BRITISH TRADE BOOM BURSTS

Evening Star, Issue 17544, 27 December 1920, Page 6

BRITISH TRADE BOOM BURSTS

FOREIGN COMPETITION REVIVES. AN EXPERT’S ANALYSIS. SPENDING UP—PRODUCTIVITY DOWN. Is the depression in the trade and industry or England a passing phase of post-war congestion or is it deeper seated? What is the remedy? These wore matters discussed by London Observer* with Mr Peter Hylands, president of the Federation of British Industries. . Mr Rylands thought that to cure their industrial trouble it was necessary to put their own house in order rather than to rely upon the world’s conditions adapting themselves to the abnormal and artmciai conditions established in the last five years m England. “There is no gainsaying,” ho said, “that we have done exceedingly well up to a few months ago. British trade and industry, in fact, has been booming under abnormal'conditions. The whole world at the close of the war looked to us for supplies. Tho Continental manufacturers were not in a position to contribute—we had to furnish them with materials for reconstruction as well as tho ordinary commodities to make good the of supplies of the war period. So the boom assumed remarkable proportions.” We are only at the beginning of a very trying period. Abnormal factors for a time sustained our trade—indeed, gave it a powerful impetus—in the face of economic law. Production was at high cost, the result of a false standard of living by artificially increased purchasing power of the population through Govern* ment food subsidies and increase of the cun rency in face of a reduced supply of commot dities.”

“ The trouble commenced with increased production cost during the -war period, whori wages rose owing to scarcity of labor and Government action at the same time that Government subsidies artificially reduced the cost of living. The effect of this waa masked during the war by the fact that industry waa largely working for Government, and foreign competition was practically non-existent. At the same time, however, Government were financing the war partly by taxation and loans, which depleted the only sources from which capital could be renewed, and partly by inflation of credit and currency, which depreciated the purchasing power of the money unit, and increased the prices of all but the subsidised commodities. Immediately after the war inflation continued, and the abnormal demand of a starving world for commodities kept prices up and trade active. Now fo--eign competition is reviving, the subsidies are disappearing, and the Government are attempting to reduce the inflation while still maintaining their high rate of expenditura and high taxation. At the same time, Labor, accustomed to a scale of living rendered possible by the artificial war conditions, and having achieved shorter hours, expects to maintain these advantages. Industry is therefore faced with a shortage of capital, Labor costa at least as high as during the war period, and the competition of countries with lower labor costs, and in most cases lower taxation, in markets which will no longer pay the abnormally inflated prices.

“It is the beginning of the recovery of foreign manufacturers with a lower scale of costs and lower standard of living that has cut short this abnormal period of British trade. Our only prospect of holding out own is to increase production, with lowered production costs, and curtailment of tins spending power of the general public white supplies are still limited." ,We are in for a bad time. This is the beginning; how long, is a question of tho survival of the fantastic and artificial economic relations within this countryi It may be six months, _ a year, or several. Many industries, now going on short time, will have to close down if these conditions are still maintained, and unemployment will steadily increase. The trade ot this country cannot be maintained if the present false relations are fostered. As a nation we are considerably poorer than in 1914, but the standard of living of tho working classes has mounted very considerably; their spending has increased while their productivity has declined. As a nation, for many years wo have lived beyond our income, and are paying current expenses by resort to money-lenders. " The only way we can replace our exhausted capital, or even avoid defaulting oil the immense interest payments due, is by working our resources to the maximum capacity, and, as regards the population in general, by cutting our coat to the cloth we have—by lowering our standard of living and our spending. But now —when the Government are abandoning subsidies and restricting credit—Labor is even still pressing for further increases in money wages. “ Since hours of work are limited, and the capacity of working our industrial resources restricted by Labor agreements, would an international wage standard help to restore the commercial balance in the foreign markets?” “ That is a proposal/’ said IMr Rylanda, ■" which would only bo of value to help the other countries to get on their feet. It is our own stability that is in jeopardy now. Unless there is a drastic cutting ctayn of the economic ratios in this country the crash will enforce its own remedy.”