Probably the Deputy has put another meaning into the word "unsteady." There is a general synonym for variation and steadiness, or invariable and unsteady. I am not saying that, in all circumstances, they are equivalent. I am talking about fixed foundations, and I say that fixed and variable are contrary terms. In money matters, for a variety of reasons, it is desirable that the basis should be kept as steady and as unvarying as possible. One of the ways in which you try to arrive at that is to make it impossible suddenly to change it. The whole question then in the narrow sense is: is it desirable to have whatever basis we are going to have embodied in the Act? I am arguing that it is desirable, for general steadiness and to prevent variation, to have it in the Act.
The next question then is: what in normal times should be the basis? All countries are trying to get such a basis for their currency that will so far as is possible keep the level of their prices unchanged, and when they are exchanging goods with other countries, will make the exchange in regard to goods as steady as possible, so that when they enter into a contract, they know what they will get: when they are buying something, they know what they will pay, and when selling something, they know exactly in terms of some unit what they will get. That is the purpose of it, and, in the years before this war, there was a variety of international congresses and a good deal of private negotiation between central banks and Governments for the purpose of trying to get over the disadvantages to trade, prosperity and the general well-being of the various countries arising from instability of exchanges and so on.
I think the House will agree, in view of the part money has to pay in the case of exchange that if it were possible to get, in the case of money, something as fixed as we can get in the case of a measure of length, like the metre or the yard, which could be reproduced somewhere else and which would always be the same thing, it would be to the great advantage of the world as a whole.
Various attempts have been made in various countries to evolve such a system. Taking a particular number of fundamental articles and trying to devise some steady basis of value has been considered, but these attempts have all pretty well failed, and all countries try therefore to have, in the first place, something steady for domestic purposes, something steady in value. They try to get some relation between their own and some external currency. There is a reason, I suppose, why we should try to have an external standard of comparison. Internally, the relativity business becomes worse because you are trying to form a basis on part of a variable thing itself, that is, the value of money, internally expressed in the value of the goods produced. If that relation changes, you have no standard by which you can appreciate what these changes mean outside. Consequently, the natural thing to do is to try to get some external thing with which you can compare your own unit at home and which will not be immediately involved in internal changes. That external thing which you would naturally try to get is the most stable, in respect of its value compared with goods, of these external bases.
If we are thinking of an external unit—and I argue that if you can get an external one which seems to be stable, it is the best one—there are two that come to our minds. We think naturally of the British unit and the American unit. If it is agreed that it is well to see that the external purchasing value of our unit is kept right by relating it to something outside, I think our choice would have to be limited to either the dollar or the £.
The most natural way of looking for a solution would be to try to get some external unit and it seems to me that either the pound or the dollar would be the unit with which we would be most likely to link ourselves. As to the relative stability of these two units, there was a time when some people thought the dollar was more stable than the pound, and, at another time, that the pound was the more stable unit, but, looking back, it is doubtful which of the two would be regarded as the more stable. Each of them has changed at various times, but probably you would find the majority to say that, on the whole, the pound was as stable as the dollar, but, leaving that question, on which I do not want to pass any judgment, aside, there was not such a difference between them— there have been changes in the dollar as in the pound—as would inevitably indicate one rather than the other as the unit to which we should be attached, so that it was more or less a "toss-up," from the point of view of external stability, as to which of the two would be the better.
On the basis of our particular situation and the commercial relations between this country and Britain, it should become apparent at once that, if there was not a particular element of stability in the dollar over and above the pound, it was much more natural that we should try to attach ourselves to the pound, because there was a tremendous advantage in having our relationship to the pound fixed rather than to have our relationship to the dollar fixed—not at parity exactly— but in a particular ratio. There was the point that the great bulk of our trade in the way of imports and exports was with Britain and, therefore, assuming that I am right in saying that from the point of view of stability there was little to choose between them, the argument was altogether in favour of using the British pound as the external standard rather than the dollar. That is the question so far as using the external unit of comparison to which you would be attached is concerned, and I think the argument up to this seems to point almost inevitably to the use of the British pound as the standard.
The next matter which you would consider is at what rate should you fix it—at parity or some other rate? Everybody at the moment is anxious that if a change is to be made, it should operate from the moment forward, so to speak. You will not change values arbitrarily, if you can avoid it, because, if you do, it means that you are going to affect immediately the distribution of wealth as between different classes of the community. If that is done—and it may be done with a definite political purpose—the relative wealth of the different sections of the community is altered by that sudden change, so that when these changes are made, it seems to me that they are generally made so as to avoid the suggestion of arbitrary changes if they are made for a political purpose. If for a purely monetary reason, because there are certain dangers to be apprehended, the change is made in such a way as: "From to-day on, something is to happen." You allow some natural thing to determine it, other than the arbitrary action of either the Government or the central bank. You say: "From this forward, or from to-day, this is our position; let us agree to have changes develop as circumstances call for them." Remember that historically we were at parity. That is where we started. It was not something introduced arbitrarily at a particular moment, but as a result of being part of the one economic and financial system. You will always have to think, if at any particular time you have to change from parity, what the changes are going to mean. Parity, even if it had not been the actual historical position with us, and if it were not so changed, would mean, whenever there was a change of a substantial amount, considerable hardship to a certain section and an unfair advantage to another section.
Even if historically we had not parity, and were starting now to examine how we should back our currency, and what should be the external value, I think we would be likely to choose parity rather than some other ratio. I am talking of a fixed and not a variable ratio. Leaving out the immediate war situation, one would like to choose parity. There was the danger, the figures being the same, that there was a certain amount of interchangeability between the units. Approaching the matter coldly and from the purely scientific point of view, I think the argument would really point to parity, that is, if we had the same sort of unit pound, the 20th part, fractions and so on, as we have now. I think we would from the coldly scientific point of view choose the £ unless there was some feature, which might be obvious, showing that there were particular dangers.
Deputy Norton has not addressed himself to the point at all. I do not know whether he wanted to excuse himself by seeing it from the very narrow aspect. When dealing with it he did not keep to the narrowness of the aspect. He spoke of disadvantages and led us portion of the way to the general question, but took very good care that he did not suggest the alternative. Of course, the alternative or the choice—it is hard to get a word to express the position accurately—if we do not have parity is that we can have something fixed at a different ratio, either above or below it. When examined, above or below, it will be found that there are going to be immediate disadvantages for sections of the community and perhaps unfair advantages for other sections. On the whole, I think the disadvantages to the community as a whole can be shown to balance the advantages. The Deputy did not tell us whether he wanted, if it was not to be parity, the frish £ to appreciate or depreciate.
