The defeat of the depression in New Zealand (begun 1932, complete 1933)

Gatenby, William Joshua, Auckland Star Print, Auckland, N.Z., 1933

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Title: The defeat of the depression in New Zealand (begun 1932, complete 1933)

Author: Gatenby, William Joshua

Published: Auckland Star Print, Auckland, N.Z., 1933

The Defeat of the Depression in New Zealand

Begun 1932 : Complete 1933

DEDICATION

as"s<<j>i

To the bloke who is broke; lost his job; t" the returned soldier who cannot find a place; to the landlord who d his fair rent; to the ten.- ' pay it; ti who is being starved; to the who cannot pay his interest; to the employer who is compelled to sack his capable employee; to the producer who cannot sell his goods; to the consumer who cannot buy; to the youth of the Dominion who are p Prom taking a par! in the industry of their country; to the aged and infirm who are begrudged a proper share of our plenty ; to all who are victims of "Sound Finance." these sympathetically but hopefully dedicated.

- 9 JUL 2008

[3]

PREFACE

The Prince an Advocate for Shorter Hours and Better Distribution of Real Wealth

I British Official Wirele

RUGBY, July 31

When the Prince of Wales visited the International Con unmercial Education in London, at which thirty-live nations represented, the President, Mr. Charles Boisserain, of Holland, introduced him as "the first commercial ambassador of the world."

In the course of the Prince's address, he said the hard lesson oi adversity had taught them that prosperity of all nations depended upon the prosperity of each. In these days of swift iran-port and communication and interlocked commerce and finance ii was increasingly true that the nations could not live for themselves alone.

"This truth is penetrating the minds and Government policies ctions of tlic nations in a growing measure," said His Royal Highness. "Recently it was demonstrated must happily at Lausanne. This international conference may well express its delight that at Lausanne the lamps of hope and confidence were 1. The spirit of international co-operation and good will is burning more brightly than at any time within living memory.

may all be profoundly grateful. The world-wide trade depression and economic disturbance have been largely caused by the maladjustment of distribution. The potential output is far greater than ever before. If all employable labour were employed for a reasonable number of hours per week the world would have at its disposal a volume of commodities and services which would enable the entire population to live on a higher level of comfort and well-being than ever before was contemplated in the rosiest dreams of the social reformer.

“The urgent task is to bring consumption and production into proper relationship. It is not a simple task, but quite a possible one.”

The Defeat of the Depression in New Zealand

(Begun 1932, Completed 1933)

As recorded and related by an Auckland Barrister

for the Relief of Distress

INTRODUCTION

MANY years ago a elever American writer gave to the world a book called "Looking Backward," which had an immense circulation, and which to-day is still being sold and read by those who are convinced that the state of poverty existing in a world prodigiously rich cannot be cured by ordinary .;• or by merely waiting £or the clouds to roll by. In •■Looking Backward," Bellamy pictured the state of civilisation in the year 2000, and now nearly fifty years after the publication of his book there are indubitable signs that the world is ready to consider proposals that will result in raising the standard of living for the workers and prevent their exploitation for the benefit of the few. Bellamy showed that complete happiness among the people of the nation and among the nations of the world was easily managed without money; his idea was that money, being the root of all evil, should not be the incentive to human effort, and he showed how the evil of the world, as well as the misery and poverty, was entirely due to dependence on an imperfect money system. And so Bellamy pictured a moneyless world, and succeeded in painting a picture so beautiful that people said it was too good to tie true or possible in a world where selfishness was the dominant motive of industry. To-day so many rich men have been ruined through circumstances entirely beyond their control, thai they are among the first to condemn a money system that gives no lasting guarantee of security.

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Ii !•: [•' i: AT OF THE DEP ft ESS JON I X SR W ZEAI, A X Ii

Though the world bas noi progressed so Ear as to be ready l" adopl a moneyless system, there are irnmistakeable signs that the principal countries are willing to confer with a view to the adoption of a better money system. New ideas on the creation .■mil issue of money are being pu( forward by cultured and thoughtful men of all nations, and all agree that the basing of the the amount of gold beld by the banks is fundamentally hum.iiml and largely the cause of the booms and depressions thai so often plunge the world into financial confusion. Major ('. 11. Douglas, in his hooks on economics, -hows that all the misery and poverty in a world teeming with riches are to be attributed to the continuance of our "Mad Money" system. Douglas Credil Associations have been formed in many of the principal countries of the world, and many able writers have endeavoured to explain the advantages of the new economics, and to show thai the adoption of the principles of Major Douglas' scheme would put an end for ever to all poverty, -which should never exist amongst plenty, [r is the endeavour the writer of these pages to show how New Zealand attained prosperity such as she had never known in the past by adopting a new system of money, which did no harm to the rich, but rendered poverty impossible.

Auckland,

Anno Domini, 1933.

[6]

DEFEAT OF THE DEPRESSION IX NEW ZEALAND

CHAPTER 1

In the Midst of the Depression

T)ETER MKLLOR ha. Ed from the Auckland University College with honour- in English and Economics. Hi- father. Joshua Mellor, a retired Farmer in comfortable circumstances, was able to allow his son to continue his studies with a view to entering the legal profession. In due time Peter look his LL.B. degree. During his study of the law Peter had gained practical experience by working without salary as a clerk to one of the principal firms of solicitors in Auckland.

The Great Depression had by this time caused a serious diminution in Mr. Joshua Mellor’s income, and it became necessary for Peter to make his way in the world. Consequently it was a great blow when he was informed that there was no opening in the law office in which he had gained his experience. He tried by every means to get a footing, but found that, instead of there being openings for highly qualified barristers and solicitors, men of long experience were being done without. The country was over-served with lawyers, as with every other profession, and even skilled manual workers were unable to keep their positions. Turn where he would, Peter could see no blue sky through the dense clouds. Peter’s lot, however, was not nearly so bad as it might have been, for he had a good home. But Peter was not satisfied to be a burden on his father, and, besides, there was a greater reason why he should get busy and earn a man’s income.

Her name was Alice Strong, a sweet girl graduate, whom Peter had known during his 'Varsity career. Both were tennis champions, and their association in the athletic activities of the College had led to more intimate acquaintance in their homes. She was indeed worthy of his regard. In the first blush of womanhood, Nature had endowed her lavishly, mentally and physically, and her University training had added to her beauty a becoming and unobtrusive dignity that made her a most delightful personality. Her deep blue eyes, healthy, full red lips forming a perfect mouth, and the faultless luxuriance of her figure suggested at once perfection of development, abounding physical vitality and feminine softness and delicacy.

Alice was the daughter of Robert Strong, managing director of the hardware firm of Robert Strong and Co., Ltd., one of the oldest concerns in Auckland. Strong himself hnd been left a considerable fortune by his father, the founder of the business,

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DEFEAT "I THE DEPRESSION IN NEW ZEALAND

but as he had grown up in his father’s warehouse and was a man of great natural ability and energy, he continued to associate himself with the daily activities of the business, through which he had, indeed, added handsomely to his fortune.

Peter Mellor was handsome enough to attract the admiration not only of members of tin- opposite sex, but also of other men. Nearly -ix Eeet in height, bis figure was well proportioned. As hree-quarter for the 'Varsity Senior fifteen, he played a ,uii'. to the delight of In- club mates and of thi tators of both sexes. Nothing could he more natural than the mutual attraction of Peter and Alice, and their similar social position gave them many opportunities of meeting each other. Peter had long realised that his greatest happiness was in her company: the sound of her soft, sweet voice was as music in his ear-, ami her undisguised pleasure in hi- company gave him reason to hope that their acquaintance would some day become more than friendship.

The difficulty of obtaining employment, however, and his apparently hopeless prospects made Peter wonder whether lie ought now to avail himself of the opportunities he bad of meeting Alice. Was it fail- to her to seek to gain her heart when she could claim the devotion of the most eligible of the young men of Auckland.' Another circumstance that troubled Peter was the conviction that bis political opinions (which were largely the result of his studies of economics and the dreadful state of industry in the land) might be wholly repugnant to Mr. Strong, who. a- a successful business man in a private concern, would be entirely opposed to economic changes in the system under which his father and he himself had built up a goodly fortune.

A- a welcome guest in Strong's home. Peter had never had any occasion to enter into the discussion of debatable subjects with Aliee's father. Indeed, life had been so pleasant, that, until the time came when Peter could not get a position, there lothing to suggest that there was anything wrong with the world. Strong was not blind to the faet that Peter ami Alice were very happy together, and he himself liked to welcome the young man. whom everybody instinctively trusted, not only because of his fine personality, but because of hi- modesty. geniality, and line intelligence.

But Strong could not now ignore the fact that Peter seemed to have no prospects, in spite of his brilliant scholarship mid physical litn<'-~. Strong know only too well the terrible results of the depression: his company had suffered enormous losses in consequence of the collapse of the building industry and the fall in prices, and the Arm's overdraft at the Bank increased so alarmingly, that it was necessary for Strong to meet the situation by depositing and pledging a number of securities that

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IT ill' Till: DEPRESSION IN Ni:\V XKAI.AN'I

formed the principal pari of his private Eortune. Strongs friends and business associates .-ill began to carry an unaccustomed look of anxiety, Eor there was uo sign of the depression lifting. Bankruptcies were of everyday occurrence, and the wholesale firms were being shaken to their foundations. It was a question of how long they could keep going before the Bank stifled them bj calling up their overdrafts. Many of Strong's friends suffered in the economic storm, and this circumstance alone was sufficient to cause anxietj as to his own fortune. The wave of depression had shown uo sign of passing; instead, it seemed to have become a permanent angry sea. threatening to overwhelm the strong as well as the weak. There was mi known remedy, and the world's financial experts came to be regarded as pure theorists, for they all had different ideas of the cause of the slump, and no idea at all of the remedies. Some said it was because of there being too much gold in the United States of America; other-, that ii was through over-production; others, that it was through under-production or through war debts (which were not being paid), or because U.S.A. expected the huge debt to her to be paid when she had all the gold, and would not take the goods of the debtor nations. One thing was certain: price-; began to fall, and it became apparent that New Zealand could not meet her obligations to her overseas creditors unless she got more for her butter and other export-. Tl xperts said the only cure was to produce more butter; but they were ridiculed when it was found that there was no buyer for the extra butter. All the nations were restricting their imports, and seeking to enlarge their exports, which of course was impossible. And so it came to pass that men with new ideas were listened to, and conferences of the nations were held.

DEFEAT OF THE DEPRESSION IN NEW ZEALAX]

CHAPTER II.

A Gleam of Sunshine

evening alter dinner, when her father was seated in his favourite chair in hi- sanctum, Alice curled herself at his feet, as she often did; for Strong had long been a widower, and Alice was all he had to remind him of his beautiful wife, who had succumbed in the terrible epidemic of pneumonic influenza thai had succeeded the Greal War.

As he ran hi- taressingly through the glory of her golden hair, Strong thanked God in his heart that the bad eouh! not take from him the blessing of his daughter'.- affection. What had the future in store for her? Had she -et her heart on that line young fellow. Peter Mellor, who, with all his advantages, could not get a job? That was the pity of it. He could not imagine a more suitable mate for her. What a pair they made! How she glowed in his company, and how tenderly tful Peter always was, as if she were some precious thing. as indeed she was.

These were some of Peter Strong's thoughts as the smoke from his pipe curled around him and his eves rested upon the picture of feminine loveliness at his feet. The sound of a firm tread caused Alice to look up as the manly figure of Peter Mellor appeared at the open casement. "Come in, my hoy." said Strong, shaking hands warmly. And as Alice gave him her hand. Peter saw in her glad eyes that he was no unwelcome intruder.

"And how is the world treating you now, Peter?" asked Strone\

"1 have -Mine g I news. Sir. I have been selected as the University candidate lor the Auckland College. Yon will remember, Sir. that, under the new system of class Parliamentary representation, the University graduates are entitled to elect two mi - lor each Island. So far it -would seem that I -hall he unopposed," said Peter. "Congratulations, my lad. 1 cannot tell you how grind I am. [am sure you will do well. And what is to he the policy of the 1 'niversity members f"

"I am afraid, Sir, you will not approve of it. as it has been decided to hammer away tit the reform of the money system, so ili.it the country will he released I'rom the stranglehold of the banking system." -s;ii<l Peter. "We have decided that the pro-

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I'EFEAT Of THE lIEI'RKSSItIN IX NEW ZEALAND

posals of Major Douglas are fundamentally sound, and that, if New Zealand will adopt them, she will -how the world tin- way the whirlpool of depression."

"H'm! I have heard something about Douglas' proposals Eor currency reform, but 1 do not see how New Zealand can get away from England in the matter of finance. Surely we are absolutely dependent on England in money matters.'" asked Strong.

"As things are at present, thai is so," -aid Peter, "but there is nothing to prevent our adopting in New Zealand a sane money system that will give our own people the means of purchasing) the products of their own industry. In the past we have entrusted the money business to private concerns called Banks, who have issued money or purchasing power in accordance with banking principles which are now known to be incapable of preventing and slumps, or, in other word-, of controlling prices, so that there will always be sufficient purchasing power Eor the g Is produced Eor consumption."

“Do I understand you to mean that it is possible to stabilise prices, so that the workers will always be provided with money sufficient to purchase the whole of what they produce?”

"That i- the idea, Sir," said Peter, "and when you think of it. it is only right that the worker should not be robbed of any I hi> industry because of a bad money system." "But where doe- the capitalist come in?" asked Strong. Ely, if you give the worker the means of purchasing all the product of his industry, there ran be no provision for the pro of the employer."

"The new sysi onomics regards the interests of the employer and of the worker as identical. Both are engaged in production of something for use or consumption, and both are of recompense, according to their share in the process. The employer's part is that of organiser or director, and his share of the product can be regulated and provided for in the prices and by State subsidy. It would take a long time to pxnlain exactlv how this would work out, but I can assure you.

sir. that the new money system would not do any injury to the capitalist, who is regarded not as the enemy of the worker, but as his greatest friend, as the organiser of the industry whicm produces something for consumption." replied Peter.

-Jt all sounds very nice but how are you going to manage when you find that the prices of our exports in England do not with the prices arranged in New Zealandt" "That is where we have been foolish in the past," said Peter. ..\V C . hi ed our own people by making them pay in their own land of plenty the same price Eor their own butter as il

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DEFEAT OF Till: DEPRESSION IN NEW ZKALAXI

would fetch in a land of scarcity thousands ot miles away. Prices in New Zealand of New Zealand products should be based on the cost of production in New Zealand, and not on thi of the British mark'!. Because people are sick in England is no reason why we should become sick too."

"Gad! Peter, ; have scored there." exclaimed Strong, who erchant hai of the havoc wrought by changing price-. In fact, be : there was a lot of luck in business, and that it was really impossible to . caused by our dependence on foreign price-. "But surely regulation of prices in New Zealand would mean interference with private enterprise, especially in the matter of exporting importing.'"

“The interference with private enterprise would be to the benefit of the employer as well as of the employee, for both would have the tremendous advantage of an assured income free from the risks of falling prices and the dreadful anxiety caused by diminishing trade. But the State would not dictate beyond controlling prices in New Zealand, and even that dictation would come from the best men the State could employ to ascertain the cost of production, and so estimate with accuracy the economic price for articles and goods. Having fixed the prices of New Zealand produce, the State would control the export of the surplus by buying it at the New Zealand price. Any loss on the sale abroad would then fall on all, and any gain would benefit the State; but foreign prices, if they were lower than New Zealand prices, would not cause us much concern, because the onlv result would be to curtail to that extent our imports, which would thus be kept within safe limits. We should not then be able to contract foreign ddbts, which we would have no earthly chance of paying. The State would exercise no other control over imports than to limit them to the amount of our credit balance after meeting our State obligations in the matter of interest on the foreign part of our national debt. Our foreign creditors would have no cause to complain so long as we made our surpluses available to meet their claims,” replied Peter.

“Well, Peter, I believe that you are on the right track, and can do no harm, but I am sure you will meet with a lot of opposition, for the reason that we have muddled along in our own independent way from time immemorial, and, though many good men have gone to the pack, it must be admitted that the world has made splendid progress, and men have shown great enterprise and indomitable courage in pushing ahead in spite of adversity and bad luck. We must admit, though, that under present conditions of trade, there is too much wretchedness and poverty, and if we can prevent distress by better regulation of

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11 t: VE A T it P TII I: DEPRESSION IN NE W '/. EAI. A X D

commerce and industry, it is our duty to consider ami adopt suitable means, and even to try experiments that have a reasonable chance of success. So good luck, my boy!"

Alice was a good listener, and, besides, she could not but be interested, not only because of her intimate knowledge of both men. but also because unemployment was the absorbing topic of conversation, and recent rioting in the city had caused much concern among those who had not as yet suffered privation. She rejoiced, too, thai Peter should get such a good bearing from her father, who was not entirely without the narrow-mindedne-s of the successful business man. But the Great Depression had made all men alter many of their firm opinions, and Strong's huge : his mind more receptive, and he was ready to listen with more respect To any scheme that might change the ! position, lie remembered also that Peter was an honours man in Economics, and would not therefore be easily converted to any idea that would outrage the principles of that science.

i the evening passed very happily for Peter and Alice.

CHAPTER III.

The Future will be Rosy

"DETER was duly elected. Before proceeding to Wellington, he made up his mind that he ought to tell Strong of his feelings towards Alice, and endeavour to obtain his consent to his wooing. ose an evening when Alice was attending a church function. After they had played 500 up at billiards, which Strong bad won. Peter broached the subject.

■'l know I have no right to expect it. Sir, but I would beg your consent to my becoming engaged to Alice if she will have

"Peter, my boy. there is no man whom I would rather have as a son than you. but, the way things are, I do not think you would be wise to take on the responsibility of a wife. You are both young, and can afford to wait until the elouds are dispersed. I am sure you will do well in Parliament, and will soon obtain a position that will enable you to face the future with confidence. So. though you have my besl wishes for your success as far as Alice is concerned, T would not think of trying to influence her in such a matter. If yon can win her. you will have mv blessing," replied Mr. Strong.

'Thank you, Sir. T love your daughter too much to seek to link her life to mine until T can protect her from every storm. Tin: if she will have me. the future will be rosy."

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DEFEAT 1)1' THE 11 EI>REB 8 I ON [X NEW ZEALAXD

Resuming their billiards, the men played on in completi bar ny until Alice returned. Strong, like a good sport, made an early excuse to retire to hi- sanctum, and the evening being mild and moonlit, Peter and Alice found their way into thi beautiful grounds and down the winding path that led to a -eat near the lapping tide. The waters of the Waitemata gleamed in the silvery moonlight, and Rangitoto stood out in colossal grandeur as an eternal promise of protection and security. The spirit of enchantment was in the air. the only sound tin- gentle murmur id' the waters a- they caressed the pebbles on the beach. In the pale moonlight Alice seemed to Peter the goddess of '.lie night, divinely beautiful, and a- lie held her -oft hand in his, the witchery of her presence tided hi- soul with ecstasy. He drew her to him. and she came a- to her mate and gave him her pure lips in sweet surrender

What mattered the Great Depression now.' thought Peter. He had won the heart of the most beautiful of Cod'- creatures, and nothing else would be impossible.

CHAPTER IV.

Mad Money

TJETEE made bis mark in Parliament. His fine, manly presence, *- liis modest demeanour, his rich, vibrating voice, his perfecl English, and the melody of his sentences were alone sufficient t<» secure the respectful attention of the House and the full gallery of spectators. A- Peter warmed to his subject in his maiden speech, his listeners became deeply absorbed in his arguments, which, being Eree from objectionable personalities, obtained for the speaker encouragemenl and applause, even from his p opponents. Dealing with unemployment, Peter first paid a jusl tribute In those private employers whose enterprise and ability had built up prosperous businesses and factories. He used their success itself to prove that prosperity depended on organisation and co-operation. Unemployment was largely due to a lack of organisation of the work of the country. Tee many teen wanted to do the job of the others: there was no one to direct their energies into profitable channels, [nstead of profitable co-opera-tion, there was too often destructive competition, with the result that the weaker or less fortunate failed and became a charge on the State. The Great War had caused such a tremendous sp up of production, that the work of the country could be done by fewer workers. There was no longer the necessity for men to work long hours, for the simple reason that machines were doing most of the laborious work. The day should come when the work

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\ ]' OF rill DEPR ERR I ON I\" NE W Z E ALAND

of the nation would be done by machines as the slaves of men. ami the peuple would be released from absurd drudgery. There was something tragic in the fact that man invented machine- to do his work ami then began to starve. 'Flo- was. of course, due to the lad .0' permitting private ownership of machinery, which rendered the work of men unnecessary. At present machinery competes against man; under proper conditions machinery would serve man. Those proper conditions could be created by the State, and by the State alone. When a useful machine was invented, it was the duty of the State to purchase it tor the nation, and the event should be an occasion for rejoicing that a further slave of man had been created, and not another enemy of the worker to compete against him. The old adage that labour was the hit of man should give place to the modern version that labour was the province of man'- -lave, machinery. Men to-day should be only the directors of work. The late Lord Leverhulme had estimated that such wa- the efficiency of machinery, that the people of Britain would not need to work more than balf-an-hour per week t.i secure a comfortable existence. Hi- experience as an organiser of work in the soap industry entitled his opinion to the greatest respect. Surely, then, it should be a matter of the greatest regret ociety wa- so constituted that man ha- not sufficient time to develop what is wonderful and fascinating and delightful in him, and that the true pleasure and joy of life are missed in the absurd struggle for existence. With machines to do the work, men would have time for the beautiful things.

"You will say that this is a dream of the impossible; that men are too selfish to co-operate to drive poverty from our midst. I venture to say that a new spirit of comradeship is being born, and that the peoples of the world are beginning to recognise that co-operation means peace and prosperity, and that competition means poverty and war. What is the purpose of the increasing number of international conferences Eor disarmament, for monetary reform, and Eor peaceful trade relations! Surely it is to put an end to international competition and to cease to play the barbaric game of "Beggar My Neighbour." Surely, also, it is because the nations realise at last that the real object of foreign trade is merely to diversify consumption, not to bunt for buyers abroad of the goods we need at li< :. What can be greater folly than for a nation to ship overseas goods that its own people need and which other nations do not want to compete with their own industry? When shall we realise that a nation's prosperity consists not in what it sends out, but in what it is able to consume, and that export- are necessary only for the purpose of exchange?

••When ■ ' tin- nations are ready to recognise the principle of 'Live and let live,' surely it is our duty to set our own house in order, and to banish destructive competition from our

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DEFEAT OF 'flit: DEPRESSION IX \E W ZEALAND

midst. To make a beginning, let us have a thorough overhaul of our money system, which we now know to be one of the chief causes of the dreadful position of such a large part of our able, willing and would-be industrious people. While great developments have taken place in recent years in the science of production and in the social structure, the science of money has lagged behind, and it is impossible to regard gold as an honest broker "when a debt contracted twelve years ago requires to discharge it, in commodities, from three to three and a-half time- it- original commodity value, apart altogether from the annual interest." (Introduction to the Annual Report of the London Chamber of Commerce, 1932). There is no need for us to wait for other countries to reform their money systems; the first nation to bring into existence an efficient internal money system will immediately assure to its people a prosperity which it has never before experienced. The great weakness of our present system that ii does not allow the currency to expand and contract automatically with the activity of business, and it never provides the consumer with the means of purchasing the product of his industry. Basing the currency on the amount id' gold lying in the vaults of the banks i- scientifically unsound, and, as we now realise, strangely late in tlie day. wholly insufficient to maintain equilibrium between v.. ami prices. Must the nation continue to entrust its destiny to an inefficient banking system? Surely it is not fair to our bankers to place so much responsibility on their shoulder-. How can they be expected through banking practice, the only system they understand, to provide the sinews of commerce when it is not their job to estimate the value of production or to study wages and prices? How can bankers be expected to act in the into of the nation when it is their job to reap the biggest harvest for their shareholders .' Let me not be misunderstood to be bringing an indictment against our banker.-. We know they are all honourable men, ami they do their best in the interests of their employers. It is the system that is wrong and unsuitable to present-day conditions, which demand a currency based scientifically on the cost of production here, and not elsewhere. That is why we can adopt our own internal money system without waiting for England to give us a lead. We do not. a- i- so persistently maintained, depend on the money system of any other country for our internal prosperity, 'file only cause of poverty here should be a scarcity of the means of existence, food, clothing and -belter. and we know that there is a great abundance of all.

"As the House is aware, Monetary Reform Leagues have been established in all the principal cities of our country, and there is no lack of evidence that other countries are realising the necessity of a radical change. Sweden. 1 believe, has already adopted a new system, and with immediate beneficial result. It is to be

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\ T OF Tll E II t: PKi:s S 1 ON I S NK W 7. EAI.A \ 1)

!. therefore, that the Government will immediately do what country expect—that i-. set up a Commission of experts and Qg business men to investigate the Currency question, and to submit a scheme thai will enable as to carry on the industry of the country in accordance with our own boundless resources, and not limited by conditions in other countries or by the amount of tically useless gold lying in our bank-."

Peter resumed his seat amidst hearty and prolonged applause. He had carried his audience with him, and few doubted that the Government would be foolish enough to postpone the investigation asked for. The speeches of other members who followed complimented the new member on the manner in which he had introduced the subject, and in particular that he had raised no cry against any class of the community. The fact that the interests of Capital and Labour would be equally protected by a sane money system was stressed, and it was pointed out that State issue of money under the control of a Currency Board composed of statisticians and business men would enable the State to finance all the industry of the country without applying to London for the money tickets. Money was not wealth, but merely the machinery for facilitating exchanges of commodities and services. The machinery was simple to produce, as paper and printing were available. It was necessary, of course, to provide, as now, against forgery, but there was no need to worry about gold for our internal currency, and gold was of little use for settling our external debts, because we could never obtain sufficient of it; and there could be little doubt that the nations of the world would before long refuse gold in exchange for their goods.

It was evident from the speeches of members that they were more conversant with economical questions, and that they had studied particularly the subject of the issue and control of money. Thev were unanimous that it should be the function of the State to provide the money for internal use, and that the operations of the banks should be restricted in the granting of loans to the legal tender represented by real deposits: that is to say, the banks should not be allowed to grant overdrafts, as they do now, by their system of bookkeeping, but by real transfers of legal tender actually in their custody.

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DEFEAT OF THE DEPRESSION IN NEW ZEALAND

CHAPTER V.

Prosperity Through a Sane Money System

AS a result of the Royal Commission set up to investigate the *■* money system, a Currency Hoard was established, and a first issue of £10,000,000 of Stale money was made. The Posl Office Savings Bank was authorised to allow its depositors to issue cheques on their credits, and this Bank became not only a savings bank, but a real convenience to small traders and the general public—in short, a People's Bank.

A New Zealand Mint was established Eor silver and copper coinage.

Trading Banks were required to hold £ for £ of State money as against their liabilities to current account depositors, and to surrender national debt securities pro tanto for cancellation.

The banks were forbidden by Act of Parliament from issuing loans out of fictitious deposits. All State notes and credits were required to be issued strictly against true deposits only.

All the gold in the Banks was to be available to the State as required for overseas adjustments. As we shall see later, New Zealand soon got rid of all her gold to save interest on her' overseas debt, and to place her foreign trade on the only sound, basis, the exchange of commodities.

The issue of £10,000,000 of new money made it possible for the Government to repeal much of the emergency legislation which had imposed such crushing taxation on the people, and to put into operation extensive public works, including the establishment of State factories, not in competition with private concerns, but to operate parallel with them, all prices being controlled by the Currency Board. Old Age Pensions were immediately raised and adjusted according to the circumstances to provide a comfortable and dignified existence lor all over (id years, and a scheme to provide National Superannuation was initiated on the principle that all deserving citizens were entitled to retire after 40 years of service as workers. The scheme provided for earlier retirement as soon as the finances id' the State would permit. Sufficient sustenance allowances wen' immediately provided Eor ad unable I" lie placed in full time employment, and gaol and hard labour was available for shirkers.

[lB]

DEFEAT HP Till: DEPRESSION l\ NEW ZEALAND

To improve the living conditions, the State established a Department of Housing, and slums were gradually removed and replaced by modern tenements, the rents from which provided interest and sinking fund to provide for repairs and replacement.

The immediate institution of National Superannuation had the natural effect of reducing the number of unemployed and permitting the employment of the thousands of youths who had been looking on while worn-out toilers did the work, and it was not long before there was sufficient work for all who were capable and required for service.

The work of the Currency Board in fixing prices not only prevented the exploitation of the | pi,., but permitted legitimate trade to he carried on without anxiety or the risk of bankruptcy, for the prices were arrived at by most careful mid exact calculations by statisticians, whose work included not only the collection of data of exportable produce, but also of the total production, as well as tin- total wages mid salaries paid for work in the Dominion. The wages tax imposed by a former Government was immediately abolished, a- it was admitted to be most unfair in its incidence, especially as regards the family man. It was pint of tin- work of the Currency Board to fix the rates of interest, as this was closely related to the cost of production and fo prices of consumable goods; and as it was a recognised principle that real service was what contributed most to prosperity, the rate- of interest were very low. the example being set by the State in providing State Advance- for farmers, workers' home-, all primary and secondary industries, including machinery and cattle purchi

But the greatest change for the better thai was incidental to National control of the issue of money was the State control of the exports, and consequently of the imports, of the Dominion. As to export-, the guiding principle was to export only surpluses or what could not be used or consumed in the Dominion. The lolly of allowing gold to lie idle in the vaults was now realised, and it was soon got rid of to such of our foreign creditors as would accept it. though it was now noticeable that gold was losing its universality. A- internal prices were fixed, it was found that it was more convenient for the State to purchase the whole of the exportable produce ,-it the same price: this procedure prevented the ruin of farmers ami other producers through falling prices abroad. They got their fair price in New Zealand currency for the whole of their output. What the foreign price was did not matter so much now. n> the only effect of falling prices abroad was to restrict the volume of mi .ml not. us in the bad old timer-, to spread ruin and starvation in our bountiful hind. Higher prices in foreign countries had no effect on our prices, as

[l9]

ii E i-' E A 'i' (i I' 'r Hi'; i> i: i■ t: ESS] ON 1 S Nt: w zt:AI. a N I

any advantage therefrom was rightly a State and not a private just as lower prices abroad caused no private loss, but only a restriction in the national imports.

The necessity for external borrowing had now almost completely disappeared, as our exports were always in excess of our imports, and were sufficienl to provide for the more rapid extinction of our overseas National Debt, which had been considerably reduced by the decision of the creditor nations to wipe out all War debts. This decision bad been forced upon the creditor nations by sheer common sense and a realisation, late in the day, that they were ruining their own peoples by impossible attempts I" obtain payments from financially impoverished nations. The creditor nations possessing four-fifths of the gold of the world could not possibly be paid in that commodity, and the acceptance of goods even to the extent of interest on the debt caused unemployment in the creditor countries, which also added the Gilbertian touch by erecting tariff walls, which effectually prevented imports and so completely put the debtor nations out of action in the matter of payment. There was only one sensible thing to do, and that to cancel the debts. This allowed international trade to be put, for the first time, on a proper basis —that is, of amicable exchanges of surpluses. The cause of war incidentally disappeared, and, instead of competition among the nations, there was the co-operation that is born of necessity, the need of one to obtain some of the surplus of another, and as there was no scarcity there was no territorial jealousy. The causes of war in olden times were founded in scarcity and the necessity of obtaining booty; modern wars, it was now realised, were due entirely to the rivalry among nations to obtain markets for their surplus goods, and this rivalry was the result chiefly of unnecessary production and a lack of organisation of industry. The use of machinery, instead of reducing- the hours of labour, had caused such stupendous production, that the world'.- market- were not able to cope with the goods on offer, and improvements in agricultural methods produced huge surpluses of food. The piteous spectacle of wheat being burned to keep up the price in the United State- of America, while millions of it- citizen- were on starvation ration-, failed to rouse Government interference until it was alarmed at the menace of the huge population of unemployed and its own failure to balance its budget. The existence of famine conditions amidst such plenty as the world had never before experienced in every civilised country could be explained only by a belated indictment id' the mean- of distribution —that is, of the money systems of the world. The Ottawa Conference of the British nation-, called primarily for the purpose of devising ways and mean- of putting an end to -lump conditions within the Empire, proved to the world that the defective money systems of

[2o]

A To r tii t: HEl'UEssiiix i \ \i: w /. kai, a \ D

the nations were the chief cause of the distress, ami led to a con Eerence oi all the nation- to devise a satisfactory international system of finance. The beneficial results of these conferences are now known, and the evil result of violent fluctuations in the rate of exchange i- now a thing of the past. No longer is it possible •"'■ the monsters of finance to "hear" the market, and suicides ol unfortunate speculators are unknown, lor the simple reason that international trade is carried on with as little rise and fall in prices a- i- tin- business of the unit nations forming the Confederation, for it was found that the national system of regulating prices could be applied in international trade because of the similarity of methods of production, the universal use of machinery, and the adoption of shorter working hours.

CHAPTER VI.

God’s Own Country

pETEE MELLOR'S career in Parliament did not disappoint those who. hearing his maiden speech, prognosticated great of him. His knowledge of Economics particularly fitted him for a position in the service of the State, and it was not long I e was offered an important office in the Statistical Department. This, of course, necessitated his retirement from politics, hut assured him of permanent and remunerative employment.

There was now no obstacle to his marriage to his beautiful lady-love, who. though courted by wealthy and eligible suitors, had novel- wavered in her allegiance. Her letters to Peter during his Wellington were as food to the hungry, and he received many encouraging messages from Robert Strong, whose business had begun to prosper again, as the building industry was stimulated by the new money properly used in the construction of worker-' tern ind the improvement of housing conditions iiout the province. Like other business men and trading compaj - g was relieved of the nightmare of uncertainty as to when the Banks would call up their overdrafts; for one of ects of the issue of new money by the State was to cause nk- to change their policy of extreme conservatism to one of co-operation in the furtherance of legitimate trade. Another circumstanci isted the trader was the substantia] reduction in the rate of interest on overdrafts, the rate being fixed by the Currency Board, and not, as in the bad old past, by the Banks elves.

Peter's marriage to the beauteous daughter of one of Auck[and's most popular and well-known business men brought to the happy pair the heartiest congratulations from many friends and

24

11 V. VV. A T OF THE I) EI"RES S I ON 1 X NE W /. EAI.A X II

well-wishers. No happier bride ever gave herselt to the man "I her choice than Alice Strong, and no man ever faced the future with lucre confidence than Peter Mellor, who, with the women for his help-mate, and the firm promise of lasting prosperity for his country, was well-equipped to continue his journey through life as a worthy citizen of a land that deserved, now foi the first time, its blessed name of "God's Own Country."

I 22 |

DEFEAT OF THE DEPRESSION l\ NEW ZEALAND

Appendices

Extracts from the Macmillan Report (June, 1931)

"During the War, and ten years afterwards, currency notes Eor CI and 10 - were issued by the Treasury entirely at the discretion of that Department."

The period was one of greal industrial activity and national prosperity; no unemployment.

"The gold held by the creditor countries in January, 1931, was Million-, or 74.5 per cent, of all the gold in the world; the debtor countries held only 53] millions, or 25.5 per cent."

tor countries: U.S.A., Croat Britain, Prance, Belgium, Holland, Switzerland, Sweden.

The debtor (-.Minifies: All the rest, except Russia and Spain, which were classed as neither.

"Tl fforts of the debtor countries to meet their debts by contracting their imports and expanding their exports may even have the effect of making their position worse through its adverse on the prices of their exports. The above figures emphasise the impossibility of the debtor countries as a whole meeting their obligations otherwise than oul of new Loans or by selling more goods al better prices. For the creditor countries to fail in taking steps to relieve this stringency would be exceedingly shortsighted, hai <l to their own creditor position." (See pp. 27, 134, 313.)

"It is the simultaneous reluctance of the creditor countries neither to lend nor to buy from the debtor countries which is the cause of the crisis."

"The decline of new enterprise has reacted adversely on , and the low level of profits and prices stands in the way of new enterprise. It is Eor this reason that some of us think that in the domestic Seld it may be necessary to invoke Governmental enterprise to break the vicious circle" (p. 136).

"We are convinced thai the Bank of England ought to be transformed into a public corporation" (Sir Thomas Allen and Mr. Bevin, p. 240).

"The failure of private enterprise to keep the workers fully employed" (p. 239).

"Private enterprise having proved totally unable to lift the country oul of the morass in which it is, there seems no alternative Inn Eor the State to grapple with the problem, and for large measures of State planning" (p. 240).

I 23 1

DEFEAT OF THE DEPRESSION I N NE \V XEAI. A X D

"The standard of life i- governed by productivity" (p. 235). "The only possible policy is to try to raise the wholesale I tic- level, ami to maintain or improve the standard of life" ip. 209).

"It seems .an insanity to keep a large part of the building trade out of employment when much of the industrial housing is of an age only lit to he demolished" (p. 207).

Extracts from "Money and Credit," by C. J. Melrose (1921). "Tlie misfortune is that, so far, man has yet failed to provide an exchange medium that does not frequently go wrong" (referring to the changes in value of gold).

"As evidence of human incapacity, blundering and chicanery, the history of money provides a plentiful crop. With lew striking exceptions, the orthodox teachers of Economics have pinned their i'aith to the 'gold standard'; hut this standard has manifestly gone wrong with the rest. Is this blundering to continue ad infinitum?" (Mr. Melrose wroti fords when England was foolishly adhering to the "old standard. Subsequent events have proved that .Mr. Melrose was justified in hi- i on gold as a faulty means of exchange.)

"Man produces nothing, but only renders services, manual or mental. Nature alone does the producing. Hence, in a human sense, all service is production, all production i- ser

What is meant by making a profit? Does it mean that the buyer gives more to the seller than the seller gives to the Xo; this is the proper definition of "proiitecrii What the seller gets in excess of the cost j. the remuneration Tor his services; this is properly "profit."

"Internationally there is no profiteering, for nations merely exchange equivalents; any other international dealing would be impracticable.

"The notion of profiteering has made mankind see a topsyturvy image of the economic reality. Men conceive of industry as a game of 'Beggar My Neighbour.'

"No one can profiteer without damaging someone else" i Montaigne).

"Workmen must be made to realise that wages are a shave of the total product, and thai if they produce less than they might, there is inevitably less to share out."

The bulk of mankind measure prosperity by the volume of the exports, not as an index to possible imports, but as a mi making profits. We arc to labour and sweat, so thai the foreigner may consume the products of our labour, and we are to gel profits in money! But what is the money to do for us? Why, oi course, to buy products. But where froml Apparently from

[ 24 1

HE THE DEPRESSION l\ SEW ZEALAND

ivhat remains at home after wi> have -■ ime for - to consume. In the words of Bernard Shaw, this is ndeed the Economics of Bedlam.

The conclusion, the only conclusion we can come to, is that, if there are any profits on balance (which there is no reason to assume, since the foreigner is no fool), it is the imports which are the profits, not the exports.

“It is astonishing that the mercantile theory of wealth still remains the economic conception of the bulk of mankind, and that no economist has so far set himself the task of demolishing this stupid fallacy, root and branch. We must realise that industry must be a world co-operation if we are to get the best out of nature, and not a game of ‘Beggar My Neighbour/ Only thus can the world recover from the terrible despond in which it has been plunged.”

Extracts from "Money Madness," an article in "Nash's Magazine." March. 1932, by Oliver Baldwin, son of the great Parliamentarian.

■■Tin- English i gratuitously handed to the Bank .'l' and the i edit and currency issue. The Bank thr nation's money .-it so much per cent. Tl nly money iduction only; none for consumption. Therehere i> never sufficient purchasing power."

"The other d I rovernment asked its nwealtb Bank of Australia, for a loan, but they could not be accepted. that the more prosperous the people, the less prosperous the Banks, .-niil the I. erous the people, the more prosperous aks."

"The ignorance of the conenl money system. Why our reverence for such words as 'slumps,' 'booms,' 'economic blizzard,' 'mystei by should there be any mystery about finance when we are ;ill vitally concerned "ill; money matters?), hen « e kno a) all about nics, that b our educat ion i .'

"Basing a medium of exchange on a metal basis, irrespective of actual or potential production, is another phase of our money madness.

"Why 11. n believing that only bank. what's Did they not tell us that a return to the L r "M standard put ii- .Hi our E.

"There i- another joke that must be mentioned in connection with 'Money Mn.ln.-~.' and that is 'Thrift.' Thrift stops the circulation of money, causes depression. Say you have a pound ii

I 25 1

EFEAT Hl' •lilt: DEPRESSION IN NEW ZEALAND

hand and are wondering whether to buy a pair of boots or invest it. Say you invest it in some industrial firm. The firm may close down for lack of orders. On the other hand, if you buy a pair of hoots, think of the good id will do. Consumption is nnteh more important than you thought. Thrift is preached under the shadow of the workhouse."

(Baldwin prophesies that the winter will see 3,000,000 unemployed in Britain, ami that the eyes of a distressed people will turn to Russia. He refers to tin- amazing ignorance of our rulers when it is a question of economics. Mathematics should be used to solve our money troubles; or do we really wain disaster!)

Extracts from Oscar Wilde's "Soul of Man Under Socialism.''

•■The chief advantage thai would result from the establishment of Socialism i>. undoubtedly, the fact that Socialism would relieve us from the sordid necessity of living for others, which in the present condition of things presses so hardly upon almost evervone. In fact, scarcely anyone at all escapes."

"The proper aim i- to try to reconstruct society on such a ha~is that poverty will he impossible. Under Socialism the security of society will not depend, as it does now, on the state of the weather. 11' a frost comes, we should not have 100,Oi work, tramping the streets in a state of disgusting misery, or whining to their neighbours for alms, or crowding round the

doors of loathsome shelters to try and secure a hunch of bn or a night's unclean lodging. Each worthy member of society will share in the prosperity and happiness of the nation, and if ;i frost comes, no one will practically be anything tin- worse."

"Charity, the poor teel to he a ridiculously inadequate mode of partial restitution, or a sentimental dole, usually accompanied by some impertinent attempt of the sentimentalist to tyrannise over their private lives. Why should they he grateful for the crumbs that tall from the rich man's table?

"Sometimes the poor are praised for being thrifty. But 1" recommend thrift I" the poor i- both grotesque ami insulting. It is like advising a man who is starving to eat less.

"A poor man who is ungrateful, unthrifty, discontented and rebellious is probably ;i real personality, and has much in him. He i- .M any rate a healthy protest. As for the virtuous poor, one can pity them, of course, but one cannot possibly admire them. They have made private terms with the enemy, and sold their birthright for very bad pottage. They must be extraordinarilystupid.

"One's regret is thai society should he constructed on such a basis that man has been Eorced into ;i groove in which he cannot freely develop whal is wonderful ami fascinating and delightful

I 26]

EAT OF T.I ,: DEPRESSION IX NEW ZEALAN]

m him. in which. ,„ tact, he misses the true pleasure and joy ol hvmg. Nothing should be able to harm a man except himself Nothing should be able to rob a man at all. What a man realh «hat is m him. What is outside of him should he a inattei of no importance. Whal arc called criminal- to-day arc not criminals at all. Starvation, and n„i sin, is the parent' of modern crime. Our criminals are as a class what ordinary, respectable commonplace people would be if they had not enough to eat.

"What is a practical scheme? Hither a scheme that is alreadj in existence or a scheme that could he carried out under existing conditions. But it is the existing condition- that one objects to. The systems that fail are those that rely on the permanency of human nature, and not on its growth and development. The only thing that one really knows about human nature is that it changes. The State is to make what i- useful: the individual i- to make what is beautiful.

•'At present machinery competes against man. Under proper conditions, machinery will serve man. Human slavery is to-day unnecessary. On mechanical slavery, on the slavery of the machine, the future of the world depends. Then scientific men will have delightful leisure in which to devise wonderful and marvellous things for their own joy and the joy of everyone else."

Extracts from Douglas' Social Credit Manuals and from New Zealand Newspapers.

Viscount Snowden, quoted by the "New Zealand Herald," .Hi Jim.■, 1932:—"The World Menace": "The world cannot go on acting as it is acting to-day," said Lord Snowden in a receni speech. "If it goes on much longer, complete world economic collapse must come, and the recognition of that, 1 think, will sooner or later create public opinion, the weight of which will overcome private vested interests. Countries arc trying to reduce their imports and at the -nine time to increase their export.-. This absurd, one might almost say insane, and certainly ruinous, policy is blind to the fundamental nature of international trade. It does not realise the essential fact that trade is a reciprocal advantage; it benefits the man who buys and the man who sells. This world depression is not an ordinary trade cycle—those periods of depression which soon run their course and are succeeded by a boom in trade. In my opinion, it is something fundamentally different. It is the culmination of the fiscal policy which nearly all the nations of the world have been following for generations past."

[27]

DEI-EAT Hl' 'IIII'. DEPRESSION IN NEW ZEALANH

"New Zealand Herald." llith December, L 931: •'The political world offer- a pathetic spectacle of statesmen striving to adjust constitutional procedure suited to tin- ancient days of self-con-tained nation- and empire to an age which must achieve the unity of a world state or perish." -Canon C. Kaven.

The author of the immortal "Lorna Do.me" makes -John Jtidd say: "The excess of price over value is the true test of in life." We seem to have made BOme advance in humanitarian principles since, but there i- -till P inch truth in John Ridd's remark.

"Under a rational money system, the interests of Labour and Capital are identical. The so-called capitalist —the employer of labour —being an organiser of work, i- entitled to he remunerated in accordance with tin- service he renders, and there can he no doubt that the employer renders very great service indeed, just as does the general of an army. The capitalist has no objection to paying high wages so long as it does not hinder him from selling hi- g Is quickly and al remunerative prices—that is. at prices that will give him a fair return for his enterprise and organising ability. These prices can he obtained only under stable conditions—that is to say. under proper money conditions."

"Under proper money conditions, whatever the community produced it would be able to pay for; consequently, trade and industry could go Lull steam ahead as long as any economic want remained unsatisfied. Cycles of good and bad trade would disappear, since human wants, however much they may change, do not wax and wane in conformity with such cycles. . . . We should not require foreign markets—that is, there would be no compulsion for us to hunt for buyers abroad in order to keep things running, since we should have all the buyers we require at home: but, having acquired a liking for foreign commodities, there is no reason why we should not indulge in it: and. of course. there would have to be a reciprocal export of goods to pay tor them. The real object of foreign trade 1- to diversify consumption, not to 'beggar my neighbour.'" International competition in trade is the cause of war. ••The State, through its statistical experts, should regulate retail prices on the basis of the nation's production and consumption."

: VT " '•' THE DKI'KKKSION I \ \I: w /. EAI.A \ I.

The Argument for Inflation

SIB ANDREW RUSSELL, and other students of the New Economics, in rec mending measures "'' controlled inflation to arrest the devastation which threatens io destroy the very foundations of our social system, is mil advocating a wild orgy of new money creation, but the adoption of such measures a- will resull in the restoration of prices within !! "' Dominion to the level which will make it possible for debts : " he discharged in a currency as nearly as possible the same as the currency in which they were contracted. Million., ol 1 tgages and much of our Natonal debt were loaned in the depreciated money, and repayment will be impossible unless prices and values of commodities and property are raised or restored by a deliberate policy of reflation, (if the two processes, inflation and deflation, there can be no dispute as to whicii causes the r hardship. Just as a balloon becomes buoyant and bounds upward through inflation, so deflation causes it to sink, and finally to collapse utterly; and so it is with the fortunes of a nation; inflation of the currency causes business to boom and make- ii e for debtors to settle their liabilities, while deflation -pread> ruin and desolation throughout the land, and may lead Io the complete collapse of the social system. The tir-i visible result of inflation i> a gradual rise in prices and, of course, in which are th,- price- of services; the invisible results are that creditors lose to the extent of the rise m price-, while debtors gain. Surely there can be no question that there would be no injustice to creditors if inflation were carried to a degree which would make it possible for their loans to be re-financed and discharged.

'I In- favourite argument against inflation i- that it will raise foreign exchanges against us. Well, what matter if it does? We shall >lill la- able to <1 j^jhi~ ( - of our good things abroad for the best prices we can 'jet, and we shall receive payment for them, as we always do. in the foreign currency, which will lie available, as now. tor the purchase of our imports. We do not obtain New Zealand money in foreign countries, nor do we bring foreign money to New Zealand. A- the Bight Honourable Reginald McKenna ex-Chancellor of the Exchequer, and now an eminent banker, lias written. ".Money is incapable of migration; the title to money may change, but the change of ownership does not remove the money, which necessarily remain.-, and van be expended only where it was created .... anil export trade only barter, as it always has been."

And so, why worry about exchange? We shall barter our '_''«mls Ju-1 the same, ami our money system will not worry those who want out' produce. Wliat matter ii' the prices of foreign

32

DEFEAT OF THE DEPRESSION [X NEW ZEALAND

goods in New Zealand are raised, we -hall have more money to pay them with, for everything else will be higher wages, salaries, and dividends—and we shall hold our head- higher, too.

There are many methods of beginning a controlled reflation of our prices and value-, but the most popular would be the creation of new money by the State under the disinterested guidance of a Currency Board, and it- use in paying a living wage to those who have to be provided with new State employment, sufficient sustenance Eor those who cannot be employed, the abolition of wage cuts and unemployment tax, the raising of Old Age I'ensions to the dignity of National Superannuation, the subsidising of producers and industry requiring assistance, the organisation of Stan- industry to provide remunerative employmen! lor all who should be expected to work, the reduction of the hour- of work to gi\c effect to the principle that machines should be the slaves of man to increase his leisure, and not to bring- about his impoverishment, and, in brief, to make possible the management of the industry of the country for the general welfare without taking from anyone anything that i- hi.-, but ensuring that each shall have a proper proportion of the product of hi- own industry without the risk of being an innocent victim of "Sound Finance."

If the proposals of the new economists were adopted, we should never need to borrow any mure from England (exci the purpose- of converting an existing loan), and it would be possible to stabilise prices to prevent booms and depressions which are inseparable characteristics of an imperfect money system. The functions of the Currency Board would include the regulation of prices by the restriction of the issue of currency, or by its expansion, in accordance with the needs of industry tained by the collection of data and complete statistics of the production and trade of the country. The issue of State paper money, and the New Zealand minting- of silver and copper coinage, would itself result in great National saving of unnecessary expenditure, and permit of an increased distribution of the real wealth of the land among its worthy people.

[3o]

I i: A I OF I 11 I: HEPRESSION [N NEW ZEALAND

NATIONAL SUPERANNUATION.

erannuat ion ia at presenl d to civil servants, in which term we include all who work for the State or municipal corporations, and whose salaries are provided out of the taxation principally on the incomes of nonState workers. The superannuation fund is provided partly from dedu from the salaries of civil servanl partly from annual contributions from lated Fund; but, in reality, all tbr superannuation money is the result of taxation of the people, most of whom are not civil servants. This circumstance alone naturally raisi ion, "Win are aot all workers per■ii superannuation after hi j ears' of honourable i hat many thousands of ■ i render service to the State . a te, but as n our able and useful citizens, are o* I fir long and faithful Bervice, in a position to retire after indeed, tnosl of thi apelled to work prevented by old age and infirmity. The pit tance known as tl Id on, whereas a civil Bervant ■ only menial work is provided with a petency up to tl ion by uperannuation for all its il workers is undoul ses of unemploymi old men and wi Med to conl inue hj reached the aveuui employment of >■ and ! superannuat ion would : curing the evil of unemploye \ oung; in can be little doubl »uld be a complete The additional I to relieve unemployment would, it iy for the purposes of national BUperannuavould incidentally ent and

add immensely to the general happines and contentment of private workei w hose service to i heir counl i \ ha at Least as valuable as that of civi 3ervanl > to hj horn superannuation i rightly allowed but i I logically confine< To put the mat ter in another wa\, t b State should be equally solicitious fo the welfare of all its worthy citizen tould organise accordingly. As t tin- amount payable to national supei annuitants, some initial difficulty wouh have i" be met, but it, should not be impossible to decide upon an irreducibl minimum, with additional allowant ding to the responsibilities of th annuite

BARRISTER.

ENORMOUS HOARD.

FRENCH GOLD, £647,793,536.

d 1 1.30 a.in. i

LONDON, June 17. "Daily financial editor says thai now in the remarkable position of Inning a hank ; rculal ion covered to the exl nearly 100 per rem. American bankers view with satisfaction the removal of the last of the French dollar holdings in New York, but it is doubtful if the i re equally pleased, as the influx of gold has not improved the si| U;|l i« m.

The gold hoard of France is now £647,793,536,

CREDIT

Sik, —The correspondence on the subject of credit may perhaps be better understood if we consider two aspects of it, viz., financial credit, which is that issued by the banker and which is merely the ability to deliver valid money as required, and real credit, which is the ability to produce and deliver goods and services as when and where required. Taken together, these two kinds of credit are regarded as the credit of the whole community, and should, therefore, be administered for the benefit of the individuals of the community. An element of real credit that is forgotten

[3ll

11 El' I■; A 1 OF 111 I: I>Ei'R E s S i «IN I X NE W V. BAL A N D

(Herald

and aot taken into account is our natural reserves, discoveries, invent ions, industrial processes, and all productive capacity the knowledge of which has developed through the centuries, and which is. therefore our cultural heritage or legacy from our forefathers. This cultural heritage belongs beyond all doubt to the community, and no class ran claim a monopoly thereof. It follows, therefore, that a huge share of the real credit of the nation {or of the world I belongs by inheritance to all the people, and should be eontrolled by them through their representatives. The exponents of ihe new economics complain that tin' veal credit of the nation is controlled, not by the people, but by tinselect few known as bankers. As the chairman of the Midland Bank, in Ins address to the shareholders, said, "They who control the credit of the nation direct the policies of Governments and hold in the hollow of their hands the destinies of the people.'' The new economists claim that this control of a nation by it- bankers ha- proved itself a cra/y System, and has indeed resulted in the dreadful condition of the world to-day; for the national credit i> managed through the control of financial credit, not to prevent poverty in the midst of plenty, but quite properly under our >ystem to make as much profit as possible for the shareholders of the banks. The new economists there fore claim with reason that t lie only means of extricating the world out of its financial chaos is to place the control of its credit with the people: that the first nation to do this will have solved the problem of the removal of poverty and distress in the midst of plenty and happiness, and will speedily be followed by other nations. And so our topsy-turvy money system will be used by the nation for the nation. and the hanks will be the servants and not the masters of the nation. There is no business s., essentially the national business as the creation and control of money: to make it depend on gold lying in the vaults of banks is to ignore to take into account the real basis of issue, \i/.. the industry and production of the people.

BATIRTSTEK

'ln my belief it is really a serious threat that civilisation is facing unless we display more intelligence, national and international, than we have succeeded in displaying in the last ' ten years." said Sir Basil Black. ■at speed]. "The collapse, in whatever form it conies, will, of course. come in some unexpected form, and it will not, perhaps, come quickly. We are more likely to have a series of ups and downs, always ending up a little further down than when we Bti but gradually declining, rather than a sudden collapse. That is what is going to happen unless. Bomehow or other, we can be intelligent about it. Nothing that has been done is preventing the collapse. On the contrary, we have been hastening it At the present moment, there is one obvious

MANIPULATION AND INFLATION.

"We are mel with certain curious .! iately we annou i suggest a policy of raising commodity prices; we are told thai we are trying create pros] currency manipulation," said Sir Robert Home, M.l'., in;i p ;h. "But currency manipulation is no crime. It is carried on every day by the Bank of England. The fact is that there is a deep-s< view in people's minds that currency has been created by Providence, and thai it is sacreligious to touch it. Manipulation is not bad, but you may manipulate ii badly, and then the whole world suffer"-. Tlierr are other obessions. The word inflation is a perpetual deterrent to the just consideration of these problems. People who tell you that you must not inflab very seldom give you any reason why you should not do it. Tn the last resort they are forced to gay that you must never begin it. because you cannot stop it. They are like people who refuse a drop of brandy to a man with a heart attack in case he should take to drink."

{Herald, ! =

THREAT TO CIVILISATION

[32]

DEFEAT OF THE DEPRESSION l\ NEW ZEALAND

An to everybody who Ls connected with the questions of reparations and interallied debts, and is, broadly speaking, thai no one is ever going to pay anyone any more. That does not preclude the possibility of some comparatively small payments. In relation to the enormous totals at that statement ran be made as a statement of fact. It is obvious to anybody. Simply to wipe off reparations means a good deal of inequality of sacrifice. That is the danger of the -i t ion. I believe Ottawa is an opportunity whirh will not recur of doing something intelligent over the next few- decades, before civilisation crashes, of checking those booms and slumps and slumps and booms which arise through the violent fluctuation of prices. Above all. ■■■ led at Ottawa is leadership of Britain in the matter of currency."

The fact thai the worker under existing conditions is not able to purchase his proper share of the product of his own industry is not owing to the or greed of his employer, but is entirely due to our defective money system. Capital and Labour are both victims of inefficient money, the capitalist often to a greater and more distressing degree than the worker, for the capitalist is a worker just as much as. and often a greal deal more, than rdinary worker. Very often the capitalist loses the whole fruits of his enterprise, expenditure, and industry, whereas it is only in very bad eases of bankrupty that the ordinary worker loses his wages. An efficient monetary system would maintain such equilibrium between prices and wages that there would he no bankruptcies, which are due (except in cases of fraud) chiefly to prices and wages not changing in unison.

[33]

EI'KAT OF THE DEPRESSION IN NEW ZEALAND

The Scheme in a Nutshell

1. New Zealand Currency to he under the control of a Currency Hoard i iposed of expert statisticians and economists, free from political interference, a- are Supreme Court Judgi

I'he issue of new money to he based on tin- cosl of production.

i lii Hanks to bold '- for £ of Stale money as against their liabilities to current account depositors, and to surrender National debl securities pro tanto, which would he cancelled.

ri Banks to discontinue issuing loans out of fictitious deposits, i.e.. State notes and hanking credits to be issued stric I true deposits only. (This would maintain an equilibrium between currencv and goods on offer for currency.)

(d) 'fhe Post Office Saving Bank to he made a Nat People'- Bank, receii laying by cheque (hut not making loan-, which function would remain with the commercial banks '.

Paper Currency, with N.Z. Minting of Silver and Copper.

'_'. An immediate issue of New .Money of such amount as would in the judgment of the Currency Board lie sufficient to restore prices and wages to a level that would make it possible for existing debts (especially mortgages) to he re-financed or discharged: to permit of proper sustenance allowances tor those who could not lie fully employed: to raise Pensions to provide comfortable existence for all who could not he expected to work.

3. National control of industry to lie extended under the direction of business mei o ability. Prevention by the State of destructive coi o Stair regulation of prices through the Currency Board, bul no interference with private enterprise thai i- functioning to the welfare of all conerned without injury to the general welfare.

4. Reduction of the number of hours of labour and utilisation to the full of labour-saving devices, the State to purchase all new machinery thai would vendor human labour unnecessary and to increase general leisure accordingly.

5. A scheme of National Superannuation to be put immedii into operation to allow .-ill over 60 to retire, and so permit the immediate employment of the young who have flnishd their schooling.

I 34

DKFKAT Hi' till.; DEPRESSION IN NEW ZEALASI

Purchase by the State of all exportable produce, including . ai the price settled by the Currency Board, the prices beii rough data collected regarding costs, wages, and salaries, the worker to receive in wages and salaries sufficient to maintain an equilibrium between currency and goods on offer for currency. Importation to he restricted to the value of the surpluses created by the -ale of our exports abroad. No further foreign borrowing except for conversion of existing foreign loan-.

7. Complete Nationalisation of the medical, dental, and education services. slum- to be eradicated by the erection of State tenements with modern equipment. State factories to be established where necessary to supplement private concerns, hut nol to ices of products from either to be the already in operation in connection with life, tire, ai ce.) A.n honourable existence to be red to all who "do their hit." and for those who. through infirmity or inherent incapacity, are not able to look after themes.

s. Parliamei posed of representatives of al] classes of districts. (Workers includes producers.)

I :»a I

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