The Auckland Star: WITH WHICH ARE INCORPORATED The Evening News, Morning News and The Echo. TUESDAY, SEPTEMBER 12, 1911. FINANCE AND WAR.

Auckland Star, Volume XLII, Issue 217, 12 September 1911, Page 4

The Auckland Star: WITH WHICH ARE INCORPORATED The Evening News, Morning News and The Echo.

TUESDAY, SEPTEMBER 12, 1911. FINANCE AND WAR.

For the cause that lacks assistance, For the wrong that needs resistance For the future in the distance, And the good that we can do.

The international crisis' provoked by German aggression in Morocco has developed in a direction that the Germans themselves cannot have seriously contemplated! beforehand. As usually happens when rumour 3 o>f war are in the air, the European money markets are dangerously depressed, and public credit is in a comparatively unstable condition. But it is not a little remarkable that the severest symptoms of this financial disorder should be manifested in Germany itself. No one doubts that if war •breaks out most of the great Powers would be involved in it. France in all probability would Ihiave to bear tho first brunt of the war, and Germany is in a position to inflict an immense amount of damage upon her before her allies could intervene. Yet it would seem that Germany is feeling the financial stress for the moment far more keenly than France or Russia. For gold is being withdrawn from Berlin to London, Paris and -St. Petersburg; while a heavy run upon the .principal German banks shows that the foreign drain of gold coincides with an urgent local demand, and that the depression of national stocks is reacting dangerously upon the whole credit system. In the light of all these occurrences it is easy to understand 1 the anxiety manifested in Germany for the maintenance oi peace and the grave apprehension entertained there as to the possible consequences that would be entailed on the country by an outbreak of war.

So far as the financial crisis affects Germany more particularly, it draws attention to a fact that in our admiration for Germany's commercial and industrial progress, we are liable occasionally to overlook —that Germany is not financially so strong a Power as her military predominance on the Continent might suggest. The financial systems of France and England arc the product of centuries of slow and steady growth, while Germany, which lias only forty years of Imperial existence- behind it, still finds ber financial system comparatively undeveloped. A remarkable indication of G-or:nan feeling on this subject is the proposal seriously put forward from time to time to settle all Germany's outstanding differences with France on a financial 'basis. Some years since when Germany was striving in vain to attract foreign capital to the Baghdad IRailway scheme, it was suggested that France might be induced to participate in the project if Germany would offer ther valuable material concessions. And a few days ago, while the negotiations over Morocco were in progress, a report was widely circulated that Germany would lie prepared to compromise ber Moroccan claims on condition that the French money market were thrown open for the free exploitation of Germany's many -expensive colonial enterprises. But, though Germany has thus openly confessed her financial dependence on France, she is even more directly indebted to England for the security of her finance. In one of the most recent standard works on finance, Mr. Hartley Withers' "Meaning of Money," t!his fact is clearly brought out. "The rajpid expansion of German trade could never have been achieved if it had not been assisted by the large credit furnished in London." We are further assured by the same authority that "Germany has quickened production by the help of English credit," and the natural inference is that the prosperity and the solvency of Germany depend chiefly on the maintenance of satisfactory financial relations with England and the other Powers.

But It ia obvious that though Germany seems to be feeling tlie sti'ain more acutely than the other Powers for the moment, this sense of insecurity is certain to extend and to affect the ■whole of the world's money markets. For the financial operations of all countries are ibound so closely together that any shock sustained by a single nation's credit is sure to be transmitted to its neighbours• and this is especially the | case when the largest financial centres are affected. To quote Mr. Hartley Withers again:—"lf a crisis becomes so severe that London has' to restrict its facilities, other centres which habitually keep Balances in London, which they regard as so much gold, because a draft on London is as good as gold, would find themselves very seriously inconvenienced; and it thus follows that it is to the interest of all other centres which trade on those facilities which London alone gives, 'to take care that London's -task is not made too difficult." This last -warning suggests very plainly how widespread and how overwhelming would be the panic and the financial disorder that would 1 ensue on the outbreak of any war between the great Powers. But it leaves out of sight another aspect of the question wsrich has (been too little considered in the past the certainty that any damage inflicted by one Power upon another's commerce and industries will rcct disastrously upon herself. Mr Norman Angell wrote his "Great Illusion" to prove that wars and conquest are simply destructive and suicidal and can never benefit even the victor j and the remarkable success that has attended the publication oi Ms jworij; t-hrougbQut

Europe 3eems to show that these truths are being gradually 'brought home to the intelligence of the civilised nations. "Trade and finance/' he reminds us, "are built upon credit—that is, upon confidence' in the fulfilment of obligations, upon security of tenure in titles, upon the enforcement of contract according to law —and if credit is profoundly touched there is not a section of the elaborate fabric which is not affected." And if this general argument does not appeal to Germany with sufficient force, possibly the shock that her financial system has already received may help her to appreciate the large measure of truth in Mr Angell's dictum that "Germany is to-day in a larger sense than she ever was before, our debtor, and her industrial success is bound up with our financial security."