THE DAWES SCHEME

Greymouth Evening Star, 13 January 1928, Page 10

THE DAWES SCHEME

TRANSFER OF WEALTH.

Speaking recently at the luncheon of the Economic League, Manchester, Sir Josiah Stamp dealt with the economic outlook in relation (1) to the execution of the Dawes scheme by the Allies and Germany (for he described it as in the final issue a joint effort to transfer German produced wealth to new owners), and (2) the future of the value of gold and general trade prosperity, including part of the solution of our unemployment problem. He said that these apparently distinct problems were inextricably interwoven, and it was probable that a successful solution would not be found by the piecemeal process of dealing with each as though it were separate. The Governments and leading < financial interests in the chief countries pad before them an effort of conscious choice along the lines 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 to the community in the long run.

He had pointed out already in connection with the complicated trade barriers of Europe and the United States and the execution of Germany’s reparation obligations and the Allied payments that we tended to stand out for our rights in each of our several capacities at 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 those 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 we were investors clamouring for our full rights in interest on our loans, in priority to all other obligations. In our third capacity, we were taxpayers expecting to receive reparations or interest in relief of our national bud-

gets and in satisfaction of our national prides, and ready to treat any failure under this head as a sign of political bad faith or reluctance. Beneath .these three aspects there was only one problem and we were in effect urging different policies aqj cording to our attitude of mind. By much circus practice it is possible to ride two horses at once, but not if they are going opposite directions. We ought to try to realise the problem as a whole and make conscious choice. Just as there were vestigial remains of our past evolution in the human body, so in the body-politic of industrial and financial opinion there were still considerable remnants of mercantilist thinking of the 18th century, and the logical fallacies of composition'and division remain in all our current thinking upon international economics.

Most of the controversy upon tariff questions in the 19th century had unconsciously admitted the fallacious mode of thinking that what was true of parts taken separately was also true of the whole. It was obvious that ‘any man wanting to see over the heads of a crowd could do so by standing on an orange box; indeed, several coqld do it, but if the whole crowd took to standing on boxes they were all' “as you were,” with the addition of great insecurity of tenure and quarrels about boxes. Conversely, much of the thorough-going free trade doctrine had been guilty of the fallacy of .division and assuming that what was good for a collective whole must necessarily be happiness for every part.

AMERICA’S PART. The time 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 on for ever with purely financial settlements and getting rid of a bjg I O U for ,a particular year by means of a series of promises for smaller I O U’s for succeeding years and then discharging ' each of these in turn by a brood of future I O U’s, and so on ad infinitum. This was what we were really trying to do by the process of continual reinvestment —dodging the underlying realities of the ultimate 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 had : no political reactions, but at present it was Utopian to suppose they would not be political. The speaker referred to the comparative ease with which the reparations and interest problem could be solved if it were consciously organised for by the receipt and disposal of definite objective wealth, and the impossibility of settling it if it were 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 the 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 the special position of America had partly destroyed the old correctives. The arrest of the declining gold price level was jthe most urgent problem of all —

quite a central one in all our difficulties —and while he 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 the best had been done and good progress made, he had no sympathy with any who failed to realise the gravity of the further problem of. stability and the new knowledge to be mastered — the attitude of mind that nothing serious ever really happens, until it does.