THE OTAGO DAILY TIMES THURSDAY, DECEMBER 31, 1931. 1931

Otago Daily Times, Issue 21531, 31 December 1931, Page 6

THE OTAGO DAILY TIMES THURSDAY, DECEMBER 31, 1931. 1931

Throughout the world the closing year has been one of acute economic crisis. The final months «of 1930 were ominous in the respect that in several European countries there was a rapid decline from a semblance of financial security, but scarcely any authority and certainly no Government predicted that before another year had passed the economic difficulties which here and there were giving individual countries cause for grave concern would have developed to precipitate a world crisis without parallel in modern history—a crisis so farx'eaching that no country has escaped its influence. The developments in the situation which has affected equally the prosperity of the United States, where, it had been generally believed, a policy of somewhat selfish aloofness from the troubles of Europe would act as a shield, and the economic security of Brazil and of the Dominion of New Zealand have been so rapid and so bewildering that for a time there appeared to be no true realisation of the extent of the threat to world stability. Europe has undoubtedly been the storm-centre in this “ economic blizzard,” and tbe international causes of the depression may be traced to the alarming collapse that has occurred in Germany and elsewhere on the Continent. It was believed that, with the adoption of the Young Plan, which established the problem of reparations upon a supposedly practical basis, the greatest financial post-war problem had been satisfactorily solved. This year, however, the carefully wrought structure erected by the nations creaked in every joint, and international financial experts and statesmen were called on, not once but several times, to take desperate measures to strengthen it. The first serious difficulty arose in May, when a banking collapse occurred in Austria and the Government was forced to seek foreign assistance in averting a complete collapse of the credit of that country. The repercussions caused by a failure of the confidence of foreign investors were immediate, and extended to a shaking of the belief in the ■ security of Germany. In the following months there was a frantic rush to withdraw credits from Germany, and the republic was threatened with financial disaster. Germany, it was realised rather belatedly, had been existing upon borrowed moneys for a considerable time. Most of these loans had been extended in the form of short-term credits, with

which the republic had not only rehabilitated industry, but had met reparations payments and budgetary deficits that had been recurrent over a number of years. The favourable balance of foreign trade enjoyed by Germany had served to conceal the true position and, indeed, it is possible that a crisis might at least have been delayed had it not been for the sudden, rather frenzied weakening of foreign confidence. As it was, withdrawals of credit made the position untenable. At this point President Hoover intervened, fortunately, with his “ war debts holiday ” plan, by which it was proposed that a moratorium in respect of war debts should be accepted by the nations for one year. Prance hesitated for a fortnight before signifying acceptance of the proposal, and in that time the raid on foreign resources in Germany continued with increasing force. Representatives of the Powers met in conference, after the acceptance of the Hoover Plan, as it is generally called, and lent assistance to Germany, not by the granting of the further credits which had been urgently demanded, but by the extension of those credits which had been granted. Events since August, when this modified form of relief was accorded, have shown that it was insufficient to produce the desired effect of restoring the financial equilibrium of Germany. Another indication of the difficulties that were being experienced was given when, in October, the British Government announced, as a temporary measure, the suspension of the gold standard, to which a return had been made in 1925. The step was regrettable but unavoidable. In the preceding two months more than £200,000,000 had been withdrawn from London, mainly on foreign account. These withdrawals had been met out of gold reserves, which were reduced to £133,700,000, and from credits temporarily secured from France and the United States. The effects of the retreat from the gold standard were not as serious in Great Britain as might have been anticipated, for foreign confidence in the security of the country remained unshaken. It was felt that the suspension of the gold standard by a Government committed to retrenchment and the balancing of the Budget, was a very different matter from a withdrawal, such as would have been forced upon it, by a Government with huge commitments for social services and with no possibility of maintaining its expenditure within its revenue. The Times summarised the position when it said: “ The National Government has been compelled to go off the gold standard with a balanced Budget though with an unbalanced trade account. When that account too has been balanced, as it will be, this country will return to the gold standard.” The first foreign reaction to the announcement naturally affected the value of the British pound abroad, where it remains at a value below its normal exchange level. The countries, however, in which the gold supplies of the world have been accumulated and hoarded, have not escaped the experience of the nations that have been suffering in consequence of a lack of gold. It is, indeed, a singular circumstance that, at a time when budgetary deficits are the rule rather than the exception, the United States and France, which together hold three-quarters of the world’s gold, have perhaps the largest deficits of all, while the economic difficulties of the United States are admitted by Americans themselves to be exceptionally serious. While the financial crisis in Germany must be regarded as one of the most important of the international factors, if not the most decisive, in the development of the world crisis, it is necessary to recognise that the plight of individual nations has been largely produced by a variety of circumstances which can be stated only in the most general terms. The British Committee of the International Chamber of ' Commerce recently set out the causes of the crisis in a report which was described recently set out the causes of the crisis in a report which was described by a high authority as the best short summary that has appeared. In this report it was stated that during the post-war years there has been a gradual upsetting of economic and financial equilibrium by:— An uneven expansion in productive capacity—agricultural, mining and industrial; The existence of international debts; The post-war policy of high customs tariffs, and The uneven distribution of gold stocks. During the war, the disturbance of normal productive activity in the belligerent countries led to an abnormal development of production in neutral countries, with the result that when post-war rehabilitation in industry was brought about production exceeded the demand. High tariffs created a difficulty in discharging international debts and balancing international investments in goods and services, with the result that it became necessary to transfer gold. The present maldistribution of gold, therefore, can be traced to the “ desire of the creditor nations to be paid [in gold] for their exports and for interest on their international loans, while at the same time these same creditor nations refuse to accept payments in goods or services, or to maintain their volume of foreign investment at an adequate level.” It is emphasised that the creditor nations have failed to recognise their duty of not preventing the debtor from paying and that the great exporting countries have not realised that they cannot sell unless they support the world market either as buyers or as permanent investors, with the result that the two opposed policies of selling freely and refusing to buy are bringing about a state of affairs destructive of the fabric of world trade. The uneven expansion in productive capacity and the uneven distribution of gold stocks have, it is stated, caused the calamitous fall in wholesale prices which has characterised the world depression, and this fall in prices has, in turn,

led to a disequilibrium between the cost of manufactured goods and of primary commodities, with a consequent interruption in the world exchange of these commodities which has stultified trading activity. Existing circumstances point to the accuracy of these observations. The hoarding of gold by the United States and France has, it is now fully recognised, reacted to the disadvantage even of themselves. External trade has fallen away, along with prices for primary produce, owing to the imposition of artificial restrictions upon the exchange of commodities for which there is, in normal times, a mutually profitable market; and unemployment and want are general throughout the civilised world, although there is a full supply of the commodities that are required, and all that is lacking is a stimulus to ordinary trading that would make the employment of these idle millions profitable and restore their purchasing power. The rich creditor. nations of the world —rich, that is, in gold and material resources —are now awakening to the fact that their well-being depends upon that of the other presently depressed nations, but there is unfortunately little indication as yet that a serious attempt is being made to bring about a freer exchange in goods and monetary wealth. There seems to be full justification for the conclusion reached in the. report to which " reference has been made: “ Creditor nations must accept an adverse balance of trade as a corollary and complement to their wealth, or must, alternatively, maintain an even flow of permanent investment abroad. Until this is recognised there is every prospect of prolonged depression, increased unemployment and unbalanced budgets. These factors have already threatened the stability of Great Britain, Austria, Germany, and other nations.”

The economic situation has so dwarfed other international questions during the year that the ordinary work of the League of Nations might almost be overlooked. Progress was achieved, however, in many directions, and the greatest importance is attached to the International Disarmament Conference which will be held early in the new year. The preparations for this conference have, for the most part, been conducted without the glare of publicity, but there is reason to hope that definite results may be.obtained from it. The Preparatory Commission on Disarmament of the League of Nations has been working quietly and efficiently in establishing a practical basis for the discussions, and the Draft Convention may be expected to provide a starting point in negotiations. This convention contains a provision that each of the contracting parties shall render annually to the SecretaryGeneral of the League a statement showing the actual total amount expended on all armaments, including land, sea and air forces and the manufacture of material of war, and the task of the World Disarmament Conference will be to insert effective proposals for disarmament into 'this framework. The acceptance of the Hoover Plan, to which reference has already been made, by the Powers that were engaged in the Great War was one of the outstanding developments’ in international co-operation during the year. The effect of the plan was to relieve Germany of the payment in the twelve-monthly period of some £.90,000,000 due in reparations, while other war debtor nations were relieved of their obligations in the same period. The delayed payments are, as the plan now operates, to be distributed over a period of ten years. As a concession to France, which was reluctant to accept the plan, although she is the only nation excepting Belgium that has received any material benefits from reparations, it was agreed that the “unconditional” payments due to her should be paid into the Bank for International Settlements, and re-loaned to Germany. The acceptance of the Hoover Plan by Great Britain was unhesitatingly given, although a considerable sacrifice was thereby entailed, since the relief granted in respect of war debt obligations to the United States failed to compensate for the suspension of debt payments due from France and the dominions and colonies. The whole question of war debts and reparations is one that is receiving the earnest consideration of the nations. The existence of the Bank for International Settlements has served to bring into closer contact on monetary policy the chief central bankers of the world, and there is evidence of a growing sentiment in favour of the scaling down of war debts. The United States, as the principal creditor, must take a lead in any readjustment that is found possible, and it is apparent that official opinion in that country, which has been opposed to any cancellation of war debts, is undergoing modification, A significant statement was made in June by an American spokesman, to the effect that if Germany was obliged to ask for a moratorium the United States might find it necessary to reconsider the war debt situation. This is a very ‘definite change of tone from that adopted previously, and expressed by Mr Mellon, Secretary of State, when he said that events had proved that reparations and war debt payments could be made without serious difficulty. American financiers have invested large sums in Europe, and the United States therefore has every reason for concern over the danger of a European collapse. 'An event which for a time gave cause for some apprehension among the European Powers was the notification of Austria and Germany that a Customs Union was in process of fulfilment. France, in particular, expressed the liveliest concern regarding this arrangement. The question whether the proposed union would not conflict with the commitments of the countries that proposed to enter into it was referred to the Court of International Justice at The Hague, but before a decision was reached by the international jurists Austria and Germany announced the abandonment of the negotiations. The ruling of The Hague Court, which was later made public, was that the union would have been illegal. During the year attempts

were made, mainly by the British Government, to secure a fuller naval limitation accord among the sea Powers. The agreement reached at the London Naval Conference in 1930 is effective as to its main clauses, relating to cruisers, destroyers and submarines, only in application to Great Britain, the United States, and Japan, and hopes were entertained that France and Italy might be persuaded to subscribe fully to the terms of the treaty. A final reconciliation of the “absolute” needs of France with the Italian demand for parity was not, however, obtained, and these two Powers have since been engaged in what represents a naval construction race. The Italian. Foreign Minister, Signor Grandi, recently announced the willingness of his Government to agree to a cessation of construction for one year, and this offer at present stands. An outbreak of hostilities occurred during the year in Manchuria, the wealthy province which is nominally a possession of China and in reality a bone of contention between China, Japan and Soviet Russia. Japan appeared as the aggressor in the fighting in Manchuria, and China appealed to the League of Nations. It was urged by the Japanese, however, that the attack was provoked by the refusal of the Chinese Government to make an opportunity of discussing many outstanding questions in regard to Japanese rights in the territory. Whatever the merits of the dispute may be, warlike encounters continued despite the appeals of the League, seconded by the United States, and Russian activities on the frontier for a time suggested that a third nation might become embroiled in the conflict. By acting with resource and courage in a situation of extreme delicacy the League of Nations eventually obtained Sino-Japanese agreement that an international commission should examine the causes of the dispute. Hostilities do not appear actually to have ceased, but there is every reason to hope that the commission, which is to make an investigation on the spot, will be able to show the contestants a way out of their difficulty without recourse to war.

The political history of Great Britain during the year is interesting and sensational, and reflects again the domination ,o£ economic problems in both the national and international spheres. When the year commenced the Labour Government, though its own party was a minority of the House of Commons, was generally able to rely upon sufficient support from the small Liberal section to withstand the opposition of the Conservatives, who were numerically the strongest party. The foreign policy of the Government was on the whole regarded with satisfaction, but the domestic affairs of the country were drifting from bad to worse. The most alarming feature of the Government’s internal policy was the stubborn preservation of unemployment insurance upon a basis that had long since altered the scheme from a properly balanced insurance basis to a “ dole ” system pure and simple. In June the Royal Commission on Unemployment Insurance reported that the income of the Insurance Fund amounted to little more than half the expenditure, while the accumulated debt had reached £80,000,000, and was increasing by nearly £1,000,000 a week. While Parliament was in session, the Government chose to ignore all warnings that the payment of the “ dole ”• could not be maintained on its extravagant basis, and it was only revealed at the time of the general election late in the year that an agreement to limit the payments of unemployment insurance in accordance with the recommendations of the Royal Commission had been arrived at by Cabinet. When Mr (afterwards Yiscount) Snowden made this fact public the Labour members, who desired that the “ dole ” should be spared from the operation of the “ economy axe,” the use of which had become imperative, sought unsuccessfully to deny its truth. The year was remarkable for the fact that two Budgets were introduced. Mr Snowden, as Chancellor of the Exchequer in the Labour Government, brought down in April his third Budget, which was generally recognised as a makeshiftdistinguished, as later events proved, by a quite unwarranted optimism. Even allowing for expectations of only a slight decrease in taxation revenue, Mr Snowden had to admit a deficit of £37,000,000, which he hoped to make up by the raiding of the “hen roosts,” the early collection of income tax, and an increase in the petrol duty. In August the report of the Economy Committee set up by the Government was presented. It disclosed a highly unfavourable position. The next year’s Budget, it was conservatively estimated, would show a deficit of £65,000,000, while the Budget for the current year was likely to show a deficit of some £50,000,000. Faced with the prospect of Budget insolvency, which would have brought disaster to the nation, the Prime Minister invited representatives of the Opposition parties to confer with him. Mr Ramsay MacDonald, supported by Mr Snowden and the Opposition leaders, presented to Cabinet a drastic economy programme. The majority of the Cabinet refused to support this plan, which included a saving on the “ dole,” and the Government resigned, to be immediately succeeded by a National Government under Mr Ramsay MacDonald pledged “ to correct without delay the excess of national expenditure over revenue.” Early in September the House of Commons met and commenced the task of reconstructing the national finances. Mr Snowden, who had retained the Chancellorship, presented a Budget which proved that the estimates of the Economy Committee had been distinctly moderate. In order to balance the national expenditures, the Chancellor showed that it would be necessary to wipe out a deficit of over £74,000,000 in the current year, and a prospective deficit of £170,000,000 in the year following. Sacrifices were demanded from the whole nation. Taxation increases were general, including an addition of*6d on income tax and of 10 per cent, on

the surtax, the total extra revenue obtainable from taxation being estimated at £40,000,000, while economies amounting to £22,000,000 were proposed. Mr Snowden's proposals Were not confined to the current year, but were aimed at balancing the Budget for the succeeding year. The prospective hiatus of £170,000,000 was filled by economies amounting to £70,000,000, including a cut of £25,000,000 in unemployment insurance, £80,000,000 of fresh taxation, and £20,000,000 reduction of the provision for debt amortization. Altogether the result was estimated to allow a surplus of about a million and a-half. The House of Commons straightway approved these proposals, and almost as soon as the emergency programme of legislation that was necessary had been adopted Parliament was dissolved. The general election gave the National Government the greatest majority ever recorded in British political history, the parties opposed to the Socialists returning over 550 members, while the Labour and Independent Liberal groups together were able to muster fewer than 60 members in the new House, The victory was, in the first place, a victory for the National Government, to which support had been, accorded by the people of Great Britain, irrespective of party colour, but it was also a triumph for the Conservatives, who count a following of over 470 members in the new House, and gained 182 seats from Labour. The Socialist • debacle was complete. Mr Arthur Henderson, who had succeeded Mr MacDonald as the Labour Leader, lost his seat, and was joined in his exile from the Commons by a dozen other ex-Cabinet Ministers, while Mr MacDonald, Mr Thomas, and the other Labour members who had chosen to put country before party, and had been expelled from the Labour Party in consequence, gained substantial personal victories. In a year of grave national crisis the King and members of the Royal Family accepted, as is usual to them, a share;of the burden and responsibility. His Majesty, it is recognised, was himself an actor in the events which followed tb6 resignation of the Labour Government, and his influence may be presumed to have been in no small measure responsible for the happy rapprochement of the parties opposed to Socialism. When the new Government was formed his Majesty was quick to set an example of publicspiritedness. Desiring “personally to participate' in the movement for the reduction of national expenditure,” he decided that the Civil List should be substantially reduced. The Queen and other members of the Royal Family also requested that their Parliamentary grants should be reduced, and the Prince of Wales made a voluntary gift of £IO,OOO to the National Exchequer from the revenues of the Duchy of Cornwall. An incident which at first reports seemed serious was provoked in the Navy by the wages “ cuts ” introduced by the National Government, but matters were promptly adjusted by the Admiralty. During the year the Prince of Wales, accompanied by Prince George, undertook ’ a tour of thu South Americas. At Buenos Aires he opened the British Trade Exhibition, which was held with the object of advertising in Argentina the industrial resources of Great Britain. British trade with the Argentine, while still enormous, has declined in recent years, and the visit of. the Prince has contributed materially to establishing trade relations between Great Britain and the Argentine upon an improved basis. The major Empire problem with which the Government of Great Britain had to grapple this year was that of India. Towards the end. of 1930 the delegates to the Round Table Conference assembled in Loudon, when proceedings were opened with a speech by his Majesty. The Indian Congress was not. represented at this conference, but despite the unsatisfactory nature of an assembly that lacked the presence of Mr Gandhi or other representatives of the. .most alert political organisation in India, the conference adjourned in an atmosphere full of hope. Shortly after the delegates had returned to India, where a large payt of the population was in a ferment of unrest owing to the civil disobedience campaign inspired by Mr Gandhi, the Viceroy consented to meet the. Congress leader. As a result of protracted conversations an agreement _ was reached, Mr Gandhi undertaking a termination of the civil disobedience campaign and a cessation of picketing and of the boycotting of British goods, while the Viceroy agreed in return to release most of the political prisoners and to permit villagers to collect salt for their own domestic use. The abandonment of civil disobedience served to make the position more peaceful, but unrest continued, and is evident.at the present time. In September the Indian Conference began its second Round Table session in London, when attention centred largely on the deliberations of the Federal Structure Committee. Mr Gandhi, after some hesitation, visited London to attend the conference, and the fact that the Indian National Congress was represented was taken, as a propitious sign. Expectations remained unfulfilled. Mr Gandhi’s presence cannot be said to have improved the prospects of a settlement being reached. Long before the conference ended he publicly expressed his conviction that it would be a failure, and when the sessions came to a close without any material advance having been made, the “ seditious, saint,” as Mr Churchill has called him, confessed that his desire had been to obtain control of the army and of finance in India. Since the British Government had never made any suggestion that such an agreement could be even conceivable, it is scarcely surprising that the. conference achieved little. A year has passed more remarkable in India for the shattering of hopes than for any progress in the settlement of constitutional difficulties. In contrast, with India, Egypt has been comparatively free from disturbances in the past twelve months. The general election- led to demonstrations inspired by ; the

Wafd, which had “boycotted” them. As a result the Conservatives, led by Sidky Pasha, gained a decisive victory, winning the majority of seats in the new Chamber. The truth was that the Wafd was ont-manceuvred, and its (desertion brought a realisation of the eparseness of its following. Towards the end of the year an outbreak against the British authority occurred in Cyprus, and troops were rushed to the scene by aeroplane and warship, but the rising was of insignificant proportions, and speedily quelled. As the year closed a general election Was held in Australia, which resulted In a decisive victory to the forces opposed to Socialism, Thus closed a chapter in Australian political history that will long be remembered on account of the indecision of the Government at a time when the economic situation of the country was steadily drifting from bad to worse. The record of the Labour Government, which was put into office in 1929, was distinguished mainly for the irresolution of its leader and the wild financial schemes of his associates. It is not unjust to characterise Mr Scullin’s continual vacillation as an expression of administrative incompetence. The real commencement of the grave financial crisis in the Commonwealth may be traced back to the middle of 1930, when Mr Scullin registered what he termed his resolute determination to balance the Budget. He departed shortly after: wards for the. Imperial Conference, leaving Mr Fenton and Mr Lyons in charge, but on his return to Australia recognised their earnest attempt to carry out his promise by an action which caused them to resign. Mr Theodore, who had resigned from the Government by reason of the fact that he was under a cloud in connection with what were called the Mungana land scandals in Queensland, was reinstated as Treasurer. In this capacity he introduced a Fiduciary Notes Bill, *a measure for “ controlled , inflation ” which was condemned by financiers in Australia and abroad as reckless in the extreme. The Senate rejected this Bill, and the Government, obviously alarmed by the effect of the inflation proposals on Australian credit, and at last taking to heart the grave warnings of Sir Otto Niemeyer, who had been called in previously as financial physician, began seriously . to consider the means of effecting economies. . After several inconclusive conferences, the Federal and State Governments, through their Premiers, approved an extensive economy and rehabilitation plan which had been drafted by financial experts and economists. This plan proyided for the reduction of . interest on bonds held in Australia by 22£ per cent.' through voluntary conversion, reductions in the wages of Federal and State employees amounting, together with previous “ cuts,” to . 20 per cent,, and the reduction of invalid and old age pensions by 12i per cent. The introduction of legislation in the Federal Parliament giving effect to the plan immediately caused a division in the ranks of the Government, and Mr Seulliri was forced to rely on the support of the Opposition in. passing the necessary measures. This support, needless to say, was accorded to him. In the following month, July, the ..Commonwealth Budget was presented by , Mr Theodore, who had perforce forsaken, but only' temporarily, his proposals for inflation. The Budget aimed to reduce to £5,176,300 a deficit, which, exclusive of a sum. owing by New South Wales in respect of interest payments made by the Commonwealth Government to avoid defahlt on the part of the State, amounted to over £17,000,000. By this time the financial position of the Commonwealth did not permit of any prospect of balancing the Budget in a single year. The Conversion Loan was a signal and gratifying success, 97 per cent, of bondholders voluntarily agreeing to the conversion of holdings amounting to over £500,000,000 into securities bearing interest at a reduced rate. If the record of the Federal Labour Government was one of vacillation, that of the New South Wales Government has been sensational and disturbing to a degree. Mr Lang, the State Premier, has contrived, by every means in his power, to bring the State into disrepute. In March he startled the British Empire by announcing the inability—or rather the disinclination — of his Government to pay the interest due on the loan obligations of the State in Great Britain. Obligations to the United States, consisting of only a email part of the overseas interest bill of the State, amounting to more than £7,000,000, were honoured, but no payments were made to Great Britain. This act of repudiation was condemned on all sides, and the Federal Government, in order to save New South Wales from a discreditable default, made the payment. Mr Lang, immediately on assuming office in the previous year, had endeavoured to cany out his promise to abolish the Legislative Council. In this he was unsuccessful, and the Council has been instrumental in vetoing or delaying most of the destructive legislative proposals of the Government. An attempt to bring about the appointment of sufficient Trades Hall extremists to swamp this body was at first equally unsuccessful, but the State Governor recently agreed to appoint 25 nominees of Mr Lang, a number which, while not actually sufficient to swamp the Upper House, represents a substantial concession to the object which the Premier has had in view. Mr Lang became, perforce, a party to the economy and rehabilitation plan approved by the Premiers’ Conference, but has failedto honour fully the agreement that was reached, while his notorious «Lang Plan,” which demands for its consummation a complete revision of the financial structure of the country and the nationalisation of banking, has a few supporters in the Federal House. The temporary closing of the New South Wales Government Savings Bank, which caused considerable distress to the people of the State, all small investors, and entailed losses that will not be wholly recouped by its amalgamation with the Commonwealth

Bank, a few months later, can be ascribed to the loss of confidence in the Government responsible for the repudiation of its interest obligations. At a time when the people of the Commonwealth are prepared to shoulder their responsibilities, and to restore the financial equilibrium of the country, the presence of Mr Lang and his Trades Hall faction in a position of authority is particularly unfortunate. Of the position caused by Mr Lang’s irresponsible schemings the Sydney Morning Herald remarked this month: The reactions in all industry and domestic commerce have been appalling.. Capital has to a considerable amount fled from investment in this State to healthier financial regions, and to the distress of vastly augmented unemployment has been added the degradation and demoralisation of the dole. Public confidence has shrunk to an alarming extent not only under the Lang Government’s proclaimed repudiation, but also under the corruption rife under the dole-coupon system, the giving over of the community to legalised gambling, and the boasting by the Premier that he has brought in "the revolution.”

The Canadian Budget this year was in line with the declared policy of the Prime Minister, Mr Bennett, of greater protection for industry in the Dominion. The United States was perhaps the worst sufferer by the tariff changes which Mr Bennett introduced, but duties were raised against many British products, both Great Britain and New Zealand being penalised by drastic impositions. The Government was faced with a possible deficit of £21,000,000, and it was undoubtedly necessary that it should take decisive action, but it may be questioned whether the policy of protection favoured by Mr Bennett will yield the required result. Generally speaking, events in Canada during 1931 have followed the trend in the other dominions; with agricultural and industrial depression and widespread unemployment, and the Government has taken measures to reduce expenditure and give relief to the workless. In April the Earl of Bessborough was sworn in as Governor-General, succeeding Viscount Willingdon, who became Viceroy of India. The rapid decline of the United States during the year from unparalleled prosperity, to the depression level of other countries, presented striking evidence of the impossibility of any trading nation remaining detached from the problems of its customers. The tremendous reserves of gold in the United States seemed rather to have the effect of stagnating commerce than of assisting it. A principal reason for the slump as it affected the United States was, of course, the decline in exports owing to the impoverishment of those countries which in better times had provided a market. But the causes were domestic as well. Production of wheat, cotton and other primary products had exceeded the demand for a considerable time, with the consequence that great hoardings of these commodities reduced prices to an uneconomic level. The United States has been reduced to a paradoxical position. An enormous dormant reserve of gold and storehouses bursting with staple commodities exist side by side with industrial stagnation and an unemployment problem which has assumed staggering dimensions. The financial reactions to the depression have been extraordinary, very largely due to the susceptibility of all industrial shares to market manipulation, to panic and to frenzied bursts of optimism. The American stock market has recorded low levels for nearly all shares, and most investors have suffered heavy losses. The national finances are at a low ebb. The deficit in 1931 was 902,000,000 dollars, and in a recent message to Congress President Hoover predicted a deficit of 2,123,000,000 dollars for the present fiscal year, and indicated that a programme of taxation increases for two years was required to meet the' position. Early in the year the Commission on Law Observance and Enforcement made its long-awaited report, principal interest attaching to the commission’s findings in regard to the Eighteenth Amendment. It was cynically suggested that the members of the Commission wrote the main report to please the President, and their individual reports to express their real views. Certainly there was a wide discrepancy between the colourless main report and the reports of the various members of the commission. Of the eleven members only three recommended that a further effort should be made to enforce Prohibition with added vigour and more efficient machinery, while the report admitted the' difficulties, so far found insuperable, of enforcing a law which treats as a crime what a large proportion of the people refuse to regard as criminal. It is evident that every year in which the law is brought into contempt not only by organised “ racketeers ” and “ bootleggers ” but by ordinary citizens and their families, swells the body of opinion that regards repeal or revision of the amendment as desirable. In both New York and Chicago crime and corruption have been rampant, and the list of gang murders is almost daily increasing. The Chicago municipal elections brought about the downfall of the notorious “ Big Bill ” Thompson, while, rather to the public surprise, the Federal authorities obtained the conviction of an archgangster, A 1 Capone, upon charges of income tax evasion. Recent changes in the personnel of Congress have given the Democrats the barest of majorities in the House of Representatives.

From the commencement of the year the discontent in Spain, which had manifested itself repeatedly since the fall of Primo de Rivera as Dictator, grew steadily more ominous. General Berenguer, who succeeded de Rivera as the Monarchist leader, and installed a military dictatorship, angered the Republicans by his refusal to call a Constituent Assembly, and the failure of King Alfonso to insist on this step added to his personal unpopularity. When municipal elections were held in April the will of the people was emphatically demonstrated in a sweeping Republican victory, and Don Alfonso quietly departed from the country in order to prove, in his own words, that he was “more democratic

than many who call themselves democrats.” The revolution was comparatively bloodless, and the King deserves much of the credit for the peaceful atmosphere in which the change was effected. Had he remained longer in Madrid, civil war would probably have broken out. Spain entered upon its career as a republic with rejoicing, in almost a carnival mood, but difficulties in the establishment of the new regime have been great. Senor Zamora became provisional President, and under his guidance an Assembly was called which adopted a constitution for the republic. Strife between the State and Church became very bitter, and all attempts of the Church to convince the Government of its loyalty were unsuccessful. In October the National Assembly, by an overwhelming majority, moved to disestablish the Church, and then voted to expel the Jesuits and to prohibit education under Roman Catholic auspices, thus destroying practically the whole of the primary educational system in Spain. Senor Zamora resigned in protest, and Senor Azana, the Minister for War, became provisional President and Prime Minister, but the former was re-elected President in December. The country is passing through a period of intense political unrest, and the economic depression is adding to the difficulties in the way of readjustment following the fall of the dynasty which, with but brief interludes during last century, had ruled for hundreds of years.

A French political crisis occurred in January, when M. Steeg’s Government was defeated on a proposal to raise the price of wheat as a measure of relief to French growers. M. Briand was pressed to form a Cabinet, but preferred to give the task to M. Laval, retaining his traditional post as Foreign Minister. Contrary to custom, M. Laval has succeeded in winning the confidence of the Chamber, and as the year closes has survived some eleven months in office. He has, during that time, taken an alert part in international discussions. A visit was paid by him to Germany in defiance of French tradition, and he later went to the United States, where he held conversations with President Hoover on economic and pacific questions. The Presidential elections were held in May, when M. Doumergue, who had witnessed sixteen political crises during his term in office, retired. The result of the election created surprise as much by the defeat of M. Briand as by the victory of M. Doumer, a somewhat colourless politician with a long record of public service. M. Briand desired at once to be relieved of his Ministerial portfolios, but was eventually persuaded to retain an office which he had occupied with distinction for six years. It was pointed out that the defeat of great national figures at French Presidential elections was by no means uncommon. M. Clemenceau himself suffered a similar rebuff at the height of his fame. The economic depression has had its effect in engendering in the minds of some communities a dissatisfaction with their Governments, to which, possibly, the straitened circumstances of the people have unjustifiably been attributed. This, at least, is a permissible conclusion to draw from the number of uprisings, mostly abortive, that occurred in 1931. ' The South Americas, true to tradition, have passed the ball of revolt nimbly from State to State. Last year changes of government were brought about by revolutionary activity in Bolivia, Peru, Argentina, and Brazil. This year a revolt in Chile resulted in the flight of General Ibanez, who had been dictator for four years, Dr Esteban Montero succeeding him as President; the President of Ecuador, Dr Ayora, was expelled in August after a rising, and 'Dr Alfredo Banquerizo is now provisional President; Paraguay towards the close of the year celebrated its seventh revolution, as a consequence of which President Guggiari resigned, and was succeeded by Vice-President Navero. An insurrection in Cuba was unsuccessful. In April a revolt occurred in the Azores against the Portuguese dictatorship, but was suppressed, and in the same month an uprising was put down in Spanish Honduras after fairly severe fighting. Later in the year a revolt was attempted in Lisbon against the dictatorship, this being the twentieth so-called revolution in Portugal in the past quarter century. Dr Pfrimer was responsible for a revolt in Austria by the irregular military organisation known as the Heimwehr, but the Federal authorities received early news of the rising and had no difficulty in suppressing it. A general election was held in Rumania in 1931, which established Professor Jorga, previously the King’s tutor, at the head of the Government. King Carol, with the support of the Government, is now virtually a dictator, but the compromise between dictatorship and democracy is said to be somewhat precariously founded. Another monarch-dictator, King Alexander of Jugoslavia, made a show of restoring his country to constitutional government during the year, but it was cynically observed that the King took no chances —only the names of approved candidates appeared on the voting lists, and polling was not by secret ballot but orally. The President of Turkey, Kemal Pasha, who has apparently a predilection for a Parliamentary Opposition provided it is kept in its place, was not deterred by his failure to establish one last year, and in April elections were held which returned to the new Assembly a fair' sprinkling of candidates holding independent views. While the warlike Sino-Japanese dispute in Manchuria was focussing attention, on the East, President Chiang Kai-shek, of China, resigned as the result of pressure from student organisations. The students’ disapproval of the foreign policy of the National Government had been expressed at rowdy, often destructive, demonstrations throughout the country. Lin Sen, a veteran politician, was chosen to succeed Chiang, and the new Administration has announced that it will, in matters of foreign policy, jealously assert China’s rights. In addition to" economic crise t s and political unheavals the world in 1931

has not been spaced destructive visitations by the forces of Nature. Floods in China are of common occurrence, but in July and August of this year the Yangtse rose above its record level, established 60 years ago, inundating sixteen provinces and bringing destitution to some fifty million people. One early estimate placed the death roll at 300,000, but this was probably conservative. The calamity was said to have been largely due to neglect of the embankment system, the flood walls in many places being swept away. The task of organising relief was promptly undertaken; it was calculated that the millions of refugees would have to be supported for six months. The United States made arrangements to sell fifteen million bushels of surplus wheat to the Chinese Government for the relief of distress, payment to be made over an extended period. A hurricane and great wave caused terrible destruction in Belize, British Honduras, in September, more than 1000 deaths being reported. Serious disease hampered the efforts of relief parties. The town was virtually destroyed. New Zealand suffered the most serious seismic disturbance of the year, but loss of life and property was caused in Nicaragua and in Baluchistan by earthquake. The year was notable for the achievements in the modern —mechani-cal-means of adventure, and provided fresh proof of the invincibility of British workmanship and engineering ability. The Schneider trophy for seaplanes went to Great Britain permanently, the British entrant “ walking over” the Solent course the victor for the third year in succession; the foreign entrants on this occasion defaulted. After a Schneider trophy record speed had been established at 386 m.p.h., a new British seaplane, piloted by Flight-lieutenant Stainforth, established a fresh world air speed record for Great Britain of 408.8 m.p.h. This achievement reasserted British supremacy in speed, Sir Malcolm Campbell having earlier in the year created a new land record of 246 m.p.h., while Mr Kaye Don retains the motor boat speed record. Among many notable flights during the year may be mentioned the several reductions in the record for flights between England and Australia. The record established by Air-commodore Kingsford Smith was lowered on three occasions, and the famous airman’s attempt to regain it was frustrated by illness and a crash. Mr Butler now holds the record with an England-to-Australia flight accomplished in nine days 2 hours 29 minutes. Mr Bert Hinkler, the Australian aviator whose flights are as remarkable for their lack of ostentation as their infallibility, accomplished the first east to west flight across the South Atlantic. A record for an England to the Cape flight was made by Commander Glen Kidson in April, and, after his death, was lowered by an English girl, Peggy Salaman, accompanied by a navigator. A round-the-world flight was made by Harold Gatty, an Australian, and Wiley Post, an Oklahoma Indian, in spite of considerable difficulties experienced en route. Captain Hawks, an American airman, made, at his second attempt, a flight from Croydon to Rome and back in one day. Early in the year a young Australian, Mr Guy Menzies, accomplished the first Tasman crossing by. an airman flying solo, and Captain Chichester, a New Zealander, added to his laurels with a flight , from Auckland to Sydney via Norfolk Island. An interesting achievement, possessed of scientific importance, was the success of Professor Piccard, of Brussels University, in establishing a new balloon ascent record. Accompanied by an assistant, he left Augsberg in a hermetically-sealed , aluminium ball attached to a balloon, and descended 17 hours later on a glacier in the Tyrol, having in the interim reached a height of nearly ten miles.