WORLD RECOVERY

Evening Star, Issue 22688, 30 June 1937, Page 8

WORLD RECOVERY

STILL MAINLY DOMESTIC NEED FOR TRADE REVIVAL The Bank of International Settlements, in its latest annual report, devotes attention to the future of world economic recovery, and reaches the general conclusion that the most legitimate form of further expansion will be found in the recovery of international trade. The report points out that five years have passed since the turning point in 1932, and that the duration of an upward trend for more than five years is of rare occurrence in past business cycles, and has, in fact, never occurred in British experience. But, in many respects, it shows, the present expansion differs from those that have preceded it. Though general it is not international. The index of international trade is still 10 per cent, below its 1929 level. Though the various countries have not been unaffected by conditions elsewhere, they have experienced recovery at different times, and have stimulated it by different means. Only in 1936 did many of the raw material producing countries feel the full benefit of the general expansion. The recovery is mainly domestic, and labour’ and capital resources remain unemployed iu the export industries. Moreover, even in the domestic industries the rate of recovery has been unprecedently slow, and while surplus capacity is now largely absorbed, there has been a smaller degree of extensions of plant than occurred in previous periods of expansion.

LIQUID CAPITAL ACCUMULATES. At the same time, foreign investment continues at a low level, and large masses of capital are still held in liquid form, while interest rates remain exceptionally low. The possibility of continued expansion is, therefore, by no means to be ruled out. When stocks of commodities are reduced to a minimum and the excess of productive capacity of existing plant has been fully utilised, there should still be a legitimate demand for long and short-term credit facilities for extensions. Moreover,_ if such extensions taike place also in primary producing countries, foreign investment may revive and with it international trade. But, as the 1 Statist ’ observes in its review of the report, the bank also issues a reminder that it is precisely the obstacles to recovery in international trade thal have been least successfully attracted. The lowering of tariff barriers, the withdrawal of exchange restrictions, the extension of improved credit facilities to exporters and importers, and the encouragement of longterm lending abroad constitute the most pressing economic problems to-day. “ The domestic boom,” the ‘ Statist ’ states, “itself is largely the_result of the artificial fostering of industries which could not be profitable under a freer trade regime; and to bring national and world price levels more closely into equilibrium might, unless very gradually achieved, precipitate the very depression it is designed to prevent. A round of bankruptcies in the autarchic industries, together with an all-round lowering of trade barriers, might be ultimately salutary, _ and a prelude to a period of prosperity less precarious than the present, but its immediate effect would probably be far from pleasant. REARMAMENT AN OBSTACLE. “ The greatest obstacle in the way of- such procedure is, of course, the large rearmament programmes which are everywhere superimposed upon the incease in production due to normal recovery. The uncertainty of the armament demand prejudices the chances of that very extension of industrial equipment in the domestic sphere which could absorb much of the present accumulation of liquid capital. At the same time it confines the attention of producers to the home market, and renders them timorous in outlook. “ It is notable that in a list of countries winch have increased their imports and exports in the past year, arranged in the report in order of magnitude of the increase, the industrialised countries tend to be higher in the list on the import side and lower on the export side. This may possibly be taken as some indication that their increased requirements of raw materials are largely for consumption in their domestic and armament production, and have not yet issued in a return flow of capital goods to the primary producing countries. For a time the position may be maintained as recovery among primary producers enables them to resume interest payments to their creditors, but ultimately a secure prosperity can be founded only upon a balanced exchange of primary produce and capital and other manufactured goods.”. PROPERTY SALE Messrs Park, Iveynolds Ltd. report the sale by auction yesterday of allotment 1, subdivision of part of section 11, block 1.. Upper Kaikorai district, containing 20.07 poles, with frontage of 38ft 4in to Grendon street, to Mr C. Gray at £275. LONDON FRUIT MARKET The Otago Provincial Fruitgrowers’ Council reports the following advice from the High Commissioner under date June 26;—Port Dunedin and Hororata discharged their fruit in sound condition. Apples: Market steady ; somewhat higher prices. Current prices are: Granny Smith, Os to, 13s; Statesman, Bokewood. 7s to 9s; Stunner, Cleopatra, Borne Beauty, and Scarlet Nonpariel, 6s 6d to 8s Od; Dunn's Favourite, Os 6d to Bs.