Has joined the Socialist League. Explains why he opposes the view that a Labour Government should nationalise the joint stock banks when it nationalises the Bank of England (cf. 1/160-2 and 1/166-7).
28th. September, 1932.
I have just joined the new Socialist League on the strength of your signature. I waited to do so as I was not sure whether it was going to be merely a “Wise” society or a body of people who are really keen upon implementing effective socialism. I shall turn up at the meeting on Sunday and I expect we shall have a rare old debate on all sorts of subjects.
The question which above all others interests me is of course currency and banking. I do not anticipate any substantial divergence of views on the former, but on the latter I know that Wise will make tremendous efforts to defeat the proposal of the Labour Executive to postpone consideration of the position of the Joint Stock Banks till next year, and will endeavour to insert instead a proposal to include their nationalisation simultaneously with that of the Bank of England.
This is a matter to which I have devoted a very great deal of thought and attention and I should like if possible to have a chance of meeting you before Sunday to discuss it. I shall be travelling to Leicester as early as Friday next and my address there will be c/o Miss Fortey, 31, Meadhurst Road, Leicester. I am at present free both on Friday evening and on Saturday late afternoon and evening. But in case we do not have an opportunity of meeting I want to set out here my principal reasons for wishing to confine ourselves in our public policy for the next general meeting to that in the Labour Resolutions. These are you will remember: first, a general power of control such as you yourself have suggested—a sort of financial D.O.R.A., and secondly, the definite nationalisation of the Bank of England.
1) I have attempted to visualise the work that will be thrown on the Finance Minister of the Labour Government after the Bank of England has been nationalised. If this is to be of any real account it will have to be a whole time job. So much so, that I do not think it can be done by the Chancellor of the Exchequer but by a separate Finance Minister chosen for the express purpose. Some people imagine that there will only be a few broad general principles which he will have to decide. I do not take this view, for most of the questions which the present Governor of the Bank of England decides are big issues, and an untrained Minister with an untrained staff will be wholly inefficient unless he devotes a great deal of time to making such changes in policy at every point where it may be necessary.
If the Joint Stock Banks are to be taken over in addition, that is a still larger job and will require minute and detailed work, particularly in the earlier stages. If this work is not be be put into the job and we are to trust to appointing as managers a number of banking people who we think are friendly to the Labour point of view, we shall mess the job up altogether. It might perhaps be said that we can have a third Labour Minister for this purpose, but I regard this as unpracticable.
2) The Labour Party has not yet thought out any clearly defined policy which the J.S.B. should pursue, and until this is done I can see no great advantage in prematurely taking them over.
3) Those who support the proposal frequently use such loose phrases as “it is the business of the Joint Stock Banks to finance industry”. In my view they are quite wrong. Financing industry is a long term operation and the work of the J.S.B. is confined in the main to short term lending. That is to say, to tiding industry over short periods in which they want ready money. It is quite true recently that some of these short term credits have become frozen, but that does not alter the essential fact.
4) Wise and Cole and others maintain that it is necessary to nationalise the J.S.B. to prevent Government policy being sabotaged. I take precisely the opposite view. In so far as Labour policy involves socialising industry, that industry ought not to be financed by the J.S.B. but by the Central Banking Institution. In Russia, Gosplan, which corresponds to the Bank of England is the authority for issuing short term credits.
5) In so far as any parts of industry remain in the hands of private enterprise it is much better that they should draw their resources from private enterprise banks instead of from Government owned banks. One of the great difficulties of the late Labour Administration was that we had to buttress up capitalist enterprise w[h]ile advocating socialism. That difficulty is bound to exist in any transitional regime: but it will be enormously increased if the media through which private enterprise is to be helped over temporary difficulties is itself a Government Institution.
6) Put into practical terms, the difficulty presents itself a) that the Finance Minister would have to pick & choose between rival industries, and b) M.Ps would be bombarded by pressure from local employers to secure overdrafts for their works.
7) We must not forget that in the first Parliament there will be great demands on time, and there will be many voices who will claim that finance ought not to take first place. I disagree with this because I think both the general power of control and the particular nationalisation of the Bank of England are essential before any substantial measure of Socialism can be brought about. But I do not see why the further step of nationalising the J.S.B. should precede, and therefore delay, other socialist action when in effect it is not necessary for this purpose.
8) We have to educate the electorate to our point of view. With a hostile press it is particularly difficult to get them to understand that any step in the nationalisation of banking is not confiscation. I believe the public are nearly ready for nationalisation of the Bank of England, but I believe they are a very long way from being ready for nationalisation of the J.S.B. And unless it is really necessary I think it will be a grave mistake to burden our programme with this big project.
I will only add one general word. If we were contemplating revolution such as took place in Russia, or a kind of catastrophic change such as happened in France at Mob[i]lisation, 1914, it might be necessary for us to swallow the whole meal and subsequently spew out what we could not digest, as was done in both those cases. But if we are going to carry out Socialism by stages as our general programme suggests, then it is essential that each stage should be well thought out in advance and should be carried out with the utmost efficiency. This is necessary to secure the continuance of public support.
The gist of my opposition is that it is not necessary in the first instance to nationalise the J.S.B., that we have neither the policy nor the machinery to carry out such a step efficiently, and on the contrary, that it is actually better from a financial point of view so long as some private enterprise remains to leave this being fed by private banks, while feeding our own socialised industry, as is done in Russia, direct from the Central Bank, or if it should prove necessary, from a subsidiary of that Bank.
Since dictating the above I have developed a slight temperature which may imply incipient “flu” but I shall hope otherwise & to get to Leicester on Friday
The Hon. Sir Stafford Cripps, K.C., M.P.,