The Dominion. FRIDAY, JULY 30, 1937. MONEY’S WORTH

Dominion, Volume 30, Issue 260, 30 July 1937, Page 10

The Dominion. FRIDAY, JULY 30, 1937. MONEY’S WORTH

One of the points stressed by the Prime Minister in an interview and also in the course of his reply to the speeches of welcome at the Wellington Town Hall on his return from the Coronation and the Imperial Conference on Wednesday, was that the troubles of this world were fundamentally economic. This is not a new discoverylt has never been seriously disputed. Where people have differed is in the method of treatment. Mr. Savage declares that the most effective method is to raise the standard of living in all countries, because, if human discontents are appeased, there will be no cause for international jealousies and every incentive for people* to live in peace. Here there is general agreement, but different ideas as to how the standard of living should be raised. “I couldn’t see,” said Mr. Savage, "how Britain was going to expand her market”—for Dominion produce unless she expanded the people’s wages. It is very difficult, I say, to make people see, who don’t want to see, that simple fact that we can’t expand the market unless people are able to buy.” Here the Prime Minister tripped pver a fact of economics the importance and irresistibleness of which neither he nor his Party seems to be able to appreciate. It is not a question of how much money a man should receive in order to raise the standard of living, but how much that money will buy, What is the use of giving him a rise in wages if the wdiole of that rise is swallowed up by an increase in prices ? On the same day that the Prime Minister was restating his belief in the theory of high wages, the president of the New Zealand Sheepowners’ Federation, Mr. H. D. Acland, in another place, was tearing it to pieces. Mr. Acland emphasised the fact that increased, spendingpower was a very different thing from increased purchasing-power. We have only to cast our memories back to the great post-war boom to realise how true this is. People then had plenty of money and spent it all too freely, with the result that prices soared. In actual fact they were no better off than they were before the boom began. As subsequent events proved, they were to be very much worse off. This experience is now being repeated, though in a less aggravated form, but if it continues the reactions may become more severe and the consequences very serious. Developing his point, Mr. Acland said that when wholesale prices had to be raised to meet increased costs imposed on industry by Government edict, or court awards, or other causes, the increased spendingpower represented in the raised wages to the workers receiving them is almost always accompanied in the long run by reduced purchasingpower, due to the increase in retail prices to the consumer being in almost every case greater than the individual extra money wage paid. The principle should always be kept in view: "An increase of purchasing-power cannot be created by shortening working hours and paying increased wages for less work done.” The warning is, as Mr. Acland expressed it: “Go slow in increasing costs.” There is not the slightest doubt that one of the, most pressing problems of the day is how to keep costs down. Raising wages in order to keep pace with the rise in prices is simply a .waste of effort, because the resulting benefit due to increased costs is nil. Ignoring the lessons of the past, the Government has proceeded on the assumption that it could raise wages all round and control, prices. Later on, when prices began to rise, it declared that reports of increasing prices were exaggerated. It has since discovered by experience if it attempted to keep prices on the old level while raising wages and shortening hours, trade and industry—and the country—would be headed for bankruptcy.