Debt-, more debt-, eternal debt : Labour's way in

Davie, D. C. (Donald Cyrus), D.N. A. Ltd., Christchurch, N.Z., 1937

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Title: Debt-, more debt-, eternal debt: Labour's way in

Author: Davie, D. C. (Donald Cyrus)

Published: D.N. A. Ltd., Christchurch, N.Z., 1937

INTRODUCTION.

As far as I am aware, Mr Lee’s pamphlet, “Money Power for the People,” is the only statement on monetary policy that has been made by any prominent member of the Government since they reached the Treasury benches in 1935. Prior to that event a great deal had been said and written on the subject, including at least two pamphlets by members who are now Ministers of the Crown—the Hon. H. G. R. Mason and the Hon. F. Langstone.

Mr Lee tells us he has set out H) express only his own views, and is alone responsible. However thaT may be, we are indebted to him for reopening this vital matter for discussion and argument. In his introduction, Mr Lee states: “No democratic Government has ever advanced so fast or so far in the world of money policy, and certainly no possible alternative Government is likely to go further.” Again I thank Mr Lee for introducing a matter that I believe is of vital importance, so early in his pamphlet. I refer to his use of the word “policy,” a word which I believe is more persistently misunderstood than probably any other word in our language. For example, the Minister of Finance himself and every newspaper in the country agree that Labour’s financial policy is entirely orthodox—that is to say, it has not deviated from the financial policies in vogue in other places. It has not, then, gone either fast or far, and the truth of the matter is that Mr Lee has made the common mistake of confusing policy with administration.

If we embark on a ship at Wellington with the intention of going to the North Cape, our destination is a matter of policy. If the captain decides to run on one engine instead of two, or to change the type of engine used, that, as far as we are concerned, is a matter of administration.

To continue the analogy, Labour said it was going to alter financial policy; it was going to run the ship to the North Cape instead of to the South Pole, where it had always gone before. On clearing the heads, however, the ship heads due South, as before, and Mr Lee observes a number of alterations on board. These alterations are administrative alterations, and not changes of policy, as Mr Lee believes. The ship is heading due South—straight into debt in the approved fashion, and not up North and out of debt.

D. C. DAVIE.

Debt, Eternal Debt, Labour’s Way In.

(A reply by I). C. Davie to Mr J. A. Lee’s pamphlet, “Money Power for the People: Labour’s Way Out.”)

While every effort is being made to emphasise the difference between what is termed a Capitalist Economy and a Socialist Economy, it is quite possible that the most politically influential vote in New Zealand is far less concerned with labels than it is with results. The vote that so often decides political issues comes from people who are not active supporters of one side or the other. The Coates-Forbes Government, for example, made the fatal error of assuming that New Zealanders would not vote for a Labour Government. They estimated, and I think correctly, that the Socialist vote was too small to sway the issue. They did not realise that thousands of voters do not care what a Government is called. Despite the frantic efforts of the Coalition in 1935, the public refused to be stampeded by the word “Socialist.” The results of the Coalition Government’s administration were too bad for that. Writers and other apologists for our present Labour Government seem determined to perpetuate-this psychological error. Much of the beneficial legislation that has been passed by the present Government is due, according to these'apologists, to Socialistic ideology. It is not due to the sound judgment of Messrs Savage, Sullivan, Mason, or other Ministers of the Crown, as individuals; it is not even due to the rank and file of the Party, except in so far as they embrace Socialism. When the Labour Government meets hard times and dissatisfaction increases, they will regret this insistent demand to. divide voters into Socialists and Anti-Socialists. The Labour Government’s popularity at the present time is due to a number of factors, but a widespread belief in the benefits of Socialism cannot be numbered among them. Acute dissatisfaction with the Coalition Government and a ready willingness to give any alternative Government a fair trial are probably the principle factors, and in saying this I am not overlooking the fact that much of the legislation passed since 1935 is popular with all classes.

Mr J. A. Lee’s pamphlet, “Labour’s Way Out,” lays the usual stress on the difference between Socialism and what is termed Capitalism. Since the ranks of the Labour Party contain many Social Credit supporters, among whom quite a number understand the real issue, Mr Lee has entitled his pamphlet “Money Power for the People” in the hope, no doubt, that the word will be taken for the deed. The frequent reiteration of Labour’s Socialist tendency has the same object in view—that is to say, to buck up the Socialists who, although small in numbers, are active workers for Labour. The abolition of profits

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in order that the toiling masses may get the full benefit of their work would, I think, be a fairly accurate description of the genuine Socialist’s aims. The Labour Government has, however, passed laws which make it an offence for numbers of traders to sell goods to the toiling masses below a set price, which, of course, includes a set profit.

On the first page of his pamphlet Mr Lee observes that the time has grown opportune to amplify Labour’s statement of monetary policy. The author proceeds to describe the administrative machinery the Labour Government introduced shortly after the last election, for dealing with money. Because this machinery is radically different from that used by the former Government, one is, by implication, invited to believe that Labour’s financial policy is also radically different, but that is not so.

There is, however, one very important alteration in the administrative machinery of our banking system—an alteration that is sometimes overlooked by Social Credit critics of the Labour Government. There is a difference, and a very important difference, between the powers of the present Government in its relations with the Reserve Bank of New Zealand and, say, the Australian Government in its relations with the Commonwealth Bank of Australia. The Government of New Zealand can at any time command the Reserve Bank to produce £5,000,000, or for that matter £50,000,000, and the Bank must do as it is ordered. We have no Loan Council, or private, or semi-private board of directors who could refuse to produce money and so hold up the business of the country, as they can and do in Australia. It is this difference in the power and duties of the Reserve Bank before and after the advent of a Labour Government that has caused endless confusion both within and without Labour’s ranks. An alteration in the power and duties of the Reserve Bank is not the same thing as an alteration to the policy or system by which the Bank shall generate money for the community.

The Amendment to the Reserve Bank Act introduced in 1936 makes it possible for the Government to demand money from the Reserve Bank at any time, and get it. It does not make it possible for the Government to treat this money as public credit; on the contrary, it specifically lays it down that it is to be a public debt—i.e., belonging to an account-in the Reserve Bank, and not to the public as their property.

As that most orthodox of journals, “The Economist,” said in March, 1937, “The complete nationalisation of the Reserve Bank diverged less far from the system of semi-public control introduced by Mr Coates than the latter itself diverged from the strictly orthodox plan originally proposed for the new Central Bank by Sir Otto Niemeyer.” And again, on August sth: “The results of Labour’s policy ARE SO FAR REASSURING. It is true that the Reserve Bank has been brought under State ownership and control . . . but the money and banking operations of the past year disclose no sign of the departure from orthodox monetary methods THAT WAS WIDELY EXPECTED.” (My capitals.)

Superficially it would appear that for the public or their representatives to borrow money from a public department makes the repayment a matter of no consequence, because a public department owns it when it is repaid. The Prime Minister, the Right Hon. M. J. Savage, was among the first to fall into this error when, throughout the election campaign of 1935 and many times since, he has endeavoured to explain the analogy by saying that he would sooner owe

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himself £5 than owe it to anyone else. For the non-technical sympathiser with the use of public credit this is, of course, a mistake that is quite understandable. It does appear to be the same thing. Actually it is nothing of the kind.

In his reference to the Douglas Credit influence at the last election, Mr Lee states, on page 7: “While no one could outline any Douglas Credit constructive proposals, nearly everyone was able to understand and agree with the Douglas Credit Movement’s criticism of the orthodox financial machine.” For at least four years prior to the election of 1935, and particularly from 1932 onwards, the Douglas Social Credit Movement carried on extensive propaganda covering the whole of New Zealand. As Mr Lee correctly states, the Movement sold an enormous amount of literature, and thousands of meetings were held throughout the country. At practically every meeting, and I think in every book or pamphlet that has ever been issued on the subject, the constructive proposal has been made that new money—that is, money that does not have to be borrowed and consequently repaid into any particular account—should be issued for increased consumption, and from that point flow to the banks in settlement of the huge debts we owe them. In spite of the extent of this propaganda, which Mr Lee acknowledges as very considerable, he himself has never noticed this constructive proposal, which was, and is, an integral part of Social Credit. In spite of the thunder of a thousand Social Credit speakers operating literally from the Cape to the Bluff, Mr Savage, too, had not heard of debt-free money until 1936. He had not even heard of the idea, despite the fact that it was being shouted from the housetops within his hearing and he was an assiduous reader of Douglas Credit literature. Now, the ■extraordinary thing about this situation is that to quite a considerable extent, if not entirely, Mr Lee and Mr Savage, together with many of their colleagues, are being quite honest in their present assertions. That is to say that, incredible as it may seem, I personally believe them when they say they never saw or heard of any such constructive proposals.

We are all familiar with the experience of meeting a word for the first time, or what we think is the first time. We look it up in the dictionary, quite convinced that we have never seen it or heard it used before. Afterwards we are surprised to find that we meet that word over and over again. It must have been before our eyes and used within our hearing on many occasions, yet we never saw it or heard of it before. This may seem to many to be a rather thin explanation, when it is remembered that Social Credit is a political subject that, as Mr Lee states, has been discussed in tramcars and on street corners from end to end of the country, yet the politicians, who would naturally be more interested than others, have never taken in the basic principle on which the whole subject is founded. I admit that it is a tall order, but I repeat that I also believe it is largely if not wholly the truth. Labour politicians found the Social Credit slogans and propaganda extremely useful, but most of the Labour people with whom I have come in contact harbour a fierce resentment to any suggestion that Douglas could teach them anything. To be a Labour politician and a Socialist is to know one’s way through all eternity. Despite this belief, it is abundantly clear that Labour members have not understood the vital difference in principle and practice between Mr Savage paying himself back £5 and the Government repaying to its own Reserve Bank money borrowed from that institution. “Hansard” abounds with Labour members’ speeches on the subject of bank-created credit.

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Again and again members have pointed out that this money comes into existence by a stroke of the pen. The question, “Where is the money to come from?” became almost a standing joke prior to 1936. To attempt to tell a Labour member that this money would be cancelled out of existence on repayment was tantamount to open heresy. They knew it all—they had always known it. If Mr Savage could borrow £5 from himself, let us say withdraw £5 from a Post Office account, he would sooner pay himself back that borrowed amount than pay back £5 borrowed from sbmeone else. When Mr Savage pays himself back £5 (that is, if there is any sense in the statement at all), he retains that £5 as his purchasing power. When the Government borrows £5,000,000 from the Reserve Bank, the Bank creates that amount of new money. When it is decided tp pay the money back, it is collected from the people, paid into the Reserve Bank, and the whole account is crossed off, the money being non-existent from that moment. There is absolutely no analogy between the two cases. To say, therefore, that the Government has altered the monetary policy and is using the public credit because it is borrowing money from itself, is to misunderstand the whole position.

There is no alteration in policy or principle; the Government is only using the public credit in the same way that private banks have always used it. It is the principle or policy employed that is so harmful to the people’s interest, and not the rake-off or profit that private financial institutions receive. It may well be that the profits of the private banks on loans to Governments have been unduly high, or even unjustified altogether, but their elimination does not of itself do anything at all to set right a faulty monetary system which keeps the people in debt in perpetuity.

A farmer, business man, or wage earner struggling to pay off a debt to the State meets just the same difficulties and hardships as does a man who is struggling to pay off a debt to a private bank. He is not helped by the knowledge that no private shareholder is drawing a profit on his struggles. If ten thousand borrowers pay off large debts to the State, the State does not by reason of this action have one penny more to spend for the benefit of the people. Neither education, public health nor pensions can possibly be advanced; taxation cannot be reduced, and no public department can benefit because of this repayment. The money is destroyed upon repayment by exactly the same procedure as that employed by private banks. In his review of banking progress to date, Mr Lee points to reductions in interest rates payable by the State, and expresses the hope that at some future date all State activities will be financed by the State-owned Reserve Bank either at still lower rates or at no rate at all. On page 18 of Mr Lee’s pamphlet he states: “Personally, I should like to see every conversion or new loan underwritten at a rate too low for Capitalist subscription.” This statement is unimportant except in so far as it brings to light the extraordinary working of the human mind. One side of Mr Lee’s mind—and a very capable mind, too—has taken in the main points in the policy and technique of high finance. He knows that bankers create money by a stroke of the pen, and he knows that the lending of this money places them in a very powerful situation. This knowledge alone would be sufficient to give Mr Lee’s imaginative mind the key to the rest of the story, even if he had no further knowledge. Yet at a given point Mr Lee closes up this part of his mind, shuts it away in a watertight compartment, while the other side embraces an old love. The Government bank, he states, will eventually lend money at a rate too low for Capitalist subscription. It is quite

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true, of course, that Capitalist finance, by which 1 mean the private bankers, extort a high rate of interest whenever it is possible to do so, but rather than give up their hold on the debt system, which is the important thing to them, they are always prepared to alter their ways. British and American loans to Italy at a quarter of one per cent, are a case in point. Mr Lee seems to have no conception of large-scale financial technique. British banks have lent hundreds of millions of pounds to foreign countries in an attempt to draw populations within their net of debt, and on occasions have lost both principal and interest. On Mr Lee’s own showing, the Capitalist financiers of England have financed a recent loan at two and one-half per cent., against our Stateowned bank charge of three and one-half per cent.

Enormous advantages to the people are claimed for reduced rates of interest payable on State loans. “The Reserve Bank netted a handsome profit for the Government when it took over the gold reserves,” pages 13 and 14. “The external debt has been reduced by about three million pounds, thereby saving a very large amount of interest to the public account,” page 16. “£12,000,000 have been reconverted from 6% to 3 V/< and a new loan of £7,000,000 underwritten by the Reserve Bank.”' “The reduction from 6 ( / to 3\ c /c was a handsome advantage to the people of New Zealand,” page 17. On page 10 Mr Lee says that in regard to the £5,000,000 for housing, a straightout issue of money for the creation of such assets was considered justifiable. Quite so, but why the use of the term “straight-out issue”? This is quite obviously an ordinary debt contracted in the ordinary way. Apparently Mr Lee hopes that the use of this term will convince some people that Labour is actually fulfilling its election pledge to use credit in a way that had not been done before. It is typical of Labour’s attitude to financial matters that there is more support for the use of public credit for housing than there is in any other direction. This is because Labour members see the necessity for new houses, together with materials and labour available. Their sympathy and support for poorly-housed people does them credit, but it so happens that no avenue of public expenditure is quite so unsuitable for an issue of public credit as housing. Obviously, the State cannot give one man a new house and another man nothing at all through the use of public credit. The State could, however, if it had the power, which it has not yet taken, use public credit for public works or to abolish the hated sales and wage taxes and thus meet with general approval. At the present moment the Amendment to the Reserve Bank Act passed in 1936 specifically prevents the Government from using the public credit at all except in the sense that it has always been used.

But let us return for a moment to Mr Lee’s more definite statements regarding what has actually been accomplished. “Handsome advantages” and “enormous advantages to the people” are met with in every paragraph. It is quite true, of course, that savings have been effected in certain accounts. Mr Lee is quite unable to show us where these handsome and enormous advantages actually make contact with the people, and that, I think, is where his case collapses. He puts forward a list of things actually done, and done with the object of producing a certain result—in this case the bringing of financial benefits to the people. These benefits were to have been brought about by reductions in interest rates, and might have materialised in reduced taxation on the whole community, or on one section, such as the weekly wage earners. They have not materialised at all. Mr Lee cannot claim that, although of a beneficial nature, these transactions were merely routine and could not be expected to show

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immediate benefits to the people. They are placed in the forefront of Labour's financial record, and in order that no mistake will be made, they are described throughout as handsome and enormous results of Labour’s financial policy. There are many thousands of people in New Zealand who do not understand the difference, and cannot be expected to understand the difference, between using the public credit as advocated by Social Credit supporters and by many Labour leaders in the past and the use of public credit that is borrowed from a State institution! I say “cannot be expected to understand this difference” because an understanding involves some technical knowledge.

The general public vote for results, such as the delivery of electricity from water power, but not on different types of generators. The technique of financial practice, however, occupies quite a different position in the public mind. To begin with, financial policy and administrative technique have, as Mr Lee states, been very widely discussed in this country, so that, despite its technical nature, I hope the following attempt to explain this very important difference will not be entirely wasted. Perhaps the most important point to keep steadily in mind in any discussion on this subject is the background of debt. All suggestions for improving the present financial system that fail to take into account the huge accumulation of debts still owing are useless. Many suggestions of this nature have been made; stamp script and what is known as disappearing money (as if money did not disappear fast enough without any special device) ignore altogether past debts, or, more correctly, debts contracted in the past but still owing. A very considerable proportion of total taxes levied in New Zealand to-day go to pay interest and principal on money that the bankers (yes, private bankers) created in the past by a stroke of the pen.

The Labour Government is reducing- the rate of interest to be paid, and m£kes a special feature of the fact that it is paying itself. It may be that any interest at all paid on loans of this nature is indefensible on moral grounds. I do not wish to express an opinion here on that score; but, as our Labour leaders say, when dealing with industrial disputes, keep the head clear and free from strong feeling in one direction or another. At least part of the interest paid to private banking institutions appears again as purchasing power, but every penny of capital repaid is cancelled —that is, destroyed, upon repayment. Anyone who is prepared to keep the head clear on this question and not be unduly influenced by moral prejudices must, I think, agree that the repayment of capital is of far more importance than the lowering or even total abolition of interest. This applies with equal force whether the money is taken from the people to settle a private bank overdraft or to settle a State bank overdraft. To repay these debts out of existing money means a constant drain on the pockets of the people, and as a matter of fact the debts are many times larger than the sum of money owned by all the people collectively—that is to say, the total sum in all the banks. I am speakingnow of debts held by the banks, and not those held by private bondholders, which, of course, come into quite a different category and are not cancelled on repayment. We cannot lessen this load of debt by borrowing, even when the borrowing is done from a State bank and all interest is payable to the State.

We can only lessen the total debt by two means—by heavy deflation or by the introduction of some

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money that js not itself borrowed, or, in other words, is debt-free. It is interesting to note that Mr Lee includes the sale of securities to the public by the Reserve Bank as one of Labour’s monetary achievements. The sale of securities by the Reserve Bank is deflationary in character and reduces the purchasing power of the people.

Heavy borrowing from the Reserve Bank increases the purchasing power of the people temporarily, but it also increases the load of debt, which in turn means increased taxation for liquidation purposes. This particular burden, taxation used to liquidate bank debts, is not affected by interest rates, whether payable to private persons or public departments; it is not, in fact, affected by the elimination of interest altogether.

. There are many people, especially among the wage earners, who are strongsupporters of heavy taxation, particularly when it is proposed to tax someone else. If the national income were fixed by some law of Nature, as so many Tories keep on suggesting, there would, of course, be a very strong case for heavy taxation of the rich in order to meet the needs of the poor. The flow of income to the people is regulated by banking policy, and not by a law of Nature, although it is true that the forces of Nature play a large part in producing the real wealth upon which our money income is based. Nature is being assisted by the inventiveness of man, and I submit that steadily increasing incomes for everybody are thereby made possible. Support for heavy taxation on the rich is a dangerous policy for the "wage earner. Taxation of the wealthier classes in New Zealand has never been heavier than it is to-day. “Quite right, too,” says the Socialist. However this may be, I should like to remind by wage-earning friends once again that a clear head free from moral prejudices is a distinct advantage. Heavy taxation of the wealthy has not brought about any lessening of the taxes levied on the poor. On the contrary, taxation on small incomes is also higher than ever before—sales tax, wage tax, and yearly levy, not to mention many others. That many of these taxes were levied by an anti-Socialist Government is quite irrelevant. Bring out the taxation whip and it curls and smites in all directions.

It may be quite true to say that the Labour Government is making better use of money wrung from the people by taxation than did other Governments. Collectively, we own New Zealand—in very unequal shares, it is true, but apart from a comparatively small mortgage held in England the entire ownership resides in New Zealand. Is there any section of the community getting progressive benefits as a result of this ownership? There are, no doubt, small gains here and there among all sections, usually balanced by losses in other places; but I submit there has been no advance either of the community as a whole or of any one section comparable with the advance in man’s inventive skill and Nature’s bounty. We own New Zealand, but we (and the “we” includes everybody) have to pay increasing taxes while at the same time our asset or potential asset becomes more and more capable of delivering to us the things we want. Despite the ever-increasing productivity of our country, workers are shortly to be asked to pay yet another tax in order that they may live with some degree of comfort in their old age ; ten, twenty, thirty, forty, fifty years hence.

But will this not be a good thing? Is it not right and proper that men should be able to retire with some degree of comfort in their old

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age? It is, of course, quite right and eminently proper—that is to say, done by the best people. It would also be right to provide everybody with a Rolls-Royce car and ten thousand a year at fifty years of age if the people wanted these things and they were obtainable. It a proviso is included to the effect that in order to qualify for these benefits people must live on river-weed and horse-flesh until they reach the age of fifty, it is not so good.

People are struggling to bring up families, and to do this they must meet day-to-day costs. Increased taxation makes this struggle more difficult, and worthy causes do not lessen difficulties; but, most important of all, the tax is entirely unnecessary, and is only levied because of an obstinate determination to perpetuate the debt system. Money received through taxation and paid in settlement of a bank debt is not available to pay workers’ pensions, and this remains true whether the bank is a State bank or a private bank.

Suppose we were all living in a more primitive community, and in place of what we now recognise as money we used shells, which in that case would in fact be money. Let us assume that the supply of shells is unlimited, but, since they pass as currency, the supply must be restricted to the value of goods produced. The supply is controlled by a private monopoly, and all shells are issued only on condition that the issue is recognised as a debt, plus a further condition that onequarter of an acre of land must be dug by hand for every hundred shells borrowed. This, let us say, is the law of the land. Shareholders in this private monopoly also draw tribute on all issues. The digging of the land is for the purpose of keeping the people in subjection; it takes up time and effectively prevents them from doing what they want to do. The private monopoly run a steam roller over the land after it has been dug, and the process begins all over again with the next loan. Now a Labour Government takes office, pledged to reform this system. The tribute payable on new loans is reduced and the State does its own lending, the population digging a quarter of an acre of land for every hundred shells issued, just as they did before. “You cannot expect to get something for nothing.” We can see that it would be absurd for a Government to allow any private monopoly to force the population to dig land to no purpose, and the fact that this foolish business also provides a profit for the private monopoly naturally increases the rancour.

Absurd is altogether too mild a term to apply to a new law, which sets out to relieve the people of their chief burden, yet insists that the land be dug as before, uselessly and laboriously, although free from tribute to the private monopoly, this is, in effect, just what is happening to-day. The chief burden on the people may be summed up in one word, “debt.” A large proportion of the taxes go to service debts owing to the banks, yet the Government insist that the money the State Bank issues shall also be recognised as a debt.

New money issued by the State Bank mingles with and is indistinguishable from new overdraft money issued by the private banks; it is used to pay debts to the private banking system. There is therefore a continual struggle to make one lot of money pay off two lots of debts, the old and the new, private bank and State Bank. Very definitely, there is no money power for the people under this rule, but only a hopeless struggle.

When the flow of money from the Reserve Bank for State purposes is for the time being greater than the rate

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of cancellation, things improve; but the struggle continues with mathematical certainty later on. It is quite true that rapacious, blood-sucking profiteer gets a profit on money issued from the Reserve Bank, but it is also true that progress is being held up and the whole country is being heavily punished in order that the State Bank may be operated on the same orthodox principle as the private bank. Mr Lee must not be unduly surprised if we do not stand up and cheer.

I believe Mr Lee’s remarks about the necessity of taking important action in the first flush of victory are correct. I only wish with all my heart that the Labour Government had taken the most important step of all and faced the barrage of hostility there and then. I am certain they would have won a victory for all time. I also wish Mr Aberhart in Alberta had realised this when he. first got in. Before Mr Aberhart made any serious challenge to the financiers’ debt system he did not meet any serious opposition. He has left it until the eleventh hour to act, and is now meeting the most serious and powerfully organised opposition any Government has ever faced. An overriding Government disallows Acts passed by the Alberta Government in spite of the assurances of Mr McKenzie King that they would not be interfered with. This assurance was given immediately after the elections, when the bankers thought there was still a chance of putting .Mr Aberhart in their pockets. They very nearly succeeded in this.

To-day a fierce war is being fought out in Alberta, and although it is not a war fought with guns and artillery, the fate of the human race for many years to come largely depends on the issue. Bankers’ men, including Mr Reginald McKenna, are pouring into Alberta, and indeed all over Canada, with unlimited funds to fight Mr Aberhart.

What has Mr Aberhart done to merit this attention? Has he said he would destroy the capitalists’ profit? No; he has merely said that his Government will take steps to pay five shillings per week per head to the people without increasing taxation and without borrowing. And this, mind you, in what is probably the richest territory in the world per head of population. The fierce crusade against Mr Aberhart is in marked contrast to the popularity of the Hon. Walter Nash in financial circles at Home and abroad, and the reason is not far to seek.

At the present moment the National Party are canvassing the country on a policy—if it can be called a policy—of anti-Socialism. Since the fear of Socialism did not save the Nationalists at the last election, there seems to me to be no reason to suppose it will help them at the next. Mr Lee on his part talks of Labour’s thoroughly Socialistic policy, and, in effect, claims a very general support throughout the country for Socialism. Nearly everybody has a different conception of what constitutes Socialism, but I do not think the majority of people are very concerned about it to-day one way or the other. I have addressed meetings of Public Works employees, forestry workers, and camps of one kind and another up and down this country, and I do not think the number of Socialists in these camps would exceed ten per cent, of the men I have talked to. On the other hand, I feel sure that ninety per cent., or perhaps more, will vote for Labour. On the farms it is harder to form an estimate, but I would be surprised if they produced five per cent, of Socialists with all employees counted in. The outstanding feature of political thought among the farmers to-day appears to me to be a readiness to accept a Labour Government, or perhaps more correctly a refusal to turn Labour down because it is called Labour and connected with a good deal of loose talk about

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Socialism. There is an abundance of criticism, much of decidedly hostile to Labour, and I think this hostility is growing. The Nationalist who thinks’ he can fan this hostility by a lot of hostile talk about Socialism is, I am convinced, mistaken. To the average country voter the screech for Socialism and the boom of anti-Socialism is merely blather. The only people who are deluded by it are the politicians themselves; the voters are not interested.

Leaving aside for a moment the question of whether the Labour Government’s legislation is good, bad, or indifferent, there is, I believe, a very general feeling that the defeat of the Coalition at the last election has been an excellent thing for the country. It has bucked up the spirit of New Zealand and restored something of the old desire for progress, even if that means experimenting. People have recaptured the idea that the sun continues to shine even after a change of Government. There is, I believe, a greater readiness to change to-day than there ever was before. I don’t mean by this a greater opposition to Labour, but just that people seem likely to swing from one party to another whenever they think they will get an advantage.

In conclusion, I would like to state most emphatically that there will not be any real monetary reform, use of the public credit, or anything of that nature until a further alteration is made to the Reserve Bank Act, and all assurances to the contrary may safely be ignored. It is futile to talk of money power for the people when the Reserve Bank Act, together with the Amendment thereto passed in 1936, specifically forbid anything of the kind. “Money Power for the People,” by Mr J. A. Lee, merely adds insult to injury, because we know that whatever money power we now possess is being steadily lessened by increased taxation.

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