GENESIS OF CRISIS

New Zealand Herald, Volume LXXI, Issue 21716, 3 February 1934, Page 14

GENESIS OF CRISIS

GREAT WAR'S AFTERMATH SELFISH ONE-WAY TRADING HOW BRITAIN HAS EMERGED "The world crisis is not as fully understood as it might bo, and one of the objects of my visit is to make known tho story of Britain's recovery," said Sir John Sandcman Allen, M.P., chairman of the Commercial Committee of the House of Commons, at a luncheon arranged in his honour yesterday by the Auckland Chamber of Commerce and the Royal Empire Society. Sir John is vice-president of tho society, and is also past president of tho Liverpool Chamber of Commerce. The luncheon was held in Messrs. Milne and Choyce, Limited's, Reception Hall, and Mr. H. Turner, president of the Auckland Chamber of Commerce, presided. The crisis started immediately after the war and in connection with it, Sir John said. One great cause was tho terrific accumulation of war debts under an arrangement by which vast sums were to bo transferred from one nation to another without the corresponding exchange of goods. This was in defianco of the economic laws, and the system resulted in a one-way stream. At the end of tho war there was £2,100,000,000 owing to Great Britain and £850,000,000 due by Great Britain to the United States, either for goods or guarantees. Britain did not receive a penny in money from tho United States, tho debt being incurred in supplying food, clothing and ammunition to the troops. One-way Stream As far as these debts, coupled with reparations, were concerned, Britain wanted to wipe the slato clean, but not a single country would listen to this idea. Thus a one-way stream was created, and there was no return. The United States refused payment in the ordinary way—shutting the door to goods and also to services by the subsidising of' steamship lines and other methods —and insisted on gold. This the United States lent back to various European countries, where much was squandered. Until tho United States called back this money the crisis was not realised. During tho war it became necessary for the different nations to set tip industries to make goods formerly obtained elsewhere. When the war was over, it was decided to keep them going, whether they were economic or not. Tho primary producing countries began to shut their doors on the industrial products of countries not primary producing, and the double passage between them was shut. The price of primary produce fell, greater production followed in the efforts of producers to maintain their incomes, and prices fell again. The elementary principle, that it is no use trviiig to sell, unless one is prepared to buy. trade or exchange, was neglected. It was forgotten that money is nothing more than a token, and the politicians of tho world still needed elementary lessons in this respect. Great Britain had gone cheerfully on without grasping the real effect of all the tariffs on trade, Sir John said Hundreds of millions of pounds were spent on social benefits, and the result was that the debt piled up, the elementary principle of balancing the budget being neglected. The country was buying more than she was selling tho whole time, and the trade balance was all the wrong way. The country that had been the backer of the world for generations suddenly realised that other countries were galling back their money. Gold Abandonment Involuntary

"Great Britain could not help going off the gold standard, but that did not save her; she was saved by coming to her senses," Sir John said. British currency had two angles, the gold standard and the credit of the country. The gold standard was gono and the credit was in doubt. The Government broke up and a National Government was formed, for which the country was immensely indebted to the wise and energetic action of the King. The country had to stop spending more than she was earning, and began to cut expenditure throughout. Taxes were raised and expenses were cut, and the country was not going to alter the cuts until it was perfectly safe. It was said in some quarters that England was decadent, but when a general election was held the whole country rose to the occasion. Parties had to go to the winds, and the Government was returned to do as it thought fit. To-day there was a prospect of a Budget surplus of £65,000,000, against an estimated deficit of £170,000,000 two years ago. Practically all the War Loan had been converted purely voluntarily from 5 per cent to 3J per cent, and the market price to-day was the same as before conversion, showing that the country's credit was restored completely, and was greater and stronger than for many years past. "I cannot explain what is going on in America; I do not know how far they can explain it themselves," Sir John added. Sterling to-day, however, was I absolutely secure, as it was based on | proved reliability. There was needed a I great international monetary standard, but lie deeply regretted that by the interference of America the World Economic Conference was completely closed up when about to come to an agreement on this matter. Tho outstanding fact 1 to-dav, however, was that the world's leader—commercially, financially and politically—was Great Britain.