F.—ECONOMIC SCIENCE AND STATISTICS III 
foreign exchange in the large and influential financial centres are very 
damaging to international exchange and it is a mistake to assume that 
such movements necessarily produce equilibrium. Experience here 
reinforces theory in demonstrating that the contrary is almost certainly 
true and that they cause more dislocation than they cure. It is evident 
that it is only by an international monetary standard of some kind 
permitting of stability in foreign exchange rates that the temporary 
excesses in the trend towards economic self-sufficiency can be cured and 
prosperity restored. 
If this be granted and if agreement in the re-establishment of an inter- 
national standard is not to be looked for immediately, the case for single- 
handed action by Great Britain is considerably strengthened. We have 
most of any country to lose by a permanent shrinkage in international 
trade, and the position of London as a leading world centre of finance 
carries with it much prestige and considerable responsibility, a fact as 
important in matters political as it isin matters economic. ‘The question, 
then, can be put very simply, although it is not equally easy to supply an 
answer. Which is to be the policy of this country if and when it decides 
to give a lead to the rest of the world—stabilisation on gold or stabilisation 
on sterling as a paper pound ? 
The latter makes a more cogent appeal to thoroughgoing economic 
nationaliststhan the former. For this there are manyreasons. Reference 
has already been made to the most important—the greater control over 
its domestic economy which is possessed by a government whose monetary 
system is not intimately linked to a general international standard in the 
way demanded by a general foundation of gold. Of less significance are 
the difficulties which would ensue from the correction of the present 
maldistribution of gold. These, it is felt, would involve retreat from 
positions of self-sufficiency which have not yet been consolidated and 
which, if lost, could only be recovered in a future crisis or depression. 
Further, it is pointed out that important countries, including Great 
Britain, have for some time worked an exchange system without the use 
of gold and that the experience gained demonstrates the possibility of 
avoiding all the difficulties which accompany the working of the gold 
standard, especially those due to variation overlong periods in new supplies 
of the metal and the occasional maldistribution of general stocks which, it 
is asserted, can never be effectively avoided. Itisonly by stabilisation ona 
sterling paper basis, therefore, the argument continues, that Great Britain 
(and the world) can escape another economic crisis in the course of time, 
The case against stabilisation on a paper basis rests primarily on 
prudence and expediency. The insulation from external economic 
influences so desired by the nationalists is a dangerous privilege for which 
a very high price has invariably to be paid. Further, monetary manage- 
ment on a paper standard demands constant vigilance, a continuity of 
policy and a trust in the moderation of governments which few people 
are willing to concede. Most important of all is the fact that the world 
is not yet ready to abandon an international standard based on gold. 
The problem, therefore, is not whether to return to gold, but when, and 
on what terms. 
