THE New Zealand Herald AND DAILY SOUTHERN CROSS WEDNESDAY, MARCH 7, 1928. UNEMPLOYMENT IN AMERICA.

New Zealand Herald, Volume LXV, Issue 19889, 7 March 1928, Page 10

THE New Zealand Herald AND DAILY SOUTHERN CROSS WEDNESDAY, MARCH 7, 1928. UNEMPLOYMENT IN AMERICA.

It may come as a surprise to some that the United States must be added to the countries suffering from unemployment. Yet such is the fact. Accounting for the Senate's resolution to set up a committee to investigate the question, and for its mover's declaration that unemployment in America has reached very

serious proportions, is an experience not .very different from that known elsewhere. Compared with other countries, America has long been prosperous, its good fortune beginning in the war years and continuing unabated almost up to the present. The national coffers have been full. All the world has heard of "the magnificent Treasury balances," and of successive reductions in taxation. Most of America's industrial and commercial enterprises have enjoyed a prolonged success, and from other countries many envious eyes have been turned thither. But there has been foreseen for some time a check to this even flow. Foreign observers have shared with prominent Americans — economists, bankers and statisticians —a foreboding that it was bound to be arrested. The whole world tends to become a commercial unit, and it has seemed inevitable that the distress known in so many other countries should eventually touch this one hitherto immune. Moreover, the knowledge that business moves in cycles has prompted an expectation that a period of depression would come to it. Nearly eighteen months ago Mr. Coolidge spoke of the burden of the national debt as a "tremendous impediment" and of "heavy sacrifices" being needed for thirty years to remove it. Side by side with his appeal were warnings from American financiers to all forms of private enterprise.

For all these warnings there has been good ground. Notwithstanding America's vaut resources in capital, labour, and skill in organisation, a weakness has been making itself felt. It has been realised that for the indefinite prolonging of prosperity another factor, in addition to materials, men and machines, is necessary. This factor is the means to buy. In an American survey greatly praised by Mr. McKerma, one o£ Britain's most gifted Chancellors of the Exchequer ? the situation of late was clearly described: "We do not produce the goods which these marvellous resources would otherwise enable us to produce, because we cannot sell the goods at prices which make continued production possible." In other words, the demand side of the relation that makes business has been weakening. Much has been said in America recently of high wages as a means of making the domestic demand effective. Give these, runs the theory, and you will put money in circulation for the purchase of the goods produced and so keep business going. The Achilles' heel in this pleasant theorem is the fact that an increase of money in circulation means raised prices. The exchange value of the wages paid sinks in direct proportion to their volume. Raised prices, of course, check demand. This is not to argue in favour of low or diminished wages necessarily; it merely shows that there is a serious limit to the beneficial influence of high wages on production, and that the seeming advantage of increasing the purchasing ability of the wage-earner may be quite fictitious.

It has often been shown by commercial statistics that American industry has to rely mainly on the absorbent capacity of the domestic

markets This fact has misled the advocates of the high-wages theory into an excessive enthusiasm for it. It does not follow from the sound argument favouring an adequate wage that the more you pay him the more the wage-earner will spend in channels fostering desirable production. Much depends on the particular avenues he selects for this expenditure. Should he choose badly, the ultimate result may not merely be valueless: it may be positively pernicious. He may devote his means to harmful extravagances ; he may even be incited to excessive and thriftless buying. Some 1926 figures of American sales on the instalment plan indicate that the United States -wage-earner -was acting in this foolish way: these sales reached then the prodigious total of £600,000,000 over and above the payments made. Clearly this meant that the wage-earner was so deeply in debt that his buying ability was largely destroyed. His prospective income was pledged to the payment of these debts. Production has been correspondingly robbed of stimulus by the checking of effective demand, and many workers have had to be dismissed. The unemployment in 1928 is partly the. harvest of that sowing of wild oats. It is apparent that behind the increase of unemployment now deplored are these and other facts calling for serious investigation and heroic remedy.