ROAD TO RECOVERY

Wanganui Chronicle, Volume 79, Issue 58, 11 March 1935, Page 5

ROAD TO RECOVERY

BRITAIN AND’AMERICA THEIR DIFFERENT ROLTTES LOSS OF FOREIGN TRADE. The recent radio address of .President Roosevelt and the speech of Neville Chamberlain, Chancellor of the Exchequer, have together served to call attention once more to the apparent contrast between the progress of recovery in England and America, writes Frank H. Simonds in the San Francisco Chronicle. For a considerable time critics of the domestic administration have been pointing to the foreign example and arguing that abroad the old deal has been more successful than the new al, home. All such comment ignores the major factor in British recovery which is necessarily 'absent in the American scene. In the crisis of 1931 the British abandoned not only the gold standard, but also their policy of free trade. For a qentury the British market had been open to foreign goods and raw materials alike and in many fields domestic production had been destroyed by foreign competition. When, however, Britain reverted to a tariff, then there was opened to domestic production a new field of activity. For the time being there was created an economic frontier. There was a great new demand to be supplied and to satisfy that demand it was necessary to build factories and employ additional labour. 'There was then, a boom which could only follow the opening up of a fresh market. That boom did not extend to the branches of British production dependent upon the world market. Coal and iron, textiles and shipbuilding remained in approximately the same state of prostration as before, or at best showed a rate of improvement not different from that of similar industries in other countries. Unemployment in these branches of National Industry remained constant and considerable. But it was offset by the expansion in the new fields. Patently no such resource was open to the United States or to any other large country for all had followed protectionist policies. In these countries domestic production already monopolised the home market in all the fields in which foreign goods or raw materials were competitive with domestic. The fact that the British raised their tariffs did not therefore open the way to any reprisal.

American goods were, for example, excluded from the British market where they competed with British and this insured an increase in British production. But, since British goods were already excluded from the American market, no domestic gain could balance the foreign loss. The figures are themselves eloquent of what took place. Between 1929 and 1933 British exports shrank by 1,800,000,000 dollars—but British, imports by 2,700,000,000 dollars. By contract, while American exports dropped off by 3,900,000,000 dollars, American imports fell by only 3,100,000,000 dollars. On balance, British exports had been reduced by 900,000,000 dollars Jess than imports. The drop in American exports, on the other hand, was 800,000,000 dollars more than that in imports. All of which means simply that the British were recapturing their home market and substituting domestic business for foreign while the Americans were faced by a decline in exports due to the multiplication of tariff barriers and a decline in domestic production due to a shrinkage in local consumption. Of course, this process cannot go on indefinitely and Mr. Chamberlain himself in another recent speech, asserted that Britain must henceforth expect an unemployment total of 2,000,000 for an indefinite period. Industrially, the British have thus taken up the slack. Agriculturally, on the contrary, there is still a vast opportunity for domestic expansion. When the British went out for free trade they abandoned their fields for their factories and undertook to exchange manufactured goods for foodstuffs. Now that they have abandoned free trade, they will have to expect further shrinkage in foreign purchases of their goods. They can, of course, offset this reduction by raising their own food. But this change will take a much longer time than the industrial transformation which is now nearly completed. In the long run, however, Jt is by no means impossible that additional employment in agriculture will counterbalance the permanent elimination ot a considerable portion of the workers in coal, iron, and shipbuilding industries. Made Easier. The British problem will be made the easier by reason of the fact that the population of the British Isles is already stationary and is destined to decline. England is thus changing from a onesided to a balanced economy. Under pressure and because of the shrinkage in the foreign markets for her manufactures she is undertaking to readjust herself to do her own manufacturing and to raise her own food. The United States is in no such position. It is feeding itself. It is supplying its own market with practically all that that market desires and can absorb in the way of goods. Its imports are largely rubber, tin, manganese, nickel, coffee, etc. things which do not exist in North America and therefore cannot be provided at home. When the world stops buying its goods it cannot exclude foreign goods and supply the demand itself. It must take its losses. But it is obviously not fair to compare jthe British situation with he American, because the basic factors are so different. A family which is spending a lot of money for servants can, in time of stress, discharge the servants and do its own work. But a family which is already doing its own work will have no such resource when hard times come. The British were doing a considerable part of the world’s work before 1929 and letting the world do an even larger share of its own work. We were doing our work and a considerable share of the world’s as well. When the British lost their foreign job they fired their servants and went to work at home. When we lost our foreign job, that was the end of it. British wisdom was disclosed rather before than after the great depression.) By their system of banking they pro-i tested themselves from the disaster which overtook the United States in

Manen, 1933. By their system of unemployment insurance they avoided the tragic winters of 1932 and 1933 in America. The consequences of the war, too, only hastened a process which was already in progress. Industrially the world had overtaken and even passed | Britain. State of Balance. Before the World War the United States had pretty nearly reached that state of balance towards which Britain is now tending. After the war we suddenly blossomed forth as a great lending and exporting country. We financed a world to enable it to buy our goods and we readjusted our domestic production to suit this condition. But the whole situation was an artificial one, and once we stopped lending the world stopped buying. Then we had no way of compensating. We were producing more than the j domestic market could consume of about everything it required. There was nothing to be done, therefore, but to let domestic sonsumption grow up to domestic production, and meantime the experience was bound to be painful. Self-sufficient in the American sense, of course, the British cannot be, save through the collaboration of the Empire. And the Imperial project launched at Ottawa has been far from satisfactory to the British themselves, because the Dominions have exploited the British market without giving England a similar reward in their own. As a consequence, the British may one day find themselves in the plight of the Germans at the moment. For all that Germany can export is competitive with American, British, French and Japanese manufactures and therefore not required by these nations. But all that Germany imports—iron, copper, cotton, oil, etc. —is essential to her own industrial life. The basic advantage of the United States lies in the fact that it has practically all of the essential raw materials of industry within its own frontiers. Britain can never possess that advantage. No one wi I deny the British full credit for what they have accomplished in the face of a problem which has no American parallel. But the nature of the accomplishment should not be mistaken. Nor should its implications be overlooked?* The British have been driven back to their own little island. They are engaged in making their diminished sphere of activity tolerable and profitable. The boy who went to the city and made good for a long time only to lose out in the end has come back to the old farm. There is a living there—a dignified, prosperous, even distinguished living—’but on the present farm, as contracted with the former Empire, the sun sets regularly once a day.