THE EUROPEAN SITUATION

Otago Witness, Issue 3522, 13 September 1921, Page 23

THE EUROPEAN SITUATION

AN EXPOSITION BY PROFESSOR PRINGLE. PERPLEXING ECONOMIC TANGLES. INFLATED CREDIT AND GERMAN REPARATIONS. The first of a series of three lectures to be delivered by Professor W. Henderson Pringle, under rhe auspices of the Workers’ Educational Association, was given in the Allen Hall on Saturday evening. The professor’s subject was “ Some Aspects of the Economic Reconstruction of Europe.” Air J. T. Paul, in the absence of Air J. C. Stephens, president of the local branch of the W.E.A., occupied the chair, and introduced the lecturer. The audience was largely confined to members of tlie W.E.A. classes, the lectures not having been publicly advertised. Professor Pringle, in liis opening remarks, spoke of the splendid opportunities presented in New Zealand for the development of the IV.E.A. He called special attention to two words in the title of his address, “Economic” and “European.” He did not propose to speak that evening of tho. political aspects of reconstruction, though he did not consider these any k-.-s important than tho economic. Neither eii t! ho propose to speak of the general economic aspects of reconstruction. There was no doubt that Europe did not. occupy the same economic position that she did ICO years ago. The centre was generally shifting to America and to the Pacific snores, but nevertheless the world’s economic centre for many years to come must remain in Europe. America, for geographical and other fundamental reasons, must tend to be rather a great .Atlantic than a great Pacific Power. The lecturer opened up his subject with two quotations from economic authorities analysing the present situation of Europe. One of these diagnosed the root of the trouble as the unwillingness of everyone to place tlie common welfare in front of particular interests.” The fact was that the present problems of Europe could only be solved if rhe people acquired A NEW MORAL POINT OF VIEW 7 . Among the great difficulties of Europe were rhe tremendous! shortage of essential commodities —particularly of foodstuffs in Central Europe—and the great shock that the whole credit system had received. .1 lie loss of life, deplorable as ir was from the human point of view, was not of such outstanding importance from ihe economic point- of view. The great problem was the recovery of the credit system of Europe, and the discovery of ways and means of securing sufficient capital to sot- the industries of Europe going again. He proceeded to discuss two questions—credit inflation and the German and Austrian indemnities. In the first place CREDIT INFLATION had caused a phenomenal rise in prices. Gold had disappeared and the values of goods were being measured in terms of paper currencies which were being constantly swollen by fresh issues. They must clearly distinguish between two aspects of credit. Credit was first of all simply confidence, trust, goodwill, faith in iho security of the established order of things, 'i lie great discovery of the modern world was that by using credit and goodwill file whole machinery of industry could be greatly improved and expanded. It enabled us to have more of the luxuries and conveniences of life. But. secondly, to achieve this result credit must he embodied in material form. Hence we had the whole system of modern credit, ihe three chief instruments of which were the banknote, bills of exchange, and cheques, and. thirdly, telegraphic ti.m-fer. Now the whole modern .-y. 'em of cvßit had been builr upon reserves of gold. During tho war it. received an unprecedented shock. T here were three ways in which Governments could carry on war—-by taxation, by loans out of savings, and by in fla lion of credit. AH Governments made tlie fundamental mistake of imposing insufficient taxation at the beginning of the war. Secondly, none of the nations sa\ed enough in order to meet tiie Great War. The result was that Governments had to fall back on the third method of currency inflationThey went to the banks and got big overdrafts to pay for munitions, clothing, and food for the forces. T his money percolated gradually through tlie whole industrial system. The Governments of all belligerents increased the volume of pa-per money in currency all over tho world. In the report of the Brussels Financial Conference last September it was shown that there was no sin gle State in which the volume of currency had been increased by less than 100 per cent. In Great Britain it had been increased by no Jess than 250 per cent. The currency in Germany had been increased by 800 per cent, and tho currency of Rn-. mania by as much as 1167 per cent. This inevitably brought an enormous rise of prices, a fall in the value of European currencies as compared with America, and the practical disappearance of gold from the currencies of the world. All Governments were LOTH TO FACE THE SITUATION so created, partly because it was a very difficult one and partly because all Governments were unwilling to reduce the governmental expenses which were at the bottom of all this Inflation. There was, of course, a minimum of expenditure beyond which a Government might not go, but equally on the other hand there were expenditures which should be abandoned. Under that heading they could assign, he thought, without fear of challenge, expenditure on military and naval equipment and services. The amount the Allies were spending to-day on these was far beyond the necessities of the case; and, incidentally, from tho point of view of the Allied Lowers one enormous advantage had been by the Treaty of Versailles given to Germany. Germany had been disarmed. In other words, Germany for the next 40 years under the Treaty of Versailles would not be allowed to spend any considerable sum on military or naval equipment. bo Germany would have at her "disposal a fund of capital and wealth which would make her a much more offerlive competitor in tho world’s markets than she could otherwise have been. Beside THE WASTE ON ARMAMENTS, there were many other sources of Governmental expenditure that might, well be curtailed. Until it was so curtailed there was lio hope of credit being seriously deflated again. Governments had been doing something in this direction. One of the most

important echemes which was on the point of being put into operation by the Financial Commission of the League of Nations was that of supplying credit- to Austria. The difficulties ot Austria had been very great. It had been impossible for her to buy the food and raw material she required, and the result had been the starvation and death of hundreds and thousands of people. A scheme was proposed by a Dutch banker to the Financial Commission of the League of Nations which gave some prospect of enabling Austria to secure the food and raw material which she required. Curiously enough, the scheme was much like that adopted by the founders of tho Batik of Amsterdam in the reign of Queen Elizabeth 'J lie. scheme Lad been adopted bv all the States of Western Europe, and if America gave her consent one might hope that iLo industrial and commercial system of Austria would soon be established again. Every nation liacl already strained its own credit to the utmost. At every point of the productive system of the modern world credit was absolutely essential, and unless 1 bore were supplies of credit available for nations that could not buy without credit we might be faced with collapse. The nroblem of Europe was file adequate distribution of its credit resources. The credit of Eastern and ( entral Europe went to the heart oF. the problem. Unless industry was re-established ir was useless to talk of raising tne stain.: id of life of European peoples. Ihe problem of European reconstruction was also bound up with the problem of THE GERMAN INDEMNITY and the cancellation of war debts. Britain stood as a buffer between Europe and America. Her position was very much sounder than that of any other European nation. Europe was troubled by tlie sense of insecurity of France, arc! taint tv,uld have been reduced by Britain and America coming to an understanding before the Treaty of \ ersailles. He had it < n good authority that President Wilson did come to t hn’tj conference prepared t.o cancel the war debts of America to the belligerent Powers, but he, was battled by the fact that some of the Allies proposed that the debts of the Allies should be pooled and borne according to population and wealth. That would have placed a larger amount on the United States than, in Ins judgment, she could reasonably have boon expected to bear. Anyhow, the fortunate moment was lost. Ihe amount of imlemniiy was not fixed at tne \ ev-aiiies Uonfereuoe fur iho reason, in the first place, that certain British statesmen had given tlie elector- , xagir,‘rated ideas of what oould be obtained fit m Gera-; M" Horatio Botfnrnb'.v. they had taken the vi. \v that Germanv mi 1 , t !.o made to bear the total ec-t cf t‘,e war. Tlie SITUATION lIAD BEEN ''LEAKED UP in the last few months and the amount hxed by tlie Reparation- Commission. Germany was 1o i«.sue bonds lo the ex.cut of £6,750,000,000 and provide funds for tho liquidation of ihe bonds. Next year sho would have- to pay £100,000.000 and 26 per cent, of the total value of the year's exportl3. This rose steadily till in 1951 it reached the maximum of £200,000,000. plus 25 per cent, of the exports of Germany. It was a great maticr to have the amount fixed, but we had not only to look at the immediate sums payable, but at ’ THE EFFECTS OF THE PAYMENTS on Ihe economic sy.-iem. Two questions arose: Gould Germany pay it? and hew would she pay it 'without raising mere problems than she solved? Imports had to pay for exports, and to pay these sums Germany must develop a veiy. large export Hade in ox»vss of her imports. She must receive foods and raw materials from overseas for hei i.udu ■ ies, and she i list } -ay for iliOse and for tho sums mentioned. Germany could pay only by a combination of four method* by im iteriai exports, by increasing th< v< 1 imo of securities placed on the international maikef hut this way was scareely upon, as sin- t d got rid of mo<t of thr-e securities during the war; --- thirdly, she might develop her shipping; or. fourthly, her banking. It was practi- ; rally impossible for her t< pay by shipping, i nor could she pay any considerable proportion < the £4OQ.CCC. GO by h r banking services. The only wav left was by the sale of goods, and by tins she would bo brought into verv* arrive and o .en fierce competition with cur iiidnsti h It was evic eufc that the economic, problem* of Europe had by no means l orn solved by the Treaty of Versailles. These problems c mid not fully be solved in existing conditio; There was still the war mmpev in .11 countries, though, fortunately, it. had abated more in the last three months ihan in any other period since tlie Armistice. —(Applause.) At the close of the address a number of questions wen, subsequently asked, in answering which Professor Pringle Said that the gold had gone to the l lilted States, which was now suffering from too much gold. One of the root causes of unemployment was tho scarcity of credit. If all classes would produce there would be no serious danger ol unemployment. It was the easiest thing in the world to shatter confidence and the most difficult thing to restore it. Broadly, he thought that tiie reduction in wages at Home was no more than in proportion to the fall in the cost of living. He thought there was a danger of a young country like this trying to develop secondary industries too rapidly. It was announced that the lectures to be, given on the next two Saturday evenings were to be on “Suggested Alternativfte to the Wage System” and “Ihe Worker-’ Educational Association Movement in England.’’