THIS DOCUMENT IS THE PROPERTY OF HER BRITANNIC MAJESTY'S GOVERNMENT
E.B. (52) 5
2nd May, 1952
ECONOMIC BULLETIN No. 58
Prepared by the Information Division of the Treasury
The Continuing Crisis
This country is in more serious danger in 1952 than in any year since the war : the danger of being forced so to contract its imports that it can buy neither the food nor the raw materials to feed its people or its machines. It is in danger too of losing its position as the country in whose currency nearly half the world's trade is conducted. It is in danger of being forced to abdicate from its position as a great power.
All these consequences will inexorably follow if the outward flow of the gold and dollar reserves is not held in check and reversed. The next few months are crucial.
Towards the end of March these reserves were no longer falling (1). But of itself this gives little clue to the future. In March there were a number of receipts — from sales of raw materials to the U.S. Government and so on — which are nonrecurring. Further, the reserves benefited from the recovery of confidence in sterling which the Budget and other measures inspired: this confidence can only be maintained if the sterling area is seen to be paying its way.
The movement of the reserves depends, of course, on the policies and the economic success of other sterling area countries as well — on the proceeds from their sales of rubber and tin to the U.S.A., for example, and on the severity of their cuts in imports from the non-sterling world (2-3).
Britain as the banker of the sterling area has clear duty to correct her own position and see that the reserves are rebuilt; and we have undertaken to try to balance our accounts with the non-sterling world in the second half of this year (with the help of Defence Aid). Since, in the second half of last year, there was a deficit with the non-sterling world of just on £600 million, this calls for a mighty effort (4-5).
The New Export Policy
The import cuts (5) already announced will help to fill this gap, when they are fully operative : and other factors — such as better terms of trade (6), may also contribute. But there still remains the need to increase exports to the non-sterling markets: success or failure here depends not so much on the efforts of the Govenment as on the efforts of individual industrialists, exports and sales managers throughout British industry.
This drive for non-sterling exports means, in effect, reversing last year's trend; whereas exports to the sterling area rose 17 per cent. by value between the first and second halves of 1951, exports to the non-sterling area fell 1 per cent. The figures for January and February show that non-sterling exports recovered a little; but there is still a very long way to go (8).
* This Bulletin is marked Confidential to indicate that its existence, as an official document prepared for Ministers, should not be made known nor direct textual quotation made from it. But all the material in the Bulletin is intended for public use unless there is an express indication to the contrary.
+ The paragraph references in this Introduction apply to Part Two.