The Bay of Plenty Times FRIDAY, SEPTEMBER 23, 1949. Britain's Battle Of Inflation

Bay of Plenty Times, Volume LXXVIII, Issue 15088, 23 September 1949, Page 2

The Bay of Plenty Times FRIDAY, SEPTEMBER 23, 1949. Britain's Battle Of Inflation

In a recent article on the dollar crisis. The London Times pointed to the fad that, whereas in tin* hard-currency areas the transition from sellers' to buyers' markets, was almost complete buyers' markets still reigned in the sterling- area. In other words, there was still inflation of purchasing power. The Times suggested that the direct reasons were not tar co seek. Nearly all the Commonwealth countries followed the same pattern of 'economic behaviour as Britain large Stale current expenditure, lavish public capital expenditure, lew money rates encouraging large private capital expenditure, and heavy taxation limiting incentive and the capacity to save. Expenditure in Lie sterling area had clearly outrun resources, and had found its inevitable outlet internally'in inflationary pressure and externally in. a large deficit. As a result of this inflationary pressure m the sterling area. British manufacturers have been presented with what has really amounted to a ready-made market. They have been able to sell their o'oods at inflated prices within the sterling area and have felt no urge to seek business in the mere difficult hard-currency markets. At°fhe same time, in order to meet the demands of sterling-area buyers, they have shown a disposition to pay considerably above harecurrency prices for imports cf raw materials. One pressing problem that Britain faces, then, is to reduce the inflationary pressure within the sterling area and thus encourage British producers to seek new markets in the hard-currency areas. Devaluation, plus the measures already approved at the Washington talks, should increase the flow of goods to the United States aim. Canada, but, as Sir Stafford Oripps has said, they must be supplemented bv other measures. The British Government has already taken some steps towards a reduction in State expenditure and others have been, foreshadowed by Sir Stafford. _ t In the battle against inflation everybody must play a part. i\oi onlv must State expenditure be reduced both inside and outside of the Budget, but there must also be a check en personal incomes and expenditures. Inevitably the application of such measures will impose hardship, but the hardship involved will be small compared with thai which would result from a failure of the policy to which the British Government has now committed itself and the nation. The Times aptlv .s-ummed up the position in these words: 'What may be called a 'soft economy' has been brought into being. The analogy is with,an athlete out of condition, too fat and short of breath. To have a chance in the contest he must get his weight down am, restore his muscles. Whatever the examples taken, workers wages. firms' profits, investment prospects, or trading enterprise, the persistence of inflated demands has tended to put a premium on inefficiency, and to set at a -discount the hard, cold test of costs and "Yet it is preeiselv this test, and only this test, that should decide the wav in which resources should be invested and workers should be employed it' world markets are to be successfully attacked in competition and if the means of life at home are to be made cheap and plentiful."