WANTED-FACTS

Evening Post, Volume CXIII, Issue 19, 24 January 1927, Page 8

WANTED-FACTS

THE ECONOMIC RIDDLE

VALUE OF ANALYSIS

(To the Editor.)

Sir,—ln your issue of tho 21st instant •Spectator' draws marked attention to one of the most urgent needs of the day— namely, the necesstiy of economic factfinding. This is being urged the world over by many writers and thinkers, without ouv getting much nearer the desired goal. Lord Birkeiihead, in a speech a few months ago, advised his hearers that a re-arrangement o£ economic theories was the only alleviation, but he did not suggest getting a bedrock fact, which is really the only true solution. If we look for an instance in the actions of commissions and committees of inquiry in the past, we find that it has been the invariable practice to take a more or less superficial view of the matter, and issue a finding that would "dope" the sensibilities of the inquiring public and so save their face; but the finding lias but rarely solved the problem. Is there any reson standing seriously in the way of our getting at underlying economics.' If so, what is the reason? There is a reason—a serious reason. Our traditional teaching, together with our love lor, even reverence for traditional teaching, puts up a barrier to only too many minds," whether consciously or unconsciously beyond which they fear to tread, lesw it bring about unpalatable resutls. bmce the beginning of the Great War much or our traditional teaching has gone by the board, and more is gradually going, but m spite of this we find a very large section of the" community han»in«on to the remnants, in the vain hope that it will save them from that' change of social conditions which it is inevitable must come sooner or later. If the wheels of commerce and industry are to be kept moving, then it is essential that we get at the root of all the economics that surround commerce and industry, Ever since the war we have been endeavouring to patch up the "machine" py glib superficial statements, and resorting to false expedients, and the last position is worse than the first—we are literally going backwards; all of which goes to snow- the lamentable want of knowledge ot true economic factors, or, if any ot these facts are known, then it is because of an unwillingness or incapacity to make use of that knowledge. btill, the bare fact remains, we have to solve the "economic riddle" if we are to maintain .our commercial and industrial prestige; ". How are we to solve it, by discarding the old-time superficial methods, and adopting analytical methods, going right to the root of the matter before a£ tempting to come to a finding. A watchmaker cannot tell what is wrong with a watch by simply looking at the case; he might find that^the case was of silver or a base metal plated over with either gold or silver, but,that would not disclose what was wrong with the watch. To ascertain that he would have to examine its interior, ancl perhaps make a very searching examination at that, and if we want practical economic results we must adopt just the same or similar practical methods that the watchmaker would do. In order to give a practical illustration oi. what I mean, just take a case, for example, that occupied my attention shortly after the Armistice. A certain class of people were clamouring for retrenchment, and one of the old shibbeloths was trotted out in support of their argument—namely, the farmer pays for all Does he? In the first place, the farmer is a primary producer, and as.a primary producer occupies exactly the same position as any other primary producer; he is engaged in extracting from the soil that which will assist in satisfying the needs of his fellow-men, but the coal miner and other primary producers are engaged in exactly the manner as he is;, there may be a degree of difference in the importance or value to man of one product over the other, but for all that flour will not make bread without'firing, so that as far as the production of bread is concerned, the man who produces tho firing is of equal importance as tho man who produces the wheat.

• Then on the foregoing statement we have arrjjred at the following position:— The farmer is a primary producer, but he is not the only primary producer. Further, -his. right to rank- first in importnude over other primary reproducers is only a matter o£ degree, which in many instances is very slight indeed. Then, whatever the farmer pays, as the result of his being a primary producer, is paid in common with other primary producers, so that if it were true that the primary producer paid for all, it would not be true to say the. farmer paid for all, because he is not the only primary producer, therefore the farmer does not pay for all. So far we.have only touched the fringe of the question; it. goes very much further than this, and in following this secondary issue it is not only important but interesting to note the value of employment on employment, and vice versa. Say, for instance, in a given area, there are 100,000 hands engaged as primary producers; probably one-half of these may be paid directly ;' or indirectly by • the farmer; the balance are paid-by the various other producers. 'These 100,000 workers are not self-supplying; they require the services of the butcher, baker, shoemaker, tailor, and a host of other workers who are all employed providing for the needs of the primary, or as we will now call it, the "A" group. Careful analysis snows that the number required will probably amount to something like 60 per cent, on the basis of the "A" group. It must not be supposed that it is possible to arrive at mathematical precision in such a matter, as the question is very involved, and is international in character. But a variation of a point or two more or less does not destroy the argument, nor invalidate the value of the illustration. Again, this second or "B" group is no more self-supporting than the "A" group, consequently they , will require another f£°up ( of 60 per cent., which we designate the C group, and so you may carry the calculation on down to zero, when if you add up the total you find that the existence of the "A" group ol 100,000 workers gives rise to the employment of 250,000 workers approximately. • Now, approximately one-half of the "A" F.!d» p««»s Paid''l3sr the farmer, but the ■D. O, and remaining groups are. paid py the various groups themselves, so that it is quite evident that- the farmsr does not pay for all, seeing that he only pays £?i g n™o£ aPP r°xiniately-50,000 out of the 200,000 workers enumerated. All the groups beyond tho "A" group ore dependent first of all not only upon the spending power ofthe "A" group, but upon the fact that they do spend. If the A group coi;ld exist without spending and so save all they earned, then there would be no need for the succeeding groups; but if such a thiug were possible. ™\en there would be no need for the A group, because no one having anything to spend, they could not buy, nobody would have any use for the "A" group, and it would be of no use the farmer producing any thing more than he needed for himself, because there would be no market.for his produce, <• „ The , foregoing completely ' disposes of the fallacy so long cherished, that "the farmer pays for all," but in addition to taat it also shows clearly that employment begets employment, and similarly unemployment begets unemployment; and in either case the ratio may be approximately. stated as being, in the proportion of five to two. 1,. There are other important lessons arising out of the foregoing illustration which are both interesting and instructive, but which space would not permit of in this SI" ■ar*, lCl-> b!s t. the mam ?°' nt of the article ls ._ designed to show'the value of 1 "ft™* ,at economic facts getting below the surface, getting to the whole root of the matter, Km o&r that tho fact may be made plain.—l am etc ''24th January. • MADISON.