A RECONSTRUCTION PLAN

Evening Post, Volume CXV, Issue 132, 7 June 1933, Page 8

A RECONSTRUCTION PLAN

The plan placed before the ActingPrime Minister by a deputation, of Auckland citizens is a sincere effort to grapple with difficulties which may become more pressing in the course of the next few months. It deserves careful consideration, though scarcely in the spirit of the Mayor's remark: "We would prefer almost to see the wrong steps taken than to be content with inertia or inactivity." There have been wrong steps enough already in contract-breaking and currency depreciation. Masterly inactivity may not be a spectacular policy, but it is preferable to a spectacle of explosive energy which is destructive of confidence and business. The question to be asked is: How far does the Auckland scheme commend itself as a means of orderly reconstruction? At the outset we would exclude the proposal for a loan to be repaid from new currency. A currency board would be a duplication of part of the central bank scheme to which the Government still stands committed, and a currency scheme launched on the eve of the Economic Conference would be most inopportune. It would tend to intensify the difficulties already caused by our 25 per cent, exchange rate. An internal loan, Avith orthodox methods of service, is a different proposition. Supporters of such a loan will naturally turn to the Keynes Plan for arguments in its favour. They will urge that the stimulating effect upon industry would quickly result in a price revival and labour demand that would enable the community to meet the cost'of the loan without difficulty. But it must be remembered that Mr. Keynes admitted that lone action, even by such a powerful unit as Great Britain, would be largely ineffective. The impetus would have to be greater, such as only a strong group of nations could provide. Obviously New Zealand cannot hope to do what Britain could not undertake. There is, however, an argument which supports moderate opening of the purse by borrowing. It springs from the consideration which we discussed on Monday with special reference to the stimulation of building. When the hoped-for improvement in produce prices comes New Zealand's rate of recovery will be rapid. There is even' the' possibility of a minor boom succeeding the severe slump. It is legitimate to anticipate this by moderate expeiiHiture from loans now soi as to make the process of rehabilitation more even. A man who" is without work and means is entitled to borrow when he has in prospect employment which will enable him to repay. Moderate increase in expenditure now may, from this point of view, be sound policy; but it must be moderate. Otherwise, as Mr. Coates pointed out, we should only, have a burst of. artificial prosperity and be Worse off afterwards. The Government's decision - to add £500,000 to the Public Works Funds (whether from-loan or revenue Mr. Coates did not say)* will, give a measure of help. It is for the Government, which •■' has ascertained. facts before it, to decide whether more is warranted. Two fictors should guide that decision: the 'necessities of the unemployed and,the need for sound finance.. Neither of these considerations, however, would justify a 10 million loan programme to provide among other things for £3,500,000 subsidies on primary produce. The subsidy policy was rejected when high exchange was adopted, and we still have high exchange.