THE WORLD CRISIS.

Waikato Times, Volume 113, Issue 18946, 16 May 1933, Page 6

THE WORLD CRISIS.

CAUSES OF DISLOCATION

MANY CONTRIBUTING FACTORS.

DR. H. B'ELSHAW’S SYNOPSIS.

Some of the main reasons why the purchasing power of the world ha declined, why prices had fallen, why production was Impeded and why unemployment had increased, were dealt with by Dr. 11. Belshaw, Professor of Economics at the Auckland University College, in a lecture m InVicta Buildings last evening. The lecture was the second in the economics course promoted by the Workers Educational Association, and will he followed by another by Dr. Belshaw next Monday evening. Mr F. A. de la Mare, chairman of the Hamilton Advisory Committee, presided over an attendance of about In opening, Dr. Belshaw reminded his audience that there were few economic problems which were perfectly simple and it was obviously possible to -cover only a little giound in a short lecture. He likened the economic crisis to a traffic jam m which various factors had come together. He believed the crisis was not a failure on the part of productioni but due to lack of organising ability on the part of human beings. The productive machine had been thrown out of gear. Substantially Uie world was no poorer than in 1914, hut the war had created a dislocation in production. By 1925 the world had recovered from the dislocation of the war. Had it been possible then to organise the processes of exchange as efficiently as the processes of production, the standard of living could have been ten times higher to-day. After 1925 there was a period of phenomenal scientific development, and production increased enormously. There were Important changes in both production and demand. Demand went into the channels of secondaiy needs, such as gramophones, cars, radios, etc. Consequent partly on changes In demand, and partly on changes In technical development, there w r as a lack of balance regarding the demands of a modern community. Such a tendency was Intensified by restrictive trade policies in different countries. Monetary, financial and political conditions were less stable than before, the war, leading to economic dislocation. There were various factors, all of which contributed to the present world crisis.

Political Insecurity

Dr. Belshaw cited political Insecurity as one factor. Strong nationalist movements had developed as a result of the Versailles Treaty and strained feelings were evident in Europe and the Far East. An atmosphere of fear, uncertainty and jealously permeated international relationships. Referring to the growth of economic nationalism, Dr Belshaw said tariffs and subsidies had sprung up, which hindered international trade. One of the major causes of the depression was the growth of tariffs. Reparations were the first financial problem which faced the post-war world. In his opinion the main cause of the marked inflation and monetary collapse in Germany was an effort to meet reparation payments. When foreign lending ceased Germany was obliged to default and in 1929 the amount of reparation payments was reduced. War debts presented a still greater problem. They affected the community by decreased purchasing power and increased taxation. With the world fall in prices the burden was increased enormously. High tariffs in the United States made payment of war debts in goods impossible; as a result the gold reserves of other countries were depleted and the central'banks were obliged to restrict oredlt in the debtor countries; this had resulted in acute deflation. When the price of exports fell those countries found, it necessary to restrict Imports so that the value of imports would be lower than the value of exports. Speculation on the stock exchange and the drying-up of lending sources had precipitated the crisis. The post-war inflation culminated in the boom of 1920 and the collapse of 1921. After that different countries adopted different monetary policies.

Sterilisation of Gold,

When Britain returned to the gold standard in 1925 the export industries were depressed because their costs could not be reduced to meet the new situation. From 1925 onwards Britain attempted to rectify the position by a policy of deflation. Dr. Belshaw pointed out that the position was aggravated by the sterilisation or gold, with the result that gold was not used as the basis of additional credit. Efforts were made to recover gold by raising the bank rate and restricting credit; this seriously hampered industrial- progress and commercial expansion. Government and semigovernment plans to stabilise the prices of particular products and the growth of large scale industrial monopolies intensified the trouble by accumulating stocks. Unemployment and relief schemes and the public regulation of wages were other factors. Under the world conditions it was impossible for the gold standard to function. Price disparities had also produced marked effects on world economic conditions.

Main Factors Summarised,

Dr. Belshaw summarised his address by pointing out that the main factors contributing to the world crisis were Hie uneven expansion of production; high tariffs leading to surplus production capacity hampering international trade and forcing debtor countries to pay war debts in gold; political insecurity leading to financial and economic insecurity; the reparations and war debts burden reducing the standard of living and purchasing power; short-term lending policy occasioned by the. loss of confidence among Investors; different, currency policies which dislocated international trade; the consequent maldistribution of gold causing a restriction of gold and a downward movement in prices; and finally a greater degree of economic rigidity. A stimulating discussion followed, which evidenced that various schools of political and economic Uioughl were well represented.