EUROPE’S PERPLEXING PROBLEM

Evening Star, Issue 17764, 12 September 1921, Page 7

EUROPE’S PERPLEXING PROBLEM

KEY TO THE SITUATION. ADEQUATE DISTRIBUTION OF CREDIT. DISARMAMENT HELPS GERMANY. FIGHT FOR THE MARKETS. A most illuminating and fascinating lecture, the first of three, throwing into relief the grave and perplexing problems tho war and tho Versailles Peace Treaty have left, was delivered by Professor Pringle on Saturday evening under the auspices of the Workers’ Educational Association. The specific subject of the first lecture was ‘ Some Aspects of tho Economic Reconstruction -of Europe.’ STRAINED. INFLATED CREDIT.

He proceeded first to discuss two questions—credit inflation and the German and Austrian indemnities. In the first place credit inflation had earned a phenomena! rise in prices. Gold had disappeared, and tho values of goods were being measured in terms of paper currencies, which were being constantly swollen by fresh issues. Tho groat discovery of tho modern world was that by using credit and goodwill the whole machinery of industry could be greatly improved and expanded. It enabled us to have more of tho luxuries and conveniences of life. _ But, secondly, to achieve this result credit mnst bo embodied in material form; hence we had tho wholesystem of modern credit, the three chief instruments of which were the bank note, bills of exchange, and cheques, and, thirdly, telegraphic transfer. _ Now, the whole modern system of credit had been, built upon reserves of cold. During the war it received an unprecedented shock. There were three ways in which Governments could carry mi 'war—by taxation, by; loans out of savings, and by the inflation of credit. All Governments made the fundamental mistake of imposing insufficient taxation at the beginning of tho war. Secondly, none of the nations saved in order to meet the Great War. The result was that Governments had to fall back on the third method of currency inflation. They went to the banks and got big overdrafts'to pay for’munitions, clothing, and food for tho forces. This money percolated gradually through tho whole industrial, system. The Governments of all belligerents increased tho volume of paper monev in currency all over the world. In ‘ the report of the Brussels Financial Conference last September it was shown that there was no single State in which the volume of currency had been increased by less than 100 per cent. In Great Britain it had been increased by no less than 250 per cent. Tho currency of Germany had been increased by 800 per cent, and tf-e currency of Rumania bv as much as 1,167 per cent. This inevitably brought an enormous rise, of prices, a fall in the value of European currencies as compared with America, and the practical disappearance of gold from tho currencies of the world. UN NECESSARY MILITARY EXPENDITURE.

All Governments were loth to face tho situation so created, partly because it was a very difficult one, and partly because nil were unwilling to reduce the governmental expenses which were at the bottom of all this inflation. There was, of course, a minimum of expenditure beyond which a Government might not go; but equally, on the other hand, there were expenditures which should be abandoned. Under that heading they could assign, ho thought, without fear of challenge, expenditure on military and naval equipment and services. The amount the Allies were spending to-day on these was far 1 bevond tho necessities of the case; -and incidentally, from the point of view of the Allied" Powers, one enormous advantage had been by tho Treaty of Versailles given to Germany. Germany ■ had been disarmed. In other words, Germany ioi the next forty years under the Treaty of Versailles would not be allowed to spend any considerable sum on military or naval equipment. So Germany would have at her disposal a fund of capital and 'wealth which would make her a much more effective competitor in the world s markets than she could otherwise have been. ' DISTRIBUTION OP CREDIT.

Every nation had already strained its own credit to the utmost. At every point of the productive svstem of the modern world credit was absolutely essential, and unless there were supplies of credit available for nations that could not buy without credit we might be faced with collapse. Iho problem of Europe was tho adequate dis : tribulion of its credit resources. iho credits of Eastern and Centra! Europe went to tho heart of tho problem. Unless industry was ro-eslablished it was useless to talk of raising the standard of life of European peoples. - The problem of European reconstruction was also bound up with the problem of the German indemnity and_ the cancellation of war debts. Britain stood as a buffer between Europe and America. Her position was very much sounder than that of any other European nation._ Europe was troubled bv the sense of insecurity of. France, and "that could have boon reduced by Britain and America coming to an understanding before the Treaty _ of Versailles. He. had it on good authority that President Wilson did com© to that Conference prepared to cancel tho war debts of America to the belligerent Powers, but he was baffled by the fact that some of tho Allies proposed that tho debts of the Allies should bo ponied and born© according to population and wealth. That would have placed a larger amount on tho United States than, in his judgment, sho could reasonably have been expected to bear Anyhow,'tho fortunate moment was lost. The amount of indemnity was not fixed at the Versailles Conference for the reason, in the first place, that certain British statesmen had given the electors exaggerated ideas of vrhat could bo ob* tabled from Germany. EFFECT OF INDEMNITY. The situation had been celared up in tho last few months and the amount fixed by the Reparations Commission. Germany was to issue bonds to the extent of £6,750,000,000, and provide funds for tho liquidation of the bonds. Next year she would have to pay £100,000,000 and 26 per cent, of the total value of the year's exports. Tins rose steadily till in 190 lit reached the maximum of £300,000,000, plus 25 per cent, of the exports of Germany. , It was a great matter to have the amount fixed; bnjt we had not only to look at the immediate sums payable, but at the, effects of the payments on the economic system. Two questions nroje: Could Germany pay it? and how would sho pay it without raising more problems than sho solved? Imports had to pay for exports, and to pay these must develop a very large export trade in excess of her imports. She must receive foods and raw materials from overseas for her industries, and she must pay for these and for the sums mentioned. Germany could pay only by a combination of four methods—by increasing her material exports, by increasing tho volume of securities placed on the international market (but this way was scarcely open, as she had got rid of most of these securities during the war); thirdly, sho might develop her shipping; or. fourthly, her banking. It was practically impossible for her to pay by shipping, nor could she pav any considerable proportion of the £400,005,000 by her banking services. Tho only way loft was by the sale of goods, and by'this, sho would be brought into' very active and even fierce competition with our industries. It was evident that the economic problems of Europe had by no means been solved ( by the Treaty of Versailles. These problems could not fully be solved in existing conditions. There was still the war temper in all countries, though, fortunately, it had abated more in the last three months than in any other period since the armistice. (Applause.) It was announced that tho lectures to be given on tho next two Saturday 'evenings will he on ‘Suggested Alternatives to the Wage System ’ and ‘ The Workers’ Educaption a! Association Movement in, England.”