5« The Economic Consequences ofMr. Churchill (1925) 1

(i) The Misleading of Mr. Churchill

The policy of improving the foreign-exchangevalue of sterling up to its pre-war value in goldfrom being about 10 per cent below it, meansthat, whenever we sell anything abroad, eitherthe foreign buyer has to pay 10 per cent morein his money or we have to accept 10 per centless in our money. That is to say, we have toreduce our sterling prices, for coal or iron orshipping freights or whatever it may be, by 10per cent in order to be on a competitive level,unless prices rise elsewhere. Thus the policyof improving the exchange by 10 per cent in-volves a reduction of 10 per cent in the sterlingreceipts of our export industries.

Now, if these industries found that their ex-penses for wages and for transport and for ratesand for everything else were falling 10 per centat the same time, they could afford to cut theirprices and would be no worse off than before.But, of course, this does not happen. Since theyuse, and their employees consume, all kinds of

1 [Written immediately after the Return to Gold.]