Economic Condition of the World.-Declaration on the Economic Conditions of the World (As approved hy the Supreme Council on March 8, 1920.) The Supreme Council of the Peace Conference has taken into consideration the causes which combine to produce the present high cost of living, and now thinks it desirable to publish the following declaration:- 1. General Statement of the Position.-The war which the democracies of Western Europe were forced to undertake in defence of their liberties, and which they have carried to a triumphant conclusion, has necessarily entailed the disorganization of the whole economic position of Europe. This disorganization is reflected in the rise of prices which is at present the source of universal discontent among the peoples, belligerent and neutral alike. History shows that high prices are the invariable result of war, and in comparison with most wars the present situation is far from abnormal. In the Napoleonic wars, prices in England rose 75 per cent, and took eight years to beoome normal again. In the American Civil War American prices rose 100 per cent and took 12 years or more to bdcome normal. As the result of this war, the most gigantic of all in the history of the world, general wholesale prices (as distinct from the cost of living) have advanced since 1913 approximately as follows:- The United States.. .. 120 per cent. Great Britain 170 France 300 "Italy 300 "Belgium 300 " Many causes contribute to this rise in prices, but they may all be regarded as directly or indirectly the consequences of war. For nearly five years the energies of the people have been diverted from the work of production to the work of destruction; for nearly five years the creation of new resources has been stopped and the resources of past generations consumed or destroyed. To feed and equip the nations engaged in this struggle, their governments had to mortgage the prospective wealth of their countries in the form of credits or paper money. The excessive creation of these tokens of prospective wealth, as compared with the volume of real wealth, is indicated by the rise in prices. Nothing but the hard necessities of war could have justified or excused this procedure. Its dangers are obvious. Public appreciation of the necessity of maintaining a strict balance between normal revenue and expenditure is weakened, and the ordinary individual is misled by the illusion of prosperity to believe that there is an increase in real wealth and an abundance of available supplies, and is encouraged in habits of extravagance. Government action may mitigate or disguise some of the effects of the rise in prices, but it cannot remove the root cause, which is the destruction of wealth. This loss of wealth is, after all, but a small matter compared with the sacrifice of life which was freely given during the war to overthrow militarism and re-establish national liberty in Europe. But its effects can only be healed by the passage of time, and the people of Europe, if they wish to expedite the process, must contribute to the works of peace the same ardour and devotion as they gave to the prosecution of the war. In the sub-joined review of the position the Conference indicates the lines on which it considers that a solution of the problem can best be found; but it is vain to expect that the result of the war can be eliminated by a stroke of the pen. 2. Peace not yet re-established.-At present Europe is far from having returned .to the conditions of complete peace. Russia is stated to have in the field armies of 1,500,000 men or more, and the disbandment of these armies is of course a primary condition of European peace. But many also of the countries which have been created or enlarged as the outcome of the war have still the appearance of armed camps; and not less than 1,000,000 men are still under arms in Poland, Roumania and the new States created out of Austria-Hungary. Moreover, although armed conflict has ceased, the mutual rivalries and antipathies which are the natural legacy of war still dominate many of the nations of Europe, and are leading to the erection of artificial economic barriers which must seriously hamper, if they do not entirely prevent, the restoration of the common prosperity. The first step to the reconstruction of Europe is to complete the process of demobilization in all countries, to resume the full employment in peaceful pursuits of the whole of the ablebodied population and to encourage by every means the normal interchange of their products. Until peaceful conditions have thus been resumed in every branch of life, Europe, which has suffered so terribly during the past years of strife, will continue to suffer from the restlessness and lack of confidence which is the natural consequence of the upheaval through which she has passed. 3. Increase of Production.-Liberty has, indeed, been preserved to Europe, and the threat of military domination is gone. This great achievement has however left victors and vanquished alike impoverished and enfeebled. Death or disablement has removed from the work of production millions qf men in the prime of life; and millions more have had their efficiency impaired by sufferings on the field of battle or through pestilence or privations at home. Instead of having the assistance of these sons, each country has to provide, in the most generous measure possible, for the maintenance of the maimed and for the families of the fallen, and this must for many years to come be the first charge on the national income. Meanwhile those who remain have not yet recovered the former habit of industry, and have not yet re-adjusted their standard of output to compensate for the reduction of hours which public opinion in all countries has demanded and is securing. At the same time, of the machinery which might have made good these deficiencies much has been destroyed, and more has been worn out, no adequate renewals being possible during the war. In particular, all means of transport have been disorganised, and the efficiency of the railway systems has been universally impaired. To these general losses rpust be added the special disturbances of production in each country. For example, a large portion of the most

fertile territory, more especially in France and in the North of Italy, has been devastated; while in France also industrial centres and mining areas, of vital importance to her industries, have been competely destroyed and will not be able to resume production for years to come. In Belgium, similarly, the national industries suffered greatly during the period of occupation. Germany on the other hand, has its industrial establishments intact, but is paralysed by lack of capital and credit, and by the disorganisation bred of defeat; while in the case of Austria these conditions have led to the complete breakdown of her economic life. Russia has passed through all the throes of civil strife and is still the victim of confusion and anarchy. Each country suffers from a different difficulty, but each contributes its share to the common deficit. In agriculture, Russia, which before the war was the most important granary of Europe, and of whose products Europe is in such need, either has not been producing at all or has not been able to exchange with her neighbours such products as she has. Roumania, which before the war exported annually over six million quarters of wheat, has altered her system of land tenure, and is now ceasing to produce more than suffices for the immediate needs of her own population; indeed, on the 1st December last, it was stated that only 530,000 hectares had been sown as compared with an annual average before the war of 1,000,000 hectares, though some improvement has since taken place. Other countries again such as France and Germany which were largely self-supporting are unable at the present moment, owing to the devastation of the land, the destruction of buildings and machinery, or the lack of capital and fertilisers, to produce more than a fraction of what is required for their own needs, and have been increasingly driven to compete in the world market for the limited supplies now available. Again, in regard, to coal, production in every country has been decreased, the approximate figures of output in metric tons for 1913 and 1919 respectively being as follows:- United Kingdom. . . . France (including Lorraine) Germany* (excluding Saar and Lorraine) United States of America 1913. 292.000. 000 44,000,000 173.000. 000 517.000. 000 1919. 234.000. 000 22,000,000 109.000. 000 495.000. 000 Although detailed statistics are not available, such information as we have goes to show that the output of factories and manufacturing industries throughout the world is below the standard which prevailed before the war, and far below the demands now made upon them. The net result of under-production arising from these various causes is an acute shortage of the essential supplies on which the economic life of Europe depends. This situation requires to be met with the same courage as was displayed on both 6ides during the war. The energy which was then thrown into the production of foodstuffs must be reVived and redoubled in order to restore the situation. It must be made a point of honour with the tillers of the soil in every country to show that peace can extract from nature more than war. Europe must take Exclusive of lignite. measures to provide herself more largely with the food she requires in order that she may resume her full activities, and much can be effected if the necessary preparations are made without delay. In regard to industry generally, each Government must take steps to impress on its people that the limitation of production directly assists the upward movement of prices, and that it is by increasing production that they can best help to solve the problem. Every proposal which may assist in this direction deserves the closest attention. Governments must co-operate in the reconstruction of the common economic life of Europe, which is vitally interrelated, by facilitating the regular interchange of their products and by avoiding arbitrary obstruction of the natural flow of European trade. The Powers represented at the Conference reaffirm their determination to collaborate with a view to the execution of these aims. 4. Increase of Consumption.-Meanwhile, instead of restricting the standard of consumption in view of this shortage of supplies, there is a general tendency to make heavier and heavier demands for the limited quantities of goods that are available. The increase of consumption takes the form of an intensified demand for commodities of every description. The demand not only for foodstuffs, but for clothing, boots and other manufactured articles, is in most countries far in excess of the supply, while , luxuries of every kind command a readier sale than at almost any previous period. The general extravagance now observable throughout the world is a phenomenon which has almost invariably followed in the footstepe of every great human catastrophe. It is well known to those who have lived in a district which has suffered from earthquake, and the history of the great plagues of Europe amply illustrates it; and the results have always been economically disastrous for the populations affected. It must be one of the first aims of each government to take such measures as appear appropriate to the circumstances of its own people to bring home to every citizen the fact that for the time being, until supplies are increased, it is by diminished consumption and unselfish denial that they are best able to help themselves and the world and that extravagance increases the national difficulties and perils. 5. Credit and Currency Inflation.-The im-. mense increase in the spending power of Europe which is reflected in this extravagance has been brought about by credit and currency inflation during the war. Broadly speaking, the general level of prices may be said to be the expression of the ratio between spending power on the one hand and the volume of purchasable goods and services on the other. In order to prosecute the war, particularly in European countries, every Government found it necessary to increase the amount of currency in circulation. Unable to raise sufficient funds by taxation and by loans from real savings, they were compelled to resort to borrowing from the banks and the use of the printing press. Additional spending power was thus placed in the hands of the public at a time when the volume of purchasable goods was being reduced. For example, the note circulation has grown approximately as follows:- In the United Kingdom from 30,000*0002. in 1913 to nearly 450,000,0002. at the end of 1919. (About 120,000,0001. of the latter figure takes the place of gold coins in circulation in 1913) ; In France from 230,000,00*. in 1913 to 1.500.000. 000Z. in 1919 ; In Italy from 110,000,000*. in 1913 to 700,000,000*. in 1919 ; In Belgium from 40,000,000*. in 1913 to 200.000. 000*. in 1920 ; While the war debts (which are closely connected with inflation amount, in the case of the United Kingdom, to over 7,000,000,000*. In France to 6,750,000,000*. In Italy to 2,750,000,000*. In Germany (apart from liabilities for reparation) to 9,500,000,000Z. In the United States to 5,000,000,000*. The total war debt of the world is approximately 40,000,000,000*. Throughout Europe prices at present are with few exceptions paper prices. But gold prices have also risen, that is to say, gold has a lower purchasing power than it had before the war. This is the inevitable result of the many economies which have been effected in the use of gold for monetary purposes and, on the other hand, of the dispersal of stocks of gold previously held in Europe and their excessive accumulation in other countries. Thus, in the United States, although the gold standard remains effective, prices have advanced 120 per cent over the pre-waf level. As the purchasing power of gold is ultimately the measure of price, it must be obvious that this change is itself responsible for much of the increase in the price of commodities, when expressed in terms of the currencies of all countries. A considerable part of the rise in prices in Europe is due to this depreciation of gold, but there is an additional depreciation due to excessive issues of paper currency. The continual expansion of paper issues with its necessary consequence of continuously depreciating exchange prevents the grant of the commercial credits required by the situation, and thus fatally hampers the resumption of international commerce. It is essential to the recovery of Europe that the manufacture of additional paper money and Government credits should be brought to an end, and this must be effected as soon as the war expenditure has been terminated. 6. Profiteering.-Excessive profit making, commonly known as profiteering, has resulted from the scarcity of goods. Deflation and a check upon the continuous rise of prices will do much in itself to end the conditions that make profiteering possible. But it is essential, in order to obtain the co-operation of all classes in the increase of production, that each government should take such steps as are appropriate to the circumstances of its own people to assure and guarantee to the workers that the burdens that they are called upon by their efforts to remedy are not aggravated by those who would exploit the economic difficulties of Europe for their own personal ends. 7. Restriction of Government Expenditure.- Demobilization has been effected by the Powers represented at the conference at a far speedier rate than could have been anticipated, but heavy abnormal expenditure Resulting The national currencies have in each case been converted into sterling at approximately par of exchange. from the war still requires to be met (particularly in connection with the restoration of the devastated areas). Such charges must be regarded as part of the war burden, but in order to stop the process of inflation and to start the process of deflation, the necessary measures must be initiated by ever country to balance recurrent government expenditure with national income and to begin at the earliest possible moment the reduction of the floating debts. The best remedy of all is that debts should be reduced out of revenue, but in so far as this is not possible, floating debts should be consolidated by means of long term loans raised out of the savings of the people, and it is out of the savings of the people that any fresh capital expenditure must be provided. The governments here represented have undertaken the consideration of the measures required for this purpose. Restriction of Private Expenditure.-But private economy is not less urgent than economy in government expenditure. It is only by means of frugal living on the part of all classes of the nation that the capital can be saved which is urgently required for the repair of war damage, and for restoring efficiency to the equipment of industry, upon which future production depends. It is of the utmost importance that it should be brought home to every citizen in each country that just as in the war their private savings made available for the government goods and services urgently needed for the prosecution of hostilities, so in the period of reconstruction, economy by individuals will reduce the cost of essential articles both for themselves and for their fellows and will set free capital for the reconstruction of their country and the restoration of the machinery of industry throughout the world. 9. Collapse of Exchanges.-Commercial intercourse, on the resumption of which the recovery of the world depends, is governed by the foreign exchanges, and most of the foreign exchanges have been to a greater or less extent disorganized during the past year. The discount of European currencies on New York approximately stands as follows: Per cent. Pound sterling 30Franc (Paris) 64Franc (Brussels) 62Lire 72Mark 96 The state of the exchanges does not reflect the true financial situation of the countries concerned, provided their industrial life can be resumed. It is in part the result of depreciation in the purchasing power of the several currencies, but in part it results from the failure of exports. Many countries are temporarily dependent on the importation of food, raw material, and other necessaries, and are not in a position to export nearly sufficient to furnish the requisite means of payment. The result has been severe competition for the very limited supply of bills of exchange which has forced down the rate of exchange beyond the point which properly represents the purchasing power of currencies in the buying and selling countries. In the degree in which rates of exchange are so forced down, the prices of imports are forced up and the prices of food and raw material increased. The ultimate cure is to raise exports to the requisite amount, and this should be impressed on the trading communities affected, but it is not im-

mediately possible to increase exports sufficiently, and unless steps are taken to furnish a substitute the situation will rapidly become worse. It is therefore urgent to obtain a temporary balance of trade by means of commercial credits, accompanied by the reduction ct all non-essential imports to an absolute minimum. 10. Difficulties of Credit.-Attempts to manipulate the exchanges by government action will only retard ultimate recovery. Meanwhile means must be found to prevent the breakdown of trading operations. At the present moment, the governments of Europe are not in a position to furnish more government loans except to a very limited extent for the purpose of relieving extreme distress, anl state aid in this matter would be at the best entirely inadequate. It is from the resumption of commercial credits that the necessary means must be found for securing the interchange of the resources of the world, and ti e Conference is assurred that such credits will be forthcoming as soon as governments have taken steps to strengthen confidence in their commercial and financial policy. The Powers represented at the Conference recognize, however, the necessity of continued collaboration in this matter, and they will continue to consult together regarding the provision and distribution of the necessary raw materials and foodstuffs with a view to Uie early resumption of normal conditions. They recognize, further, the special position of the devastated countries, and particularly of France, having regard to the widespread devastation which her territory has suffered, the consequent diminuation of her immediate resources, and the heavy capital expenditure which she must incur in restoring (lie damaged areas. The restoration of the devastated areas is of primary importance to the reconstruction of Europe. They have also had under consideration the special position of Germany, where enterprise is at present paralysed and the possibility (*f obtaining commercial credit closed, by reason of the fact that her obligations for reparation are still totally unknown. It is most desirable, therefore, in the interests of the Allied countries, no less than in that of Germany, that at the earliest possible moment the total of the reparation payments to be made by Germany under the Treaty of Versailles should be fixed, and that, in accordance with the terms of the Treaty and the reply of the Allied and Associated Powers to the German delegates dated the 16th June, 1919, she should be enabled to obtain essential foodstuffs and raw materials, and, if necessary in the opinion of the Reparation Commission should be allowed to raise abroad a loan to meet her immediate needs, of such amount and with such priority as the Reparation Commission may deem essential. In the case of Austria, the powers here represented recognize that even more active assistance may require to be given. 11. Need for Co-operation of all Classes.-The review which the Conference has made of the situation indicates that the process of recovery of Europe must necessarily be a slow one, which cannot be expedited by short-cuts of any description. It can, however, be most seriously hampered by the dislocation of production by strikes, lock-outs and interruptions of work of all kinds. The civilization of Europe has indeed been shaken and set back, but it is far from being irretrievably ruined by the tremen- dous struggle through which she has passed. The restoration of her vitality now depends on the whole-hearted co-operation of all her children, who have it in their own power to delay or to accelerate the process of reconstruction. It is the hope of every Government that improved conditions of livelihood and of employment may be assured to the workers. To secure this result, each individual must contribute his best efforts to the restoration of his country. Taking the Allied countries as a whole, the recovery of industry has been remarkable. Nearly 18 months have passed since hostilities terminated ; and the reaction which necessarily followed the tense strain of the war is gradually passing. The citizens of every country are once again resuming the normal occupations of home life, and in their renewed labours the Conference sees a clear sign of renewed prosperity. 12. Summary of Conclusions.-In view of the above considerations, the Supreme Council, after a careful survey of this vitally urgent problem in all its aspects, agree upon the following recommendations with a view to the amelioration of the present economic difficulties of Europe:- (1) It is of paramount importance that peace conditions should be fully and completely restored at the earliest possible moment throughout the world. In order to achieve this object it is desirable- (a) That peace and normal economic relations should be re-established as soon as possible throughout Eastern Europe; (b) That armies should everywhere be reduced to a peace footing, that armaments should be limited to the lowest possible figure compatible with national security, and that the League of Nations should be invited to consider, as soon as possible, proposals to this end; (c) That the states which have been created or enlarged as the result of the war should at once re-establish full and friendly co-operation, and arrange for the unrestricted interchange of commodities in order that the essential unity of European economic life may not be impaired by the creation of artificial economic barriers. (2) Not only the government of each country, but all those engaged in the task of production in every land, should give immediate attention to the execution of all measures which will contribute to the full resumption of peaceful industry, to the encouragement of better output on the part of the workers in every country, to the improvement of machinery and means of transportation, and the removal of such disturbing factors as profiteering. (3) Each government should at once consider means for urging upon its nationals in every rank of life the vital necessity of suppressing extravagance and reducing expenditure, so as to bridge the gap which must for some years exist between the demand for and the supply of essential commodities. (4) It is essential that early steps be taken to secure the deflation of credit and currency (a) by the reduction of recurrent government expenditure within the limits of revenue, (b) by the imposition of such additional taxation as is necessary to secure this result, (c) by the funding of short-term obligations by means of loans subscribed out of the savings of the people, and (d) by the immediate limitation and gradual curtailment of the note circulation. (5) The privision of raw materials being essential to the restoration of industry, means 6hould be found by which the countries which are in present conditions of international ex- change unable to purchase in the world markets, and so are unable to re-start their -economic life, can obtain commercial credits. It will be possible to achieve this when the countries have made the reforms indicated in the foregoing paragraphs. (6) The Powers at the Conference recognize the necessity for continued co-operation between the Allies and for removing obstacles to the easy interchange of essential commodities. They will continue to consult together regarding the provision and distribution of necessary raw materials and foodstuffs with a view to the early restoration of normal conditions. (7) The Powers represented at the Conference have given careful attention to the special case of the devastated regions, and more particularly of Northern Prance. The restoration of these areas is of prinjary importance for the re-estab-ment of the economic equilibrium of Europe and the resumption of normal trade conditions. It is evident that the large sums required for this purpose cannot be provided out of current revenue, nor can the work of restoration he postponed until the reparation due from Germany under the Treaty iof Peace has been received. Under these circumstances the Powers represented at the Conference recognize that the capital sums required for this restoration may properly be raised by market loans in anticipation of the reparation payments provided by the Treaty, and that the restrictions which they desire to see placed on new borrowing do not apply to loans and credits raised for the purpose of meeting this abnormal capital expenditure. (8) The Powers represented at the Conference have taken under consideration Article 235 and cognate articles of the Treaty of Versailles, and the passages in the letter addressed on the 16th June, 1919, by the Supreme Council to the German Peace Delegates which contemplate that Germany shall make proposals for fixing the total of the payments to be made by her by way of reparation, and that facilities may be given her to obtain necessary footstuffs and raw materials in advance of payments being made by way of -reparation. The' Powers are agreed that it is desirable in the interest alike of Germany and of her creditors that the total to be paid by her for reparation should be fixed at an early date. They observe that under the Protocol to the Treaty a period of four months from the signature of the Treaty was provided during which Germany should have the right to make proposals of the kind referred to, and they are agreed that in the circumstances as they exist to-day such period should he extended. 2, Whitehall Gardens, S.W. 1.

Bill No. 95 for the relief of William George Mackness.-Mr. Fraser. Bill No. 96 for the relief of Charles Elias Vardon.-Mr. Hoeken. Bill No. 97 for the relief of John Hamilton Harvey.-Mr. Boys. Bill No. 98 for the relief of James Goddard.-Mr. MacNutt. Bill No. 99 for the relief of Frederick Stephen Hartmann.-Mr. MacNutt. Bill No. 100 for the relief of William George McBride.-Mr. Boys. Bill No. 101 for the relief of George Stinson-Mr. Boys. Bill No. 102 for the relief of John James Davis.-Mr. Boys.

On the Orders of the Day: