It is still too early to give a complete analysis of the Government’s policy as regards the nationalisation of the banks. Sir Hugh Dalton’s statements were too vague for that, he gave us to understand that all his plans were still in the experimental stage.

Nevertheless, from statements made by different Labour leaders, especially from those of Mr. Bevin, as Minister of Labour of the former Government, we can get quite a clear picture of the philosophy behind their policy, and of this philosophy I shall give a short outline and criticism.

The Labour party is convinced—and rightly so—that our reconstruction problems of today are not so much production as financial problems, that though we may have as many plans for industrial expansion as we like, while this expansion has to be financed according to the old system, in which the power to create and destroy money is left to the banks, our plans will turn out failures.

They fear especially the consequences of deflation. Deflation, the deliberate creation of a shortage of money, causes of necessity a sudden drop of prices, so that producers are forced either to sell below cost price, to destroy their products to keep up their price, or to cease producing at all.