The Economist's World of Debt—The Politician's Rebellion—What is the Cure?—“Reduce Debts!”

Politician's Economic Compass.

The war legacy of unparalleled world debts began to assume a definite shape with the reconstruction of Continental currencies (after inflation) and the return to the gold standard, which event was recorded in Britain in 1925. Since then a deflating world, over head and ears in debt, has realised that the pre-war separateness of politics and economics is ended. The world's commitments are so great, and the cost of everything is so high, that no step at all can be taken—in the direction of social rebuilding or otherwise—without an anxious glance at the financial barometer. The politician must either be an economist (thus clipping his own political wings) or else, in his political ambition, he must defy economics. Civilised countries the world over are either taking painful heed of their economic limitations, or are essaying courses that bankers say will end in ruin.

Throw the Compass Overboard.

In Great Britain that very remarkable man Mr. Philip Snowden, Chancellor of the Exchequer, has allowed social reform expenditure to run to a Budget deficit, but he is credited (11th Feb.) with having blocked the Lloyd George plan for a big developmental loan to deal with unemployment. A deficit is a problem for the Chancellor; a loan is another debt burden for posterity. Mr. Snowden hates debts—most of all the American debt, and constantly gives figures showing that the trans-Atlantic burden is relatively heavier in the case of Britain than in the case of France and Italy. Few will deny that Mr. Snowden is an economist as well as a politician. On the other hand, banker criticism in Britain is being heavily concentrated on Mr. Theodore, and still more on Mr. Lang, for their financial proposals for Australia and New South Wales respectively — proposals branded as uneconomic.

A Universal Issue.

It is not the province of this column to enter political judgments, and the purpose of the last paragraph is merely to show that while Britain remains in the class of countries taking heed of economist advice, Australia (from the British banker standpoint) is a country professing uneconomic expedients. This fact is too profound to be passed by, and it needs no elaboration. It throws up two fundamental things—(1) The complete latter-day interdependence of politics and economics, and (2) the choice that politicians must make between keeping in step with the economist, and marching away from him into some new adventure. The issue that is between Mr. Snowden and his Left Wingers, and between the Rights page 50 and the Lefts in Australia, is becoming also the issue between Mr. Hoover and those who would lead him into great Communistic experiments.

International Cure.

This critical contest between economic ideals and political objectives, affecting the English-speaking world and impoverished civilisation generally can be approached from two ends. From the national end, giving rise to such separate policies as one witnesses in Britain, Australia, America, France, Germany, Russia, etc. Also, from the international end, where hope centres on some big agreement for reduction of debts, removing the throttle on trade and industry. Australia's moral claim for reduction of her British debt emphasises Britain's moral claim for reduction of her American debt. With the fall in prices (appreciation of gold) all the debts are doubled. “The British annual payments to America of thirty-three millions are now really sixty-six millions,” says Mr. Francis Hirst. Ditto the German debt, the Australian debt, and others.

Danger of a Divorce.

The economic crisis precipitated by the war debts and by the deflationary policy adopted by the gold world, having caused forced marriage of politics and economics, may go farther and cause a violent divorce of the contracting parties, unless the overhead pressure can be reduced by international action or otherwise. Whether the immediate events threaten divorce, as in Australia, or the continuance of strained matrimonial relations as in Britain, the moral lesson is the same—a paramount need of a settlement that will be more than Empire-wide and more than nation-wide. Under threat of losing its economic bearings, will the world be forced into a new basis of political-financial compromise? That seems to be the outstanding question of 1931.

How is it Done?

A member of the House of Commons, Mr. Locker Lampson, Conservative, declared in January, the Russians were being starved in order to allow Russian wheat to be exported at prices undercutting other wheat-exporting countries. It is certainly of great interest to know whether the Russian wheat export at low prices represents a genuine economic success in the legitimate lowering of costs, or whether it represents starvation and forced labour. Meanwhile, there is a silver lining, London cabled on 5th February that bread at 6½d. the quartern loaf is “the lowest since 1915.” The people whose bread is cheapened are New Zealand's chief customers.

Over-production and Price.

When the depression deepened in Australia, the Government appealed for more wheat production, Australia being in sore need of additional exports to counter-balance the fall in export values, and to meet pressure of interest payments. In the United States, which is not bothered with the need of paying interest oversea, the Federal Farm Board is prescribing less wheat production. The Board's chairman, Mr. Legge, says that the United States farmer cannot compete in world markets and ride in automobiles too. As to the home (U.S.) market, if over-production and over-supply continue, “artificial maintenance of price will have to be abandoned.” In other words, the world market will not buy dear U.S. wheat, and the now depressed home population cannot be compelled to.

A Transformation.

If one were to compare the news of the world to-day (as represented by the cablegrams and radiograms) with the news of the world before the war, he would see revolutionary changes. A cross-section of pre-war world's news would have a greater percentage of pure politics, as apart from that blend of politics and economics which forms the staple news of the day. Before the war, the Balkans, or some other Continental centre was generally providing for the cablegrams highly-coloured political events. There could be a political crisis in France without fear for the status of the franc, and when the Kaiser rattled his sabre the page 51 world thought of millions of soldiers, not multi-millions of marks. But now all is changed. The pre-war world knew that Mars brings slaughter. The post-war world now sees in his train the spectre of bankruptcy also.

Living in Fast Times.

The land speed record of 231.36 miles an hour, made by the late Sir Henry Segrave in 1929, with the Golden Arrow, has been beaten by Captain Malcolm Campbell, who in two runs at Daytona averaged 245.73 miles an hour in a Bluebird car. It is stated that the Bluebird's engine is similar to the engine that won the last Schneider Cup race. Its chance to maintain its supremacy in the air as well as on land has been restored by the subscribing in Britain of private money to meet the cost of defending the Cup. To defend the sea speed record, Miss England II., it is cabled, will be seen in action this year in America. The pilot will probably be Kaye Don, who at Lough Neagh, in January, broke Segrave's record by driving the boat at 107 miles an hour.

An Important Branch of the Railways Organisation.
(Rly, Publicity photo.)
Some of the typists under the charge of Miss B. McQueen (standing on right), at Railway Headquarters, Wellington.

Millions in Smoke.

Certain economists in Britain are trying to insert reservations in the gospel of thrift. Mr. McKenna, banker, is against the thrift that amounts to underconsumption. But where does thrift end, and where does under-consumption begin? How would one draw the dividing line? If a car-owner economises in its use, at what point does he cease to be thrifty and become an under-consumer? To fix an under-consumption line in benzine or in tobacco would be difficult or impossible.

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