Economists Cannot Agree

Northern Advocate, 30 December 1938, Page 3

Economists Cannot Agree

Economists have crossed swords in the correspondence columns of “The Times” recently on the subject of monetary policy and borrowing by Governments. Mr R. F. Harrod, of Christ Church. Oxford, advocates expenditure on defence as a remedy for trade decline. “It so happens,” he says, “that the coincidence of two things evil in themselves, trade recession apd the necessity of extra defence expenditure, may work together to make a good-better employment and a higher level of production of useful things than would otherwise occur in our imperfect world.

His Suggestion. .

“X suggest that the Chancellor of the Exchequer should get authority to inform the Minister for Co-ordina-tion of Defence that provided that our equipment is increased beyond the present plan in full proportion to the increased expenditure, he would not in the least mind seeing our expenditure on defence in 1938-39 double thal of 1937-38. ' “I state this large figure advisedly. The more modest increase that has occurred during the last year has been insufficient to remedy the depression, and this would be expected by the statistically minded. The Chancellor will need to have the courage to brush aside/the advice of old-fash-ioned economists, into whose souls the facts' of the trade cycle have not bitten. Danger From Borrowing. Referring to the “danger” that comes from “the views concerning Government borrowing which still circulate in influential quarters,” Mr Harrod continues: — “This being the recession phase, it is important that most of the new money should be found by loans. At a later stage, when recession turns to revival and revival to prosperity, higher taxation may be required to curb a general tendency to excess profits.

“Now the influential quarters just mentioned may deem the loans unhealthy, and by their influence weaken Government credit. It is desirable ‘ that this view should be combated by the propagation from the highest quarters to the two truths:— “G) That in a rich community, with insufficient opportunities for capital outlay, it is healthy that the National Debt should grow, for otherwise the savings of the community, lacking vent, will cause deficient purchasing power and unemployment; and, (2) that the increase in the National Debt should best be concentrated in those years, the present, when the trade cycle is in its descendant phase.’’