CRISIS IN EUROPE

Taranaki Daily News, 4 June 1935, Page 7

CRISIS IN EUROPE

ARMAMENTS AND CURRENCY. I■ _ _ WHOLE POSITION OBSCURE. The European situation is not merely a drama of which we in America are the interested but detached spectators. It is already having an important effect and it may at any time touch the vital interests of America, writes Walter Lippmann in the Daily Telegraph. Although the whole position , is obscure, complicated; and explosive, it is not too early to begin to define the issues as they affect American interests. I realise that any such attempt is likely to give an over-simplified picture. Yet in examining any problem, if one is to think about it at all, there must be a working hypothesis, however tentative. There are, it seems to me, two concurrent but inter-related crises, in Europe to-day which can be identified roughly as the crisis of deflation and the crisis of militarism. They accentuate each other in more ways than it is possible to describe. For present purposes .it will be sufficient to note that the latest figures show that in December world trade was in value at its low point for the whole depression. The effect of this is to intensify the competition among nations for their share of a shrinking volume of trade, and to intensify the competition of classes within the nations for their share Of a greatly reduced national income. HOME MARKETS DEVELOPED. In some measure njost of the great Powers have succeeded by developing their home markets . and by expenditure on public works and armaments in finding some compensation for the world trade they have lost. But in all nations this is wholly inadequate. In all nations, therefore, the internal pressure which threatens radical reform or revolution and the external pressure which threatens war have been increasing. Among three great Powers where the pressure is most severe, in Japan, and Italy, and Germany, it has already produced the Manchurian adventure, the Abyssinian adventure, and the Nazi rearmament with its guns pointed towards Eastern Europe. It may be said, I think, that America is affected at the following points: First, since we are attached to an international gold price , level, the world deflation now in progress and the greater one which is threatened must tend to deflate us. Second, the crisis of militarism in Europe may produce a war in which neutrality will be as difficult as it was in the last war* unless the

States is far better prepared .to preserve it than it was in 1917. Third, the rearmament of Germany means that Russia and Great Britain must now concentrate all their energies in Europe, and therefore, as respects Japan, we in America are alone. . ' These would appear to be the three most- . immediately important consequences of the crisis as it affects the United States. They call for the formulation of three major policies dealing with international monetary matters with preparation for neutrality, and with Japanese-American relations. A monetary policy which would produce stabilisation and thus end the deflation is a matter of reaching an understanding with Great Britain. The strength of the British position in rejecting stabilisation at this time rests upon the size and power of the sterling bloc, the experience of London in international finance, ahd the political dependence of France upon Britain owing to the menace of Germany. The weakness of the American position lies in the fact that, though we have great assets, they are at the moment politically unrealisable.

But if Congress would consent we could offer Great Britain and France enormous advantages in return for a currency agreement. We have a stabilisation fund which could be used -in co-operation with the British fund to support and maintain the agreement.,We could settle the war debts. By settling, the war debts, the embargo on the American capital market would be lifted, - and in certain eventualities that might prove to be a matter of life and death to, Britain and France. From our point of view and from theirs, it is costly ,and . dangerpus to let the world deflation continue. From our point of view it would be . absurd to let* deflation continue in order- -to- collect debts that cannot be collected as they stand. From their point of view it is lunacy not to make a substantial investment by paying a respectable sum tc lift the financial’ blockade; A neutrality policy has two main requirements. One is' to possess sufficient military strength to make, it-impossible for belligerents to ignore the. neutral. The other is to recognise clearly -the difficulties of neutrality, to have, appropriate legislation enacted, or at least drafted, to have plans? drawn carefully for all developments that can be foreseen. * . ..'..V RELATIONS WITH JAPAN. Experience has shown that the maintenance of neutrality is not a mere matter of doing nothing. American commerce and American citizens range the world, and their • interests would be threatened in all the zones of war. A successful neutrality policy requires clear decisions as to which of these many interests are to be defended and by what means. As to Japanese-American relations, it is necessary to be frank as well as firm. To be firm, is to stand on the proposition that the American Navy must he superior to the Japanese in the ratio of five to three. The Japanese face one ocean. We face two oceans, and in a heavily-armed world that does not give us the power to attack. Japan in .he Sphere of her influence, even if we had any such purpose. To be frahk is to recognise that the weakness of China and the enforced withdrawal of Russia and Great Britain from an active position in China and Eastern Asia makes it impossible for us to assume the burdtaof solitary opposition to Japanese imperialism in the Asiatic mainland. Our traditional policy has been’ based upon the idea of collective action in the Far East. There is no prospect of collective action in the Far East to-day and we have th. adapt our policy to the altered facts. It may not be inappropriate to suggest that a successful American policy requires something like unified patriotic support from the people. - Let US forgo the excitement of tearing ourselves to pieces over internal quarrels, which can only waste energies and brain power that we must have if we are to do justice to the American interest at this; fateful hour, . ■ ■,