The Wanganui Chronicle. MONDAY, JULY 25, 1949 THE MEETING OF FINANCE MINISTERS

Wanganui Chronicle, 25 July 1949, Page 4

The Wanganui Chronicle. MONDAY, JULY 25, 1949 THE MEETING OF FINANCE MINISTERS

THE sterling crisis has operated to bring- together in even closer

x association the members of the British Commonwealth of Nations. Canada, with half its trade conducted with the United States of America and the other half with the United Kingdom, iias long been in a half-way position in respect to her currency. In viewing the sterling crisis, therefore, Canada is able to look at the problem from a somewhat detached but certainly not a disinterested standpoint. She could not, however, because of her interest, seeing her' currency is now based on the American dollar, view with any pleasure the measure which perforce had to be taken to protect the dollar-gold reserves of the London money market. The Union of South Africa is also in a nomewhat freer position than the rest of the sterling area. As the great gold producer, the Union of South Africa can protect herself in respect to her dollar requirements by shipping gold to New York and thereby establishing credits to meet her requirements. Dor the rest of the Commonwealth the unity of interest in respeet to sterling is absolute.

The Finance Ministers’ meeting recognised that the first step to be taken was to stop the outflow of gold and dollar reserves. This would mean the bringing down of negative proposals which would stop the flow of trade. Such proposals, while satisfactory from the standpoint of immediate needs, offer no solution to the main problem which is the establishing of a freer condition of world trade. The American view of the situation is that world trade rests upon two currency pillars and that if one of them gives way the strength of the other will be of no avail to keep world trade moving in a satisfactory manner. According to the statement issued in respeet 10 the meeting of Finance Ministers it is asserted that they were “pleased to note that discussions had taken place between United Kingdom, Canadian, and United States Ministers and agreed with them that the aim must be the achievement of a pattern of world trade in which the dollar and non-dollar countries can operate together within one single multilateral system. The meeting noted with satisfaction that further discussions were being arranged to take place in Washingtotn early in September to consider the action required to carry out this aim.”

This statement seems to amount to the fact that the short-term steps that have been taken were recognised for what they were and that the real problem remained to be solved. It was recognised that present conditions did not amount to a system of world trade, and that it was desirable that such a system be brought into existence as soon as possible. “It was agreed, too, that a lasting solution of the sterling area’s difficulties could not be found without a very substantial expansion of the area’s earnings of dollars and the most effective use and development of the resources of each component part.” The question to be asked is: what is to be expected if an expansion of the sterling area’s earnings of dollars is not achieved? The answer is both simple and painful: it means that the sterling area will have to deny to its constituents the benefits of American production. In fine, the world will have to learn to live without the United States of America and the dollar area.

The dividing of the world tyade, however, is not easily to be achieved. The Soviet Union has been endeavouring to live within itself. This attempt has failed to produce satisfactory results and provides the reason for the expansionist policy prosecuted by the Soviet Union in respeet to its foreign policy. It has gone aggressive imperialist for the same reason that any other country has gone aggressive imperialist, to secure for her own needs that which her present territory fails to provide. This was the reason for the expansion of Imperial Rome and it was the reason for the expansion of Imperial Germany. It was not the reason for the expansion of the United Kingdom into the British Empire! the adventurousness of her people in the overseas parts of the world brought an Empire into her liip. In that expanded territory the British economy grew up and that is why the British people cannot Tinderstand today the reason for the imperialist urge of Russia, Germany and Japan.

If the dollar area is to be withdrawn from the network of world trade then several results are foreseeable. The first is that the American standard of living cannot be maintained at its present level. The second is that the sterling area would take much longer to recover to its full functioning and the third is that in order to save the capital necessary for requirement of industry, many people in the sterling area would be compelled to accept a standard of living and comfort which they would consider unsatisfactory. These are foreseeable results, but conjecture can carry the picture further. It can be conjectured there would be serious political reactions. There are always men and women who are willing to voice the wishes of the mass of people, be those wishes attainable or not. The Great Depression, for instance, was a world-wide dislocation of trade, but there were many who were willing- to proclaim that it was a national phenomenon which could have been avoided by national action. A period of economic underactivity no matter what is the cause will always give to the political adventurer the opportunity which lie seeks to pose as a retriever of a situation, and the less his sense of responsibility to the eammunity the greater is his prospect of succeeding in securing a large numerical following The trading position of the world might easily turn into a political hotbed in which anything may be generated. This is Ihe compelling factor in the present situation. '