Bay of Plenty Times. SATURDAY, APRIL 2nd., 1938. DEFENCE EXPENDITURE

Bay of Plenty Times, Volume LXVI, Issue 12317, 2 April 1938, Page 2

Bay of Plenty Times. SATURDAY, APRIL 2nd., 1938. DEFENCE EXPENDITURE

Throughout the world an enormous amount of money is being spent on armaments, and this expenditure will continue for the next four or five years. Building warships, aircraft, tanks and other military and naval equipment, seems to be taking the place of ordinary public works, and this new form of public works is being vigorously pursued. Perhaps were it not for this expenditure the economic conditions of the world would be in a state of slump with unemployment as bad as ever. The marvel of this high pressure expenditure on armaments is how the nations are fiuacing it. Britain and the United States have the money. ’When Britain first decided on extensive rearmament the appropriation for the purpose was fixed at £1,100,000,000, to be spread over a period of four years. Of the total only £400,000,00(1 was to be raised by loan and the balance was to be de- ! rived from current revenue, and i taxation was increased to provide (his. Britain’s financial year j closed on Thursday, and the Brit- | ish Budget will show a satisfacI tory surplus. The defence ex--1 penditure is to be increased, prob- ! ably by £500,000,000, but the i whole of this amount is to be raised by loans. Britain can pay for her defences without disturbing her economic system. America can also provide the funds necessary for the increased defence expenditure, for the country holds an enormous quantity of gold. The national finances of U.S.A. are not in a healthy state. The Budget deficit has been accumulating for years, and now amounts to a very large sum, and the public debt also shows an enormous growth. America has tampered with her economic structure, and depreciated the currency, but for all that the United States can readily find the money for defence expenditure. France is not in as good a posit on as Britain and America, but France will get through, although she will probably have to resort to currency inflation. The mystery is how Italy, Germany and Japan are j managing. Italy has no money, I and recently had to make a capi- [ tal levy. She has been shifting I her armies about, spending money in Spain and Abyssinia, besides continuing a big defence programme. Germany is the great mystery for no statistics are published. Russia is another enigma, but Russia is obtaining large quantities of gold from the mines in the Ural Mountains, and is in a position to pay for imports of raw materials. How the smaller nations are managing is also somewhat of a mystery.

The effects of this heavy expenditure on defence must be good if only temporary. There should be in all countries full employment, and with more workers earning, there should follow an increased demand for the necessaries of life, that is food, clothing and shelter. Food prices will probably advance, and there is a fair prospect of a continued demand for our dairy produce and frozen meat at- good prices. There should be a sustained demand for raw materials, but the main demand amongst the metals will be for iron and steel. Most industries in most countries will be concentrating on defence orders and the manufacture of goods for export must be neglected. Importers of goods, especially from Britain, will meet with difficulties, and will probably have to pay higher prices. That would raise costs in the importing countries, so that although we may do a good business with Britain in dairy produce and frozen meat, the profits will not be any better because of the increased costs. World economic conditions to-day are not easy to understand.