ENGLAND'S BOOM.

Auckland Star, Volume LXVIII, Issue 3, 5 January 1937, Page 5

ENGLAND'S BOOM.

ECONOMISTS' FEARS. , 'IN SPITE OF UNEMPLOYMENT' i MAT START NEW DEPRESSION ! To the ordinary intelligent person with a social conscience, to talk about a boom when there are still more than 1,600,000 unemployed, and "when large numbers of our fellows are living in the moqt wretched poverty in the depressed areas, must seem the height of madness, says the London "Daily Herald." Yet eminent economist after eminent economist', leading financial authority after leading financial authority now finds it necessary to point out the potential dangers of the industrial boom period in which, according to them, we now find ourselves. Moreover, paradoxical though it may seem, they are perfectly correct in declaring that we are Jiow in the midst of an industrial boom, and that this boom is already showing signs of reaching such proportions as to precipitate a fresh depression. It may seem difficult to reconcile unemployment conditions as we know them with the statement that we are in the midst of a boom. The paradox lies, not in the statement, but in the economic system under which we operate. What is, indeed, again being demonstrated is that our present economic system is completely incapable of providing large numbers of the population either with a decent standard of living or with the opportunity to do useful work for the community,' even when it is operating on boom levels. Rocks Ahead. And the economists are, on all the available evidence, right also in declaring that this boom—tragic misnomer though that must seem to all who have any awareness of the conditions large numbers of the people of Great Britain

may now be reaching its height, and that it may be necessary to control it in order to prevent in the not very distant future a sharp dip tq_ a new depression. The latest economist to examine the problem is Mr. H. D. Henderson, onetime secretary to the Economic Advisory Council, in the current issue of "Lloyds Bank Monthly Review." Mr. Henderson asks whether the time ! has now come or is approaching when it will be desirable to modify the cheap money policy of recent years in order to control the present boom. He points out that a characteristic of some recent booms has been a spiral of rising prices and. rising wage rates, in which wage rates rise because the cost of living has risen, and the cost of living rises further because wages Have risen. He sees no such vicious spiral at the moment, "but considers that there are various features of the present situation hich make it not tinlikely that it may develop in the course of the next year or two. f Armament Danger. He sees particularly the danger, as every intelligent observer must, of the large part that heavy armament expenditure is coming to play in the economy of this country and other countries. "In ordinary circumstances," he writes, "the steady growth in the productive power of industry and agriculture affords a safeguard against the vicious spiral danger, for so long as wage rates do not rise on the average at a faster rate than that at which productivity is increasing, there is no reason why a rise in prices should take place. "But a large part—and perhaps the greater part—of the annual growth of productive power is now being absorbed by increased expenditure on armaments which adds nothing to the supply of commodities available for meeting human needs. This limits narrowly the extent to which real wages or real incomes can continue to improve and makes it much more likely that any increase in rates of remuneration will be reflected in a rise of prices." Mr. Henderson sees danger also in the fact that there are • now indications of an over-expansion of constructional activity. What can be Done. Capital goods of all kinds are pro- , duced on a scale which cannot possibly be sustained indefinitely; sooner or

later the demand for them necessarily falls off; employment in the constructional industries declines; purchasing power is reduced; and a general depression is apt to follow. What can ne done about it? Short of complete national planning, such as has been consistently advocated by the Labour party, there is, I believe, nothing very effective that can be done.