F.—ECONOMIC SCIENCE AND STATISTICS 91 
previously debtor becomes creditor the problems attending readjustment 
appear to it to be almost insuperable. In every case, in both debtor and 
creditor countries, there was marked reluctance to attempt any solution 
which might offer a reasonable promise of success. ‘This was especially 
unfortunate ; for no cause has contributed more to the present dislocation 
of international trade and to the financial and currency troubles accom- 
panying it than this one outstanding fact—the reluctance or the inability 
of the countries concerned to handle the problems presented to them by 
their changes from general debtor or general creditor position to that of 
general creditor of or general debtor to the rest of the world. 
Of the theoretically appropriate policy in the new situation thus 
created there never was any doubt. Creditor countries should have 
accepted additional imports from their debtors and encouraged them to 
build up favourable trade balances in the shortest possible time. This 
implies, of course, that exports from the creditor countries should have 
been discouraged and a drastic reconstruction of internal productive 
systems undertaken. Of the practical difficulties in the way of such far- 
reaching changes the economist is well aware ; and he would have offered 
his sincere sympathy along with the maximum of encouragement to any 
statesman attempting the task. But to statesmen who not only shirked 
a duty admittedly difficult but who adopted a policy calculated even to 
increase the obstacles in the way of ultimate reconstruction he cannot be 
equally indulgent. The offer of loans to debtor countries by their creditors 
was a profound mistake ; and disaster was inevitable when the borrowing 
and lending was mainly short-term. Long-term loans, which would 
have been more helpful by permitting time for readjustments, were 
discouraged by legislative restrictions in the debtor countries themselves 
as well as by the natural reluctance of the lenders to risk their money for 
any length of time in areas where disturbances, both economic and political, 
were liable to occur without preliminary warning. In such a nervous 
atmosphere alarms were inevitable; and a climax was reached in the 
summer and autumn of 1931. Since then the forces making for economic 
self-sufficiency have suffered little check in any country in the world. 
It is from the events of this year, 1931, that the existing highly- 
developed system of barriers to international trade sprang, armed as it 
were overnight. The seed, however, had been sown long before; and 
tentative efforts by debtor countries to control transactions in foreign 
exchange and to reverse adverse balances of trade were not unknown 
several years prior to this date. But now, in addition to extensions of 
tariffs and the raising of existing rates, the device of the quota was developed 
to the full, and condemnation was passed on anything which, like the most 
favoured nation clause in commercial treaties, was designed to disentangle 
foreign trade from the obstacles which encumbered it. The more liberal 
of existing trade agreements were everywhere denounced and restrictive 
measures or one-sided bargains substituted. Currency difficulties in any 
country were used by its trade rivals as a pretext for further tariff increases 
on its merchandise. In a brief space of time the whole structure of 
foreign trade as it existed before the war was swept away; and nothing 
systematic or definitely planned has, so far, taken its place. 
