SHARP CRITICISM.

Auckland Star, Volume LXIX, Issue 24, 29 January 1938, Page 16

SHARP CRITICISM.

MR. NASH'S FINANCE. 'SMASHING PRIVATE INDUSTRY' PUBLIC WORKS EXPENDITURE. "Your present Minister of Finance is ! using public credit to smash private ; industry," asserted Mr. W. L. Barker, in ' an address at Lower Hutt at a National party meeting. "On this issue alone I 1 I am prepared to take Mr. Nash on to any ! platform in New Zealand and prove to any audience that Mr. Nash's national finance is unsound. "Most of tlie measures followed by ! Mr. Nash to alleviate unemployment have been financed out of budgetary . resources; in other words, out of taxation, which means that it has not in . any way produced an addition to the purchasing power of the country. The ■ purpose of heavy spending on public works as carried out by Mr. Nash was a twofold one. The first was to reduce unemployment, and the second _was to raise the internal price level and relieve the burden of private indebtednss. Now public works can produce these two effects, but it all depends on the method by which the public works are financed, if they are financed mainly by inflation they will tend to serve this dual purpose. But if t iey are financed out of taxation the danger is that a normal productive activity will be greatly discouraged owing to heavy taxation, and that is just the position in New Zealand to-day. In this method lies a fallacy. Large "public works should not be encouraged in comparatively good times. When a State is moving into prosperity it is better for industry to absorb the unemployed than for the State to strangle industry by taxation so as to obtain money to create employment for men who, if taxation had been reduced, would have automatically been absorbed into private industry. Population and employment follow capital and profit. But "if a Minister of Finance imposes heavy taxation on industry he must in the long run create more unemployment—which is exactly what Mr. Nash is. heading to do to-day. "Monopolising Credit.* "I am prepared to admit," Mr. Barker said, "that in a period of depression public works should become an integral \ part of our economic system, but they ; should be financed essentially by borrowed money or through an unbalanced Budget, which could be carefully balanced when good times came round again. But it is not wise or sound for a Minister of Finance to spend huge sums on public works during a period of rising prices, because by bo doing he is monopolising credit which would otherwise be absorbed in private enterprise, and thus private industry, which normally absorbs about 65 per cent of our people, is starved by a shortage of credit and excessive taxation which prevents industry from expanding, frightens the necessary capital out of the country, and keeps capital from being invested in New Zealand. "However, to allow private enterprise in comparatively good times to absorb the unemployed would not suil Mr. Nash, because that would not be working toward Socialism. For Mr. Nash to establish Socialism he knows that he must first cripple private enterprise, and the easiest way to do that is to impose heavy taxation and other burdens like ' the 40-hour week on industry so that our private industry, competing with the rest of the world, must break down, leaving the way clear for Mr. Nash to establish largescale organisations under, the direction and discipline of the State. That is what Mr. Nash calls constructive Socialism! "Sections within a community may thrive temporarily at the expenee of another section, but in the long run they alt suffer, and that was where Mr. Nae'h and his colleagues made their big mistake in 1935. The Exchange Rate. "Mr. Nash was going to release bank credit left and right and at the same time lower the exchange rate," said Mr. Barker, in a reference to Labour's plan for control of the Reserve Bank. "But he soon discovered that he hae no hope of reducing the rate of exchange while external prices and costs are rising and he has also discovered that if he throws too much bank credit about he will be in the awkward position of having to allow the rate of exchange to break and go up to about 135-140. Of one thing you can reet assnred, Mr: Naeh cannot lower the rate of exchange while lie ia permitting costs to rise. "The only way that Mr. Naeh can hope to achieve hie ideal where he can be more liberal with bank, credit is by establishing State control of imports and exports eo that he can eliminate the rate of exchange and start a system of State bartering. Then he would be able to use his bank credit a little more fully, but at the same time such aecheme would require a degree of State planning and State control over business and industry in New Zealand that we would not tolerate. But unless Mr. Nash is prepared to plan industry and control this country along the lines of Russia he cannot do much except break one imporant election pledge after another; and they made Mr. Nash Minister of Finance. He hae a lot to learn yet, but New Zealand is paying for his education."