THE New Zealand Herald AND DAILY SOUTHERN CROSS. TUESDAY, MARCH 30, 1926. LOANS AND OBJECTIVES.
A reminder that the Minister of Finance has authority to borrow £-1,000,000 for public works, and that, in the ordinary course, he should soon set about raising the money, inspires certain reflections about expenditure and policy in this department of State activity. To the exclusively financial side of the operation—-the suitability of time and conditions for profitable application to the London money market —there attaches a keen if technical interest, but there is a wider significance in the question of those purposes to which the funds will be applied. The indictment of a borrowing policy simply by citation of the gross public debt, with recent accretions, is a .popular because easy way of attacking the Government; it always is, whatever Government may be in power. Actually it is quite valueless, because no true estimate can be made unless due weight is given to the way the money is spent and the return which can reasonably be expected from its outlay. A private corporation is not accused of extravagance or recklessness for raising fresh capital if it is to be applied to the legitimate expansion of a profitable business. , If the new money adds to the volume of output, reduces the cost of production or helps in any other way to increase the prosperity of the enterprise, no shareholder questions the addition to capital commitments. The same test can reasonably be applied to State borrowing, especially for public works. The true criterion is: Will production be increased, directly or indirectly? The apparent accession of prosperity coEiing immediately from distribution of the money is not enough. It is the final result which counts.
For the reasons cited the purposes of the loan which may soon be raised are more important than the question of placing it on the market. The objectives have not been clearly defined. A number have been suggested unofficially, the list including almost all the activities governed by the Public Works Department. The possibility of goldfields development and irrigation receiving special attention is advanced. Isolated and considered separately each of these things may be capable of endorsement, but to do this is to destroy the true perspective. There is a limit to the amount of money which can be spent on the whole of the enterprises named. Consequently each is competing with the other for attention. In these circumstances the soundest procedure surely is to institute a system of classification by which the urgency of each and its possibilities of profitable return are carefully balanced against those of every other. The process will be recognised at once. It is that applied by the present Prime Minister with excellent results to railway construction. Before his time funds and energy were dissipated in the effort to complete a large number of works simultaneously. Mr. Coates recognised the waste and delay entailed. He substituted a system of classification and concentration. So completely has it proved its worth that its wider application to the whole field of public works would be a logical and commendable move. The basic principle is very simple. It is to devote loan money directly to the works which will increase production, not merely to those demanded | by a particular locality or by any one section of the people. The application must come from careful comparison and rigid classification. To adopt Mr, Coates' policy of classification to the whole field of public works is a natural, almost an obvious, extension from the one section railway /construction. Actually and logically there is no reason why it should end with public works. Irrigation, for instance, is an enterprise handled by that department. Swamp drainage, the converse process carried on with the identical object of increasing production, is an activity of the liands Department. They come under different authorities, but the money absorbed by them is originally raised and disbursed by the Treasury. Therefore they are in competition for allocations from the public funds, whether obtained by borrowing or derived from any other source. There may be a loan ear-marked for public works, but it makes inroads on the State's reserves of credit and affects the possibility of borrowing for any other developmental purpose. Irri gation and drainage afford but one example showing that all the enter prises absorbing State capital, designed to increase production, could with very great advantage be analysed, compared, classified and arranged in order of urgency and profile making potentialities. Ther* are in addition to the two mentioned Buch ■schemes as development of the pumice lands and 4he gum lands of the North; resuscitation of land reverting to fern or forest; provision., of access to districts partly developed but retarded by difficulties of transport; assistance to men struggling to become producers but hampered by inadequate finance; all these things are
calling for expenditure, and in each of them the desired end is increased production. The guiding line of policy should be to determine which promises the best result in the shortest time and to give it preference. The fact that lines of departmental activity cross and recross should be no barrier to the application of the principle. All are looking to the same source for money and all should be judged impartially on their merits. In its widest aspects the scheme could not affect the forthcoming loan, which is for public works, but within that limit it could very well be applied in the distribution of the money shortly to be sought on the London market.
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Bibliographic details
New Zealand Herald, Volume LXIII, Issue 19289, 30 March 1926, Page 10
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923THE New Zealand Herald AND DAILY SOUTHERN CROSS. TUESDAY, MARCH 30, 1926. LOANS AND OBJECTIVES. New Zealand Herald, Volume LXIII, Issue 19289, 30 March 1926, Page 10
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