Awake, America!

King Country Chronicle, Volume XXVI, Issue 3400, 30 July 1932, Page 3 (Supplement)

Awake, America!

DEBTS AND WORLD-DEPRESSION. THE “ GOLDEN RAZOR ” AND ECONOMIC SUICIDE. HOW THE SYSTEM WORKS. CIVILISATION ON TRIAL. WHY THE UNITED STATES SHOULD LEAD. (By J. L. Garvin in the London Observer.)

The world presents a spectacle as ridiculous as tragic. Never in peace time were its difficulties and distresses so general and severe. Yet never were they more remed able in themselves or more foolishly prolonged. When human power and knowledge are at the height of their resources there is a stubborn refusal to use them for economic salvation. Wanted, above all, in international affairs, as every intelligent mind well knows, is more unity, moral and practical. Instead, the cohesion of civilisation is broken up. Common action is imperatively required to solve or lessen the problems which affect all nations alike. Instead, each separate country is driven like ourselves, to do the utmost for itself. By comparison with the rest, Britain has done well, and will do better. That is not enough. The universal slump cannot be cured by any number of disconnected efforts. On these lines the world-depression might last for years. Drastic as we might suppose the instruct on of the last twelve months to have been on both, sides of the Atlantic, there is no evidence that the world has learned its lesson. At the moment the prospect for the Disarmament Conference at Geneva is not good. Europe by itself cannot solve these problems. America by herself, with all her gigantic natural advantages cannot solve her own problems. The question, then, is whether, by some great initiative from Washington, America and Europe can get thoroughly together. Crucial enough already, that question during the next few years may become of life and death significance for the prosperity and even the peace ,of the world. THE LEADERLESS WORLD. At present there is no leadership of the world such as we ardently hoped that President Hoover would provide. Unless the United States takes the lead no one can take it. Reason—like nature —abhors a vacuum^ The League by itself cannot give ffie decisive guidance. Within itself it is politically at discord. By itself it does not possess sufficient economic and financial power. Unless the United States rises to a greater international policy all the dismal influences which have caused and deepened the world depression will continue to welter indefinitely; and in that respect things may go even worse before they go better.

capacity; while demand is diminished beyond example in proportion to power of supply. The Budget deficit is terrific, and political confusion extreme. These are the external and visible effects. There is something worse. The psychological temperature of the American peop.e is lower than at any period within living memory. This temporary loss to themselves is a loss to the world. For generations their sanguine energy had been a stimulus to all the older nations, as it will be again. GOLD AND LIFE. The contrast in America to-day between the accumulation of goM and the blighting of life and happiness is amongst the most unexpected and astounding things in human experience. We ventured to say a few months ago that America was cutting her own throat with a .golden razor. In the economic sense this is not a metaphor but a fact. Payment of war debts by Europe, over and above the habitual balance of trade in favour of the United States, led to the prodigious accumulation of gold. The consequences were of two kinds, and affected very differently the receivers and the payers.

On the one hand American enterprise was lured into unprecedented orgies of optimistic imagination. Over-confidence, over-construction, and over-trading of every kind; mortgaging of future purchasing power by the instalment system; jubilance in speculation—all these were carried to a height bound to end in an economic crash. Had Mephistopheles wished to America he need not have planned and worked it otherwise. France followed the example of the United States. Our neighbours amassed and hoarded still more gold in proportion to their numbers. What was the result :i Increasing embarrassment and strain were caused—directly or indirectly—to the rest of mankind. The scarcity of gold throughout ninetenths of the world played a principal part in spreading difficulty and uncertainty; in killing confidence and smashing prices. From heart-breaking and home-break ; ng prices no c'ass has suffered more than farmers and other primary producers in the United States. If these are not thriving the bottom is knocked ouf of the economic tub. For the world as a whole the old German proverb is true: “ When the farmer has money the rest goes well.” RUINING YOUR CUSTOMERS. For some years after the Armistice the overwhelming majority in the United States reasoned very natura ly on two assumptions. They held that war debts—despite the controversy about relative sacrifice of blood and money together—implied just the same obligation of honour as private debts; and they assumed honestly that international payments, through two generations to comq would be nearly as easy as a setfement of accounts between two individuals or two concerns belonging to the same nation. No one., so far as we know, fully realised the tremendous practical difficulty of “ transfer” from one’ currency to another. Now everyone knows that debts, reparations and abnormal acquisition of gold by two countries have spread dire disaster throughout the world. Already Americans have lost a great deal more in the last two years than they could have gained by successful -'nsistence upon European payments for more than half a century to come. The reasons are acutely clear. For Europeans, even though they have the best and uttermost friendship towards the United States, it is absolutely impossible to pay the American coupon and yet buy American goods to the former extent. There is no escape from this dilemma. The debtors of the United States on this side of the Atlantic —no matter what their goodwill—are physicafiy incapable of paying war contributions to America unless they reduce their purchase of American commodities. Nor does it end there. We come at th : s point to effects which are indirect but none the less damaging. Britain, Germany, and France are great buyers from the countries in every continent which depend largely upon the export of raw material. Even these countries are retarded because of the injury inflicted on their principal customers by the debts system. American commerce is bound to suffer, as a result, in more than one way. “ SCALING DOWN ” OR “ WIPING OUT.” There is no escape from these conclusions. The present condition of international finance as the result of claims and liabilities between Governments since the war has caused the unparalleled severity of the depression; and now threatens to make it of unprecedented duration. For while the system is maintained at all, a unique factor of economic uncertainty will continue to exist in the post-war world. Uncertainty in its turn is the most subtle and deadly enemy of the general confidence which it is the chief interest of all nations to restore. The people of the United States last year alone lost through the system far more than they could ever gain even had it proved possible to continue the European contributions on the original scale until near

But this proposit'on requires to be treated in the coolest spirit. Emotional eloquence on the subject is not only useless, but prejudicial at this phase. European countries ,can no longer make facile appeals for relief out of America’s boundless super-abundance. On that side of the case the change in the relative conditions has been enormous. The United States suddenly finds itself confronted on a huge scale by all the characteristic economic troubles of an old society, and is without an established organisation to cope with them. The leaders and the masses of the American people will have to be convinced that thorough co-operation with the rest of the world and especially with Europe, for the general good, is for them the best way out of the'r own economic disaster, and perhaps the only way. AMERICA'S ORDEAL. Let us look at it from that point of view. First let us keep a sense of proportion. In the middle 'eighties and the early 'nineties of last century there were similar economic set-backs in the United States. Conditions were nearly as bad and complaints as loud. Then, as now, there was much talk of desperate remedies. There had been over-confidence and over-construction. As in the years of soaring optimism up to 1929, the equipment for supply had developed far beyond any possible demand that could exist when the boom broke. When the demand caught up again pessimism vanished like the night, prosperity returned like the day, and past misfortunes were forgotten by a forward-looking society. So it will be once more. But when ? How long will this depression last ? What of the social consequences in the present age ? What of next winter ? What "of the one after ? To us these seem to be the searching questions for citizenship and statesmanship in the United States to-day.

Nothing can touch the foundations of America’s econonrc strength, incomparably based upon the magnificent resources of half a continent and upon the innate vigour and inventiveness of a vast population. There will be a brilliant recovery sooner or later. But this time will it be later rather than sooner ? Is full prosperity to be brought back to them in a couple of years or less ? Or not until after five years or more ? Between these two conceptions of sooner or later lie immense possibilities of good or evil. In the whole world-picture, equally ridiculous and tragic as we have described it, the feature most extraordinary and almost incredible is the American situation. There you have nearly half the worlds’ gold buried in the vaults. On the surface, where life goes on. you have stupendous unemployment and reduced wages; annihilated profits or lean dividends; low prices breaking the hearts of the farmers and other primary producers; a marvellous machinery for production and transport working at half

the close of this century. This year the same gigantic process of loss will be repeated. What then of the future ? The debts-system in this sense is the hugest bad bargain ever made. To wipe it c:ean out would pay the United States over and over again. That course, by its moral and practical effects, would do more than anything else imaginable to lift the economic nightmare from the American people themselves, as well as from the rest of the world.

Happily, across the Atlantic there are signs at last of the beginning of a great movement in the right direction. Mr S. O. Levinson, Chicago—the distinguished lawyer and exemplary citizen who did so much to bring about the Kel.ogg Pact—• has worked out a scheme by which debts and reparat ons alike would be largely scaled down upon certain conditions. The plan was originally published over two months ago by our great contemporary the New York Times, and afterwards had the honour of being reprinted as an appendix to the “Congressional Record.” it has since been supported by Senator Borah in two outstanding speeches, admirable in spirit and form, worthy of any statesman. Mr Levinson’s scheme of scaling down, though vegar clear and definite like all he dura, is too e'aborate to be explained here in detail. Enough to say that if, wjth the aid of Senator Borah and other powerful influences, he can make his plan a basis for international discussion, he will have rendered another signal service to mankind. PRESDENT HOOVER AND “ GETTING TOGETHER.” The majority of the American people as yet dislike the sweeping words like “cancellation” and “wiping out.” Their reasons must be fainy and fully considered by Governments and nations on this side of the Atlantic. Even Senator Borah and Mr Levinson demand as the conditions of scaling down the debts that armaments shall be drastically reduced and that the Treaty of Versailles shall be reasonably revised. Br.tish opinion is heart and soul with both these objects, but neither will be achieved unless more powerful methods are adopted under American leadership.