COST OF LIVING

Evening Post, Volume CXI, Issue 73, 27 March 1931, Page 8

COST OF LIVING

GETTING BACK TO NORMAL

THE RIGIDITY OF WAGES

The best manner in which the professional iiccoiuitu.nl; could assist in bringing about the necessary economic readjustments in business life, consequent on the present position of industry and commerce, formed the basis of an address to tlio Wellington branch of the New Zealand Society 6f Accountants by Mr. W. Apple ton, IM.A.N.Z., last evening. "Even the business man, who presumably should know something about the subject/ he said, "has been, rather bewildered in recent months with the economic counsel that has been given by exports who, we must suppose, know their job. Not long since Mr. J. M. Keynee, a man with an international reputation, denounced reckless saving, and declared that every unspent iiveshilHngs condemns a workman to a day's unemployment. More recently the Eight Hon. Reginald M'Kenna, speaking with dual authority as a past "Chancellor of the Exchequer, and the present chairman of one of the Big Five Banks, the Midland, has told us about 'mass psychology, 1 and has emphasised the half-truth that business improves when people think it is going to be bettor. Then Sir Josiah Stamp, a name to conjure with in accountancy circles, blesses thrift in general, and cordially recommends the people to continue the purchase of National Savings Certificates, on the ground that it has fostered a desirable ■ thrift among the masses of the people. "Here in New Zealand we have the Prime Minister (Mr. Forbes) emphatically stating that the only way to save the country from disaster is to put a 10 per cent, cut in wages of the Civil Service, .and declaring that there will need to be a readjustment in the awards of the Arbitration Court, and a reduction in wages and salaries on the part of all other employers if the cost of living is to be brought down and the finances of the country placed on an even keel. Our esteemed friend, Mr. Harry Holland, on the other hand, avers that the road to prosperity lies rather in increasing wages than in reducing them, and that the spending power of the community must be kopt up if we are to get back to normal conditions. Mr. F. C. Goodenough, the.chairman of Barclays Bank, recently laid emphasis on over-production, which he attributes very largely to the imposition of protective tariffs by various countries. Mr. M'Kenna blames underconsumption, and accouuts for this by mal-distribution of gold. Mr. Goodenough, while acknowledging' that the extension of fiscal preferences and the fostering of trade within the Empire might help industrj', believes that the greatest impetus which industry could receive at the present time would be the announcement by tho British Government of its intention to take in hand retrenchment and national economy. "Is it any wonder," asked Mr. Applcton, "that the man in the street has become confused with all these divided counsels? The question is, is it better to save or to spend) but on this point one must remember that one man's thrift is another man's luxury, while it may be a third man's wanton extravagance. Take the case of a purchase of a motor-car. In many instances the use of a motor-ear under present-day conditions becomes an absolute necessity—-in others it is a needless waste of money. In credit terms, | money which is not spent on. a motorcar might go to swell the bank deposits, but this determination not to purchase will probably create unemployment. The same thing applies to even smaller purchases, for instance, a suit or a hearthrug. '' GIGANTIC PARADOX. '' "The economist of the old school would say that it is the same thing in the end, as money placed on deposit will, with other balances, help to finance industry, but since 1918 the old doctrines have been rather rudely upset. ' We have witnessed the most gigantic paradox, inasmuch as wo have seen that the worst thing that can happen to a nation is to be glutted with gold. This, of course, is the position in the case of the United States, but as individuals we know that to have plenty of bullion is not altogether disadvantageous. "Summing up the opinions of the various gentlemen whom I have quoted," said Mr. Apploton, "I do not think there is any doubt but that the conclusions of Mr. Goodenough that the announcement by . the Government of its intention to take in hand retrenchment and national economy, is the only solution of our economic 111b. The average person to-day is more concerned with the security of tenure of his job than he is with all sorts of fancy theories, and if a business or an industry can only stand a certain amount of money being spent on wages or salar-; ies, then it is inevitable that there must be a drop in the sum that can be paid to each individual. It is far better that there should be an equality of sacrifice with each person taking a little less, than for wage rates to be kept np and a large number of people put out on the street. The rigidity of wage rates is one of the greatest difficulties that we have to face in reducing overhead charges,' and this is specially the case where various industries aro working under the Arbitration Court. There ca.n be no satisfactory full in the cost of living, which will be fair to all, unless the basic wage rates aro brought into Jino with to-day's oconomic position."