Panel Debates Propriety Of Finance From Abroad

Press, Volume XCI, Issue 27643, 27 April 1955, Page 14

Panel Debates Propriety Of Finance From Abroad

“The panel seems to approve of i borrowing abroad in a conditional sense. I think the question may be left there, entirely inconclusive, as in most < economic questions,” said Professor A. J. Banks, question master of a panel : which discussed various questions on money and banking at the annual ■ meeting of the Christchurch branch! of the Economic Society of Australia' and New Zealand last evening. The other members of the panel | were Messrs Angus Henderson, formerly accountant of the National Mortgage and Agency Company, Ltd.: I J. H. Kilpatrick, secretary of the Can- : terbury Freezing Workers* Union; and ' W. Rosenberg, a lecturer in economics at Canterbury University College. Explaining that anything members of the panel said must not be held against them. Professor Danks asked: “Should New Zealand borrow abroad?" “Yes. definitely,’’ said Mr Hender-j son. "We have to purchase abroad, and : I think it is to our advantage to borrow abroad as well as to rely on our exports.” His view was “Yes,” with the proviso that the money should be put into economic development of some kind such as roads, said Mr Kilpatrick. “It should go to capital works which would help the country to be richer economically,” he said. Mr Rosenberg said he thought the question would have to be subdivided, as “abroad”, was such a big place. “I am not against borrowing from England, Ifct I am at present opposed to borrowring from the United States, for various reasons,” he said. He also thought borrowing should be done mainly through the Government. If private firms were to do it on a big scale, it might be done in the interests of the firms instead of the country. A member of the audience suggested that borrowing should be limited by the interest payments which could be afforded in the most economic circumstances. Application of Capital Mr Rosenberg said he thought it was more important what was done with the money when it came to the country. To Mr Rosenberg, Mr Henderson •aid that, in the past, a great deal of development had been made possible < through private borrowing. He thought it was carefully done. Mr Rosenberg: No, I wdiild not exclude it altogether. The panel was also asked about borrowing from the World Bank. A mem- i ber of the audience said he thought ; that, in the long run. it was desirable : to have some central banking authority ; for trade purposes. “I agree,” said Mr Kilpatrick. “It 1

i is not so much that the Bretton (Woods scheme is not good. I think the apprehension is lest the people who control it are not to be trusted. There is a fear that it is a cloak for United States domination of the finances of ! others.” If a country wanted to borrow from ' the International Monetary Fund it had to subscribe to the Bretton Woods agreement, and that was another quesition, Mr Rosenberg said. It was a “complete tie-up.” The point was that, if a country wanted money, it could 1 often rfet it somewhere else. Under | Bretton Woods, there could be no exchange controls, and the New Zealand economy was partly based on ; their use. Wage Increases “A rise in wages will always cause inflation. If this statement is correct what are the '.vorncrs to do?” the i panel was asked. The question had to be answered with some reservations, said Mr Kilpatrick. If no more gcods were produced, and there was just a big rise in wages, he would say it would cause inflation. Another thing was that if an employer was doing well and the workers wanted their share of the “gravy,” it could be given, and it had been. However, if an employer was working on a slender margin, a wage increase had to be passed on in prices. He thought a little mild inflation ‘‘kept the pot bubbling,” and Finance Ministers could get their “rake-off” in taxes. Mr Henderson said there had been progressive inflation all through the ages, and a slight rise in wages did not harm an economy. It was analagous to alcohol—a little was all right, but a _ lot could do damage. ‘‘lt again a matter of certain conditions.” said Mr Rosenberg. “At times, there are conditions when a rise will cause inflation, and times when it will not.” There were two different types—a general wage order and individual wage increases. He had no doubt that individual rises need not cause inflation, but the trouble with the arbitration system was that every rise became a general one eventually. ‘When someone gets a rise, everyone wants it,” he said. “That tends to eliminate competition and the individual approach to the question. “It depends to a large extent on now much employers will give out of their profits, and that in turn depends to a large extent on the rate of interest,” Mr Rosenberg said. “So it is mainly Government policy. To make a general statement that all wage rises inflate is wrong. What the workers to do 15 to 2° against the arbitration system and return to collective bargaining.”