EUROPE'S MONEY PROBLEMS

Dominion, Volume 12, Issue 278, 20 August 1919, Page 3

EUROPE'S MONEY PROBLEMS

' - NEW YORK BANKERS WAY OF RECONSTRUCTION A FINANCIAL CONSORTIUM ? • TH d', s °!'S an ' Sf it:ion and paralysis of ~,• mdusi-rial production are tho worst ro* •' 'suit in Europe of the war, the result '. much augurs most blackly for the future of Europe as a whole; and the first big reconstruction job to bo initiated py tho Unitod. States is that of "furnishing tho minimum necessary to restart industry i ll ali ilurojjean nations concurrently/ says Frank A. Yenderlip, in his book, "What Happened to Europe," and which was written in its entirety oil the five-day trip between Southampton and Halifax, May 10 to 15, on Mr. Vanderlip's way homo from a. trip of investigation into the state of European finance. "I went abroad to learn at first hand . something of what tho war had dono to tho finances of Europe," ho says. "I liad gone but a short way in that investigation before I perceived that there WO3 something far more fundamental ■ and important to investigate than tinan"l.ces. 'l'ho most profoundly significant ■thing that I sensed in Europe is the disorganisation and paralysis of industrial production. Tho paralysis is not confined to tho war zone. If extends to ~ _ the industries '>f the neutral countries. '* So long as it continues tliero is danger : .of development and of Bolshevik tendencies. Wherever unrest develops into Bolshevism, that new nainfi ' .'for an old disease, anarchy, there is dan- \ for of contagion, and tho disease is liable to spread to adjacent territory. This makes it necessary to regard Europe as , a unit in any forecast of futuro conditions."

1 Tho book is short, but condensed and concentrated as a book written in the five, days at 6e'a might be expected to ho. It tolls tho story, simply find vividly, sending sharp rays of light into the individual countries of England, li'raace, Belgium, Italy, and Spam, and at the end the proposed solution is plainly put, in the form of a plan for an International Peaco Loan for tho re- . starting of the industrial processes of tho European nations. This plan had already been discussed. beforo Mr. Vanderlip sailed for home with some American officials, a number of French statesmen and financiers, and tho principal hankers in London and Holland, and the idea :is that tho loan should be participated in by the United States, the Netherlands, the Scandinavian countries, / Switzerland, Japan, those South Amori- ' can countries which are'important exporters to Europe, and Groat Britain, "although the latter to perhaps a limited, amount, if British intorests so desired." The Plan. "Tho governments of tho leading nar .-tions each should appoint a consortium of bankers to have charge in tho respective countries of tho notation of an international loan of a certain amount. These consortiums of bankers, in * conjunction with their respective governments, each should appoint members of . an international loan commission, the . headquarters of which might well be in - the Peace Palace at Tho Hague and tho • number of representatives of each' coun- • try respectively, or their voting power, should be equitably determined.

' "The International Loan Commission would determine from the facts regarding tho industrial situation in each of the possible borrowing countries, the proportionate allocation of parts of the total loan to each borrowing nation, and later should determine, .-iji' conjunction with representatives froftf the bor,wring nations t'ho definite a'lnounts -of m.ohinsry, raie materia), .rolling ,stock, etc., should bo fuKsifeied. ' "Each lending natioJf !, -W>uW' furnish, Recording to its, capacity sH'amount.of machinery, raw 'materials, etc., equal to its' amount of participation in tho international : loan, with; adequate safeguards insuring' to 'the borrowers that these materials were furnished at proper prices.

"The International Loan Commission wouldtproposo to the borrowing nations that tney would furnish to them credits to the>'deteimined amounts, to be expended in the way provided against obligations that in the caso of every nation followed the same forniula. The bbliga-.. tions would run for, My, fifteen years, bear —_ per cent, interest, provide fot .amortisation of one;fifteenth each year, and be repayable,'interest and amortisation, in the currencies --of the various lending . countries in... the proportion., in which the obligation was at the time o£ each interest pajnient actually held by the nationals of such country.

"Each borrowing nation should pledge a first; lien upon its Customs Tevenue to meet tho interest and amortisation servico of that portion of the international loan allocated to'that particular nation.

"Tho International' Loan Commission would issue for sale to the investors jn each loaning < nation its obligations secured by the obligations of the several borrowing nations. The interest charge on tho obligation of the, International Loan Commission would bo the first ohargo against all the income. received by the Loan Commission from all the borrowing nations. r."lf one or more of the Borrowing rations defaulted in the first years of tho contract, the Loan Commission could devotes such part of tho amortisation funds received from ■the other nations aa might be necessary to the payment of interest on the International Loan Commission's total outstanding bonds, and any such depletion of amortisation funds could subsequently be made good when tho, nation made good its overdue obligations. The result of this would be that even in the event a nation defaulted in its obligations to the International Loan Commission, tho full interest payments would bo kept up on the obligations issued by the International Loan Commission, and time would thus be given to any defaulting nation to subsequently make" up this default. If it were unable to do that beforo tho final maturity of the loan, tho loss would_ then make Itself manifest in a defioit in tho ultimate final payment of . tho principal of tho International Loan Commission's obligations. V "Each borrowing nation would undertake to lay sufficient import diities to provide amply for its obligations to the International Loan Commission. The obligations would include in addition to tho interest and authorisation yt the original loan, the proper expense of the flotation of the International Loan Commission's obligatibns, and tho expense of tho International Loan Commission up to ; . tho final discharge of its obligations.

"Any borrowing nation Ending itself in a position to liquidate 'its obligation to the International Loan CommiEsion in advance of the maturities of those obligations, ' and desiring to do so, would lie permitted to liquidate those obligations at, say, 1021." . Emphasis is laid all through the' book upon this taking of Europo as a whole, not dividing it ,into individual countries to bo given individual help. "The prime cconomio necessity is now," rays Mr. Vanderlip, "fo re-establish the flow of production, to givo employment to the millions of unemployed, and to get each European country started back towards a normal industrial life. The danger in not doing this promptly, or in not doing it for all, is so extreme that it is no exaggeration to soy that failure to do this may mean a breakdown in European civilisation which will involve tho whole world. Tlio conditions are so extraordinary that extraordinary means of coping with the difficulties should not be Tejected because,, of their novelty." And again: "A failure to restart industry in any European nation, resulting in continued idleness, want, and hardship, is certain to lead to social upheavals that will be communicated to other nations. The problem, therefore, is an inclusive one, and must bo so solved that .there will bo a serious and a comprehensive effort mado to re-establish tho industrial cycle in cach of tho European _ countries simultaneously. If this is not done, there can be no safety in financing any ono of them."

Industrial Paralysis. The reasons for tho paralysis of industry are, ho says, "the difficulties in obtaining credits to purchase in foreign markets, the inability to get ocean tonnage, tho breakdown of domestic transportation, labour unrest, and throughout the great war area the destruction of machinery. Ma-jhinory, raw materials, and railroad equipment are tho main

things that Europe needs and must have to restart iho industrial processes. . . I 'believe that tliero can l,e 110 secure peace until the way is found to supply these credits to all industrial centres. It will iwtdo to pfclc oiiit only thoso districts of those industries which may seom to 'offer the best security, for there will bo security nowhere as long as tliero are. here and there, plague centres in which idleness, lack of production, hunger make a breeding ground for the disorganised transportation, want ami Bolshevik microbe."

Tho talk of transportation, or the lack of it, takes 0110 suddenly from fjho ! igh and complex regions of "finance, to tho primitivo and fundamental question of good roatls, over'wltichjill civilisation and progress must always pass, and of vehicles for tho passing. (There were nine locomotives left in Serbia at tho time of the armistice signing.) "Amonc all of Europe's nocds," says Mr. Vanderlip, "none is more poignant than ti'nc rehabilitation of her railroads," and ho makes his plea for help in this direction on the simplest ground of all, namely, that the people; of Europo shall not starve.

"I ihave the highest possible authority," he says (which probably means Hoover), "for the prediction that the food situation will be more serious ill the spring and summer of 1920 than it htfs been this year, and, indeed, that it will be so* serious that, taking into account the breakdown of transportation, U will be impossible to prevent another horror of starvation even it' the ports of Europo arp amply supplied with food. 1' am not arguing that this whole situation cannot be readily put to rights, but 1 do say thnt 110 substantial start has yet been made to do so, that evfln no systematic plan has .vet been developed, and that under the verr best of conditions the task is one that will consume a great deal of time."

Chaotic currencies, credit ("so delicate a thing it is dangerous to talk nbont it") and "the international soalepans" are taken up, chapter by chapter, giving to any one who cares to know' tne fundamental details of what did "happen to Europe" in the ways not spoken of so offf-j-os nre material devastation and tlii) '*VT waste of land. ■<j ' ,ort and Liberty" is the heading of-.' -iapter which deals most directly j .■'imatiity itself, with the fundademands of tho labourer, and the Ways in which those.demands may be met by ."Employers with vision. This chapter migh-.well bo amplified into a book -all by itself, its title taken from tho motto of the -dhief Syndicalist' organisation of . tho present day, tho Confederation Generale du Travail or France. The motto is thoso words, "Comfort and Liberty," which are indeed inclusive and give tho key, says Mr. Vanderlip, to the greatest problem »f tho age,- the labour problem." And in connection with this he quotas Sir Lynden Macc-asSey, who, for the English, labour situation, has summed up the essentials to peace in industry under the three headings of (fcntcntment, co-operation, and production. It is in these matters of labour that England is worst oft' at the close of tho great world war, says Mr. Vanderlip— in insufficient wags scale, gigantic housing problem and deterioration of the na tional physique. "Jt is fesseutial to tho continuation of British industrial life," he says, "that she regain lior European market. That .cannot be effectively dono until the industries of Europe are themselves restarted." And ho ends his English discussion with this:

"If tlio hope which was clcarly expressed by some employers that a'satisfied body of workmen putting their brains into the job will in tho end produce on .a scale which will make the present scale of production seem indicative of a period of the dark ages in industrialism—l say, if that hope is realised. tho future of England's industry is brought beyond anything ever dreamed of." France's Difficulty. . .1 Finance is France's difficulty, and it is to America that she is looldng for help. Italy has had her two great eourccs of income cut completely off —tha foreign traveller and the emigrant eon who sent his moiioy home. In the-'creat number of eases the son has been fighting in tho war, and his money-making days liavo been gouged into. For years sho has imported more than exported, and her . foreign trade has boen out of bale.ncc. Loans are her onlv help now, though "in many ways Italy struck me aa being richer "in human material than any other European Cto.tK that I visited. These Northern Italians srem to have a genius for industrial organisation."

Spa;. qivca a dash of colour to Ilia .oook.. r ii her churches and her noblw? aitfK'V,' i'ncutrality-piled heaps of gold, «t' rf \ casually into the bullion vaults of u.a Bank of Spain, which' were opened up for Mr. Vanderlip to see, by four elderly guardians each armed with an enormous key. His story of the Syndicalism in Spain, which calls strikes simply as warnings to employers and to keen employees in good trim, as a (ire drill is held, is an amazing bit. Hero in.Spain are the richest undeveloped resources in Europe. For the intelligence and statesmanlike grasp of affairs of Alphonso. XIII Mr. Vanderlip has only high praise. Belgium comes last in the list of five nations, and it is a short and sad chapter, as those on Belgium are these days. But at the end is thi9 which is a new light on tho subject: "It struck ms that Belgium offered an opportunity for partnership with America that would bo profitable to both partners; America to furnish capital, machinery, and some supplementary mcchauical methods, while Belgium furnished a knowledge of international affairs and practical cxperienco in many foreign fields and a trained intelligence in international business with which wo are fat soantily supplied."