GERMANY’S TRADE

Hokitika Guardian, 27 July 1931, Page 3

GERMANY’S TRADE

IMPORTS- EXPORTS AND t- LOW OF CAPITAL. SITUATION ANALYSED. Apropos of tlie Seven-Power Conference now sitting in London to study the German economic crisis and effect a settlement of the problem is the following article by Karl Lang, manag-ing-director of a big engineering, ooncern in Germany. Contrary to the unanimous opinion of economists, he says,. large sections of the German public persisted, during recent years, in regarding the passive character of Germany’s balance of trade as the outward sign of an unhealthy economic development. They held that;an active balanqg of trade would be. the most satisfactory proof of an economic advance and that ac- ; cordingly, every effort should be made to create it. Even now this view is very prevalent; and i'F it were correct, it would mean that periods of “activity” would coincide with economic prosperity and periods of “passivity” with economic depression. MERELY CAPITAL MOVEMENT The real truth, however, is that the passive balances' in' recent’years cannot give : rise' to' any objections'. : They aTe merely the* result of ri capital l move 1 ment, which was'in itself the inevitable outcome of r th e' ‘existing severe shortage df money arid' the' inflow of capital borrowed abroad. * ■ '■ 'While the .’export figur'es'riontinTially went rip during the period’” 1,925-1929 arid’only decreased’ last year, iri consequence of the world trade depression, the import figures were subjected, during ,the same’ period, to exceedingly violent fluctuations. The high mark reached iri 1925 was succeeded by a low mark in 1926. After that a vigorous rise set in leading to-an absolute climax at the close of 1927 an the begriming of 1928. Up to the summer of 1929 the high level, generally speaking, was maintained intact; but after that a decline took place which very nearly reduced the. import figures to the position of ’19261 ,' , , This partial counter-movement of export and import led to a carr.cspondiiig alteration of .apfiyc, , ynd passive balances of trade. | , ;■ •: /: ; •! ’ tIiADE and UNEMPLOYMENT. rif ive want' to undersland the real coinicc-Liuu pet*vcoiii ucnu..i.y s foreign couiiiu rce and cue slate ol oiis.ness, "e liiasb; c-inpai'g the foreign tiiiae- cuivc with trie Carve indicating the state of einp.o., ment at home. - •In conformity with tlie contrary development, now going on for a number of years, m the state ol -business in Gerftiiiiiy oil the one "Band arid''in'seV-' -oral ot.ier impoitaut countries on the c her, the curve indicating the pi 0gi’bss of the’ German export trade shews"no visible comiectiori—oluring the gfciit dr part of the pbribd .concerned—with the.'.’violent fluctuations in. the. statg of employment at. home. . It was' not, until, the. decline in tlib' purchasing capacity of important., foreign markets due., to the world trade depression that ...the,. German, export trade, b(''"<'i)c subjected to-the same retrograde „ movement which had already commenced a months earlier iri connection with the'’production intended for the home market.

The import curve on the olher hand faithfully reflects the state of business at home during the whole period. Its very considerable fluctuations exactly c'-rr speed to those characterising the stat' 1 of employment. Whenever, during a time of economic progress, an increase manifests itself in the state of employment in the rni veil asii or power of the public and in fbe -nflow of foreign capital, this is.ac'comfianicd by a corresponding rise, in imports. i PREPARING- FOR CpMRRITnON u.tt- -is dor.his • reason. that : there • was a - siA.ptUc. of-imports over exports in lirJb'r&m when was tguod; i lie loreigß moiiey r tueif 7 ink; ' yufled was, incleeu; : int'etided to make. ’Germany’s iiKiustml plant fit'for competition. On the otlier hand, export surpluses hae to be recorded for tliose years daring ‘winch imports underwent: a notable decline, more especially in 1926 (a year of reconstruction) and under the influence of the present crisis (now going on. for three ye: rs.) A notable event is the raising of the export figure to the pre-war level which lias since been effected; and.every endeavour is made to maintain it there in order to prevent a further decrease in output, even, thoughthe resulting business does not .yield a» profit... No one, ..however, can? possibly contend that, the increase in export surpluses, month after .'month,- indicates a condition of industrial prosperity, seeing that the number df unemployed is but little short of five millions. ? it is obvious, indeed that this active character of the trade balance—brought , about by the steep decline in imports and the efforts made "to increase exports—indicates better than anything else the serious nature of the existing crisis. NOT STGN OF PROSPERITY. The foregoing explanations ‘how that ns far as Gorman economic history since the inflation is concerned, the

balance of trade was passive "hen ousiuess was gootl and passive when it was bad. Hence it, is iuaffvisable to look upon these. UcaLures of ..foreign trade as advantages, or disadvantages in themselves, and as indications ol industrial prosperity oiy ,industrial ilccline It must be stated emphatkally that an activg; or pussivg . trade ba-Uince is nothing.; but .the equivalent—in,, terms of uiercbandiser— of a-,, sp,onding; inflow or outflow/ 0f..-capjta|,.andrDhat no, dir,eet and. can be- traced-.between s.u.cj) -a-nd M ie state, of t)ie. CQtmt.ry’S: kisiriesv; ; '. \ The state of busin«§3riat;>hoiiiSj,| the import oifi capital,and. the .’.pas.sjyri charjicter of the>balapee“..of. .ti'iide av.U’l-con-tinue for several; .years .to,; yomeii to be_ dependent ujion one ..another. Even ;if- , the present readjustinent -of. economic policy should lead-to a notable diminution in the cost of production ' and — ns a corollary—increase the' possibilities for the creation of capital in Germany, it will take a considerable time iri cause tin* five millions now out of employment to be reabsorbed by the process of production.

CHEAP CAPITAL IMPERATIVE. It follows that, in order 'to overcome the serious crisis, a further inflow of foreign working capital /at the cheapest possible rates is imperative, the* natural outcome of which will'be a return to the passive character 'of the; nation’s balance of trade. As time goes''on, however, the German reparation obligations and the interest etc., payable on the exi-tiiig.and future, loans raised abroad will once" more lead to an active balance of trade. •’ Tt is to he lion p d that this renewed activity will merely be the result of normal commercial development and thnt '"nr-ropsp wi’l oon'p<-pnrd to the nogressivp inorense in the total volume rxP tmdp in steed of being brought shout hv an lnvlesiralile flopline in the omiufrv’s purchasing power and, in imports.