MONDAY, JANUARY 17, 1921. PUBLIC ECONOMY.

Hokitika Guardian, 17 January 1921, Page 2

MONDAY, JANUARY 17, 1921. PUBLIC ECONOMY.

Tub world ill general is devoting a great deal of attention to the report of the international Financial Conference at Brussels. The report is divided into many useful - sections, which, probably, are destined to become a standard for economics in inteatnational finance. Dealing with the limits of increased taxation, the report goes on to say: In so far as, after every effort has been made, it is impossible to cut down expenditure within the limits of existing revenues, iiresh taxation must lx? imposed to meet the deficit, and this process must be ruthlessly continued until the revenue is at least sufficient to meet the full amount of the recurrent ordinary expenditure. The conference considers that the relative advantages of the various possible means of increasing the national revenue, whether by direct dr indirect taxation or by a capital levy (to be devoted to the repayment of delMt), depend upon the special economic conditions obtaining in each country and that in consequence eacli country must decide for itself on the methods which«are best suited to its own internal economy. If the above principles are accepted and applied loans will not be required for recurrent ordinary expenditure; borrowing for that purpose .must cease. In a number of countries, however, although the ordinary charges can be be met from revenue, heavy extraordinary expenditure must at the present time be undertaken on capital account. This applies more especially in the case of those countries devastated during the war, whoso reconstruction charges cannot possibly be met from ordinary receipts. 'Hie restoration of the devastated areas is of capital importance for the re-establishment of normal economic conditions; and loans for this purpose are not only unavoidable but justifiable. But in view of the shortage of capital it will be difficult to secure the sums required even for this purpose and only tfie most urgent scheme should be pressed forward immediately. The means by which loans are raised are no less important than the purposes for which they are destined. In future the loans which are required for urgent capital purposes must be met out of the real savings of the people. But those savings have, as it were, b t een pledged for many years ahead by the credits created during the war, and the first step to raising fresh money must be to fund the (undigested floating obligations with which the markets are burdened. These principles apply both to internal and to external borrowing, and in regard to the latter avo suggest that it would be in the general interest for the creditor countries to give such facilities as may be possible to the debtor countries to fund their floating obligations at the earliest possible date. Another subject considered by the International Financial Conference was

that of International credits. Countries impoverished by the war must for some time import more than they can export. There irf thus a difficulty regarding payment for imports. Clearly, what is wanted is that creditor countries 'sb|o'uld invest largely in thes<> debitor countries. Whether such investments will bo made depends upon the estimation which which the investor regards the debtor country. Just as Australian Governments ask English investors for loans to build railways, so impoverished countries of Em rope ask English, American and Dutch investors for money to rebuild their industries. The principle is the same, though the manner of lending may not be exactly on all fours. Hitherto that lending has

j been done in the main by banks and by financial institutions. Such loans can only be for short terms. What is wanted in each case is a loan or loans extending over a period of three to ten years. The conference placed on record its belief that apart from particular decisions dictated by national interests or by considerations of humanity credits should be accorded directly by , Governments. An international organisation in its view, should be formed and placed at the disposal of States desiring to have resort to credit for the purpose

of paying for their essential imports. These States would then notify the assets which they are prepared to pledge as security for the sake of obtaining these credits, and would oome to an understanding with the international organisation as to the conditions under which these assets would be administered. The bonds issued against this guarantee would be used as collateral for credits intended to cover the cost of commodities. These suggestions touch the colonies nearly, inasmuch as it is suggested that a large portion of our carry over wool should be sold to Europe on credit. That scheme of sale may be considered in conjunction with the 11th. resolution of the conference regarding international credits. That resolution states: “The attention of the conference has been called to the present system of ‘finishing’ credits, that is to say, of credits under which a lion in favour of the exporter or a banker is maintained on the raw material in all its different stages and upon the proceeds of the manufactured article. This system has suffered greatly owing to the lack, in many countries of sufficient legal protection to the exporter through the Various stages of importation, manufacture, re-exportation, and sale. Tlie conference suggests the summoning of an advisory body of legal experts and Ebusiness men to specify the legislative action which it would be desirable to take In order to obtain the desired object in each of the concerned countries.