WAR ECONOMICS

Southland Times, Issue 23675, 25 November 1938, Page 3

WAR ECONOMICS

WORKABLE SYSTEM IN JAPAN PROBLEM OF CONTROL The German and Italian economic systems have been on a semi-war basis for some time. Great Britairr and other democracies are following very slowly in fitting their rearmament programmes into their general economic life, writes Professor D. B. Copland in The Sydney Morning Herald. . Japan was on much the same basis as Germany and Italy for some years before 1936, but in the last two years she has been waging a war on a very substantial scale. Up to _ the present she has been successful in establishing a workable war economy,_ and in demonstrating that modern nations can go an important step beyond Napoleon) who hade conscription a powerful offensive weapon. They can now place the whole nation under discipline, and divert men and resources into the work essential for prosecuting the war and for maintaining the civil population. This is the real cost of war, and a country’s capacity to carry on a war depends upon the efficiency of the men, the nature of its resources, the organization of men and resources, and the willingness of the people to accept rigid discipline and forgo some of their customary standard of consumption during the war. A war is fought by weapons produced, at the moment and bandied by men who consume food and wear clothes produced at the moment. This is the I burden that has to be met. Posterity pays only in so far as man I power is impaired by war, the coun- I try’s economic resources diverted into | unproductive channels and the country ! has incurred a heavy internal debt. In the absence of the external debt, the burden on posterity is comparatively light compared with the burden on the people at the time. OUTPUT AND FINANCES Some indication of this may be seen in the fall in the output of consumers’ goods in Japan, the index of which 1 declined from 137 in April 1937, to 120 in May 1938. At the time producers’ | goods which, paradoxically, include heavy armaments, rose from 194 to 221. These figures may under-estimate the change over from consumption to production goods. Even so, the drop in the output of consumers’ goods is not as great as might have been expected. Tlie effects on Government finance are inevitably disturbing. The following table gives the relevant information in summary form: — , 1,900,000 yen 1931- 1937- 193832 38 39 Government expenditure 1,477 5,463 8.400 Amount borrowed 120 3,393 5,800 War expenditure: Percentage of total 31 73 81 Figures for 1938-39 are Budget estimates. The Government debt had risen from 4,525 m. yen in 1931 to 12,422 m. yen in 1938. As prices are rising in Japan comparisons in money values from year to year are misleading. Wholesale prices rose by 30 per cent, from July 1937 to July 1938, and the cost of living as a whole was up by 16 per cent., but food ; rose only 6 per cent., and fuel and light rose 24 per cent., and clothing 31 per cent. These figures are not yet startling, but the budgetary position and the large sums that must be raised by : loan contain quite strong elements of ' danger.

The note issue, for instance, increased by 25 per cent, from August 1937, to August 1938, and bank deposits rose by 20 per cent. This suggests a recourse to the inflationary method of war finance by credit expansion so common in the last war. It is . really a device of democracy, which is less able than the totalitarian State to impose rigid discipline on the people. Perhaps Japan’s tendency to indulge in a moderate inflation (moderate now, but doubtless destined to increase if the war goes on) is some evidence that she has not yet completely absorbed the totalitarian gospel in spite of the Rome-Berlin-Tokyo bloc.. Any vigorous development of inflation would inevitably impair her capacity to prosecute a war just as effectively as a shortage of guns, though not as quickly. EFFECT ON TRADE The effects upon foreign trade are not less serious than the effects on the budget. The following table compares imports and exports for the first half of the last three years: — 1,000,000 yen Unfavourable

In the second half of the year the balance is normally ’favourable. This table shows that the authorities have been able to control imports and reduce the unfavourable balance. Drastic control is exercised over the use of foreign exchange for any purpose but military effort. This control includes the. prohibition of some imports and the limitation of others, and the regulation of expenditure from the foreign assets of companies. ...LX It is through exchange control that rigid regulation of an economic system is usually built up. As Japan finds herself more absorbed in war her capacity to export will fall, and her reserves of raw materials will be exhausted. The necessity for regulation will become more and more pressing, and the effective prosecution of the war will depend to a considerable extent upon the discipline that can be imposed upon industrial and business leaders as well as upon the people. It would be a great error to assume that the capacity of Japan to continue the war will be gravely impaired by failure to develop the proper controls of a war economy, but there are enough difficulties ahead to encourage the authorities to take up a less bellicose attitude to their international responsibilities than they did two years ago. THE WOOL MARKET NEW ZEALAND CROSSBREDS SELL WELL AT LONDON SALES (Received November 24, 6.30 p.m.) LONDON, November 23. At the wool sales 8630 bales were offered, including 3985 from New Zealand, and 7758 were sold. There was a good selection, with active competition, rates being generally maintained. New Zealand crossbreds were well taken by the Home trade and there was good Continental bidding for Merinos. Quotations: New Zealand greasy halfbred, “Howard,” average 9£d, top price 13Ad; scoured Merino, “Oxford,” 16d. TURNOVER OF MILLION SHARES (Received November 24, 6.30 p.m.) NEW YORK, November 23. The day’s turnover on the Stock Exchange was 1.000.000 shares.

MINING CENTRAL SHOTOVER (United Press Association) DUNEDIN, November 24. The Central Shotover return is reported to be 28oz 12dwt. \ MOSSY CREEK , (United Press Association) GREYMOUTH, November 24. The Mossy Creek dredge return was 17oz 15dwt for 8800 yards of material and 126 hours. STOCK MARKETS DULL AND IDLE (Received November 24, 6.30 p.m.) LONDON, November 23. International uncertainties caused a continuance of the movement of funds to New York. Bidding for dollars was undiminished and the exchange account eventually intervened and partly reversed the earlier fall in sterling. The stock markets were dull and idle. SYDNEY PRODUCE MARKETS (Received November 24, 9.25 p.m.) SYDNEY, November 24. The wheat market is dull but remains well above the export parity. Quotations: , , , Wheat.—Silo grain, 2/6J a bushel; bagged, 2/8. Flour.—£7 10/- a ton. Bran and Pollard. —£5 a ton. Potatoes.—Tasmanian, £l3 a ton; others, £7 to £ll. Onions.—Brown, £l5 a ton; white, £l3 Maize.—Yellow, 4/8 a bushel; white, 4/6.

First half of Imports Exports balance 1936 1,378 1,263 315 1937 2,238 1,598 640 1938 1,479 1,284 195