AVOIDING A SLUMP

Evening Star, Issue 23093, 20 October 1938, Page 16

AVOIDING A SLUMP

AFTER REARMAMENT VALUE OF PUBLIC WORKS A review of the extent to which public works could lessen the severity of trade slumps was given in the Economics Section of the -British Association by Mr R. F. Bretherton, of Wadham College, Oxford, says the ‘Manchester Guardian.’ He pointed out that purely temporary expedients for reducing unemployment do not provide any real remedy for the trade cycle, and it was by developing such services as housing, road construction, and the building of power stations and the like that the demand for the products of the constructional trades could be stabilised. However, it should be noted that the housing programme had passed its peak, that expenditure on sewerage, water supply, and so on had accompanied the shifting of population outwards from centres of towns and would decrease as that drift showed down, and that the raising of the school-leaving age was responsible for capital expenditure on education and gave only a temporary avenue for public works. Accordingly, it was difficult to see how expenditure by local authorities under the present system of local government finance could be made into a really effective instrument to trade-cycle control unless some new services were started. The financial aspect was important. Public woriks executed by the State might pay for themselves, but the scale for local authorities was far too small and few of them would bo willing to put the extra cost on rates. THE GERMAN SYSTEM. In the same section a paper on Germany’s economic recovery was read by Mr C. W. Guiilebaud, of St. John’s College. After an historical review in which the extraordinary success of public works -on a vast scale was outlined, he turned to Germany’s policy for the immediate future. Her most difficult problems at the present time, he said, would seem to be: (1) The allocation of her resources between alternative uses, and in particular the need, if the standard of living was to be raised, for a larger proportion of productive capacity to be turned into the consumption goods industries; (2) the difficulty of adhering to the policy of stable wages and prices under conditions of full employment; (3) would it be possible for Germany to avoid a very serious slump when rearmament came to an end? (4) Was Germany so much a closed economy that she could insulate herself completely from the effects of an international slump similar to 1930-32?

To the third , point the answer appeared to be in the affirmative, as there were_ vast reserves of public works, csnecially housing, and private investments available in the background. The answer to the fourth question was no. Germany would certainly be affected by such a slump and would suffer a decline of employment in her export industries. WHAT OF THE FUTURE? “ Finally there remains a long-range problem of great ultimate importance: Can Germany maintain a managed economy on her present lines without stifling initiative and creative thought when the momentum that lias been inherited from a freer past has run down? Her leaders are aware of the oeril of bureaucratisation, but it is one that it is easier to diagnose than to avoid.

■“ In conclusion,” Mr Glillebaud went on. “ it may be said that at the present time there are no signs of a pending inflation or breakdown of the economic system, nor is the total volume of indebtedness excessive either in relation to the size of the national income or to its level in other countries." In common with all States, Germany has large economic problems to face in the future, but it would be a serious error to rate low her strength, whether in labour, resources, or intelligence.”