124 SECTIONAL ADDRESSES 
embark upon such a policy of foreign investment as would enable them 
to maintain the existing industrial structure. 
Again, the credit system of the world has been completely disorganised. 
The change in the relative financial strengths of Great Britain, America 
and other countries, has tended to reduce the pre-eminence of London 
as the financial centre of the world; the power of the City has been 
challenged by New York and Paris. But that is not the only change that 
has occurred. I have already referred to the existence of a large mass 
of liquid capital that would normally have been absorbed by industry in 
the form of long-term investments. This liquid capital has not been 
employed by the Central Banks as a stabilising factor ; on the contrary, 
it has proved to be a disturbing factor. Before the war the Bank of 
England, as the centre or controller of international credit, employed 
such credit in the service of distressed countries and thereby maintained 
financial stability. Since the war it has not been able to perform this 
function with the same effect, while other countries that were able to 
render assistance could not be relied upon. When the credit of any 
country was threatened, foreigners withdrew their funds in search of 
security. When, in 1931, we needed the type of assistance that we were 
accustomed to render to other countries, the latter deserted us like rats 
deserting a sinking ship. A large mass of liquid capital moved about the 
world leaving crisis in its train and creating embarrassment to the countries 
that it sought, always hunting for security without ever being sure of 
finding it. The most recent victim of the damage wrought by this 
movement is the United States of America. 
NV: 
In the fourth section of my paper I have tried to indicate those 
differences between the pre-war and the post-war gold standards which 
accounted for the success of the former and the failure of the latter. The 
question arises whether, under present conditions, it is worth while either 
to restore the gold standard or to establish any other form of international 
metallic standard. It is known to all economists that the difficulties of 
working the post-war gold standard were increased by technical defects 
in banking organisation, particularly in the United States of America 
and in France. A discussion of these defects would not be possible in 
this paper; I refer to them merely to indicate that I am aware of their 
existence. But I believe, and I therefore assume, that if the more funda- 
mental difficulties to which I have referred were overcome it would be 
possible to solve purely technical problems. 
The essential feature of the gold standard is that it maintains a fixed 
rate of exchange, establishes an international price system in the sense 
of a common measure of value, and controls the internal or domestic 
supply of currency and therefore the domestic level of prices. It seems 
to me that if we are to return to the gold standard it must be a standard 
that retains this feature. Before the war a movement of gold from one 
country to another automatically reacted upon the relative supplies of 
money in the countries affected. It has been suggested by the Gold 
