SMOOTHING THE BUMPS

Evening Post, Volume CXVI, Issue 33, 8 August 1933, Page 6

SMOOTHING THE BUMPS

Recently we referred to the possibilities of Government , action, in lessening the differences of boom and slump, by stimulating private business in a slack period, as for example with the present unemployment subsidy for building. A similar issue was discussed in passing by Professor Dennis Robertson in a British broadcast debate with Major Douglas on the Douglas Credit Scheme. ■ I look forward, said the professor, to, the time when public opiiiiou will bo much more enlightened in these mattors than it is now,, and whon it will be possible, without fear" of undermining confidence, to make much more use than we do now of Government finance as an auxiliary engine to banking policy, by giving money awny to people in time of-slump and—one must not, I am afraid, forget the other sidp of the story—taking it away from them by oxtra taxation in times <?f over-confidence and over-expansion. The idea is quite an attractive one. The Government should function as a regulating engine to maintain an even balance of public spending. Just now thousands of people would applaud the idea. Of course, the Government is acting in this way, though in a rather one-sided manner. It is taking from all workers and recipients of income to give to those with no income; and it is taking from the community ,at large (through exchange) to give to the farmers. Those who have a prospect of gaining more would say: "An excellent plan. Start it now." There is, however,, an obstacle in the way of an excellent scheme. Public opinion is not as enlightened as Professor Robertson would have it be, and public opinion would pull the little lever of the Government auxiliary finance engine. What does experience teach us? Democratic-ally-controlled bodies of all kinds go the way lhat>public opinion wishes. When the public are over-con-fident and spending freely central governments and local governing bodies join in the rush and spend freely, too, not from high rates and taxes, but from loans. The additional public expenditure makes the boom greater; and the loan method of financing makes the slump worse when it comes. If governments would tax and rate heavily in prosperous times and create reserves they would do double good by establishing a store for use in time of need, and checking boom spending. But public opinion will have to be much more enlightened before this will be possible, for a government which dared to take this course would speedily be displaced by one ready to give the people what they want. New Zealand at one time did accumulate a surplus, and part of that is proving useful now, but- the greater part was applied to purposes which helped to raise tlu; land boom higher.