THE TABLET January 3rd. 1959. VOL. 213, No. 6189
Published aa a Newspaper
H E TA BI ET A WEEKLY. NEWSPAPER* & REVIEW
Pro Ecclesia Dei, Pro Regina et Patria
FOUNDED IN 1840
JANUARY 3rd, 1959
N1NEPENCE
One World ior Progress: The Lesson for Asia and Africa
The American Business Man: Changes and Contrasts. By Colin Clark
What They Say in Finland: Increasing Soviet Pressure. By J. E. Alexander
The Pope's Christinas: a Narrative Account, and a Summary of his Broadcast
Cardinal Godfrey's Return: His Eminence’s Address in Westminster Cathedral “ Language and Christian Belief : A Review by Dom Illtyd Trethowan
Critics’ Columns : Notebook : Book Reviews : Letters : Chess
SECOND STEP TO COME
1959 begins very well with steps towards the convertibility of the world’s main currencies. It is true that these steps have been taken by men quite conscious that there is an element of risk for each country, but judging the risk necessary because there would be a worse risk in lagging behind. Of all the currencies, sterling is the one that most needs to be freely and fully convertible. To a far greater extent than any of the other tied currencies, it is used in international trade.
Once full convertibility has been achieved, the Government will be able to look back to the happy ending after twenty long years of an unnatural and undesirable state of affairs. I t will be the end which will crown their work, and nothing will be more to their credit, or reassuring to the world, because it is the great weakness of the present position th a t the Government is still frightened of withdrawals and sales, a flight of capital, as people with property judge it common prudence to put some of their assets beyond the reach of predatory Socialism.
At the moment the Government have only taken the first and easier step, convertibility for foreigners holding sterling. For residents the old restrictions continue. The concession to foreigners has really come about gradually. I t is the formal recognition of a state of affairs that has long been tolerated, the existence of markets outside Great Britain where sterling could be exchanged for dollars. That was tolerated because of the greater injury th a t would have accrued from trying to enforce any rigorous control, when at the same time we want foreigners to think sterling a good currency to hold.
Foreigners are estimated to hold well over £3,000m., but the gold and dollar reserves have risen so satisfactorily that they could withstand any likely withdrawals.
But it is obviously inequitable that foreign holders should remain for long in a privileged position, or that British residents should be able to effect sales through foreigners which they are not allowed to effect directly. The Government is plainly testing the ground, and if this first step proves to have been taken on firm soil, then the second and bigger step can be taken. We do not believe there will be a General Election until it has been taken, or that the Government will want to go to the country leaving the work half done, and knowing very well that a Socialist victory would create great nervousness abroad about what was in store for sterling and lead to a run on the reserves.
For a long time the Labour Party leaders have been losing their enthusiasm for convertibility, which was still their official creed, in their older international tradition, when Dr. Dalton attempted it prematurely as soon after the war as 1947. They do not want to have to consider the outside world, or to make allowance for speculation against the pound, to which so many of their policies, all involving more expenditure, would naturally give rise.
Nothing is more tempting for a Government than to think it will have much more freedom of action if its currency is only, convertible with its own permission. There are countries which are so hard put to it to pay for their essential imports, like oil, th a t they are driven to a close control. But that is not Britain’s position. If we are immense importers, it is because we are immense exporters as well. We want to sell in sterling, and we want it to be among all the hard currencies the most useful to hold. The gain for this to British trade very much outweighs the disadvantage of having to allow for foreign opinion - f o r nervousness and speculation such as originally drove us off the Gold Standard in 1931. For the same reason we should not freeze balances held here when we have political disputes with other Governments. A correspondent of the Financial Times has pertinently pointed out that all through the
