THE OUTLOOK TODAY
AN ADDRESS BY
SIR ALEXANDER CLUTTERBUCK, K.C.M.G., M.C.
Chairman: The President, Mr. Thos. H. Howse.
Thursday, November 25th, 1948.
HONOURED GUESTS AND GENTLEMEN
Keeping in mind that this is The Empire Club of Canada and that our motto is "Canada and a United Empire," it is but natural that we should endeavour to arrange for as many speakers as possible from the heart of the Empire. Today it is my privilege and pleasure to introduce Sir Alexander Clutterbuck, High Commissioner for the United Kingdom in Canada.
Sir Alexander was educated at Malvern College and Pembroke College, Cambridge. He served with the Coldstream Guards in the First World War, was awarded the Military Cross and mentioned in despatches.
He then entered the Civil Service and served in the Colonial Office from 1922 to 1928, during which time he visited Ceylon.
Sir Alexander then moved to the Dominions Office and was a member of the United Kingdom Delegation to League of Nations Assembly, 1929, 1930 and 1931. He was Secretary to the Newfoundland Royal Commission and visited Canada and Newfoundland in 1933. He paid a further visit to Newfoundland in 1938.
In 1939 Sir Alexander was appointed Deputy High Commissioner for the United Kingdom in the Union of South Africa.
In 1942 he was appointed Assistant Under-Secretary of State for Dominion Affairs, when he again visited Canada and Newfoundland, with the then Deputy Prime Minister, Mr. Atlee.
In 1946 he was appointed High Commissioner for the United Kingdom in Canada, in succession to the Right Hon. Malcolm MacDonald.
Incidentally, when I was talking to His Excellency, the Governor-General last Tuesday, he said "Clutterbuck is a very fine speaker. I am sorry I cannot hear him." I thought Sir Alexander might like to hear that he was held in such high esteem by His Excellency.
I now have very much pleasure in introducing Sir Alexander Clutterbuck, K.C.M.G., M.C., whose subject will be "THE OUTLOOK TODAY."
Mr. President and Gentlemen: It is a very great privilege for me to have the opportunity of addressing you today and I thank you most warmly for your kind invitation and for the very friendly reception you have given me. I well know what fine work this Club is doing in focussing attention on current problems, both in the Commonwealth and outside, and helping in that way to build up that informed public opinion without which our democratic system cannot function to its fullest effect.
We live in times when history is in the making. History is being made before our eyes and far-reaching changes are taking place all over the world. Here in Canada during this month history has been made, for a great Prime Minister has laid down his burden after carrying it for longer than any of his predecessors. Now, history itself will record the achievements of Mr. Mackenzie King, and it would be presumptuous indeed for me to attempt to assess them. I will only say this, that the entire Commonwealth joins in salute to one of the great figures of our time. What a great satisfaction it must be to him in his retirement to be able to look back and reflect on the tremendous strides which this country has made in prosperity, expansion and international stature since the day when he first took office.
And now Mr. St. Laurent assumes the burden. No one who has come into contact with him can have failed to be impressed by his great qualities of heart and mind and Canada is indeed fortunate in having such a man at this juncture to assume the direction of her affairs. We in Britain join with you in Canada here in wishing him every succcess in his high task.
When we look out on the world today we seem to see nothing but troubles and difficulties, and I think we are in slight danger of becoming so obsessed by these difficulties that we fail to observe the progress that has been made since the war. Above all, we must not get into the position of failing to see the wood for the trees and so today, with your permission, I should like to give you just a short bird's eye view of the situation as we in Britain see it, concentrating chiefly on the economic side of things which to my mind is the most important, because I am convinced that without improvement in economic conditions you will not get political stability.
In order to get the correct perspective I must ask you to come back with me for a few minutes to 1946, two years ago, when we all thought that the world was making a fair start toward recovery. We realized that from the economic standpoint the most formidable of all problems was confronting us, namely, the righting of the great unbalance which had been left in the world by the war. On the one hand, there was the great productive machines in Europe, built up over the centuries, but shattered and dislocated out of all recognition, and having to be slowly and painfully rebuilt, inch by inch, as it were, against great odds in a world of shortages and often, too often, against a background of acute political unrest.
On the other hand, there was the great productive machine in North America which--and thank Heaven for it, for it is rescuing Europe today--emerged unscathed from the physical damage of the war and was indeed vastly expanded under the impetus of war necessities.
Now, to right that unbalance was a big job. It had to be done as quickly as possible because it was obvious to all that the economy of the world simply would not work until it was done and until trade could flow again in normal and not artificial channels. We thought that could be done, working together, in about three years, and we set out in 1946 with high hopes. 1946 was a good year -it seemed that those hopes were justified. But as we all know, they were doomed to frustration, largely through a series of adverse factors beyond our control. I need not go into these here, except to mention the most important and that was that we had thought, perhaps innocently, but I think justifiably, that we could count after the war on the same degree of co-operation among the great powers of the world in rebuilding the peace as we had secured in carrying the war through to final victory.
Now, we all know that that co-operation has been denied to us, and continues to be denied to us, in one most important quarter and the result of that has been to retard seriously economic recovery over large parts of Europe.
In 1947 we had shock after shock and crisis after crisis. We had the abnormal winter, the convertibility crisis and so on, and then there was a general running down of confidence in Europe. Country after country fell into economic straits, had to take new measures to protect its reserves. Trade began to contract instead of to expand. There was a downward drift of truly alarming proportions.
Meanwhile we, ourselves, through the disappearance of the U.S. credit which we had counted on as a cushion for three years to give us the breathing space necessary to build up our industry and our export trade, found ourselves thrown back on our own resources in less than two years and forced to draw on our final and ultimate reserves.
It was a very unpleasant position and it was clear one of two things would happen--either the downward drift in Europe would continue until the whole world was plunged again into a fresh economic crash or some great new effort would be required to carry us all round the corner.
Well, that great effort has been forthcoming and it looks to me now as though 1948 may go down in history as the year which marked the turning of the economic tide and it came first through E.R.P., that great initiative taken first by Mr. Marshall and subsequently supported and adopted by the U.S. Congress and people, an initiative taken as only a great nation and a great people could take it.
That was parallelled in Europe by this new movement for the drawing together of the free countries of the West with a view to solving their problems in close collaboration, instead of in competition with each other. It is a movement which goes far beyond the economic and financial field. It is a movement for mutual defence, but, more than that, it is a movement for the rallying of the moral and spiritual forces in Europe against the perils which are only too obvious to all--a movement for the protection of all those standards and values and freedoms and ideals which are the heritage of western civilization and which we are all alike determined to preserve.
Now, we must not expect too much from this too quickly. I notice a certain tendency to imagine that by a wave of the magic wand you can produce a United States of Europe as one political unit, almost, as it were, over night. That is not so. We are dealing here with very old nations, and with their own history of which they are very proud, and naturally, because they have all contributed greatly to the development of the world, with their own traditions, their own background, their own culture and their own language. You cannot expect that they will suddenly forget all about their history and background and merge themselves in one unit. No, the approach must be more gradual and this in ever increasing collaboration, in economic affairs, in defence and indeed in all matters tending to speed up European recovery.
It is this for which Britain has been working. She is playing a leading part in this new movement and we have great hopes from it. Had time permitted, I could have given you some striking illustrations of the new team spirit which is developing in Europe and which we are doing our best to foster and encourage.
Britain is the better able to take the lead in this way since she herself has made remarkable strides this year on the road to recovery--so remarkable indeed that, as you will have seen, Sir Stafford Cripps was able recently to make in the House of Commons his first cheering speech since he became Chancellor of the Exchequer. Britain has now got her second wind after the shocks of 1947 and the results are now beginning to appear. Here are some of them.
In the first place, our industrial production today is running at about 25% above pre-war, that is, about a quarter as much again as before the war, and is on a mounting curve.
Secondly, our export trade reached in July a figure of 149% as compared with pre-war--practically half as much again as before the war, and although there was subsequently a seasonal drop, owing to holidays, we are hoping we shall reach the target of 150% by the end of the year. Thirdly, the account for the first six months accounts of this year show that we were able to reduce our over-all deficit with the rest of the world by no less than 55%.
Now, there are two special points which I must mention hurriedly which give us great satisfaction. First of all, the improvement in our invisible earnings. As you will realize, as a great creditor before the war we always imported more than we exported and we relied on our invisible earnings-shipping, insurance, overseas investments--to fill the gap. That, of course, put us in a very bad position after the war because we had to liquidate most of our investments for carrying on the war and our shipping and insurance earnings fell also to very low proportions. To show you the change between our postwar and our pre-war position, I need only mention that before the war we were accustomed to draw $1000 million a year from our invisibles, in aid of our visible trade balance, whereas last year, 1947, so far from having any income at all from that source we had a net deficit on invisibles of $700 million--a turnover of $1700 million against us as compared with before the war.
Well, this year I am glad to tell you, as a result of the improvement in the situation, we have wiped out that deficit on invisible earnings and we are going to start again with a surplus on invisible account.
A second point is that it is not often realized that these results are being achieved at a time when the terms of trade have turned very seriously against us, compared with pre-war. Owing to the scarcity values ruling in the world, we have had to pay nearly three times as much for our imports as before the war and our export prices have never been able to catch up with that rise in import prices. They are still only about two and a half times what they were. Even this year, in 1948, import prices have risen against us about ten per cent, though they are now showing signs of flattening out, whereas our export prices have only risen three per cent. This factor, of course, hinders our export trade because it is bound to be reflected in our export prices. I think we ought to bear that in mind when we are inclined to think, as I sometimes am myself, that British prices are not quite so favourable as they might be. That is a situation that cannot last indefinitely. We are bound to see before very long a drop in commodity prices and, personally, I do not think any factor would contribute more toward the healthy development and expansion of trade.
Meanwhile the fact that this improvement in our situation has been achieved in adverse conditions gives us great encouragement for the future. How is this improved situation reflected in industry? Taking coal first, there has been a very good recovery. We are producing about four million tons per week, as against four and a quarter before the war and with a labour force much reduced as compared to pre-war. We have resumed our exports in coal on a modest scale and that helps our dollar earnings.
In steel, we have hit an all time high of fifteen million tons a year and we have large schemes for expansion which should come to fruition in the next few years.
In shipbuilding we are building more ships than the whole of the rest of the world put together and we hope soon to resume our traditional position as the chief carriers of the world.
In machinery, we are producing half as much as before the war, in textile and agricultural machinery, several hundred per cent more than pre-war. In locomotives, railway wagons and heavy engineering goods, half as much again as before the war. Commercial vehicles, double pre-war, and the exports two and a half times prewar. Consumption of electric power by industry, 75 per cent above pre-war.
I could give you quite a list of industries in which production is now about double pre-war. I have selected those because coal, steel, transportation, machinery and power are the keys to production and from what I have said I think you will see that the whole productive machine in Britain is really getting at last into top gear.
These results have not been achieved without considerable sacrifice from the British people and I would be the last to pretend that they have. I think they should be regarded as a monument or tribute to their self-discipline, their restraint and self-denial--a self-discipline that can only come from a truly democratic nation.
Of course we have our controversies as to methods. I expect you will have seen from the press that one is raging today. We like that. We should think it very strange indeed if we all had the same opinions about what should be done. We like to blow off steam and have our daily grouse against the Government. That is one of our national pastimes. Don't be misled by it. Underneath all that is a solidity of purpose and determination throughout the country to get Britain back to where she was before.
I haven't time--I would like to tell you some of the methods of conquering inflation-though I must just mention the voluntary agreement this year between Labour, on the one hand, and Management, on the other: Management to limit profits and dividends, and Labour to limit wages and salaries. It is something which in our view would formerly have been regarded as a quite impossible, indeed something which it was almost lunacy to suggest a treading on everybody's corns. Yet this has come about not compulsively but purely voluntarily, as part of a determination throughout the country to overcome this financial trouble.
Well, on the economic side I think it can be said that the stage is now set for a general advance. E.R.P. is acting like a tonic in Europe, and Britain too is forging ahead. But we must not forget that E.R.P. is on a diminishing scale. The aid is to extend over a four year plan and is to decrease each year. Now all these sixteen countries receiving assistance are putting their heads together with a view to drawing up a basis of action so that production can rise each year in Europe as aid diminishes, with the object that at the end of four years every one of them will be able to stand on its own feet without external assistance.
That is the programme, and on paper there is no reason at all why it should not be achieved. It will be a hard struggle. We can't expect things to right themselves too quickly. Nor can we expect much heightening of the present standard of living, but at least we can now see daylight at the end of the tunnel and that in itself is a great encouragement to us all.
Now, what are the results for Canada? In the first instance there should be a great increase in exports from Europe to this hemisphere and particularly in exports from Britain to Canada. Last year we exported from Britain $160 million worth of goods. This year we shall achieve our target of $280 million, and next year should be well over $300 million. I regard that as a foundation rather than an objective. We must go much further and get to $400 or $500 million. It is so vitally important. We have such a tremendous stake in you and you have such a vital stake in us, as one of your biggest markets, and unless we can achieve a better--don't say a complete balance--a better balance in our trade, the British purchasing power in this market will decline and we must not allow that to happen.
One of the important results of Sir Stafford Cripps's recent visit was, as you may have seen, the appointment of a Continuing Committee composed of representatives of the two Governments to keep a close watch on all developments having a bearing on our trade and economic relations. This Committee will meet alternately in London and Ottawa and its main object will be to take advantage of every opportunity that may occur in this fast moving situation for keeping the volume of trade between us to the maximum that exchange possibilities will allow. And further than that, it will also have the duty of seeing that where adjustments in our mutual trade are required these adjustments are carried out with the least possible adverse impact on the economy of the other party.
Some adjustments will be necessary. We must face that fact. You can't build up Europe without seeing that she gets back her pre-war trade, and if she gets back her pre-war trade we and others must divert some of the purchases we have made over here in recent years back to their pre-war channel. However, those adjustments should not cause any serious impact here. They should be carried out without any great noticeable effect. The object will be keep up the general volume of trade between us and we should be able to do that.
On the economic side, therefore, I feel I can really give you an encouraging report, but it will be very foolish for us to look at the economic side only. That would be ostrich like because it is so entangled with the political side, and we must recognize that on the political front there are some nasty clouds on the horizon which, unless the air is cleared may seriously affect the pace of economic recovery. In the first place we may have to face a diversion of men and materials from much needed peacetime purposes to defence requirements, and the truth is that we have all of us got so many reconstruction jobs to do to get the economy of the world right that we can't really afford to divert people to defence needs without interfering with our economic objectives. Secondly of course, this tension, if it continues is bound to affect confidence between nations. It is bound to make it more difficult to build up that mutual trust between countries on which alone we can hope to erect a stable world.
There is no need for me to elaborate on that. We all know from what quarter the danger arises. Now, either that tension will lighten or it will continue. Your guess is as good as mine. In any case our course is clear. We must stand firm. We must stand firm behind the things in which we believe and refuse to run away from any of our responsibilities or obligations. That is point number one.
Point number two is that we must at the same time have a positive policy, a policy of improving economic conditions in Europe as fast and as widely as we can. The special importance of that, in my view, is to enable this rallying of the moral and spiritual forces which is now going on in Europe to assert itself. I am quite convinced that in this trouble now going on in the world the spirit of man will assert itself and will triumph if it is given a chance. But it must be given that chance and it won't be given it until economic conditions are better.
So I regard that myself as a double-headed policy, and the second head is just as important as the first. Canada is making a tremendous contribution in this field in her advocacy of the North Atlantic Pact which I hope will come about and which will buttress the new movement going on. That will be a tremendous contribution toward insuring security in the world.
Well, if we can get around this corner, and I am confident myself that we shall, a whole new age will open up before us, an age of scientific advance, an age quite unlike any of its predecessors. Where all these great discoveries of science which keep on crowding in on us day by day will be used, not for destructive purposes, but for the advancement of human welfare, for the improvement of standards of living, for the providing of new amenities, for the expansion of trade, for the drawing together of countries, an age promising greater blessings than the world has ever known.
One of the things that gives me greatest encouragement at this time is the way in which good comes out of evil. And it is coming out. We are seeing formed before our eyes a great new unity of purpose, a new brotherhood, if you like, which sees itself manifested not only in the Commonwealth--and our relations in the Commonwealth have never been closer than today--but which embraces also that great neighbour to the south of us. It reminds me of the words of Mr. Winston Churchill, in one of his great speeches in the war. You will remember his remarking of the United States how increasingly we were mixed up together in our affairs, "It is a process", he said, "which, like the Mississippi, just keeps rolling on and nothing in this world is going to stop it". I think in that great unity and closer brotherhood lies our greatest safeguard for maintaining peace in the world, and our greatest guarantee we shall together enter that new age to which I have referred.
At the request of the President, Mr. Colebrook thanked the guest speaker.