At col. 1878, Vol. 125 of the Official Debates, Deputy McGilligan said:
"After a period of virtual stability import prices took an upward turn last summer when we began to experience the delayed impact of devaluation, later reinforced by the effects of rearmament and the stockpiling associated with it. There is reason to fear that we have not yet experienced the full consequences of the increased international demand for basic commodities. Concurrently with the rise in import prices there has occurred an increase in our trade deficit; the return for our exports, though it has also increased, has advanced less than the cost of our imports. When what we produce for export does not go as far as before towards paying for our import needs we suffer, as a nation, a reduction in the standard of living we can afford.
Increases in remuneration offer no escape from this unwelcome development; indeed, they can only accelerate the process of inflation and cause social injustice as between those able to improve or maintain their position and those who cannot enlarge their income and are therefore forced to assume an undue burden of hardship."
Here is the first of the Central Bank's recommendations:—
"For this reason, the Government ask for restraint in the putting forward of wage and salary claims and have taken measures intended to limit price increases to those justified by increases in costs."
There is no outcry from Deputy MacBride when Deputy McGilligan clearly advocates a voluntary wage freeze. There were no protests from Deputy MacBride or from Clann na Poblachta on that occasion. That was the recommendation, a voluntary near-wage freeze advocated by the then Minister for Finance on the occasion of his Budget speech. In column 1879 of the same volume, we have this statement:—
"That much of the new credit was spent on imports is shown by the fact that the sterling holdings of the banks decreased by nearly £19,000,000, bank deposits—including those in public accounts—going up by approximately £12,000,000. The increase in certain prices and the greater volume of transactions to be financed account for the rise in the total circulation of notes and coin from £51.1 million on 1st April, 1950, to £58.1 million, or 5 per cent. more, at the 31st March last. In present circumstances, it is desirable that the banks, while continuing to finance capital projects, and normal import requirements, should discourage any merely speculative or excessive borrowing."
In other words, the then Minister for Finance gave a perfectly clear hint to the banks that, when being requested for credit, they should select very carefully the credits they would issue, that they should use some discrimination and reserve credit for essential productive purposes and that, if a person wanted to import an undesirably large quantity of goods that would be of no service to us in time of war, and merely for the sake of having them in his warehouse, the banks might perhaps give him a hint that he had gone too far—another recommendation in the Central Bank Report.
Then in column 1880 of the same volume we have the following:
"A deficit in the balance of payments is a means of adding to our current resources—a means open to us because we have been able to finance additional imports by drawing on our sterling assets and incurring dollar indebtedness. Deficits in the balance of payments cannot, however, be sustained for more than a short period."
We may notice that the then Minister for Finance used the word "short"; he did not speak of some long period.
"They involve an initial loss of purchasing power over imports owing to the depletion of external capital and the income derived from it."
Apparently, the then Minister for Finance was interested in preserving some external capital because, as I have indicated, he thought it essential to preserve a reserve for the financing of foreign payments. He was then, months ago, warning the country that the growth in the foreign payments deficit was a matter for serious consideration.
"Unless we are building up our productive capacity to an adequate degree, so that by increasing our exports or reducing our imports we can within a few years equalise our external receipts and payments we must inevitably suffer a decline in our living standards."
The same warning is given in the Central Bank Report. The Minister goes on to state :
"It is still proper and eminently reasonable to draw on our external assets if thereby we speed up the process of capital development at home. What is abnormal and, if it persists, can be seriously damaging is to use up our external resources for consumption purposes."
Then in column 1883, he states :
"The present position on external account is by no means satisfactory, and if it continues to develop unfavourably the application of corrective measures will be called for."
Then in his final conclusion, Deputy McGilligan foresees the whole of the Central Bank Report when he says :
"The conclusion to which the analysis leads is that while the extra external disinvestment we incurred in 1950 was balanced as to roughly two-thirds by new home investment and increased stocks, there still continues to be a substantial use of past savings merely to lever up standards of consumption——"
not for capital development.
"Making all allowance for the exceptional conditions now obtaining, it is to be feared that we are not producing and earning enough to pay our way. The implication is obvious. We cannot have both consumption and capital development on the present scale unless we save more and produce more. Additional saving would ease the congestion that now exists and causes consumer demand to seek an outlet in imports. It would relieve the pressure on the balance of payments and help to confine external disinvestment—or surplus imports—to what is needed for home development or stockpiling."
I think that this is about the fourth or fifth time that portions of his speech have been quoted, but members of the inter-Party groups, the former coalition Government, appear to have forgotten those warnings or even to deny almost that Deputy McGilligan made the speech. My own belief is that if that speech had been published as a Central Bank Report by itself, and issued by the Central Bank and if Deputy McGilligan had not made any Budget speech, we would have Deputy MacBride getting up, making exactly the same observations as he has made on the Central Bank Report which, as I have said, is divided into facts, conclusions and remedies. Although we may feel that the Central Bank may have exaggerated the seriousness of the position, the main facts were predicted by Deputy McGilligan. As I have said, in truth he wrote himself the preface to the Central Bank Report, and with Deputy MacBride's approval in that he never formally denounced the Budget speech or expressed himself in opposition to any of the recommendations made therein.
I next want to deal with the question of the use to which these external assets that have been repatriated have been put. We have had a great many boastful speeches and a great amount of talk from the Coalition Parties about what they were going to do to increase the capital resources of this country. When Deputy Costello made his now well-known speech to the Bankers' Institute, he talked as though repatriation of external assets was going to bring vast quantities of productive machinery into this country. In some way or other they would be used in the way that Fianna Fáil always believed they should be used, for importing machinery which would produce the goods that we formerly imported. We said that if a man had money invested in a company making shoes in Great Britain, we would like that money to be repatriated in order that, if shoe machinery could be purchased in England with the money such machinery could be used here to make shoes that were formerly imported.
After five years of all this talk we find that of the imports into this country in 1948 and 1949 about 10 per cent. were for capital goods. In 1938, after five years of economic war and after a world depression, the imports of capital goods were 7 per cent. of the total. The sole result of all this talk that we have heard in regard to the grand new policy of repatriating sterling assets has been that the proportion of capital goods in our imports has gone up from 7 to 10.4 per cent. That is an astonishing thing. I do not believe that many people in the country know that fact or realise that the main objective of all those who talked about the repatriation of external assets has not been achieved, that they have not been in large measure used to bring capital goods into the country.
We, without talking about it at all, without any advocacy of special policies, of crank financial policies, and, as I have said, after years of economic war and depression, managed to import 7 per cent. of capital goods out of our total imports in 1938. We were doing it after a period when every time we advocated a new tariff for a new industry it was fiercely opposed by the Fine Gael Party on almost every single occasion. In spite of the economic war and the political opposition against a tariff policy, the percentage at that time was very nearly as great as it was in the case of the present Opposition in 1949-50, when they had all the advantages of our being able to sell in a world that was continually more hungry and, in addition, had all the advantages of being able to borrow money from the American Government for the purchase of capital goods. Yet that, in fact, was the final result. Indeed, if agricultural prices in this country had not reached three times their pre-war level, the policy of the last Government would have ended in a financial crisis long before. They have only been saved by the fact that agricultural prices have been rocketing all over the world and reached three times their pre-war level towards the end of their period of office.
It is an extraordinary fact that, although imports trebled in value, although there was every evidence of high consumption in this country, the ordinary commercial public were apparently unwilling either to save sufficiently to finance Government expenditure or to provide the Government with a sufficient proportion of the loans they issued. A fact to which we have to have regard, a fact which is of the utmost importance in the future is the necessity for securing the personal savings of the community for carrying out capital expenditure for developing the nation's resources.
As an example of the difficulties we face, of the capital expenditure in the financial year 1950-51, which was indicated in the Budget as being £24.6 million, only about £3.13 million had the effect of directly stimulating production and so increasing the volume of our exports. About nearly £13,000,000 were for purely social purposes. That is not to say that they were inadvisable. That is not to say the money should not be spent. The point is that the money did not help to increase exports and made the problem of continuing the financing of capital expenditure more difficult for us.
Much talk has been heard in connection with the use of the American Counterpart Fund and a great deal has been said about the land rehabilitation scheme. In that connection, it is just as well to remind the House again that the Government intended to spend in the financial year 1950-51 £3,000,000 on the land rehabilitation scheme. In fact they spent under £600,000 and of that very nearly half went to pay civil servants, showing that one of the major schemes requiring a large sum of money apparently was not prospering. Apparently, there were difficulties experienced. The present Minister for Agriculture is carrying on the scheme; the scheme is being developed, but he will have to do his utmost to see that it can be carried out more economically because, obviously, if half the cost of land rehabilitation is going to be dissipated in administration expenses the advantage to the country is questionable.
Some other schemes that might have been adopted at an earlier stage were adopted only in the last few months of the then Government's activities, such as the expenditure of the American Counterpart Fund money on the lime subsidy scheme. We were told that at the end of the war the country required a capital application of 10,000,000 tons of limestone. One of the most vital and important works that could have been carried out would have been to restore the lime content of the country but, as I have said, a scheme of practical significance like that was adopted only towards the end of the last Government's régime.
Members of the Coalition Parties seem to be afraid of the term "disinflation," as though again it was something which you had to do to the tune of 100 per cent. If ever a Government in its wisdom mentions the necessity of adopting disinflationary policy immediately everyone cries out you are going to disemploy everyone, cancel and arrest works of capital development, whereas in fact the word "disinflation" can mean the mildest corrective to overspending, an adjustment in taxation, or an adjustment in the methods adopted to finance capital projects. Anything which tends to reduce inflation is naturally disinflationary. We on this side of the House are not afraid of the term. It does not keep us awake at nights and if we say that we have to adopt certain disinflationary measures it does not mean that our policy of national development is going to be suddenly ended overnight or that the schemes that were continued by the last Government and which were the result of our imagination and our vision are now going to be stopped and put aside.
One of the difficulties we face is the fact that the previous Government had been assisting in the creation of an inflationary position by issuing money that did not originate through the savings of the people. When counterpart money is used and introduced into circulation in the country as a method of financing schemes, it is inflationary in effect, it is money being spent for which there is no production backing. The same thing is true with other types of transactions effected by the last Government in trying to meet their obligations.
One of the strangest things about the whole business is the fact that there is no country that has had any kind of sound financial history where the policy of saving for borrowing is not fully accepted. You can examine, as I shall indicate later, the financial systems in the whole of Scandinavia, in Holland, in the United Kingdom, in Switzerland and Belgium. They all admit the necessity of borrowing for capital development. They all agree that the cost of carrying out capital projects must be borne in part by the next generation. But, they all admit also that the money provided in the way of loans by the people to their Government must be met out of savings, that there is no other way of providing the necessary funds and they all of them in their different ways, when savings are insufficient, apply the necessary corrective measures to ensure that savings are found in one way or another, either by an increase in savings by the people in their savings institutions or by increased taxation.
One of the difficulties we face in connection with Deputies like Deputy MacBride is that he never will tell us exactly what he believes in regard to the use made of the national credit. He will always talk vaguely and airily about making use of the national credit for developing the country but he will never say what he means. Yet you will have the impression from some of the people who have already spoken in this debate that the Fine Gael-Clann na Poblachta policy is in some way different from the policies of sane normal countries such as Scandinavia, Switzerland and Belgium, where these financial axioms are well understood and accepted by the people. I am going to go into that in very great detail later because it is just as well that people in this country should learn what other small nations in Europe have done since the war— the difficulties they have faced and the measures adopted—to get them over the problem of post-war inflation.
In the financial year 1950-51 £22,000,000 of Exchequer Bonds were issued to the public. Only £12,000,000 were obtained from the public, showing that there was reluctance on the part of the people to assist the Government in their capital expenditure schemes. One of the causes for this disinclination to lend has been the propaganda of every Deputy opposite, who for years past has been telling the people they can go about their ordinary tasks and need not make the slightest effort, while the nation was being rebuilt around them. As soon as you get that kind of atmosphere it is natural that loans will not be successful and that savings will not be sufficient to carry out costly development projects—and, in particular, development projects that do not result in increased exports and trade.
Hospitals and housing are very desirable projects and we are going on with that work, but they do not result in an increase in exports. The land rehabilitation scheme will not result in an immediate increase in exports, even if it eventually succeeds and is based on sound financial principles. It will be years before land which has been drained will produce an actual increase in exports. The same remarks apply to a great deal of Government capital expenditure. The actual fact is that the Central Bank Report simply repeats Deputy McGilligan's statement that the public must surrender some of their purchasing power if the investment campaign is to continue, that the Government cannot do without this resource, that the investment campaign cannot continue using the thin air, that there must be a greater volume of savings and that if there is not a sufficient volume of savings there will have to be increased taxation.
We have heard far too much in the past three years of a policy which can be well represented by the well-known American verse :
"My candle burns at both ends,
It cannot last the night,
But oh, my foes, and oh, my friends,
It gives a lovely light."
As has already been indicated by people on this side of the House, bank restriction was not ordered by the Government or the Central Bank. I ask Deputy MacBride to tell the House what he means when he says that there has been a severe restriction in bank credit. Bank advances in the March quarter of this year totalled £111,000,000. In the June quarter the bank advances totalled £114,000,000. In the September quarter the bank advances were £122,000,000. Where does the bank restriction lie? Whose credits have been restricted? The figures can hardly be denied as being accurate. The banks may have restricted credit to people who wanted to stockpile excessively, who wanted to bring in consumer goods, who, perhaps, wanted to open retail establishments in areas where there were already rival retail establishments, who had insufficient security to finance their transactions or to guarantee that they could exist profitably with other competitors in the area.
There are all sorts of applications for credit which, at a time of inflation, must be considered seriously by the banks. The figures show that there has been no alarming or considerable restriction of credit because, as I have pointed out, the advances for the September quarter were greater than those of the March quarter by no less than £11,000,000.
We should like to ask members of the Opposition Parties what their attitude is towards general banking policy. Although there has been an iron authoritarian régime in Great Britain since 1945, although the Bank of England was nationalised, although the national income of the people of Britain is taxed to the degree of 42 per cent., although every Englishman and woman works half the day for the Government—although there has been every known kind of control to direct the flow of English trade, the general policy of the commercial banks of this country resembles that of the British banks in almost every particular in regard to their conservatism in issuing loans. There is no notable difference between the attitude of the banks of this country and that of the banks which have been under Socialist administration in Great Britain since 1945. I should like to hear from the members of the Opposition Parties to what extent they would like the Irish banks to go beyond the prescriptions given to the English banks by the nationalised Bank of England under a strictly authoritarian Government. In Britain, as here, there are other institutions designed for special purposes, such as the Industrial Credit Corporation and the Agricultural Credit Corporation, and arrangements are made to provide farmers with grants if they find difficulty in securing credit from the banks. There are arrangements here, just as in Britain, to overcome restrictions in credit of a kind which are contrary to the immediate interests of national policy, but there is very little difference as regards ordinary borrowing and lending.
We should like the Opposition Parties to tell us what changes they think should be made. We should like them to tell us how much the Irish banks should change their ordinary attitude towards lending and anything in the direction of becoming less conservative than the British banks. I think it would prove an interesting discussion. I do not believe anybody would dare give any kind of reply to that observation.
Deputy MacBride, in the course of his speech, adverted to a statement made by the Minister for Finance of the present Government that either public spending or private spending must be reduced. That is the cry of half the countries of Europe who have faced post-war difficulties. There is nothing exceptional or conservative about it. It has been uttered by violently Socialist Ministers for Finance who like to organise their whole community, who believe in a degree of interference with the private individual which would never be tolerated here. Socialist Ministers for Finance all over Europe whose finances are still holding together, have said that if there is to be greater public spending there must be greater savings or taxation. It is the simplest phrase in the world and it has been used by Ministers for Finance in every country.
I do not think I need say very much about Deputy MacBride's vague hints in regard to an alteration in the currency. We have heard from these gentlemen in the last 20 years grandiloquent statements about a change in our currency. Yet not one member of the Clann na Poblachta Party or any person who holds their view has ever dared to deliver any kind of address lasting for even three hours in which they could really indicate to us whether the Irish £ should be greater in value than the English £ or less, or the advantages or disadvantages of either of these alternative policies.
We have never heard from them precisely what they wanted to do and why they wanted to do it and what advantage this country could have from a change. We have never heard them argue the point properly that if 90 or 95 per cent. of our trade is with Great Britain, and if there are Six Counties in the North separated from us we should hesitate before we alter our present relations with the £ sterling in Great Britain, particularly as there is a free flow of sterling, at least, if nothing else between the two parts of this island.
Some members of the Coalition have made a deliberate effort to confuse the public mind by failing to relate our dollar liabilities to our sterling assets. I do not think there is any need for me to go into this question in detail. A statement has been made that in 1949 and 1950 our sterling assets actually increased for a period and the argument was adduced that, because those sterling assets increased, there was no general external disinvestment. The speakers concerned forgot to mention the fact that we had borrowed money from the American Government and until the money was used up it was made available in the Central Bank in the form of sterling and that created temporarily new sterling assets of an unusual kind for us in that they were the result of an American Loan. Once the loan is spent, these external assets will disappear in the ordinary way. They had absolutely no fundamental effect on the main balance of payments position in this country, which is a thing to which we have to give attention above all else. They were merely the result of an accounting position, the use of dollars converted into sterling and its subsequent use by the Government. The Government, through the Bank of Ireland, spent the money. The money appeared in circulation and the commercial banks held these assets temporarily. Those assets were the result of the American Dollar Loan. The fact that the particular assets went up for a time has no significance in the present situation. Indeed, this was mentioned one or two years ago by Deputy McGilligan, the former Minister for Finance himself.
We heard a great deal about the glory of the double budget. Other countries have double budgets besides ourselves. It can be a very convenient method of illustrating the investment plans of a Government, of separating their capital expenditure from their current expenditure. It is a very convenient method of illustrating their investment plans. Of course, the plan can be demonstrated in another way. The double budget has no very special significance. It can be used as an effort at window-dressing, designed to make it look easy to spend money without sufficient saving, or it can be used to illustrate what the position is in regard to capital investment. There are some countries in Europe which have a different kind of capital budget statement. They put into the plus and minus accounts the exact amount of domestic and Government saving that will be effected during the year including the extent the people will save money to provide the Government with loans towards capital development and the investment they intend to make. There are some countries in Europe which provide that kind of double budget for the public to examine. Such a budget illustrates exactly and precisely whether the country is living above its means or whether it is not.
We have heard a great deal about the domestic capital formation effected by the last Government. I was interested to notice from the report published by the Statistics Office that the figures for 1949-50 have apparently not enormously increased. Domestic capital savings in 1946 and 1947 were £91,000,000 and in 1949-50 they were £99,000,000. There did not appear to be any great change in regard to the formation of capital domestic investment. I noticed also that, again in connection with the import of capital goods, the figures have increased but so have prices. Without any talk of miracles or any dramatic announcement of a new policy and when the war had only just ended and goods were still scarce, we imported what seemed to be the miserable sum of £19,000,000 of capital goods in a world which was almost exclusively a sellers' market for capital goods and machinery.
The amount went up in 1948 and 1949 to £29,000,000 and in 1949-50 it went up to £31,000,000. I am not ashamed of the figure of £19,000,000 for 1946 and 1947. Anyone who is a machinery agent in this city would know very well that you would have to wait months to meet replacements in machinery of that kind. If we had gone on with our policy of national development without any airy phrases or the announcement of any special policy the import of capital goods would have increased.
Deputy MacBride made various suggestions in regard to restrictions effected by the Government in connection with development schemes. He mentioned a reduction in the number of Local Authorities (Works) Acts schemes. The Estimate for these works was reduced this year a reduction by several hundred thousand pounds and effected by the last Government. The Estimate was reduced because the number of useful works that could be effected had diminished or else the Government reduced the Estimate out of a desire to save. I do know that the Minister for Local Government is sanctioning grants for useful schemes up to the limit of the Estimate. It is essential to make sure that if money is spent it will be spent wisely on useful works.
Deputy MacBride complained that we reduced the annual target of afforestation from 25,000 acres to 20,000 acres. We intend to plant 20,000 acres a year in the course of time and it will be done. There will be a sufficient planting reserve left—a reserve which is essential in connection with afforestation work. The former Minister for Lands was never given evidence by the department of afforestation that he could, within the next few years, have a sufficient planting reserve to enable 25,000 acres to be planted yearly. With all the caution and care that was required in such circumstances a target of 20,000 acres is based on what we believe is the amount of plantable land that can be made available and drained in that time. We make no excuse for having reduced the figure.
The figure of 25,000 acres was a figure promised by the Minister for Lands in a speech made in Cork as long ago as two years after the Government was in office. It will not be possible to plant 20,000 acres in the coming year. The yearly acreage, we hope, will be increased provided the land can be obtained and provided we get a supply of the necessary protective wire and seedlings.
So far as unemployment is concerned, if there is any increase this October as compared with October, 1950, we are given to understand that three-fourths of any increase is due to a temporary depression in the clothing and textile trades which has taken place not only here but in Great Britain and is due to circumstances in connection with the price of wool which is well known to everybody. There has been no noticeable increase in unemployment judged by the figures which will be issued in the course of the next few weeks. I discovered that the increase is very small and is almost entirely confined to those trades. If there is any suggestion that there is now a widespread increase of unemployment it is not true.
I thought I would take the opportunity on this occasion of dealing with the position in which other countries find themselves. When one goes abroad, one finds only too frequently that we hear far too much of what is going on in Great Britain and America, and that the people of this country who are concerned with national development, with the development of our resources, have all too little information about the efforts made by some of the small countries in Europe to restore their position, to improve their production, to develop their wealth and to provide a happy life for their citizens, and so I made a study of the credit history of four countries in Europe since the ending of the war—Sweden, Norway, Denmark and Holland.
The facts I ascertained varied from one country to another. Some countries have fuller documentation than others. They are all countries with a relatively high national income; they are all countries in which there have been advanced liberal administrations. In most of them there have been at times Socialist, or partly Socialist, administrations, where people with advanced views in regard to the utilisation of credit have had their say and their effect on the life of the community. They are all democratic countries and all of them have had a longer history of independence, with all the advantages thereof, than we have. During the war, two of them, Norway and Holland, suffered physical destruction on a considerable scale. Two, Denmark and Sweden, suffered little or no physical destruction but considerable trade dislocation. They all have the same post-war history—a tremendous impetus to buy goods to restore the normal consumption level of goods, to sell goods abroad to pay for imports, to invest money in national economic schemes, to rebuild their economy to the degree to which it had been shattered.
They are all in a position in some way more advantageous than we are in that, in the case of at least three, they have very large industrial exports which can be immediately increased, provided the machinery and capital are there because they have all the experts. They have traditional industries, together with the experts and the managers. They have not got to develop new industries from scratch. In the case of industries such as those related to paper, pulp and timber, the raw materials are immediately at hand. There is an immediate and vast demand for the goods and exports can be stimulated very rapidly. In the case of Denmark, only 27 per cent. of her workers are occupied in agriculture, industry now playing a very large part in the Danish economy.
They also have a certain advantage over us in that they have a very high tillage level. They are able suddenly to stimulate the production of agricultural produce for export more quickly than we can where the level of tillage has never been so high. They have all these factors in common and I thought it would be a very good thing if I were to give the House some account of their history since the war, principally in order to show and to indicate the difficulties from which we must escape by carrying out corrective measures now instead of having to take more drastic action later as most of these countries did, to their immense disadvantage.
It is a curious thing how one can accumulate vague ideas about countries, to the point that one can actually exaggerate their efficiency and capacity to manage their own finances. I do know that these four countries have always shown intelligence in their economic development. They have never suffered financial disaster and they have never engaged deliberately in wholesale inflation, with the continuing evil result, but nevertheless every one of these countries has been too anxious since the war to invest money and to spend money without taking regard to all the circumstances of the case, and they ought to provide an absolute warning to us of the difficulties we shall get into, unless we overhaul the national economy now instead of listening to the vague expletives of Deputy MacBride and vague accounts and descriptions of fantastic financial policies which can lead us nowhere.
I take first a report entitled "An Economic Survey", dated December 15th, 1946, and March 15th, 1947, issued by the Svenska Handelbanken, which is one of the very large commercial banks in Sweden. It says :—
"The predominant feature of Sweden's economic development during the period under review has been a steady deterioration of the foreign exchange position. The drain on the exchange reserves that has been going on since the middle of 1946 has continued at an increasing pace during the past few months, and the necessity of taking countermeasures to protect the country's international liquidity has accordingly become ever more urgent. On March 15th, the Government imposed a general ban on imports as a preliminary step towards the introduction of a system of quantitative import control.... As a link in the chain of restrictions, the consumption of coffee is to be cut down, and this has involved the reintroduction of rationing—though not only of coffee but of tea and cocoa as well. The imports of motor cars will also be reduced, which will involve certain restrictions on private motor traffic."
It goes on to give the reasons :—
"For the whole of 1946, the import surplus rose to 842,000,000 kroner as compared with an export surplus in 1945 of 674,000,000 kroner. It is true that the increase in imports may be regarded partly as a natural phenomenon, now that the scarcity conditions on the international markets have been gradually relieved. There is no doubt, however, that imports have reached an excessive scale under the pressure of the considerable excess purchasing power in the country and have to an alarming extent come to comprise goods of a luxury character."
In other words, they began to go through the same sort of difficulties as this country. They did not balance their trade, and, as a result of Government policy built up excess purchasing power. Then a year later, the Svenska Handelbanken issued another warning:—
"The economic situation in Sweden continues to be characterised by extreme boom conditions and by an ever-increasing inflationary pressure. The widening ‘inflationary gap' and the pressure of consumer purchasing power has entailed a serious deterioration of the balance of trade, imports being stimulated and part of the goods normally exported being retained for domestic consumption. This, in turn, has led to a heavy outflow of foreign exchange from the Riksbank on such a scale that it cannot be allowed to continue without seriously impairing the country's international liquidity."
We now come to the remedies that were applied:—
"Such, then, was the background of the import control introduced on March 15th of which an account was given in the preceding issue of this review and of the subsequent efforts on the part of the Government to work out an anti-inflationary economic programme. Such a programme is now crystallising——
mark these words——
"though unfortunately at a rather late stage. Its main points are : a reduction of the volume of real investments down to two-thirds of the 1946 volume, a tightening up of price controls, measures to increase exports of paper and timber at the expense of domestic consumption; and certain steps—of a somewhat platonic nature —to encourage savings."
It is precisely in order to escape that kind of disinflationary policy—adopted by one of the most modern and intelligent Governments in Europe, with a long record of developing natural resources, developing State forests, developing shipping and other State companies on a huge scale, a Government that went much further in interfering with everybody than even Clann na Poblachta would like to do—that we suggest the corrective measures be taken in time. Because they did not attend to their foreign exchange difficulties, they had to reduce the volume of their real investments to two-thirds of the 1946 volume. As I have indicated, we in Fianna Fáil do not wish to be forced to do that. But if a country with the intelligence of Sweden —because they were too optimistic, because they had pressure groups just like those of Clann na Poblachta—was forced to take action of that kind, the public will forgive us if we issue warnings in time so that corrective measures can be applied that need not be in the nature of cutting down our real investments to two-thirds of the 1946 level. I may add that this was done by a social democratic Government that believed more in authoritarian Socialist policy than the present Labour Party here.
