WORLD TRADE.

Auckland Star, Volume LXIII, Issue 252, 24 October 1932, Page 4

WORLD TRADE.

IS IT REVIVING? VITAL ECONOMIC QUESTION. MAIN FACTORS OUTLINED. Many who are concerned in the economic welfare of the Dominion will have been puzzled by the paradoxes . that have characterised the general trading position. On the one hand, signs of returning buoyancy have been noted in the stock markets, and mercantile circles have shown more confidence, yet improved commodity prices, which are necessary as the basis for an economic recovery, are lacking in many instances, notably in meat, wheat, and wool. The position generally, as at September 17, is dealt with by the London " Economist " under the caption "16 It Revival?" The writer says:— " There is no business man in the world who is not asking himself this question, or whose plans and hopes do not depend upon the answer. What is the immediate meaning, and what the promise for the future, that may be read into the. recovery in the stock markets and the rise in commodity prices which we have been witnessing in the past two months? Is this movement no more than, a flash in the pan, or does the advance possess any of tile indispensable attributes of durability? May we believe that we see before us an outward and visible sign of the approach of a real improvement in the volume of trade, production, and employment? This week's shake-out in the markets may be taken as marking a definite stage in the movement, and affords an opportunity to pause and review objectively the main factors in the situation. "One significant sign is the almost universal tendency to take a rather rosier view. The letters from our foreign correspondents in recent weeks, and again in the current number, speak in definitely more hopeful terms of the situation in various parts of the world, ' including the depressed countries of Central Europe. Even in the case of Germany, those who have been recently in touch with opinions in Berlin have returned with slightly more hopeful, if qualified, reports, to the effect that the German financial and business world is not so alarmed or so hopless as they had expected to find it. A very general market flutter might be expected to follow from so substantial a stimulus as that which has been given in recent weeks from New York and London; but that there has been even a sentimental response at least indicates that a less tragic view is being taken of the difficulties which still lie ahead. Securities Improve. "As to the extent of the movement which has taken place, it may be summed up by saying that if we leave out of account the somewhat violent movements of the past week, the rise in the case both of our international index of gold prices and of the prices of Stock Exchange equities that has taken place since June approximately cancels the fall that took place during tlie first six months of the year. This is in itself a great gain, for it has relieved anxiety in many board rooms throughout the world, made conditions more liquid, and reduced or eliminated losses on current working. "On the other hand, if we look for tangible results in the field of production, employment, and trade, frankly there are none. In this country unemployment is at the highest figure ever recorded, while August exports are the lowest in British history since the war. " Clearly, then, the present phenomenon can mean only one of two things—either it is merely a recovery of stpeks and of commodity prices from an abnormally low level due to distress and fear of bankruptcy to a level which still represents severe depression, but not panic and acute crisis; or, alternatively, though actual production and other figures always take time to respond to psychological improvement, the present movement may be the forerunner of recovery. In times past upward and downward movements in the stock and commodity markets have preceded the major movements of the trade cycle. Are we once again witnessing an example of intelligent anticipation by investors and speculators of an economic movement which can only be detected in the first instance by almost imperceptible signs, such as the transfer of stocks from producers' hands to merchants and consumers; an improvement in the order books; a discussion of projects for expansion, and a spreading conviction that prices have passed their lowest point? "The phase through which the world has been passing has been so much more acute than any similar experience, and political considerations have played so much larger a role than in normal times, that we hesitate to apply ordinary tests; but if economic considerations alone are to be taken into account, there would, in our opinion, be sufficient grounds for thinking that we had definitely entered upon an upward phase of business conditions. The most substantial evidence of this is that in a number of directions production lias adjusted itself to the present level of consumption; stocks are not rising and are in some cases tending to fall, and may be expected to drop further if the conviction persists that the bottom of the price curve is passed. In some important industries the level of production is down to or below that necessary to provide replacements, apart altogether from normal expansion. In the financial field also most countries have made a serious and, in many cases, a successful attempt to deal with their public finances; and, though the position of debtor countries, particularly in Central Europe, is still extremely embarrassed, there is much less fear of a currency debacle, and a slowly growing conviction that, if adjustments may still have to be made in the matter of international commercial obligations, there is no reason why these should not be dealt with in a deliberate and orderly manner, without involving a threat to the stability of the chief creditor countries. The Political Aspect. " But if in these respects the ground for revival has been prepared, there remain grave elements of doubt due to difficulties in international public policy, the two aspects of which are the political situation and the economic and financial relations between nations. " There is something to be said for the view that in the long run economic life will start again whatever muddles the politicians may make; but the time is not yet. There is no continent which is yet free of its political difficulties, and there is no country whose economic life is still not vitally affected by the unprecedented dislocation of which the slump in prices is the index. If steps are not quickly taken to restore international intercourse on the basis to which the world has grown accustomed, we must look to years of painful readjustment. It is those who are responsible for State policy who will determine whether we make a relatively short return to recovery or have to face a prolonged depression, the course of which it is impossible to foresee."