F.—ECONOMIC SCIENCE AND STATISTICS 123 
wish to retain their capital within call. They are therefore far more 
susceptible to sudden changes in demand and immediately available 
supply, and their existence on such a large scale has added to the 
instability of the post-war economic world. 
In the third place, a change of the first importance has taken place in 
the financial relationships of nations without a corresponding change in 
their industrial structures. The United States of America provides the 
outstanding but by no means the only example of such change. Im- 
mediately before the war that country, although a heavy debtor, had 
ceased or almost ceased to be, on balance, a borrower. Her industrial 
structure was appropriate to that state of affairs. She possessed a large 
export surplus representing interest upon, and to some extent the repay- 
ment of, the accumulated loans of the past. The war enabled her not 
merely to pay off her debts but also to become an important creditor 
state. Her industrial structure remained practically the same as before ; 
the interest element was transferred from one side to the other side of 
her account with the rest of the world. Not only did she possess an 
export surplus in respect of commodities and personal services but that 
surplus was now augmented (where once it was offset) by interest pay- 
ments. She was like Mr. Manhattan of comic opera fame, “all dressed 
up and no place to go.”’ One factor in the situation is the amount owing 
to America in respect of so-called war debts, but from her point of view 
it is not an important factor. The much discussed transfer problem is 
as relevant to and important for America in the case of other forms of 
indebtedness as in that of the debts of other governments. What is 
peculiar to the so-called war debts is the fact that they represent a con- 
tract between two governments, but this is of no international economic 
significance. 
The failure to fit the industrial structure of the world to the new 
financial relationships between nations constituted one of the real diffi- 
culties in operating the post-war standard. I have already referred to 
the fact that, before the war, gold moved from one country to another in 
response to economic influences and that such movement produced its 
effect upon monetary policy and relative price levels. Since the war 
the changed financial relationships have caused not merely a large-scale 
movement of gold but also a concentration of gold in those countries in 
which the change in financial relationships, with the given industrial 
structure, had not been fully offset by a policy of foreign investment. 
Thus France and America have jointly amassed a large proportion of the 
total world supply. But they have not allowed that supply to produce its 
pre-war effects. About ten years ago Mr. McKenna rightly pointed out 
that America was on a dollar standard, not the gold standard. It is, 
I believe, literally true to say that at no time since 1920 has the United 
States been on the gold standard in the full technical sense of the words. 
It is equally true to say that France, while legally on the gold standard 
since 1928, has never accepted the implications of that standard. The 
reason for the failure of these two countries to employ the gold standard 
in the full sense of the words is to be found in their unwillingness either 
to adapt their industrial structures to the new finanical relationship or to 
