COMMON GOOD

Otago Daily Times, Issue 22630, 23 July 1935, Page 5

COMMON GOOD

RETURN TO PROSPERITY INTERNAL READJUSTMENT POSSIBLE STABLE CURRENCY VALUES NEEDED Financial problems facing New Zealand at the present time were reviewed by Sir James Grose, general manager of the National Bank of New Zealand, in an address to the annual meeting of the Dunedin Chamber of Commerce last night. Sir James emphasised that although the difficulties that were being encountered were international rather than local, he believed that much could be accomplished internally towards the ultimate aim of securing a return of prosperity. Business in New Zealand had improved to a more normal and healthy condition than that which characterised it during the deep depression years of 1931 and 1932, said Sir James in his opening remarks. Following on the comparatively good returns from wool production in the 1933-34 season—more than double those of 1932-33 —wool prices during the present season had been disappointing, but it had been cheering to note the improving tendency at latest sales. Regarding dairy produce, prices had ruled throughout the past year at very low levels, but here also there had been atf appreciable increase in the price for butter recently, although cheese remained dull, and this was in part at. least probably due to the milk marketing 1 scheme. in England under which there had been an increase in cheese manufactured there. Regarding meat exports, it had been indeed gratifying to learn during the past week of the very satisfactory agreement reached in London, and although this arrangement was a temporary one, prospects for a favourable long term agreement now appeared very much brighter. “ Of all th'ia you are fully aware,” Sir James continued, “but I have purposely commented on, the Dominion’s primary products before" mentioning its manufacturing industries, wholesale andl retail trades. A study of the banking returns, sales tax returns, j and unemployment figures reveals that a definite increase in internal business activity has occurred during the past two years. Nevertheless the large number of men who.remain a charge upon the Unemployment Fund provide a painful reminder that we still have a long way to go before a „ full measure of prosperity is attained, and I am sure that as citizens of Dunedin and as business men your most earnest hope is that the near future will witness such further . improvement in trading conditions, as. will ensure; the complete absorption pf your unemployed fellow citizens into productive occupations. WIDESPREAD PROBLEMS “ The problem which faces us,” he continued, “is to find by what means prosperity is to be obtained. This problem is hot a new one and it is not one peculiar to New Zealand. ,If our country happened to be a self-contained unit, without need for external trade, the problem would be very much simplified. But the economic structure of this Dominion has been built upon the basis of production for export and, to a large extent, importation .for' consumption, with heavy overseas borrowings for development purposes. There are; those who .would have uja beli.eVc that, recovery of ; business prosper|ty^ : 'Can be accomplished; without! regard to conditions in our overseas markets, but I feel safe in stating that, to a very large extent, recovery in New Zealand is dependent upon' recovery in the chief markets of the world. FRANK* DISCUSSION NEEDED “ L do not advocate that New Zealanders, should simply accept the present situation and await developments overseas. I ; firmly believe that much can be accomplished internally, and for that matter I believe much has been so accomplished. The major problems are not local in character; rather are they national and international, and therefore the duty of dealing with these problems has devolved. largely upon the Government of, the day. Our politicians are therefore called upon to deal, with problems, which touch at-the very roots of the business land social life of. the Dominion, and'l firmly believe it is the duty of the business men of this Dominion, represented so largely by chambers such' as your own, to study carefully every-subject which affects the welfare and prosperity of the country, and to give the benefit of their studies and experience to the politicians of_ the day. In making this statement I do not intend to belittle the ability of our politiciaris "to deal with the questions which arise, but I do say that a more frank and full discussion of current problems and legislative proposals would redound to the ultimate benefit* of the Dominion as a whole. I believe that a small committee of, say, five leading men, well representative of business generally, with whom the authorities could consult, would be of advantage to the Dominion. I am aware that your chambers are not organised to secure petty business advantages for individuals. This implies a broad outlook and ability to see the other man’s point of view, and the aim of every responsible body of citizens in these uncertain times should be the maximum benefit for the.maximum number. This aim may-appear rather altruistic, but its attainment would result in that fuller measure of prosperity which we are all seeking. : f ,

EVILS OF ECONOMIC NATIONALISM

“ If the world depression is to be overcome, a fuller and freer development of international trade is essential, and this requires the nations of the world to jettison that policy which has been so generally adopted in recent years—economic nationalism'. The desire to protect an industry is readly understandable, but that protection almost invariably creates an artificial state of affairs and directly affects the interests of another nation, which in turn takes steps to protect itself. The result is repercussions in other countries, and so the vicious circle is commenced. Embargoes, quotas, levies, tariff increases and subsidies are some of the methods by which nations have sought to protect themse|ves, and the net result has been stagnation in International trade.

“ The wonderful progress made by New Zealand during the past 50 years has been achieved,” continued Sir James, largely through free entry of her produce to British markets. Britain has not escaped this malady of * economic nationalism’ and the threatened restrictions on the free entry of products which this Dominion has so long enjoyed are a direct result of this disastrous policy of self-sufficiency. When international trade was comparatively free and unfettered the world was more prosperous than it is now, and and I have no hesitation in saying that free and extensive international competition, with each nation selling to others that which it is best able to produce, is more likely to result in world prosperity than is perseverance with the policy of self-suffi-ciency, which involves State interference in business and the repression of healthy business enterprise.

“Although criticisms of this trend towards economic nationalism have been widespread for quite a period of time, up to the present very little has been accomplished in the direction of getting out of the difficulties created by this vicious circle to which I have referred, the difficulty being that, although eventual benefits appear certain if general abandonment of the policy is secured, any one nation taking the preliminary step would seem certain to bring on itself at least a temporary disadvantage. Nevertheless among certain nations we find fresh trade agreements being entered into which involve at least some modification of the policy of complete selfsufficiency, and it seems probable that further progress towards recovery of international trade is likely to be effected along thete lines.” CURRENCY STABILISATION Turning from that aspect of the present position. Sir James mentioned briefly another line of thought which had been given much prominence in recent months —the problem of currency stabilisation. Within recent years the people of New Zealand bad bad experience of wide fluctuation in the value of their own currency in terms of sterling and other currencies, and business men had a full appreciation of the confusion and uncertainty resulting from shifting currency values. He quoted an extract from a report which had recently come to his notice, emphasising the necessity for stability in international exchanges:—“ Of all disturbing changes, widely fluctuating currencies are perhaps the worst, because they affect not merely payments . . . but prospects, for no amount of ingenuity will make, clear which prospects are reasonably assured, at a time when constant changes are going on. If currencies were stable in terms of each other or if—to take another alternative —they varied exactly in proportion to real changes going on within countries, the position would bo a known one.. When this does not happen a slowing down of trade is the inevitable result.”

The period of the depression had witnessed the competitive depreciation of currencies, with temporary and sometimes illusory benefits to one country being quickly ‘ wiped out by a similar action in another country, until a stage had been reached where confidence in currency units had been largely lost. It was therefore cheering to note the prominence which was now being given to the problem of currency stabilisation, and he believed that this was one direction in which substantial progress would yet be made in solving the immense problem of lost prosperity. He had an appreciation of the difficulties to be overcome in reaching an international agreement on any matter, and was, therefore not prepared to hazard a guess as to the basis upon which leading nations of the world would bo prepared to discuss an international currency agreement, but he thought the nations were coming to a realisation of the benefits likely to accrue from such agreement and therefore there was justification for more than a little hope in that direction. LINK WITH BRITAIN ’* I have spoken at some length regarding matters which may appear .to be the concern of the Motherland rather than New Zealand,” said Sir James, “but I fee) that the solution of our difficulties will be very closely linked with the future trade and monetary policy of Great Britain and that therefore one must, to some, extent at least, view matters from an, international standpoint. Turning, however, to efforts which are being made internally to Improve the present condition of affairs, we find very great activity in the direction of alleviating the burdens of the borrower, both by way of lower interest rates and by way of adjustment and writing down of capital indebtedness. “In the main,” he concluded, “the member of the community who will receive., the. greatest benefit from these efforts is the primary producer, and; as primary production is the foundation of the Dominion’s economic life its preservation is a matter of utmost importance. Relief has, of course, been given to private borrowers of all classes through the sharp fall in interest rates, and the present period of abnormally cheap money is no doubt lubricating the wheels of industry ■to some extent and easing the position of many long-term borrowers. With regard to the legislative interference in private money contracts with a view to the reduction and cancellation of de"bt, my experience has been that the majority of lenders have appreciated the difficulties with which borrowers have been faced during the past few years iand have dealt sympathetically with their debtors in negotiations for readjustment of commitments. In many cases they have written down principal, greatly reduced interest, and even waived it altogether for substantial periods. Therefore it would seem very doubtful whether legislative interference in this direction will facilitate the adjustments which are so desirable, and which I feel would be more satisfactorily achieved by friendly consultation and agreement between the parties concerned. Certain it is that if repudiation of honourable obligations is to be encouraged, a disservice will be rendered the pastoral and agricultural sections of the community and rural mortgages will be rendered an unattractive field of investment for private investors.”