Finance—Public & Private

Trade Outlook and the War Debts

JUDGING from the cables from Washington and New York, the speech of Mr. Goodenough, of Barclays Bank, concerning War Debts, to which I made an extended reference last week, would seem to have been read with as much interest on the other side of the Atlantic as in this country. During the past week there has been an important development in the War Debts controversy in the shape of a hurried consultation between President Hoover and the incoming President, Mr. Roosevelt, resulting in an invitation to the British Government to send representatives to Washington to discuss the subject of War Debts. Following upon this development there has occurred a sharp rise in the sterling exchange, due in some part to expectations of a reduction in the total of War Debts, but also to the extreme ease of money in New York, so that there has been the greater disposition to remit money for employment in this country.

In view of the importance which attaches to an early discussion of War Debts, and in view, moreover, of the importance of a settlement of the question being reached before the World Economic Conference has been held, readers of The Spectator may, perhaps, have been a little surprised that in the editorial and especially in the financial columns of our leading newspapers the action taken by President Hoover should have been treated with a certain amount of reserve. The reason, however, is not very far to seek and I think that on the whole it is one which justifies the attitude which is being taken up by the City and business men.

CONFIDENCE HAS BEEN SHAKEN.

For more years than one cares to reckon up, the author- ities in this country have been doing their utmost to aid the financially distressed countries of Europe in their efforts to retain solvency,-but with scant aid from countries such as the United States and France. Throughout these years the British Government has endeavoured to impress upon the United States the fact that War Debts constituted one of the greatest obstacles to financial recovery, and soon after the War they supported their view on this matter by promising to forgive all their debtors if the United States was disposed to act in similar fashion. The offer was a fair one, for the amounts owing to us were much greater than the amount we owed to the United States. America, however, treated the suggestion with something more than scorn and in more recent years when, largely as a result of her own policy and excessive speculations, depression began to settle down upon the United States, all suggestions that the world depression was closely linked with the problem of War Debts fell on deaf ears. As recently as the early part of last year, when there was a question of a World Economic Conference, the United States declined to do more than send someone as a looker on, refusing to be an active participant in the Conference. Indeed, at one time she only consented to send a representative on the under- standing that subjects like War Debts and Tariffs were to be- rigidly excluded from the agenda. Yet now, when, stirred by the disastrous state of affairs in America itself, she makes the suggestion that there' should be an early Conference with this country concerning our War Debts, the suggestion is coupled with the condition that the discussion must be concurrent with and conditional on a discussion on world economic problems. Rightly or wrongly, the impression, therefore, is conveyed that the United States is likely to use the War Debts as a lever to obtain some concessions from this country of a character calculated to offset the effect upon the American Exchequer of any drastic revision 'of War Debts.

THE GOLD STANDARD AND TARIFFS.

Now this interpretation of American intentions possibly does that country less than justice, but it is, I think, the rather natural result of the American attitude over a period of years and betokens a determination to re- fuse to reconsider the whole question of the equity of the War Debts themselves. In fact, much of the caution dis- played in this country with regard to any return to the gold standard and much of the success achieved by the Protectionists in imposing tariffs upon this country may be traced not to an abandonment of the old ideals of the gold standard or to an abandonment of Free Trade principles, but to the fact that aggressive action on the part of other countries both as regards hoarding of gold and the erection of high tariff walls have positively driven us in certain directions.

A BANKER'S VIEWS.

At the present time, and in view of the great problem of unemployment in this country, it is scarcely surprising that we should now be considering each and every problem in the light of its probable effect upon trade, and each speech of the bankers at the present series of annual meetings is always studied to obtain fresh light and guidance upon our trade problems. Thus, in the speech of Mr. A. A. Paton at the recent meeting of Martins Bank, some remarks concerning the trade position are of special value and are not without their bearing upon the attitude of this country with regard to the impending War Debts Conference. Briefly stated, it may be said that Britain is disposed to adopt a defensive attitude with a deter- mination that no concession in the matter of War Debts must occasion us to cede any points calculated to prejudice our trading possibilities.

THADE CONDITIONS.

A summary of the more important passages in Mr. Paton's speech will be found on another page, but there are one or two points to which I would like to direct special attention. Concerning the cotton industry, lie was able to speak a little more hopefully, remarking that changes were taking place in Lancashire which " if pursued with determination should place the industry on a more stable and remunerative basis." Then as regards the iron and steel trades, there is little doubt that the industry has experienced some benefit from the deprecia- tion in sterling and from the adoption of tariffs. Mr. Paton pointed out that during the first nine months of last year our steel production had increased by 1.8 per cent. over the corresponding period of the previous year, whereas in Germany it had decreased by 38 per cent., in France by 32 per cent., and in the United States by 50 per cent. To-day, he said, " the British steel industry is better equipped to meet future demands, and when confidence is restored will be ready to take full advantage of any trade revival which follows." Some fairly hopeful remarks were also made in regard to the wool textile industry.

PSYCHOLOGICAL FACTORS.

Mr. Paton then showed how greatly psychological influences may affect world trading. Last November the mere rumours of Great Britain having possibly to remit through the exchanges about £30,000,000 to America caused a slump in sterling, and a similar fall in all currencies in the sterling area. We know that as a matter of fact the remittance was finally effected in gold, but the mere psychological influence exerted by anticipation caused a fall in sterling, which not only meant loss to power in the sterling area to purchase American goods, but gave the sterling area greater power to compete with those goods, thus involving a further collapse of American prices of the goods concerned. Now, it would be unreasonable to expect that Great Britain can be unmindful of the weapon which she holds in her hands in the shape of depreciated currency and tariffs. That America is aware of them is plain from the hurried calling of a Conference after years of refusal to listen to any idea of revision of War Debts, and business men are properly on their guard concerning the outcome of War Debts and Economic Conferences.

CO-OPERATION NEEDED.

That is not to say, however, that the City is unmindful of the need for international co-operation. The very reverse is true. It is recognized that 'without it there can only be a moderate improvement, in the trade of any one country. World chaos, and especially the chaos in currencies and exchanges, has become so great and so widespread that nothing short of international understandings and co-operation can bring about a better (Continued on page 134.)

Finance—Public and Private

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order of things. Mr. Paton. was quite right when he said that there has never been a moment in the_ world's history when the spirit of international conciliation was more evidently required. " Economically the. world has become one unit," but, he hastened to add, "politi- cally it is still ruthlessly divided." The situation, in short, is one requiring statesmen of international mind and those who are concerned for the welfare of other countries as for their own. I venture to think that this altruistic attitude has not been lacking in the case of Great Britain during the post-War years, both as regards the problein of Disarmament and those problems con- nected with economics and finance. It now remains to be seen whether the two nations with the greatest stores of gold, but with conditions of considerable financial distress will have the wisdom to perceive that their own and the world's salvation is to be found in a real international co-operation rather than in what Can only be described as economic warfare. ARTIER W. KIDDY.