THE INDUSTRIAL PROBLEM.

Otago Daily Times, Issue 21033, 23 May 1930, Page 2

THE INDUSTRIAL PROBLEM.

TO THE EDITOR. Silt.—Sir T. J. Chapman, professor of political economy, Manchester University, lias declared that “ the ground for State action is the failure of competition to insure industrial peace.” This remark w;as expressed more than 2(1 years ago, since when competition has apparently lost none of its effectiveness in maintaining a steady friction between the employers and the wage earners, who both in turn are encircled and controlled by foreign competition, which is the actual and direct economic force that operates upon prices throughout the commercial world. The English school of economic thought has always maintained the importance of competition as a primary factor essential in production where the aim is superiority in quality and price, and every, advanced student has been forced to admit that the definition is a sound and correct one. It therefore sounds strange if the function of competition isto increase quality and price—an aim which everybody desires—for Professor Chapman to declare that the reason for Government action arises from the failure of competition to ensure industrial peace. The statement is obviously incongruous, but other economists have pointed out that the real cause arises from the fact that competition is not perfectly free. This, however, is not a satisfactory explanation, as State action involves a restraining control which necessarily also prevents competition from being free; moreover, as all State regulation so far has failed to secure industrial peace, the actual cause may be said to be one which the economists have failed to lucidly explain, and failed because competition is only one of the important factors controlling production in relation to quality and east, being in turn subject to the influence of international exchange values of doubtful stability. We have therefore two distinctly different aspects of the subject—competition in relation to local production and competition in relation to the foreign exchanges, forming a condition from which there _is no possible escape, plainly indicating that the dominating influence regulating prices of commodities arises from abroad. Now, it is well known that international exchange values the notoriously unstable, which can arise from two causes; (1) Prom excessive supplies; and (2) from inflated currency. Of the two, the latter is by far the most pernicious, and the .actual cause of industrial, strife everywhere. The origin of infistion dates back to the commencement of the use of paper money, which in itself has no intrinsic value, and therefore practically cost nothing to produce, and when issued to excess . possessed no metallic convertibility. This flaw was supPosed to be corrected by the adoption of the Bank Act of 1844, which, however, is overcorUe since by the expansion of “bank credit, which is not subject to legal restraint. and therefore produces similar ettects on a more restricted scale compared with an issue of inconvertible notes. Aow, a feature associated with money is the fact that its value when in circulation is affected by the volume issued in excess of its requirement for the purpose ot effecting an equitable evehange. The value of money always falls in an inverse ratio to the rise in prices, wheih indicates ■to at the denomination of money forms a measure of the monetary exchange value ot all commercial commodities, including of labour. When the general purchasing power of money falls as a result of a general rise in prices the cause can at once be traced to inflation, because there is no cqrresponding production to sustain the rise and no artificial manipulation can sustain fictitious prices for any length of time against the inexorable law' ot value which centres in production. from the foregoing explanation the actual cause of industrial disturbance is therefore seen to arise from currency inflation that had its origin abroad, and nas not checked by local control. Legitimate competition cannot produce an artifacia rise in prices. This is always the result, apart from inflation of restricted supplies, which denote an inactive com petition usually of short duration.—l am. etc ” W. SIVERTSEIf.