Beida

The large ground-floor apartments of this building and the surrounding gardens are ablaze with colored electric lights. Expensive automobiles fill the square in front of the Residency. They are in charge of native chauffeurs who dress in Turkish fashion, for the burnoose and the turban interfere too much with their freedom of movement. As soon as the French had built good roads in Morocco, the landed aristocracy adopted the automobile; so now rich cadis and the wealthier merchants use this form of transportation almost exclusively. It is an interesting spectacle to watch these luxurious limousines roll up and disgorge their picturesque and exotic-looking passengers, whose turbans, covered with the hoods of their jelabs, and ample robes so fill the vehicles that it seems impossible that they could have held the number of people that alight from them.

Undoubtedly the nomadic tastes of the natives make them exceptionally ready to adopt new ways of traveling. No matter to what class he belongs, or whether he be rich or poor, the Moroccan is always on the road. Formerly he was on foot, on horseback, astride a mule, or seated on a camel; to-day he is very often in a motor-car. There is scarcely a village accessible to the highways that has not a garage, generally operated by an Italian or a Spaniard. Its sole vehicle is often a little Ford or Citroen touring car or truck in a state of the utmost dilapidation. Passengers are packed two deep into the affair, for they sit upon each other's knees. Thus the contraption rattles off, and by special grace of Allah - it can be naught else reaches its destination.

But all the White House guests tonight do not come by automobile;

In Morocco the mule is always the mount de luxe reserved for the master. The animals are lined up against the wall and facing the ranks of automobiles, whose glaring headlights blind them and make them restless.

Along the walks leading to the entrance and in the hallways squat servants waiting for the masters. Beyond is a marble courtyard with a fountain. Next come the reception rooms, at the entrance of which stand Marshal and Mme. Lyautey. Mme. Lyautey. The roomy apartments are furnished in half-Moroccan, half-European style. Long divans are ranged against the wall, comfortable easy-chairs and low Arab tables and French desks stand here and there. Everywhere are curious native works of art a veritable museum collection. On the right and left cadis sit facing each other. One handsome old fellow with a white beard has fallen to sleep in a deep leather-covered chair.

The four great cadis of the South are present. They have been received individually by the Marshal during the day, and important official business has been transacted. The most powerful and the wealthiest of them, the Pasha of Marrakesh, is also the most modestly appareled. He wears a jelab of homespun woolen with black and gray stripes, woven in their tents by the women of his native tribe. I have met him before, and he greets me cordially, his proud, tawny Berber features lighting up with a pleasant smile. He tells me that he will not visit France this season, as is his custom every other year, on account of the fighting in the Rif; although he would much like to see how his race-horses, which he had sent over, perform on the track. Two of his sons are about to enter school at Paris.

paved colonnade into the terraced garden outside. Cadis are sitting seated about at different levels, according to the height of the article of furniture on which they have placed themselves, and, as the seats they occupy are completely concealed under their broad burnooses, the effect is rather odd. Still others promenade up and down under a long pergola. Waiters bustle hither and thither with trays of cool water and warm drinks. Servants crouch around a samovar near a fountain brewing nana, or tea flavored with peppermint. On a European sideboard stand pitchers of orangeade and lemonade.

I beckon a waiter to serve two pashas and a cadi with whom I am talking. But the cadi, who is from the country, merely glances at his glass and places it brusquely on the table without touching its contents, at the same time saying a few words in his native dialect. The pashas burst out laughing and make a remark, whereupon the cadi, laughing likewise, picks up his glass again and drains the contents.

'He thought it was wine,' the Pasha of Rabat explains.

When these native gentlemen depart, they bid their host and hostess adieu with a grace, a dignity, and a distinction not shared by the Europeans present. Moreover, our Western garb, either civil or military, appears stiff and scanty amid these surroundings. We look like marionettes, as if we had not quite finished dressing, in contrast with these amply and gracefully gowned natives.

But the latter do not appear to as good advantage clambering into their motor-cars, for, being tall and robust men, the feminine way in which they gather up their skirts looks rather awkward. Those who have come on muleback, however, spring lightly into their saddles with the dignity and grace of riders to the manner born. They have the poise and carriage of a warrior race. I can easily imagine them galloping at the head of their cavalry, brandishing in the air their long carbines with pearl-inlaid stocks and long Damascene barrels.

At the time when the gold standard was restored in Sweden, the purchasing power of money in that country was already approximately equivalent to that of gold; and it has continued to be so since then, subject to insignificant fluctuations. This is true, however, only when we measure purchasing power by the general price-level. A complete adjustment to the new currency standard has not occurred. The cost of living is somewhat higher than the general price-level, and average wages are decidedly higher- as we say, 'overcompensated.' The result is that, although we have little unemployment, most business enterprises are not earning enough to keep them permanently solvent. We must seek the reason of this, however, not only in our past currency crises, but also in the imperfect accommodation of production to new technique and a new market new market situation.

England is facing an identical problem of readjustment, with the difference that the solution there seems farther off and the dangers pending its solution are much more serious. To a certain extent England's embarrassments likewise are associated with her currency policy. A school of economists in Great Britian is inclined to attribute her difficulties exclusively to this cause, and to make the restoration of the gold standard solely responsible for her existing business depression and unemployment crisis. The most promi

1From Taglische Rundschau (Berlin Stresemann-Party daily), February 18

nent champion of this theory is J. M. Keynes, who has given it wide publicity. Keynes's argument is that by restoring the gold standard England has artificially increased the value of the pound sterling without bringing about a corresponding reduction in wages and other production costs, and that for this reason Great Britain's ability to compete in the international market has been crippled so as to produce the present unemployment crisis.

In theory there is nothing against this hypothesis. It merely emphasizes the difficulties to be anticipated whenever we increase the value of a currency in international exchange. In case of countries like Denmark and Norway, which have taken a long time to get back on to a gold footing, I have foreseen and predicted this outcome for several years; and the experiences those countries went through this season have been exceedingly unfortunate. The restoration of the English pound to its old gold-value has naturally caused similar difficulties. Those difficulties must have been decidedly less than those of Norway and Denmark, however, for only a small percentage was added to the value of the pound sterling when Great Britain returned to gold. Furthermore, the general price-level in England quickly accommodated itself to a gold footing, and is at present appreciably lower than might reasonably have been feared. To be sure, the cost of living is still high, but not markedly higher than that of the United States. In August 1925 it stood at 173 in Great

Britain and 169 in North America. The level of British wages last July was 180. [These percentages refer to the pre-war standard.] Overcompensation, therefore, exists in Great Britain, but it is considerably less there than it is in Sweden, which has a relatively mild unemployment crisis.

In view of these facts, it is quite impossible to maintain that the failure of business to readjust itself to the new gold standard is the principal reason for British unemployment. A return to that standard has naturally brought certain troubles with it. But even if the currency had remained untouched, Great Britain would have encountered practically the same difficulties she faces at present, on account of her failure to adjust herself to new controlling factors in world economics.

Political discussion, like economic discussion at times, overlooks the fact that methods of production have been revolutionized since the World War and that more progress has been made toward reducing production costs within this short period than during any other equal period, perhaps, in the history of the world. This progress, which involves a permanent change in market conditions in several branches of production, is the combined result of technical progress and improved business-organization. Complete adjustment to this new situation demands extraordinary alertness and adaptability, not only on the part of the heads of business undertakings, who must be ready in many cases entirely to reequip their plants and to change their locations, but also among the working classes themselves. The country that is most alert and ready in these respects, provided it possesses adequate capital, will quickly outdistance its rivals and will be able to keep its factories fully employed. Any policy that hampers this adaptability inevitably delays

economic recovery and is the chief cause of unemployment and business depression.

So far as I can see, we have here the key to England's present difficulties. To attribute them primarily to the Bank of England, or to the return to a gold standard in general, is merely to distract attention from the real errors of economic policy I think the Baldwin Cabinet has unquestionably committed. The Government's measures to subsidize industries and to grant doles to idle workers are in defiance of the irresistible changes occurring in conditions of production, and a futile attempt to preserve an impossible status quo. For example, what could be worse under such conditions than to encourage the workingman to stay right where he has always been? This artificial immobilization of labor and industry is not only a disaster for England, but it has set a most unfortunate example for the rest of Europe, which looks upon England as a model to copy in such matters. Sweden is already suffering from imitating England. Hitherto we have followed a comparatively prudent unemployment policy and have made considerable progress toward overcoming our crisis. But the Socialists clamor for us to follow England's footsteps and start on a dole system.

Germany is facing a similar problem of readjustment. But conditions are different in that country, and the practical obstacles in the way of a quick recovery are greater than elsewhere. When she returned to a gold standard it was natural that her money, in view of the prevailing situation, should have a gold parity not appreciably lower than its domestic purchasing power justified. This necessitated a radical increase in home prices. That occurred. Between July 1924 and July 1925 the average price-level, according to the

official index, rose from 115 to 135. It is impossible to say how comparable these figures are with the Swedish or American index numbers, but it seems certain that the rise of prices in Germany was not exaggerated, and that there is no sound reason why prices should fall again.

Naturally the Reichsbank was compelled during this period of ascending prices to keep the movement in bounds by a high discount rate, a vigorous restriction of credit, and strict control over the expansion of the circulating medium. On the other hand, the Bank apparently made a mistake in continuing its credit-restriction policy, and especially in maintaining a discount rate as high as nine per cent, after prices began to sag again. Possibly part of the responsibility for Germany's severe depression must be charged against this prolongation of creditrestriction. But it is certainly a gross mistake to make Germany's currency policy the principal cause of her present business crisis.

In truth, Germany is likewise involved in a period of readjustment that is forcing her to equip her best industrial plants with the most modern machinery, to concentrate production at these points, and to reform her old business methods. She will have to

reduce her costs of production until she can keep her people continuously and profitably employed. That is the goal toward which she must aim. Unfortunately, many persons in that country do not realize this, and still imagine that they can revive business by driving down prices through some sort of currency-juggling. That is false. Irrespective of the general price-level, which is a purely monetary question, Germany, like every other country, must learn how to lower her costs of production by improving her technical equipment and commercial organization.

Germany's situation is relatively more difficult than that of the rest of Europe because it is harder for her to procure the capital she needs to reorganize and reëquip her factories. That handicap will continue to hamper her for a long time, since her reparations payments will be a constant drain upon her resources. The only way that she can revive her industries is by accumulating capital at home. Let her beware of attempting what England has tried to do - that is, to maintain the economic status quo. Any measures that interfere with the industrial revolution now occurring will only weaken her. Adaptability to new conditions is the indispensable prerequisite of her future prosperity.