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TODAY, the people of our island country are confused and bewildered. Older people are distressed at what they see around them. The old and familiar standards appear to have been abandoned; the statements of men who are presumed to lead the nation are conflicting and often contradictory, and there are no firm bases on which to decide conduct and national policy. This represents a serious and disastrous loss to a people whose character has been nurtured in the natural disciplines of freedom and a free economy.

And if the older people are confused, how can we blame the young for the many follies of today? Many of them know little of the past and of the great contribution which the people of these islands have made over the centuries to the well-being of the world as a whole. They have been, and are being, brought up in a society that has little respect for great qualities and sound traditions, and which in recent times has been much engaged in dissipating the national capital accumulated over at least two centuries.

The fact that we have once again refused to face the Issues that confront the nation by devaluing our currency provides abundant evidence that we are approaching a crisis of great magnitude. When a currency is debased it represents moral and economic defeat. It means that while many of our people still believe they are getting more wages, they are actually getting less, because while the volume of paper money is increased, the quality of that paper is reduced. Devaluation of the currency was not an inevitable process. It could have been avoided by honest government.

To find at least one of the most important elements leading to our present situation we have to go back to 1931 when the late Montagu Norman was defeated by a Press campaign in his effort to maintain a sound currency and to restore the free trade policy in its fulness. From that day onwards the protectionist policy, which had recommenced with the McKenna duties in 1915, gathered strength, culminating in the notorious sweeping protective duties of the early thirties, and it was that protectionist philosophy that has provided the basis for the socialist elements we now see around us. It has to be recognised that nationalisation and the other elements in socialist policy could not have come into being if protectionist policies had not at first provided the basis for the socialist argument, which was that if there are to be such things as monopoly profits arising from protection, those profits should go to the state rather than to what was wrongly described as private enterprise.

So effective has propaganda against sound money and free trade been in the past forty years or so that there appear today to be very few supporters of Montagu Norman and his policies. He has been condemned without a hearing. Nevertheless, there have been, and still are, men who recognise the tremendous significance of the change which took place in 1931.

An outstanding supporter of the free trade and sound money policy was the late Sir James Grigg - private secretary to Churchill, Baldwin, Chamberlain and Snowden - who became during the second world war, Secretary of State for War under Churchill. He wrote a book entitled Prejudice and Judgment in which he declared that the rise of Hitler was due largely to the French march into the Ruhr in 1923 and to the abandonment of the gold standard and of free trade by Great Britain. These decisions caused so much distress in Germany that the people became only too ready to accept the promises of relief made by the then potential dictator.

Also firmly accepting the need for sound money and freedom of the economy was Professor R* S. Sayers, now the historian at the Bank of England, who wrote in 1960 that the return to the gold standard in 1925 has been so widely condemned that it has been generally accepted not only as a basis for argument but for policy. Professor Sayers wrote:

"We have a lot of bogus monetary history, largely composed of the old skins thrown off by the snake of controversy. No matter how historical they be, most people engaged in the controversies of economic policy use arguments avowedly based on an interpretation of recent events, and this interpretation being bandied in current controversy tends to harden into the accepted view of history. Yet it is most unlikely to be a sound view; it will have been based on the evidence of the moment alone, and its shape may well be influenced, if not dictated, by the most striking phrases of the controversialists. One of the qualifications of the effective controversialist is the ability to coin the striking phrase: these phrases and the evidence of the moment form the basis of the view commonly taken of an episode as it slips back into the past.

"Though this process may be repugnant to the scholar, it would not greatly matter were it not that this accepted view itself becomes one of the arguments bandied about in the next phase of monetary controversy. The policies of tomorrow are influenced by today's slipshod history of yesterday; this is the evil we seek to correct by turning our searchlights on to the recent past.

"The commonly accepted view is that the return to gold was a grave mistake by Churchill after he had been misled by his official advisers and that the interests of industry were sacrificed for the benefit of the City of London and that it was a primary cause of the depression of the thirties."

Professor Sayers expressed his belief that examination of the evidence makes it possible to interpret events quite differently. The story that Churchill was misled by his advisers is completely false. It was recognised that Britain's unemployment problem was due to depression of world markets. This was partly due to currency disorganisation. Therefore it was argued that the proper thing to do was to get the world's currency instability removed, the former foreign exchange stability restored, and export markets could be expected to revive and Britain's unemployment would dwindle.

Far from being neglectful of the interests of British industry and the unemployed, the decision to return to gold was one calculated to eradicate one of the principal causes of trade depression and unemployment. Nor in the circumstances that then prevailed did Professor Sayers see any advantage in having the pound stabilised at 4.40 dollars to the pound, as was suggested, instead of the old parity of 4.68. Mr. Reginald McKenna, who became Chairman of the Midland Bank and was formerly Chancellor of the Exchequer, and who had proclaimed against a return to gold in public, when asked his advice by Churchill, wobbled to the end, but finally declared: "There is no escape: you have got to go back."

The policy of free trade is, of course, complementary to a sound money policy, for it is out of the accumulation of wealth resulting from trade without discrimination that the value and stability of the currency was buttressed and strengthened. Any protectionist policy could not do other than weaken the currency and lead on to other evils.

The abandonment of the gold standard in 1931 came about as a result of the decision of a so-called National Government which had been formed for the specific purpose of maintaining the value of the currency. It was done at a time when Montagu Norman was out of the country on holiday as a result of illness. He had given assurances to foreign bankers that the pound would be maintained in value and he believed that as a result of his sound money policies the end of the depression was in sight. On his return to Liverpool on September 23 - three days after the decision to abandon the gold standard had been made by the government - he recognised the great losses that were being sustained in consequence by the Bank of the Netherlands and other banks which had entrusted money to the Bank of England. For him it was a major disaster, and it was a major disaster for his country.

At the time of the departure from gold there was at the Bank of England Dr. Oliver Sprague, an eminent American banker who represented the Federal Reserve Board. I had met Dr. Sprague in an aeroplane going to Berlin, and subsequently we had met frequently to discuss international affairs. For some days before September 20 there had been a run on the Bank of England by foreign depositors demanding gold. Two days before the departure from gold I had asked one of my colleagues on the Sunday Express* to ask Dr. Sprague for his opinion on this matter, and on the following morning I had met Dr. Sprague and confirmed with him that his interview could be published in full. This is what was printed:

"Dr. Sprague tells me that he has no fear for the future of the pound. The present difficulty can be overcome, provided there is no large exodus of British capital. Foreign balances in London are declining. We can take care of what is left. We, of course, cannot bail out the ocean. We have by no means reached the last of our resources to maintain the value of the pound. Far from having used the last shot in the locker, very much useful ammunition had not yet even reached the locker. I refuse to believe that the character of the British people, who were responsible for the triumphant emergence from the difficulties of thirteen years ago, will not achieve an .equally great victory now. This is the financial centre of the world and it is unthinkable and impossible that the value of sterling should fall. Although I suppose it is part of my duties here at the Bank of England to estimate the effects of such a catastrophe on world trade, I find the task beyond me. Anyway," he concluded, "It won't happen next week or the week after."

It did happen, in fact, on the very Sunday that the statement made by Dr. Sprague was published. And on that Sunday afternoon Lord Beaverbrook himself, disturbed by the event which he had largely caused to come about, instructed his editor to proclaim on the front page of his newspaper the decision to abandon gold as being "good news." It was, as impartial historians will in due time record, a major disaster, and one of the most significant decisions in the modern history of the world. They may also conclude that the beginning of this major disaster was the demand by newspaper proprietors for artificially cheap money and protection for agriculture and industry. Some of those concerned made these demands out of ignorance of the true interest of an island nation dependent on world trade, but others were concerned only with securing circulation and advertising revenue in the battle of the newspapers.

As a result of these years of one-sided propaganda it has become commonplace to identify free trade and free enterprise with antisocial egoism. Advocates of economic freedom are commonly stigmatised as defenders of selfishness, or as people who imagine that nothing matters in life except the accumulation of wealth. This black picture of economic liberalism is not only put about by professed socialists; it is echoed by religious leaders, and has come to be accepted by men of all parties and of none. "Each man for himself and the devil catch the hindmost" is presumed to be the authentic expression of the free trade creed; as a result, people are reluctant to envisage a free economy even as a possibility, and are willing to accept almost any measure of state control and direction rather than return to what they regard as the law of the jungle. To defend economic freedom, it is said, is to defend the right of the strong to exploit the weak, and since no one wishes to admit that such is his object, freedom finds few defenders at a time when a free economy and all that goes with it is needed more than ever before.

The identification of free trade and free enterprise with the exaltation of selfishness and greed is not only false, but is the reverse of the truth. The cause of economic freedom is the cause of individual liberty and of personal responsibility. The free trader is the man who is willing to treat human beings as responsible adults able to manage their own affairs, and who seeks no special favours for himself or his friends. For he recognises that special favours can be given only at the expense of others. The cause of freedom is essentially a moral issue, and it is only when free trade is seen in this context that it will again be able to command the dedicated support of any substantial body of people.

It has to be recognised that the essential freedom of religion, of opinion and of action can have no effective safeguard where a man is not free to employ his own money and property as he sees fit and to strive by this means to attain a proper independence. In a country where the individual citizen is dependent on officials for permission to earn a livelihood in his own way, he dare not freely express his opinion, and a state monopoly of economic power leads directly to a monopoly of education and the Press, and thus to the state's control over all the organs of opinion. Our country has already gone a long way on the road to a kind of automatic censorship.

In the early days of this century, when Sir Arthur Pearson, the protectionist, bought up the free trade newspaper The Standard, Churchill said: "What shall we say of those who use vast wealth to poison the fountains of public information?" He knew that as a result of that transaction the case for free trade would no longer be proclaimed. Since those days Lord Beaverbrook purchased the Daily Express from the Pearson interests, with the result that in the public Press the case for free trade has gone by default. No newspaper today risks the loss of its advertising revenue by urging the need for foreign competition against its advertisers. Few men in protected industries have had the hardihood to speak on public platforms against the protectionist and unsound money policies which today contribute so much to the national decline in quality and character.

In the contemporary world it is possible to envisage three main types of economic organisation. On the one hand there is communism, which upholds the state ownership and planning of all means of production and exchange. At the opposite extreme is the regime of economic freedom. In between these two extremes are to be found all the various types of protection and all the various Systems in which the state plans the economic life of the nation but does not own the means of production and exchange, or at any rate does not own all of them.

It is obvious both from the nature of the case, and from experience, that communism involves the suppression of individual freedom, not only in the economic sphere but in most other spheres as well; but it is not generally realised that the intermediate system also undermines freedom, and is, indeed, in several respects more obviously immoral than communism itself. Once international trade has become an important economic activity, it is clear that the imposition of protective tariffs to discourage certain imports unfairly advantages certain privileged sections of the community at the expense of others, whereas under a system of strict communism any profits that may be made are at least the property of the state itself. In a protectionist economy the power of the state is used to line the pockets of some private citizens at the expense of others.

Quite apart from its economic ill effects, protectionism is thus immoral in itself; but it also leads almost necessarily towards ever greater state planning and state control, and thus tends towards the communist system, for people will not consent indefinitely to having to pay unnecessarily high prices for certain goods, for the sole benefit of one section or other of their fellow citizens; they will demand instead that they too be protected, and that the whole economy be planned and organised "for the good of all." Protection makes the demand for coercive centralised government planning irresistible, but once such a system of planning is introduced, freedom is dead. Political and religious freedom require a free economy, but a free economy cannot survive inside a country in the absence of free trade externally. A free economy is acceptable only when it is genuinely free, when each citizen has a fair field for his enterprise and no section of the community is specially favoured. In a world where international trade is important, honest capitalism is inseparable from free trade; in the long run the cause of free trade and honest money is thus the cause of liberty itself.

When we look at the world as a whole, the case for free trade becomes overwhelming. Protection is not only unfair to the domestic consumer but it is also unfair to the foreign producer. It is thus a cause of international tensions. No one contends that a free trade policy will prevent wars, but a nation that provides a world market place for the distribution of goods and services will find many friends around the world. Many people in economically developed countries feel uneasy in their minds about the conditions in the poorer countries of the world, but they refuse to accept cheap commodities or manufactured goods coming-from those countries and instead offer them economic aid. Such policies, though perhaps well meant, amount to pauperisation of the countries concerned, whereas a free trade policy would give them the opportunity to earn their own livelihood and to stand on their own feet, to their own benefit and that of the world. The primary heed in international economic relations is for justice rather than charity, and justice means free trade.

In our day we see a great emphasis placed on "internationalism" of many kinds; an internationalism that often results in a misplaced and rather naive faith in the United Nations and other international organisations. But there is a true internationalism, and that is the free trade policy. This issue is of vital importance to the whole of mankind. Our country should once more take up the leadership and begin again where Montagu Norman and his friends were compelled to leave off.

NOTES

*Mr. Alexander was Financial Editor at the time.