WAR DEBTS.

Press, Volume LXVII, Issue 20351, 25 September 1931, Page 12

WAR DEBTS.

«, THE WORLD'S TROUBLE. CANCELLATION URGED. (from oua owk correspondent.) LONDON, August 20. The importance'of a speech delivered by the Hon. Alexander Shaw, deputychairman of the P. and 0. Company, lies in the fact that he is also managing director of the P. and O.— one of the great industrial enterprises of the country—he is a past-president of the Chamber of Shipping, and he is a director of the Bank of England. Ho was speaking at Glasgow at the launching of the twin-screw steamer Carthage, and he dealt with the questions of war debts, national economy, and the urgent necessity for balancing the British Budget. The situation to-day, ha said, vras that Britain's Bhort-term position did' not possess the vast inherent strength of her long-term position. By and large, it was the long-term position which gave the British pound sterling its unparalleled place in the confidence of the world. , It was only because the enormous strength of that longterm position was obscured by our unbalanced Budget that there were any nervous apprehensions anywhere. Britain was liko a millionaire temporarily left short of cash and unable to pay his taxi fare. Anyone would be glad to lend him his fare and put matters right with the taxi-driver—un-less it was notorious that he -was living at a rate far beyond even his ample means. Then it might be difficult to get back your half-crown. Apprehensions, absurd as they might be, really existed - in certain countries. They could be completely allayed by one thing only—a national effort by all parties and all classes to reduce expenditure, balance the Budget, and set Britain once again on the road to prosperity. That was overdue. It was urgent, and there was no time to be lost. If the people at large were taken into the confidence of the Government, with an appeal for common sacrifice, theTO was no doubt that the patriotic response would be overwhelming. Equally widespread should bo the response to an appeal properly made for a reduction of the costs of production in this country. No subject could provoko such bitter controversy as this, but none was more vital to British recovery. It must be quite obvious that unless the products of Britain could compete in the markets of the world she would never regain her position of commanding strength. It was in the interests of all classes, and above all of the manual workers themselves, that Britain should again become not merely the workshop of England, Scotland, and Ireland alone, but the workshop of the world.

A Vicious Circle. Another argument in the address was concerned with the disturbances, to the world caused by the payments of war debts or reparations. Europe and America had, Mr Shaw. off the old. sound - basiß of for6igiii trade —tho exchange of goods or services of one Country for the goods or services of another. Great blocks of,the production of certain countries had, in effect, been pledged by treaty to bo handed over to other countries in payment, not for present production, but for past destruction, . and the mechanism of the foreign exchanges wag not capablo of carrying such a burden.

That mechanism had ' only been saved at all during the past few.years by the simple process of creditor •countries lending- to their debtor countries the bulk of the funds, which wero then directly or indirectly received back as payment of war debts or reparations. Whenever the creditor countries grew weary of this and sought to withdraw their credits, then the situation of a debtor, country like Germany grew desperatte. Its exchange weakened, its banks started to close down, and Europe was hung for a fortnight or so over the pit; until an international conference was held* like the conference in July, and people agreed to go on again aB before, lending to their debtors. So we travelled wearily from the Dawes Plan to the Young Plan, and from conference to conference. The politicians met and handed over the task to financial experts. The most brilliant financial brains in Europe wero set to tackle this hopeless labour. One might as well seek surgical advice about "an earthquake.. At root the trouble was political and not financial. Because of these things animosities and fears flourished and Europo was an armed camp. Unemployment here was vast in scale and chronic in character; and the foundations of social stability were everywhere shaken.

Three Choices. In all this he was speaking for himself alone. But there must be many who, like him, could see no hope or relief from ■ the present atmosphere of menace and no prospect of any permanent improvement in trade and employment except through the drastic scaling down or cancellation of reparations and war debts. That was the essence; of tho plan which Lord Balfour put forward with great vision and courage. It was now more generally agreed that the world would have to adopt it yet; for what were tlict choices? There were only three: 1. Lending by creditor countries to their debtors. That was a temporary palliative. For a time it buried the symptoms, but in the long run it increased tho disease of indebtedness. It must bo ruled out as a cure. 2. The second plan was payment in gold. That also must bo ruled out. There was not enough gold in the world to meet the bill; and apart from that the creditor countries already had most of it in their vaults and did not want more. 3. The third method was the liquidation of these prodigious sums by payment in goods and services. That course presupposed two things, both highly unlikely. First, that the debtor countries were both able and willing to go on exporting goods and services for nothing; and, secondly, that the creditors were willing to receive theso goods and services. Were they so willing? The high tariff policy of the creditors • gave the conclusive answer to that. The only real way back to normal, Mr Shaw concluded, lay through drastic dealing with reparations and war debts. Only that would make the world fit for healthy international trade to live an. It was bound to come because it was ordinary commonsense. But commonsense sometimes tarried long.