World War: Stinger’s Plan

While France’s Paul Reynaud and Britain’s Sir John Simon put their heads together to strengthen the external economy of the Allies (see above), one of Britain’s leading economists advanced a notable plan to strengthen Britain’s internal economy, to help pay for the war while it is being fought, to help smooth the economic bumps which must be felt when it is over. Author was “The Stinger in the Triple Bromide”—Economist John Maynard Keynes, who, as a member of the Economic Advisory Council and secretary of the Royal Economic Society, frequently stimulates the thinking of Britain’s financial triumvirate: Chancellor of the Exchequer Sir John Simon, Governor Montagu Norman of the Bank of England, and Lord Stamp, the Bank’s most celebrated director.

Economist Keynes addressed to the semiofficial London Times two articles to which that august organ gave full space and a respectful editorial. His idea was that Britain should apply a forced loan scheme to all her income earners. As military production goes up in the Government-financed war cycle, production of consumer goods will go down, the cost-of-living will rise.

High war prices, caused by money being a lot more plentiful than goods, are already beginning to worry Great Britain. Economist Keynes’s plan had a particular appeal as a price-keeper-downer since it would lock up money that would otherwise be spent. To keep down the price of consumer goods, to temper the war inflation for those who do not enjoy its upward effect on wages and speculative profits, Mr. Keynes proposed a double levy on all incomes, one part to consist of tax, the other of low-interest (2½%) loan to the Government, to be deposited at the Post Office Savings Bank and redeemed only after hostilities cease (except for personal dire emergency). On small incomes, the tax levy would be low, the loan levy high. Example: on £500 of income, a total of £105 (21%) might be levied, £77½ to be loan credit, £27½-to be tax. On £20,000 income, the total levy might be £16,000 (80%), of which £13,000 would be tax, £3.000 loan credit.

Mr. Keynes added that British soldiers’ pay might be raised similarly, by “the reward of deferred consumption” instead of cash. Instead of more pay now, Tommies would receive savings certificates (“bonus”) which, when war ends, would enable them to share in the increase of consumer goods which would then ensue, thus benefiting both themselves and the national economy.

London’s “City” viewed this Keynes Plan askance as “totalitarianism.” The Times feared it would decrease production of consumer goods at a time when unemployment is still high, but said the plan “deserves the most serious examination.” To Tommy in the trenches, it sounded fine.