PRIMING THE PUMP

Evening Post, Volume CXXVIII, Issue 12, 14 July 1939, Page 11

PRIMING THE PUMP

TRADE POINT OF VIEW

INEVITABLE REACTION

COMING CENTENNIAL

After a brief historical sketch of New Zealand's history over the past 3 100 years, the "New Zealand Draper ) and Clothier and Boot Retailer' re- . fers to the Dominion's present position i and especially to the Government's i "vigorous policy of 'pump-priming,'" 3 which boosted trade, raised wages, re- • duced working hours, enlarged Gov- ;! eminent expenditure, relieved unemt j ployment, and increased social ser--3 vices. I "But," says the journal, "increased I i wages and salaries all round, with :; shorter hours, and a five-day week in ■ i many industries, soon had • the inevit- ' i able effect of raising production costs i i and reducing the volume of output. . j The people had to pay more and were ,; producing less goods. "With the first [jblow of injected spending power buy-; . | ers flocked to buy goods to refurnish, ■ J reclothe, and rehabilitate themselves i after years of forced economy and self- | I 1 denial. Manufacturers here and over- ' I seas were rushed with orders to meet j the sudden demand for consumers' . goods. "But it was not a natural or normal demand, and when the first hun- ! ger for goods was appeased the de- j mand eased off, though commodities continued to pour into the shops, stores, and warehouses. . Much of the heavy State expenditure was not going to the production of goods, or in capital expenditure for future wealth production. "No increased income was coming from our land and no new industries were starting. Then it began to dawn | on us that we were living Deyond our income, and that standards of living cannot artificially be forced beyond that yielded by our national production of wealth, unless some Santa Glaus scatters borrowed cash or issues lOUs galore. A RUDE AWAKENING. "Had our large army of unemployed been spread over productive as well as non-productive works, and if more wealth had been won from our land, mines, forests, etc., ■ the increased national income might have continued , I the new economy of spending for pro-! sperity; but actually farm production < was falling off, and after the election last October it was admitted that we had been spending from our reserves instead of current wealth production. "Reserve funds overseas from the sale of exports were disappearing rapidly, leaving insufficient to meet the public liabilities in London. That was not because we were importing . too many everyday household require- ; ments, for these form only a small : portion of our total imports. In spite of this proven fact the Government ; became panicky and rushed to stop ; almost all imports except their own < requirements. "Business has been thrown into the worst confusion which has existed in ] our century of existence as a British ' country. No one knows exactly where he stands in the matter of supplies of ! goods, either from local or overseas sources. It is not too easy to sell goods with the former advocates of free spending now urging everyone to save,. but the problem of replacing stocks sold is even more difficult than our job of selling: them. "So the closing of New Zealand's first century finds the business world and trade generally in a state of confusion and uncertainty," states the journal. "In spite of the embargo on imports reserve funds in London remain far below requirements for State debt commitments, and none are available or permissible for normal trade re- ; quirements to supply the wants of the ■ people." s [