NOTES OF THE DAY

Dominion, Volume 24, Issue 51, 24 November 1930, Page 10

NOTES OF THE DAY

Out of the welter of ideas and opinions forced upon the British Conservative Party by friends, candid friends and so-called friends, a definite policy seems at last to have emerged. It is stated briefly by the chairman of the Party organisation, Mr. Neville Chamberlain, as follows: Reduction of direct taxation, involving a reduction in national expenditure; protection of the home market; development of Imperial trade through reciprocal trading agreements. Somesuch clear-cut objective has been required by the Conservative Party and now that it has been defined, political warfare in Great Britain is likely to emerge from the shamfights that have marked the past 18 months into a real struggle for supremacy. In fact it appears as if the Conservatives are ready to challenge in earnest and, with the Liberal. Party crumbling and divisions in its own ranks, the Labour Government will be hard put to it to withstand the imminent offensive.

Lower prices for raw wool are beginning to be reflected in appreciable reductions in the price of the finished article, according to a report from London. This is good news because anything that will increase the consumptive demand must ultimately be reflected in the demand for the raw material. One of the great difficulties with the modern economic system is that its complexity inevitably imposes a long time “lag” between the fall in price of raw materials and the appropriate response in the retail markets. One has only to reflect on the long journey wool must take, and the many handlings and processes to which it is subjected on the way, between the sheep’s back and its final purchase as clothing by a customer, to realise that there is considerable justification for this “lag.” All the same there are many thinkers who believe the “lag” is too long in time and too wide in price and are giving study to the problem of reducing it. For the sake of all parties interested, it may be hoped that some practicable solution will be reached.

It was notable that at the deputation of unemployed to the Government the other day, the speakers did not attempt to get down to fundamentals but contented themselves with asking for the application of more palliatives in the form of relief works. Yet, according to'Mr. Taverner, these makeshift and temporary remedies are costing a huge sum annually. The Minister failed to distinguish between public works and relief—indeed it is plain that for some time very little distinction has been made—but he did say that the Public Works Department is at present employing 17,000 men at a total cost to the State of £17,000 a day. That means spending at the rate of £5,100,000 a year, no doubt a portion of that sum is loan money, and yet the registrations of unemployed continue to increase although the busy season is well advanced. What does that mean? It means that the price of labour is too high by comparison with what labour will produce. Unless that price (which is wages) is reduced in proportion to the fall in commodity values, the unemployed will not decrease but will tend to grow in numbers. Relief works and more relief works will have the effect of aggravating the position because they must be paid for by taxation and more taxation, thus adding to costs of production.

Two items in the news from the United States offer sharp contrasts. The first is that 40 per cent, or two-fifths of the world’s monetary gold lies in the coffers of the United States. The second is that eight North Carolina banks closed their doors on Thursday as well as two more Kentucky banks, making a total of thirteen in the latter State during the past few days. Several other banks in the South and West of the United States have also suspended in recent weeks. How can this shortage of cash resources be reconciled with the overwhelming stocks of gold held by the Federal Reserve banks? The explanation is that the gold is “sterilised” or. in other words, most of it is not being put to monetary uses. The financiers responsible for its administration have been afraid that its release would mean inflation in the United States and, apart from causing domestic problems, would prejudice the American trader competing in world markets. Certainly they have avoided inflation but now the country has been economically devastated by deflation and it is doubtful if what was feared could be much worse than what is actually happening Recent events may incline the Uniter! States to look more narrowly at its sterile millions and perhaps to lend a more sympathetic ear to those who are urging international co-operation to secure the better distribution and more economical use of gold.