THE New Zealand Herald AND DAILY SOUTHERN CROSS TUESDAY, JUNE 29, 1937 AVERTING A RELAPSE

New Zealand Herald, Volume LXXIV, Issue 22767, 29 June 1937, Page 8

THE New Zealand Herald AND DAILY SOUTHERN CROSS TUESDAY, JUNE 29, 1937 AVERTING A RELAPSE

Xew Zealand has scarcely yet accustomed herself to renewed prosperity but already has to listen

to warning voices against the return of depression. That raised by Mr. W. R. Crocker, of the International Labour Office, is only one of many, although Mr. Crocker does so, not in the spirit of Jeremiah, but in order to give a lead on how present tendencies may be corrected or their effects be cushioned. He does not say that relapse must inevitably follow recovery, although the fact of the trade cycle is now well established. What he does suggest is that Xew Zealand should heed the lesson of experience—that slump succeeds boom—and act in time so that the worst effects of the economic rhythm may be averted. She should seek to flatten out the

curves of the economic graph—prevent the surge going too high so that the backwash need not be so irresistible. In other words, Xew Zealand is invited to exercise economic discipline and conscious

control. These restraints can best be applied by the Government by restricting public works and borrowing in the meanwhile, reserving financial power to keep the machine running when it gives signs of slackening. As Mr. Crocker puts it, public investments should be saved so that purchasing power may he released in times of stress. These may seem to be counsels of perfection, and yet not so politically impracticable, surely, to a Government that talks much of rationalisation and planning and control, or of spreading purchasing power. It should realise that purchasing power can with benefit be spread over periods, as well as over classes. The policy of "onward and upward with the brakes off" should be scrapped and a steady pace adopted as the best safeguard against a dangerous reaction.

Mr. Crocker mentions public works I particularly, but the average citizen, equally with the politician, will ask how these activities can be curtailed while over 30,000 men are still registered as unemployed. How, also, can economists speak of a boom when so much potential labour power goes unused 1 The same haunting questions are being asked in other countries, and, there as here, part of the answer begins to appear in the development of a shortage of skilled labour. The other parfc of the answer consists in qualifying the unemployed to fill the demand. Relief and most public works are no more than palliatives to be used as stop-gaps until the men can again be placed in normal employment. The trouble is that the Government tends to regard the palliatives a3 permanent and to neglect the constructive task of fitting men to regular jobs. Xow is the time to make progress, but the opportunity is being allowed to slip. Another safeguard against leaner times mentioned by Mr. Crocker is social insurance. Xew Zealand often boasts of leading the world, but in this department she remains one of the most backward countries. Even the United States, the home of "rugged individualism," has enacted and is developing a comprehensive system of social security upon the insurance or contributory principle. Through social insurance many countries are building up huge reservoirs of purchasing power to be released in sickness, old age or unemployment. Instead of the old " feast and famine " routine a cruel and crucifying routine this reservoir tends to feed in time of need. It takes from plenty and stores against famine, thus assuaging two extremes. So conservative a witness as the Westminster Bank Review speaks of "the beneficial economic as well as social results" of social insurance, and asserts that "the comprehensive British system has contributed very greatly to the comparative immunity of Britain from the more serious consequences of economic depression."

It is gratifying to note that the I acting-Prime Minister is actively ! investigating this department of | social and economic reform. Some j such system of national and universal J thrift is needed, because at the j present time the Government is ! placing nothing to reserve. Expenj diture is being kept at the maximum j along with taxation. A large ' reduction in unemployment is | recorded, but relief costs more than I ever before. In many other ways ' emergency measures are being continued in prosperous times, so that I there is nothing left on which to fall back in time of need. Every day j State intervention proceeds further in an attempt to bolster up labour and production at the moment when, if ever, they should be able to stand firmly on their own feet. Now is the time to return to a freer regime, a more natural economic order. If the system that is being pursued is so artificial that it can scarcely be propped up in the present economic summer, nothing will avail to support it against the first blast of winter. In a country that depends so largely on overseas trade, a policy should be pursued aiming at evening out disparities in price levels; not one that tends to preserve artificial standards and exaggerate them. New Zealand may nevertheless reflect that, for all she may do, she cannot escape the implications of her dependence on world markets. Yet she should realise that other nations are conning the lessons of the past to find correctives against the future, to check the ebb that follows the flow. She may help this rational movement by doing her part and at the same time save herself from the full violence of any reaction.