ONE-WAY CAPFUL

Evening Post, Volume CXXVIII, Issue 14, 17 July 1939, Page 8

ONE-WAY CAPFUL

Mr. Lee is reported as saying in the House of Representatives on Thursday that "external funds had been taken by people who should never have had them, because they belonged to the people of New Zealand." What evidence can Mr. Lee bring that any funds "belonging to the people of New Zealand" have been taken by persons to whom they did not belong? Mr. Lee has on other occasions referred to "gangster raids on exchange funds," but when has he defined these raiding operations, or said precisely what they amount to? Seeking for a clue, one finds in his "Socialism in New Zealand" the remark that "insurance funds are notoriously liable to raid exchange surpluses if higher rates of interest prevail elsewhere." This seems to mean that if investment capital, owned by insurance companies or other people, seeks higher interest elsewhere, then external funds are "raided" (vide "Socialism in New Zealand") or, worse still, external funds "belonging to ihe people of New Zealand" have been "taken by people who should never have had them," to use the reported terms of Thursday's speech. If an investor in New Zealand transfers his capital (not "the people of New Zealand's" capital) to an investment abroad, and thereby uses sterling funds and reduces the amount of sterling funds available for imports or interest, in what way has he taken anything "belonging to the people of New Zealand"? It is true that the New Zealand Government may see fit lo try to prevent such departure of capital, but that is only a measure of expediency. If it becomes more than a measure of expediency, and if capital's freedom of movement outward is permanently denied, serious difficulties arise. For instance, the Minister of Finance, Mr. Nash, is now seeking to borrow in Britain—that is, he is inviting capital to enter. He is inviting additions to the £156,800,000 which the New Zealand Government already owes in London, aud is quite Avilling to welcome additions to the large amount of British capital invested privately in New Zealand. Obviously a one-way movement of capital (everything to come in, nothing to go out) would not be acceptable to the British investor or to any oversea investor. If an investor finds that he will not be allowed to remove from New Zealand his capital (which does not "belong to the people of New Zealand") and the income his capital has accumulated in New Zealand, he will weigh this disability in a manner prejudicial to Mr. Nash's borrowing mission. In fact. Mr. Lee's talk about gangster raids on sterling funds is a distinct disservice to Mr. Nash. The only Government that can make a success of private investment is a Government whose political policy helps to provide economic attractions for investment; not a Government that locks the outward door, opens the inward door, and regards all outward movement of capital as an appropriation of funds "belonging to the people of New Zealand."