The Evening Star WEDNESDAY, MAY 4, 1932. A STERLING BLOC.

Evening Star, Issue 21093, 4 May 1932, Page 8

The Evening Star WEDNESDAY, MAY 4, 1932. A STERLING BLOC.

After-dinner speaking covers a wide variety of subjects, and; may be either grave or gay, boring or interesting. Two at least of the speeches at the London Chamber of Commerce dinner a few days ago seem to have been at once grave and interesting. They were those "of Lord Leverhulme, successful industrialist on a big scale, and Mr Walter Runciman, President of the Board of Trade and a Tyneside shipowner. On the heels of what - they skid appears ■ the quarterly business forecast of the Federation of British Industries. From these three sources a composite picture may be drawn, and an apt title for it would be ‘The Crisis.’ Trade and industry are at length convinced that their sustained attempt to continue under the burden of war. debts and reparations has proved futile, especially if payment is confined to gold. Especially does this apply to Central Europe, where “ the existing economic structure appears to be doomed beyond recall.” The rise in the commodity value of money constitutes the world’s great problem, and it the process were reversed —if the value of money fell, i.e., if wholesale prices rose—that problem would be on the way to being solved. With that end in view the idea is gaining ground of & sterling pool of currencies linked no longer to gold, but moving in sympathy with the pound. Within a comparatively short time of Britain “ going off gold ” there was a fairly widespread tendency towards the suspension of the gold standard, and for certain exchange rates to approximate to their normal parity with sterling. The three Scandinavian countries and Japan all suspended gold payments, and by the nevv year their currencies were all on a par with the pound. Thus one obstacle to world trade was lowered. It helped to re-establish the bill of exchange on Loudon in its traditional position of the medium of world commerce. But there remains another obstacle to trade, and that is high Customs tariffs. There is now evolving a movement to encourage the formation of a low-tariff group of countries with currencies based on sterling and not on gold, and it is thought probable that Norway, Sweden, Denmark, Holland and Belgium, Germany and Austria, as well as some overseas lands like the Argentine, might join the British Empire in such a group.

Such a group, designated the sterling bloc, would by its very existence and operation tend to end the fall in prices, and thus bring about renewed confidence in place of the anxiety over the possibility of further fails. Ihis, together with freer entry through wider Customs doors and the stability of exchanges, would increase the volume of international trade, which in itself should help commodity prices to recover. But the Federation of British Industries warns people that they will be bitterly disappointed if they think that concerted banking action can raise prices to the 1929 level. Very possibly there is a school of thought which yet nourishes that hope. It is fairly near the truth to say that since the war it is the financier, and not the industrialist or the producer, that has made money —that is over the whole period from 1918 to now, and not in any individual year or years. The argument of that school is that, out of self-interest, tho financiers must now come to tho rescue of industrialists and producers and traders—and can afford to do so. But tho soundness of finance is based on the profit-earning ability of those who have been financed. So long as an unrenumcrative enterprise or a debtor country can borrow new money, it may go on without visible disaster, and often .with apparent suc-

cess, while laying up inevitable trouble for the future. The future became the present in 1929, though that is now the past. From that year the economic life of the world camo to depend increasingly upon precarious advances recallable at short notice and with a decreasing ratio of renewals, while new lending stopped. Finance doubted the security. Obviously no help can bo afforded by finance unless there is a successful effort to prove that security good, and that effort can only come from a low-tariff, sterling bloc such as now seems to be emerging. In tins arch Britain is the keystone. I’laced next to herself in that arch she desires her Empire, but that will not span the chasm, and the co-operation of other countries is needed. Mr .Neville Chamberlain some time ago pledged the British Government not to enter into arrangements with foreign countries before the Ottawa Conference, though several countries have already evidenced their willingness to negotiate. The Ottawa Conference thus Lakes on a significance and responsibility growing greater as its date approaches.