PROBLEM AFTER PROBLEM

Evening Star, Issue 23726, 6 November 1940, Page 12

PROBLEM AFTER PROBLEM

WAR RURS COUNTER TO BUSINESS ' « ' AN ANALYSIS OF SITUATION “One problem after another arises before us, with implications running counter to business interests,” said Mr W. S. Mac Gibbon in his presidential address to the Associated! Chambers of Commerce to-day. “ Many people arc wondering how far their ‘ saving ’ for the war effort should go. If we go as tar as Britain, for instance, where ‘ every possible useful resource must be taken away from civilian and nou-necessary use and mobilised for war. employment,’what will happen to Nexv Zealand’s peace-time industries and the workers .in those industries? In this country the amount of money available exceeds the Quantity of goods available, which-is a fundamentally dangerous situation. Behind it, as the Chancellor of the Exchequer has pointed out as regards Britain, there is always a danger of rising prices and the development of a rapidly inflationary movement, in which people come to distrust money and try to turn it into goods as soon as they get it, with fatal results as. regards the successful prosecution of the war. ' “In peace time the first object of government should be increased consumption and the welfare of the people. But not in war time. During war consumption must be reduced to essentials. The welfare of the people must take second place to the welfare of the fighting forces, and the provision of fighting equipment. A country cannot fight foxexistence and remain concerned about the comforts and little luxuries of life, especially when the adversary has starved tor years so that ho may have guns. At the. same time the workers must have something to fight for. No family should be forced below tbo subsistence level, oven though relief payments be a strain. On the other hand, thex-e is the consideration that spending may be restricted to the point where men will be thrown out of employment, thus depi-essing business and seriously reducing the amount raised by taxation. Theprimax-y aim of the country should be to expand the output of produce and materials needed for waxpurposes. There is'nothing to be gained by dischargixxg employees, or so curtailing spending as to result in jobs being lost unless men can be absorbed in work which increases oxir essexxtial px-oduc-tion. The; end of all taxation, of. all saving, should bo the expansion of our war effort.

CONSERVING NATIONAL WEALTH. “It has-been pointed out, in a recent issue of the British ‘ Chamber of Commerce Journal.’ that there is some danger of an assumption that it is in itself a good tiling at the present time to destroy any industry not contributing directly to the war effort. If the national wealth and income are to he maintained as far as possible, and our economic strength conserved, the attitude should always be that any selfsupporting trade or industry deserves -to be maintained unless its continuance impairs the national effort. There are only three good reasons for suppressing or limiting any industry. First, it may be using a raw material in short supply, the importation of which by some reason or another presents insuperable difficulties; secondly, the land, machinery, and other capital equipment of the industry may be better employed in war production;'and, thirdly, its labour may be needed elsewhere. For any or all of these reasons the Government might decide to take the serious step of nutting that industry out of business. But onlv such an unavoidable necessity should bo allowed to justify the action. Apart from raw material consideration, if the limitation of home consumption merely means that a factory continues on its normal work, with its normal complement of staff, but with a reduced output, then. there is no advantage to the community—there is an appreciable loss.

ALSO NECESSARY TO SPEND. While it is undoubtedly necessary for individuals to reduce consumption and to save, in order that a larger part of the national income will lx.' available for war, it is also necessary to spend, in order, that production and trade, and the national income dependent on them, may bo maintained at the highest possible level', and that there will bo a higher national income from which savings may be drawn. La war time, total national expenditure by the Government a fid the people combined is likely to increase rather than diminish, and the higher the income can be pushed •without inflation and rising prices, the less will be the sacrifice imposed on the community. But it is ineidtable that in war time the Government should spend more than in peace time, and it is as true in war as in peace that whatever the Government spends the people must pay for. Saving, and the transfer of savings to the Government, reduces individual expenditure, but it does not reduce total expenditure. Rather it transfers the power to spend from the people to the Government, and provides for increased Government expenditure. Since one man’s expenditure is another man’s income, expenditure must bo maintained in order that income may be maintained. But expenditure, whether by Government or individual, should be economical; that is. the money should be spent where it will do most good. And it might be added that the Government needs to enforce, in its town administration of the people’s affairs, the same strict economy which the Government’s demands for tax and

loan money enforce upon the 'people who pay the taxes and provide the loan money. & . BRITISH METHOD. “The course the British Govoriimont is pursuing is to divert the excess of incomes to the State by taxation!, 1 so far as this is practicable, and to secure that‘the public saves a substaxxtial portion of its renxaixxing incoxxxe, to be lent to the State. To what extent should this bo duplicated ixx New. Zealand? Deferment of unessential spending must react adversely on some business turnothers will be increased by higher Governxxxent spending, and over the whole field it must be recognised that purposeful thrift and real economy are essential if a dangerous wartime situation is to be avoided. The question of hoxv far private expenditures shoxdd be curtailed is a difficult one. The line of judicious compromise between waxthrift axxd the ixiainteuaucG of normal economic life of the country (quite apart from political considerations) can obviously not be drawn in New Zealand pracisely where it is drawn in the United Kingdom, which is in the front •battle line. There is, happily, xxo call for ns in this coxixxtry. to make the stupendous sacrifices which arc being willingly and gladly borne by the civilian population of the United Kingdom, but the call for thrift and economy, which means using limited resources in the most effective way, though xxot proportionate, is governed by the same general considerations. Restriction of purchases which require foreign exchange is already operating in New Zealand under the import control machinery. I know how badly importers have * been hit by the progressive restrictions in this connection, but I cannot see what other recommendation the recent National Economic Conference (in which the Associated Chambers participated) could make in the light of war, conditions than the one it did make on this subject —namely, that “it is necessary that the policy of import control should be continued.”

“ We must cut our expenditures, but only in those directions xvhero some good—and no bad—xx-ill result. Wo, as individxxals, may find it hard 1° know where and how to reduce spending. Here xve must Took to the Government for guidance. The Government will itself reduce our individual expenditure by the taxation it imposes. Wo might reduce it further in order to subscribe to xvar loans. But the Government, through its administration and its expenditure, nxxxst stimulate that production which is most useful in present conditions, discourage that which is less useful, and in this xx-ay , transfer resources of both men and materials from uses that are less essential, to those that are more essexxtial. It is only iix this way that true economy can be achieved.”