Evening Post. TUESDAY, JANUARY 24, 1939. DRUGS OR A CURE?

Evening Post, Volume CXXVII, Issue 19, 24 January 1939, Page 8

Evening Post. TUESDAY, JANUARY 24, 1939.

DRUGS OR A CURE?

Though it is over six weeks since the Government placed exchange and trade under complete control, no ■ satisfying explanation has yet been given of the policy guiding this radical departure. There have been official statements by the Prime Minister and the Minister of Finance; but these have not harmonised with each other. The Prime Minister has presented control as the introduction of the Government's so-called "insulation" plan; not merely a temporary expedient to tide the country over a financial emergency, but a normal development, applying planning to trade and industry for the purpose of fostering domestic manufacturing. The Minister of Finance, on the other hand, has spoken more of the need for restoring the strength of overseas funds, and, while mentioning the possibility of encouraging local industry, has not made it appear that this is the chief purpose. An authoritative declaration to remove the obscurity as to the Government's aim will, it is expected, be the first request of* the conference convened by the Associated Chambers of Commerce and opening in Wellington tomorrow. The declaration is necessary, not just to settle a theoretical or political issue, but to inform traders, and manufacturers also, what tliey may expect. It will make all the .World of difference in the operation of control whether it is regarded and applied as a temporary rationing of the funds available'for imports or as an instalment of the process of vesting control of all industry and trade in the State. Settlement of this point is, essential for the whole community, as well as for. traders and manufacturers, since the answer must determine the Government policy affecting the welfare ' and livelihood of every individual. The conditions calling for , drastic action did not come into being overnight, nor were they created, as some Government defenders would imply, by "unpatriotic capitalists.!' They are the product of, the Government's general policy of "increased spending power," higher costs and higher taxes, pursued without due consideration of the,direction of the spending power, or the effect of costs and restrictions upon industry. As a series of graphs and tables published in our news columns reveal, there has been a steady deterioration in the Dominion's sterling position since soon after the Labour Government came into office. Higher wages and the expenditure of huge sums upon public works have led to a demand for imports which could not be met with the funds provided by exports. The capacity of local industry to supply goods in place of imports has simultaneously been checked by costs and restrictions. It needed only a moderate check in exporting (partly through lower values and partly through declining production) to bring affairs to a crisis. This is the cause—a cause deep-rooted in Government policy. Control alone will not correct it. Correction must go right to the root. A clear declaration of policy will reveal whether the Government is prepared to do this or is bent upon either temporising or adopting more dangerous experiments. Neither the Prime Minister nor the Minister of Finance has suggested the Government's willingness tq revise its policy. But whereas the Prime Minister has cheerfully pronounced control as the cure for present ills, the Minister of Finance has not been sq happy about it. In his most' recent statement, which placed more emphasis on the local industry factor than was given in his initial announcement, Mr. Nash said: It is not possible to state any period during which the regulation will continue—but, accepting the overriding necessity of regulation on account of the emergency, the main objectives of the Government will be: 1. To ensure availability of funds to meet its overseas debt commitments. 2. To allocate funds for the importation of commodities essential to the trade and development of the Dominion, * 3. To maintain the standard of living in the Dominion by the extension of production and manufacture to those -commodities which can be produced in .the Dominion and which were previously imported.' . 4. To safeguard the market in the Dominion fpr manufacturers who engage 'in the production of commodities which .can be sold at reasonably economic prices. Though Mr. Nash told the Associated Chambers of Commerce that "from this statement you will realise that the policy has a large degree of per- ■ manency," that conclusion does not necessarily attach to the main objectives slated. Neither the provision of funds for debt service and imports, nor the improvement of living standards, nor the safeguarding of > economic domestic industries re-

quires control, if the basic policy is sound. In fact control need have a "large degree of permanency" only if the Government persists in the unsound policy it has hitherto followed. The choice, however, is not between basic correction for restoration of a sound economic foundation, and attainment of sound economy by artificial control measures. A sound economy cannot be obtained by artificial means. All that these will do is to induce a deceptive appearance of strength, to be maintained only by further control, until finally a ruinous collapse is inescapable. New industries and increased production can be secured if cost factors are favourable and moderate protection is afforded. Funds for imports and debt service can be assured if it is recognised that spending must bear a reasonable relationship to the productivity (again dependent on costs) of industry, especially of industry producing for export. Expedients adopted to avoid measures for keeping this economic balance must produce only an artificial prosperity. The value of internal currency will certainly depreciate. It is doing so already. More inflation will be needed to hide this, and compensate for higher living costs. It will be the old story of a small drug dose taken to produce a false energy and bigger and bigger doses being called for till health is so sapped that a cure (possible now by reasonable self-discipline) becomes attainable only at the cost of great hardship. When Mr. Nash explains the policy to the business men of New Zealand will he declare for a cure or more drugging?