TO AVOID CAUSE

Timaru Herald, Volume CLIII, Issue 22474, 8 January 1943, Page 2

TO AVOID CAUSE

Post-War Problems

Economic Machine Available

A new system of international finance on the model of the Federal Reserve System in the United States, in order to prevent world-wide financial chaos after the war similar to that which followed the last war. is urged by the U.S. Assistant Secretary of State, Mr A. A. Merle, jr. In such a plan, he said, there were a possible use for America's vast gold hoard.

Speaking at the annual meeting of the Alabama Chamber of Commerce, he said that his call for American leadership in such international cooperation was based on a realistic foreign policy which believed that the welfare of the United States depended on the welfare of other nations. With new aeroplane designs already on the drafting boards which might make several hundred Pearl Harbours possible all over the United States in some future war, self-preservation required America to establish a new world order in which a new war could not start, he said. “For purposes of defence.” he asserted, “we have erected an economic machine for war supply capable of developing the entire world. In the light of this experience, it should not be too difficult to create institutions capable of handling the finance of transition and turning the processes of reconstruction into permanent processes. of international trade.” Vision of Limitless Power Asserting that the first World War taught that military victory depended on united action, he continued: “The last two decades have shown us that united action is not less essential if victory is to mean peace. The second World War has given us a vision of limitless economic power achieved by co-operation. We must not again lightly throw away that power in the moment of triumph, when arms are grounded and we embark on the task of healing the world.” Business and financial men. he suggested. should “begin to do some thinking as to how the methods which have proved successful within the United States may be applied so that the trade and commerce necessary for the health and peace of the world may be kept going.” Saying the task was “not impossible.” he went on: “We have the resources. If it is desired to use gold as a financial base, as many people do. we have at our command by far the greatest share of the world’s gold. What is more important, we have the production and the goods available to back up our finance. We shall be in a position to make and deliver almost anything which is required to give to our neighbour countries a new start in international economic life. At the very time this is most needed, we shall want to keep our plants busy, our people employed, ana to provide jobs for the returning soldiers. Machine Already Built Up “A good many observers, both practical bankers and students, have been advancing the idea that we could profitably extend some of the principles of reserve banking to the international field. Certainly experience suggests that this is a logical line of development.” He said that the international machine already built up by the United Nations for war purposes, the adaptation of which he urged for his proposed post-war system, was so “truly international” and so effective that it had probably saved the United Nations from losing the war long ago. Without it, he said, the United Nations would have been defeated one by one for lack of munitions, food, and other supplies. “During the war,” he went on, “this is the machinery that must support the economic life of all the United Nations, including ourselves. Sometimes we have been criticised because the huge machine did not get into action more rapidly. Much of this criticism is sound and useful. But it must be remembered that all this huge design of wartime life has been built within a period of nine months. It will increase in effectiveness until the war is over. “When victory comes, as come it will, this vast machinery will be the way by which the civilian population of most of the world gets its supplies. The organisation will be there and standing; it will have under its direct charge the resource of most of the world.” He said that there would be the problem, after the peace was won, of keeping and holding that peace through an extremely difficult period. “A Hungry World” “You cannot expect order in a hungry world, and the world will be very hungry indeed,” he added. “The machinery which has been built up to supply us during wartime will have to be used, in large measure, to keep us supplied until the commerce of peace can be re-established. “There will be no other way. Until new arrangements can be made to reopen the flow of trade and commerce, to repair the wrecked plants, and replace the broken machines, we shall have to rely for a time on the war supplies, while we are working to reestablish the business of peace. “The technique of that period of transition must be planned and thought out soon, for this time we cannot risk the breaking of all ranks which took place in 1918 when Germany collapsed. Then the Allied machinery stopped at once.” He said that the trade routes and markets of the world would have to be reopened so that nations could get into production and put their resources to work as rapidly as possible. “This rule goes for everyone, including America.” he added. "No country can expect to cut itself off , from general commerce without harming its neighbours a great deal and itself most of all."