PAYING IN TWO WAYS

Evening Post, Volume CXIII, Issue 26, 1 February 1932, Page 6

PAYING IN TWO WAYS

The executive of the Associated Chambers of Commerce has expressed disappointment of the exchange^ pool; but it lias done so in a highly unsatisfactory way. It has neither given adequate reasons fp> its opposition, nor has it suggested any alternative—unless another conference can be called an alternative. The statement made by the Associated.Chambers purports to give reasons, ■ but all it does is to reaffirm, the principle of less business in Government, a feaffirmatiph which can carry little weight in this emergency. The Government is in the business, and must be in the business, .; to avoid default in London. We.approve high principles, but we are inclined to think that the principle of meeting our" obligations is more important than keeping the Government out of business. The objection that the exchange pool could be replaced by simpler and better plans could be sustained if the Associated Chambers submitted those better plans. But no plans at all are offered—just Opposition. As the executive'of the Associated Chambers of Commerce is supposed to speak for the commercial interests of New Zealand, something better than this—something more constructive than opposition—is required of it.

We should like, for example, to hear whether the Chambers of Commerce favour the cost-spreading inflation view that has been expounded. It is said that, as the export income (and' therefore the whole income of New Zealand) has been reduced, it is necessary to reduce primary producing costs in the same ratio. The difficulty of doing this directly is perceived, so it is suggested that half, say, of the reduction should be made directly and the other half should be obtained by. inflation. To illustrate: it would be awkward, if not impossible, to reduce wages by 40 per cent, so let a 20 per cent, reduction be made and then obtain the other 20 per cent, by adding to the cost of living without raising wages.

The exchange, said Professor Cop land on Saturday, is paid by New Zea: land- to New Zealand within New Zealand. ■■...•. ■. •..

We fully agree, and if, by exchange, 20 per cent, is added to the primary producer's income, that 20 per cent, must be paid by someone in New Zealand. If it does not come out of wages and salaries, then the merchant, the retailer, and the manufacturer must carry it. If they believe they can make this concession, then they can reduce'prices by an equal amount. The only argument in favour of the double method is that some of the people may be so busy in watching the right hand taking away the 20 per cent, that the increments of the left (adding 20 per cent, to-costs) may pass unnoticed or be explained as due to the operation of the gold standard, or the law of supply and demand. The explanation will no more satisfy the thinking consumer than a reference to the Einstein theory, and it will be about as relevant

': Another point that calls for some elucidation, cither liy the executive of the Associated Chambers of Com-

merce or any other inflation advocates, is: who will benefit in the long run from "free, open exchange"? The Farmers' Exchange Committee now accepts the measure of regulation desirable to smooth out changes clue to seasonal variations. Obviously such acceptance is sensible. Otherwise how would the producer benefit? ' The farmer who was obliged to sell during the export season (and if vthe statements of the Farmers' Exchange Committee are accurate few can afford to hold) would be compelled to .accept a low exchange, or parity, or even a discount. When he had nothing to sell the farmer would have the doubtful satisfaction of seeing the exchange rate rising— for the benefit of someone else. The banks in normal times have spread the cost of credits. They have been doing so lately by keeping the rate at 10 per cent, when a reduction would have been possible. But speculative outside operations would hinder this spreading process to the detriment of importers, and with little benefit to exporters. Whose interests does the executive of the Associated Chamber of Commerce believe would be advanced by making it impossible for the banks to exercise prudent control so that speculation would be rampant and sudden fluctuations almost inevitable?