Читать книгу Economics and the Public Welfare - Benjamin M. Anderson - Страница 10
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Those who have an adult’s recollection and an adult’s understanding of the world which preceded World War I look back upon it with a great nostalgia. There was a sense of security then which has never since existed. Progress was generally taken for granted. It was even necessary at times for scholars in addressing scholarly audiences—as, for example, Leonard T. Hobhouse in an address at Columbia University in 1910—to make the distinction between progress and evolution and to point out that evolution might not always be progressive. The theoretical distinction was recognized, but the experience of the preceding century, so far as social and economic evolution was concerned, had made the distinction seem unreal. We had had a prolonged period in which decade after decade had seen increasing political freedom, the progressive spread of democratic institutions, the steady lifting of the standard of life for the masses of men. We had even come to the point where some were asserting, incorrectly, that the problem of production had been solved, that enough was being produced, and that with better distribution everybody could be made comfortable.
In our economic life we had occasional sharp setbacks. Crises and depressions alternated with relatively prolonged periods of active prosperity. We thought of these depressions as severe, but they did not approach in length or depth the depression of 1929-39, or in depth the much less severe depression of 1921. Even in the midst of depression, moreover, it was axiomatic that revival would come again, the question being simply when the bottom would be reached and when the turn would come.
It was an era of good faith. Men believed in promises. Men believed in the promises of governments. Treaties were serious matters.
In financial matters the good faith of governments and central banks was taken for granted. Governments and central banks were not always able to keep their promises, but when this happened they were ashamed, and they took measures to make the promises good as far as they could. In the greenback period in the United States, the federal government was unable
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from January 1, 1862, to January 1, 1879, to make good its promise to pay gold on demand for its paper money. But it did make good its promises to pay interest and principal on the public debt in gold, and it did, in 1879, resume payment of gold in redemption of its paper money. No country took pride in debasing its currency as a clever financial expedient.
The world was incredibly shocked in 1914 when Bethmann-Hollweg, chancellor of Germany, characterized the treaty guaranteeing the neutrality of Belgium as a “scrap of paper.” In retrospect, one may say that this was one of the most terrible things that has ever been said. The world is full of scraps of paper today. The reference here is not to the brazen, cynical, contemptuous attitude of Hitler toward treaties and toward promises. Hitler made many promises with no intention of keeping them when he made them. But the world united against Hitler. His level of bad faith obviously could not be tolerated. The reference is, rather, to the attitude of some of the most decent governments of the world toward many promises and treaties. Japan and Mussolini could never have started on their careers of aggression if the great democratic nations had kept faith with one another. The reference is also to the broken promise of the British government and the Bank of England in 1931 to pay gold on demand for Bank of England notes. If it be objected that England was forced to this, a view which is erroneous,1 surely no such defense can be made for the government of the United States, when, in 1933, with $3 billion of gold in Federal Reserve banks, it suspended gold payment and when, in 1934, with $4 billion of gold in the Federal Reserve banks, it reduced the dollar to 59.06 percent of the old gold parity and repudiated the gold clause in its own bonds. In 1913 men trusted the promises of governments and governments trusted one another to a degree that is difficult to understand today.
The greatest and most important task of the next few decades must be to rebuild the shattered fabric of national and international good faith. Men and nations must learn to trust one another again. Political good faith must be restored. Treaties must again become sacred.
A world in which all men are upright and in which all nations are voluntarily decent in their international relations is, of course, too much to expect, but a world in which the ill intentioned fear the condemnation of the well intentioned we can rebuild. The same basic human nature which created the fabric of national and international good faith on which we relied in the century preceding 1914 exists today—just as we have discovered that the same human nature which animated the Assyrian conquerors and the hordes of Genghis Khan exists today. The raw stuff of human nature is immensely plastic and can be turned in many different directions, depending on the cultural influences which play upon it. There is no
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certainty that we can re-create the fabric of good faith which we have destroyed, but there is no higher duty than to make the effort.
The economic life of the world in 1913 went on in an atmosphere of good faith. Men with liquid capital used the capital themselves confidently in business enterprises or loaned their capital at market rates of interest to others who would use it in productive operations. There were no billions of dollars of “hot money” such as characterized the decade of the 1930s, moving nervously about from one financial center to another through fear of confiscation or through fear of further currency debasement—moving from countries which their owners distrusted more to countries which they distrusted less, but finding nowhere a place which they could really trust.
Industry, commerce, and finance depend on credit. Credit was in general soundly based on movable goods which had dependable markets, on corporate securities, readily salable in dependable stock markets, and on governmental securities, usually moderate in volume, buttressed by balanced budgets.
Not all the great countries had safely balanced budgets. France, though enormously strong financially, in 1914 had had chronically unbalanced budgets for many years. The balance in Russia and in Italy was precarious.
But always the statesmen of these countries winced under criticism, and none of them boasted of their achievements in unbalancing the budgets or termed the deficit “investments.”
There were protective tariffs in the United States, France, Germany, and many other weaker countries. England held to a free trade policy, as did Holland, the Scandinavian countries, and Switzerland. But the tariffs of those days were moderate in comparison with postwar tariffs. They were subject to infrequent change, and trade lines were sufficiently open so that countries under pressure to pay debts could do so by shipping out an increased volume of commodities.
The head of the Austro-Hungarian National Bank, Popovich, later the head of the Hungarian National Bank, said in 1929 that in a prewar crisis Austria-Hungary had paid her adverse foreign balance of indebtedness by shipping out an increase of timber down the Danube, through the Black Sea, into the Mediterranean, and up the Atlantic Coast to the Netherlands, at prices which made it effectively competitive with timber from the Scandinavian countries. All that it was necessary for him to do, as head of the Austro-Hungarian Bank, was to hold his discount rate high, compel a moderate liquidation of credit, and rely upon the merchants to find markets for Austro-Hungarian goods, which, sold abroad, would produce foreign cash and turn an adverse balance of payments into a favorable balance.
London was the financial center, but there were independent gold standard centers in New York, Berlin, Vienna, Paris, Amsterdam, Switzerland, Japan, and the Scandinavian countries. There were many other countries on the gold standard, with some tendency for the weaker countries to
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substitute holdings of sterling or other foreign bills for part of their gold, primarily as a means of getting increased earnings. For their purpose the sterling bill was quite as good as gold. They trusted it. They could turn it into gold. The gold exchange standard was the primary standard of India. But, in general, the great countries held their own gold. They relied upon themselves to meet their international obligations in gold. At times of great crisis a country under very heavy pressure would seek international cooperation and international assistance, and would get it—at a steep rate of interest.
In 1907, for example, we eased off our own money panic by importing approximately $100 million of gold from London. At times London leaned on Paris. The Bank of France had a much larger gold reserve than the Bank of England, and Paris was always ready to accommodate London—at a price—in an emergency. But these incidents were infrequent. In general each country went its own way and made its own financial policies and money market policies, subject always to the limitation that if it over-extended itself the other great money markets would drain away its gold and force it to reverse its policies. There was no such thing in prewar days as the kind of international cooperation which we saw in the 1920s, under which a dangerous boom was prolonged and turned into an almost uncontrollable inflation through the cooperation of the Bank of England and the Federal Reserve System of the United States.
In the United States, with our inelastic currency system, we had several unnecessary money panics. The panics of 1873 and 1893 were complicated by many factors, but the panic of 1907 was almost purely a money panic. Our Federal Reserve legislation of 1913 was designed to prevent phenomena of this kind and, wisely handled, could have been wholly beneficent. It is noteworthy, however, that the money panic of 1907 had nothing like the grave consequences of the collapse of 1929. The money stringency of 1907 pulled us up before the boom had gone too far. There was no such qualitative deterioration of credit preceding the panic of 1907 as there was preceding the panic of 1929. The very inelasticity of our prewar system made it safer than the extreme ductility of mismanaged credit under the Federal Reserve System in the period since early 1924.
The whole world was, moreover, far safer financially when each of the main countries stood on its own feet and carried its own gold. In the 1920s gold in New York was made the basis of deposits in American banks which served as the gold exchange reserve of great European banks, and over-expansion in New York did not lead to the prompt withdrawal of gold by foreign monetary centers.
