Economic Problems

Dominion, Volume 24, Issue 147, 18 March 1931, Page 11

Economic Problems

Sir, —I was interested in perusing the letters to the Editor in a recent issue of “The Dominion” to note that although the first five letters dealt with the same fundamental economic problem, they exhibited in several instances a certain lack of knowledge, superficial thinking and confusion of thought which so often characterises discussions of the subject nowadays. Due no doubt to insufficient co-ordina-tion between banking, commercial and those academic views which are worthy of respect, an authoritative logical statement of value, in regard to our local economic ills, is all too infrequently seen in our daily Press. That th® corre'rt views exist and are in circulation in confined circles should result in their publication in reply to ill-informed correspondents’ letters. This would cer tainly result in a wider, diffusion of knowledge, a greater clarity of thought and a proper appreciation of current problems by the masses and perchance by our politicians, who in the bulk give such little indication of acquaintance with our economic requirements, bo long as our politicians are of such a cahbre as to have to rely on the advice of Government officials, who have practically no commercial training or first-hand experience, we can hope for little relief. Such departmental advice is necessarily influenced and determined by theoretical deductions, political expediency and, 1 fear, self-interest, which, without . the leaven of practical business experience, must lead to such serious consequences as we are now experiencing, in addition to the ordinary effects of world-wide depression which we can neither control nor avoid. The effect of this reliance on Government departmental instruction was the main factor in ousting the Reform 1 arty from power. The still greater reliance of the United Party will be an important factor in their political oblivion in the near future, and the even greater reliance of any Labour Party will prevent such party attaining office in this country. Politically our sole hope seems to be the return of a chastened Reform Party comprising men of higher qualifications than the “rejected of the people,” and a number of others who scraped home. . As space will not permit otherwise 1 will refer briefly to your correspondents views. Any system of graduated percentage in taxation is fundamentally wrong from ethical and economic standpoints, and the material effect is less incentive to thrift or to expansion on the part of an industrial concern, a withdrawal of capital from industry and an increase of unemployment. Its effect on the individual is obvious, and any further aggravation of the. principle would accentuate our troubles, as “One of the Lower-paid would very soon discover. We need have none of Mr. Edgar Jones’s fears regarding possible failure to reduce commodity prices, also prices of services, in sympathy with the necessary wage cut. Ordinary competition would effect this; how much, more will the acute competition of this depression do so? In a short time the purchasing power of the New Zealand pound, which has already increased, will be greater still, if increased taxation does not neutralise the effect of the wage cut. “Cassius” is apparently unaware of the fact that all sections of the community will suffer a wage cut, not merely Government departments, but the Government, being the largest individual employer,’ must lead the way and legislate to allow readjustment, of artificially fixed wages by the Arbitration Court in order to minimise further unemployment. Teachers, in common with all others, must participate. The reduction is certainly not temporary. It is the over-delayed first cut of a series that cannot be avoided over a period of tlie ensuing 20 years. It is only then that the falling tendency of prices will probably be arrested to give place to a 30-year cycle of rising prices. •No little part of our trouble to-day is due to failure in making a wage cut about 1926. In effect we have to make the equivalent of two cuts now. Cassius” has fallen into the same error as Mr. Forbes in advocating increased taxation. Such increases will defeat the objects in view and the sum of taxation imposed during the past twelve months, plus that now suggested by Mr. Forbes, will, to a great extent, nullify the benefits of the wage cut and will retard the fall of commodity and services price levels. “Cassius” is on a surer footing in advocating the sound idea of reduced Government expenditure to make good the anticipated deficiency, as such reduced expenditure relieves industry of otherwise necessary taxation required to pay for unjustifiable/luxuries, increases capital available for industry, relieves pressure on the banks, tends to reduce exchange rates and rates of interest, and paves the way for a restoration of confidence. Confidence is the first need of to-day and can be restored only by the recognition of fundamental economic principles and by acting in accordance with what those principles dictate‘ 1 PRACTICAL' ECONOMICS.