Evening star., 1949-09-20
Britain Takes the PLUNGE

Drltoln IokeS the Plunge
The British government, after much
hesitation and soul searching, has bowed
to the inevitable and devalued the pound.
Henceforth, instead of $4O3, the pound
will be worth $3.50 at the official rate of
exchange.
1t would be hard to overemphasize the
fact that this is no cure-all for Britain,s
economic ills. There is nothing magical
about currency devaluation. But it is safe
to say that, without devaluation, Britain's
problem was hopeless. With it. there
comes fresh opportunity to earn the
dollars which Britain must have to achieve
-sufficiency.
As recently as last July, Sir Stafford
Cripps, Chancellor of the Exchequer, said
the pound would not be devalued. Why he
said that in the face of the mounting
evidence that there was no escape from
devaluation, is any ones guess. It may
have been a political statement, or it may
be that the Chancellor even then hoped
for miracle. At any rate, he has now
faced up to the logic of the facts, and has
taken the plunge.
For a while after the war, when goods
were scarce everywhere, Britain could sell
her products readily. The fact that the
pound was artificially pegged far in excess
of its real value in relation to the dollar
did not greatly matter. But as supply
caught up with demand the picture
changed. In competitive market, the
British producers found it increasingly
difficult to sell their overpriced goods. A
second factor necessitating devaluation
was the so-called fight from the pound
Despite tight restrictions, people who
anticipated devaluation were finding ways
to convert their pounds into gold or dol
lars before the price of the pound fell,
and this, Of course, imposed an added
drain on Britain's dollar reserves. Still
another factor, important though hard
to measure, was kind of buyers strike
It was only natural that an American
importer, for instance, expecting devalua-
ton, would hesitate to buy British goods
at a rate of $403 per pound when his
competitor, by waiting while, might buy
similar goods at the rate of $3.50 per
pound. .s.., 80
These were the principal reasons why
forth, the drain on the dollar reserves
should be eased, and Britain can start
anew, in stronger competitive position,
to earn more dollars.
But this is only one side of the story.
Devaluation cuts both ways, and Britain
now must reckon with the fact that she.
viii have to pay about 80 per cent more
in pounds for everything she buys from
the dollar areas. In other words, unless
the advantage Of devaluation Is to be
frittered away, the British people must
will appear in the form Of higher prices
for bread and perhaps other essentials.
Sir Stafford, in announcing his govern
ment's decision, dealt with this aspect of
the matter candidly and at some length.
The overriding necessity for Britain now
Is to hold down costs of production, for if
costs go up so will prices, and the oppor-
tunity offered by devaluation will have
been lost.
In the old days (meaning the Tory days.,
Sir Stafford said, prices would have been
held down by letting unemployment force
workers to accept lower wages and longer
hours. That remedy, he declared, is not
acceptable to the Labor government, which
prefers the alternative of devaluation.
This has partisan political ring, but
one can overlook it. For the Labor gov
ernment may suffer politically from the
fact Of devaluation, and it may suffer still
more as it attempts to harvest the pros
pective benefits Of devaluation. Sir Stafford
can hardly be blamed if he tries to sweeten
the bitter pill
Britain now moves into period which
will bring decisive test of self-discipline
in free society," Government controls will
be in force, but there is limit to what
controls can do If the British workers,
under the spur Of higher food prices, force
the government to grant higher wages,
devaluation will become futility. If the
government stands firm and extensive
strikes result, the consequences will be the
same. If British producers, who have been
prospering in the sterling market, will not
make the effort, without new incentives,
to sell in the dollar areas, that, too, will
raise serious obstacle to recovery
In a word, there is not a great deal
more that the British government can do.
Britain's future is in the hands of the
British people. Their willingness to work,
and to sacrifice, will tell the story. And
as we on this side of the Atlantic watch
the experiment run its course, we ought
to understand that the implications Of the
test are not confined to Britain alone. For
the outlook for life as we have known 1t
will not be bright If it is shown that free
men cannot r'will not measure up to the
responsibilities which freedom imposes.
Frank Morgan
Starting his career as a boy soprano in