Evening star., 1949-09-29
Justice-but Rough

If any one is casting about for something
harder to mix than oil and water, it might
pay him to keep close watch on the
course of events in the British Isles. For
the British government is busily endeavor-
ing to mix politics and economies in a free
society, and this is an undertaking which
reduces the oil-and-water business to the
level of child's play.
Sir Stafford Cripps has announced that
the tax on distributed profits, or dividends
is to be Increased Immediately by 20 per
cent. He said that this is "a matter only
of rough justice, but believe 1t to be
justice"
A little translation is necessary to find
out what this rough justice" really
amounts to. After the devaluation OF the
pound there were ominous rumblings in
the ranks OF the governments Labor sup
porters., It was clear, though Sir Stafford
sought to minimize 1t, that devaluation of
the pound meant higher prices for the
things Britain has to buy in the dollar
area, and that this in turn would be re-
flected in some rise in the cost of living
for the British wage Garner. So there was
grumbling to the effect that the little man,
not the big fellow, would suffer from
devaluation.
Presumably, Sir Stafford felt that it was
necessary, for political reasons, to mollify
these complainants. So he does it by
taking another swipe at the profit system.
And the Labor government now can say
to its supporters: You may suffer a little
from higher prices, because wages must
be held down, but look what we have done
to profits!
Well, what has been done? From the
British point of view the only valid reason
for devaluation was the imperative need
to sell more British goods in the dollar
markets. Enough could not be sold be-
cause the pound, at $403, was overvalued.
Therefore, 1t was reasoned reduce the
pound to $3.50, and then British producers
can cut their prices and sell their goods
in sufficient volume to bring in the dollars
that Britain must have.
That was the theoretical solution, and
it looked good. But there is a catch to it.
Most British producers have been doing
a thriving business in the sterling area.
Despite oppressive taxes, they have been
prospering, and, without some special in
centive, what is going to induce them to
take the trouble to find new and strange
markets in the dollar area?
Apparently the only incentive they are
going to have, aside from exhortative ap-
peals to patriotism, is 20 per cent increase
in taxes. And this increase, despite Sir
Staford's asserted desire to curb profits
arising solely from devaluation, applies to
all distributed profits. In other words, the
business which realizes no4new profit must
pay the higher tax, just as must the
business which benefits from the slash
in the pound.
Perhaps, as sop to the '1ittle man."
there is Justification for this as a partisan
political move. But 1t is utterly senseless
as an economic measure, for it will tend
to discourage the very thing that Britain
needs most-namely, an increase in dollar
exports. One comes away from Sir Staf-
ford's announcement with the feeling that
the Labor government has not yet decided
whether domestic politics or economic
realities should have first place on its
agenda, and, further, that there is scant
hope OF British recovery until the correct
decision on this point is made and firmly
adhered to.