COITS,.......based on a 'Guardien' report.
a riteinatioiat capital movements have grow enormously in recont years. The U, S. has found that a massive curnent account surplus is not sufficient to offset ths net outflow of capital “nd the goverment has now trisd to put & direct curb on capital.
It is suggested in ths current issue of the “‘estminstar Bank 'Rsview' by 4,09%SM that Britain is suffuring from the sane trouble and my adopt. admiliar =easures, He points out that during the 1950's capital movements in money terms were at least 10 times as great as in tho 20 years pracet ang World War II, In mors rosent years Britain hai looked tothe. current account balance as the main cause of the payments trouble. It is assumed that we noed s large surplus on current account to sarviss the external debt, finance overseas invesent and replenish the raserves. A.Conan thinks this unrealistic, "The U.K. does not nommally earn a surplus with non sterling countriss and its customary surplus in the overseas sterling area is financed by a reduction in sterling balances, Under such conditions, capital movements exert a major influoncé on the raserve ratio. The flow of capital from the U.K. impairs the ratio because it ineréasos liabilities, —~ On tho other hand, the reserves aro maintained by imperts of nomsterling capital into the U.K. and the overseas sterling areas."
If it can he proved that the capital account is in fact tits more troublesome part of the payments balance(as in the US), it may be a fallacy te insist on a big current account surplus just cs it was to insist on a Budgst surplus 30years ago.
The argument that a payments balance can be put right painlessly by controlling tho outflow of capital has always appealed to economists.O0n the whole, the experience with British “xchange Control in: time of peace has . not been encouraging. It became increasingly ineffective and damaging to stability. Time alone will show whethsr the naw American attempt will be more successful. Meanwhile, the work done by A, Conan in this and previous pspers has brought out hfw littlo is really known about the ways in which a country's external accounts can be kept in reasonable balance,