A Study in Contrasts
Finance
I DOUBT whether it would be possible to discover an :weasion when so striking a contrast was presented between conditions at home and thosepre*lingi!in adjacent countrips fig that which exists today. ItZly we have a country at war and rapidly exhaustings financial resources;, so that even assuming an early termination of the war with Abyssinia it is 'difficult to see how she can avoid bankruptcy. In Germany we hate a nation apparently given over to militarism and with -its industrial activities largely centred upon preparations for war, so that its economic position must be almOst desperate. In France, too, we have a country passing through currency crises aggravated at every turn by social and political unrest: And not only so, but these unfavour- able economic conditions in various countries are blended with such a disturbed condition of international politics that fears are entertained almost daily of some European conflagration.
CONDITIONS AT HOME.
111 pre-War days these conditions would have found a very full reflection here. Even apart from fears of war, such was the close connexion between countries in every- thing pertaining to finance and commerce that the economic and financial distress of other countries of importance had repercussions here, while fears of war found a prompt reflection in a fall in securities on the London Stock Exchange. And yet amidst the present disturbed conditions of Europe we find in this country evidence on every hand not only of improved financial conditions, but of considerable optimism with regard to the -future. Increased spending power of the people:is plainly reflected in an increase of over £30,000,000 in the note circulation of the Bank of England when compared with a year ago, while rising railway traffics, good reports by leading industrial companies, a rise in the total.: of bank cheques in circulation, and an upwaid tendency in the advances of the -joint stock banks all testify to improved trade conditions, which obtain further confirmation from the expansion in the national revenues flowing into the Exchequer and the latest figures of employment. These conditions in their turn ha ve been responsible for a steady rise in prices of Stock Exchange securities and even British Government stocks, notwithstanding the increase in national expen- diture and the likelihood of an expansion in the Debt by reaSkin of the National Defence prOgramme, -Continue to advance.
POSSIBLE EXPLANATIONS.
How then arc we to reconcile these favourable condi- tionS at home, and especially the firmness of Stock Exchange securities, in face of the unsound economic conditions in many of the foreign countries and the serious trend of international politics ? The inquiry is a pertinent and 'a practical one, if only in view of the numbers who have invested in securities in the belief that piir prospeiity is likely to continue andel-en make further progress, which it certainly could not do in the true sense of the word if we were to be engaged in any European war. I think the answer to the question I-have propounded is to be found along two main lines of thought. In the first place, I think the reason for the Comparative insensibility -of financial and commercial conditions here to the conditions prevailing in many of the European countries is to be found in the fact that our departure from gold in 193,1 in itself brought about a kind of economic isolation, and,7the ordinary workings. of international finance bovine's° completely broken down, we are no longer sensitive to the conditions prevailing in other countries, though of course our export trade is still affected by their jprosperity or distress. Our leans to foreign countries during recent yefirs have been virtually nil, kmd, that in itself. has tended to lessen- ouir interest in 'detelopments abroad 'and to occasion greater concentration by the investor upon Home securities.
THE/ POPULAR': ThEkTEF,
But undoubtedly the chief reason for our comparative . insensibility tci -the aispaieddy "aspect of -international politics is teckettikuld in the fairly general belief that no country is really desirous of going to war at the present -time„.that-=the ,:real interests of every country lie in the direction of peace, and, furthermore, that, given an improvement in the international political louthiok, such factors as-cheap .money and hidden reser\ 'hoarded for years in fear of a war contain in themseh cs elements which, given an assurance of international peace and international co-operation, would easily make for a .period of exceptional activity'in finance and commerce all over the world. In the City the betting in fact is in favour of these favourable conditions ultimately materialising, and up to the present in the battle between pessimism and optimism the latter has secured most points. 'Whether this optimism will be jutsified by events remains to be seen. For my own part, while on the whole I am on the side of the optimists, I cannot help thinking that the City has given insufficient consideration to the psychology of other nations. Here we see so plainly the benefits which would accrue from peace and the disasters which -would attend and follow a war, but can we rely on this same reasoning spirit in the other European countries ?
ARTHUR W. KIDDY.
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