FARMERS’ VIEWS ON MONETARY REFORM

Dominion, Volume 28, Issue 248, 17 July 1935, Page 11

FARMERS’ VIEWS ON MONETARY REFORM

Conference Debate

CURRENCY CONTROL APPROVED Proposal For Creation of New Credits Lost

All yesterday afternoun and last evening ware occupied by the annual conference of the New Zealand Farmers’ Union in a discussion on monetary reform, winch was inaugurated by a lengthy remit from Auckland dealing with this subject. The remit was taken in sections. The first clause, urging the establishment of a national authority to control currency and credit was supported by 40 votes to 29, but the second and third clauses, which were taken together, and which aimed at the creation of new credits to enable purchasing power to be balanced with production, were rejected by 41 votes to 21. The adverse vote on these clauses automatically disposed of the last section of the remit, which outlined how these proposed new credits sltould operate.

The full text of the remit was as under : — “(a) That as a simple and practical method of carrying out monetary reform, this conference approves the following plan: (1) That a national authority be set up to control our currency and credit; (2) that such national authority should prepare a national account of our production and purchasing power, taking into account among other things New Zealand’s sterling balances; (3) that new credits should be created by the national authority to enable our purchasing power to be balanced with our production and to restore the price level obtaining when most of our mortgage debts and local body debts were incused. “That these new credits should be put into circulation as follow: (a)' By paying farmers such a payable price for their products as will restore their equities, enable them to carry out their contracts, and generally bring their prices into a fair relationship to costs; (2) by paying the men at present on relief work a standard wage for public work satisfactorily performed under proper conditions and for such men as cannot be found work, the payment of such wages, less than a standard wage, as will enable them to live in reasonable comfort; (e) by increasing old age and other pensions, by paying accident and illness pensions and by paying children’s allowances on more liberal conditions.” Before discussion on the remit commenced, Mr. C. Mclntosh (North Canterbury) suggested that the debate on monetary questions should be held in abeyance. The Reserve Bank, he said, had been established recently, and it should be allowed to have a proper try-out before anything was done. It was obvious that the. Government would make no alteration in the pres-' ent system. In those circumstances, and in view of the long list of remits for consideration, no good purpose could be served by discussing the reform of the monetary system. Increased Production. Moving on behalf of Auckland that part of the remit dealing with the establishment of a national authority, Mr. A. C. A. Sexton said the appeal had been for increased production and the farmers and their wives and families had responded magnificently. In spite of that additional production the farming community was far worse off. What was wrong was the distributive system, which was controlled almost entirely by the monetary system. In that direction they must look for reform.

The reasonable thing to do was not to cut down production so long as people needed food, but to make the money system fit the productive system. Tlie remit outlined a practical method for achieving that. The men who controlled the purse strings directed the policy of Governments. The power of creating and destroying national credit should not be in the hands of any private interests or collection of private institutions. but in the hands of a national authority specifically appointed for the purpose. It was agreed to take the remit in sections, first the part urging the establishment of a national authority to control currency and credit, then clauses two and three, together, and finally tlie sub-clauses detailing how new credits should be put into circulation. Authority of Parliament. The first section was seconded by Captain H. M. Rushworth, M.P. (Auckland). He contended that there was only one authority that should be entitled to issue records of debt and that was the constitutional authority of King and Parliament. Mr. Mclntosh moved by way of amendment to postpone the discussion on monetary matters. Even if the remit were carried unanimously, he said, it would not make a scrap of difference, at least for very many years to come. The amendment was seconded by Mr. lI*D. de Latour (Wairoa).

Opposition to the amendment was expressed by Hr. AV. A. Slieat (South Taranaki), who said they should not burk discussion on a question of such supreme importance. He hoped the conference would not shirk discussion by agreeing to the amendment. He was sceptical of the practicability of some of the details in the Auckland remit, but supported the general principle. Mr. J. E. Tosland (South Taranaki) said that if the conference opposed the appointment of an authority to control credit it was against any further progress. Opposition to Remit. “As any intelligent person with his head properly screwed on and his feet on the ground would do. I oppose the renjit,” said Mr. P. J. O’Regan (Westland). There was already a national authority controlling credit and currency. There was no doubt about that. Mr. J. Morris (Westport) said no business man could sell his goods below the costs of production. That was what the farmers had to do.

The Hon. J’. Waite, M.L.C. (Otago) said that the fact that sales tax and income tax were up, showed that more business was being done, despite Mr. Sexton’s statement that any business man would say business was bad. Mr. A. A. Ross (Auckland) remarked that he did not sell eye to eye with his Auckland friends on monetary questions. He did not see that sufficient reasons had been advanced for the establishment of a national authority as proposed by Mr. Sexton. No one disputed that it was a State right to issue money. 'The coin and notes circulating in New Zealand were issued under the authority of the New Zealand Government. For 99 per cent, of the world’s business no money passed, goods paying for goods. Mr. A. E. Robinson (Auckland), pointed out that the present exchange rate had something to do with the increased sales tax and income tax. It

was a nice bluff that Mr. Waite had attempted to put across the conference.

“Ingenious Arguments.’’

The president, Mr. W. J. Polson, M.P., said he was in agreement with the establishment of national authority, but he was not in agreement with the ingenious arguments put forward by Mr. Sexton in an endeavour to commit the conference to a form of national inflation on Douglas Credit lines. National control of credit was part of the policy of the Farmers’ Union, and its objection to the Reserve Bank was tha-t private capital was to have any say in what should be the function of the people of New Zealand. That, however, was different to the proposal suggested by Mr. .Sexton in moving his remit. The proposal was that a form of national inflation could be safely embarked upon so as to give everyone a larger share of the wealth of the country and that the Government through the national authority should create credit and that it was its function to do that. He did not agree with that. The amendment was put and lost on a show of hands. Election Year Money. Replying to the discussion on the first part of tlie remit, Mr. Sexton said the increases in sales tax and income tax returns were easily accounted for—it was election year, and more money was about. For the same reason banks were easier on overdrafts. He took it that by inflation Mr. Polson meant raising prices. That was what every Government in the world was trying to do. If an attempt were made to increase prices by the method outlined in the remit it was described as inflation, but to do it through the existing financial machinery was considered all right. The first section of the remit advocating the establishment of a national authority was carried by 40 votes to 29. Mr. Sexton then moved clause two and three of the remit. He said that having established a national authority the obvious thing for the authority to do was to prepare a national ledger. With purchasing power balanced with production there would be no deflation; neither would there be inflation.

Captain Rushworth, who seconded, said the proposal was far removed from Douglas credit. Unless the consumers had the purchasing power the producers would go bankrupt. The idea was to equate purchasing power with the wealth we were producing. It was highly desirable that the doctrine of sanctity of contracts should be restored as soon as possible. As the majority of people were unable to keep contracts to-day the solution was to make it possible for them to do so. Mal distribution of Wealth. Mr. Slieat said the plan outlined was really the policy of the Douglas credit movement in New Zealand, of which Captain Hushworth was president. That movement appeared to have repudiated 75 per cent, of the teachings of Douglas himself. He believed they should try to readjust their affairs so that financial contracts could be placed on a sound basis and measured on that basis. The bulk of our produce was sold outside this country. And we could not ignore changes in other parts of the world. He believed we had to go further in the direction of revising contracts. If contracts were based on values on a fictitious basis they had to be revised on a reasonable basis or repudiated by bankruptcy. He challenged the idea there an insufficiency of purchasing power in New Zealand. He had put that up to Douglas credit speakers and they had run away from the challenge. Mr. Sexton: Tell us another! Mr. Sheat said the problem to be discussed was the evil of the maldistribution of wealth. Although he stood for the national control he did not believe it could be tackled as suggested in the remit. Principles and Not Party.

Mr. de Latour said the remit was based on the assumption that we could live unto ourselves. Remits should be to further principles and not party, and one could be excused for wondering what was the origin of this remit m view of what had been heard of the socialisation, of credit. Why not be honest and say there was no easier money to-day than at any time in the past? “There is no easy way out,” said Mr, de Latour, and let us have the guts to stick it out.”

An admission that the proposal in the remit was not the only way out, although he considered it the best, was maoe by Captain F. Colbeck (Auckland). He believed a system of single tax was a way out. That method, however, was an impossibility. He also believed a system of universal income tax would be a way out.

Mr. H. E. Blyde (North Taranaki) said it seemed to him that the only real value of our goods was the value the world placed upon them. The world’s valuation of New Zealand goods would be a big factor in any scheme brought in here. . „ . Mr. O’Regan said the inflation ot our currency by the increase in tlie exchange had increased the cost of debt services, and the proposal in the remit would intensify the nosition. The remedy, he suggested, was to get tariffs and the pegged exchange down instead of monkeyingabout with any cranky adventures in currency.

Exchange Assistance.

Mr. Polson said he was satisfied Mr. O’Regari was wrong in his whole outlook. Exchange was, in his opinion, a very valuable assistance to the farming community, and was not at the present time hurting anyone. Since the increase in the exchange retail costs had fallen by about 14 per cent., and at the same time the farmer had had the advantage of the exchange. He admitted exchange was a form of inflation, but it had not hurt the rest of the community. The proposal in the remit would so cause the exchange to fluctuate that it would be impossible for any trader to trade. New Zealand was dependent on practically one market, and that market in Great Britain was already demanding that they should not embarrass the authorities at Home by sending them supplies that could not be assimilated, and that would happen if prices were maintained here at a level irrespective of what was realised abroad. Mr. Waite said it seemed to him the proposal was not very far removed from Mr. F. Langstone's (Labour M.P.. for AA’nimarino) scheme for guaranteed prices.

Replying. Mr. Sexton said there were two ways of dealing with the exchange —by allowing exchange to go free or having it fixed. Exchange was fixed now and prices fluctuated overseas. He suggested that articles that were necessary might be purchased with exchange at par. There could be a second class of goods that were not so necessary but desirable that could be purchased with exchange at .a higher rate, and articles that could be done without, but which they would like to have, could be purchased with exchange at a higher rate still.

The second and third clauses of the remit were then put and lost by 41 votes to 21. There are fourteen remits on monetary reform for consideration by the conference when it resumes to-day.