INSULATION PLAN

Evening Post, Volume CXXVII, Issue 45, 23 February 1939, Page 15

INSULATION PLAN

DOUBTS OF SUCCESS

PROBLEM FAR FROM EASY

(Special to the "Evening Post.") AUCKLAND, This Day. Doubts whether a policy of insulation could succeed in a dependent economy like New Zealand were expressed by Dr. H. Belshaw, Professor of Economics at Auckland University College, in addressing the Auckland Creditmen's Club at a luncheon yesterday. Dr. Belshaw's address was on the subject, "Economic Stabilisation," on which he delivered a paper at the Science Congress recently held in Australia. Dr. Belshaw said there had been a great deal of talk about insulating New Zealand, but the problem was far from easy. In fact, it was full of difficulties —political as well as economic. NO SIMPLE PANACEA. "Stabilisation cannot be achieved by any simple panacea, which we wait until depression to apply," he con- j tinued. "The easy road is to go while ; the going is good, and leave the morrow to look after itself. It is possibly | for that reason that I am a little sceptical whether we shall succeed in achieving any substantial measure of insulation of this most dependent of economies." Problems involved in stabilisation might be divided into two classes, Dr. Belshaw continued. Firstly, there were those problems centring round the stabilisation of real income as it was affected by external causes, and, secondly, to adjust internal conditions to changing export prices so as to stabilise production and employment. LONG-TERM POLICY INVOLVED. Stabilisation of real income from overseas involved budgeting for a surplus by higher rates of taxation in prosperity, and the use of this and other surpluses to buy exchange on London and its investment in interestbearing securities. When prosperity declined these would be sold and the proceeds used to meet the country's overseas interest bill. This increased the finance available to buy imports. Taxation in a time of depression would be lowered. Dr. Belshaw said his view was that exchange variation was a necessary device to be used if any degree of stabilisation was to be achieved. Internal credit expansion alone in depression would not meet the position, because it either raised internal prices, or prevented them from falling, and therefore embarrassed exporters and caused depletion of exchange funds. Stabilisation involved a long-term policy operating in prosperity and de- ; pression, he added. It involved some ; sacrifice in prosperity to ease the situation in depression. But any stabilisation policy which would be effective was politically and administratively ; difficult. -