WORLD PROBLEMS.

Auckland Star, Volume LXI, Issue 227, 25 September 1930, Page 24

WORLD PROBLEMS.

NEARLY ALL INTERNATIONAL t( DOMINION CANNOT STANI ASIDE." SIR OTTO NIEMEYER'S ADDRESS. (By Telegraph.—Press Association.) I WELLINGTON, Wednesday. An address on international financ and its problems was given to-day ty Sir Otto Niemeyer at the New Zealanc Club luncheon. The acting-Prime Min ister, Hon. E. A. Ransom, was present. "It may se.em odd that any represen tative of the Bank of England should visit New Zealand," said Sir Otto, "bul is it not perhaps symptomatic? Is ii not a symbol of the need which we fee for closer relations and more accurate understanding? It is every day becom ing more apparent that every consider able financial, and economic problem is less and less a national problem anc more an international problem. Everj war tends to become a world war ant even those who remain neutral do nol escape from its economic effects. Sucl a problem as unemployment, which used to be a local matter, is rapidly becoming an international matter, afflicting practically all countries at the same time and possibly curable in the end only by international agreement and international action. Overproduction is 1 not a local problem. It is a phenomenon which appears in all parts of the world and in <>U branches of production. World politics are becoming more and more international; world finance is becoming more and more international; and world trade and industry are becoming more and more international. Dominion Affected Intimately. "New Zealand cannot in her own interests stand aside from international affairs or close her eyes to international happenings. They affect her intimately and domestically. You have only to look at the present prices of wool and agricultural produce to see how closely the fortunes of New Zealand are bound I up with events at the other end of the world. I think I need make no further excuse for dwelling on two great international movements among many. The firet is the growing co-operation between the central banks of the world and the second is the growing political co-opera-tion which centres in the League of Nations. Functions of a Central Bank. "You must distinguish a central or reserve bank from an ordinary trading bank. A reserve bank, such as exists at Home in the Bank of England, or in America in the Federal Reserve System, or in South Africa in the South African Reserve Bank, or in various countries of Europe, is.not mainly or normally a bank which deals with the ordinary commercial banking business of a country. It is rather a bank which holds the ultimate reserves of the country, including the cash reserves of other banks, and whose general mission may be described as that of endeavouring to maintain parity of national exchange. "With the great currency disturbances which have arisen out of the war—disturbances which deprived of any value at all, the currencies of Germany and Central Europe and reduced the value of the French and the Italian currencies to about one-fifth —the problems facing central banks obviously became much more difficult. There has arisen a perception of the fact that a central bank, too, muet have an international outlook. It is not possible for them to carry out their functions completely without understanding and co-operation with the corresponding central banks of other political units.. If you reflect on how greatly the exchange problem depends on the level of prices in an important country which buys your exports, you will see at. once how closely the functioning of one central bank depends on the policy being pursued by another. If you take again the question of stability of the value of gold in relation to commodity prices, a most important world problem, it is obvious that unless there is a measure of agreement between central banks as to the amount of gold they respectively think it liecessary to hold, there will be a scramble for what gold is available, and consequently growing danger, as the price of gold goes up, of commodity prices falling, to the ultimate disadvantage of all parties. Co-operation in Banking. "Co-operation between central banks, a slow and difficult process, has been making steady progress in the last five or six years and now, perhaps, is taking a new step forward in the foundation of (lie Bank for International Setttlements in Basle which, though primarily a piece of machinery connected with reparation payments, has also in it, we hope, the seeds oi closer and more formal cooperation between central banks. "One of the thinge one would like to see would be accelerated growth /of similar co-operation between, say, the Bank of England and the Dominion.',l believe myself : that is one of the most urgent 1 problems within the British Empire. "The second point on which I would like to dwell is the international cooperation which takes place through, the League of 'Nations. My active interests in the League began in 1922, when I first became a member of the League .Financial Committee. I have been a member of the committee continuously since then and was chairman of the committee in 1927. My approach.to the League and its work has not been from the 'side of high ideals or international politics, but from.the.severely practical standpoint of the financial administrator. The Financial Committee has about 12 members, each a national of a different country. These members do not represent their countries in the normal official sense, but arc chosen for their expert financial knowledge, and as persona "of financial , standing in.their own-countries. They' are largely well-known.; bankers. The committee is truly international and absolutely independent. When we started we were all strangers to one another, but by constant association, and discussion we have, become a united,body, = knowing each other, well arid trusting each other. Reconstruction in Europe. "Wo have evolved a definite, doctrine and a united spirit in dealing with public financial problems. It has been our duty to advise the Council on those financial reconstructions in Europe which have been undertaken under the auspices of the League, and you will remember that the League has no power, to enforce its advice on anyone, .and no, money .of, it| own which it can' lend : to anyone; ■ We have had, therefore, in forming our reconstruction schemes not only, to decide among ourselves what is a practical solii- 1 tion of a difficult financial problem, but j also, on «ne hand, to persuade the. coun-j try concerned to adopt and carry out our j advice, and on the other hand, so to 1

■frame our scKemes as to secure the support of the investing markets where that was necessary. "The first country with which we had , to.deal in 1922 was .Austria.. Austria at that moment was the despair of Europe and of herself. We were able, > by exceedingly drastic measures, to establish a plan which restored Budget equilibrium in about six months. To carry out this scheme for a year or so, a distinguished Dutchman acted as the League's commissioner-general in Vienna, and for some time an expert adviser was a member of the Austrian Central Bank staff. That scheme, which was an experi-. ment for the Financial Committee, which had to elaborate new and untried methods for an xinparalleled situation, and also an experiment for Austria and the Powers of Europe, was from the first completely.successful. Budget equilibriun has never been seriously threatened since; the currency has been absolutely stable; in two years foreign advice could be safely withdrawn; and Austria is now a well-ordered and reasonably prosperous financial community. "It was the international prestige of the League of Nations which enabled us to.get from the neighbours of Austria essential guarantees of her territorial integrity and necessary adjustment of her reparations. It was the prestige of the League of Nations which enabled us to claim in half a dozen international markets the necessary financial support from outside, and it was the prestige of the League of Nations which put at the service of Austria the expert advice she received and persuaded the people of Austria that it was wise to accept that advice. "In later years we have dealt with the very similar case of Hungary, with the case of Greece and the case of Bulgaria. We have also been engaged in currency advice in Estonia and Danzig. "Misery Breeds War." "I have heard it said: 'This is all very well, but why should the League bother itself about, the domestic troubles of second-class Powers?' I think the answer is as follows: Putting all other considerations aside, and so far as the Financial Committee is concerned, we, do not claim to be humanitarians or to take any action except on strictly economic grounds. I think the answer , is that in the first place, order and tranquillity are essential to the maintenance of internal trade and commerce, and in the second place, economic misery is a fertile breeder of war. No man can say where starvation in Vienna or misery in Budapest or destitute refugees in Bulgaria or Greece might end, and it may well be that those small causes might in the end even touch distant New Zealand. Events in a much less important town in southeastern Europe crucially affected New Zealand in 1914. "The moral which I should like to impress upon.you, particularly those of you who are interested in commerce and among them particularly those who are interested in primary products, is that distant as New Zealand may seem, and remote as may be happenings on the other side of the globe, there never was a time when there were more problems calling for international settlement, when there were more problems which can only be settled internationally, and when it was more important to New Zealand that she should take her full share in such activities." Sir Otto was accorded a hearty vote of thanks, and was presented with, a memento in the form of a silver kiwi mounted on greenstone. 1