THE New Zealand Herald AND DAILY SOUTHERN CROSS MONDAY, JUNE 12, 1933 WAR DEBTS AND PROSPERITY

New Zealand Herald, Volume LXX, Issue 21515, 12 June 1933, Page 8

THE New Zealand Herald AND DAILY SOUTHERN CROSS MONDAY, JUNE 12, 1933 WAR DEBTS AND PROSPERITY

It is inevitable that speculation should be rife concerning war debts, particularly the attitude of America to adjustment of them. The next half-yearly instalment on account of the debt to America is due this week, on June 15, and the proximity of that date thrusts the question into prominence. Doubts that have been held at bay must be immediately grappled, for this reason alone. There is an additional reason. Into this critical week falls also the opening of the World Economic Conference, and nothing can keep the war debts out of thought there. In spite of the most studious and resolute endeavours of Washington to hold this question apart, even to the point of making America's collaboration in the conference conditional on the exclusion of war debts from the agenda, they will enter. In one respect, recent and current expression of American thought about them increases the necessity to give them a place. This expression makes the necessity a practical one. While it is possible to exclude from consideration the views of American economists and bankers favouring readjustment as essential to the recovery of American prosperity, there is being pressed an American purpose to use the debts as a means of gaining national advantage. Mr. Hoover frankly uttered it in a message to Congress. After reiterating his determination not to entertain any thought of cancelling the debts, he said —"I believe that whatever further sacrifices the American people might make in the way of the adjustment of cash payments must be compensated by definite benefits in the markets or otherwise." This view is held also by his successor in office and it dominates Congress. Notwithstanding the constant obstacles in the way of a coherent American public opinion on the question—vast territory, variety of local interests, diversity of constituent peoples and absence of unifying agencies—it is such market benefits, rather than budgetary gains through disarmament, that now seem to appeal to the American public. If Europe cannot pay instalments at due date, the thought of this public goes, then Europe must give America some commercial advantage instead. And this brings the question into the purview of the London Conference. Expectation that President Roosevelt- would make at once a courageous gesture to Europe has been damped somewhat by the "minor revolts" in Congress, and in to-day's news is confirmation of the wish of a strong Congressional section to stay his hand. How far he will insist on exercising his prerogative in international affairs is doubtful, although ground exists for the belief that he has given some promise to Mr. Mac Donald and is not averse to considering any overture that may be made by the debtors. Apparently, some of them are moving in the matter, and possibly the doubts will beset at rest almost immediately by his answer to decisive communications understood to be framed by Britain and Italy. It is to be assumed that his answer will proceed on lines defensible to the aggressive section of Congress, and that it must give attention ,to two practical considerations : either clemency will be unequivocally extended in the interests of universal prosperity, including America's, or it will assume the form of helping the debtor nations to pay their due debts, again from the point of view, in part, that takes account of America's own need as a commercial unit in a world system of trade. Whatever form the debtors' approach may take, whether by request for moratorium, by offers of partial payment, or by "token" payments not immediately redeemable, they can be assured that favourable heed will be given, providing America has a prospect of some compensating advantage. This may not seem the worthiest way of settling the imminent question, but circumstances are taking it out of the realm of ideals into that of practical politics. Tho possibility of deliberate default has been scouted on practical grounds, as a way entailing repercussion on national credit, and one or other of the alternative methods seems bound to be chosen. Each of them connects the problem with the business of the conference, called to consider tariffs, monetary policy, and such matters, as of international concern.

Everything points, therefore, to a decisive approach to the problem fhis week. Some may think that tin; best course would be to make the due payments, no matter what the immediate national disabilities of that course, and trust to an early American recognition of tho far-reaching injury wrought by it. That would be heroic, no doubt, but practical considerations impel something more than a merely provisional and optimistic handling. No country in the world —least of all, perhaps, America —can afford to wait. Any further embarrassment, not to say impoverishing, of del.-)tor nations can have only one result —tho hampering of all efforts to restore economic security—and even to leave the question unsettled would have the same dire effect. These debts, as enlightened thought in the United States has admittedly seen, cannot 1)0 treated as capable of indefinite separation from all else, and mere postponement of definitive dfction, so far from helping, would prolong and increase the financial uncertainty that is so prejudicial a factor in the whole problem. Some things have been done to promote recovery. Lausanne, in evolving a policy for the extinction of German reparations'., marked a great advance. As far an it could go, this achievement was real; but so long as war debts remain, even as a ghostly presence. Ihere is a risk—as is impressed by Germany's threat to declare a mora-torium—-of its utter breakdown and a plunging of Europe back into chaos. A final facing of war debts would go far to bring certainty and hasten economic recovery.