Evening star., 1932-07-03
BY FRANK H. SIMoNDs.

the imperial conception. This is, of
course, not true In any political sense.
Just what the empire means politically
it is at the moment impossible TO say.
The outraged Tory who in Parliament
the other day inquired if it were true
that Britain itself was now dominion,
fairly indicated the political confusion
into which the empire has fallen.
Politically the empire, so far as the
self-governing dominions are concerned,
is a confederation or a commonwealth,
as the British prefer to say, united only
through the crown. The ties that bind
these lf-governing states Of this COM
monwealth are and would be in crisis
precisely what the separate dominions
chose to make Of them. But Ottawa
Is not concerned with political ques-
tions The problem there posed is
whether it Is possible to establish some
form of tariff unity in the vast area.
And for Great Britain itself the ques-
ton appears to be one of life or death,
or, more precisely, that of a restoration
of prosperity or a continued decline.
Americans generally have been so con-
cerned with their own domestic phase Of
the great economic blizzard that they
have failed to appreciate at its full
value the extent of the disaster that
has overtaken Britain in the last two
that confronts British craftsmanship.
Before the coming Of the present de-
preston Britain found herself in the
presence of a real but not acute crisis.
Even before the World War 1t had eX-
hausted the advantages which had come
to it by being first-comer in the indus
trial revolution, and thus being able to
become both the furpisher and the
banker of a large part of the world.
It was gradually but unmistakably fall
ing behind in the markets of the world
as Germany and the United States ex-
panded their trade. 1t was losing the
advantage of cheap coal, as oil and
hydraulic power and the more cheaply
exploited mines Of other nations came
into play.
Foreign Investments Vast.
Nevertheless. in certain respects Brit
ain still remained supreme and in the
ordinary sense a going and profitable
business. 1t had accumulated vast for
eign investments, and the interest upon
this capital not only paid for the raw
materials and foodstuffs required to
support its almost completely urbanized
population, but to supply at least q
billion dollars annually for reinvestment
abroad It's shipping still earned large
revenues and the profits of its activities
as the world banker were enormous.
The war further accentuated the de-
cline of the British part in the trade OF
the world, as 1t also resulted in mate
rial reduction OF the foreign Invest
ments. But after 1920, despite the pro-
greSsive decline Of its export trade, the
profits from the other departments of
national activity gave Britain on bal
ance tidy profit at the end OF each
year. And this came largely from the
returns on previous investments. Brit
ain had thus laid up great reserve
against rainy day.
The economic blizzard, however, If it
did not permanently wipe out this re-
source of foreign investment, progress
sively stopped present interest payment
South America, Australia, Germany and
Central Europe, in which the aggregate
of British investment and short-term
lending is enormous. became bankrupt.
The regular inflow of interest payments
declined until the amount actually re-
ceived was no longer adequate to meet
the enormous requirements of the Brit
ish nation in foreign purchases OF food
and raw materials.
Thus for the last commercial year
Great Britain was, for the first time in
peace within the memory of living man,
actually lin the red" 1t cost her more
investments and earnings by all her va
riouS national occupations combined
could provide. She was frankly living
ION her capital But meantime two new
disasters, the one immediate, the other
eventual, had to be faced. When Brit
ain went off the gold standard and the
pound sterling lost one-quarter OF its
gold value, since Britains debtors paid
in pounds, both the principal and in
terest return Of her foreign investments
were cut quarter.
British Income Cut Of.
Concomitantly the obvious resolution
of Germany to pay no more repara-
tions and her equally clear inability to
pay more in any present time shut on
both German payments and the similar
payments of Britains wartime allies.
On the other hand. while the United
States postponed debt payment for the
moratorium year, it announced its pur-
pose to resume collection thereafter.
Thus the British were a. the same time
deprived Of the payments Of Europe on
an aggregate of S4,500,0 100000 and faced
with the necessity to pay America in
the same amount.
The effect Of this double blow is clear.
On the one hand British capital abroad
had been reduced by some 000,000,-
600 through the fall of the pound; on
the other, British Indebtedness abroad
had been actually increased an almost
equal sum through the German col
lapse and American refusal to cancel
the war debts. The Bslfour note had
permitted Britain to balance her Amer
lean payments by those of Germany and
the allies of the war. Now these Euro
pean payments would cease automati-
cally, while the burden Of the Ameri-
can debt would remain. But before
these two developments Britain was al
ready "in the red"
There was, too, third complication.
With the spread of the depression all
countries resorted to tariff increases.
The British had hoped with the fall OF
the pound to be able to increase their
exports through cheaper costs Of pro-
duction. This hope proved ilusory.
Accordingly they broke with the policy
of a century and went in for taritf
But the advantages of the tariff proved
relatively slight Imports fell little,
but exports continued to fall also.
Thus the single fact that is unmis-
taxable is that Britain, regarded as a
business, is operating at loss. She
Is buying more abroad than she can
pay for out of her own earnings, And
while the fall of the pound sterling
and the collapse of reparations and
debt payments in Europe have wiped
out a capital Of nearly $l0,000,000 900
so far as British income is concerned
American debt policy requires payment
on a $4,000 600, 900 war debt. In word,
where Britain was taking IN perhaps
$500 00o, 900 annually and paying Amer
ica around 5000 1000, 600, thus on bal
ance being s300.0o0,000 to the good, she
is henceforth $500, 900, 900 to the bad
.fff,a cha had
600 she could not make both ends meet
America Still Solvent.
OF course the point has nothing to
do with balancing the national budget
The United States has just passed
through great uproar on this question
but whether the national budget were
a A -ir.n az a h.,r