II

INFLATION AND DEFLATION

129

11

Our whole economic policy during recentyears has been dominated by the preoccupationof the Treasury with their departmental prob-lem of debt conversion. The less the Govern-ment borrows, the better, they argue, are thechances of converting the National Debt intoloans carrying a lower rate of interest. In theinterests of conversion, therefore, they haveexerted themselves to curtail, as far as they can,all public borrowing, all capital expenditure bythe State, no matter how productive and desir-able in itself. We doubt if the general publichas any idea how powerful, persistent, and far-reaching this influence has been.

To all well-laid schemes of progress and en-terprise, they have (whenever they could) barredthe door with, No! Now, it is quite true, thatcurtailing capital expenditure exerts some tend-ency towards lower interest rates for Govern-ment loans. But it is no less true that it makesfor increased unemployment and that it leavesthe country with a pre-war outfit.

Even from the Budget point of view, it is aquestion whether the game is worth the candle.It is difficult to believe that, if this questionwere considered squarely on its merits, any in-telligent person could return an affirmativeanswer. The capital market is an internationalmarket. All sorts of influences which are out-side our control go to determine the gilt-edgedrate of interest; and the effect which the British

F

4