REPARATIONS AND WAR DEBTS

Evening Star, Issue 21036, 25 February 1932, Page 3

REPARATIONS AND WAR DEBTS

A BANIErS WARNING-

CHOICE OF REPUDIATION 00 CHAOS Mr Alexander Shan - , deputy chairman of the P. and 0. Steam Navigation Company and a director of the Bank of England, and Lady Margaret Shaw, daughter of Lord Indicape, chairman of the company, received a largo number of guests on board the P. and 0. steamship Strathaird, at her moorings in the Mersey, on the occasion of the inauguration of this vessel, tho sister ship of the Strathnaver. Mr Shaw, in addressing the guests after lunch, said that the Strathaird represented for tho time being the end of a great effort by the P. and 0. Company, Since 1919 the'company, apart from its allies, had constructed in various yards no fewer than thirty-nine vessels, 23 of which were first-class passenger and mail ships. The P. and 0. was doing its best, amid the longest and severest depression ever experienced hy British shipping to keep tho lied Ensign Hying upon the Seven Seas. He believed their friends in India and the East realised the strain in these hard times of running an absolutely regular weekly service to and from India all the year round, in good season and in bad, win or lose, and without a single gap. It would be very easy for the company, instead of doing this, to have a merely spectacular' service of two or three special ships, especially if the British lines should receive, like some others, great subsidies from Government, and also if they had their Suez Canal dues paid for them. But British ships received no subsidies at all, except payments not more than adequate for large and definite mail services rendered. BRITAIN’S POSITION. Turning to the subject of war debts and reparations, Mr Shaw said that the elements of the situation and the immediate remedies required were clear to almost all economists and statesmen in all countries. The great difference between ordinary loans from one nation to another and war debts was that in tho former case the loan created a corresponding asset, while in tho latter nothing remained but a liability. Money lent for railways or factories abroad tended to create more wealth and an ability to repay; whereas money lent for guns, shells, or poison-gas created nothing but destruction of property and life when it was used, and afterwards left nothing but a liability behind. There was no question whatever of the willingness of Great Britain to pay her war debts, as well as all other obligations to her creditors. Neither could there he .any question of Britain’s leniency to her own debtors. It should never bo forgotten that while America had, with a generosity which nobody hero sought to minimise, remitted 18 per cent, of Britain’s war debt liability, Britain herself as creditor had forgiven to her Allies a total of 70 per cent, of the war debts due by them. He believed she was ready to cancel the whole as soon as a world arrangement made that course at all possible. As to war debts themselves, if they looked back to the old wars of the seventeenth and eighteenth centuries they found that countries allied in a common cause contributed in men, munitions, money in accordance with their ability. Britain again and again granted subsidies to her Allies, not as a loan to he repaid, but as a free grant. If that sound precedent had been followed in the Great War the world would present a more peaceful and prosperous scene to-day. AN ILLOGICAL DISTINCTION. But, Mr Shaw proceeded, instead of free contributions, both of _ men and means, to a common effort in a great cause, the Allies drew a most odd, illogical, and unliistorical distinction. Where an American shell was fired by an American artilleryman from an American gun the’ United States did not charge against her Allies either the pay of the soldier or tno cost of the gun or the shell. But where the American shell was fired hy a British or French soldier for the same purpose and in the same common cause, it created a gold debt due to the United States. That was not the fault of the United States for the same extraordinary rule held between all the other Allies, ~ As an admirer of her people he could not conjure up the picture of America insisting on a course which m the moral sphere fell short of her greatest traditions and in the practical spheie would continue to perpetuate the dislocation of her own economic system and at the same time postpone to the Greek calends the recovery of Europe and indeed of the world. Not many days ago the Basle Committee in the dearest possible language gave a very grave warning of the results which would assuredly flow from the present policy of Europe and America on reparations and war debts —for the two were bound up together. TWO PROBLEMS INVOLVED. What, in a word, was the problem? It was twofold —a problem of collection and a problem of transfer, ihc collection of the great sums required inside the debtor countries themselves was, under present conditions, a crushing and an almost impossible task. Ihe Basle Committee had made that clear in the case of Germany. But jt was when they came to the question lot transfer that the difficulties became indeed insuperable. Sums in payment of debts could be transferred from one country to another only in two ways (1) by gold, or (2) by goods and services. This obvious truth had been obscured up to the present because creditor countries hnid until recently been lending freely to their debtors. That had stopped. Much of the money so lent was frozen in Germany and Austria, with most inconvenient results. The tightness of money which afflicted this country'was largely due to that cause. The nations were now confronted by the immovable fact that there was not enough free gold in the world to meet tjm bill for reparations and war debts, and that it must therefore be paid in goods and services. How, Mr Shaw continued, did this fact operate in practice ? If they took America as an instance of a creditor country they must remember that if she insisted upon payment she must-be paid almost entirely by commodities. Tho total value of these goods spread over the next' fifty years amounted to the equivalent of 4,500 millions of gold pounds sterling. How did America feel about that? Did she welcome the prospect of a continual rain of goods in payment of war debts? On the contrary, she disliked it very much, for tho excellent reason that the entry of these goods into lior markets would dislocate the ordinary machinery of production by which she lived. They would have that effect because such imports moved no corresponding export of American goods in exchange. If

they considered also that the effort to pay" impoverished her foreign customers they could see quite plainly the plight into which not only America but the whole world was drifting. THE ONLY SOLUTION. How could factories and yards be busy and the ships of the world be well employed when the channels of international trade were blocked by these war debt and reparation payments? The-stream of commerce between countries could not flow as before. Great industries here, as elsewhere, had been living on their reserves, and these were being, daugerpudly sapped. This was one .of the ominous signs of the times which no responsible and thoughtful citizen could view without anxiety. As to the money markets of the world, the symptoms were those of general malaise, punctuated by panic. An atmosphere ol menace hung over Europe. Distrust gave rise to armaments and armaments to more distrust. Tire stagnation «f industry was pointed to as the failure of Capitalism by those who would wreck the system of free enterprise and replace it by a slave State, it was by no means an exaggeration to say that the economic and social '‘structure , of Europe, was daily moving nearer the precipice. Europe was in a position where willingness to pay, however admirable, was no longer relevant. The blunt truth was that if things went on as they were now going the choice was quite simply between repudiation and chaos. “Might I suggest to you,” Mr Shaw concluded, “ that the healing message for which the world is waiting is this, which was first spoken so long ago: ‘ Forgive us our debts ns we forgive our debtors.’ In the sphere of leparations and war debts these words teach us, as I profoundly believe, the wise, and indeed the only practical, economic policy.”