As promised in the provious bulletin, we are going intothis question in a little more detail. This is because it is important to understand that the present policies of the Tory Government do not arise out of their stupidity or hatred of the working class, but from a real crisis of British capitalism, This in turn needs to be undorstood when considering the possible political svolution in the coming months — the postmaster general is quite correct when he sayd that he i? not standing firm against the post office workors because he is pig-headed. He may be a pig-headed man -— we don't know the gentleman - but the main motive force to his stubbornness is the determination of the Tories to peg wages in an effort to put the burden of the crisis on to the backs of the workers and to retain the confidence of their continential capitalist friends. The weakness shown when the electricity agreement breached the wages pause shook the faith of the big continental bankers in the Tories! ability to stabilise the pound. One of the by-products of this was doubt about the wisdom of leaving their money, attracted by the high interest rates,in the London money market.
The balance of payments crisis has been one miin expressions of the wider crisis of British capitalism. Internal inflation, overseas military apenditure, welfare state and Keynesian cconomics all contribute, but are in practice merely the by-products of British capitalism's attempts to adapt itself to modern conditions and the threat of social change. Incéed British capitalism has managed to prevent a slump of the 1929 varicty, but only by transferring the effects of the chronic crisis of British capitalism to cther fields. It may be said that they have succeeded in modifying the tempo of the crisis but have not by any means menaged to solve the basic contradictions of capitalism. Hence we can see the dangers of the policies of the right wing who merely want to intensify all the very policies whici” elping to give rise to the balance of payments crisis.
The fall of £85 millions in the gold reserves during December was larg ely due to the usual year-end payments on the U.S. and Canadian post-war loans amounting to £67 millions. Even so, this leaves a loss of £18 millions in normal transactions, compared with a corresponding gain of £59 million in Novembe (of which £50 millions was used to make a repayment to the I.M.F.) In this first place, the big total drop demonstrates that British capitalism is not earning enough balance of payments surplus that is needed to meet these annual debt _ , payments, let alone providing for overseas investment and 'aid'. All the latter is still financed by the precarious reserves or out of short-term funds attracted to London from abroad.
Secondly, the December loss brings home how unreliable is the inflow of these short-term funds. MJarly in December, rumours of a2 possible revaluation of the Italian lira and the Swiss franc (both without foundation) were sufficient to drain away large funds from London although they had only coziv in during Octobor and November, At the ond of the year, further largo auwunts of money wore withdrawn from both New York and London by Continental commorcial banks for tho purposes of ‘window dressing! of year-end balance shocts,
Between August and November there was a total of inflow into London of some £300 millions: scen against this trend the reversal in December was only small, But the Bank of @ngland's "Quarterly Bulletin" points out that the inflow during Muyust and September scems to have been duo primarily to the rovorsal af short term positions, e.g., the rebuilding of abnormally low balances held in storling, including inter—company accounts.
Thus we see that even as a short-term device the attempt to vet over the balance of payments crisisby attracting short-term funds is extremely limited apart from the lonsterm disadvantages which have been outlined in a previous article in the bulletin.