THE OTAGO DAILY TIMES FRIDAY, MAY 12, 1933. "THE MEANS TO PROSPERITY."

Otago Daily Times, Issue 21951, 12 May 1933, Page 8

THE OTAGO DAILY TIMES FRIDAY, MAY 12, 1933. "THE MEANS TO PROSPERITY."

In the course of his inaugural address the Mayor described as " historic for The Times " a statement made by that great journal a few weeks ago which was, he said, "to the effect that immediate capital expenditure to provide work for the unemployed was justified on economic grounds." The Mayor would seem to have read the statement somewhat carelessly. The Times had been publishing, under the heading " The Means to Prosperity," a series of articles by Mr J. M. Keynes in which he recommended the device of a scheme of capital development for the reason that the effect of the series of repercussions that would be set up would be to increase purchasing power and thus to raise prices and create fresh employment. And he particularly recommended this device because, in his opinion, to which a great deal of weight must be given, the coincidence of capital expenditure with a favourable foreign balance would have a peculiarly valuable effect. To a certain extent, as The Times pointed out, Mr Keynes's scheme had been anticipated by the British Government, since its policy, as affirmed by the Chancellor of the Exchequer, was to employ its credit for the promotion of public works and of private enterprise. It is true that «• to this policy The Times accorded its support. " Mr Keynes's main contention, surely irrefutable," it said, "is that the mechanism of prosperity can be set in motion by the action and influence of Governments here and elsewhere, and that a measure of positive action is already within the competence of the British Government." But neither The Times nor Mr Keynes expressed any such view as that "immediate capital expenditure to provide work for the unemployed was justified on economic grounds." They approach the problem from an entirely different angle. The conclusion which they have formed is that there should be a planned capital expenditure that will have the effect of the reabsorption of labour by established industry. Given an expenditure of that description, the distribution of the wages of the freshly employed would lead to the employment of others and tend to the benefit of the State through the additional revenue, direct and indirect, which it would receive. The publication of Mr Keynes's plan has been followed by an interesting discussion at Home which has, as the Spectator observes, brought out the distinction between improvised relief works, the disastrous extravagance of which has been abundantly demonstrated by experience, and the encouragement of normal business enterprise, fostered by a judicious use of Government credit. There are, however, other points about Mr Keynes's scheme that are not to be ignored. Combined international action is, he says, of the essence of policy. In other words, he holds that there is no way by which world prices may be raised except that of increasing capital expenditure throughout the world. And, throughout his articles, he wrote of capital expenditure wholly in the sense of loan expenditure. As the Economist observes, his argument would have made a more powerful appeal if he had avoided the use of the phrase "loan expenditure." When we remember that every child that is born in New Zealand has a millstone hung round its neck in the form of a public debt liability of £lB5, it is important that any capital expenditure undertaken by the State should be confined to undertakings so remunerative in character that they will at least earn interest upon the cost, and this at once excludes from consideration any such so-called national undertakings as railways that could never be operated except at a large annual loss. It is necessary that, where capital expenditure is proposed, it should be limited to sound undertakings. There are large funds available in ' New Zealand for expenditure on capital undertakings once the possessors of them are satisfied that they may be safely invested. As Sir Josiah Stamp said in an address in which he touched upon Mr Keynes's plan, it is necessary to have regard to the psychological factor of confidence.