ECONOMIST’S WARNING ON I.M.F. MEMBERSHIP

Press, Volume XCVIII, Issue 28895, 15 May 1959, Page 7

ECONOMIST’S WARNING ON I.M.F. MEMBERSHIP

Tull employment in New Zeaimd would be in danger if New Zealand should reserve its policy and join the International Monetary Fund, Mr W. Rosenberg, senior lecturer in economics at the University of Canterbury, told t meeting of the Chartered Institute Of Secretaries Students’ Society last evening. Apart from Switzerland, which w as traditionally neutral, and Spain and Portugal, New Zealand was the only non-Communist country of importance which was not a member of the fund, said Mr Rosenberg. He said there were 62 member countries and for New Zealand to stand aside was either an action of very great foolishness or one of very great wisdom. “I think it is an action of great wisdom,” said Mr Rosenberg. That New Zealand was the only country in the capitalist world with no unemployment problem made its non-membership of the fund understandable. “If we want to maintain the state of continuous full employment which most New Zealanders cherish as a precious aspect of their social life, and which is absent elsewhere in the Western world, we must not join the fund,” he said. Unemployment resulted when Governments, frightened of inflation and exchange crises, tended to cut demand below what full employment would support. Before the war New Zealand had no policy of full employment because the Government lacked the power to influence effective demand. In addition, exchange restrictions or import control were considered identical with bankruptcy, to which no self-respecting Government would ever have recourse, said Mr Rosenberg. This led to wild fluctuations in employment in connexion with fluctuations in overseas prices. Unorthodox Policies

The reasons for full employment in New Zealand ever since the war were the country’s unorthodox financial policies. The main factors could be found in Government finance, in interest policy and in import and exchange policy.

New Zealand policy had been to stimulate effective demand by raising consumption—by way of a most generous social security programme and some guaranteed income payments, and by raising investment, by way of Government capital development in spheres which were elsewhere frequently reserved for private enterprise.

Interest policy had been used consciously in New Zealand to maintain full employment and to stimulate certain sectors of the economy, Mr Rosenberg said. The reason why New Zealand had so far never, even temporarily, succumbed to the disease of unemployment was that she had co-ordinated her internal policy for full employment with external import and exchange controls.

“New Zealand’s unequalled employment record is due to a policy which boldly abandoned orthodoxy in the fields of Government, finance and freedom of trade and income formation,” said Mr Rosenberg.

Describing the principles of the International Monetary Fund Mr Rosenberg said it was often thought to be a lending body; really its main business was to maintain, international monetary discipline.

“To subscribe to the fund means really to accept the fund’s advice, * he said. “Would we be prepared to accept this advice? It not then we must not join the fund.”

Commission “Mistaken” The Monetary Commission was mistaken in two ways when it said the fund had no authority over the internal policies of member countries and that assertions that the fund attempted to bring about inflation or unemployment were groundless, he said. The fund had a measure of indirect authority over the internal policies of member countries. It could refuse to lend money if the country’s “memoranda of intent” was not approved, and it also had the right to make an annual inspection of a country’s exchange regulations.

If New Zealand joined the fund its quota would be about £lB million, the first 25 per cent, of which it would have to deposit with the fund in gold—or to the extent of 10 per cent, of its gold reserves. Only that quarter would be available readily, and would not be a large amount relative to the country’s needs. There were stringent restrictions about further borrowing from the fund, and loans had to be repaid quickly. “I think one can say conclusively that the purely utilitarian aspects of joining the International Monetary Fund and its affiliated institutions could not in any way outweigh the aspects of principle which speak against joining,” Mr Rosenberg said. He said ‘‘credit worthiness” was the ideal towards which the fund’s “educational” policy was directed, and that “credit worthiness” meant the deflationary policy of monetary orthodoxy which was productive of unemployment. Although the managers of the fund were people of high purpose and honest opinion the objective policies which they pursued were detrimental to economic welfare. “It is no accident that the only Western country which has not joined the fund is also the only Western country which has been continuously without substantial unemployment,” said Mr Rosenberg.