LABOUR’S TASK

Otago Daily Times, Issue 22743, 2 December 1935, Page 7

LABOUR’S TASK

TO THE EDITOR Sir, —There are scores of highly intelligent men in New Zealand whose prominent business standing gives them practical experience of economics such as no academic university professor possesses. Employers of labour control and direct every department of production and distribution solely by technical knowledge of finance. The financier does not require any personal knowledge of the skill involved in the art of the production of goods, which is performed by the mechanic, tradesman, and other skilled labour. The financier’s function is exclusively concerned with monetary values that have their origin in the cost of production, and these costs arise exclusively from the rate of wages paid to hired labour and the price of material from the start to finish of the goods. Finance in all its branches, when properly understood, is much more than mere money-lending, or the advance of credit by the banks, or the investment of public money in the flotation of companies that represent what is termed public enterprise. Finance in business is the art of controlling and directing the expenditure of money with the view of securing its return without loss, a perfectly legitimate aim in all sound business and one that is necessary' to avoid bankruptcy. It is not a shortage of money that afflicts the financiers. It is the. limitation of purchasing power on the part of the consumer that reacts upon the financial control of enterprise and prevents expansion from absorbing the unemployed. To solve this problem forms the task that confronts the Parliamentary Labour Party, and naturally now, the attention of the whole community will be concentrated upon the plans that are to be adopted. In their very nature they are purely financial tests and are far from simple, because they involve a clear understanding of “ the theory of value,” which has never been satisfactorily explained by any economist living or dead.

The theory of value, scientifically explained, is not a figment of the human mind. It operates in every commercial transaction, both wise and otherwise, in accordance with the mental judgment of the individuals operating it, and imposes obligations upon the contracting parties which, from alteration in external circumstances, may upset calculations however honest and fairly agreed upon. Every employer engaged in the production of commercial commodities requires hired labour irrespective of the nature of the work performed. From this stage value expressed in monetary terms commences. Hence, it becomes perfectly clear that no monetary value cau be correctly established before labour has produced the goods, the cost of which includes the cost of every requisite in production. In this process it becomes absolutely necessary to assess the monetary

value of each individual worker, for the protection of both the employee and employer—and here it will be seen that it is the personal skill of each individual worker that establishes the economic monetary value of his own work, quite independent of the market price obtained for. the product by the promoter. Monetary value is, therefore, seen to arise froin individual skill, but individual skill has its limitations’, and at this stage further monetary increase in wages spells inflation, which manifests itself in a rise of prices, with a corresponding in the purchasing power of money, and this reacts against the means by which an equitable distribution is to be secured. This is the part which Labour leaders have not taken into consideration when, they talk about using the public credit by issuing more money by means of a State Bank. Certainly that is not the method by which either an equitable distribution nor an equitable wage can be established. This part of the problem does not require money for its solution, being purely ,an alteration in the system of assessing monetary values based upon the economic cost of production in order to deteimine the correct price to be paid by the consumer.

These and some other questions will no doubt come to light when a closer examination is made by experts. The problem of the foreign exchanges is also indissolubly part of the problem, and neither expansion of credit nor foreign borrowing can assist in opening up markets for our growing exports. That must be dealt with by totally different means.—l am, etc., W. Sivebtsen. December 1.