April 14, 2013

Finest Hour 153, Winter 2011-12

Page 12

Churchillnomics: Gold, Currency and Finance:Then and Now

By Richard M. Langworth

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If you laid all the economists end to end,” Milton Friedman allegedly said, “they would not reach a conclusion.” (Friedman? The quip was repeated recently by presidential candidate Mitt Romney, who’s a little creaky with his sources (page 8). Actually I’m quite certain that George Bernard Shaw said this first.

My college economics professor was a Goldwater Tory who preached the doctrine of Adam Smith. (Profs were different then.) His name was Charlie Kramer, and he pronounced his dark science “eek-onomics—with the accent on the ‘eek.'”

If we learned nothing else, he told us on Day One, “I hope you’ll go away with two lessons: 1) It’s a dog-eat-dog world out there. 2) When in doubt, ask the gate guard at the Staten Island ferry.”

“If you really want to know what to do about the economy,” Professor Kramer explained, “don’t ask an economist.” They’ll hesitate and waffle and disagree with each other. Ask the fellow holding back the crowd until the ferry docks. He’ll give you an answer that’s as good as anybody else’s.”

Winston Churchill might ruefully have agreed after his tenure as Britain’s 1924-29 Chancellor of the Exchequer, when he “restored” the Gold Standard and “caused” the General Strike which paralyzed the country in 1926. This same Churchill in 1930 “abandoned” Free Trade to “support” protective tariffs, putting Britain in even worse shape in the Threadbare Thirties. Of course Churchill didn’t actually “do” any of those things in quotes. He simply accepted the recommendations of economists.

Having learned exactly what Professor Kramer predicted I’d learn from his course, I had only his two prime lessons to fall back on when we considered an issue devoted to one-tenth of Churchill’s political life. I turned ipso facto to people who not only know much more about it than I, but whom even I can understand. It’s like the Prime Minister asking his military planners: “Pray summarise for me on one sheet of paper the pros and cons of invading Sumatra.”

Ryan Brown was recommended to us by Ashland University Professor Justin Lyons as able to state Churchill’s case—which of course is debateable—for putting Britain back on gold. Ryan did. For review, Professor David Dilks sent us to George Peden, Emeritus Professor of History at the University of Stirling in Scotland, who has written at length on the Treasury and Keynesian Economics. His comments helped Ryan improve his work.

For Keynes’s side of the story, and his relationship with Churchill, Alfred James of Australia sent us a fine article by the late H.W. Arndt. We may not be “all Keynesians now,” as Richard Nixon once memorably cracked, but we will be the wiser for his thoughtful piece.

We could not leave the subject without Churchill’s own words, which come in two sallies: his 1934 article, “The Truth About War Debts”—a major issue in economic relations between Britain, Europe and America in the 1930s—and his leading remarks on economics and fiscal policy. Our “Wit and Wisdom” column recalls that WSC once favored nationalizing the railways, changed his mind, and how he replied when accused of flip-flopping.

For the modern aspect we asked Ryan Brown to write about a current issue: the overvalued Chinese Yuan, which many politicians believe is the root of our troubles. Again Ryan delivered, which is not to say everyone will necessarily agree. No one ever agrees about economics.

If all this brings us no closer to what Professor Kramer warned us is a witch’s brew of arcane science and conflicting opinions, it may provide an understanding of what Churchill tried to do—and how the economic events of the 1930s are reflected in the Chinese currency issue today.

If you finish reading this convinced that Churchill was right about gold, and the politicians wrong about punishing China for the overvalued Yuan, write to your Congressman or your MP. If, which is quite possible, you decide that Churchill was all wet, and that we should go after those troublesome Chinese, write us with your opposing view.

Remember Churchill’s and Lord Birkenhead’s famous Rule 12 of The Other Club (page 24): “Nothing in the rules or intercourse of the Club shall interfere with the rancour or asperity of party politics.”