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iderai aecterve System,

rtith the Goiapllfiientb of the Hon. K#H«
Feb. 24- (

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Speech by the Hon. Robert H. Brand
to the Bond Club of New York at
New York, February 20, 1945.
I should, like to say to start with that when I chose
as the title of my speech "Some British Post-War Problems" I had
in mind economic and financial and not political problems, and I
meant the problems of the United Kingdom alone and not of any
other part ^f the British Commonwealth.

I say that because the

relationship financially, for instance, between the United
Kingdom and other parts of the British Commonwealth is not
always clearly understood * I remember for instance after the
last war reading a book devoted to an examination of the resources
of the United Kingdom in relation to the British war debt. In
this study the assets, national income, and so forth of Canada,
Australia, and other parts of the British Empire were added to .
those of the United Kingdom in order to find the answer. When
therefore I speak of the resources or the debts of the United
Kingdom I am speaking of the resources available to and the debts
due from the 47 million people who live in England, Scotland,
Wales and Northern Ireland, and no one else.

I have heard it

said on occasions when the United Kingdom1s external indebtedness
is in question "Well anyhow you neednft bother about what you
owe India or other parts of the Commonwealth, because you are all
one concern and you can make them do what you like". Nothing
of course could be more incorrect.

' e can only pay a debt due

for example to India, Australia, Canada, or any of the Crown
Colonies by the same means as we pay a debt due to any foreign
nation or any other part of the world.
What I am considering, therefore, is the position of
the United Kingdom alone.


do not intend to give you many

But I want to draw in large outline a picture of our

position as it has been affected by the war, and there may be
some advantage in painting with a broad brush.

Let me begin

by comparison between the five largest belligerents in this
war • the United States, Russia, the United Kingdom, and Germany
and Japan.

The United States and Russia are both continents

by themselves.

They have immense resources, immense productive

powei4 of their own, and have been able to rely almost entirely
on those resources, though of course they have had also to sequre
certain essential imports from other countries, and though Russia
has also received very large assistance in the way of munitions
from you and also from us*

Germany is not a great Continental

power like the United States and Russia, but it is a considerably
larger land power than the United Kingdom, and what it wanted
from outside it has taken by force during the last four years
from the vast territories which it has occupied.

Japan has

also followed Germany's example and lived on China and her rich
conquests in the South West Pacific. What Germany and Japan
have taken by force the United Kingdom has had to secure either by
cash purchase, the cash being secured from the sale of investments or out of its current resources, by United States Lend
Lease, by Canadian Mutual Aid, or by arrangements with other
countries to accept our sterling obligations, that is in effect
by borrowing.

It is very easy to understand how with the small-

ness of our island and the relatively very large population
living on it that we should necessarily end the war with very
large obligations to other countries.

Of all the great raw

materials we have in abundance only coal. We have fought for
51 years a great war on land and sea all over the world, and we
set ourselves to produce and have produced immense quantities of
munitions as well.

In normal times we cannot make our living

out of our own country alone. We had before the war to import
annually nearly £ 1,000 millions (at pre-war prices) of imports
from abroad.

And therefore we had to have very large exports.

During the first 18 months of the war, when France was at first
fighting with us, and then when we were alone, we tried to go
on making our living and to export to the utmost extent as well as
to fight. Towards the end of 194-0 for instance the British
Government sent a mission to all the South American countries, on
which I and others went, to try to increase our exports to that
part of the world.

But it was already obvious that difficulties

of shipping, difficulties of getting the raw materials or the
labour in Englaad for exports, were too great. You may remember
it was just about this time that my dear friend, Lord Lothian,

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explained to the American public that our external resources
were becoming exhausted*

Then Lend Lease came to our rescue, and


*;hat with Lend Lease and later Canadiah Mutual Aid, and' the fact

that we were able to purchase imports from many countries, not
against exports, but against blocked sterling, we were relieved
from so extreme a necessity as to fight as we have done and keep
up our exports as well.

Particularly because of Lend Lease we

were able to divert many hundreds of thousands of extra men into
the services or the munitions•

In fact as a nation we, so to

speak., "went off to the wars11 and left our business to look after
But the food, the raw materials, the ships, the
munitions, which we have thus obtained from outside have not
been the main cause of our great external indebtedness. That has
been caused by our having had to finance the war, to put it
briefly, from Gibraltar eastwards to Burma - just as apart from
the European theatre of war, the war in the Pacific has been,
apart from Chinese, Australian and New Zealand help * and no
countries in the world have done more within the limits of their
resources than they have - your burden, so our burden has been
the Middle East, India and Burma, though it should not be overlooked that India herself has borne relatively to her resources a
very great burden also, and though you have liberally aided us
with Lend Lease munitions.

So far as we are concerned, however,

it is the external expenditure in North Africa, in Egypt, in
Palestine, Iraq

Iran, Abyssinia, and in India and Burma that

accounts for a very large proportion of our external indebtedness,
You may say it has been the height of imprudence to outrun the
constable so far in this part of the world.
stopped Rommel if we had not done so?

But should we have

Moreover there would have

been no Burma campaign, and the position of India would have been
very different from what it is and the Burma road would never
have been opened.

I believe, therefore, you will be satisfied

that we were right in taking the course we did.
The total result of the war, so far as external finance
is concerned is thus as follows: First the United Kingdom spent
in this country out of its own and the sterling areafs current

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earnings of dollars up to March 31, 1943, plus dollars obtained
from liquidating investments, about $6 billions. Since then we
have continued to spend large sums out of our current earnings.
For instance the United Kingdom plus sterling area expenditure
in the United States in 1944 is estimated at nearly $1.3 billions.
Secondly,we have spent in Canada all our earnings of dollars, and
have found additional Canadian dollars by selling back to Canada
sterling investments amounting to Canadian dollars 700 millions.
Thirdly, in addition to having had to- liquidate other large
amounts of foreign investments (altogether including U.S. and
Canadian investments we have sold $4 billions) the United Kingdom
has incurred liabilities to other countries which calculated in
dollars amount to about $12 billions, and of course we are still
incurring liabilities particularly in the Middle East and India.
I may add that we on our side have also done our best to assist
our Allies.

The Reciprocal Aid we have given to the United

States up to the end of September 1944 amounts to over £ 700
millions ($2.3 billions).

In addition we have given Mutual Aid

to our other Allies about £ 490 millions ($1.96 billions).


your national income is from four to five times as big as ours,
you would have to multiply these figures four or five times to
represent an equivalent strain on you.

Anyone who cares to make

this simple calculation for himself will see that the United
Kingdom has also played its part in Mutual Aid,
The result is that almost every other country (leaving
out of account North America) whether it be Portugal, Sweden,
Switzerland, the South American countries, India, the Middle
Eastern Countries, the Dominions, or the Colonies, such as
East and West Africa, Ceylon and so on, will have improved its
creditor position and in every case we shall be the debtor. As,
with the exception of certain neutrals, they are almost all *
United Nations, even those who have not shared with us in the
actual fighting will have the satisfaction of feeling that the
debts we shall owe them will have enabled us to help to bring
their cause to victory.

This indebtedness, which unlike a

commercial debt, has left behind it no productive asset, can
clearly only be redeemed over a long period of time. You are all
quite well aware of the great difference between an internal and

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an external debt.

In the case of an internal debt, the real

sacrifice has been made at once*

If, for instance, we build a

locomotive in England, we have expended the labour and material
at once. We have made the sacrifice represented by the total
effort required.

What remains is a debt within the community.

It is all in the family.

If we borrow money abroad to buy a

locomotive abroad, we must expend labour, material and effort in
future to repay our debt by exporting some material article of
equal value.

The burden remains for the future.

In other words,

it is out of future exports only that we can repay our debts.
The help we have had from outside has enabled us
completely to distort our peace-time economy.

The 47 million

people in the United Kingdom have been mobilised for war to a
point beyond which it would be impossible to go, and beyond perhaps
what even Germany has been able to do.

Out of 33 million men

between 14 • 65 and women between 1 4 - 5 9 * 22 million are in
the services or in industrial employment•
anything achieved in the last war.

This is far higher than

This concentration of effort

is directly due to the fact that we were able to rely so greatly
on outside assistance. We have abandoned, as I have already told
you, most of our expert trade, and in volume in 1943 our exports
were only 29$ of what they were in 1938. We have got to build
our export business up again, and indeed greatly increase it, and
till we do so we shall not be able to make both ends meet. Notwithstanding your huge war production, you have managed not only
to keep up and increase your civilian consumption, but to keep up
fllso to a far larger extent than in our case your pre-war
commercial exports.

This is certainly an outstanding feat, but^

mobilised as we are, it is far beyond our capacity.

Meanwhile, if

the war stopped now, our exports would be only one-third of what
they were in 1938. It is generally estimated indeed that in order
to balance our external income and expenditure (excluding external
debt service) we shall have to raise our exports to 150 percent in
volume of the 1938 figure or five times the present figure. This
is because we have lost invisible exports in the way of income
from investments, shipping and so forth*
Our exports in 1938 and at 1938 prices and expressed in
dollars amounted in value to $1,880 millions, or if calculated in

present prices, that is at, say, 180 percent of 1938 prices to
$3,384 millions.

An increase of another 50 percent in volume

would in terms of money bring the figure to about $5 billions.
In 1944 they were over $1 billion.

It must be borne in mind

however that this latter figure would in any event be very
rapidly increased after the end of the war*

The world is starved

of goods and if we were able quickly to reconvert our war
industry to produce them, we could no doubt in a short time secure
a very great increase in exports.

Thus a rapid reconversion of

our export industries as soon as war conditions permit is of the
greatest importance to us.
You will see, therefore, that both our main external
problems join together in emphasizing our need for exports. We
want them first in order to live; we want them then to repay our
indebtedness. We shall no doubt make every attempt notwithstanding our urgent needs t^ reduce our imports to whatever extent
they are not essential, since to pay our way and to be
independent financially must be our very first aim*

But in the

main our imports represent essentials for life and industry, and
it is questionable how we can compress them.
For an authoritative statement of how the British
Government looks on these questions I cannot do better than
quote to you a few sentences from a speech made by Sir John
Anderson, the Chancellor of the Exchequer, in October last:
"Finally", Sir John Anderson said at the end of his
speech, "I want to say a very brief word about ovv external
financial position after the warf

We shall emerge with heavy

overseas obligations, but at the same time our credit throughout
the world will stand very high.

I hope I am not being unorttwdox

in suggesting, at such a gathering, that the basis of national
credit is the character of the people, their courage, their
determination and skill, and above all their productive efficiency.
I do not think that anyone need be apprehensive about our
possession ©f these real assets. Now that means that our financial
indebtedness can be translated into physical terms of production.
I tell you, and I speak under a sense of responsibility, that I
believe we can see our way through. We can meet our obligations
in a realistic way: that is by producing goods that other

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countries will want#

The process will take time, but it depends

in the main, not upon skillful financial adjustments, but upon the
willingness of our own people to recognize that, as they fought
their way to freedom, so they can work their way to security and
progressive improvement in all their material conditions*


depends also upon recognition by our creditors that they have a
common interest with us and must collaborate. They must be
reasonable and not seek to treat war debts on the footing of
ordinary commercial obligations*

Practically the whole of our

external obligations incurred during the war are to our Allies and
associates in the war*

We have incurred 9 debt to them - but have

they not also incurred some kind of a debt to us which they too
can pay, by their confidence in us which has stood a much sterner
test and by their practical co-operation with us?11
To this authoritative statement by Sir John Anderson I
should like to add some general comments of my own, First of all
I wish to stress that the significant and fundamental character**
istic of the present age is the greatly increased possibilities of
wealth production, which applies, or can be made to apply, to the
whole world•

In the great industrial countries the production of

wealth, it is estimated, increases yearly by some 2% or 3$?


oth^r words the production of a nation over 10 years should be up
by 20$ or 30$. This is the vital factor which, notwithstanding
the war, should enable the standard of living to be gradually
increased everywhere and with it, of course, given reasonable
conditions, international trade*

This is the first point to bear

\T) mind*
In the second place you should remember here that our
exports, while a vital element in our own problem, represent a
very small proportion of our total national production and income,
something between 2% and yfo now, I think, and normally about 10$
With increased wealth production we should have no difficulty at
least in producing sufficient exports of the kind needed by the
world, and I Relieve at the right price and of the right quality*
In the third place it is clear that, so far as the needs
of our creditors are concerned, we shall have a market*
not have to pay their own currency for them.
sterling balances to buy them.

They will

They will use their

But of course a debtor who hasn't

enough to eat and is out of work is not much of a debtor - we must
therefore export enough to buy our essential imports first, in
addition to what we can export to meet the needs of our creditors*
Fourthly we come down therefore to our ultimate problem,
namely how we are to find a sale for what I may call our ordinary
exports up to an amount 50 percent greater than in 1938. The
first essential is, of course, our own efficiency, so that we can
compete in quality and price with other nations. This is our own
job,. I have no doubt there is much to be done, particularly with
certain great industries, for example, coal mining and cotton

In the case of other great industries we are well able

to compete* When put to the test in the w$r we have not failed
to show the necessary efficiency and I have no doubt we shall
succeed in future. The second and final essential is that there
should be a good foreign-market, indeed an expanding foreign

We cannot by ourselves insure that such a market will


It depends on the rest of the world and how things go*

If it were necessary to assume that international trade, namely
the total trade of the world, cannot be increased beyond, say,
the 1938 standard; if, in other words,, the cake can get smaller
perhaps, but can never get larger, then our task will undoubtedly
be very difficult, For, ex hypothesis if in such circumstance's we
increase our export trade by 50%, all others together must decrease
theirs by the same amount*
But, as I have pointed out, there is absolutely no need
for the size of the cake to be limited* There are endless unsatisfied wants in the world and also a capacity for increased production of wealth with which to satisfy themf

Thus under favour-

able conditions total international trade ought greatly to increase.
In that case our exports would increase and yours too and everybody

To put it shortly, the more we export, the more we buy

from you and from others.. Thus the more we export, the more you

Exports are imports and vice versa.

It depends on the

end from which you look. We all grow rich or poor together, and
foreign trade like internal trade is simply the mutually beneficial
exchange of goods and services. Forgive me for these elementary

We all know they are true, but'we often forget them in
If foreign trade does greatly increase, our own problem •

becomes comparatively easy, provided we can surmount our immediate

post-war difficulties*

For together with some other nations,

particularly in Europe, who face the same sort of difficulties,
we ought, with a push from our friends, to be able to float ourselves off on the rising tide*

Thus the answer is that we can be

prosperous and thus surmount our difficulties most easily if the
rest of the world is prosperous and stable, and particularly if
your country is prtsperous and stable * and I would emphasize
the word "stable" in both cases - and if then through free and
multilateral trade we can greatly increase the international
exchange of goods •
But undoubtedly a terrible war like the present one is
not the best prelude to usher in a world of stability.

There is

above all the condition of Europe, the greatest producing and
trading area of the world outside your own country, with its
countries, devastated and impoverished, and some of them altogether
without any means of their own quickly to restore their economies.
And not only that, but with hatreds and divisions greatly deepened
by the war*

For us to make a beginning towards peace and stability

requires- some special measures of assistance towards this part of
the world*
But beyond that we all know more or less what is needed
to make things better. Every businessman, for instance, knows that
a flourishing and stable international trade depends more on
political security and peace than on anything else, and on
confidence that there will be peace and that nations are settling

It will depend in the next place on financial and

economic stability, particularly in currencies and exchanges•
My memory as a banker goes back to the years before 1914, and when
I think of those days I realise how very far we have travelled
from those stable or apparently stable and happy days*

When I

tell my children, or other young people, that in those days there
were no passports, except to Russia, they do not believe me #
There had been no war involving all Europe for 100 years. There
was absolute confidence in the great currencies of the world.
Nobody thought anything could happen to dollars, sterling, francs
or Reichsmarks.

I am quite sure that many of the most distinguished

bankers in London had not the faintest idea, in those days, what
the "transfer" problem meant • We have got to get back t o something equivalent in terms of political and monetary security to

those halcyon days*

And, as you know, we are nowadays all setting

our sights much higher even than that* For in those days we were
certainly not without bad slumps and booms and unemployment•


our economists have encouraged all our Governments to undertake to
solve all unemployment, and to do away with slumps and booms*


us hope that we shall be successful in this difficult task as
But whether we are talking of political security,
exchange stability, or avoidance of booms and slumps, we must
recognise that none of them can be reached without international

Peace is international. Currency diseases

communicate themselves from one country to another. Nothing is
more international than booms and slumps*

The world is now so

tightly woven together that international co-operation in these
fields is absolutely necessary, and po-opera,tion above all between
the United States and the British Commonwealth and the sterling

It seems to be absolutely natural, indeed inevitable, that

our two great Commonwealths should co-operate in the closest
degree, and beyond that should join in supporting world-wide cooperation. But when it comes to the world we have to go cautiously.
Impractical idealists who long for some simple and immediate
solution, for some sort of world Government, for something which
decides everything and which will force rather than persuade the
independent states of the world, are the most fatal guides. We
are only at the beginning here of a long and immensely difficult
road* Nevertheless we have to start upon it* There are risks in
it5 but they are nothing in my opinion to the risks we all shall
run, if we each try to go our own way. That is what the hard*-


boiled realists who think they are hard-headed too, but who are
certainly short-sighted, forget.

It is for these reasons that we

should welcome the efforts made at the Dumbarton Oaks and Bretton
Woods Conferences,
I had burnt into my mind in the years after the last
war the disasters which then happened to Europe, largely because
the problems were not understood by the world1s statesmen. I
watched them from near at hand in the City of London. They were
in my opinion a direct prelude t o this war*

It will be an act

of major statesmanship to avoid them this time and of necessity
the responsibility must largely devolve on your great country.

A discerning friend of mine who knows my country well said to me
the other day that he included among the devastated countries the
City of London and nothing in his view was more important to
stability and international trade than to enable it once again
efficiently to perform its world-wide functions. You will
certainly not expect me to dissent from this view and I believe it
will find sympathy and support in such an audience as thisf
In addition to helping those devastated countries which,
through no fault of their own, since they were not aggressors, are
not in a position whatever their efforts, to restore themselves
without help, another great responsibility - more important than
anything else in view of your immense economic power - will be
yoursj and that is to maintain a high degree of prosperity and
stability in this country*

We on our side have the responsibility

of assuring as far as we can prosperity in our country and maintaining and strengthening the sterling area as a very important
element of stability in the world•
If all this can be done there would be good hope that we
might in a reasonable measure of time achieve success in raising
international trade to a much higher level and that in that case
the problems 9f my country and of others who have suffered will be
solved in the best manner possible. But no one can yet say
whether all this will be done or whether the world will, in fact,
find the political and economic security that is necessary for

If it does go astray and if there is less security

and less progress in every direction, then our task will be a more
difficult one.
What is certain is that whatever Government may be in
power, the British Parliament will insist that no stone shall be
left unturned to maintain the standard of living and the employment
of the people, and we might then be forced to carve out such
prosperity as we could achieve in a more limited fashion* Personally I draw confidence from a very simple thought, which I
expressed a good many months ago, when I was speaking to the
American Bankersr Association*

There are in the United Kingdom

47 million willing buyers of the primary products and the raw
materials which millions of sellers in other countries will want
to sell.

It cannot be that We should find it impossible either

directly or indirectly to supply what they also want and so to

complete & mutually beneficial exchange> and moreover without
injury to the world at large* But it remains that the best hofre
of the world is in a common and co-operative policy to be
pursued at least by the United States and the British Commonwealth
and the sterling area by means of which the difficulties of each
country may be solved through the prosperity of all.

February 20, 1945«