TRACTS FOR THE TIMES.

Auckland Star, Volume LXIV, Issue 190, 14 August 1933, Page 6

TRACTS FOR THE TIMES.

THE RECOVERY.

(By PRO UONO PUBLICO.)

The world docs not appear to have been particularly depressed by the failure \ of the London Conference. Everybody hoped that the conference would accomplish something useful in the promotion of recovery, but no one was very sure that the results would be at all substantial, and the prevailing mood seems to be one of disappointment, but not dejection.

What keeps the world going is the sentiment that forms the title of a recent'book by Mr. Walter Price, "Wo Have Recovered Before." Mr. Price's general thesis is that the revival of trade cannot be far away. Clothes and boots wear out and must be replaced, low prices tempt people to buy, and retail trade shows a small recovery. But retail stocks are low "and have been kept low for a long time, and they must be replenished. The manufacturers have small stocks and- they in turn must buy raw materials and must employ labour. It needs only a little stimulation of retail buying to set the ball rolling again. This, he argues, has actually happened this year in many lines, so that there is already a recovery, though a small one, in progress. Unless anything happens to interrupt it the process will continue, until people begin to regain confidence and to trust one another and credit flows freely once more. Of course, the upward swing of the pendulum docs not conic so easily and smoothly as that, but so long as the swing is upward it seems to gather momentum. Unless there is some fresh setback normal buying gradually brings about normal manufacturing and

producing. Everyone knows that this is the natural process of recovery from depression, but a point that Mr. Price and many other economists seem to overlook is the difficulty of knowing what normal conditions really are, and what is the full extent of the natural trade recovery. We have had at least nine or ten years of abnormal prosperity, due to widespread currency inflation, and the problem is to decide what the new normal i 3 to be. Where can one And the data on which to determine "normal" wages? What are "normal" prices under the present conditions of partial deflation? I confess that this is a puzzle beyond the solution of the common man. Wholesale and retail prices will become stabilised, but taxation is not likely to be reduced to it's former level, and therefore it would seem that profits, salaries and wages and interest must all be stabilised at figures Tower than they used to be, *>ossibly lower even than they were before the

war. 1 It seems to me, therefore, that there may be a return to normal without our recognising it, and that the process of adjusting ourselves to this new normal may cause a lot of heartburnings and discontent. The very fact that so many countries, including Britain and the United States, are off gold is pretty strong evidence that all countries ought to be off gold and that the world would be wrong to attempt to deflate completely at this stage or, indeed, for a very long time to come. What I mean is that if the world is content to let the recovery come by the so-called natural process it is going to suffer a great deal of sorrow and hardship unnecessarily. People are extraordinarily cheerful about the matter on the whole because they are convinced that things will come right. But my point_ is this, that "there is a certain point at which buying and producing will be normal, but stabilisation at this point may mean lower standards of living and small margins or none for savings, and instead of rejoicin™ at the return to normal we may be profoundly 0 dissatisfied. If that is a sound argument, then the American "reflation" cure may have everything to commend it. N