AS OTHERS SEE US

Greymouth Evening Star, 15 July 1939, Page 3

AS OTHERS SEE US

NEW ZEALAND’S NEW ECONOMY

New Zealand is a country populated i largely by Scots (says a regular writer in the “Christian Science Monitor”). No doubt they took out with them some of the currency which is minted among the heather of Spartan Caledonia and which may be recognised in ! any bank of common sayings. One of I these coins is that you must cut your suit according to your cloth. Whether such commonsense suffered a seachange en route, whether Herbert Spencer’s principle of segregation was ■r at work in turning Scotsmen into New Zealanders, whether the Scots strain couldn’t compete for domination of the Antipodes with other strains — this is a problem for the natural scientists. Anyway, in 1935 New Zealand got tired of the old economics which happened to coincide with Scots common sense, especially in a pioneer community. And the people, feeling that there must be a short cut to the millennium without too much pioneer toil, voted in a Labour Government and a brand-new set of economics. The Old Deal, appropriately, went out with a Forbes. The New Deal came in with a Savage. All went so swimmingly that when Premier Savage stood for re-election in 1938 he had built up quite a sizeable New Deal. Public Works, minimum wages, a 40-houi: week, social legislation. guaranteed prices for farmers—flic entire Scries, and then some, were all: on the statute book. And they seemed 10. be working well. Understandably, therefore, the New Zealanders had come to think of Mr. Savage as a moderii Moses. The road seemed open to a land flowing'with milk and honey. Neverthei less, the New Zealanders wanted to 1 bring the goal nearer, and the candidate. Premier, nothing loath, decided to ! essay a short cut. The short cut was a fresh pension scheme containing so many benefits that even deserted wives were included! Such a prospect dazzled the New Zealanders into returning Mr. Savage to office again with a bumper majority. SAVAGE “MAGIC.” The- Savage magic, of course, had a very mundane explanation. The Dominion thrives- Oh its export surpluses

of dairy produce, frozen meat, and wool. Mr. Savage was fortunate enough to be in office when world prices for them were on the up and up. At one time, in fact, they were so favourable that the Government actually cashed in on the difference between world prices and the prices guaranteed to the farmers. Out of this increased national income the Savage Government was thus able to levy and collect the higher taxes necessary to pay at least some of the New Deal bill. Income, however, didn’t wholly foot it. Capital had been drawn upon out of reserves built up in London. With this money, on top of the taxes out of income, the Government had bought the material necessary for the Savage amenities. This is generally called living off fat. but it was not at first recognised as such in New Zealand, at least at the time of Mr. Savage’s reelection last fall.

Accordingly the Dominion settled back to enjoy the more abundant life. But not for long. Scarcely had the last cheer over the election returns subsided than the hovering storm clouds appeared over the capital at Wellington. World prices had been falling. They didn’t stop falling when Mr. Savage became Premier again. The reserve in London, likewise, had been dropping. And even this didn’t stop dropping after the re-election of Mr. Savage. Last. December, therefore, the Government decided that it could no longer keep up the initial pace of its New Deal.

Its first slowdown took the form of putting New Zealand's foreign trade in a Government strait-jacket. Now Zealanders now cannot change their money into foreign currencies. If they wish lo buy anything abroad they must get the Government’s permission. Exports must go over Government desks. It was a three-ply stroke destined to build up capital again and executed so suddenly that the “London Economist” observed that it ought to put the old hands at totalitarian economics to shame. The step had a significance in that it marked the first breach in the British Commonwealth of libertarianism in international trade. Premier Savage had his own explanation for his departure from what we used to call liberalism. He said that “by insulating Now Zealand from the disturbances in the outside world,” , the Government might reaccumulate I the spent capital. Alas! there’s only I one way to do that, and it is the hard Scottish way. New Zealand must cut

down its suit to even smaller dimensions than ils cloth, so that the sur-

plus can again be segregated. Foreign trade controls won’t solve the difficulty. Sure, they will contribute to retrenchment by denying to New Zealanders that part of their living standards which come from luxuries bought abroad. Likewise there is a contribution contained in the Savage decision to curb the luxury plans for bigger and better public works, and to postpone the ambitious pension legislation promised at the last election. But income must be augmented at the same time that expenses are being cut. New Zealand will have to earn more the better to save. And, in the absence of a world-wide return to higher prices, the way to bigger earnings can come only by the further demobilisation of a New Deal which has hoisted the costs of doing business skyhigh. Only in that way can New Zealand’s export industry be levelled down to a competitive position. Only in that way can the good and practicable be preserved out of the progressive experiment down under.