FINANCE AND WAR

Marlborough Express, Volume XLIX, Issue 286, 3 December 1915, Page 3

FINANCE AND WAR

THE ' 'SILVEII B ULLET.''

INTI'III'.STING REVIEW OF THE SITUATION.

URGENT NECESSITY FOR

ECONOMY

In die course of his address at the half-yearly mooting of the Bank of Nev. Zealand at Wellington to-day the chairman of .-liroctors.(lVir Harold Beauchamp) said: — All tin. circumstances seem now to point to the conclusion that the war is to be a war of exhaustion, and that victory ultimately will be on the side of the combination possessing the greater capacity for endurance. The financial might"of Britain has been a therm? of constant encouragement and confidence when we have speculated upon the final issue of the war. Most of us recognise that, in a test of endurance, the sida which controls the longest purse is in a position of immense superiority. But we must not close our eyes to the fact that a measure of advantage will also lie en the side which, by rigid economy and caution in both private and public expenditure, maintains itself in a positjorfto support its people and prosecute the war at a substantially lower cost than its enemies. The application of the old adage,-"a penny saved is a penny gained," becomes at once apparent, and it is quite possible by the exercise of extreme care in the private and national outlay that our enemies may in great measure counterbalance the superiority we possess in the way of more ample financial resourcs. In this respect, Germany, particularly, has been forced to economise through the effective blockade of her ports by our-Navy. While our enemies themselves have admitted the serious handicap under which they labor—that is, viewing iiieir position from the financial standpoint—and while we freely iecogn:se Britain's pre-eminence iind vast financial resources, it will never-

theless be prudent that each constituent part of the Empire should take i-tock if the position, for it is to bo feared that an overweening confidence in our financial supremacy may encourage, nay, is encouraging, a recklessness and prodigality in ex.penditurc which may, if not checked, expose, the Allies to a risk of that, fust exhaustion which is to be the determining factor in the struggle. I am persuaded that, at the present juncture, the greatest optimist and the truest patriot is one who proclaims, in no uncertain tones, the supremo importance the utmost care in the conservation of the national resources. Unless the source of supply be limitless, it is plain that it is only a question of time, and of ' rate of outlay, when the end of even the most ample resources must be reached. This obvious fact is one which, at the present time, the British Empire stands most in need of realising.

Owing to the segregation of the Allies, and the distances which i separate the component parts of our ! own far-flung Empire, the cost of | marshaHing..~the Allies' forces, and i placing them at the points where they' , are-required to engage in hostilities, •ib in itself enormous. This is an exj. pense from which our enemies are al-

; most entirely free. The contiguity ( and compactness of their territories, I and the completeness of their strategic I lines or' railways enable them to move | their forces in large numbers with ! great facility and at a minimum of j expense. Therein our enemies have a decided advantage over us. But these are not the only advantages they enjoy, for we have- to admit that" our I entire outlay is on a vastly more costly scale than theirs. Om: soldiers are better paid, better clothed, better fed .and better cared for. This superiority of conditions,'though most commond*j able, is purchased at a very great j price. Again, instead of being, as our enemies largely are, self-contained and self-dependent, producing within our own borders the greater" part of what we require for our support and for the prosecution of the war, and discharging our internal obligations by means of a' paper currency, we are drawing supplies, civil and military, from almost evefy quarter of the' globe,. and paying our debts in coin. This, of course, involves us in enormous addiI cx P'eil' se > P 1- tlie price demandj.ed. by the foreign manufacturer >,or |: producer has .to be paid in fiold,,a,nd ! transit, charges adde<l. ■'Generally, j therefore, it js a case of making war on a basis Ihal. is calculated to strain our financial resources to the uttermost. :

Tins cursory review of the position will readily convince even the most f superficial thinker that- the outgo of i the Allies for war purposes must be ,• enormously in excess of that of their • enemies. It would be well that we I should all keep this substantial disI advantage to ourselves prominently jin view, because, if victory is to i Crown the arms of the side which can ; the longer endure the process of pxI liaustion, it is obviously desirable that | we, who, in the matter of expendi- ; ture, are so unfavorably placed as | compared with our enemies, should • economise and husband our resources in every possible direction. Our fof's { are, I am sure, keenly alive to this, ; and they are consequently wielding : the economic weapon with the same skiJl and intensity of purpose as they 1 handle their actual .implements of war. They are "living" as .well v* 1 "fighting" the Hnttie. The civil population," as well as the military, are performing their own peculiar part—spinning out the thread of the .. national resources to the last finest strand and to the utmost possible limit. It can only be by the exercise of on overwhelming determination to continue the struggle to the utmost extent of human and economic endurance, that th&y have been able to thus far prolong the conflict. Life in the Austro-German confederate States must, at the present time, be anything but pleasant. Th-e truth, under such jealously guarded censorship as prevails in Germany, is difficult to get at, but information which leaks out from time to tirn<gives a sufficient index to the trv.o position. The iron ring of the B<:----tish Fleet has closer! in upon tlio enemy's seas, and his external supplies have dwindled practically to tho vanishing point. Having failed on his military fronts ami feeling the misupportable pressure of his internal

necessities, our foe is now engaged, with the assistance of Bulgaria, in an endeaVor to force a passage through Serbia to Constantinople with the object of opening up a channel of supply through Asia Minor. The Allies are evidently alive to this.

and are !>r>nt anon {'rusti-atms; his design. N-evertholpr.s, n-.ujniins that tlu* effort is, <is wo Ihiix-, deemed to failure, it ha<; Wen sliowji tliat- Ans> tro-C»Grmaiiy's internal nvitional rrsonrees ait so cojK-iderahle, and the capacity of her jjccjpk' lor endurance and solf-sflcritiri' in what tlioy cosircirc to be the interests of their

Fatherland so great; that it is impossible to predict the length to which their ingenuity and devotion may enable them to protact hostilities. It behoves uSj. therefore, to faco our own economic problems in the spirit in which they confront theirs, and to set ourown affairs in the best possible order with the least possible delay. If the resources or xhe Empire are to bo conserved to the extent neuesisary to enable them to meet the demands that will in all probability bo made upon them before this war is brought to the conclusion that the interests, of humanity arid freedom necessitate, the civil population of the Empire will have to do their part by instituting a regime of much .sterner personal economy and a wider range of personal industry than have so far been practised. This point was stressed by the British Prime Minister in an address at the Guildhall delivered on 29th June last. I give you his own_words:. — '•'There remains only one course which can be adopted without adding to the necessary destruction and dislocation caused by the war, a. permanent source of impoverishment of this country. What is that course? Ifc is one we have come here to advocate and to press upon our fellow-countrymen—to diminish our expenditure and to increase our savings. I put-before you two very simple propositions. The first is this: If you save more you can, lend to the. State more;---end the nation

will be proportionately enabled to pay for the war out of its own / pocket; and the second proposition, equaly simple and equally true,-is this: If you spend less you either reduce the cost and volume of our imports or yoii leave a. larger volume of, our commodities available for export. The state of the trade lalance between ourselves.and other countries at this mome;nt affords ground, I do not say for anxiety, but for serious thought. If you look at the Board of IVade returns for the first five months at the end of May of the present year you will find, a.s compared with the corresponding period of ia.st year, .that our imports have increased by thirty-five and a-half millions, while our exports and l e-exports have . 'decreased J.>y and j three-quartßr millions. What does j that mean? rlt means a total I addition in five months to our ! indebtedness to other . countries of nearly one hundred ami ten millions. And if that rate was to continue until we reached the end ! of a completed year, the indebtedness would rise to over two hundred and sixty millions. That is n serious problem, and I want to ask you and those outside, how can that tendency be counteracted ? The answer is a very simple one-—by reducing all unnecessary expenditure—first of imported goods. . . . i That would mean: wo-should have

to buy less from abroad."

In the- directions mentioned nearly everyone can afford help, and those who act on the suggestion, will be I rendering to the Empire a service, ' second only in importance to that 1 given by those who offer themselves | for the war and take their places on the battlefield.

Hitherto supplies have been largely drawn from . outside—particularly from the United States of America— but, while outside ".supplies may have been right enough .a^.the commencement of the war •pEnctirig organisation of our own productive capacities., it would be suicidal to go on relying upon- them because it is patent that they may, in ihe event of the war being much further prolonged, l>e closed to us by our in-ability to pay. for what we require. Therefore, we should increasingly make it our aim, to produce as far as practicable within the Empire's own borders all that is necessary to satisfy its needs.' Many of you will doubtless havo noticed in the press, within the last few months, references from time xo

time in regard to the nominal state of the exchange between Great Britain and the United States of America. Some of you, who may have had business dealings with America, have had tiie significance of the condition of the exchange brought home to you very forcibly, by your personal experience in discovering that your British pound has been "converted into a much smaller number of American dollars than has ever before been the case. At one time the rate fell as low as $4.48 per pound, as against the pa-i----of exchange $4,867. This is equiv-nj-lent to a loss in British money of £7 18s 4d per cent., so that for every £100 paid by Great Britain at that time for American goods she was receiving goods to the value of only £92 Is Sd. If, therefore, with the exchange market in such a position, she had bought £100,000,000 of American goods, sha would have lost roughly about £8,000,000 through the transaction, in consequence of the adverse state of the Exchange. This unfavorable position was created through the necessity that arose for Britain to place such enormous orders for munitions and goods witli, AmericaThere was no immediate prospect of the huge balance in favor of America (these having shrunken to small figures since the commencement or the war), or by a settlement in coin, which would have been disadvantageous to both countries, if not alto- ; gether impracticable, and the ex- < change rate fell persistently until it : reached the ruinous level I have m&n : ; tioned. . ;

An Anglo-French Commission visit- •■ ed America with a view to discussing ; remedial measures, and it was finally arranged that Britain and France should raise a joint loan in New York ' for as large an amount as possible. A j billion dollars was talked of in the | first place, but the amount was ulti- j mately fixed1 at 500,000,000 dollars j (about £100,000,000^ sterling). Tho | issue was made in. 5 per cent, notes at £98 having a currency of five years, with an option of conversion at maturity into 15-25 year 4J per cent, bonds. The whole loan was underwritten by a New York syndicate at £96. Tho terms are sufficiently onerous, the cost to the borrowers beX ing., at £96, about £5 19s per cent.^ <and at £98 -about £5 9s'3d per cent. .

Tho effect of the raisng of the loan has been to improve the Exehamie rate somewhat. It stood on the 20th

ultimo at 54.69J, but, unless the Empire can reduce her demands for American supplies 'by increasing heY own internal productiveness, it is almost certain to recede «gain before long, and the borrowing operation will in that case have to be repeated,

probably upon even more disadvantageous'terms than those exacted in this instance.

This contingency will stress what I have already mentioned with regard to the. need for production, within our own borders, of all the essentials of national subsistence and munition supplies. ( It will further emphasise' what \T have said upon thio subject of economy in individual expenditure, for it is an indisputable fact that every purchase of American goods by New. Zealsmders has gone to swell the balance of the huge indebtedness ot London to New York, and helped to intensify the exchange difficulty. Britain's outlay connected with the war is, as already indicated, of a steadily increasing character. Commencing, at the beginning of the war, with about £750,000 per day it has now, the British Prime Minister informs us, reached the enormous total of £5,000,000 i per day, or say £1,825,----000.000 per 'annum. Of this, probably at least £1,500,000 000 per-ari-j mini will have to be raised by way of loan; and in addition to providing for her own outlay Britain has. to a -largo extent, to finance the requirements oi

her Allies both in money and munitions. In the early stages of the war, Britain financed by the issue of Treasury bills by tender at varying rates, but all below 4 nor cent. Her first

effort to fund her war liabilities was made in November, when the 31 por cent war loan of £350,000,000' was issued at £95. This was equivalent to a borrowing at 4 per cent. The Treasury, shortly after the issn4j of the loan, discontinued the placing ot

.Treasury bills by tender and adopted

tne method of issuing them, as ai> ;:" f'n\ at fixed rates, viz.': 2». 35, and 33 for 3, 6, and 9 months' bills respectively. In June last the Al per cent war loan (without limit as to amount) was offered at par, and cash subscriptions of about £585,000.000 were received. tssues of Treasury bills continue to be made, and the rates are now fixed at 5 per cent for all currencies. In view of the present rate of expenditure, it cvannot be> long before another Imperial war loan must be placed on the market, and the increase of the Treasury bill rate seems to indicate that, when the time arrives, at least 5 per cent interest will have to be offered. In this connection, it is interesting to note that, just prior to the commencement of the "Avar, the British, National Debt amounted to £706,154,110. On 31st March, 1915, it stood at £1,161,951.----702; and by the 31st March, 1916, it is estimated that it will have reached the stupendous total of £2,200,000,----000. " ,

In this Dominion our Government is inflexible in its determination to assist the Motherland to prosecute the war to a successful termination, and, with that end in view, will, if necessary, send every man of military -nge and fitness to the front. Eecontly here, as in the case of Australia, a war census has been taken, with ■ the object of ascertaining how many Tien are still available for this purpose. So far, ro difficulty has been experienced, under the voluntary system, in obtaining ample supplies of p^igibilc men to make good the "wast-

age" that has occurred since the despatch of our Mum Expeditionary Forces. If, however, later on, there

be any failure to respond to the call i of farms, I am satisfied that neither the Commonwealth nor the Dominion ; Government will hesitate to take such • ster>s as will compel every man, of military ago, to perform his duty to j the Emniro. '■