.

Mr Manser notes that in many years the ‘natural’ shortfall of exports over imports is made good by the flow of revenue from profits made abroad, insurance, shipping and banking fees – the so-called ‘invisible’ exports. Even then, he concedes, overall deficit is sometimes unavoidable; but a problem becomes potential disaster when on top of the payments deficit is added a massive flight of foreign capital from London. And this he demonstrates, in case anyone doubted, can involve staggering sums of so-called ‘hot money’ in a very short period of time. The answer, he suggests, is to reassure these foreign money switchers that what appears to them Britain’s foreign indebtedness (involving in its turn the danger of devaluation) is in reality only an episodic readjustment normal in any enterprise and one which will correct itself without foreign holders of sterling getting their fingers burned.

But how to do this? Partly, says Mr Manser, by rejigging the official statistics to give a more reassuring impression. Partly by the government cutting its overseas spending (which Mr Manser fails to identify as the necessary insurance premium British capital must pay to safeguard its overseas profits) and partly by letting the pound float free on the currency markets. He has been overtaken by real life in this last proposal. But, sad to report, Mr Manser assumed that no floating currency would drop sharply simply because there should always be willing buyers for willing sellers. Recent events on the foreign exchange markets which have resulted in a substantial and ‘unintended’ devaluation simply are not allowed for in the rules of the economic game Mr Manser would devise. Oh well, back to the drawing board.

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