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Published online by Cambridge University Press: 03 February 2011
War is a drain on resources, both of manpower and of materials. The object of government financial policy in time of war is primarily to ease the real drain by making its monetary counterpart work as smoodily as possible. In a long and brilliantly written book R. S. Sayers has provided a meaty account of Britain's financial policy during World War II. Any serious study of the problems of war finance or the financial history of World War II would do well to begin with this volume.
1 Financial Policy, 1939-45. ( History of the Second World War, United Kingdom Civil Series, edited by Sir Hancock, Keith; London: H. M. Stationary Office and Longman's, Green and Company, 1956), pp. xv, 608, $6.98 postpaid. American agents: British Information Services, 45 Rockefeller Plaza, New York 20, N.YGoogle Scholar.
2 Converted at £ 1 = $4.03. This was the official exchange rate for sterling during most of the war. All data in the text are either taken directly or calculated from tables in the appendixes of Financial Policy.
3 $27,023 million converted at the wartime official rate. In Appendix III, table 11, p. 539 of Financial Policy, U.S. lend-lease aid to the U.K. is valued at £ 5,049 million using £ 1 = $7.00 for military stores, and £ 1 = $4.03 for other goods and services.
4 “What was new in 1941 was the universal acceptance of the Keynesian formulation.” Ibid., p. 69. Keynes was strongly opposed by many in the Treasury and certainly did not get his own way on everything; for example, he wanted a flat “war tax” instead of the increased income taxes of 1941. Prime Minister Churchill viewed the 1941 “standard” income tax rate with alarm. “I cannot believe that an income tax of that rate would be compatible with National thrift or enterprise. … People will be indifferent to whether they earn an income or not, and will live on their capital … with the result that death duties will suffer.” Ibid., p. 78.
5 Such secret maneuvers were—and are—made possible by the anachronistic Bank of England balance sheet, published weekly, the form of which has scarcely been changed since 1844. This balance sheet has quite rightly been termed “an ideal instrument for giving away as little information as possible.” Macrae, Norman, The London Capital Market (London: Staples Press, 1955), P. 194Google Scholar
6 Gardner's, R. N.Sterling-Dollar Diplomacy (Oxford: Clarendon Press, 1956), provides an invaluable aid for a full comprehension of these relations, both as they were intimately connected with broader British financial problems and as they carried over into the monetary quandaries of the postwar eraGoogle Scholar.
7 In addition, the government of India itself bore a very heavy burden, for which Sayers, provides much-needed evidence, needed if for no other reason because of Sir Winston Churchill's published opinions that India did not pay its way and that the cost of supplies in India was exorbitant. Financial Policy, pp. 255 n., 261 n., 271.
8 Gardner, , Sterling-Dollar Diplomacy, pp. 167–70, 204-5, 218-21, 325-31Google Scholar.
9 The logic behind this policy is difficult to fathom. Gardner suggests that it was part of the American administration's policy of forcing Britain to “scrape the barrel” in order to ward off Congressional attacks on lend-lease aid. Also “the lower the level at which British war-time reserves were kept, the greater would be British dependence on American post-war assistance …and the greater would be the chances of gaining acceptance for American views on multilateral” Ibid., p. 174.
10 Curiously enough, the premium sale of gold and gold coin to hoarders as a method of absorbing excess cash balances has proved its worth in more advanced monetary systems; this technique has recently been employed by the Swiss central bank. See the New York Federal Reserve Bank's Monthly Review, 11. 1955, p. 142Google Scholar.
11 Cf. Financial Policy, pp. 405-13, and Gardner, , Sterling-Dollar Diplomacy, pp. 54–68, 384-80Google Scholar.
12 President Truman himself had no qualms about his duty to end lend-lease once and for all when the fighting ceasedTruman, Harry S., Memoirs (2 vols.; New York: Doubleday, 1955), I. 475–76. For the British reaction see Financial Policy, pp. 476-86Google Scholar; Gardner, , Sterling-Dollar Diplomacy, pp. 184–87Google Scholar.