TAXATION AND UNEMPLOYMENT

Hawera Star, Volume L, 26 August 1930, Page 4

TAXATION AND UNEMPLOYMENT

TWELVE POINTS. (By A.E.M.) 1. Socialffst-Labour speakers indulge in cheap appeals, to tne> galleiry when they declare that unemployment can be cured by increased consumption or spending! 2. The economic need, of the day is not for increased consumption or spending, but for increased saving and reinveistment.

3. The basic fact to he recognised is that more labour cannot be employed unless a certain necessary amount of new capital is available in .advance. 4. Before any labour can be employed, somebody must possess and invest the 'capital required (a) to purchase the plant and materials ,and (b) to pay the' workers’ wages week by week. (Note : The worker must be paid cash down, though it may be many months, or even years, before the finis,hied product can bo sold, and the capitalist can recover the money he has advanced for weekly wages.) 5. Employment is absolutely conditional, then, upon capital being available in advance. No new jobs can be provided unless new capital is available.

6. An increasing population, which means an increasing number of workers Hooking for employment, requires an increasing amount of capital to employ them. If the amount of capital does not increase at the' same rate as the increase, of population, then some of the people are bound to be left unemployed. 7. New capital can be obtained qmly by persons saving, (instead of spending) and re-investing (instead of consuming) part of their income. 8. The great economist, J. M. Keynes, states the position as follows: “To maintain the growing body of workers at the same standard of life as before, we require ... an increasing amount of capital. In order to keep our heads above water, the national capital must grow as fast as the national labour supply.” Another of the world’s leading economists', Sir Josiaih Stamp, says: “It is not a question as to who owns the capital. . . The existence of the capital is the thing that matters for this purpose. ’ ’ Even Mr Phi 11 in Snowden accepted tiffs: principle', and dediared : “Lack of savings is l greatly hindering the trade recovery of Britain. Trade revival is vitally dependent upon capital saving.” (London “Times,” 19th October, 1927).

i 9. The leading British economists estimate that the amount of suing and re-investment needed in Britain is about £700,000,000 a year, tor Australia it is estimated (by Mr J. T. Sutcliffe) that the amount required is about £56.000,000 a year. No detailed calculations seem to have been made yet for New Zealand; but we may be sure that there the amount of saving and re-investment (new capital) needed is at least £15,000,000 a year. 10. Comparatively small portions of this amount are provided by investments in savings banks and premiums on small life insurance policies. But it is evident that the great bu'ik of savings and re-investment must be done — the great bulk of the new capital required each year must be provided by the class which receives incomes of £IOOO a year upwards and especially by the small section enjoying incomes upwards of. say, £3OOO a year. Probably 90 per cent, of all incomes in excess of £3OOO is re-invested every year.

11. Heavy direct taxation on large incomes is likely to reduce not the amount spent,- but the amount saved and re-invested by the super-taxed

class. This in turn must inevitably, by reducing the amount of new capital available, reduce the number of new workers who can be financed into employment. Yet-, with our increase in population, we have about 10,000 more males every year needing to be absorbed in business and industry- So insufficient saving and ,re-investing (a result of excessive taxation or otherwise is bound to cause ever-increasing unemployment. 12. It is easy for demagogues to blond the cold logic of the question by cheap appeals to ignorance, 'prejudice and emotion. lint if they cannot follow this, an abstract argument, at least they should be willing to profit by the experiences of Mr P. Snowden and the Labour Government in Britain. Hie higher they have raised taxation the greater has become the number of nilemployed—until the figure to-day stands at nearly two million, nearly twice as many unemployed as there were when the Labour Government went into office fifteen months ago. Even in New Zealand the number of unemployed •has increased enormously—the number of registered unemployed has increased threefold—since the United-Labour alliance came into power and increased the burden of taxation bv £2,300.000 Ghat is comparing the first' year of United with the last yeair of Reform). Excessive taxation and increasing unemployment- go hand in hand—or, rather. the latter inevitably and invariablv follows the foirmetr.