"RECOVERY."

Auckland Star, Volume LXIV, Issue 17, 21 January 1933, Page 10

"RECOVERY."

A NOTABLE SURVEY.

THE WORLD'S ILLS.

A CRISIS OF PLENTY.

(By A.G.)

It has been said that everyone who wishes to discuss the slump should read "Recovery," by Sir Arthur Salter, the obvious retort being that every man who has lost his job has a perfect right to discuss it, while the fact that Sir Arthur Salter was a responsible official of the League of Nations means that he must bear his share of blame for the tragic muddle. Nevertheless his book is the most comprehensive diagnosis available and most people would admit that bis proposals both for a way out of the iliump and for maintaining an even keel after recovery, should be accepted. Plenty, Not Scarcity. In his diagnosis he quotes authoritative figures proving the crisis to be one of plenty, not scarcity, of distribution not of production, and he says that five years after the war the world outside Europe was more prosperous than before the war, while the next five years saw rapid progress everywhere. But while some of the" factors making for rapid recovery were unsound he considers that the crisis is due to a combination of deepseated pre-war tendencies with special disturbances resulting from the war. He describes liow the generations before the war were transforming and modifythe principle of laissez-faire or enlightened self-interest, the principle of competitive private enterprise, which combined with science and invention to increase the material welfare of Western nations. Free trade was one of the elements of this system which was never put into practice at all widely; factory

legislation, wage regulation and unemployment insurance were all socially necessary, but they were opposed to the principle of free competition, while mass production, rationalism and co-ordination in industry were also eliminating the basic element of competition from large parts of the organisation. In spite of all these changes the world before the war was still & busy ant-heap in which countless efforts fitted in more or less effectively with an unplanned society. The gold standard before the war kept most countries in step with the band. The war accelerated the action of the forces undermining laissez-faire. Interruptions in supplies encouraged the desire to be self-sufficient during the war, and this tendency was strengthened after the war; for the determination of the Allies to exact reparations from Germany was accompanied by a determination to prevent them being paid by goods sold cheaply. Since the sale of goods cheaply is tiie only method available to Germany for the greater part of the amount, reparations plus national self-sufficiency desires have led to higher and higher tariff walls. Salter quotes the subsidised beet sugar industry in Britain as one of the most foplish examples of war mentality applied to peace conditions. But these forces have had most scope in the United States, and Salter describes the Hawley-Smoot Tariff of 1930 as the action which renrlered inevitable the financial crisis of 1931; for U.S.A. was attempting an impossible combination of policies, namely, to continue exporting, to refuse imports, to stop overseas lending and to expect payment of past debts from abroad.

Trade and Debts. Salter shows how tariff changes have broken down the gold standard; for he shows how the fall in world prices, caused by the concentration of gold in U.S.A., would have enabled goods to cross the high tariff wall if the HawleySmoot Act had not granted powers to the executive to prevent them. No conceivable monetary system could work under such conditions, and Salter points out that the United States must make tlieir choice fairly quickly between the alternatives, (a) self-suffi-ciency, with past debts cancelled and future exports negligible in quantity, or (b) participation in world' trade and eollcction of debts, which will only be possible if imports are allowed fairly free entry and if lending to foreign countries is revived. To some extent every country faces the same problem, but whereas debtor countries must export more than they import, creditor countries should import more than they export, and in the near future, at any rate, must lend on a large scale if international trade is to revive. In 1928

lending from creditor countries to debtor c6untrics totalled over two thousand million dollars, and although

a part of this was the result of reparations and war debts, even if these were cancelled a sum approximating this figure would be needed to finance such trade every year until the creditor countries increased their excess of imports over exports. The Currency Problem. As regards currency,. Salter says: "A managed world currency, without the support, or the cost, of gold, should doubtless be the ultimate ideal. But such a currency needs a degree of international trust which does not now exist, and would best be controlled through an institution whVcli had acquired confidence and a reputation in many years of humbler work. We should aim first, therefore, at a reformed gold standard, managed by international co-operation. It must maintain a reasonable stability in the general level of world prices, while leaving sufficient elasticity within the general level to allow adjustments to changing economic conditions. Government control of finance, under extreme difficulties, failed after the war; private control of finance has also failed since.

Neither can afford to throw stones at the other. The problem of the constitution of central banks is indeed one with two aspects: that of avoiding the dangers of political pressure on the one hand, and that of safeguarding the general public interest on the other." On the subject of tariffs, Salter considers that there is no parallel in history for the divergence between the almost unchallenged doctrine of lowering tariffs and t..:e practice of raising them. The World Economic Conference of 1927 was composed of some 200 persons of every kind of qualification in business, agriculture, and official life, representing 50 Governments; they agreed unanimously that the chief impediment to the growth of world prosperity was to be found in tariff policies. Yet since that date nearly all alterations to tariffs have been upward. Salter considers that the effect of tariff building on Governments themselves is possibly even more harmful. " "After several years of trying to get into the minds of those who were nominally in control of commercial policies, I came to the conclusion that the secret calculation in most minds was one of : the strength of political groups and

political pressures on the Government" Government is failing because it >L leges to competitive industry Tf methods which involve detailed e *J? i ™r;™* nd • übis "" "> -«s Disarmament, peace pacts, economic councils, and the machined government all undergo expert discus 6)011 by Salter, and one of the most interesting proposals is that forTJ, proving the organisation of f O J™ lending. International lending he rlf siders an essential ingredient of revival of international trade and M proposes a number of working rules h which unsound borrowing could be nr vented; but even with the adoption oi these, .he considers the only way £ which Americans and Frenchmen will i, induced to subscribe to foreign l oan = • the near future is for the loans to be guaranteed by the American and FreJi! Governments. Unless that is done £ believes their export trades will cease The book, however, is so full 0 f mattTr that it is impossible to do more tha„ hint at his proposals for "A New Wm-ii Order." »wiu