"UNBALANCING” THE BUDGET

Hawera Star, Volume LIII, 26 August 1933, Page 11

"UNBALANCING” THE BUDGET

with the “ulnibakUnciing of the Budget” in a recent speech in Glasgow, Sir Josiali Stamp said' ho took the view that economic tendencies a,ml results were at a'H times compounded of two principles, mechanical and psychological. Sometimes these principles ran counter to each other, and o;ne had to be deliberately chosen; i'n precedence to the other. _

In the establishment of the country’s credit at home, and especially abroad, ■there were certain important psychological conventions which could not be defied with impunity, because experience had shown that their non-observ-ance led to great evils. Foreign countries distrusted a currency of a country that was living beyond its- mea'ns and' not balancing its Budget. Their experience was that sooner or later it wais tempted to get up to curremcy manoeuvres or borrowing of an: imfla*tio.narv character.

Hence the importance of satisfying the current world conventions and ideas about soundness. But under certain conditions a balanced Budget might coincide with a thoroughly unbalanced

Queries Raised by Sir Josiah Stamp

condition in the internal economy of a* country. If private enterprise amd confidence were active •they had a state, of affairs in. which, public expenditure ought ito be restricted because it must entrench upon private opportunities and capital. But if five sum l being withdrawn from expenditure on our,rent consumption and put on one aide for investment iu capital expenditure was not, in fact, being fully used for that purpose, a condition! of grave disequilibrium existed, spending power would be. going to waste anid unemployment resulted. If, then, the national amd local authorities began to spend more than they were raising in taxation, i.e., when they we’re borrowing for ichpiltal 1 purposes, they would be making ai meehandeail adjustment between saving and spending which might be o.f great value), because they would be making good the shortage of business and private investment. Hence, by ‘ ‘ unbalancing” their Budgets, they could make a corree.t.iion which might be .mechanically advantageous, though at- the isam-e -time it wo-ukl have psychological risks and need watching.