MERELY AN OLD STORY

Evening Post, Volume CXV, Issue 108, 10 May 1933, Page 8

MERELY AN OLD STORY

There may be a ■. hundred causes of depression, but debt is always a sufficient one. In ordinary times one expects to see a wasteful borrower go bankrupt; and his bankruptcy is allowed to take its course. But when general bankruptcy—or even the bankruptcy of a considerable section —impends, the community—or the Government—is afraid to let it go on. Moratoria, inflations, and expediency measures intervene. This:occurs in so many countries and over such wide areas that the ordinary cure of debt by process of liquidation is checked. "Too dangerous, on such a big scale!" Bankruptcies, as is plainly seen, may even become less in number. The general effect is to obscure the basic fact that over-bor-rowing and over-spending are the root of the trouble, and it is therefore opportune that the Bishop of Wellington has recalled public attention to the fact that "not a little of

the borrowed wealth was utterly wasted." No doubt the currency and the credit system, and other inanimate things, are not perfect and may •be blameable, but the prime cause is over-borrowing, which, in turn, is a defect of character. This defect is not concealed when only individuals are going bankrupt,' but as soon as there is a threat of a general march to the Bankruptcy Court, concealment, in the form of expediency measures, steps in. It does not cure, j It postpones. And it provides a text from which Bishop Sprotl, at the Synod, preaches candid, yet obvious, lessons. The heritage which the pioneers won by labour and thrift from the wilderness has been mortgaged to the hilt by their sons, who in many cases have nothing to show for the investment. Capitalism has never been free from inflation and deflation. They have their well-marked cycles. There is nothing to indicate that they will not recur. A lot is heard of Slate capitalism in Russia. Will State capitalism be more careful in good times, and therefore happier in bad times, than private capital? New Zealand's experience is certainly in the negative. We see now that it would have been better to have left the construction of the unused railways to private capital. . In that case, they % would either not have been built, which would have- meant so much less debt; or they would have been built by private enterprise, on whom would have fallen the "huge interest burden. A Government could have viewed with less concern the liquidation of a private concern (example, the old Midland Railway) than of it.s own created assets. So it. is not at all likely that State capitalism will be any more free than is private capitalism from that defect of character which impels so many people to over-borrow in prosperity, and later, in depression, to go bankrupt or., secure political protection. Again, when the inevitable reaction of borrowing arrives, the fashion of any Government" is to get money where it can, and that means die penalising of people who have had sufficient character to accumulate small savings. Only character enables a small man to save, and his savings at once become a target for the taker of taxes and the giver of relief work; even though his thrift —applied when others were misspending—has in no sense made him rich. Certainly the cure of depression does not lie in "the transference of the burden from one set of shoulders to another set of shoulders little, if at all, more able to bear it." In emphasising that point Bishop Sprott renders particular service. It is all part .of the debt tale. The man who controlled his spending is paying for the other. It is bad economics, and worse morality.