The Waterbury Democrat., 1938-05-25
WORLD SLUMP
 SEEN BREWING
 IN ARMS RACE
Neutral States Will Not Escape, Says British
 Economist

Geneva, May 25 UP) - managed to remain aloof from the arms race are warned in Interna- tional Labor Office Review, that it will be impossible for them to es- cape its aftermath, The warning is made by A. J. s. Easter British economist.
 "The trend toward greater na- tional lf-sufficiency," he said, "and the greater risk of economic rela- tions characteristic of a rearming world may suggest that, as interna- tional trade and capital movements become less important, neutral countries that do not desire or are not obliged to enter the rearma- ment race will escape the effects of it, and that if and when the boom collapses only the country imme- diately concerned will suffer.
 Easter argued that although there may be some evidence to support that view, it is doubtful whether even in the present restricted state of international trade and capital movements, national isolation from boomS and slumps is secure any where
 Fears to Pass Frontiers
 "Pessimistic views about the econ- onic future will pass national from tiers unchecked, to influence bus mess mems decisions on both sides he said. More important, over-in- vestment in any part of the worlds economic system will cause the other parts to become adapted to it, so long as there is any international trade at all. It is easy to see, for in- stance, that the American steel in dustry may be over built in con- sequence of orders connected di- rectly or indirectly with European re-armament, but there may be less obvious cases of other industries whose increased exports to Europe set free resources there for arma- ments making. Thus expansions and contractions in all international trading countries are linked, what ever the exchange system. Isolation from the international repercussions of rearmament or disarmament is an illusion"
 The chief danger, ahead, Easter believes, is that of top-heavy structure of production in which the distribution of real resources and consumption goods industries, will fstl to correspond to the distribution oT the stream of money income be- tween saving and spending. AL though in some cases readjustment may not be postponed indefinitely, most countries will have to deal with the inevitable recession when it comes he argues.
 Three-Point Program Urged
 ''The most hopeful beginning ai,d the most hopeful guarantee for the success of a recovery policy any where" he said, would be an eff Active armaments truce or arma nients convention containing econ- ornic clauses embodying information al agreement" The agreement would, aim at three main results: the lib- eration and expansion of interna- tional trade to facilitate diversion of war plants to peacetime production; a plain statement of national policy by the principal economic countries, and an exchange of information among them.
 "The alternatives" he concluded. ito an armaments truce and some international economic understand ing such as suggested are plain. Either rearmament will have its na- tural consequence in a world war, precipitated perhaps by the econo- mic breakdown of one of the com peittors, or the burden of arma- ments expenditure will become so in- tolerable in the poorer countries as to produce widespread hardship, with incalculable political conse- quences.
 Ut is certain that the economic problems that would be raised by return to international common sense in this matter are not insol- uble, given the modest degree of cooperation which would be as sured by an armaments truce it. self"