Putting Back Pay-day.

Press, Volume LXII, Issue 18723, 21 June 1926, Page 8

Putting Back Pay-day.

In a short paragraph the other day in our General News column it was explained that cows are now bought in Canada on the deferred payment system like motor-cars, pianos, and general furniture, and that the change has been brought about by the action of the Government. In New Zealand this "trick of easy payment," a3 the "Economist" recently called it, is familiar to most householders, but the Government has not yet introduced it as a method of stimulating primary production.' Perhaps it will never introduce it, and perhaps it never should, but deferred paying is now so near to the universal method of doing business in America that it constitutes - one of the most baffling of the economic problems of .the age. The effect of it at the outset has been that no country in the world has ever known such a high standard of material enjoyment. Rich country though America is in and by itself, its people would not have seventeen million motor-cars, and all other material luxuries on the same lavish scale, if everything had to be paid for in advance. Aotually only about 25 per cent, of the new cars sold change hands for cash, and as there is one car for every six or seven people, the instal-ment-purchase system has created a situation for which there is no modern precedent. For of course one instalment purchase naturally, and indeed inevitably, leads to another. As the "Economist" points out, "the " mechanic who has paid down £lO for "a car, and committed himself to "regular payments for the balance, "does not find it as easy as before to "buy either the minor luxuries or the "necessities of life. He has learnt the " trick of easy payment from the motor "salesman, and is ready to accept the "same kind of accommodation from "those who supply his other require-, "ments. The fashion has been set, " and all sorts of other commodities " begin to be bought and sold in the " same way." It is no use saying that the man who does business In this way is riding for a fall. He may be; but if he falls in America twenty or thirty millions of people of all degrees will fall with him, and no one quite knows what would happen afterwards. The position is so unusual that even a cautious paper like the "Economist" feels that it has 'not enough information to justify an out-and-out attack. If a set-back comes, as sooner or later it is almost sure to come, one would expect it to overbalance the whole financial system; but it might not do that. \The system may really be holding itself up quite securely, and may continue to do so, but this is how it works out at present: every manufacturer is producing at high pressure, and most are preparing to increase the pressure, or at least the scope of their operations; but while they are planning this greater output for the future, they are still collecting from the consumer the payment for goods bought months before and already partially consumed. In other words, if reaction comes soon it will find the country with a great industrial programme in full swing, " relying on a body of eon"sumers who not merely have not been "saving, but are actually in debt to " their manufacturers—consumers who "are so far from having the accumu- " lations of thrift to draw upon that "they are still in pawn for their past " luxuries." Though it is obvious enough that the hire-purchase system is a form of inflation, and that it is at least in part nullifying the careful anti-inflation policy-of the banking authorities, no one at present can abolish it or even sharply restrict it. Indeed, two experts sent recently to t J e n D ™ ted ' Stat «3 the Federation of British Industries thought so much.

of the effect of it as an incentive to work that they decided it would be to England's advantage if it were more widely adopted.