THE OTAGO DAILY TIMES WEDNESDAY, August 19, 1936. PROBLEMS OF GOVERNMENT

Otago Daily Times, Issue 22963, 19 August 1936, Page 8

THE OTAGO DAILY TIMES WEDNESDAY, August 19, 1936. PROBLEMS OF GOVERNMENT

In an address delivered last evening to the Dunedin Chamber of Commerce Mr Downie Stewart examined, lucidly and with characteristic tolerance, some of the intricate problems implicit in the financial policy of the Government, as revealed in the Budget and in subsequent Ministerial utterances. We use the word “ tolerance ” because it has never been the habit of Mr Stewart to criticise merely for the sake of being critical. His authority to discuss the intricacies of Governmental finance has to be admitted, the more so in his case because to a lifetime of study of political and economic questions has been added experience as Minister of Finance during perhaps the most trying period of post-war economic uncer tainty. Mr Stewart is not only familiar with the peculiar difficulties now confronting Mr Nash, but his interest in them is also undeniably sympathetic. He approves freely, where he is able, of the lines which the present Minister of Finance proposes to follow, he notes with satisfaction the Minister’s general leaning towards financial orthodoxy, and he expresses grave doubts, as might be expected from one whose political thought is, in the main, conservatively inclined, when there appears to be an undue tendency towards experimentation Mr Stewart’s address is one that should be read with care, for he is genuinely informative even while he confesses, in the words of an English cleric, to the difficulty of steering “ between platitudes on the one side and party politics on the other.” A special value is given to his reasoned and moderately-phrased comment on the purely financial aspects of the Budget when it is remembered that discussion of that deliverance in the House of Representatives—where it should have

been examined critically and at length—was in fact fortuitously curtailed. Mr Stewart remarks on what he regards as the most marked change in public policy “ both in New Zealand and elsewhere ” —the vast expansion of State intervention and Government control in the economic sphere. The phenomenon is certainly not likely to have escaped notice in New Zealand, Mr Stewart rightly emphasises the universality of the demand for State planning, and the consequent importance of distinguishing precisely between “ State control ” on the one hand and “ Socialism ” on the other. The distinction is important if there is to be a proper understanding of the aims of the present Government. Mr Stewart postulates that so long as the means of production remain in the hands of private capital, and the State’s function is to assist or to provide such services as have not attracted private capital, the term “ Socialism ” does not strictly apply He apparently does not care to suggest just where the Government stands in this respect. What he does suggest is that, since State policies appear to be dominated by the idea of control, as distinct from ownership, the urgent need is to provide safeguards against the dangers arising from that conception of government. He has no doubts about the unwisdom of carrying the doctrine of Ministerial responsibility to an extreme, and he believes —as is likely to be generally accepted—that experience will point to the desirability of restoring certain important administrative functions to nonpolitical control. What Mr Stewart has to say about Government ownership of the Reserve Bank has been said many times, but need lose none of its force by repetition. He is nervous about the possible consequences of political dictation. European experience, he declares, has been that rigid political control intensified the difficulties of the banks so governed. No question of the integrity of members of Parliament as opposed to that of private individuals is raised. It is a question “whether political and electoral considerations may not over-ride soundness of banking principles.” Political expediency may exert a powerful pull when the means are at hand to permit of that happening. There is an effective answer, too, to another point of Ministerial criticism —that the trading banks are run for profit—in the statement that the profits of the Reserve Bank as originally constituted, over and above the amount absorbed in the payment of a statutory dividend on privately-owned shares, were to accrue to the State. Mr Stewart is concerned also with the powers taken by the Government to borrow from the bank, and he emphasises the need for caution in exercising those powers, although he is obviously inclined to place considerable reliance on the discretion of the Minister of Finance in availing himself of his unusual privileges in that respect. Mr Stewart’s warning on the tendency of rising prices and costs to cause an increase in imports is timely, as the local manufacturer is assuredly entitled to expect that his only market shall not be swamped by importations encouraged by social legislation in the Dominion. The comment that was offered on the probable effect of an embargo on the removal of capital for investment overseas is also to be heeded. New Zealand, it is pointed out, owes much to the employment of foreign capital in development schemes. Mr Stewart’s argument is that if an export embargo were imposed, overseas investors, having no wish to see their money indefinitely tied up here, would be compelled to look elsewhere than this country for profitable investment. A proposal to isolate the Dominion, and, as Mr Stewart puts it, to “ make it possess a closed financial policy which is by no means possible or desirable in a nation which lives so largely on export business,” is not to be regarded as in the national interest.