The Evening Post WELLINGTON, SATURDAY, AUGUST 25, 1945. WHAT WE GET FOR OUR MONEY

Evening Post, Volume CXL, Issue 48, 25 August 1945, Page 6

The Evening Post WELLINGTON, SATURDAY, AUGUST 25, 1945. WHAT WE GET FOR OUR MONEY

One of the comments most commonly heard when the man in the street talks of finance is: "If we can spend thousands of millions for war, why can't v/e spend thousands of millions in peace?" It is a natural question, expressing humane urgings, and a ! revolt against the use of all the resources of the earth to kill and cause suffering, while seeming to withhold them from uses which would promote human welfare and happiness. But the question, though natural, is not simple. It does not contain its own answer, as many people are inclined to suppose. It is not an answer to" say: "Of course we could spend as freely in peace if it were not for the perversity of politicians, or money controllers." The true answer is given in two parts: (1) We can spend as freely for peace as for war if we are prepared'to pay the price; (2) we can spend as much :f we are satisfied to get as little (in goods and services) for our spending in peace as we get in war. This is in part the answer given in two contributions to the discussion by Mr. A. T. Traversi and the "Sydney Morning Herald" which we reprint today. It is advisable for. people to study the question and the answer, for if they listen to the soothsayers and rashly conclude that spending can be free and without price, they will most surely pay the price, and in a disastrous way. The problem cannot be rightly understood unless the bedrock difference between war and peace spending is kept in mind. In war the nation is like some pioneer householder whose homestead is being attacked by savages. The pioneer directs all the efforts of his household and all his resources to defence. He leaves undone the normal work of his farm, he works and fights with his hours limited only by his endurance, he piles his implements and furniture in barricades, and counts no cost excessive if he can beat off the attack. With the danger ended he must face this cost in the form of neglected tillage, lost produce and stock, damaged buildings, and implements and furniture destroyed. Then, too, he will wish to resume his normal way of life, with relaxation from work and such pleasures and comforts as are needed to make life tolerable. In a broad way this is the position of the nation. It has been for years on a war footing; it must replace the civil, losses of that period and make good the war damage. It must do this also while relieving the people as far as may fairly be done from irksome controls and burdensome demands. Only when this has been done can a beginning be made in the spending which will give a return in an improved living standard. The provision of the money for this purpose is merely part of the machinery of the process. Before money can be wisely spent there must be labour and materials with which to carry on the work. Otherwise the use of money creates excessive competition for labour already employed and materials fully used, and this gives no benefit but causes harm to the consuming public by raising prices. People have more money but they cannot procure more goods. In wartime there is more money than goods for civil consumption. Those who earn the money cannot spend it with fuil benefit. For the economic good of the community and their own benefit, and for the salvation of the nation, they must be forced or persuaded to divert part of this money to national uses. Hence we have high taxation, big loans, rationing, and other means of keeping the public spending down. The people will accept these measures irt wartime for patriotic reasons and with the expectation of later being able to spend what they have saved. But with, peace they demand something different. They wish to spend a greater proportion of their income as they choose and to receive full value for it. Moreover, they are not eager to see an unlimited continuance of the methods used in wartime to increase production—man-powering and longer hours. An interesting point, and one which must be faced, is raised by the "Herald"—whether the money for heavy national spending can be procured by the emergency methods used in war, forcing people to save by removing the opportunities for spending. The "Herald" asks whether it will not be necessary and advisable, when the war urge no longer applies, to provide an incentive by a modest increase in the reward offered. Possibly this suggestion will provoke opposition from persons who protest strongly against "the interest burden," forgetting that at least half and probably more is paid by the recipients of the interest who merely hold it for a little while before returning a large share in security and income taxes plus the "unearned income" impost. The practical force of the argument, however, is undeniable. People will not save eagerly in normal times unless they have a definite object (usually the purchase of something of value) or an adequate reward. And if they do not save, and heavy expenditure for capital 'purposes is continued by recourse to credit creation, thrifty and unthrifty alike will be penalised by the inflationary addition to the volume of money pressure on an inadequate j supply of goods. Either there will be higher prices, or there must be continued and even greater restriction upon the use of the money by price control and rationing, and sterling control and import restriction to prevent the earner from spending his money where and how he pleases. That is what we mean when we say that there might still be high spending in peace if the people were content to receive as little for their spending power as they can get in war. But will the force of these arguments be perceived by a Government which, while increasing social security benefits, appears strongly averse to permitting, much less encouraging, people who try to establish an independent basis for security?