ECONOMIC FACTORS

Evening Post, Volume CXXX, Issue 92, 15 October 1940, Page 11

ECONOMIC FACTORS

TRADE RESTRICTIONS AND EXCHANGE CONTROL

(To the Editor.)

Sir, —We know only too well the internal effect of trade restrictions and exchange control. Do we realise the external disharmony to which they tend? Ma 3' I recommend to your readers in this connection the paper on "Economic Factors and International Disunity," by Professor Lionel Robbins, Professor of Economics in the University of London, one of "The World Order Papers" published by the Royal Institute of International Affairs?

In it he shows how restrictions on migration, restrictions on trade, monetary nationalism, which "may be viewed as by-products of the tendency to independent national planning in the economic sphere" are "economic factors tending to make for international disunity."

Of the introduction of quotas and quantitative regulation generally in the contest of European politics, he says that with their introduction "the disunity introduced by any kind of trade restriction undergoes so great an intensification as almost to change its nature. The tariff is an obstacle which may be surmounted. It imposes disabilities; but the disabilities may be overcome. Under a regime of tariffs there is still some general interdependence" of the prices in different areas." But with quotas it is different. " The quota imposes rigid limits. It is an absolute disability. It destroys all interdependence of prices; it puts tradd into a strait jacket. The tariff is an anti-social obstacle. But the quota is. an overt declaration of national separatism. It is no accident that, in just those areas of Europe where political disunity is most acute, the prevalence of quantitative control of trade has been greatest." .

Coming to monetary nationalism and competitive depreciation, he points out the effects in the; economic sphere: "There has been a virtual cessation of international investment. There ha? been a succession'of local crises as the incidence of strain shifted from one region to another. There has been an increase in the general uncertainty of trade and a not inconsiderable decrease in its volume. On top of all this, in certain parts of Europe most liable to political frictions, the character of trade itself has undergone an almost revolutionary transformation. The institution of exchange control and exchange clearing systems has involved such a degree of Government regulation of the nature and direction of trade, that free private business of the type, prevalent elsewhere has become almost a thing of the past. The term international trade, which in the past meant trade between individuals in different national areas, in Central and Eastern Europe in. our own day has come to mean actual trade between nations organised more or less collectively. The quantitative controls which we have examined already are one aspect of this change. The various mechanisms of exchange control, which we have just discussed, are their monetary counterpart. And if we were to inquire which was the leading influence here, we should be compelled to give priority to the monetai-y factor. Other manifestations of economic nationalism may persist for some time without producing further repercussions. But monetary nationalism is more virulent and brings the other evils immediately in its train." (In certain parts of Europe the areas of monetary and political union have coincided and the one reinforced the other.) He is alluding to its effect in intensifying the advantages of extensive rational areas. As to its internal aspect, he says, "An interesting essay might be written on exchange control as an indispensable instrument of political dictatorship." May the Professor write it soon and his words be heeded, before it is too late. He urges that in the international spheres "the general tendency to more Government control has had the results I have mentioned (viz., international disturbance and friction) and that the more this tendency develops in its present form the greater the possibility of disharmony. This is not to urge that there should be no planning in these spheres. It is only to point out what seems to be the inescapable fact that, if the planning is done by independent States, or by small exclusive groups of States, then the disharmonies mentioned are likely to be generated. What is in question is not planning in general, but independent planning by independent States. - ■ . -..-;•

Professor Robbins hopes for a more solid international structure to replace the disunity in Europe arising from the chaos of unregulated national sovereignties, failing which "the civilisation of Europe will dissolve in chaos or be unified by Caesarian conquest." He hopes for some permanent nucleus of stability in the West, possessing sufficient power to ensure a healthy space in which there may proceed with due care and circumspection the kindling of a more extensive organisation, one of the most important principles of which will be "the surrender of sovereignty in regard to certain economic powers."—l am, etc.,

H. F. YON HAAST.