Question : Why did you always think an economic crisis is sooner or later inevitable?

Answer: The approach of economic crisis has been obvious for years past. I gave my reasons for thinking this in my resignation speech from the government. Each one of them is now slowly being proved true. The process has been interrupted by the war and two armament booms, the first preparing to fight Germany, the second preparing to fight the communist allies we had in the war against Germany. But despite the armament booms and a few new measures, all these factors are now beginning to operate again, and with increased force by reason of the postponements. The war also caused new and greater dangers to our economy.

When exactly it will come to crisis, no-one can say. If you see a ship with a great list to one side, you can say with certainty it will sooner or later capsize, but you cannot say when. That depends when a particular wave or gust of wind hits it in a particular place. The Stock Exchange too at such a moment leads the stampede by behaving like passengers who all make a dart for the side of the ship nearest the water.

My reasons for thinking the present island economy of Britain cannot endure are briefly the following:

We are still living with the same structure of industry and trade as we did when we were the only industrial nation in the world. A far higher proportion of our production than of any other nation goes in export trade, just as it did when the whole world was eager to receive our goods and ready to give particular advantages to us in exchange. Even a Conservative Chancellor of the Exchequer observed not long ago that this position has been passing away for over fifty years. Now the special demand which follows a war – particularly a long and devastating war – is over, we are faced on world markets with the following factors of intensive competition. We will look first at the adverse situation on world markets which is the direct result of the war.

Previous competitors Germany and Japan, once prostrated by the war, have returned to world markets with far more intensive competition. We have made of Germany another England in industrial matters. Its agricultural base in its eastern lands has been taken away. It has, like us, a top-heavy industrial structure. Germany too must “export or die”, and is working desperately and successfully to live in competition with us. We fought a victorious war to prevent it expanding in the east and setting up the self-contained economy of its desires, which would have taken it away from world markets.

Japan is in a similar position. It, too, is a country with a top-heavy industrial structure, and must “export or die” in cut-wage competition with us. Its desire to expand in Manchuria and set up another self-contained system away from world markets was also frustrated. Our policy has produced a strong communist China and a Japanese competitor. That is why competition from Germany and Japan is more severe than before the war. It has to be, if all try to live in the system we have established. They are in the same boat as ourselves. But, as we shall see, there is not room in it for all of us, until we build together a bigger boat.

Let us now look at the “normal” factors of the existing system which created all the unemployment in the thirties. They are likely soon to return with increased force. Every modern country is fighting for world markets. Every country is trying at the same time to sell more than it buys in order to have a favourable balance of trade. That is obviously a mathematical impossibility, and the result is that one country or another – whichever happens to be the weakest at the moment – is always going under. And the weakest country in the long run of the coming intensive competition is likely to be the country most committed to the business of “export or die”, because of its large dependence on world markets.

None of these countries has yet found any means of enabling their own people to consume what they produce. Some like ourselves cannot, because we are too small to be at all self-contained. We must export and sell on world markets enough to buy the foodstuffs and raw materials we cannot produce at home. So we are always dragged back under the present system to the dog-fight for world markets. And our wages are held down to the level of that competition, which is very severe. If wages are raised beyond a certain point we are costed out of world markets and we all starve. That is pointed out to us all the time by present politicians. It explains why British wages, salaries, pensions, profits and general purchasing power cannot be raised sufficiently to enable our people to consume what they produce, thus providing a steady market which eliminates slumps and unemployment. That cannot occur until we are members of an economic system large enough to be independent of world markets, and viable because it contains all its own foodstuffs and raw materials.Europe alone can provide that system for us, now that the Empire has largely gone and we have been made too weak by war to develop what remains by ourselves.

The United States has not even yet solved the problem of enabling its people to consume what they produce. That is why it had economic crises and huge unemployment before the war, as its “technocrats” and others pointed out. Since the war it has temporarily solved the problem by giving away a very large part of its total production in world charity, by an armament boom, by a very skilful monetary policy on Keynesian lines which partially maintained the demand, and by a fantastic edifice of debt in a hire-purchase system which can crash at any moment, Yet despite all these measures, America has over five million unemployed at the time this book goes to press.

The sweated labour of the East is being more than ever exploited by western capitalism. Before the war cotton mills in India and woollen mills in Japan ruined Lancashire and Yorkshire. These mills did not grow like mushrooms on an autumn morning. They were erected by international finance supplying large loans for the purpose. The object was to make more money sweating the East than they could get from developing the West. These mills were supplied with modern, simplified machines. A very few highly paid technicians could supervise the machines and the oriental labour doing the job for a few shillings a week. That is why Lancashire has had to shift to other industries since the war. But the East is learning other industries as well, and international finance is supplying the capital to develop them. We have drawn attention for years to this fundamental problem. Modern, simplified, rationalised machines can be worked by illiterate, backward labour which has no trade unions, nor any possible means of self-defence. The mass of labour, sweated for a fraction of our wages, needs only a few highly paid supervisors and technicians. How can we compete against them when this method gets going on a great scale? We failed to compete before when it only affected certain industries. These industries were ruined.

All this is not theory but proved practice. It happened on a smaller scale in India, Japan, Hong-Kong and China. It was this process which ultimately threw China into the arms of communism. That is always the end, if you are foolish enough to allow it.

Have a look at all these things and then ask yourselves if our island economy can continue in prosperity for ever without any crisis? If your answer is no, have a close look at our constructive solution. In short, withdraw from the chaos of present international trading into a self-contained economy of Europe and its overseas territories, where government can equate consumption and production and maintain the ever-increasing standard of life which science makes possibles
This requires a new economic system in Europe which will be different both from American capitalism and Russian communism.