The New Zealand Railways Magazine, Volume 7, Issue 1 (May 1, 1932.)
A Creditor Debtor Entente—Al. Smith's Brainwave—P.N's. as Export Bonus—British Patience—A Super Swindle.
The obligations of debt-payment have ever played a big part in world-history, but never before was so big a strain put on them as in this fourth decade of the Twentieth Century. For one thing, the world never before witnessed so huge a total of public and private debt, including war debt. So much of revenue is ear-marked for debt service, that the funds for new enterprise are limited, and this fact in itself is a prime cause of lack of trade and lack of employment. A lending system that impoverishes the debtor to the point of stinting him of the necessaries of life—of bleeding him white—is a lending system in danger. No wise creditor is satisfied with such a position.
Mr. Smith's Coupons.
Mr. Al. Smith, a Democratic candidate for the United States Presidency, is asking his country to be a wise creditor. He would extend the Hoover Moratorium in a novel fashion, and would supplement it. He thinks that the United States Government should tell European Governments to forget for twenty years their Governmental debts to U.S.A. Further, the paper representing such debt should be handed back during the period as a percentage bonus on United States goods bought by the debtor country. Thus, if Italy (or Britain) bought a hundred million dollars worth of U.S.A. commodities, the Italian (or British) Government would be absolved of twenty-five million dollars worth of its American debt and interest thereon. Mr. Al. Smith confirms what Mr. Mellon said before becoming U.S. Ambassador to Britain—“Trade is better than debt.”
Some Delicate Surgery.
Concessions in capital and/or interest cause no disturbance when they originate with the creditor, in the manner willed by Americans like Messrs. Smith (Democrat) and Mellon (Republican). When they come as demands of the debtor, the whole moral position is altered. Coercion of creditors has occurred on innumerable occasions in the world's history (the list of defaulting Governments in itself is a considerable one), yet as a general thing the obligations of debtors have been respected and are the foundation of finance and of the confidence on which finance relies. This very delicate structure of credit is now being examined by almost every Government in the world to see what alterations can be made without impairing the machine. Experimentation of that kind will be one of the page 50 features by which this era will be remembered in history.
Although the American creditor has hitherto been unbending in his capital claims, the attitude of some big Americans is important, because what the world most needs is not the defection of debtors, but creditor-debtor co-operation. We live to-day in a world in which men and women are saying, “Food must be bought before interest and rent are paid.” At least one Government is saying: “We will maintain our standard of living before we will pay interest on bonds;” and in Australia a Federal Government is actually seeking to intercept the revenue of a defaulting State Government—an event probably unique in the Federal system. Such a climax crystallises the debtor-creditor issue in its most destructive phase; and if that phase is to be avoided for the common good,. it is in creditor-debtor co-operation that the remedy lies.
It has again fallen on a former Liberal, in the person of Mr. Walter Runciman, as Chairman of the Board of Trade, to rejoice in Britain's industrial progress under a policy of 10 per cent. tariff and off-gold. He said:
“British industries had adapted themselves to the needs of the present time, and the work-people had shown a tranquillity and determination unrivalled in the world.”
British patience has certainly been marvellous. The general strike of some years ago is forgotten. All classes have suffered. To keep industry going, and to pay the American debt, workmen have endured privation and taxable interests have been super-taxed. But the country has avoided repudiation. Its credit is high. And since the Soviet Republic itself asks its workers to invest in bonds, it must be assumed, on this anti-capitalistic evidence that the virtue of credit still has a place in the modern world.
Honour of Thieves.
America, in her struggle against crime, scored a point when she gaoled Capone. That was a distinct triumph over the class that almost killed law in the United States by exploiting the law's delays. But so far, in the fight over the unfortunate Lindbergh baby, the criminals seem to be well ahead. It is said that, without exposing themselves, they have got hold of about £10,000 of Colonel Lindbergh's ransom funds, and have thereupon raised their price, proving that the law of ransom is as elastic as is honour among thieves. The whole transaction is black in itself, but still blacker for society is the general threat it implies. When this class of crime becomes widely organised, whose child will be safe? Will anyone be safe?
First Hatry, then Kylsant, now Kreuger! It is of social importance that the British Courts dealt unsparingly with Hatry's frauds, and later with Lord Kylsant's deceptions. The Swede, Kreuger, if it is true that he forged bonds and entered them as assets, will never come to justice, either in Sweden or elsewhere, as he ended his own life. But the charges now brought, and the statements of responsible newspapers, put a different colour on the Swedish match magnate to that painted of him by Mr. J. M. Keynes. International finance has presented no greater sensation. Keynes seems to have regarded him as a great internationalist. The press now says “common forger.”
The Russian Sphinx.
Russia is credited with experimenting in various forms of State farming. In some cases the State is sole owner; in others there is partial ownership by private people, amounting to a kind of State-private partnership. One thing the cablegrams in April were fairly definite about—that farm stock was going back to private ownership. It is alleged that the neglect of State-owned farm animals proved ruinous and incurable. New Zealand, as a farm produce exporter, cannot be indifferent to what is happening in Russian farming. New Zealand's interest in Russian oil is less direct, but it is worth noting that the “Daily Express” predicts failure of the Soviet cheap oil and cheap wheat campaigns.
Clouds Nearer Home.
There was a time when the recent fighting in China would have claimed almost a monopoly of European newspaper space; when the prospect of Russo-Japanese war over Manchuria and Mongolia would have been a ruling topic; when the Hellenist outbreak in Cyprus, and the Italian outburst in Malta, and the renewed Anglophobia in Egypt and India would have provoked a new spasm of anxiety concerning the Empire's Mediterranean-Suez artery. But it is a changed world that reflects itself in newspapers to-day—a world striving first and foremost for economic recovery. The depression strikes too near home to stimulate public curiosity in adventure oversea. This quiescence does not mean that the diplomatic sky is cloudless. It only means bigger clouds confronting everybody in his own back-yard.
The Heart of Democracy.
With the usual contempt for ages gone before, some superior person has witheringly remarked that Dryden wrote an ode to a woman's eyebrow. If Dryden had been alive to-day he would have been expected to write an epic about Phar Lap. One touch of Phar Lap made the whole of the people kin; and if only they would investigate the economic situation with the same united zeal as was displayed in Phar Lap's rise and fall upon the American turf, many things should be made plain. But in the presence of Phar Lap, the British surplus and the record American deficit leave people cold. Who can bother about them, when Phar Lap is dead of colic?page 52