SPAIN AND PORTUGAL
THE signing of a protocol to the Agreement between Spain and Portugal strengthening the bonds of mutual assistance was announced by the B.B.C. with the rider: " it is stated that this is not incoesistent with the mutual treaty obligations between Britain and Portugal." The obvious inference was that a rapprochement between Spain and Portugal would appear to be contrary to the interests of Britain; such an inference could only be drawn by people whose understanding of the Peninsula is totally blotted out by prejudice against
the present regime. The truth is of course, that we have every interest in the strengthening of bonds between these countries. Both have a tremendous vested interest in maintaining peace. Both have almost exclusively Catholic populations. Both have Many cultural and trade ties with this country. Both have so far adhered to their neutrality with scrupulous fairness.
It almost seems as if the British press was seeking to create an Iberian Ireland, putting Spain into the position of Eire, and Portugal of Ulster. Some day perhaps we shall read, or hear over the air, that conversations have taken place between Mr. de Valera and Lord Craigavon about a united Ireland " but it is understood that these conversations do riot weaken the ties with Britain."
LINES ON A MAP
WHILE the Pan-American Congress
has directed attention to the transAtlantic continent, political changes in Japan and the closing of the Burma road into China have brought the Far East into the limelight. Our political .thinking with regard to both America and Asia would become more realistic if we could learn to attach less importance to continental divisions.
There was a time when Europe was a clearly defined term, when Asia denoted an unexplored mystery and America was little more than the El Dorado of idealistic dreams. But the lines on the map which indicate continental frontiers have become almost as artificial as that which marks the Equator. A Pan-Asiatic movement finds itself at once confronted by a Power which, while it controls the vast region of Siberia and therefore has vital interests in the Pacific, is extending its territory westward and now commands a wide reach Of the Baltic while it is credited with designs of establishing itself on the Mediterranean. The Russian bridge between Asia and Europe is a matter of prime political significance and was never more so than at the present time.
The purpose which dominates the Havana Congress, again, is to some extent enfeebled by a lack of realism similar to that which invalidates much thinking concerning•Asia. Apart from the racial, commercial, cultural and (in the case of Canada) political ties which link the Americas with the Old World, the Germanic and Italian elements in the South sympathetically disposed to the Axis Powers are so strong as to constitute, in the words of The Times correspondent, " a real danger."
TAX ON BOOKS
THE fight to secure exemption for books from the proposed purchase tax ebbs and flows. There is far more still to be heard about it.
The case for exemption is strong on two grounds: first, books must be regarded as the staple diet of the mind; secondly, some degree of prosperity for the home trade is necessary if the export trade is to be maintained.
For obvious reasons not much is heard of the comparative value of the Press and books; but if the importance attached to the Press is not overestimated, then there does seem room for a more generous estimate of what it is worth to the country's morale to have the publishing trade preserved.
Again, the export value of books is generally assumed to be measured in foreign currency, but the propaganda value --using the word in its best sense— is eurely ten times more important.
A suggestion is being mooted now to accept the tax, but to ask the Government to return a part of the proceeds by way of subsidy for " books of national importance." The definition is not going to be easy, and the application of the subsidy will raise the problem of how. when and where to insert the support, so that it will help books, arid not merely a few individual publishers. But those two problems Should not be insurmountable, and such a scheme would answer the objection which is widely felt against indiscriminate subsidy of books— good, had and indifferent.
But the publishing trade must face up to the question of production costs, and recognise that no good reason has even been given for the retention of expensive binding, which no other country finds necessary.
OUR FOREIGN INVESTMENTS
TN the latest Budget speech Sir Kingsley Wood made reference to our overseas investments which he categorised as a source of reserve wealth that could legitimately be taken into consideration when framing a war budget. In the last war we used up in this way 11,000,000,000 of our overseas resources which, however, we have largely replaced since. In 1938 the total value of British overseas investments was estimated at £3,692,000,000, or about the cost of one year's war at the present rate of expenditure.
Lord Haw Haw's gibe at England's role in world history as a sinister money lender whose nefarious tendrils are gripped around the hearts of European nations is, like many of this variety artist's assertions, in need of considerable qualifications.
In point of fact out of a sum of £1,398,000,000 which we have sunk in foreign Government bonds and public issues, only £107,000,000 is spread over Europe. By far the greater portion, a1,081,000,000 has been invested within the Empire. This is equally true of our commercial investments, of which only some 14 per cent. are European.
If Germany's commentator would for once stick to the facts he would have to admit that much of his Fatherland's present greatness is due to British help, as in 1937-38 it paid to Britain £1,817,060 in interest on its public loans, roughly 50 per cent. of our total income from that source in Europe, an indication of the extent which his supposed traditional enemy has been willing to help and trust him.
There is no doubt, of course, that much of the attraction of foreign lending is the prospect of very high yields, but such yields carry increasing risks of recent years.
Over 100,600,000 of British capital has been completely lost in Russia, and the annexation by that country of parts of its neighbours. and also the whole of Esthonia, will add fresh defaults, Very little more satisfactory, however, is the position of stockholders of hoods issued by Brazil. Latin America is our second largest debtor country, and has been on the brink of complete default several times, and is now only meeting a portion of its commitments.
THE REAL TEST
the object of the last Budget was to
administer a little oxygen to the stock market, it has succeeded, for quoted securities have appreciated by a hundred million pounds or so. But the war will not be won, nor will it be fought for five minutes, by any mere appreciation of paper values. Quoted prices are the immediate result of two things only, supply and demand, and they have no necessary relation to intrinsic value. By almost prohibiting capital issues, by strict limitation of borrowing, and by closing the American market, the Government has done much to restrict supply. By the last Budget, the Chancellor has stimulated the demand for industrial shares, by allaying for the moment the universal fear of investors that taxation was going to be heavily increased.
That side of the picture, why values rise and fall, is incomparably better understood now than it was a few years ago, and accordingly the investing public is far more cynical, and rightly so. The other side of the picture, the effect of these fluctuations, is not however nearly so well understood. The individual investor who wishes to raise money is naturally well satisfied when he sells at an increased price, but the community is not one penny richer, for someone else must pay him the increased price.
On the longer view, Stock Exchange values are ultimately nothing more than a reflection of credit, that is the trust of the community in what they are buying. To the extent therefore that the Chancellor of the Exchequer has restored the confidence of the public in investment, he has done some good, although it may only be temporary.
The real test to-day of the nation's finances must be the extent to which the energy of the country is being directed into constructive channels, and obviously war machinery is what we have first to construct, in order to defend our ultimate power to construct useful things. It must therefore be admitted that the last Budget is, on the main issue, cornpletely negative. It is quite arguable that taxation Is not the best machinery for diverting energies into the desired channels. It cannot however be questioned that such direction must come, and the nation's reaction to the Budget has made it exceedingly clear that they not only await but positively demand such direction.