THE DAWES SCHEME

Evening Star, Issue 19779, 1 February 1928, Page 5

THE DAWES SCHEME

TRANSFER OF WEALTH BRITAIN'S DIFP ICULTIES. Speaking recently at the luncheon of th« Economic League, Manchester, Sir Josiali Stamp dealt with the economic outlook in relation (1) to the execution of the Dawes scheme by the Allies and Germany (for ho described it as in (be Anal issue a joint effort to transfer German-produced wealth to new owners), aiul \2l the future of the value of gold and general hade prosperity, including uart of flic solution of the unemployment problem. He said (hat these apparently distinct problems were inextricably interwoven, and it was probable that a successful eoiution would not bo found by the piecemeal process of dealing with each as though it wore separate. '] he Governments and leading financial interests in the chief countries had before them an effort of conscious choice along Ihe linos of an intellectual solution, rather than our usual opportunism, which was of enormous future importance. Indeed, modern problems were not so much a, question of deciding which of two courses was absolutely right, or wrong, but, rather of completing the logic of each system with its own advantages and deciding which was of greatest value lo the community in tho long run. Ho had pointed out already in connection with the complicated trade barriers of Europe and the United Slates and Iho execution of Germany's reparation obligations and the Allied payments that wo tended to stand out for our rights in each of our several capacities ai, separate times and never to face up to the fact that they were one and the same situation underneath, concerning which a definite choice had to be made. On one day we were industrialists objecting at all costs to foreign goods, especially (hose made under cheaper conditions than our own, coming into our country, spoiling our competition in neutral markets, and adding to our unemployment problems. The next day wo were investors clamoring for our full lights in interest on our loans, in priority to all other obligations. Tn our third capacity wc were taxpayers expecting to receive reparations or interest in relief of our national budgets and in satisfaction of our national prides, and ready to treat anv failure under this head as a sign of political had faith or reluctance.

Beneath these three aspects there was only one problem, and we were in effort urging different, policies according to our attitude of mind. By much circus practice it is possible (o ride iwo horses at once,_ but not if they are going opposite directions. \Ve ought to try to realise the problem as a whole and make conscious choice. .lust as there were vestigial remains of our past evolution in the human body, so ,in tire body politic of industrial and financial opinion (here were still considerable remnants of mercanlilist thinking of Ihe eighteenth century, and the logical fallacies of composition and division remain in all onr current thinking upon iiiternaiionul economics.

Most of the controversy upon f-ariff questions in the tiitic tfjonl ii century had unconsciously admitted tho fallacious mode of thinking that what was true of parts taken separately was also (rue of tho whole. It was obvious that any man wanting to ko9 over - the heads of a crowd could not do so by standing on an o van so box; indeed, several could do it, but if the whole crowd took to standing on boxes they were ail “as you were," with the addition of groat insecurity of tenure and quarrels about hoses. Conversely, much of the thoroughgoing Frcetrade doctrine hod been guilty ot the fallacy of division and assuming that what was good for a collective whole must necessarily bo happiness for every part. AMERICA'S I’ART. Tho lime was fast coming when we must really make up our minds what we want on the subject of German reparations and interest, which could only be paid in goods, and in this decision America must take a prominent part. It was impossible to go cm for over with purely financial settlements and gelling rid of a, big lOU for a particular year by means of a scries of promises for smaller lOU’s for succeeding years, and then discharging each of these in turn by ft brood of future lOU’s, and so on ad infinitum. This was what wc were really trying to do by the process of continual reinvestment —dodging the, underlying realities of tho uliimate transfers of wealth. It could succeed for quite a considerable period, but must break down in the end. That did not matter much if the breakdown hud no political reactions, but at present it was Utopian to suppose they would not bo political. Tho speaker referred to the comparative ease with which tho renarations and interest problem could be solved if it were consciously organised by Ihe receipt and disposal of definite objective wealth, nnd the impossibility o r settling it if it wore left entirely to financial expedients progressively pyramided into a distant future. Sir Josiah Stamp concluded by showing the interaction with the flow of gold according to trade movements, and doubting whether the civilised world was showing signs of real success in combining in gold tho double function of a stable standard of value and the shuttlecock of trade balances. At one time these functions had automatically adjusted each other, but tho special position of America had partly destroyed the old correctives. The arrest of the declining gold price level was the most urgent problem of all—quite a central one in all our difficulties—and while ho had every sympathy with the banking and other exponents of the recent conduct of our financial affairs, the resumption of the gold standard, etc., and the view that tho best had been done and pood progress made, ho had no sympathy with any who failed to realise the gravity of tho further problem of stability and the new knowledge to be mastered—tbr attitude of mind that nothing serious waljy happens until it does.