Billions for Victory

Shuffling and shivering in Threadneedle Street one morning last week long lines of thin, neat, pasty-faced, bowler-hatted London stockbrokers' clerks waited for the Bank of England to open at 10 a.m. It was zero hour for the -L-300 million 3% war loan ($1,200,000,000) announced fortnight ago by Chancellor of the Exchequer Sir John Simon. This first major fiscal barrage of Great Britain in World War II had to go over with a triumphant rumble of "Oversubscribed!"--or else. The waiting clerks gossiped that Distillers Co., Ltd. was buying $4,000,000 worth, Prudential Assurance Co., Ltd. $20,000,000, and there was said to be "hardly any stagging."

A "stag" in the London market is a broker who subscribes for bonds not to fill orders on his books but believing he can resell them to laggards at a slightly higher price for small but quick profit. Sir John, by offering only 3% (some British loans in World War I paid 5%), had left the disgusted stags too thin a margin on which to operate. In City jargon the Chancellor was "trying it on the hard way," but when two top-hatted, scarlet-coated minions of the Bank of England swung its portals wide his confidence was justified. In went the stockbrokers' clerks and within four hours the loan had been oversubscribed.

Golden Eggs? This was magnificent, so far as it went, but free Britons are fast learning what an appallingly short way -L-300 millions go today in even the present "phony" (therefore "cheap") stage of World War II. Years ago the Nazis quit issuing Treasury figures, blindfolded the German people to what they were having to pay to get ready for Armageddon. Adolf Hitler boasted, when he entered conquered Poland, that this cost was 90 billion marks. He seemed to think that cheap. Economists shuddered.

Last week Economics Professor Lionel Robbins of London University estimated in Foreign Affairs that Britain must spend this year in direct war costs some -L-2,000 millions ($8,000,000,000). Another -L-750 millions must go for normal Government expenses, so Sir John must find somewhere a staggering total of -L-2,750 millions--just about half the British national income.

Although the Chancellor has raised taxes (TIME, Oct. 9), Professor Robbins thinks these cannot yield much over -L-1,250 millions. Thus a gap of -L-1,500 millions yawns. Into it Sir John is pouring the -L-300 millions he raised at long term last week. Into it the Treasury continues to pour about one million pounds realized every day since break of war by the sale of Savings Certificates and short-term Defense Bonds. But everyone in the City realized last week that before long something more would have to be done about this estimated -L-1,500 million deficit. In answer The Economist recently showed that if the whole of all British incomes of $8,000 yearly and over should be taken by the State--which already takes from 37 1/2% to 80%--Sir John would reap only an additional -L-60 millions. Mere chicken feed --and of a kind to poison those bourgeois pullets who lay so many golden Treasury eggs.

"Deferred Spending." Not chicken feed but -L-400 millions yearly is the sum famed British Economist John Maynard Keynes figures His Majesty's Government could obtain by what he now calls "Deferred Spending." This is an improved, revised version of the famed Keynes Plan (TIME, Nov. 27) which today is just about the biggest topic of behind-the-scenes fiscal gossip in Britain.

Some 250 House of Commons members of all parties recently gathered to hear Professor Keynes expound "Deferred Spending." Originally the Keynes Plan was for the State to take a portion of all incomes above -L-150 ($600) yearly--this would exempt some 12,000.000 British wage earners from the Plan--and give in exchange 2 1/2% Postal Savings Certificates redeemable after the war.

Professor Keynes now proposes that anyone affected by the plan who does not want to leave his "Deferred Earnings" in the Postal Savings Bank should be permitted to leave them with a trade union or Friendly Society. Planner Keynes is confident that in any case the Government would directly or indirectly receive the loan of nearly all these funds because Trade Unions and Friendly Societies are inveterate buyers of Treasury bonds.

"Spiral of Inflation." To irate critics who call the whole -L-400 million scheme a "forced loan," Professor Keynes is tireless in his calm, persuasive retorts. He starts by asking everyone to remember how, during World War I, prices rose much faster than wages (as they are again doing in Britain), argues that even though war wages run high, the working class suffers an actual loss in "real wages" from this "spiral of inflation." It is obviously much more to the workers' advantage, he insists, to be left at the end of the war with a packet of 2 1/2% securities than to have nothing left but the memory of fat pay envelopes which somehow turned lean in the spending.

Professor Keynes claims that during World War I the main reason that prices leaped ahead of wages in Britain was that wage earners, flush with fat wartime pay envelopes, spent so lavishly amid a shortage of goods that they forced up prices to their own disadvantage. If they had "deferred spending," says the Professor, the "spiral of inflation" and of post-war deflation would not have been so violent.

The Rt. Hon. Arthur Greenwood, Deputy Leader of the Labor Party, has flayed the Keynes Plan as, "Good enough for Hitler's workers--but not good enough for ours." Lord Stamp, Economic Advisor to the Government, is still for "voluntary methods." Because good words have been said for the Plan by Lords Balfour, Swinton and Glentanar, the capricious London Daily Express paradoxically headlines, "Peers Of The Realm Unite! You Have Nothing To Gain But Keynes!"

"Voluntary Methods." Nearest any member of the Government has come to touching the Keyres Plan in public was when Minister Without Portfolio Baron Hankey told the House of Lords that, "It has not been rejected." A forced loan was out of the question, said Lord Hankey, while the Government is still trying to see whether the same object cannot be attained voluntarily. In retort last week Professor Keynes snorted: "To depend on voluntary methods, when the Treasury has to take half the national income, is comparable to relying on these methods to raise an army of 5,000,000 men."

Best fiscal-aim-political opinion in London this week is that the deeply ingrained British mistrust of any "plan," and the proud memory of how many times Britain has successfully "muddled through," will continue dominant at the Exchequer. On the present scale, one group of Government experts believes that Britain can muddle along for another twelve months without more "extraordinary measures." After that the measures will either have to become extraordinary indeed or some rich friend--say, the U. S. --will have to carry the Empire on the cuff.

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