WINNING THE PEACE

Franklin Times, Volume XXXII, Issue 5, 15 January 1943, Page 4

WINNING THE PEACE

ECONOMIC METHODS STATE CONTROL OR PRIVATE ENTERPRISE “After the war State 'control, private enterprise, individual freedom, and voluntary effort will all be needed, and in any individual case the question to be answered is by what method can the job best be done?” states the Canterbury Chamber of Commerce in an article on the economic bases of post-war reconstruction which it has prepared after consulting with the Department of Economics of Canterbury University College.

“It is getting Ihe job done, whatever it is, as simply, directly, cheaply, and effectively as possible that matters,” states the article. “The method of control adopLed is only a means, an instrument, or a tool, and the common interest of all the people demands that the best method should always be used for the end in view. "The first requirement is peace, and the 'inking of nations in a genuinely co-operative effort to further their common welfare and settle their differences in a manner that will ensure a lasting peace. This involves the removal of many elements in the prewar set-up which accentuated international differences and tended to promote war. Individual Freedom “A second requirement is a greater measure of individual and collective freedom than is possible in wartime. War necessarily brings restrictions on freedom . . . which seriously limit opportunities for work and progress toward desired ends. They shackle activity and effort, and tend to promote both internal and international differences and strife. Genuine peace, both external and internal, must be based on the voluntary co-operation of free and democratic peoples, rather than on the tyranny of servile totalitarian Slates.

“A third requirement is for the higher standards of Jiving wliicdi should be made possible by the tcelinical progress stimulated under war conditions, by the reduction of social, economic, and international barriers, by greater equality of opportunity, and by real co-operation in national and international efforts to increase communal welfare.”

Socialism and Capitalism

Few people would disagree with these general aims, but there was diversify of opinion about the methods of achieving them, The major difference'. particularly in New Zealand, was between the parties who on Hie one band favoured a socialist and on the other hand a capitalist solution of economic problems. But ttiis difference was unreal and retarded progress because it lost sight of the end in disputing about ' the 'means. The real object was to achieve the end in view: the means were of secondary importance, and both socialist and capitalist methods would undoubtedly tie employed. Generally this difference boiled down to State control or private enterprise, but the distinction was by no means clear. In New Zealand, for instance, it was said on the one side that Slate control should continue after the war, and on the other that present controls should be removed. Actually there were some State controls Unit had operated for the last half-century and were likely to be continued under any conditions. There were some controls which were definitely emergency wartime measures and which could not he tolerated once the war was over.

With certain exceptions, no methods yet designed approximated tree competitive enterprise and the free play ot' market prices in securing die most effective distribution of resources and in adapting to changing needs. Over file major part of production, trade, and consumption. Slate control was arbitrary, inequitable. unnecessary, inefficient, and uneconomic. But there were parts of the economic field where State control was both desirable and necessary. The real question was therefore to determine just what part of economic acitvity should be Stale controlled, and what paid left free to operate itself as it would do if freed from control. Control or Freedom

“An important and useful example of the difference in results achieved by Stale control on Ihe one hand, and by automatic adjustments of economic activities under free enterprise on the other, is found in the operation of exchange and import control and llie related rationing of commodifies. Under war conditions, when both imported goods and shipping space are so very scarce that they have to be rationed out. when priority must be given to the most essential goods, when ships must be convoyed, when finances are strained and money must be directed into special channels, much central control is inevitable and it is applied in all countries. But consumers and others suffer heavily in consequence and living standards are seriously reduced thereby. War conditions involve shortage of many goods in the market on the one hand, while excesses of purchasing power are common on the other. The Minister of Supply has recently estimated that the money income available to buy goods in New Zealand at present exceeds the goods available by about-£.1.00,000,000._ On such circumstances, rationing and price control are necessary to secure reasonably equitable distribution of the limited supply of goods. But in peace time, there'should be neither inflation of money nor shortage of goods. tt is the essence of any sound monetary system that the money income should balance the goods. . . . There is then no need whatever for either rationing or price fixing and the general welfare is best promoted by free exchange, free prices, and free markets.

Effects of Restriction

“The effects ot' State interferences restricting trade exchanges were welt seen during I lie last depression. New Zealand farmers found then that prices for their products were greatly reduced, largely, though not wholly, because trade restrictions elsewhere narrowed their markets very greatly. Out of their reduced incomes. New

Zealand farmers and others could buy much less of overseas products, and our imports fell heavily in consequence. But overseas producers, selling so much less to us, could not pay higher prices for our exports. They could not buy from us because we could not buy from them, and a position of stalemate resulted in which both producers and consumers, in New Zealand and overseas, suffered heavily. “The depression was very largely a breakdown in the exchange of goods and services, caused and prolonged to no small extent by the heavy restrictions imposed on such exchanges by Governments. It appeared to be forgotten that international trade is es-entially an exchange from which both parties gain. “Left alone, with or without moderate and stable protection of particular interests, the balance of payments arising from trade can salely be Jolt to care for itself. Any departures from the normal balance will speedily be corrected, as they have been for centuries, without any external control. Internal production and trade follow the same rule. They expand under free conditions, but arc regimented, canalised, restricted, and tend to contract under control. Bureaucratic Control

“Exchange and import control were first imposed in New Zealand towards the end of 1938, nine months before the outbreak of war, and were the direct result of creating in New Zealand more new money than could be covered by existing overseas funds, in order to finance internal expenditure by the Government in excess of its receipts from normal sources. There was immediately an excess of money over goods, and the controls imposed were a form of rationing. The results speedily showed the marked differences between the work of importers, whose business it is to know the requirements of their customers on the one hand, and the sources of supply on the other, and whose efficiency was stimulated by competition, and the achievements of a bureaucratic control which was both ill-in-formed and destructive of competition. “In much interna] marketing and in other war controls, too, however indispensable they be under war conditions. it lias been amply demonstrated that as regards efficiency in doing the job, in encouraging production, facilitating exchange, and getting the goods to the consumer cheaply and effectively, State control falls very far behind unfettered private enterprise.

“So much is. this so, that our own experience suggests the possibility of a decided rise in living standards after the war as the direct result of eliminating unnecessary, inefficient and wasteful controls alone, and permitting resources to be. directed more effectively to the satisfaction of consumers' needs.”