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ESSAYS IN PERSUASION

PART

policy of forcing down money wages and thecost of living to the necessary extent.

“We must warn you that this latter policy isnot easy. It is certain to involve unemploy-ment and industrial disputes. If, as somepeople think, real wages were already too higha year ago, that is all the worse, because theamount of the necessary wage reductions interms of money will be all the greater.

“The gamble on a rise in gold prices abroadmay quite likely succeed. But it is by no meanscertain, and you must be prepared for the othercontingency. If you think that the advantagesof the gold standard are so significant and sourgent that you are prepared to risk great un-popularity and to take stern administrativeaction in order to secure them, the course ofevents will probably be as follows:

“To begin with, there will be great depres-sion in the export industries. This in itselfwill be helpful, since it will produce an atmo-sphere favourable to the reduction of wages.The cost of living will fall somewhat. This willbe helpful too, because it will give you a goodargument in favour of reducing wages. Never-theless, the cost of living will not fall sufficiently,and, consequently, the export industries will notbe able to reduce their prices sufficiently untilwages have fallen in the sheltered industries.Now wages will not fall in the sheltered in-dustries merely because there is unemploymentin the unsheltered industries, therefore youwill have to see to it that there is unemployment