NOTES AND COMMENTS

New Zealand Herald, Volume LXX, Issue 21454, 30 March 1933, Page 8

NOTES AND COMMENTS

INDUSTRIAL RESEARCH

For various reasons industrial research is not undertaken in Great Britain to anything liko tho extent that it is in competitor countries such as tho United States of America and Germany, state Professors N. E. Cibbs and Mr. A. J. V. Underwood, of tho London University in a letter to tho Times. In somo instances this neglect of research has been due to an excessive individualism on the part of manufacturers engaged in tho same industry. A further factor lias been the failure of somo research organisations to justify tho expectation of those who established them. Generally they failed either because they were badly conceived or because they were entrusted to workers who, cither by temperament or training, were not suitable for the work. A manufacturer has been known to establish a research laboratory much in the spirit of tho man who mounts a beautiful mascot on the radiator of his car: it looks well, and might bring him luck! Another has regarded his laboratory primarily as a special show place with which to impress visitors or prospective customers. In many cases the failure of a research laboratory to be of real service to industry has been duo to lack of industrial training and outlook in the members of the research staff.

SILVER COINAGE

The Times gives prominence to a letter from Mr. 11. W. A. Detarding, of St. Moritz, on tho subject of silver coinage. "The value of silver," he says," has been reduced artificially simply because tho legitimate demand for tho metal has been artificially curtailed by so many countries ; for instance, Great Britain and Holland have debased their silver coinage from about 900 fine to about 500 and 700 fine respectively, thus reducing tho demand for silver for coinage purposes by about four-ninths and two-ninths respectively of tho quantities which in the past were required, when silver coins were "real" silver coins. This artificial reduction in demand is exactly tho eame diseaso as tho present so-called 'overproduction,' which is simply caused by artificially creating under-consumption. The low price of sliver is largely—if not wholly—responsible for this under-con-sumption, as it has reduced the purchasing power of about 50 per cent of tho world's population, i.e., the inhabitants of British India, China, etc. It has in fact done more than this, in that Japan, having recently adopted tho same standard as China, is now in a position to compete more fiercely than ever for the trade which tho European countries have been accustomed to do with Far Eastern countries; hence the enormously cheap Japanese cotton goods of which Lancashire has felt the effect. Unemployment in England is therefore closely connected with the artificial reduction in silver consumption."

THE REFLATION DOCTRINE "It is, I believe, possible to achieve a rise in the internal price level by monetary management, and I am unshaken in this opinion by the frequent charge that reflation has already been tried and found wanting both in Great Britain and in the United States," said Mr. Reginald McKenna, in his address at the annual meeting of the Midland Bank. " Reflation means the expansion of bank deposits, and therefore of potential purchasing power., to such an extent as will restore the price level to the point at which it stood before the present great slump began." Expanding his statement that the experiment had had only a partial trial in Britain, Mr. McKenna explained that the additional purchasing power arising from an increase in bank deposits " cannot get into use in trade for a considerable time" because its first effect is to create a demand for fixed interest securities, and it is only when the demand creates oppox - - tunity for new issues that the newlycreated money will bo spent in the purchase of materials and the payment of wages, and thus find its way into trade. " The whole process in any circumstances takes time; when the circumstances are unpropitious, the time may be very considerable." The process had been delayed in Britain because the market had been closed against new issues, in support of the conversion scheme, so that the expansive monetary policy in Britain had been no more than half a policy. After reviewing the course of events in the United States, Mr. McKenna concluded that " the pressure of surplus cash has not yet been heavy enough, or sufficiently long in operation, to induce such large purchases of investments as will restore the volume of bank deposits," so that the experiment of reflation "has not been tried at all." BANK DEPOSITS AND PRICES Commenting on these observations, the City editor of the Times remarked that although he supported the return to gold in 1925, Mr. McKenna has long been regarded as an inflationist. For years he has held the view that the price level could bo manipulated in either direction by monetary management, that if credit were expanded commodity prices would rise, trade would bo stimulated, and unemployment reduced..These views are certainly not held by the majority of leading bankers, nor can they bo considered representative of City opinion. The .writer presents a tabulated statement for recont years of deposits in the clearing banks and prices indices. This shows that in 1924 deposits were £1672 millions and the Board of Trade index of wholesale prices was 166.2. In 1925, deposits declined by £10,000,000 and the index fell to 159.1. For five years in succession deposits increased until the total in 1930 was £l,801,0(j0,000; during that period the wholesale price index foil annually to 119.5. In 1931 deposits dropped to £1.760,000,000 and tJle price index to 104.1. in 1932 deposits rose to £1,791,000,000—0n1y £10,000,000 below the record—but the price index fell again to 101.6. However, the Times agrees with Mr. McKenna that the reason why the considerable credit expansion Inst year had signally failed to have any effect on the price level of commodities was that the credit was used not for the purchase of commodities, but for the purchase of securities, the prices of which have risen.