CRISIS AHEAD

REMEMBER 7°? It was an unlucky number for the Tories. It was the level which Bank Rate reached in the autumn of 1957 to cope with a rapidly worsening position of sterling. It was one of the Tories’ most unpopular acts, even with their own supporters—though not with the City gents whose activities the subsequent tribunal did something to bring to a wider audience.

Anyhow, interest rates later came down, when the British economy was menaced in the autumn of last year by a slow decline into depression. Easier credit conditions brought about a big rise in hire purchase debt, bank advances and business borrowing, thus creating an additional ‘artificial’ market for goods of all kinds.

However, capitalism is international, none more than the British variety, and the revival—which was a political necessity with a General Election in prospect—would have been impossible without a favourable international climate. The end of the US recession and low raw material prices played a part. The balance of payments figures improved and sterling became ‘strong’: that is foreigners and our domestic speculators were prepared to hold more of it and for longer (yes, we know you would too, but that is not quite the same thing!—these people have the dough anyway, it’s just the kind which is important for them). There was even some weakening of the dollar for the first time since the war.

International factors threaten International factors are now swinging in a direction which threatens to raise uncomfortable problems for the new government. The general movement is towards higher interest rates: the lead is coming from New York. : _ In fact the question may be asked: can the US financial system any longer support a prolonged boom? The answer seems to be no. The mounting total of Federal, as well as private, debt—which provided the indispensable market for the industrial production of post-war prosperity is causing increasing concern.

If the Republicans are to make good their economy claims a brake has to be imposed. ‘But this can only be, directly or indirectly, through raising interest rates. Indeed the movement in that direction has been going on this summer. But such a rise must cut short the new prosperity—and not only in the US. For, before long, these moneyed boys, good patriots all, will be out of sterling and into dollars as fast as you can send a 278 ©

cable.

Result—funds will leave London, the current balance of payments will be affected, the reserves will fall and Bank Rate will have to go up to stop the rot.

Rising interest rates will bring back the credit squeeze and with it recession and stagnation under less propitious international conditions than those of a year ago.

Perhaps this is what Macmillan had in mind when he warned that expansion could not go on indefinitely. Incorrigible ‘expansionists’ like Andrew Shonfield and Hugh Gaitskell— who can think away the problems of international capitalism at will—will have to do some new thinking. And, if the latter happens to be Prime Minister it will be interesting to see how he copes with the Governors of the Bank of England and the other denizens of the City’s square mile on both sides of that nebulous line which separates ‘honesty’ from its opposite.

THE KRUSHCHEYV VISIT the East European groups and the McCarthyites who were heckling behind them to shut up. Finally, in San Francisco, a crowd of 10,000 cheered Khrushchev to make up for the -needling he had received at official hands in Los Angeles.

The great majority of the American people are not running ahead of Eisenhower yet in their political actions. But they are not lagging behind him either in the expression of antiwar sentiments. There is moreover an all-important difference between Eisenhower and the American people. Eisenhower is manoeuvring in the cold war. American imperialism needs a relaxation of cold-war tensions for a while in order to. mask its long-range preparations for war better. But the American people aren’t manoeuvring. While deep-seated antipathy for the Soviet Union and ‘communism’ remains (it was bred by Stalin’s crimes and exploited by big business for imperialist, propaganda), their longing for peace is genuine and their hopes of attaining it are now being aroused by the exchange of visits.