THE GOLDEN SEMICIRCLE
503
Africa
directly, since London, and to a smaller extent Paris, Berlin and
Holland were the traditional centres of capital supply, but it
inaugurated (if it did not cause) an international depression of the
gravest kind. It is true that falling prices and falling costs, which
are characteristic of depressions, put industries which sell at fixed
prices in a favourable position, but any benefits to be derived in this
way do not necessarily compensate for the malaise which affects
capital markets at such periods and which disinclines investors to take
up speculative securities, and gold-mining shares are necessarily
speculative. What was required to overcome the reluctance of investors
was some spectacular change in the profitability of the gold-mining
industry, such as would be represented by a drastic change in the
monetary price of gold. So long as the dollar price of gold remained
unchanged, and so long as the South African pound remained unchanged in
terms of the dollar, the South African mining industry stood to gain
only in so far as there was a fall in costs; but a change in the dollar
value of the South African pound would at once have transformed the
situation. These were the issues which, from the standpoint of the
mining industry itself, were involved in the decision, which had to be
faced as soon as Great Britain departed from gold, i.e. either to stay
at the old parity with gold or to follow Great Britain's example.
From
the standpoint of the Union Government the problem was more complex.
The fall of prices inevitably increased the real burden of all debts;
and, in so far as South African producers (primarily agriculturists)
were selhng in depreciated British pounds, they suffered losses; also,
a fall in the value of the British pound in terms of South African
pounds encouraged imports and checked exports. In these circumstances,
the importance to the Union's economy of the gold-mining industry,
great at all times, was still greater. Even if no change in the value
of gold in terms of the South African pound took place, here was an
industry with an unlimited market for its product at a time when other
industries were losing theirs; and not only was economic activity
buttressed by the expenditure of the gold industry, but, with declining
revenues, the dependence of the Union's finances on the gold industry
was greater than ever. A rise in the receipts of the gold-mining industry would then be of great moment from more than one point of view.
The
first reaction of the Government was to maintain the gold standard at
the old parity, and it was the practical difficulties which had to be
faced which forced a change, so that fifteen months after the
