ABSTRACT
I t is not clear how nearly absolute a priority has in fact been accorded to armaments over civilian requirements Mr George Strauss, in a speech explaining his own attitude after the resignations of Mr Bevan and Mr Harold Wilson, asserted that the arms programme remained conditional on the obtaining of enough materials to meet civilian claims, whereas speeches by Mr Herbert Morrison and others have suggested that the priority allowed to re-armament is to be, if not absolute, at any rate very high Whatever the precise intention may be in this matter, the fact remains that the actual and prospective forcing up of prices in Great Britain is a consequence mainly, not of British, but of world re-armament
The Effects of American Stock-piling As A GREAT importing country, heavily dependent on imported materials
as well as on imported food, Great Britain is already suffering severely from the shortages and from the tremendous rise in world prices that have resulted mainly from American re-armament and stock-piling of essential materials The prices of our imports have risen much faster than the prices of the goods we export, and this tendency is likely to continue unless measures are taken on a world scale not only to allocate supplies of scarce materials, but also to control their prices and to stimulate additional production
Such measures cannot be taken without the consent and full participation of the United States, which would need, in order to make them effective, not only to slow down its own buying from abroad but also to release for foreign use American materials for which there is an unsatisfied domestic demand It will take a great deal to persuade the Americans to act in this way, which will be represented as undermining their own re-armament programme, already proceeding at a furious pace , and it would be most unwise for us to reckon on enough being done to prevent world prices from continuing to rise sharply, and shortages from getting very much worse, as long as world re-armament goes on *
material prices, were to rise sharply enough to narrow the gap, or, in more technical language, to bring about some improvement in the "terms of trade", this would not solve oar problem, because our re-armament measures will mean holding back from export, and using for our own military purposes, precisely those goods for which we are in the best 'position to raise our prices in the world market Even if the prices of such goods were to go up, we should have many fewer of them to sell
In practice, the prices of our exports are most unlikely to rise as fast as the prices of our imports, because we shall be trying to fill the gap caused by the withdrawal of the goods other countries want most by selling more of
things they want less urgently, e g, textiles. Moreover, in the world market for textiles and other exports which we shall be trying to push instead of goods now needed at home we are faced with rapidly growing competition from Japan and from Germany-countries whose absence from the world market helped us greatly in building up our export trade after 1945 Japan is already selling abroad more cotton goods than we are, and is in a position to supply even more, and at prices with which we shall find it hard to compete
The Adverse Balance W E MUST THEN expect the "terms of trade"—that is, import prices as
compared with export prices-to continue to move against us, unless the Americans show much more readiness than seems at all probable both to join with us and other countries in regulating supplies and prices, and to slow down their own re-armament in order to ease the burdens of other countries Already, on the figures for the first quarter of 1951, our adverse balance of trade had risen again to nearly £235 millions as against an average of £87 millions in 1950, and much less than that in the latter part of 1950
But for re-armament we should now be more than paying our way in terms of visible trade † As things are, we are already dissipating the balances we had begun to accumulate last year out of the earnings of our "invisible exports"—shipping and financial services and returns on overseas investments A small part of this deterioration in our overseas position may be due to our own buying of stocks of goods of which prices are rising and supply difficulties growing greater. But this can hardly account for much, because there have not been large supplies available for us to buy, and we are already faced with a sharp fall in our supplies of a number of vital materials-above all, of sulphur.
