The Evening Star TUESDAY, MAY 3, 1932. GIVING PLEDGES.

Evening Star, Issue 21092, 3 May 1932, Page 6

The Evening Star TUESDAY, MAY 3, 1932. GIVING PLEDGES.

The ! beginning of May and tbo long parliamentary week-end coinciding, a number of meetings in various parts of the dominion have been addressed by Labour members. At all of these gatherings resolutions were carried demanding, first, the repeal of the pensions and wages cuts, and then the resignation of the Government. The arguments for such a course are more fully set forth in the report of Mr Holland’s speech at Lower Hutt than in any other reports, doubtless because of his leadership of the Labour Party in Parliament, Mr Holland appears to have spoken quite temperately, and quite a number of his statements will appeal to those outside the Labour following. He emphasised a point to which we alluded in these columns a few days ago—viz., that these cuts and this heavy taxation have the defects of their qualities. When out of diminishing incomes the people have to deduct a growing proportion for the needs of the Government their spending power is reduced, their anxieties and loss of confidence in the future are increased, and their standard of living is lowered, all of which goes to deepen the general depression and push back the dawn of recovery. But this must appear the lesser of two evils when one considers the alternative. There is really only one alternative, and, brutally put, that is to call the receivers in. That might be achieved in more than one way. It could be brought about by defaulting in overseas interest payments, which the Government admits to be the biggest and most uncompromising hurdle on the expenditure side of the Budget. There is no use in discussing that matter much further, beyond hinting that there is a vast difference between repudiation and compromise by amicable arrangement. In respect of debts owing by certain Powers to other Powers English writers have been stressing the above distinction, and have been urging that in terms of commodities (almost the only means of payment nowadays) the discharge ot liabilities is now treble the burden that it was when they were incurred.

Another method would be by further borrowing. is admitted that* one

main cause of New Zealand’s present difficult situation is past over-borrow-ing and expending the loan proceeds wastefully and unproductively. To borrow overseas at present is next door to impossible, and, if it were possible, would mean only fleeting alleviation followed by a position certainly no easier than now. In effect Mr Holland proposes borrowing, but he does not call it that. “ Utilise the people’s credit,” he recommends. What is this but borrowing? The Government has just raised, or is raising, £2,500,000 in bank advances by pledging £10,500,000 (face value) of soldier settlement securities. This, Mr Holland says, is the equivalent of a very modified use of the people’s credit, and “ a better way would be to utilise the whole of the public credit in the dominion in a wide effort towards reconstruction and rehabilitation.” It was with mixed feelings that many people learned of Mr Downie Stewart’s recently-announced deal with what one may term the native-born banks. They admitted the necessity and were relieved at the escape from so much extra taxation this year, but the transaction induced comparison with the visit to “uncle” with a selection from the domestic furniture, together with the reflection that an article once pledged cannot be pledged again unless it is first redeemed. Mr Holland desires this unhappy practice to be extended to the last stick in the' house—“ utilise the whole of the public credit in the dominion.” Another term by which some would euphemistically describe this is “ inflation.” We 'presume that he would again make the banks the instrument for it—which would be rather rough on the banks. Or would he make Treasury bills the common currency? In that case our Government’s credit abroad would suffer the most severe shock in its history. Germany began inflation and defaulted altogether; Franco tried inflation and defaulted four francs in five. Thus it appears that Mr Holland’s alternative might be no alternative at all if inflation is the road to default or repudiation.

Passing by the strong probability of inflation making the cost of living soar, which would be doubly disastrous under present conditions, one comes to Mr Holland’s views of taxation. He would remit the increases laid on the small taxpayer in the last year or two and make the wealthier taxpayers disgorge an extra amount equal to those remissions. The motive is the laudable one of equality of sacrifice. But it would probably not work out that way at all. What would happen would be that capital would leave the country as fast as it could, and at a time when it could ho ill spared, so that the effect on general conditions would be disastrous. In Australia, because of Mr Lang’s misgovernment (which comprises, inter alia, the keeping up of wages and pensions artificially and spurning of economy), capital has migrated wholesale from New South Wales to Victoria, and unemployment is in consequence far less acute in the southern State. Mr Holland would restore all cuts in wages and pensions, and the whole community would like to see them restored. But New Zealand must first 'be in a position to restore them, and Mr Holland’s method to put New Zealand in such a position would only push the chances of restoration of them well back towards the horizon. But it may appeal to those directly interested, and the inflation may appeal to the farmer, who longs for a more greatly depreciated New Zealand pound. Thus Mr Holland sees Labour’s chances of office greatly improved if Parliament now went to the country. Therefore he and his colleagues are instrumental in the passing of many resolutions at public meetings calling on the Government to resign. If a mere change of Government were the highway to New Zealand’s recovery how simplified matters would be 1 The real situation is that, pending! a recovery of export prices, New Zealand can do little more than economise. That is what this Government is doing, and that is what a Holland Government says it would undo.