PURCHASING POWER

New Zealand Herald, Volume LXXI, Issue 21698, 13 January 1934, Page 15

PURCHASING POWER

.Sir, —The Mayor of Auckland has given his opinion that an increase in spending power is desirable and all will agree. How is this increase to be achieved? More than one-third of our output is produced for external consumption and must be sold at the prices external markets allow us and the goods we receive in exchange must be purchased at prices that are equally beyond our control. Apart from increasing the volume of our exports we have no power to increase this portion of our purchasing power. How can we regulate the purchasing power of the goods we produce for exchange among ourselves? If two families, forming an island community, exchange one ton of potatoes grown by the one family for one ton of fish caught by the other, the purchasing power of the one family will be one ton of fish, and the purchasing power of the other one ton of potatoes, and whether these goods are valued at one pound, or at a hundred or a million pounds, the purchasing power of the community will remain at one ton of potatoes, plus one ton of fish, without the least response to any manipulation of money values. The purchasing power of any community is the volume of useful things .and services it possesses and has available for exchange, and the money circulated does not affect this volume. Again, our two-family community might allot a portion of its output to certain members as wages for work done, but the amount so allotted could not affect the volume of the community's possessions or purchasing power. In any community the amount paid in wages forms the wageearners' share of the total output and an increase in wage rates can no more increase the purchasing power of a community than an increase in the rations of a ship's crew can increase the supply of food contained in the vessel. These two beliefs that purchasing power can be increased by the simple process of printing additional money, or the equally simple process of raising wage rates, are delusions the propagation of which can help us nothing in our efforts to arrive at sound policy. J. Johnstone. Manurewa.