740.00112 EW/5–145

Report by Mr. Lauchlin Currie80 on Conversations with British Officials, March 1945


I was authorized by President Roosevelt to stop over in London en route to or from Switzerland81 for the purpose of familiarizing myself with British official thinking on some emerging economic and financial problems. After discussing the matter with Ambassador Winant I arranged with the help of Dr. Penrose for a series of interviews in the period from the tenth to the sixteenth of March.

I had conversations with the following people: Anthony Eden,82 Richard Law,83 Ronald Nigel84 of the Foreign Office; Keynes, Eady, Waley of the Treasury; Meade85 of the War Cabinet Secretariat; Stone of the Central Statistical Office; Liesching of the Board of Trade; Schuster, Member of Parliament, representing City views; Durbin, a leading Labor economist, and secretary to Major Attlee;86 Clark, of the Ministry of Production.

In general I was interested in ascertaining views on Britain’s postwar economic situation with particular reference to her balance of payments. On the political side I had some discussions on the mooted Northwest European alliance and on the treatment of Germany.

Britain’s Post-War Economic Position.

1. Employment. I came away with a strong feeling that despite a certain amount of official pessimism those who are most actively studying this problem and are in a position to influence policy are relatively optimistic over the post-war outlook. There was no fear of widespread or chronic unemployment. Rather, there is concern that [Page 37] the available manpower be employed in directions most beneficial to the national interest. There appears to be little concern about the demand for British exports. There is, however, some anxiety lest the pull of domestic requirements may leave insufficient resources to meet this demand. Some thought is being given to the various ways in which the government might, without exerting too direct control, prevent absorption of too much manpower for the satisfaction of domestic demands. There was general assent to my suggestion that, whereas our problem would be to build up sufficient consumption to absorb our productive capacity, England’s problem might be to hold down consumption so as to permit the requisite degree of capital formation for domestic and foreign purposes.

2. Balance of Payments. I found the same degree of optimism, though even less acknowledged, with reference to Britain’s foreign balance of payments. Here I made an effort to get some indication on the proposed settlement of the large volume of sterling indebtedness. After talks with both Eady and Keynes, I was satisfied that while no one formula would apply to all sterling indebtedness, the overall settlement would be such as not to burden Britain unduly. Both men used the word “token” in connection with the repayment. Keynes suggested that a more “generous” settlement would be in order for balances which represent monetary reserves of other banking systems, and for balances of colonial areas for which Britain acts in a trustee capacity. On the other hand, I received the impression that very small payments would be made on the large Indian and Egyptian balances. Keynes indicated that while they were still increasing these balances they were reluctant to raise the subject of settlement. However, he expected that the British Government’s policy in this matter would be formulated by the end of the year. Keynes believed that equilibrium in the British balance of payments could be attained in three years after the defeat of Germany.

In general the possibility of Britain achieving equilibrium without assistance from America or the International Monetary Fund or Bank is dependent upon (a) the quickness with which exports can be built up, (b) the length of the Japanese War and (c) the magnitude of Britain’s contribution in that war, (d) the magnitude of lend lease in this period.

The goal on imports is not a pre-war figure but rather whatever volume is necessary to permit reconstruction and to provide for higher nutritional standards than prevailed before the war. I believe that these standards have been worked out and that if they could be secured some light would be thrown upon British objectives in the fields of domestic food production and imports. It is felt that while food [Page 38] production would not attain the levels reached during the war it would remain higher than before the war.

I did not have an opportunity to get any data on British cost-price relationships with American costs at the present rate of exchange. However, the economists with whom I talked all seemed to feel that the present rate would be very satisfactory to Britain. Satisfaction was also expressed with the improvement in industrial and agricultural efficiency that has gone on through the war.

3. Trade Policy. General views on trade policy have been fully reported by the Embassy. I found general acceptance of our broad position in favor of a return to freer world trade on a multilateral basis. However, most of the people with whom I talked adopted a cautious attitude. They felt that the British commitment to remove exchange restrictions must be conditioned upon a full recovery of equilibrium in the balance of payments; that the principle of imperial preference must remain, although further reductions in the preference might be expected; and that we have probably not given sufficient weight to the strength of protectionist sentiment in Europe and in economically undeveloped countries. Keynes renewed his objection to the generalization of all tariff reductions through the most-favored-nation clause. He thought that the better way to proceed would be for the British Empire and the United States, together with whatever countries might care to join, to form a sort of customs union within which reduced rates would prevail. This would constitute an inducement for other countries to join but not be too severe a penalty if they elected to remain outside. He was strongly in favor of the promulgation of a broad statement of principles to apply to world trade and the setting up of an international trade organization.

4. Use of Dollar Pool. At the time of the Phase II lend-lease negotiations last year I persuaded Keynes to write a letter to Secretary Morgenthau making a commitment that the dollar pool of the sterling area would be used only for financial considerations and not to push British exports at the expense of existing American exports.87 This letter has never been released. I raised the question of the advisability of releasing this commitment and Keynes, on behalf of the British Treasury, said that he had no objection in principle but that the particular letter referred to the lend lease negotiations and that a new document would be more suitable. He suggested I get in touch with Mr. Brand88 on this matter on my return to Washington.

5. Credits to Britain. Sir George Schuster suggested that it would be to Britain’s interest to borrow from us for the purpose of re-loaning [Page 39] abroad, which would enable Britain to participate in long-term foreign capital developments and place her in a position to secure repeat orders. Keynes, on the other hand, was opposed to borrowing under any conditions.

6. Cartels. I found little interest or concern over the cartel problem. In fact Keynes stated that such firms as Imperial Chemicals had worked to increase volume at lower cost and that the most backward industries were those in which they had hundreds of small and independent operators, as in the textile and mining fields.

7. Coal mining. While the Conservative Party is opposed to the nationalization of coal mines, most of the people with whom I talked thought that it would be inevitable. The antagonism between the miners and the operators is such as to make impossible the investment of the hundreds of millions of pounds necessary to bring about the requisite technical improvements in this industry.

8. Lend-Lease settlements. I received the impression that the British would welcome an early lend-lease settlement that would wipe out the bulk of the obligation and would leave those items having a peacetime utility to be negotiated separately. However, they feel that any lead in this matter must be left to the United States.

The Position of Economists in the British Government.

In recent years the small group of professional British economists has attained a very influential and probably permanent place in the British Government. In general they have buried their doctrinal differences and are protected by the security, prestige and anonymity of the British Civil Service. It is proposed to continue the War Secretariat as a permanent secretariat to the Cabinet, with James Meade as Secretary.

The Labor Party and the United States.

Some interesting points were brought out in a discussion with Durbin, an influential economist in the Labor Party. He said that the Labor Party generally felt some hostility toward it in the United States. He cited the mixed reaction here to the Beveridge plan89 and thought that the Labor Party’s program of nationalization of mines, railroads, and utilities would encounter a critical reaction in the United States. He expressed the hope that some particular attention might be paid to Major Attlee during his visits to the United States.90 He thought that the Labor Party’s research and thinking had been weakest [Page 40] on the international economic side and admitted that the proposal for state purchases of imports had not been thought through.

Treatment of Germany.

Keynes was very exercised over the decision to exact reparations from Germany.91 With the current destruction in Germany and the proposed stripping of industrial equipment he was fearful that the outcome might be a situation in which the United States and Britain found themselves forced to put goods into Germany while the Russians were taking goods out. He thought that exports from Germany for the purpose of paying for necessary imports should come ahead of reparations. Since, in his view, it was not feasible to contemplate the imposition of sufficiently rigid and long-continued controls to permit the rebuilding of Germany for the purpose of getting increased reparations, we should plan to stay in Germany only sufficiently long to do what had to be done to war criminals and the stripping of German plant[s], and then get out, say, in two years’ time. On the Reparations Commission, the British members may be expected to take the position that goods suitable for export to pay for imports of food, etc., should come ahead of reparations, and this will probably become an issue with the Russians.

The Western European Alliance.

One of the leading controversial, though undercover, issues in British government circles centers around the advisability of British taking the lead in forming a defensive alliance with Scandinavia, the Low Countries, and France. Proponents of such an alliance include Richard Law and Ronald Nigel of the Foreign Office. I was, however, assured by Eden that this was not the present policy of the British Government and that he personally is opposed to it. While ostensibly directed against Germany it would actually be directed against the Soviet.

The matter is likely to become a party issue in Britain as the proposal derives its strongest support from the Conservative Party and is most strongly opposed by the Labor Party. Although there are exceptions, most of the influential people in the Labor Party feel that the formation of such an alliance would indicate a lack of faith in the proposed world organization, would invite retaliatory action and would mark a continuance of the balance of power concept. Proponents of the alliance feel that Britain cannot entrust its safety to the world organization until it has been proved and that the alliance would place Britain in a position “where it could better fulfill its military obligations to the world organization”.

  1. Mr. Currie was Administrative Assistant to President Roosevelt and later to President Truman, on loan as Deputy Foreign Economic Administrator.
  2. For information on Mr. Currie’s role as head of the Allied Mission to Switzerland, see documentation concerning economic pressure applied against Switzerland to stop exports to Germany, vol. v, pp. 765 ff.
  3. British Secretary of State for Foreign Affairs.
  4. British Minister of State.
  5. Sir Nigel Bruce Ronald, Acting Assistant Under Secretary of State, British Foreign Office.
  6. James E. Meade, Economic Assistant, Economic Section, Offices of the British War Cabinet.
  7. Clement R. Attlee, British Deputy Prime Minister and Lord President of the Council.
  8. The letter, not printed, was dated November 20, 1944, and enclosed a document entitled: “Statement by Lord Keynes at the Meeting in Secretary Morgenthau’s Office on 17th November 1944”. The subject under reference was covered in this enclosure.
  9. Robert H. Brand, Chairman of the British Supply Council, Washington.
  10. British Cmd. 6404, Social Insurance and Allied Services, Report by Sir William Beveridge, November 1942.
  11. Mr. Attlee was a member of the United Kingdom delegation to the United Nations Conference on International Organization, held at San Francisco, April 25–June 26, 1945; for documentation, see vol. i, pp. 1 ff. In November 1945, as British Prime Minister, he held discussions in Washington with President Truman and Canadian Prime Minister Mackenzie King; vol. ii , entries in Index under: Atomic energy: Attlee–Truman–King meeting in Washington.
  12. For documentation on this subject, see vol. iii, pp. 1169 ff.