Evening star., 1949-07-16
British Theories Seen
Needing 0verhau|ing
To Iron Out Crisis
Welfare of the Masses
Must Demonstrate Self
By Facts, Writer Holds
By Dorothy Thompson

By Dorothy Thompson
In the discussions regarding
means of closing the sterling
areas gap and the reasons for the
British crisis, both sides Gas rep
resented by the American Secre-
tary of the Treasury and the Brit
ish Chancellor of the Exchequer)
have reason to support them.
The fall of American raw ma
terial purchases from Malaga,
West Africa and Australia from
$10O 100000 in the first quarter OF
this year to a mere SIS 100000 in
the second, drained Britain's dol
lar reserves and is attributable
partly to seasonal fluctuations and
partly to the sensitivity of Amer
ican business to crises of conf
dence or financial rumors such as
the possible devaluation OF ster-
ling. The United States could aid
stability by systematic stockpiling
to balance private buying and
prevent drastic fluctuations.
But the British Labor govern
ment has not faced, the fact that
its policies have broken down at
the first touch of a return to
buyers market. Sir Stafford
Cripps exhorts British producers
to make their industries more ef-
ficient and reduce costs. And II
Britain is to keep any consider
able export market, British prices
must reach a more favorable COM
petitive level.
Incentive Strangled.
But exhortation never yet in
f1uenced economic realities. and
the Labor government does not
squarely inquire whether high
British costs are not the result OF
its own theories and practices.
Writing from Britain in April
I raised the question of whether
the enormous restrictions on
British enterprise. the taxation
level and the constant threat OF
further naturalization were not
strangling the incentive to eff
Cient production. The present
practical confiscation of profits
stops the building of new capital
interest in profits is killed ano
wages, interest and dividends are
knocked away. Actually, moi
production, but production costs
are rewarded. The businessman
is interested to raise. not lower
costs in order to make the net
taxable revenue small, not large
Actually, Russian state capital
ism is truer to the experience Of
capitalist economies than Brit
ish socialism. In Russia. all new
heavy Investments are entirely ta1
free. Effort and reconstruction
are rewarded to the point of cyni'
cism: progressive taxation Il
halted very low; incomes of mil
lions are lightly taxed.
In Great Britain, bureaucratic
administration costs are ex.
cessively high. The trouble with
all economies planned by maze
of civil servants is that nobody
ever has discovered how to plan
the planners, who have enormous
power without commensurate re-
sponsibility. They do not pay out
Of their own pockets for their
mistakes. The British people as
4 whole pay.
Invention Of DR.. Schacht.
That the British economy breaks
down at the first touch of return
to a buyers market, was noted by
the Manchester Guardian. There
is basic reason for this. Socialist
planning always shows its worst
failures, not in production figures
but in the price level. The enter
priser, exchanging profits for Sc
curity, in the form Of fixed prices
and subsidies. stops caring about
costs-as American producers
stopped caring during the war. A
rigid economy follows, in regarc
to all the elements of production
which shows inelasticity in re-
spending to consumers shifts.
The Labor government can fore,
the British consumer to purchas.
at British prices by barring from
the market other goods, or assess.
ing sales taxes to bring them ur
to the British level. But it canno
force non-British buyers to pur.
chase anything. Actually, social.
ism Of the British variety is com.
PEELED to be national socialism, in.
compatible with a competitive in
ternational market. 1t is, there.
fore, logical that the British La
Dor government, in internationa
trade. is indulging in a form OF
the trading system invented fol-
Nazi Germany by DR.. Hjalmar
Schacht.
No one can accuse Socialists of
the wicked profit motive" They
genuinely desire "the welfare of
the masses" but this Righteousness
regarding their own motives in
duces a peculiarly irritating snug
ness. binding them to the fact
that noble" bureaucratic costs
can greatly exceed wicked" prof
its. and that the welfare of the
masses has to demonstrate itself
by facts. not theories.
The British government needs
to overhaul its theories, before it
will successfully overhaul the
economy.
released by the Bell Syndicate, Inc.)
Two Board Groups Approve