1111. TER MEULEN scFrEmE..
IT is, we think, generally realized that until the delicate fabric of international credit, shattered by the war, is in some measure restored, international commerce cannot revive. For Great Britain above all the outlook is most serious. Our merchants and manufacturers have large stocks of goods to sell ; but their former customers, especially in Central and Eastern Europe, cannot buy the goods which they urgently need for lack of purchasing power. Merchants who cannot dispose of their stocks in the usual foreign markets have meanwhile to strain their credit at the banks, which are dangerously overburdened with loans on the security of goods that may depreciate in value. Manufacturers for whose wares there is no effective demand abroad cannot find full employment for their workmen, unless with the help of their bankers they continue to manu- facture for stock, hoping to sell the accumulated goods hereafter. On the other hand, countries like Austria and Poland cannot begin to resume their industrial activity because they are linable to purchase raw materials like cotton and wool, or the foreign machinery that they require. Until this deplorable deadlock is removed .unemployment must increase, and with it the industrial unrest that gives the enemies of civilization their opportunity. Yet it is obvious that our former customers, though impoverished by the war, are in no sense destitu;.e. The natural resources of their countries are still what they were. The mercantile and industrial ability of their peoples is not greatly affected by the long conflict. We are prevented from trading with them, and they with us, by the confusion into which the monetary systems of Europe have fallen; and by the difficulty of arranging for definite payments. The Austrian "krone," for example, is little better than a token coin, like the " rei," which was nominally the thousandth part of the Portuguese " milrei." The owner of the magic bottle in Stevenson's story of " The Bottle Imp," who had to sell it for less than he paid for it, would have had no difficulty now in finding currency of smaller value than a cent or even a centime.
An attempt is now being made to restore international credit
• 1.4ague of Nations. International Credits (The Ter Maiden Scheme). London : Harrison. (ed.)
by means of the Ter Meulen scheme. Mr. Ter Meulen, an Amsterdam banker of the firm of Hope and Company, laid his plan before the Brussels Financial Conference last September, and received its unanimous approval. The Conference reported its decision to the Council of the League of Nations, which then set up a provisional Economic and Financial Committee of officials and men of business to consider Mr. Ter Meulen's proposals. On the advice of this Committee the League Council appointed Sir D. Drummond Fraser, Joint Managing Director of the Manchester, Liverpool, and District Bank, as Organizer of the scheme. As a practical business man, he has undertaken to work out the details, make preliminary inquiries, and devise a code of regulations for the International Commission of experts which will supervise the scheme for the League of Nations. Ho has just issued a pamphlet explaining very clearly the nature of the plan. Mr. Ter Meulen's main idea is that the Governments of the impoverished countries shall help their importers by lending them Government bonds secured on national assets. For simplicity's sake let us take the case of Austria. Her finances are in a desperate condition ; but for all that she has certain assets yielding a considerable revenue. There are, for instance, the Customs, the railways, and the forests worked by the State. If Austria wished to issue bonds under the scheme, she would apply for leave to do so, informing the International Commission of the specific, revenues which she would pledge as security for the bonds. The Commission would then fix the gold value of this security and empower Austria to issue bonds up to that amount, as and when she required them for financing trade. The Commission would, however, have to be satisfied in each case that the transaction was desirable, for the scheme is intended mainly to promote the importation of " such raw materials and primary necessaries " as would enable Austria and other industrial countries to re-establish production for export. Suppose, then, that Austria had been authorized to issue certain bonds, and that an Austrian manufacturer proposed to import some wool from London. If the International Commission approved of the transaction, the Austrian Government would lend the manufacturer bonds to the amount required, payable in gold in London. The manufacturer would deposit these bonds here, either with the exporter or with his bank, as collateral security for the purchase money ; or if he paid for the wool by a bill on London, in the usual way, the bank or accepting house which discounted the bill would take the bonds as col- lateral security. Behind the bonds there would be the security of the Austrian State revenues, attested by the International Commission. If the manufacturer met his obligations, the bonds would be returned to him for cancellation by the Austrian Government. If he failed to meet his obligations, the British holder of the bonds would be free to sell them, provided that he first gave the Austrian Government the opportunity of redeeming them. Any balance remaining after the sale of the bonds and the payment of the debt would go to the Austrian Government ; for any deficit—supposing that the bonds realized less than the amount of the debt outstanding—the British creditor would have a claim against the Austrian manu- facturer, and not against the Austrian Government.
It will be seen that Mr. Ter Meulen's scheme is designed to encourage the distressed countries to make full use of their own resources. Sir Drummond Fraser lays stress on the fact that nothing can be done until these countries apply for per- mission to issue bonds secured on specific revenues. They must take the initiative, instead of waiting for the solvent Allies to do everything for them. Again, it must be clearly understood that the traders in Austria, Poland, and elsewhere who can secure credit in the ordinary way of business are not concerned with this scheme. The creation of special credits by means of State bonds is intended only to help those traders who cannot obtain the necessary credit here or in France or elsewhere without providing some special security.' It is to the interest of British merchants desirous of trading with the distressed countries to impress on their would-be customers the advantages of giving the Ter Meulen scheme a triaL The scheme is, of course, open to criticism ; any such scheme would be. But, if worked with care and goodwill, it is calculated to stimulate that revival of international trade which all
countries desire. We wish all success to Sir D. Drummond Fraser in his praiseworthy attempt to place it on a practical basis and to make it widely known to British business men.
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