INFLATION FEARS

Evening Star, Issue 21945, 4 February 1935, Page 14

INFLATION FEARS

U.S.A. ECONOMISTS UNBALANCED BUDGET Economists, political scientists, and sociologists attending the thirteen meetings of their national associations at Chicago put out_ warning signals against possible inflation, resulting from an unbalanced Budget and excessive spending on public works, states the ‘ Now York Times.’

Grave misgivings were pronounced on the Federal policy of “ priming the pump ” of private industry through public works. At the same time, the extraordinary •growth of civil servants under the New Deal, bringing with it a large mass of appointments “ dictated by political considerations,” was pronounced by various speakers as “ a form of social suicide ” because the traditions of the spoils system “had received a new impetus.” Coupled with the need for national economic planning was the proposal for a national training school for public service to develop a new type of public servant who would make public welfare his primary concern.

UNEMPLOYMENT SCHEMES

Meanwhile, intimations of the Federal Government’s possible action on unemployment insurance were conveyed in a paper presented by Dr Edwin Witte, secretary of the President’s Committee on Economic Security. Proposals for old age pensions and old age insurance were outlined by Murray Latimer, chairman of the Railroad Retirement Board, and one of the experts on the Committee on Economic Security. Dr Witte veered away from an exclusive national unemployment insurance system and said he favoured a national-State system growing out of a plan similar to that proposed in the Wagner-LeAvis Bill, Avith dree play to the States to adopt whatever plans they saAv fit.

George Soule, editor of the ‘ Now Republic,’ opposed Mr Witte’s proposal, saying that it was another example of the fact that the Roosevelt Administration “ has always bee.n too timid in the face of the opposition of employers.” Mr Soule asserted that important business interests would support a comprehensive national unemployment insurance scheme if one were brought out by the President’s committee, and asserted that those who were now hesitating to advocate such a plan would be surprised to see the ease with which it would be passed by Congress. Dr Leo Wolman, Professor of Economics at Columbia University, defended the N.R.A., taking a viewpoint opposed to that of George Tefhorgh, of the Brookings Institution. Dr Wolman held that in raising hourly wages above price increases and in increasing minimum wages the N.R.A. had fulfilled its purpose. He ripheld the N.R.A. against the attacks of those who alleged that minimum wages tended to become the maximum under the codes, and pointed ou.t that weekly, average hours had fallen eleven to fifteen hours as a-result of the codes. LABOUR LAWS. In other sections, Labour and the codes was discussed by speakers, among whom were Lloyd K. Garrison, former chairman of the National Labour Relations Board. Dr Garrison, dean of the Wisconsin Law School, declared that section 7a could never be thoroughly enforced under the existing administrative machinery, as the powers of the Labour Board were inadequate for the proper discharge of its responsibilities. He favoured Congressional action along the lines of the Wagner Trade Disputes Bill, further implementing the Labour Board with increased powers, and also favoured haying majority rule in industry enacted into law. He thought section 7a needed no clarification.

Professor Irving Fisher, of Yale University, classed the New Deal as “ full of contradictions.” In advancing arguments for inflation, he said that the most outstanding contradiction of the New Deal “ seems to grow out of confusion between two opposite sorts of price raising.” “We may raise prices by making goods scarce or by making money abundant,” he said. “ Ihe first way is followed when cotton fields are ploughed up, wheat acreage limited, pigs slaughtered to reduce the food to be made of them, business paid to induce people not to produce. All of and like measures reduce the natW :1 income, for that income consists o\. aese very goods, bread from .wheat, pd i from hogs, clothes from cotton, ad so on. Our income is our ‘ daily b| id,’ ‘our bread and butter ’ —and w| cannot get more of this real income by producing less of the elements of w!j :h it consists. j SOME CLASSES INJURED. 1 Such a New Deal is a raw deal, ho! ever good the intentions and howevij it may relieve certain classes at thj expense of other classes. But putting'more money into circulation to replace the 9,000,000.0Q0d0l of checking deposits destroyed in thp banks raises prices in a totally opposite way, for it leads to more production, not less. Wherever such correct monetary policies have been tried—in England, Canada, and Australia—other sterling countries, the Argentine and Japan profit, and so production and employment have increased. There is more, not less, daily bread, more bread and butter and clothing. The administration’s monetary New Deal is a square deal.” It was Professor J. W. Angcll, of Columbia University, who questioned the soundness of the public works policy of “ priming the pump ” in an address before the American Economic Association meeting. Even immediate gains had been loss than students of the problem expected, he said. In order to carry the costs of relief, recovery, and the New Deal in general, be said, the nation was mortgaging the future very heavily. “ We are altering the character of our currency and banking systems in ways that seem to me to bo open to serious question, and we certainly are running the risk of severe future inflation with all the violent fluctuations in prices and income and all the social injustices which severe inflation entails,” he asserted. FEARS EFFECTS IN THE FUTURE. “ It will be the task of future generations to decide whether the real benefits which Ave may receive from these steps have justified the costs _ and dangers incurred. I hope the future decision on our actions will not be adverse, but I do not look forward to it with confidence.” After saying he entertained grave misgivings concerning the “ pump priming ” results, he asserted that ultimately this policy could he successful only so far as private business Avns thereby induced to increase its own activity.

“ But the rising public debt and Governmental inflation, which the process of pump priming almost inevitably .carries with it, are precisely the factors best calculated to destroy private

confidence and to discourage private business recovery,” he continued. “ Until the Administration gives some assurance that it will keep the currency substantially stable over a time, that it will really endeavour to keep the total Budget balanced, except in so far as genuine relief needs necessitate further borrowing, 1 do not see how substantial and sustained recovery of general business can be reasonably hoped for.” WARNING ON UNBALANCED BUDGET. Before the' same session, Professor Fred. K. Fairchild, of Yalo University, spoke of the “staggering” national debt increase of the last four and a-half years, and Avarned that “an unbalanced Budget is a continued threat.” “ A permanent national deficit has never been regarded AA T ith favour in this country,” said Professor Fairchild. “ Only in time of Avar have Ave con•sented to deficit financing, and even then Ave have been uncomfortable about it.”

In an address, Dr Frederick C. Mills, president of the American Statistical Association, pointed out that “ whether we like it or not the working of our social and economic systems will depend; in increasing degree, upon the efficiency of technical bureaus of the Federal Government. “ In the face of this situation and of needs more acute than ever in our past for properly-qualified public servants, wo find current conditions marked by some highly disturbing features,” said Dr Mills.

“ Trained men are finding a place, it is gratifying to note, in the technical organisations of the Central Government. But this favourable movement ou the one flank is balanced, perhaps overbalanced, by a reverse movement on the other flank. The traditions of the spoils system have received a new impetus and ucav sanctions in recent months.

“ The ship of the New Deal is not mannned exclusively by Galahads. Political considerations control a great mass of appoitments. Under fair skies this might be tolerated. It is a form of social suicide to-day.” PLANNING AND DEMOCRACY. In a paper on the possibility of national planning in a democracy, Dr Lewis Lorwiu, of the Brookings Institution, of Washington, touched on the same note in dealing with the need for trained public servants. He suggested the establishment of a national training school for that purpose, and indicated his belief that a beginning already had been made in that direction by the N.R.A. Training School for executives.

Dr Lorwin maintained that democracy and planning were comptaible and ridiculed those who identified planning with! “ regimentation.”

“ The critics of planning,” he said, “ refuse to see that, as a result of technological _ processes, regimentation already exists on a large scale for the majority of the people under our present system of presumed economic freedom. The masses of workers in factory, mill, arid mine are regimented to a degree unknown to any previous society.

“Of the 49,000,000 people in the United States who carry on the work of the country, at least 35,000,000 are regimented in detail for at least eight hours each working day. Those who are free from regimentation form only a small minority of the people. They are the large owners of industry, the higher groups in the managerial class, some professional groups, and an interdeterminate number of business men who combine in their own persons the functions of entrepreneur and manager.”