AN ECONOMIC ASPECT.

Lyttelton Times, Volume CXVI, Issue 16751, 5 January 1915, Page 3

AN ECONOMIC ASPECT.

PENALTIES OF DEFEAT.

GERMANY'S LOST TRADE. An interesting analysis of some of the economic aspects of the war waa made by Professor W. J. Ashley (Dean of the Faculty of' Commerce at Birmingham University), in a lecture which ho delivered to the Workers' Educational Association, at the Birmingham University, on November 18. The importance .of the economic aspects of the war, Professor Ashley said, must not be exaggerated. If the naval forces of the enemy and of the Allies were equal Germany would 'oe in a far safer position than Britain, for Germany had not sacrificed its agriculture to its manufactures to anything like the same extent as Great Britain, and was much more able to run the risk of a stoppage of foreign food supplies. The mere magnitude of our trade could not have saved us. Moreover, difficult as German's economic position is, it is not so diffi» cult as to compel, by itself, a speedy termination of the war. It was, perhaps, impossible to find out what the state of affairs actually was in Germany now, but he would not bo surprised to learn that life on the surface had hitherto gone on very much the same as in England, that such distress as there may have been'had been relieved, and that there was not, as yet, any widely diffused popular discontent.

EVER-ACCUMULATING WEIGHT. ' And yet, though the economic factor was not the most vital one. it was one of essential importance,! and one which, as, the months went, on and the German forces were steadily driven back, would make itself felt with an ever-accumulating weight and hasten the final submission. "For if only" Britain and the Allies can retain the] mastery of the sea between the economic difficulties of England and Germany there is a fundamental difference'. England's difficulties were duo in the main to the complicated _ mechanism of modern credit, international payments, and contracts for the future. Germany did not feel these particular difficulties to anything like the same extent; it is able to boast, for instance, that it did not need a moratorium. "That, however, "is simply because London had become the credit, centra of the world and the pivot of the delicate apparatus of the foreign exchanges." But the temporary breakdown of the credit and market system was capable of being repaired, and j has in large measure been repaired already, by co-operation between the Government, the b-mks. and the great organised interests which are involved, and by the assistance thus rendered possible to billbrokers, to merchants with outstanding foreign accounts, audi to dealers- in futures. | "Meanwhile, the productive capacities, the mutual wants, on which British economic activity at home and: abroad was really based, have remain-1 cd substantially as before. Te begin, with, quite two-thirds of the nnnuaL produce of British industry is normally consumed at home. There remain the same needs to be supplied, and so long as our people can import - their food and the necessary raw materials there was no reason why most of this consumption should not be resumed as j soon as the first alarm was over.

CAPTURING GERMAN TRADE. " Of our export trade the cessation of business with Germany and Austria, even with Belgium and Turkey thrown in, withdrew only between an eighth and a, ninth. But, on the other hand, the market in England and in the British colonies which Germany was losing at the' same timo can evidently be supplied to some extent,' at any. rate, from English factories, not to' mention Germany's other oversea markets in which, as we shall find good reason for believing, it must b 9 increasingly difficult and soon impossible for her to dispose of her goods. Even making largo allowances for American and Japanese enterprise, there are certainly quite promising openings in these previous German markets for fresh British trade. Accordingly, when once credit and exchange difficulties have been got over, the prospect is that Britain will regain, and more than regain, all it has lost." The process of recovery in our own trade was already talcing place. But in Germany the obstacles to trade were not of the secondary order, resulting from the temporary interruption, in the delicate balance of the market machinery. They were of that absolutely primary character which were involved in the sheer physical impossibility of obtaining the imports and disposing of the exports to which its economic life had 'been adjusted. As long ago as 1900 it was reckoned by a distinguished German economist that 70 per cent of German trade was overseas. The proportion to-day was even greater, and, accordingly, so long as Germany was unable to command the seas, every single German cargo, inwards or outwards, was a fresh hostage to the fortune of war. TREMENDOUS DIFFICULTIES.

"This is rot the mere optimism of nn English enemy. It is what the economists of Germany have long ago quite clearly recognised. The representatives of German high finance may talk as they please about the vast accumulation of wealth in Germany, and suggest that it can bear with ease even the enormous burdens of a war like this. But the economist knows that the only forms of wealth on which a nation can rely in times like this are forms which can feed and clothe it, and that to distribute these means of lifo they must either be doled, out by the State or earned by employment. " A few figures may bo useful by way of illusration. To begin with, quite 40 per cent of Germany's export trade and 44 per cent of her import trade have been with the countries with which sho is now at war. To its allies and to neutrals it cannot convey merchandise in its own ships (except "perhaps in the Western Baltic), because all its ships that have not been captured are now confined to the ports. Jt can dispense with its own "vessels and do its business by means of neutral shipping or through neutral countries, only for a small and decreasing part of its trade; and this for several reasons.

" In the first place, the neutral shipping available is very limited. , , The shipping of the neutral countries is only about one-fourth that of the world, and only a portion of this fourth can bo spared for Gorman cargoes. Next, a large part of what Germany might import is absolute or conditional contraband, and will be avoided bv neutral shipowners. Then, again, tlie Allies have put an embargo on the export from their shores of certain vitally important materials for which they are the chief sources of food supply.' •"And. finally, the proclamation of the North Sea as a dangerous area, and still more the olmous fact that, owing to Germany's initiative in the distribution of mines,.it obviously is exceedingly dangerous to shipping, will send up freights'and insurance rates on cargoes sent by the North Sea to prohibitive figures.'. FOOD SUPPLY. " As to food, owing to measures of agrarian protection, Germany is better off than wo should be in a like case. The chief bread-corn of the people is still rye,'and practically the whole* German supply is grown within the Empire. But white wheat-broad has in recent been owning >i#*p mora

general use, and even the so-called ' block bread' has a good deal of wheat flour in it; so that wheat now constitutes about two-fifths of the nation's bread. Of thi6 wheat, a good' deal more than a third has lately-been imported, mainly from Russia., It is hardly conceivable that this deficiency should be made up from other sources. And it is a commonplace in economics that when prices are determined' by competition the effect upon prico of a deficiency J n supply is altogether out of proportion to the deficiency itself.

"It is a significant thing that weeks after the plan of fixing food prices in England has been discontinued as unnecessary, the German Government has been compelled to have recourseto it, with this notable difference, that, while bread was never in the English lists, it is the price 'of bread which demands the German Government's most anxious attention. It looks, indeed, like the beginning of the end, even though the end should be a good way off.

"I shall assume, then, that the Allies are going to win, and that economic pressure will contribute raoroatnci more, as the war goes on, to that consummation. What is going to be the outcome? Much doubtless that w© can as yet hardly foresee; but there are a few large results that are b e^nn i n S to make themselves discernible."

One result, Professor Ashley said, would lie the further consolidation of the Empire. The closer intercourse not only between individual Britons but also between the several British Governments engaged in a common ana world-wide task, could not but contribute towards the solution of the oreat problem of allying self-governing nationalities in a. permanent confederation for common purposes. The cup- ■ ture of the Emden by the Sydney w.is north, not only for imperial sentiment, but also for Imperial organisation, far more than the Emden cost ur, in cn.ntured merchantmen. The best missionary of the Empire in South Africa, the best reconciler of Boer and Briton had been William 11. LOST COLONIES.. " If there is reason to believe that colonies are craved for by would-be German colonists they have been made useful by Germany as centres for the distribution of German exports—the avowed object, for instance, of KiaoChau— as well as for the mimosa of coaling and wireless stations. The result of the war will he the loss of most of _ them, if not of all. The British Government will probably want to be as generous as possible when the settlement comes; but others will have a say in the matter besides the Government of Great Britain. Considering the circumstances under which it was acquired, not even Germany. I should imagine, can expect to get Kiao-Ohau back. And as for the rest, those too far off from any great British dominion to compel its attention, and really at the disposal of the British Government, may possibly be the subject of negotiation. But German possessions which the Dominions have themselves conquered, and which are within their sphere of solicitude, will have to remain ill the hands of their new masters. " Of more immediate interest to us in England is the dramatic transformation which the war is effecting in the economic policy of the Home Government. Under the pressure of necessity the Government, with the complete support, of the nation, instantly abandoned the traditional policy of economic inaction. We now wake up every morning to find Government credit extended to some new department'«of commerce, som<* branch of trade put under an embargo, some enormous purchase of commodities undertaken, such as sugar, some extensive raw manufacture encouraged and ' assisted, and a financial return guaranteed to investors, as for the-production of dyestuffs. T do not think the significance of new departures like this has been sufficiently realised, by. the German .observers, who imagined the English jwere a decadent" people/. NEW SPIRIT OF ECONOMIC •COURAGE.

"Of the trade measures, breathing the same new spirit of economic courage that have followed in rapid succession upon the outbreak of war, the most significant is the stepping of the Government into the arena of manufacture. As to the bill-broking machinery and' the futures market, they have only to be put on their legs again and will march as before. But a country in which the Government accepts in principle the duty of ' guaranteeing ' the ; permanent' production within "the land of commodities previously imported from the- enemy's country can never be as before. "There has been a great deal of talk about ' capturing German trade.' Xo number of statistical pamphlets and newspaper paragraphs would make the English business man take any practical steps to 'capture German trade' unless the matter were pressed upon him in some more evidently remunerative way. What is really happening is that buyers of German manufactures, both at Homo and abroad, are beginning to get to .the end' of their stocks, and are turning to English manufacurers to supply them,. ..'••, "The word which strikes the keynote of the present disposition of the business world is ' continuity.' Very big capital expenditures, however desirable, will probably not be entered up unless the Government follows the dye-stuffs precedent and offers a financial guarantee, of debenture interest or the like. But many others of smaller amount will probably be undertaken, if the war 'continues, and if ' inquiries' from customers accumulate to a stimulating extent, without waiting for a formal guarantee in the confidence, which I cannot doubt is a reasonable one, that when peace returns they will not bo left in the lurch. Great stocks of German manufactures will, of course, have accumulated by the time peace is made, and the e will be thrown upon the market at almost any price. Somehow or other, and there are more ways than one, some means will assuredly have to bo found to prevent the sudden extinction of the newly-created English businoss. NEW PEELING AND NEW INTERESTS. "If I could hope that anything I could say would reach German ears, I should remark that the longer the war lasts the worse it will be Tor Germany, economically as well as politically. The longer it goes on the more it will he straitened in its economic activity when peace returns. England has hitherto afforded Ger-; many an elbow room which has been highly convenient to it in the alternating expansion and contraction which form the cyclical movements of trade. This is very apparent to anyone who looks into its industrial history and learns how it was it escaped so lightly from ithe great depression of 1801-1902. " That elbow room is going to he taken from it, and the more completely the. longer it waits. It is not' that the English people'have heen converted to a new economic creed: it is that the English people will come out of this war with a new feeling for its Jellow-Britisliiars, its allies; and itfi enemies, and with new interests to which its honour will he pledged."