Coalition

Early last Sunday afternoon little knots of people began gathering in front of Buckingham Palace and No. 10 Downing St. The little knots grew until Downing Street had to be cleared by police. The crowds overflowed into Whitehall and down to Trafalgar Square. They were anxious but good-humored. Each Cabinet Minister as he arrived was greeted with shouts: "Good Old Snowden!" "There's Jimmy! Gor Blimey!"

Darkness fell, the crowds stayed, still growing. As tenseness increased an immaculate young man with a monocle in his eye, yellow gloves and tight rolled umbrella firmly gripped in his hand, inspected the crowd with amazement and standing next to a United Press correspondent, hailed a policeman:

"I say! What's it all about?"

What It Was About. The Labor Government of Ramsay MacDonald was faced last week with the almost impossible task of balancing a budget with a deficit of some $583,000,000* (TIME, Aug. 24).

There were three ways out:

1) Increased taxation. Britain is already the heaviest taxed nation in the world. The British camel can stand few more straws.

2) A tariff. Britain is the traditional home of free trade. Most of her food must be imported. No government has been able to stand after threatening to increase the nation's food bill.

3) Economy. This was the obvious solution. The MacDonald Cabinet tackled it manfully. As a first step last week the War Office and the Admiralty sent telegrams to all military and naval commanders, the chiefs of the air force, suspending immediately and until further notice all contracts for military works. But here again the Laborites ran against a stone wall. Britain's great extravagance is the Dole. Liberals, Conservatives, businessmen, were demanding that it be cut. Trades union leaders and left-wing Laborites cried just as loudly that if the Dole was cut they would desert the party, kick out the Government. Cabinet meetings went on day after day. On a final Dole vote, right and left Laborites split 12 to 8, Foreign Minister Henderson and First Lord of the Admiralty Alexander leading the Left.

Lombard Street Pressure-British bankers brought on the crisis. Last week the world was told that the -L-50,000,000 ($243,000,000) Franco-U.S. credit to the Bank of England, largest credit the Old Lady of Threadneedle Street has ever needed, had been nearly exhausted. Moreover, of the credits totaling some $1,200,000,000 (just about the same as Germany's), many will expire in October and must be renewed if sterling is not to collapse. French and U. S. bankers would not renew Britain's credits until they were assured that Britain's budget would balance. A tariff and a cut in the Dole are the only ways the budget can balance, but no single British party is strong enough to enact such measures. Only a Coalition Government could do it. About the time that Lombard Street board rooms were figuring this out, fox-bearded Montagu Collet Norman left Great Britain for Canada with a nervous breakdown. Governor Norman has been in increasing ill favor with a section of the British Press. Editors were recalling the enormous influence he has exerted during the eleven years he has been Governor of the bank. Montagu Norman went to Quebec which is 550 miles from Wall Street by rail, $2.45 by telephone, and left behind square-jawed Sir Josiah Stamp, long the Bank of England's No. 2 man, little known Sir Ernest Musgrave Harvey as Acting Governor.

The King. King George arrived at Balmoral last week for a three-week holiday. It rained continuously. Suddenly, only two days after arriving, the King Emperor put away his kilts and gave up all thought of vacation. He rode all night to London in a special train. At Euston Station, Sir Josiah Stamp was waiting for him with his hat in his hand. King George emerged from the train, grim-faced in a black bowler, black overcoat. Sir Josiah joined him at once and, as the two walked slowly through the station to the royal limousine, delivered to his sovereign a short, grave report on the state of British finances. All that afternoon and evening leaders of all three British parties were summoned to conferences at Buckingham Palace. Just as in 1911, as in 1914 at the height of the Irish troubles, King George was being the ruler of Britain.

Meanwhile the crowds were gathering in front of the palace and at Downing Street. Scot MacDonald emerged to call on his King. "Any statement, Mr. MacDonald? Any statement?" asked the thronging reporters.

"Yes," said the Prime Minister, "I am . . ."

He changed his mind and stepped into the car. As it drove off Ramsay MacDonald took off his hat and buried his face in his hands.

Coalition. At 5 o'clock the next afternoon the news broke. Ramsay MacDonald had tendered his resignation and that of his Cabinet. It had been accepted. Immediately he was called upon by King George to form a new Coalition Cabinet, including members of all three parties. Scot MacDonald bowed his grey head and kissed King George's hand.

There were more meetings at Downing Street. Slowly the new Government formed. Conservative Stanley Baldwin had said that he would take no part in a Coalition Cabinet. He changed his mind last week after he had been interviewed by King George. He entered the emergency Cabinet as a leader of the Government in the House of Commons. Liberal Lloyd George was still sick abed and Sir Herbert Samuel represented him in the new group. Meanwhile London soothsayers wagered that as soon as the emergency was passed Stanley Baldwin would become Prime Minister of Great Britain. Philip Snowden as Chancellor of the Exchequer, Margaret Bondfield as Minister of Labor and Lord Sankey as Lord Chancellor were held over among the Laborites. A gaping vacancy was left by "Uncle Arthur" Henderson, the Foreign Minister, who could not bring himself to swallow the projected cut in the Dole.

Montagu Norman remained in quiet Quebec, kept himself from being seen or heard. If he was conferring with Wall Street bankers, if he was borrowing more money for Britain, no word of it leaked to the Press. In the midst of the excitement, Secretary Andrew W. Mellon of the U. S. Treasury reappeared on the international scene by disembarking from the Conte Biancamano at New York. A flashlight bulb exploded almost in his face.

The 76-year-old Secretary leaped back quickly, suffered only a slight glass cut on his right hand which Captain Cavallini of the Conte Biancamano swabbed with alcohol and iodine. Secretary Mellon immediately hurried downtown to confer with Governor George Leslie Harrison of the Federal Reserve Bank of New York.

Newshawks watched and waited at New York, Washington, Quebec and London to see how Great Britain's great credit crisis would be passed, who was guiding the events, and how. For the moment Britain's destiny had been taken from the hands of her politicians and lay among the dictators of the international world of money.

* The U. S. has for the 1931 fiscal year a $903,000,000 deficit. There is this vital difference: The U.S. debt is internal, can be postponed. Britain's debt is external, must be met.

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