THROUGH ENGLISH EYES

Press, Volume LXXII, Issue 21806, 11 June 1936, Page 14

THROUGH ENGLISH EYES

Experiment of Labour Government CURRENCY SEEN AS CRUX OF PROBLEM Under the heading “Socialism in New Zealand,” a writer in the “Listener,” a publication of the British Broadcasting Corporation, discusses the plans of the Labour Government in this country, and comes to the conclusion that the factors on which the success of the experiment depends are monetary, saying: “The problem of keeping the currency sound and the budget balanced is undoubtedly the critical element in the Labour party’s policy, on which the chances of the rest depend. It may prove also to be the element of greatest concern to those in other countries who may wish to apply New Zealand’s experience to their own tasks.” The writer, H. V. Hodson, reminds his readers that any lesson to be drawn from the New Zealand experiments must be conditioned by consideration of the difference of the economic backgrounds of Great Britain and the Dominion. He emphasises that New Zealand is predominantly an agricultural country, and that as her economy depends on the export of primary products, there is scarcely any country in the world more dependent on overseas trade. “All this must check the pace of socialistic experiment in the Dominion,” he says, “because its economic foothold is liable to be violently disturbed by outside events, like a fall in world prices.” 9

Agriculture and Socialism Remarking that agriculture is perhaps the most difficult of all industries to socialise, that there are no other great industries in the country to nationalise, and that the great public utilities are already mostly nationalised, the writer goes on to say that more important for agriculture as a whole is the Government’s plan of export subsidies on primary produce. He contends that .though this measure is obviously not socialism in itself, it faces in that direction, for when a subsidy .is large or expensive enough there arises a strong demand for public control or supervision of the industry that receives it. Mr Hodson says that the project of guaranteed prices, besides its own difficulties, is complicated by the problem of the exchange rate, because the amount of subsidy to be granted must be regulated by the local price of New Zealand exports, which is itself determined by the rate of exchange. He gives the example of a New Zealand farmer selling a quantity of produce in London for .£IOO sterling. At the present rate of exchange he receives £125 in New Zealand currency with which to pay all his costs and to make a profit. But if while the London price remains the same, the New Zealand pound moves up to equality with sterling, the farmer’s return is reduced from 125 to 100 New Zealand pounds and to that extent he would require a higher subsidy from the Government. \ The New Zealand Pound The writer recalls that an avowed intention of the Labour party is to restore the New Zealand pound to parity with the English, and makes the following comment: “The odd thing is that while the exchange policy of New Zealand Labour is to raise the value of the New Zealand pound, and would therefore seem to require a lower price level and a deflation of currency and credit, their policy in other respects seems to imply the very opposite. They have promised a generous extension of pensions and social services, as well as the restoration of pay cuts and larger expenditure on unemployment and public works, which will not make it any easier to balance the budget, quite apart from the export subsidies. . . . The Reserve Bank of New Zealand is to be nationalised, and there will certainly be great pressure on the Government to make credit easy and to expand the volume of money.”