TRADE REVIVAL

Dominion, Volume 26, Issue 101, 23 January 1933, Page 10

TRADE REVIVAL

Governor-General’s Review

FREE INTERCHANGE

World Co-operation Need

sanity in nationhood

Dominion Special Service.

. Napier, Jan. 21. The economic interdependence of civilised nations as illustrated bj tiie present paralysis of world trade through the stagnation in the, now of gold, was stressed by the Gover-nor-General, Lord JJledisloe, in an address at the Napier Chamber ot Commerce dinner this evening.

“Of the many factors which have unsettled world industry and affected most materially primary production, none has been more dominant than the non-availability of the world’s normal medium of commodity exchange,” said his Excellency. ‘‘That the whole world should be faced with bankruptcy and social upheaval through the unavailability of the particular metal chosen as a matter of convenience by civilised people . for facilitating commercial transactions between nations and individuals is unthinkable and grotesque, particularly if such unavailability is due, not to its serious world scarcity, but to the process of hoarding, coupled with the artificial, interruption of the free flow of goods and services whose' value it is its function to represent.

Overhead Charges Still High.

“The burden of financial commitments fixed in terms of money has increased on the average since 1929 by about one-half, and with no fall of fixed overhead charges corresponding to that of commodity prices the gap between these and the cost of. production has attained a width unparalleled in industrial history, and the incentive to productive activity has consequently weakened materially, and in some fields of industry disappeared altogether. “International trade has shrunk even more than production, and consequently there is in most countries a seriously heavy adverse balance of international indebtedness. World unemployment has grown correspondingly to unprecedented dimensions. These are among the many unfortunate consequences of the fall in prices or, alternatively stated, the rise in purchasing power of gold. “The fact that Britain and the Empire countries (except South Africa.— a great gold-producing area) were forced off the gold standard on September 21, 1931, resulted in their suffering less of an economic upheaval than those which, on account either of their immense accumulations of gold or of their grave international Indebtedness, felt bound to maintain their confidence in it. This, however, can afford small consolation, seeing that under modern world conditions, no nation can afford to be a disinterested spectator of the bankruptcy of others. Essentially International.

“For over a century there has developed aii economic system which is essentially internatiortal and which has rendered possible a simultaneous rise both in population of civilised countries and in the standard of living. This system is in process of destruction, and unless it be restored either the population or the standard of life must materially decline. Its restoration would appear to involve the establishment, by definite international agreement, of an international monetary system which will serve the essential requirements of world trade. “This in , turn seems only likely to be secured subject to certain , conditions: First, a rise in the general level of commodity prices throughout the world; secondly, a reasonable settlement of reparations and war debts; thirdly, the removal of fiscal and other Impediments to the free International exchange of goods and services by which means alone international debts can be paid; fourthly the discontinuance of the hoarding of gold; and fifthly, due economy in the use of gold or whatever be the future medium or media of exchange, so that the volume of currency and credit may keep pace with the growing volume of production and trade. > Factor in Trade Stagnation. “The maldistribution of monetary gold is a powerful factor in the trade stagnation of the world. The United States, France. Belgium. Holland and Switzerland hold about. 70. per cent, of the total monetary stocks of the world, the two first-mentioned holding 60 per cent, between them. The redistribution of the gold held by the five gold standard countries is conditioned by their willingness to exchange their superfluous gold for commodities, services or securities.

“Opinions of financiers and industrialists differ considerably as to whether and when it may be advisable for the British Empire (now unified in its monetary policy by the recent decision of South Africa) to revert to the gold satndard, but it will probably- be admitted that no international monetary standard can operate smoothly’ and equitably unless costs and prices are in reasonable harmony with one another in all the principal countries where such a standard exists.

“It is significant to notice that the level of gold prices continued to fall after our abandonment of the gold standard on September 21,.1931, at the same rate that it had fallen during the preceding two years, whereas the level of sterling prices is 5 per cent.- above what it was at that date. No additional burden has been thrown upon Britain’s debtors, and the producing classes in the sterling area have been able to compete in outside markets to a far greater extent than gold-standard countries. Sterling Area Better Off. “The. sterling area is much better off economically than any other part of the world. Its position and outlook would materially improve if a rise in the sterling level of prices were to bring the latter more into harmony with sterling costs. “Great Britain has deemed it wise to facilitate such a rise as from last April by rendering money readily available at the lowest possible rates of interest—a policy- which was inaugurated prior to the big war loan conversion scheme which was carried through with such consummate skill and success a few months ago.

“Coupled with this monetary policy Britain is using every endeavour, pending the International Economic Conference, to facilitate the purchase by the primary producing countries of the sterling area of her manufactured goods —a process more essential to the economic salvation of New Zealand than to that, of any other part of the world. “Sufficiency of cheap money in any country can do much to stimulate internal trade and promote enterprise. But harmonious international co-operation and the free interchange between nations of commodities and currency will alone restore industrial equilibrium. Sane nationhood is n source of solidarity and strength, exclusive • nationalism is the road to war and universal bankruptcy. 1