The Daily News. THURSDAY, JUNE 22, 1922. REPARATIONS.

Taranaki Daily News, 22 June 1922, Page 4

The Daily News. THURSDAY, JUNE 22, 1922. REPARATIONS.

The failure of the suggested International Loan and Germany’s repeated attempts to secure postponement of payment of her reparation obligations has led to yet another conference between the British and French Prime Ministers. It has been decided to leave the Reparations Commission to investigate what steps should be taken to meet the possibility of an honest default by Germany and what her financial condition really is. Starting from the basis that the only means of payment at Germany’s disposal are goods and services, Great Britain finds herself faced with the prospect of having her markets flooded with cheap goods from Germany, whose selling price would be much below the cost of production there, owing to transport, and other subsidies plus the present rate of exchange. These cheaper goods would therefore be purchased in preference to similar goods manufactured in Great Britain. The obvious consequence would be stagnation in several home industries and increased unemployment. Another point to be considered is the effect of setting up restrictive tariffs against German goods in order to protect home industries, for the debt cannot be liquidated if the goods wherewith payment is of fered are kept out of the country Various solutions have been suggested, notably that payment from Germany should be demanded in the shape of raw. material” to be worked up in Great Britain. Another, that claims on industries and other- undertakings in Germany might be substituted for payment on such goods, and that only the interest on such claims be liquidated in goods and services. Another, that the restoration of the devastated areas in Europe be handed over to Germany, and that this principle be extended to include undertakings of a capital character in other countries, under Allied direction. None of these suggestions, however, get round the difficulty, and the fact that such gratuitous sei-vices would upset the natural equilibrium of trade must not be lost sight of. If the absorbing capacity of the world were equal to the supply from private sources plus that from reparation payments, the Government could place the reparation stocks on the market at the ruling market price; but this is not the ease; under-production due to lack of effective demand is hampering business as it is, and that effective demand capable of absorbing supplies from reparation 'and ordinary production should be quickly established is out of the question. Dislocation would ultimately right itself, because capital and labor would in time seek other fields; but they are both notoriously immobile, and a transition period of acute privation would be certain. This would be compensated for to some extent by the steady receipt of goods as payment in kind, and the question' would arise as to what extent, would the advantage of one be set off against the disadvantage of the other. If it were finally agreed that the advantage was inadequate, the only course would be to I demand payment in those goods land services that were not competitive. The adoption of this course, however, would probably necessitate abandoning all hope of payment of the whole debt. It is most unlikely that Germany’s, or any other nation’s, activities could be diverted from their natural chan nels into channels that were artificial without a considerable decline in productivity. It would seem that the maximum indemnity and payment in specific kinds of goods . or services must also be recognised as incompatible. In addition there is the purely political question as to how far the Entente nations dare reduce the indemnity, seeing that, a reduction in Germany’s liability would free money for renewed military preparations. Yet any policy, to be successful, must have the united backing of all the Allied nations notv no less than during the war, even though for the

moment neither England nor France contemplate coercive measures.