Gold Standard, Anglo American Loan and Welfare State

 

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.
(by Alan Greenspan, Published in Ayn Rand’s “Objectivist” newsletter in 1966, and reprinted in her book, Capitalism: The Unknown Ideal, in 1967)

The Anglo-American Loan Agreement was a post World War II loan made to the United Kingdom by the United States on 15 July 1946, and paid off 29 December 2006. The loan was negotiated by John Maynard Keynes on behalf of the United Kingdom from the United States and Canada at the end of World War II. The loan was made primarily to support British overseas expenditure in the immediate post-war years and not to implement the Labour government’s welfare reforms. British politicians expected that in view of the United Kingdom’s contribution to the war effort, especially for the lives lost before the United States entered the fight in 1941, America would offer favorable terms. Instead of a grant or a gift, however, Keynes was offered a loan on favourable terms. Historian Alan Sked has commented that, “the U.S. didn’t seem to realize that Britain was bankrupt”, and that the loan was “denounced in the House of Lords, but in the end the country had no choice.”

After the United Kingdom general election, 1906, the Labour Party became a serious competitor to the Liberal Party. The resulting Liberal welfare reforms laid the foundations of the modern welfare state. The reforms were greatly extended over the next forty years. Certainly, governments which had seen the wave of communist revolts after the First World War were keen to ensure that deeper reforms reduced the risk of mass social unrest after the Second World War. In addition, modern, complex industry had more need for a healthy and educated workforce than older industries had. Crucially, the experience of almost total state control during the Second World War had inured the population to the idea that the state might be able to solve problems in wide areas of national life. Finally, it seems likely that the social mixing involved in mass evacuation of children, and of service in the armed forces, had increased support for welfare among the middle classes.
The Beveridge Report of 1942, (which identified five “Giant Evils” in society: squalor, ignorance, want, idleness and disease) essentially recommended a national, compulsory, flat rate insurance scheme which would combine health care, unemployment and retirement benefits. Beveridge himself was careful to emphasize that unemployment benefits should be held to a subsistence level, and after six months would be conditional on work or training, so as not to encourage abuse of the system. After its victory in the United Kingdom general election, 1945 the Labour Party pledged to eradicate the Giant Evils, and undertook policy measures to provide for the people of the United Kingdom “from the cradle to the grave.” Included among the laws passed were the National Assistance Act 1948, National Insurance Act 1946, and National Insurance (Industrial Injuries) Act 1946.

(Wikipedia)