PROSPERITY BY SPENDING

Evening Star, Issue 22797, 4 November 1937, Page 15

PROSPERITY BY SPENDING

A DANGEROUS FALLACY INDUSTRIAL LEADERS ENRICH NATION “ I'lits past year has not been an easy ono. The commercial community has had to face a spate of legislation initiated with the best of intentions, but fraught with grave immediate and still graver potential dangers to the stability and prosperity of the industries, both primary and secondary, upon which the welfare of the people of this country depends,” said Mr M. G. C. M'Oaul in his presidential address to the annual conference of the Associated Chambers of Commerce, which opened at Timaru yesterday. Mr M'Caul, after referring to international trade and world peace, went on to speak of the desire to raise the standard of living of those below a reasonable level. This was to be commended but more harm than good was likely to result if it was accomplished by reducing the standard of living of other sections of the community. “ Moreover, desirable as it may be to raise our standard of living,” he said, “we must be careful not to do so at the expense of security. ' If we adopt a standard of living beyond the .standard of our production we will obviously be living as a nation partly upon capital, and each year we will become weaker financially until a general collapse ensues, with its attendant miseries.” Security and moderate comfort were of more benefit to humanity than a precarious luxury. In particular a standard of living based upon a capacity to borrow could not possibly last. To achieve a permanent improvement in the standard of living they should avoid waste of any kind and learn the necessity of cutting the garment according to the cloth. “ An increasing standard of comfort and culture has been made possible by the accumulation of wealth,” Mr M'Caul continued. “ and it would not be for the good of our social life if present accumulations of wealth were dissipated and future accumulation made impossible. Large numbers of wellmeaning persons, totally ignorant of the nature of the economic function of personal riches, entertain a vague hope that prosperity may be found without the aid of .rich people. The possession of money Is not of so great importance as the use to which it is put, and the main consideration of the /political economist should be the _ best agency through which to secure its most effective use. Money in the possession of the leaders of industry provides a livelihood for those who produce more wealth to the enrichment of the nation. Money absorbed by taxation , flows mainly into unproductive channels, and the nation is the poorer thereby. “ yho accumulation of capital by the natural leaders of industry should be encouraged,” he said, “in order that more and still more people may benefit from their capacity for organisation and management. It is a mistake to suppose that a wealthy captain of industry leads a life of ease and luxury. The law of Nature is not one of equality, but one of infinite variety. Some are designed by Nature to lead and others to follow. It is the unevenness in Nature that makes life possible.” It was often asserted, he said, that prosperity came by spending. This was at best a half-truth, and at worst a dangerous fallacy. Wise spending upon productive enterprises and upon well-directed industry would bring prosperity. It would come in no other way. The opinion appeared to be gaining ground that the standard _of living could be raised by raising prices, hence the cult of the “ guaranteed price,” and the ever-advancing wages of town and country workers. No people could permanently enjoy a standard of living higher than the real value of their production to their fellow man. Loan money or expansion of currency might hide the facts for a while, but they would work out eventually. Better results would follow from the inauguration of a consistent policy aiming at the reduction of the cost of living, thus permitting of a. given wage purchasing a higher standard of Jiving. All those engaged in the production of wealth had to pay tithes or taxes for the support of the non-producers, thus increasing the cost of their product and reducing the standard of living of the producers by the cost of the maintenance of the non-producers. Apart from railway servants and those engaged in some few other public services of a productive nature, Civil servants in the main were non-productive. They did not add to the wealth of the country, and lived upon taxation dr qwn from the revenue-producing section of the population. “ In addition to public servants,” Mr M'Caul continued, “we have acquired a rapidly-growing army of pensioners and other recipients of State aid. As high a proportion as one person _ m every three to four of our population is now directly dependent upon the State for its livelihood. The enormous cost is mainly a charge on—not an addition to—our national income. No one suggests that the old and feeble should not be cared for, but the burden of taxation we are carrying is far beyond this, and there is a grave danger that the time will come when the ranks of those who produce and pay will become so attenuated that the great and everincreasing army of non-producers who receive will find the source of their income dried up.” HIGH TAXATION CHECKS SAVING. A common apology for high .taxation was the theory. that some virtue attached to spending without regard to who performed the spending, why the money was spent, or the return received for the money spent. The accumulated savings of the people were a most desirable form bf capital, because it was new capital available for the promotion of further employment and increased production. Action by the Government that checked the growth of savings and thus robbed industry of the means to expand set a limit to progress. Action by the Government that. reduced the available capital of the nation, whether by excessive taxation or by expenditure of borrowed money, ultimately adversely affected prosperity and reduced the standard of living of the people below the level otherwise attainable. “If we wish .permanent]v to raise the standard of living of the. hulk of the people,” he concluded, “ it cannot ho done by the dissipation of wealth, hut must be attempted by the conservation of wealth and by economy in its use.”