AN ECONOMIST’S NOTEBOOK

Dominion, Volume 29, Issue 196, 16 May 1936, Page 9

AN ECONOMIST’S NOTEBOOK

(BY

M. B.)

The Gold Standard. The popularity of guns in international trade and the dyinf struggles o gold to remain the hero of trade (lia * suggest that we have abolished the gold standard for an armament one In 3933 at the World Economic Conference. those countries which were s i adhering to gold (Italy, 1; rance, egium, Switzerland and Holland) join ed, with a heroic resignation suggest Je of a suicide pact, in an agreement to support each other in the of the gold standard. Since then tl devaluation of the belga is too recen to need mention, while Hah s nd It ern e to this guarantee of hna c alinte"ritv has become hypocritical latnei than factual. Dr. Azzolini S"'’ er "" r » the Bank of Italy, opened his annual speech this year with a P aBsa ? e of congratulation on the teimci J which all of the true faith had stuck to Y'e°t'italv has for practical purposes already effected a partial devaluation, since the Bank of Italy buys > ol, ' a ; fl 10 ner cent, premium, and na> °' cr ami above that broken with gold standard practice in every conceivable wav the latest being the invention of “tourist” lire, sold at a discount Hypocrisy on this subject is not confined to Italy, for Germany has broken not less decisively with gold s,i ' n(l:,l(l practice, though without actnnllj recognising a premium on the gold price. Nevertheless Dr. Schacht continues o fulminate against devaluation and to bask in the reflected glory of J ld standard orthodoxy. France is the onl important country still true to the faith, though her fortnightly runs on the franc” are a serious danger even to her gigantic gold reserves. Food and Income. Herr Hitler recently stated that it was guns, not butter, that Germany wanted Sir John Orr has just published a report (Food, Health and Income: London, Macmillan and Co.), which shows much more convincingly that it Is butter England needs. In tracing

the relation between food and income h e divides the population into six income groups, the lowest of which consists of 4.500,000 persons, lias an income of 10/- a head a week and spends 4/- a week a head on food. Half the persons in this group are children under 14—indeed, it contains 20 to 2u per cent, of the children in the country. The consumption of bread and potatoes is practically uniform throughout the different income groups. Consumption of milk, eggs, fruit, vegetables, meat and fish rises more or less rapidly with income. In the poorer group average consumption of milk is equivalent to 1.8 pints a bead a week: in the wealthiest group it is 5.5 pints. The poorest spend 24d. on fruit and the wealthiest 1/8. All the diets except those in the three wealthiest groups are deficient in one or another of the physical constituents necessary to good health. The diet of the poorest group is deficient in every constituent. The diet of the second group is adequate in protein, fat and carbohydrates, but deficient in all the vitamins and minerals. Sir John Orr estimates that the total increase in consumption necessary to bring the whole population up to the standard of diet necessary for health is about £200,000,000 a year. Reform and Socialism.

Political and social reform must always be limited by the economic system. An economic system Is the organisation of producing and distributing material goods, and the first ne cessity for any policy is to keep this process going. Only within the limits imposed by this necessity can social and political reform be carried out. Our present system is one in which production is carried out in response to profit. All political change then is subordinate to the necessity for pre serving some measure of profit. There fore when Mr. Armstrong, talking of unemployment relief, claims that “the sky is the limit,” he is talking jnsi metaphorical nonsense. For those who think that taxation need have n<iiinit tlie best lesson is contained in English post-war experience. Other countries were in such a financial mess that they were forced to a repudiation which, by decreasing their tax burden, enabled their industries to recover much faster than those of Britain, which were weighed down by taxation. Similarly attempts to raise the worker’s standard of living are, in our present system, limited by the necessity for preserving profit. Any raising of this standard above I lie economic level will lead to unemployment in the least profitable industries for private enterprise. This unemployment can only bo absorbed by the Government extending its own operations in this sphere. So the inevitable concomitant of artifici-ally-raised standards of living is extended Government enterprise. Tills indeed is part of the story of the boom in State control that has taken place in recent years. Socialism is forced to absorb the least profitable enter-

prises. Housing. Another example of State regulation in one sphere forcing more Government activity elsewhere is provided in the question of housing. It is admitted that there is in New Zealand a serious shortage of bouses. Building is depressed when it is cheaper to rent or buy than to build ; it is encouraged when rents rise till it is cheaper to build than to rent a house. In the first flush of recovery building costs rose, perhaps more than any other costs. Latterly rents have risen more than in proportion to building costs, and the resulting encouragement to building is .seen in tlie jump from 1981 houses erected in 1933-34, to the 3811 erected in 1935-36. Even this 1935-36 figure, however, is small compared with tlie estimated shortage of some 17.000 houses and with the need for an annual increase of 5000. Increased building activity to cope with this position could, under ordinary circumstances. only be secured by allowing rents to rise even higher than they are now. The Government in threatening control and restriction of rents Is limiting the response which private enterprise will make to fill this housing shortage, and so forcing on itself the necessity for undertaking the task Already it has announced a £3.000.000 plan, hut with further rent restriction it may have to expand this.

After Russia, London has been most active in housing schemes. Total capital expenditure pn housing by the London County Council up to March, 1936, totalled almost £49,000,000, while provision has been made for a further expenditure of almost £9.000.000 during 1936-37. Beside this our New Zealand scheme looks very small.

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