ERNEST BEVIN'S PROPOSED SOLUTION
The view that the solution was at hand with a combination of devaluation and protectionism and that the only obstacle was the 'usurious' interest of the financial sector, was put forcefully by Ernest Bevin. According to Skidelsky (Politicians and the Slump, pp.406-8):
'Ernest Bevin had by this time emerged as the dominant personality in the trade union movement, with an intelligence and breadth of vision far beyond those of his colleagues, with the possible exception of the general secretary, Walter Citrine, with whom he worked closely. His economic education had been considerably extended by his membership of four bodies - the Mond-Tumer group, the Macmillan Committee, the E.A.C [the government sponsored Economic Advisory Council - PB], and the trade union economic committee, started in 1929 after suggestions that the General Council was ignorant of wider economic issues. The experience and knowledge he gained through these bodies gave him an essential background for creative economic policy making, and the necessary assurance to challenge Snowden’s recipe for economic recovery.
'His view of money as a means of exchange, a device to meet the needs of industry and trade, to enable men to manufacture, buy and sell goods, was unexceptionable, but he concluded from this that the international money market was a system of collective usury, ‘a word he frequently used with the full Aristotelian flavour’ [quoted from Alan Bullock's biography, vol i, p.427 - PB]. From this it was not hard to conclude that the financial crisis:
'"has arisen as the result of the manipulation of finance by the City, borrowing money from abroad on ... ‘short-term’ ... and lending it on long-term ... As is usual, the financiers have rushed to the Government ... attributing the blame for the trouble to the social policy of the country and to the fact that the budget is not balanced." [Bevin quoted in ibid. p.480].
'This in itself should make the Government wary of accepting the banker’s advice, but quite apart from that Bevin had come to believe that the existing currency system based on gold was bound to break down; hence the bankers’ policy "which aimed at restoring the free working of the system" offered no remedy.
'Bevin’s own remedy, which he expounded in the summer of 1930 and in his addendum to the Macmillan Report, assumed that the old nineteenth-century laissez-faire system was gone for good, instead the aim should be to create a regional grouping based on the Empire
'"in which there would be a rough balance between supplies of raw materials and foodstuffs on the one hand and manufactured goods on the other, a group of nations practising Free Trade between themselves, but putting up tariffs, if necessary, against outsiders, a group as self-contained as possible but with sufficient bargaining power to exchange products with other nations on fair terms." [ibid., p.441]
'At home the plight of the great export industries offered a magnificent opportunity for extending Government control:
'"He was prepared to agree to a protective tariff, but only on condition of the thorough reorganisation of the industries to be protected, not as a substitute for reorganisation, behind which inefficient industries could find protection from the need to put their house in order." [p.445]
'Since such a programme could not be carried out with the existing gold standard, Bevin advocated devaluation and urged the Government in his addendum to the Macmillan Report, to consider "an alternative basis" for the economy.
'Such measures would, in Bevin’s view, resolve the "fundamental paradox" of a Labour Government trying to save a capitalist system from the difficulties which the Labour movement itself had created [through trade union activity preventing the 'automatic' adjustment of wages to suit the perceived needs of the overall economy - PB]. Thus his opposition to the policy which the bankers were trying to foist on to the Government stemmed not only from the sectional interest of his own union members, but also from a long-term view of future development.' (6)
(6) An elaboration of Bevin's views in a pamphlet co-written by G.D.H.Cole and published in 1931 can be found on my 'Labour Values' website at http://www.labour-values.com/bevin/crisisindex/
In advocating devaluation and a retrenchment on the Empire, Bevin was advocating more or less what happened. What didn't happen, though it happened in the United States and in Germany and was advocated by Keynes, Lloyd George and Oswald Mosley, was a government funded public works scheme that would have addressed directly the problem of unemployment.