Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE, WEDNESDAY, SEPT. 27, 1933 BRITISH INVESTMENT POLICY

Poverty Bay Herald, Volume LX, Issue 18204, 27 September 1933, Page 6

Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE, WEDNESDAY, SEPT. 27, 1933 BRITISH INVESTMENT POLICY

A good deal of perturbation, was. created in political circles at Home by a very definite pronouncement, made by the President of the Board

oi Trade, Air. Kunciman, 10 me lmonomic Commission of the World Conference. “We have in recent years,” be said, “devoted about £100,000,000 to public works schemes of relief. The result has been that, on the average, for every £1,000,000 expended wo have employed 2000 men directly and about. 2000 indirectly. From this you will observe Ihat this method of dealing with t,he problem is expensive. It. is not, an experiment which we. intend to repeat. We have terminated our scheme for dealing .with unemployment by way of capital expenditure works, arid we shall not reopen those schemes, no matter what, may be done elsewhere. We are, abandoning, this policy once arid for all and wc do riot fetd that we can usefully participate in any international scheme of a similar character.” The .statement, was directed primarily to a proposal made by the International Labor Office that facilities should be given for the issuing of international loans 1 o finance public works in Eastern, Europe, and so l'a, as it re-

fated 1o that project it must give satisfaction. England Ims been altogether too generous with its assistance to the foreigner to build up public services and utilities that eventually come more or less, directly or indirectly, into competition with her own. The losses sustained by British investors in 1932 by default on the securities of foreign Government and municipal securities was £14,457,000, made up as to £2,109,000 for Europe, £12,212,000 for Latin America, and £136,000 for China, so that it is quite understandable that there is a reluctance to extend further credits of this nature. In reply to a storm of criticism that was raised in the Commons Mr. Ramsay MacDonald made it clear that his Minister’s pronouncement was not to be taken literally as indicating that the Government would bo unresponsive to legitimate schemes of development within the United j Kingdom itself or within the Empire.J “As regards works here,” said the I

Primo Minister, “the policy of the , Government is in, no way altered. 1 They arc providing, or assisting to provide, finance for schemes of a re-j mu iterative or necessary character,l such as slum clearance. ’' At. the same time, he pointed out, during the . past ten years a very large amount, of j capital expenditure had been incurred ,on public works of all kinds with disappointing results, and the scope for J useful schemes was now comparative-: lv limited. “Ministers have always made it clear," comments the Times, “that the present Government would not countenance the readoption of the exploded theory that a vast expendi-j turo upon public works could have 1 any permanent effect', or on balance any favorable effect at all, upon unemployment. For example, they have pointed out that during the lifetime ( of the Labor Government schemes estimated to cost £200,000,000 were J approved, that the number of men employed thereby never at any time exceeded 114,000, and that the number of unemployed rose during the ( same period by 1,600,000. Nor can there be any doubt that the policy pursued during those years, which, after all, was only an intensification of tho policy pursued for many years previously, played a considerable part

J * * in bringing the country into the danger in which it stood in the autumn of 1931. ” The Daily Telo-' graph pointed out that of the £200,000,000 authorised for 17,040 schemes of public works, £172,000,000 will be met out of loans by local authorities repayable, over periods of from 20 to 30 years. The Exchequer liability of £28,000,000 will not bo discharged till 1963-4. Yet for every million' pounds expended no more than 2000 men are employed and another 2000 indirectly. ‘‘lt is the most unremunerative way of dealing wiTh unemployment,” the paper declares, ‘‘and it makes no real impression upon it. Mr. Chamberlain has said that it would be criminal folly to pursue such a policy. It would be Still more criminal to the British taxpayer to have anything to do with the new fantastic idea of ‘international public works/ especially if Great Britain were cast in her original role Of the largest contributor.” The objective of the International Labor Office's proposal was that the institution of great public works should constitute a “solGstarter” for international trade, but the general opinion 1 is that the British Government would ! , , ..... „t.

be foolish to put money into it, nl- ■ though the Economist; 1 takes the exceptional view that ‘‘the inception of it well-considered programme of j public works as a stimulus to recovery would be a tangible proof of the sin- ! eerily of Britain’s expansionist professors.” The controversy lias served j to bring home to the British invest* ' ing public the conviction that it is eminently desirable as a busines proJ position that British capital should henceforth be devoted to the development of the vast Imperial estate, rather than to tho betterment of foreign countries. Britain, has huge sums to invest, and tho comfort and contentment of her people rests very largely upon the manner in which those investments are placed, It is

I estimated that. the nominal amount, of British capital overseas in 1031 was £3,700 millions, yielding £109,- , 000,000 of income on the basis of an average yield of 4.50 per cent. London ceased lending abroad after midyear, 1932, when the British Government placed restrictions upon the export of capital, this step being taken to ensure the success of the huge internal conversion loan .then undertaken. The restrictions continued throughout the balance of the year and into 1933, eliminating new foreign investment as a factor in British finance. Restrictions still operate but with some modification in later months to the extent of allowing British Dominion borrowers entry into the London market. Both Canada and Australia have taken advantage of this privilege for their conversion loans and there is no doubt that New Zealand would receive a like favorable reception when the time conies to seek an abatement of its present heavy interest commitments. Money for legitimate developmental purposes will also be supplied. The curtailment of foreign investments has left large sums available, and any Dominion that can show genuine prospects of

remunerative return for the capital required for any particular public works will not have to wait long for a, sympathetic response. The Home investors are not unmindful of the fact that' whilst the losses on. foreign investments have been tremendous, no British Dominion or colony lias yet defaulted.