Evening Post. WEDNESDAY, JUNE 29, 1938. A ONE-WAY ARGUMENT

Evening Post, Volume CXXV, Issue 151, 29 June 1938, Page 12

Evening Post. WEDNESDAY, JUNE 29, 1938. A ONE-WAY ARGUMENT

The Government has put into the mouth of his Excellency the Governor-General two political claims: (1) That the Government's policy has increased the purchasing power of the people, and (2) that the Government's policy has been a greater factor than the rise in oversea prices in causing the economic improvement that has occurred in New Zealand since Labour took officc in 1935. These claims are placed on record as being the opinion of the Governor-General's advisers. The claims arc not new. In the past Governments have tried to establish relations of cause and cffcct between their policy and visible socialeconomic progress; and Governments yet to be will make the same claim. Hitherto it has been easy for both Governments and their critics to find economists whose hypothetical findings appear to be favourable to whatever political argument it is sought to establish. So no finality lies that way. If the economists are ever to be capable of giving a casting vote that will definitely determine economic issues raised by politicians, the economists will have to. speak with much more unity and authority than they do today. This seems to imply that economics will need to

be a more exact science than the testimony of its disciples indicates. Until then, party politicians will be able to make extravagant claims with impunity. The people cannot decide where doctors and economists differ, but the people will at least note one suspicious circumstance attaching to the claim that the Government created prosperity. Suspicion must attach to the fact that the argument is always a one-way argument. A Government that admitted that depression was caused, or even partly caused, by its own policy, such as over-taxation, has never yet been

born. Oppositions have a monopoly of the argument that Government profligacy caused bankruptcy, and Governments have a monopoly of the argument that Government spending caused prosperity. This rule stands all tests, even the gruelling test of frequent exchanges of office as between two contending parties; a party politician who passes from Opposition to Government (as Labour did in 1935) or from Government to Opposition takes his colour from his altered surroundings and picks up his cue instantly. The Government always causes ruin (if you are not a member of it) and always ' causes prosperity (if you are). This is not an economic fact, and complex; it is a human fact, and entirely simple. Therefore it is a fact that the people ,as a whole can readily understand, and do understand. They do not alter their estimate -of this one-way argument because it happens to appear in the Governor-General's Speech.

If two economists went to work to consider, pro and con, whether the Government's policy has been a greater factor in prosperity than overseas prices have been, each would produce a huge pile of figures, which the public would not read. The net result is that the economist does not referee the football match, but merely joins the barrackers. The onlooker might be more easily convinced if he reduced the whole process to an absurdity by trying to imagifte a political economist who failed to prove what he set out to prove, or a Prime Minister and a Public Works Minister who broke into tears when admitting that their policy broke the country. The expansion of the national purchasing power through Government employership, replacing to a degree the expansion of the national purchasing power through private employership encouraged by reduced taxation, is an issue which is today the subject of assertion and counter-assertion; but the only real test that is available in the absence of a definite economic code is the test of results—results which will not be available by next November. Meamyhile, in the party-political arena, the prize is to him that shouts loudest.

Assertion is also mingled with prophecy:

My Ministers ... are confident that it is within their power to eliminate the evil effects of those alternating periods of prosperity and depression which have, up to the present, been such a disturbing feature of economic life.

This is the "insulation" idea reappearing through the GovernorGeneral's Speech, but, not added to or explained. The economic theory of smoothing the ups and downs by saving money during the ups and spending it in the downs can hardly claim to be "insulation"; it may be amelioration. But in any case that plan of slump-resisting is recognised by the outward and visible sign of a reserve-building economy in times of prosperity. Can any such sign be recognised in the Government's policy today? If not, is "insulation" something entirely original and untried? The bracketing of "insulation" with a social security scheaie of great range and cost seems to be H magnificent challenge to the future, and the assumption of "leadership of the world in humanitarian and social legislation" beltings strictly to the sphere of human hope and prophecy.