Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE, THURSDAY, DEC. 13, 1934. INTERNATIONAL DEBTS

Poverty Bay Herald, Volume LXI, Issue 18579, 13 December 1934, Page 4

Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE, THURSDAY, DEC. 13, 1934. INTERNATIONAL DEBTS

The falling due at the end of this week of another instalment of war debt payments—a point that has almost escaped notice in the welter of more pressing international affairs serves as a reminder that this vexed question has not vet been finally settled, although.there, are indications that thd policy of all-round procrastination that has been adopted will eventually resolve itself into a solution. In some respects il might be suggested that an actual settlement could not be more effective than the present position, but, on the other hand, there is no doubt that there would be enormous psychological gains from an intimation that a definite decision had been reached by the United States, with whom the initiative must lie. In the meantime, the nations concerned are in the position of being under suspended judgment, a state of affairs which does not tend to promote confidence or encourage initiative. It is now four years since full instalments of the debt, were paid. The Hoover moratorium applied to the payments that became dues in June, 1931, and subsequent to that date receipts by America became progressively smaller until finally practically every debtor had defaulted. Officially, of course, the liability is still recognised, but unofficially there is a belief that payments will never be resumed, at least on anything like the old basis. The change of opinion is nowhere -moie apparent than in America itself. Trained and enlightened observers in that country have repeatedly declared that an arrangement which has the effect of restricting normal trading activities must come to an end. The most recent, and, perhaps, most authoritative assertion to this effect was that of the commission set up by President Roosevelt to advise upon the policy of the United States in regard to its international economic relations. One of the commission’s most important recommendations was “the establishment of a commission to settle war debts.” This proposal, made in conjunction with others advocating a reduction in American tariffs and the stabilisation of the price of gold, is indicative of the growing appreciation of the imperative need for lessening the barriers to international trade, of which debts are the most important, and, at the same time, the most complicated. There arc, as is usual, two sides to the question—two extremes between which it is necessary to try to find an acceptable milium. The point of view of the average American in regard to war debts is not difficult to understand. His country is struggling with a depression that is without parallel in its history; yet enormous sums of money are owed to it by nations which refuse to pay. Inability to pay is pleaded as an excuse for the disregard of contractual rights, but against this the American sees Britain with a large Budget surplus, with widespread evidences of industiial recovery; and he sees debtors generally spending enormous sums on armaments. While his own taxation and internal debt are continuously piling up, ho has the mortification of seeing other countries apparently steadily improving their financial position. On the part of the debtors, it is contended, not only that there is inability to pay, but also that much of the difficulty has been created by the action of America herself, firstly, by lending indiscriminately for unproductive purposes; secondly, bv suddenly curtailing new loans and thus forcing down prices; and, thirdly, by the imposition of tariffs which made it impossible for debts to be paid in goods and services, the only practical way in which they can, be paid. Which viewpoint is* the more logical? It is admitted that large sums of money are owing to the apparently impoverished United States, but payment of the debt would not necessarily reduce that poverty. Supposing that the debt could be entirely liquidated by the shipment of gold to America. In what way could the individual benefit, unless some means could be devised for putting the new wealth into circulation? It could only be distributed in return for goods or services, and the demand for these would inevitably be reduced in proportion to the exodus of capital from other countries. Were it possible for the debtor to pay in goods the result would be different. If America accepted goods from Britain, for example, their value would bo distributed amongst British industries, there would bo some prospect of Britain importing goods from America, whose workers, in turn, would reap i he benefit. If a large exchange of trade were created it is possible that there would develop a balance that would serve to meet the war debt liability, but in no other way can this liability be liquidated. The United States, however, by reason of her tariffs, refuses to accept the goods of other countries, but, at the same time, expects payment of the debts due to her. She cannot have it both ways because one policy nullifies the other. The payment of debts, after all, is

only a matter of being able to buy and sell, and buying, perhaps, is more important than most people,' realise. If a retailer has his supplies cut off, for example, his chances of meeting his debts are reduced. It is all a question of trade activity. Germany to-day is restricted in her purchases of foreign raw materials; but it is a moot point whether her loss is greater than that of those who desire to sell to licv. She is, at least, keeping her money circulating in her own country, and her erstwhile suppliers are not only losing current trade, but are also jeopardising their prospects of collecting old debts. As it would be with even the small retailer, as it is with Germany, so it is, on a Largo scale, with America. Her whole attitude of recent years has had the effect of hampering world trade, firstly by her insistent demands for the payment of war debts, with a consequent withdrawal of gold from circulation, and, secondly, by her restriction ot trade with other countries. Any country which, by any means, restricts the trade of others, must also restrict her own, since she is curtailing, and probably killing, the markets on which she has come to rely. Primarily, she drives trade into other channels, and when these, too, become closed, there develops that economic nationalism from which the world is suffering to-day, and which already has cut world trade in half. 'I he United States is not the only offender, hut she is in a wonderful position to give a lead to the rest of the world by adopting the recommendations' of the recent commission and settling war debts once and for all and reducing her tariff barriers to a level that will make a resumption of trade possible.