NOTES AND COMMENTS.

New Zealand Herald, Volume LXVIII, Issue 20985, 23 September 1931, Page 8

NOTES AND COMMENTS.

HIGH SPENDING A FALLACY. "The situation must be met part way by the bold efforts of Government, but in the main it will be necessary for people to help themselves," said Dr. Albert Shaw, editor of the American Review of Reviews, in a survey of conditions in the United Slates. "There is a limit to the margin of national wealth that can be drawn upon by loans for roadbuilding, rivers and harbours and dozens of other desirable things. Another reason for limiting public expenditure lies in the disturbance of normal conditions of private industry and employment, when Government goes too far in the furnishing of jobs. We merely set up again the kind of dislocation that existed during the war period. Tn many ways we hnve indeed entered upon a new era in our way of living. But we have evidently risked too much upon the relatively untested doctrine that the more everybody spent the more certain must be the continued demand for goods and therefore the assurance of ample employment at high w.-fges." EXPANDING PRIVATE INDUSTRY. The Governments of Australia are engaged in tapering off their loan expenditure on public works, and have already brought it down from £40,000,000 a year three years ago to about £9,000,000 at present. Addressing the Constitutional Association in Sydney, Mr. A. C. Davidson, general manager of the Bank of New South Wales, said the process must be continued until public works expenditure is limited to what local subscriptions from savings will supply, and that is likely to be small in comparison with recent borrowings overseas. "It follows that, in addition to maintaining in employment those workers of whom they have hitherto had need, the private industries of Australia must, as soon as we can organise the expansion, absorb some big part of the hundred thousand for whom we used to find work in public construction gangs and dependent, trades," said Mr. Davidson. "This means, as the Secretariat to the Loan Council on production and employment has already reported, 'a longrange policy designed to put industry and production on a sound business footing.' Every financial proposal or policy must be subordinate to that main aim. The present unemployed are largely, recruited from former construction workers. To quote the Loan Council Secretariat's report: 'They cannot be provided for, except by their own production, and that production needs to be made possible and profitable. No temporary palliatives can meet this position, and we regard the general reconstruction and the long-range policy suggested at the outset of this report as fundamental to recovery.' At the first mention of policy the Secretariat emphatically stated that 'the first aim of the long-range policy must be a reduction of costs of production. Export production at world's prices is the basis of our industrial organisation. We can only continue to compete in the world's market by reducing the costs of export production, which depends largely on the costs of sheltered and protected production. Our primo need is, then, a reduction in costs of all industry and services.' " TRUE PURCHASING POWER. "There i,s much talk of the danger of reducing purchasing power, but I am not sure that those who indulge in it realise tho ultimate source of purchasing power," Mr. Davidson added. "Surely no community can go on indefinitely buying more than it produces. We have kept up such a process for some decades, it is true, by running deeply into debt. And we are still doing so. The financing of theso deficits by bank credits is only consistent with the stability of the Australian pound if the Governments do as they have contracted to do, namely, balance their budgets by June, 1934. Only then will they have reached the position that the British National Government proposes to reach by one leap, of refusing to pay for current and recurring expenditure out of borrowed money. As a people wo have, on paper, a more difficult transition to make than the people of Britain. But we have more untried resources if we care to use thorn. A certain amount of 'new money' is being created to ease the transition. To keep the process sound and consistent with recovery the expenditure of this money must be managed so that it does not impede the reduction of costs and the expansion of all our 'current production' indus-tx-ies. But, never forget, the main task is to restore the ability of Australian production and consumption to cover their costs out of market prices. Whether we organise our economic life under middle-class venturers on individualist lines, or under union secretaries on Communist line_s, wo can only go on consuming what we produce, either for our own use or to exchange for others' goods and services. So there is no evading the problem of living within our national income, and the best citizen is, and always will be, the one who leads, cajoles, or even bullies his fellows into making that income bigger and better. Making two blades of corn grow where one grew before may bo a little out of fashion just now. Then let us invent new commodities and services, as other good Australians have done before us."