FIGHTING SLUMPS

Greymouth Evening Star, 19 July 1939, Page 9

FIGHTING SLUMPS

NEW METHODS EMPLOYED

LONDON, May 31.

New methods are being adopted to fight trade depression, according to Mr. J. G. Winant, an American, recently made Director of the International Labour Office. Hi's first report, to be presented to the International Labour Conference at Geneva next week, is available to-day. “Twelve months ago,” he says, “the world found itself in the throes of a depression which threatened to rival and even to surpass in severity that which began in 1929, “In face of curtailments in investment activity and income from foreign trade, many countries were confronted with the prospect of the familiar deflationary spiral, of which they had bitter experience at the beginning of this decade.

“Their reactions in 1938, however, stood out in sharp contrast to traditional depression policy. “In previous depressions, the first symptom of a setback in business was generally an acute credit stringency. This checked investment, leading to unemployment and a cumulative fall in demand.

“The accepted policy for dealing with unemployment was to cut wages, and this often simply accentuated the fall in demand.

“The downward movement was normally accompanied by a wholesale destruction of purchasing power through credit liquidation, and bank failures, which further accelerated the deflationary spiral and reduced economic activity to a small fraction of its potential level.

“It is now widely agreed that whatever the initial cause of a business decline, active steps can be taken to prevent the secondary effects which inevitably followed it under the traditional procedure.

“If consumers’ demand can be maintained by rapidly replacing any decline in private investment by wellprepared public investment, the secondary fall in private investment and further deflation may be checked.

“It is hard to resist the conclusion that the avoidance of a repetition of the 1929-1932 experience, in the past year, was ill part due to the more skilful and active business-cycle policy which most countries pursued.” Mr. Winant writes a warning of serious economic re-employment problems that will arise when re-armament slows up.

“Re-armament,” he says, “cannot continue at the present rate without absorbing so much of the national income of many countries as will prove intolerable. A point may come when defence expenditure will cause actual starvation in the lower income groups. “Some means of absorbing the workers thrown out of employment by the slowing down of armament production will have to be devised.”