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[Mr. Boothby.]
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the Economist," the laissez-faire capitalist newspaper, which is in prin- ciple opposed to any kind of interference with industry if it can possibly be avoided. The " Economist," after point- ing out that the existing method of Treasury control over contracts is far too rigid and that what everyone in this House knows there is a war going on all the time between the Departments and the Treasury under the present system, continues:
"Those who have been advocating the creation of such a Ministry ever since the inception of rearmament have been told by the Government that it would be an unneces- sary interference with the normal course of industry. The Government have preferred the alternative course of co-ordinating the activities of the independent Ministries through a Minister with Cabinet rank, but without executive powers. It may fairly be said that the system associated with the name of Sir Thomas Inskip has failed. It is precisely because interference with the nor- mal course of the armaments industry is re- quired that a Ministry of Supply has now become a necessity. What was formerly an objection to the proposal has become its very
marrow.
It is no insult to the Defence Departments to say that they are not equipped for the mass production of armaments. They are staffed by officers, by civil servants and by technical experts; the one character who
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Nothing less than that will meet the case. I am glad to see my right hon. Friend the President of the Board of Trade here because this was supposed to be some- thing in the nature of an economic De- bate. There has been very little talk about economics so far; but before I come to my concluding sentences I would like to say one or two words about certain economic aspects of the situation. I think the Prime Minister is genuinely worried about the financial aspect of rearmament, and that two of the things which make him hesitate to set up a Ministry of Supply are the cost, and the interference to industry which might be great enough to diminish revenue.
All I can say in this connection is that we ought seriously to ask ourselves a question which, incidentally, we ought to ask ourselves with regard to many other aspects of the present situation, namely, How have the Germans done it? They have nothing like our resources, although it is wrong to say that they are at starvation level. On the contrary, they are fully employed at a tolerable standard of life. They have done it in three ways. They have done it by the creation of credit, by the issue of long-term loans, and by taxation. We can do it by these three methods much more easily if we choose to do so. Their current rate of State expenditure is over 35 per cent. of their total national income. Ours is only Their loan expenditure is 25 per cent. 10 per cent. of the national income. Ours is less than 3 per cent. They have no unemployment. We have 2,000,000 un- employed; and, therefore, a considerable leeway to make up of unemployed and Their resources of productive capacity. pro-
never penetrates their portals is the business organiser or the big industrialist. They are hampered at every turn by Treasury control. This mechanism cannot compete with the totalitarian domination of industry in Ger-
Sir Kingsley Wood many.
has recently announced that 20,000 to 80,000 man-hours of work are now required to produce an air- plane. This figure in itself is a conclusive condemnation of the present system. Ger- many is believed to be turning out 600 machines a month, and she is certainly not devoting 48, or even 12, million man-hours to the job. Doubtless our methods of duction turn out excellent machines; the Russians in 1916 made shells that engineering masterpieces. But they lost the war because their shells were too good and too few, and we shall lose the peace if our aircraft are too good and too few."
were
I believe that to be profoundly true. The article goes on:
"One of the most urgent tasks before the Government is drastically to reduce the num- ber of man-hours per airplane, per gun, per shell turned out. It is not a task for which the officer, the designer, the civil servant has any qualifications. It is a task for the indus- trial manager.
He must be enlisted, as he
was in the war, in a special Ministry, led by a human dynamo, and equipped with the legal powers necessary to organise the pro- duction of arms as the biggest mass produc- tion industry the world has ever known."
of productive power are fully employed. Ours are nothing like fully employed, and are infinitely superior.
We could carry out the armaments programme quite easily, and with con- siderable benefit to the economy of this country and to the working classes if we had a measure of controlled domestic inflation, for which I have frequently pleaded in this House. An eminent economist, whose qualifications are not disputed, Mr. Harrod, of Oxford, has repeatedly advocated this policy in a series of able letters in the Times," which have
been adequately answered. He advocates an increase of bank investments, and, as a consequence,
never
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a further cheapening of money, a reduc- tion of the rate of interest, followed by loan expenditure until the slack has been taken up, and until the majority of those unemployed are in full employment, and then, and only then, an increase of taxa- tion. At the same time he advocates an adjustment of the exchange rate of sterling in accordance with the price levels prevailing in this country and in foreign countries at any given moment. The technique of controlled inflation is now well enough known. The arguments against it have never been put with any great force, and I have never seen the arguments in favour of it adequately answered. An expansion of internal activity in this country would create addi- tional purchasing power, increased demand, increased imports, and increased exports. Mr. Harrod says:
The time is economically propitious for the operation of a great drive in defence works,"
and he believes that our defence expendi- ture could reasonably and beneficially be doubled during the next 12 months. I think that is profoundly true, and if my right hon. Friend has any arguments to put against it, I wish he would put them. We have the experience of 1932-37, when we had controlled inflation; and we can compare it with 1937-38 when, as a result of action taken in this country and the United States, we had a period of defla- tion. These recent experiences stare us in the eye, and go to prove that the arguments of Mr. Harrod are funda- mentally sound,
I would like now to say a word about the point which the Prime Minister made on the question of export trade. Our ex- port trade is falling off with alarming rapidity. It is no good pretending that a great deal of our prosperity is not dependent upon export trade, because it is. The prosperity and the economic life of this country were built up funda- mentally upon the export trade, and also our industrial population. We cannot go on watching with equanimity our export trade falling, and doing nothing about it. But it will go on falling unless drastic and constructive steps are taken quickly. Swift action is essential in this matter, if we are to save some of our remaining markets. The Prime Minister dismissed
this trip of Dr. Funk as being of little account. He rather scouted the idea that
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there was any sinister motive behind it. I do not think there was; but I do think that there was a definite objective to get us altogether out of the markets of South- East Europe. This must not be done. If you survey the whole field of exports you naturally take the Empire first of all. The hon. Member for Basingstoke (Mr. Donner) made an eloquent appeal for Em- pire trade. I agree with him. But in the natural order of things the Dominions are bound to become increasingly self- supporting in the years that lie imme- diately ahead. Our Colonies are first of all largely dependent for their purchasing power upon the level of world commodity prices at any given time. The markets in our Colonies are also definitely limited; and if rumour is correct they are likely to be still more limited in the near future. Take the Far East. Whatever the Prime Minister may say about future capital investment, the Chinese market has gone for the time being. And now we are being hustled out of the markets of South-East Europe.
I entirely agree with the Prime Minister that our objective need never be to try and
German check legitimate
and Japanese expansion in the markets of Europe or of the Far East; but I submit with all due respect to my right hon. Friend that there is an absolute need for this country to maintain a footing in the valuable markets of Europe and of the Far East. We have to be prepared to consider measures much more unorthodox than we have ever employed hitherto, if we are to do that, and stand up against the methods employed by Dr. Schacht with any hope of success. I outlined some of these methods to the House a few weeks ago, and they are well known to But we can offer my right hon. Friend. to these countries three things which the Germans cannot. We can offer credits and sterling and, therefore, we can offer a choice to these countries. They will give a lot not to be completely dominated economically by Germany, and to have free access to raw materials and manu- factured goods in other parts of the world.
A free currency alone can give that to them. But if we are to exploit these advantages against Germany and Japan the Government must be prepared, in certain circumstances, to shoulder some of the risks which no individual can be expected to do as long as the world is in its present state. This is where the
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Herr
My final quotation is from Terbhoven, the local Gauleiter, at the Essen Conference, who, again reported in
Times," said:
[Mr. Boothby.] Germans are scoring, because their Gov- ernment assume the whole risk on behalf
the Our Government have of their traders. got to assume some risks if we are to hold our own, still more expand our trade in some of these foreign markets.
The
May I say this in conclusion? Prime Minister believes that he can come to reasonable terms with the totalitarian States. I think he sincerely believes this, and all of us would wish him success in his efforts to do so. But reasonable terms are not necessarily Hitler's terms. Munich was something to be profoundly thankful for, and I agree with the Prime Minister that it is nothing for us to be ashamed of. I do think, however, that it is nothing to cheer; and if something far worse than Munich is to be avoided, we must negotiate, in the future, not from weakness but from strength. Otherwise there is absolutely no chance of our getting reasonable or fair terms from the totalitarian States. Here is the crux of the problem. If we cannot gain the necessary strength in time, there is no point at which we shall ever be able to make a stand, and we shall sink slowly but steadily to the status of a third-rate Power. The Germans are well aware of this. I would ask hon. Friends of mine who are always accusing us of not taking Hitler at his word, and of saying that he cannot be depended on, to consider one or two speeches made by responsible German statesmen since the Munich agree- ment. Dr. Goebbels, speaking at Ham- burg, said:
Hitler was not modest or timid. No, he was very astute, cheeky and sly. We knew these Parliamentarian tricks, their dilatory tactics. We had to say, By such a day we get what is ours, or we draw the sword." That worked. So now the German man-in- the-street is asking quite casually,
'Well, then, when will the Colonies be served up? Let me quote a speech of Dr. Ley at Essen, reported to-day in the Times," which is not generally considered to be an anti-Nazi newspaper:
"To obtain a sphere of existence equal to that of other nations, German effort and pro- duction must be increased 100 per cent. We must not only maintain our lead in aerial armament and other fields, but increase it many times.
Other nations must learn that nothing can be done against this people. If the Kaiser in 1910, 1911 and 1912 had done what the Fuhrer has done on the Western front, we would probably never have had a worl dwar, or at least should have won it."
"We are clear, my comrades, that if Mr. Chamberlain found himself ready to sign the Munich Agreement it was not because he felt within himself an irrepressible urge to help the Sudeten Germans to attain their national living rights If he signed it was because of two quite simple considerations: first, because he had to acknowledge that the Fuhrer, and the whole 80,000,000 people of the nation, were determined, if it must be, to use arms to establish the natural rights of our Sudeten German brothers; secondly, because this will was expressed not merely in words and negotiations, but behind it and this affected England especially-there stood an air force which, under the determined leadership of Field Marshal Goering, was ready to prove to the English nation within a few days that so- called splendid isolation had for all time ceased to exist."
A
These speeches have all been made since the Munich Agreement; and I only say, in face of them, how can we consider it possible not to rearm with all the strength in our power? It is the only language to use to Germany; it is the only language they understand, and the only language for which they will ever respect us. democratic State is impotent unless it is led with energy and conviction. Operating on a normal peace-time basis, how can we hope to compete with a totalitarian State like Germany, efficient to the nth degree and operating on a war-time basis? I was amazed when the Leader of the Opposi- tion said he did not advocate any form of compulsion in this country. We must have many forms of compulsion, not only with regard to labour, capital and profits, but over the whole field. I am not talk- ing about military conscription.
I am talking about a Ministry of Supply, which to be effective must have compulsory powers. If we do not ultimately make the necessary effort and sacrifices, I think it will be the end of the British Empire. The other day I was reading an article in the
Manchester Guardian by my old tutor at Oxford, Professor Namier, of Manchester University, in which he used these words about the democracies:
"Sated and sophisticated, civilised, sensi- tive and war-weary, the democracies have a conscience and no faith-the most dangerous condition for individuals and nations. Hitler,
on
over
the other hand, is single-minded, and ready to take risks which makes him supreme those who do not know their own minds and cannot control their fears Berchtesgaden is now the emotional centre of an incalculable German policy."
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