Candour and Humour Mix With Economics

Manawatu Times, Volume 60, Issue 194, 19 August 1935, Page 8

Candour and Humour Mix With Economics

HARD KNOCKS FOR ADJUSTING ECONOMISTS BARROW-PUSHING BY VESTED INTERESTS Some hard knocks that combined a largo element of both candour and humour wero dealt out by Dr. W. M. Smith, of Palmerston North, when speaking on Friday night at the meeting of the Economic Society. There had been a discussion —a symposium by threo speakers—on the topic of guaranteed prices, and when Dr. Smith rose to open the subsequent discussion lie made a rapid and telling survey of recent economic developments.

“I will not waste time with technicalities —in examining, for example, the effect of a guarantee of Dd per inch upon tho supply curve of sausage casings. I shall confine my remarks to a discussion of the economic environment in which this brat of guaranteed prices has been conceived. In o: r to give some sort of coherence I shall ask, and attempt to answer, three questions: Aro guaranteed prices feasible? Will they tend to minimise the national income? Is this device socially equitable? ‘‘Since Ilatry everything is feasible,” said Dr. Smith. ‘ 'A tactical mistake was made by those advocating guaranteed prices; they should have hired an economist, or what is called an economist, toi furbish up a long-winded argument wherewith to bamboozle the man in the street. But perhaps the party advocating guaranteed prices had not tho means to catch their economist. They could not hold out trips to the Old Country, jobs on commissions or even Jubilee medals. But if anyone calling himself an economist tells you positively that guaranteed prices are beyond the pale of practical politics, don’t believe him. He does not know, any more than I do. Some Australian and New Zealand economists have become exceedingly cocky since they were asked to bring out their meccano toys and show them to tho politicians. It is, indeed, an interesting, perhaps flattering experience. I have had experiences something like that in London on more than one occasion. When I was first caught up in the gravitational system of a statesman, I began to wonder how such a big fool could have become such a big mau. Still it is nice to be asked to show the gentleman how your toys work.

“Some of our economists have unfortunately assumed that they could with safety and” equity play with the economic system as they were accustomed to do with their meccano sets.

“I shall conteut myself with saying that there is no unimpeachable authority for some of the recommendations which some of our economists have made to tho Government. Economics is a study which may yield some broad conclusions as to policy but which can offer no precise results. If I am told that wc have to do tho best with what wo have, I reply that politics is not economics.

On God’s Eight Hand? ‘'For these reasons I object, for example, to the overconfident assertion of Professor Copland, when discussing the recommendations of the Australian committee for robbing Peter to pay Paul, to the effect that a 10 per cent, reduction in read' wages was necessary to complete the scheme. Who told him that was undoubtedly necessary? Do he and the other economists enjoy the inestimable privilege of sitting at the right hand of God? If so, they have made a singularly poor use of their unexampled opportunities. But I imagine that history will merely record of them that they were the principal midwives in attendance at the birth of that moronic monster —authoritarian economic adjustment. They will havo justified the remark of Kari Marx that a political regime tends to throw up the economists it requires—free trade economists, protectionist economists, and now adjusting economists in New Zealand. I regard this departure as most unfortunate from the point of view of academic culture and intellectual integrity. In my judgment these economists have forfeited their right to teach and examine, so partial havo they been.

In Case of Crisis “Tho relevance of this is that any plan for authoritarian distribution of wealth is feasible, so long as the authorities are powerful enough to enforce it and so long as it does not lead to revolution. For example, if we have what is called a political crisis at the end of this year it may bo made amisdomcanour to , say or do or write anything against guaranteed prices.

Cars or Aeroplanes “Will it maximise the national income? Guaranteed prices are mcrciy another form of subsidy. For fivo years we have had subsidy upon subsidy, and the principal result has been to assist in maintaining the rural debt structure, to confer benefits on many farmers who do not require them, and to preserve the existing scale of farm enterprise for the advantage of middlemen. You will have observed that the imports of motor vehicles have trebled between 1933 and 1935. If weget guaranteed prices the debt-ridden farmers will bo better able to meet t-hir obligations, and the well-to-do farmers and the middlemen may bo able to go in for aeroplanes instead of motor-cars. I should hesitate to predict that guaranteed prices, if kept within any reasonable limits, would lead to inflation. The money rvould not go into tho right pockets. "In any case, ivo will have to faco a relative decline in agriculture. There can bo no stability in agriculture unless we concentrate on our nearer and better areas and cease to follow the costly policy of uneconomic subsidy to the more remote. I believe that in the world as a whole, and having regard especially to population tendencies, the expansionist phase of agriculture is over. Bootstrap Economics “Is it equitable? I do not think so. Tho farmer has no more right to security than anyono else. We hear a lot of bootstrap economics in-'New Zealand on this point. We are toid that farming is an important, industry; that

we must make it prosperous so that we may all be prosperous. It is assumed that agriculture is the determining factor; but that of course is not true. Even in normal times world agriculture does not purchase a sufficiency of manufactured goods to affect industry decisively. If making agriculture prosperous by subsidies is possible, all we have to do in order to achieve infinite prosperity is to make every farmer a millionaire and everybody a farmer.

“If I went to a farmer and told him, wliat is true, that he had been on the dole for a generation, there would be an uncomfortable interview behind the cowshed. But how illogical we are. A dole will promote the efficiency of agriculture, but it will merely demoralise the unemployed.

“There are cases in which, on paper at any rate, it can be shown that State intervention may promote the national welfare. But in practise things do not always work out as expected. We have to remember that tho intervention is made by what Adam Smith called ‘that insidious and crafty animal vulgarly called a statesman or politician.’ When' tho economic advisers leave tho sanctum, the vested interests go in.

“By a limited use of the moratorium device, by some increase in efficiency, and by bigger and better bankruptcies as and when required, we might have effected a rapid cleansing after 1929. It will bo said that such an adjustment would have been too harsh and that a slower method was needed. But I suggest that "the slower method that has been employed involves a wholly new orientation of economic policy. We have entered a neo-capitalist or semi-Fascist phase in which political power is used to protect predominant producing interests and their middlemen dependents, including financial institutions. “Those who imagine we can draw back from that and restore the economic system of the pre--1929 age are simply beating the air. We are in grave danger of having fastened upon us a form of economic feudalism with secured high incomes for the few at one end and a dole for the unemployed at the other. If some are entitled to claim security through the State all are equally entitled to do so—and that is Communism. Barrow-Pushing “Our economic system is best considered as the play and interplay of vested interests. On that account we need to be for ever watchful. They are ail busy pushing their several barrows—and not from Auckland to Wellington. In normal times the predominant interests insist on the strict letter of tho law, but when a crisis comes they strike out wildly and even blindly, making breaches in their code which would oneo have horrified them. The present system has resulted from the determination of the predominant interests to secure themselves at any cost. It may be that this is inevitable, yet I would not be certain that the need for watchfulness would be any less in a collectivist economy than in an individual one. Comrade MeLusky, Commissioner of Love in the Union of Socialist Soviet Republics of Aotearoa, might, if he were not watched, keep all the best ‘tarts’ for himself.

Economists —and Their Toys “Where we are heading' I cannot pretend to say. B'ut there is one thing that greatly perturbs me—the relative scarcity of accommodation in our gaols and lunatic asylums. As for the economists, I am happy to say that, their future is assured. I have made exhaustive inquiries, and am glad to be able to report that, despite the undervaluation of the New Zealand pound, the local supply of meccano sets is adequate.’ ’