114 SECTIONAL ADDRESSES 
vary, within narrow limits, even between different parts of Great Britain. 
The statement may be extended to include prices. Nevertheless it is 
true to say that for each community there exists a normal relationship of 
wages and of prices towards which actual wages and prices tend. I 
assume this broad generalisation in all that follows. 
My next statement is equally elementary. It is a truism that some 
commodities and services supply local markets while others supply 
national or international markets. In the market, whether it be local or 
world-wide, there is a strong tendency towards a common price. Within 
this country the price would be quoted in the same money, but in other 
countries it would be quoted in some other kind of money. If, however, 
we exported a commodity we would normally expect to be paid, in foreign 
money, an amount equivalent to the British money obtainable for it if it 
were sold at home. ‘The means of payment may be some foreign money 
—we may, for example, accept payment in marks—but the measure of 
value is our own money. 
For the purpose of simplifying the statement I shall assume commodities 
(including services) to be divided into two groups, international and 
domestic, the former comprising those which are commonly exported 
from one country to another and the latter those which supply local 
markets. Further, I shall neglect variations in costs of transport. Finally, 
I shall assume that all communities or countries employ gold as money. 
It follows that international commodities command the same prices in all 
countries. British exports are sold at the same prices as German exports 
or American exports. But we have already seen that the prices of British 
exports are normally related to the prices of all other things produced and 
sold in Great Britain. Consequently the price average or general price 
level in this country will be such as to produce the international prices 
for international commodities, while the wage average or general level 
of wages will be such (under a normal distribution of individual wages) 
as to produce that price average. It does not, however, follow that the 
wage average in this country must be the same as in other countries. 
The wage average will be a function of natural conditions, industrial 
technique and human efficiency; but it must be such as to enable 
the country to maintain the price average dictated by international 
conditions. 
The same general truth may be expressed in another way, Gold, like 
other international commodities, is distributed among the markets 
(countries) of the world in such a way as to command the same value in 
all. Value in this connection means purchasing power. It follows that 
in the state of equilibrium represented by such a distribution of gold, 
the exports and imports of a country are balanced.” It must be so, for 
1 It is immaterial that, in this case, we accept the risk of exchange : it would 
be possible for us to cover that risk, and the cost of covering it would be a prime 
cost and a component part of the price in pounds. In a state of equilibrium 
there would be no such risk. 
2 It should not be forgotten that I am assuming exchange to be confined 
to commodities, including services. I shall presently refer to movements of 
capital. 
