WINNING THE PEACE

Evening Post, Volume CXXXV, Issue 2, 4 January 1943, Page 4

WINNING THE PEACE

ECONOMIC METHODS

STATE CONTROL OR PRIVATE ENTERPRISE

"After the war State control, private enterprise, individual freedom, and voluntary effort will all be needed, and in any individual case the question to be answered is by what method can the job best be done?" states the Canterbury Chamber of Commerce in an article on the economic bases of post-war reconstruction which it has prepared after consulting with Ihe Department of Economics of Canterbury University College. "It is getting the job done, whatever it is, as simply, directly, cheaply, and effectively as possible that matters," states the article. "The method of control adopted is only a means, an instrument, or a tool, and the common interest of all the people demands that the best method should always be used for the end in view. "The first requirement is peace, and the linking of nations in a genuinely co-operative effort to further their common welfare and settle their differences in a manner that will ensure a lasting peace. This ■ involves the removal of many elements in the pre-war i set-up which accentuated international j differences and tended to promote war. INDIVIDUAL FREEDOM. "A second requirement is a greater measure of individual and collective freedom than is possible .in wartime. War necessarily brings restrictions on freedom . . . which seriously limit opportunities for work and progress towards desired ends. They shackle activity and effort, and tend to promote both internal and international differences and strife. Genuine peace, both external and internal, must be based on the voluntary co-operation of free and democratic peoples, rather than on the tyranny of servile totalitarian States. "A third requirement is for the higher standards of living which should be made possible by the technical progress stimulated under war conditions, by the reduction of social, economic, and international barriers, by greater equality of opportunity, and by real co-operation in national and international efforts to increase communal welfare." SOCIALISM AND CAPITALISM. Few people would disagree with these general aims, but there was diversity of opinion about the methods of achieving them. The major, difference, particularly in New Zealand, was .between the parties who on the one hand favoured a* socialist and on the other hand a capitalist solution of economic problems. But this difference was unreal, and retarded progress because it lost sight of the end in disputing about the means. The real object was to achieve the end in view; the means were of secondary importance, and both socialist and capitalist methods would undoubtedly be employed. Generally this difference boiled down to State control or private enterprise, but the distinction was by no means clear. In New Zealand, for instance, it was said on the one side that State control should continue after the war, j and on the other that present controls should be removed. Actually there were some State controls that had operated for the last half-century and were likely to be continued under any conditions. There were some controls which were definitely emergency wartime measures and which could not be tolerated once the war was over. With certain exceptions, no methods yet designed approximated free competitive enterprise and the free play of market prices in securing the most i effective distribution of resources and in adapting it to changing needs. Over the major part of production, trade, and consumption, State control was arbitrary, inequitable, unnecessary, inefficient, and uneconomic. But there were parts of the economic field where State control was both desirable and necessary. The real question was therefore to determine just what part of economic activity should be State controlled, and what part left free to operate itself as it would do if freed from control. CONTROL OR FREEDOM. "An important and useful example of the difference in results achieved by State control on the one hand, and by automatic adjustments of economic activities under free enterprise on the other, is found in the operation of exchange and import control and the related rationing of commodities. Under war conditions, when both imported goods and shipping space are so very scarce that they have to be rationed out, when priority must be given to the most essential goods, when ships must be convoyed, when finances are strained and money must be directed into special channels, much central control is inevitable and it is applied in all countries. But consumers and others suffer heavily in consequence and living standards are seriously reduced thereby. War conditions involve shortage of many goods in the market on the one hand, while excesses of purchasing povver are common on the other. The Minister of Supply has recently estimated that the money income available to buy goods in New Zealand at present exceeds the goods available by about £100,000,000. In such circumstances, rationing and price control are necessary to secure reasonably equitable distribution of the limited supply of goods. But in peace time, there should be neither inflation of money nor shortage of goods. It is the essence of any sound monetary system that the money income should balance the goods. ... There is then no need whatever for either rationing or price fixing and the general welfare is best promoted by free exchange, free prices, and free markets. EFFECTS OF RESTRICTION. "The effects of State interferences restricting trade exchanges were well seen during the last depression. New Zealand farmers found then that prices for their products were greatly reduced, largely, though not wholly, because trade restrictions elsewhere narrowed their markets very greatly. Out of their reduced incomes, New Zealand farmers and others couid buy much less of overseas products, and our imports fell heavily in consequence. But overseas producers, selling so much less to us, could not pay higher prices for. our exports. They could not buy from us because we could not buy from them, and a position of stalemate resulted in which both producers and consumers, in New Zealand and overseas, suffered heavily. "The depression was very largely V breakdown in the exchange of goods and services, caused and prolonged to no small extent by the heavy restrictions imposed on such exchanges by Governments. It appeared to be forgotten that international trade is essentially an exchange from which both . parties gain. "Left alone, with or without moderate and stable protection of particular interests, and under sound money conditions, the balance of payments arising from trade can safely be left to care for itself. Any departures from the normal balance will speedily be corrected, as they have been for centuries, without any external coni trol. Internal production and trade follow the same rule. They expand under free conditions, but are regimented, canalised, restricted, and tend to contract under control. BUREAUCRATIC CONTROL. "Exchange and import control were first imposed in New Zealand towards the end of 1938, nine months before the outbreak of war, and were the direct result of creating in New Zealand more new money than could be covered by existing overseas funds, in order to finance internal expendii ture by the Government in excess of its receipts from normal sources. There was immediately an excess of nioney over goods, and the controls imposed were a form of rationing. The results speedily showed the marked differences between the work of importers, whose business it is to know the requirements of their customers on the one hand, and the sources of supply on the other, and whose efficiency was stimulated by competition, and the achievements of a bureau-'