2

THE ECONOMIC JOUBNAL

[JUNE

Thus it is a mistake to suppose that the United States had anenormously favourable balance on current account. If the nine-year period is broken up into three-year periods, the averagefavourable balance works out at $356 milhon, $98 million and$239 million. The average for the whole period—namely, $231million—is very much the same as it was for the latest triennium.Moreover, if the first and last years of the period are left out, it willbe seen that during the intervening seven years, which includedthe slump, the United States current balance of trade broke abouteven. Even with the inclusion of the first and last years theaverage favourable balance of the United States on current accountbefore the war was much less than the favourable balance earned bythe United Kingdom (at a much lower price level) at the time whenwe were building up our overseas investments; and it was aboutthe same as our own favourable balance as recently as 1923-29,when our own average surplus was $374 milhon. The generalimpression to the contrary is based partly perhaps on the figureof the most recent pre-war year—namely, 1938—but mainly, Ithink, on a confusion between current movements and capitalmovements. The pressure on the rest of the world from 1930onwards was due to a large-scale capital movement from Europe to America being superimposed on a substantial, but not unwieldy,balance on current account. The serious consequences to the restof the world flowed from the anomaly of a country with a sub-stantial favourable balance being simultaneously the recipient ofinvestible funds from abroad. Most countries, however, have nowarmed themselves with precautionary powers against the repetitionof undesirable and useless capital movements of this character.The influence of the Bretton Woods plan is, of course, against afuture repetition of this experience. Surely we now have meansto avoid it.

Nor is it the case that in times of depression in America imports always fall off on a great scale relatively to exports.The statistics of the decade before the war show that, on thewhole, industrial production, exports and imports tend to movetogether. The common opinion on this matter is based tooexclusively on the experience of 1938 (1939, being a war year forthe rest of the world, cannot be used as a basis for the argument)compared with 1936 and 1937. The movements are shown inTable T.

All that can be said on the other side is that these figures do notshow what would happen in a period of slump in the United States and of full employment in the rest of the world. This, however,