LETTER TO THE EDITOR
From Mr. A. J. L. Barnes
Sir. - The late Sir James Grigg was kind enough to see me (as biographer of Baldwin) and inter alia to explain the decision to return to Gold in 1925. As Churchill's Principal Private Secretary he was in an unrivalled position to assess his master's approach to the whole question. Whatever he said subsequently to Lord Boothby, he was not at the time of the 1925 Budget "apprehensive about the future". On November 1, he wrote to Baldwin: "Time will vindicate all the principal actions we have taken", and he specifically included "the Gold Standard". In subsequent Cabinet Papers he took credit for the step. Dr. Sidelsky (Business News, March 17) flies in the face of such evidence at his peril.
But in an otherwise excellent refutation of Dr. Sidelsky's argument, Mr. Moggridge (Business News, March 24) is in danger of overstressing the "tentative and exploratory" nature of Churchill's memoranda. He ignores the genuine doubts sown in the Chancellor's mind by Keynes, McKenna, above all, perhaps, by Beaverbrook. The difference of tone between Churchill's memoranda of January 29 and February 22 is marked, and is explained perhaps by the visit Beaverbrook paid him in February. Since Churchill reaffirmed the Gold Standard policy on February 12 some explanation is necessary for the hostile tone of his remarks 10 days later.
That the siuation was fluid at the time is apparent from a letter written by Niemayer: "Gold is excessively active and very troublesome. None of the witch-doctors see eye to eye and Winston cannot make up his mind from day to day whether he is a gold bug or a pure inflationist." This despite the fact that in December he had seen no difficulty in the return and had approved the Governor of the Bank's exploratory mission to New York.
There is no doubt that Churchill was put under strong pressure by the threat from the Empire to return to Gold in any case, an event which undoubtedly influenced Niemayer to abandon the caution he had shown in early January. There can be very little doubt that Sir James Grigg was right to see the decisive moment in the confrontation between McKenna and Keynes on the one hand, and Niemayer and Bradbury on the other (which took place, I believe, early in March).
Bank rate went up on March 6, a clear indication that the decision had been taken, although formally it had to wait for the third week of the month, and does not appear to have been ratified by the Cabinet until they considered the BUdget.
Dr. Sidelsky would seem to be the prisoner of his limited information and, it may well be, the victim of outdated prejudice. There is much to be said for a high rate of exchange, where a country has a propensity to be a net importer, pays a large war debt across the exchanges, and possesses City interests equal to a tenth of her export trade; more still where the decision was seen as the necessary path to an expanding world trade, Central Bank cooperation, and an attempt to stabilize world prices, then declining to the ultimate detriment of the entire world community.
Yours faithfully,
JOHN BARNES
London School of Economics and Political Science.