PURCHASING POWER

Dominion, Volume 27, Issue 33, 2 November 1933, Page 16

PURCHASING POWER

How to Strengthen It A TIME FOR CONFIDENCE (To the Editor.) Sir, —The problem of unemployment is bound up inseparably with the problem of the world; where one half produces what the other half cannot afford to buy; where there is poverty in the midst of plenty. The preachers of the over-pro-duction theory and the preachers of the under-consumption theory must meet.; they are both right. Of course, there is over-production because there is under consumption, and it will be so until the distribution of production is in harmony with purchasing power. No one can tell how much general over-production, if any, there is. until the purchasing power is raised and the problem of unemployment overcome. ' . „ I realise that we are now m a power age, where the pressing of a button does the’work of many men, and that is why I say that no one can tell how much overproduction there is until the purchasing power is increased. I know that the list of saturation cases is large. Coffee is being thrown into the sea or ground up for pig feed, yet pure coffee is not less than 2/6 per lb. in New Zealand. Wheat is burnt in Canada and elsewhere, yet good milling wheat is sold at 4/8 per bushel in Christchurch. Cereals are freely used as fuel throughout South America. Standing cotton is ploughed into the earth in the United States. 25,000 head of cattle in Denmark were recently destroyed and cremated in the destructor which usually functions only for condemned animals. The Dutch have reduced their agricultural production by 50 per cent., and owing to markets having been closed all round, 100,000 pigs were destroyed in the suck-ing-pig stage. There is a five-year restrictive plan, yet sugar is worth 3d per lb. in New Zealand. The Japanese spent seven million in two years in trying to keep up the price of silk and recently they announced the destruction of silk worth 50,000,000 yen. This would look like an over-production from the cocoon, now that artificial silk has conquered. The fact that the Japanese soldiers wear silk “undies” is a mere “flea bite” as regards the quantity. The price of good Japanese silk in New Zealand is 2/6 a yard. An agreement of restrictive tea production has been arranged with Ceylon India and Java, and the price of tea

in New Zealand is 1/- per lb. higher than a year ago. . One could go on with the list over many pages—Butter, benzine, zinc, wine, fruit, and even meat with its quotas. The truth is that in many cases, directly a nation increases its production, the price naturally comes down but the rulers of tlie other nations make it impossible for the consumer to get the direct gain by raising tariff barriers, exchange, etc., and little is sold. I believe that the solution will be in the diverting of .work into other channels. In the meantime, mentality, alertness, accurate judgment and precise handling should be perfected. I am not going into a lengthy criticism of the different remedies for unemployment, except to mention them. First, the Douglas Social Credit Scheme—unemployment to be solved by creating more money and the distribution of a National Dividend. No one has explained how the system could be applied on a scale to meet the world’s present difficulties. Russia, with one sixth of the world, would, for one, not join up. Major Douglas was asked at the Macmillan Enquiry on Finance and industry this question: “If lam an individual not wanting to do any work and not producing anything, is the remedy to give me some money in order that I may have effective purchasing power?” Major Douglas replied: “I should not be inclined to deny that.” What is, therefore, quite clear, is that the scheme abolishes the incentive to work.

Second, the reduction of working hours. A system by which a greater number of men would be employed but costs increased. This is assuming that the Trade Union policy is a reduction in working hours but proportionate reduction in wages. America’s effort in this direction is problematical, but it would be definitely disastrous to New Zealand if applied to work connected with the export trade. Thirdly there is the socialist remedy—heavy taxation and costly social services.

The real cure for unemployment lies in one vitally important yet simple factor — purchasing power, which can be increased only by confidence. In the restoration of a spirit of confidence lies the cure. Many people to-day are not spending money; many have large sums lying safe in the banks; others have put their money into Government stocks rather than into industry. Look at the bank returns; there' is ample money for spending and lending. Confidence is checked all the time by taxation. which is a direct and an indirect cause of unemployment. It is of no use considering the Douglas Scheme, as the world shows no signs of adopting it. Why waste time? I think it is possible to greatly improve the position by a great united effort by Parliament and the people in co-operation. It is of no use continuing the ‘quack’ remedies and the present socialist remedy of heavy taxation and costly social services.—l am. etc. F. S. GOLDINGHAM. Palmerston North, October 18.