BRITAIN WAITS

Taranaki Daily News, 15 January 1931, Page 9

BRITAIN WAITS

POLITICAL POSITION.

RATIONALISATION DELAYED.

Just ( when it seemed that the monetary feather was set fair, at least over the turn of the year, the London market was upset by the news that £3,000,000 in gold had been engaged for shipment from the Bank of England to Paris, and a few days later the amount was increased to £5,000,000, writes Hartley Withers in the Christian Science Monitor. 1

Since the Bank of France already has an enormous holding of gold—over £400,000,000, as compared with £160,000,000 in the vaults of the Bank of England—and has been adding to it x steadily for years, this movement looks unnecessary in the., light of all the good advice that has been given to central banks by Geneva Conferences and other advisers concerning' the need for economising gold by co-operation. It was explained by the development of banking trouble in France on a small scale, which made the French banks anxious to strengthen their position. Owing to the antiquated arrangements of the French money market they cannot do so by obtaining credit from the Bank of 1 France by borrowing and rediscounting, x as would be done in New York and London, but have to turn part of their . foreign balances into gold and then turn it into notes at the Bank of France. The whole affair is an example of inexpert handling of the ‘international gold stock. At the same time London cannot be acquitted of making rather an unnecessary fuss about this threatened gold loss. Even if it takes place —and the arrangement may be countermanded if the French banking trouble blows over —the Bank of England’s gold stock will still be very much more than ample according to British notions, which do'not-' take a huge stock of idle metal as a sign of strength. "But this little bombshell from Pans fell at a time when financial nerves were already strained by political uncertainties. Cheap money had been lifting the prices of Government securities and. raising hopes in: some quarters of possible conversion operations, by which the burden of the national debt charge might be reduced and taxation lightened. But now the Government, which many consider to be already spending more than the country can afford, brings in a Bill to extend the period of compulsory education by a year, raising the school-leaving age from 14 to 15, and to provide for maintenance grants to the parents who will thus be deprived of their children’s earning power. Most people admit that more education is desirable for the; children of manual workers and a strong case can be made out for .the maintenance grant. But at a time when British industry. is engaged in strong competition , with foreign rivals, who are much less heavily taxed, the proposed addition of some £9,000,000 ±o the “social services” expenditure —which is far heavier here than on" the Continent —has fiaturally aroused a good deal of criticism. Recent by-elections,.for what they are worth, might indicate that the Government has disappointed its supporters by its failure to cure unemployment, and that the swing of British opinion toward Protection is a definite fact. The rest of the world has had plenty of warning that, if tariffs are continually raised against British goods, England’s free market will be closed in self-defence, and. the political omens now indicate that this is going to happen, in spite of the Government’s refusal, at the Impenat Conference, to entertain any proposal of Imperial preference involving a tariff on foreign goods. In the meantime rumours of dissensions in the Cabinet on this subject have been rife though stoutly deWith change of Government and fiscal policy thus one of the obvious, possibilities, the incentive to British industries to set about the necessary task of reconstruction is seriously weakened. Th* dead wood that needs cutting away, but does not want to be cut away, is more than ever obdurate in its resistance to schemes or rationalisation, hoping that a tariff wall may, by affording protection to inefficiency, give it a fresh lease of life. Nevertheless the need for reconditioning is gradually being more forcibly recognised, though it is significant that most progress in this direction is being made in industries which no tariff wall would help. • The Lancashire , cotton trade,-which is .hardly affected by foreign competition in the home market, and the shipbuilding industry, which is in the same 'position,' are both busy on schemes of reconstruction and amalgamation, by which overheadscharges will be reduced." and the necessary re-equip-ment on modern lines carried out. Other favourable features in the position ate" the decision -of Australia to carry out' the programme of financial reform that has been forced on her by inability to borrow and the low prices fetched in the markets of the world by her staple commodities, wool and wheat; and a slight recovery in the prices of cotton, tin, copper, rubber and other materials. The catastrophic fall in the general level of commodity prices is at once a cause and a result of the present world-wide depression, and until this fall is definitely stayed there can be no nope of real recovery in world trade, on which British prosperity is so closely depenaBv a curious paradox, cheapness and plenty bring world-wide depression with them, and the critics of our present economic system are fully claiming that such a state of things s hio-hly discreditable. Somehow, ve have to restore confidence and the free flow of international capital, so that tne goods which are waiting to be sold may find a freer market. As long as international bitternesses hinder the exchange of goods and keep alive the few of war, this restoration of confidence is impeded.