TIDE TURNED?

Auckland Star, Volume LXIII, Issue 243, 13 October 1932, Page 23

TIDE TURNED?

PROF. CONDLIFFE'S BOOK.

A WORLD SURVEY. HIS "CAUTIOUS OPTIMISM." (By E.L.C.W.) LONDON, September 9. What is the world coming to? Is the machine of international trade creaking towards complete stoppage? Does the shrinkage cl world trade —and during the recurrent crises of the last few years it has been ominously accelerated —presage veritable breakdown? Is De Valera's sudden jump into economic nationalism but an intelligent anticipation of a movement which other nations—consciously or unconsciously — have been making timorously, tentatively? Is the "growing paralysis" of trade which was bewailed this week at Stresa to sprrad into a wider ■ area? All these are questions so urgent as hardly to brook delay until the World Economic Conference meets.

In any case, the League of Nations has done a most timely thing in issuing just now the "World Economic Survey, 1931-32." Not that the survey makes any excursions into politics. Its task is to collate with severe and complete competence the relevant facts and figures of world economy. The book's chief value lies undoubtedly in the fact that it provides in a single brief, readable volume —its price, it should be noted, is only six shillings—a bird's-eye view of the world as a whole.

To New Zealand, in common with every country, in these critical times, the book has its value. But it has a special interest to the Dominion in that its compilation was entrusted to Dr. J. B. Condliffe, an Australian-born New Zealander, for some time Professor of Economics in Canterbury College, and later in the Research Section of the Institute of Pacific Relations. The Dominion can take some pride in the fact that the Economic Committee of the League of Nations put in Dr. Condliffe's hands the task of providing a book which is intended "to afford an account of recent developments which, is, intelligible to the lay reader." As New Zealand has reason to know, Dr. Condliffe has the gift of marshalling the figures and facts relevant to his problem, and setting out with convincing lucidity and charm what they mean and towards what goal they tend.

In Professor Condliffe's view, "it would be superficial reasoning either to ascribe the depression to any one single course, or to seek a solution of its problems by any. simple panacea," and the very universality of this survey should exercise so profound an influence not only on those who are to play their part at the Conference, but in the creation of a well-informed public opinion.

Why World Deadlock? As has been well said in one of the current reviews, "Lack of imagination leads most people to think closely along the lines of the material which meets their eyes, and on this account the presentation of economic statistics and information in arbitrary national compartments must be reckoned partly responsible for the dead lock to world trade. Broadcast in forms which make misconception inevitable, they have allowed the fatal fallacy to gain root that trade is a type of warfare in which country A as a whole seeks to get the advantage over country B. The Economic Intelligence Service of the League of Nations has struck a telling blow at this mischievous opinion by issuing at the psychological moment the "World \ Economic Survey." i

When, like any novel reader, I turn shamelessly to the last page of the I survey, it is cheering to find that Professor Condliffe ends on a note of "cautious optimism." And this week one feels the caution as necessary as. the optimism in the face of the more spectacular moves in Wall Street and in our own Stock Exchange. Psychology has its place, but no exploitation of psychological methods will avail in the end if there be no real basis for them. Analysis of Depression. The survey, containing as it does an analysis of certain phenomena of the greatest significance for the study of the economic depression—the changes in the world output of raw materials and foodstuffs, in industrial activity in the principal industrial countries and in the activity of certain important industries, and finally, relative movements in prices—cannot be summed up adequately in the compass of a review. A quotation or two will, however, give a taste of its quality. "It is not difficult to follow the sequence of decline in the world trade in the early stages of the depression. In 1930, the heavy fall in the prices of raw materials struck the agricultural countries, particularly those outside Europe with special severity. Certain of them were able to increase the quantum of their exports, but even so the fall in prices diminished the total value. In the later stages of the depression, however, reduced purchasing power of the agricultural countries in all parts of the world caused a fall in the exports of the industrial countries so that the decline in trade became general. From the second half of 1931 onwards, the sequence of events becomes so confused that it. is not possible to state anything more than that there was a general decline proceeding at uneven pace and distorted by a variety of restricted measures." Professor Condliffe continues:— "For the world as a whole, the shrinkage of world trade clearly means impoverishment. It is already reflected in increased unemployment, lower standards of living and disorganised industry and commerce. If it should continue peoples of the world must forego the advantages of specialisation and exchange, and suffer still further lowering of their standards of living." Shift To The Pacific. But the most startling figures adduced by Professor Condliffe are those showing the accelerating rate of decline in world trade until in the first four months of this year it shows a shrinkage at the rate of 42 per cent! The economic conference of 1927 had declared for reduction of tariffs, in 1927 a standstill was proposed, but in spite of the evidence then shown of the progressive decline of trade the tide of economic nationalism set in which has reached its logical conclusion in the Irish Free State.

There are indications that the depression has not only caused a startling diminution of world trade as a whole; but has also aggravated the pronounced tendency since 1925 for trade with and between the new developing countries to lag behind the average. Despite > virtual stoppage of oyercea taigration,

population was increasing fastest in such areas as South America, the Pacific slopes of North America, Indonesia, Australia and New Zealand. In these area 6, production, both of raw materials and finished products, was also increasing rapidly, new shipping routes were being established and international trade was developing so fast that, as late as 1927, it could be 6aid with reference to the statistics of the previous year, "trade was passing from, the Atlantic to the Pacific." Such a trend was in harmony not only with the increasing population, but also with the rapid industrial development both of North America and of such countries as India, China and Japan. Where Trade Fell Off. "In the years after 1925, however, the share of Europe and Africa in the world's trade constantly increased, while the shares of Latin America, Asia, Australia and New Zealand fell off considerably, and that of North America less considerably, hut perceptibly.

"The growth of, European trade since 1925 was, in part, caused by a recovery of industrial and agricultural production after the war destruction and disorganisation. In so far as it reflected a vigorous restoration of economic life, it was a healthy development, creating a larger total of world trade by which the share of non-European countries tended i to be reduced in relative, but not abso-' lute, amount."

The emergence once again of Russia as a trading country, Professor Condliffe considers, while subject to somewhat special qualifications, should be included aa part of the general recovery of European trade.

"The restoration of European production, in itself a desirable and healthy development, was accompanied, in its later stages, by a remarkable volume of borrowing, made possible by credit expansion. The boom thus created masked the necessity for fundamental political and economic measures of readjustment to the changed post-war situation of world trade and production."

The world still awaits those fundamental political adjustments. Even with these it is not clear that there is any general agreement upon economic measures necessary for recovery.

As relevant to the position now, one might conclude with Professor Condliffe's dictum on the repercussions of banking and credit measures. "It is too soon to judge," he says, "whether the measures so far taken will prove adequate in the long run to bring about credit expansion in sufficient volume to cause an upward movement of prices. If this should prove to be the case, or if the expansionist policy is pursued further, until it does bring about a rise in the American price level, it is obvious that this will not only facilitate the accumulation of gold reserves in other countries, unless in the meantime they also expand credit pari passu with the United States, but will also enable those countries that have abandoned the gold standard to pursue cheap credit policies without running an undue risk of their foreign exchange declining."