MONEY POLICY

Otago Daily Times, Issue 23334, 28 October 1937, Page 12

MONEY POLICY

MOVEMENT FOR REFORM POSSIBLE NEW PARTY EFFORT TO FORM LEAGUE REVIVAL OF SOCIAL CREDIT iFrom Our Parliamentary Reporter/ WELLINGTON, Oct. 27. Monetary reform, which has been a comparatively quiescent topic for some time after having been a live political issue at the last election, is apparently about to be revived. Efforts are being made, apparently in Auckland, to establish a League for Freedom and Economic Security, which appears to aim at upsetting the anticipated two-party contest at the next general election. Circulars have been sent out by the proposed League for Freedom and Economic Security, signed by Mr A. R. D. Fairbairn as acting secretary of the Provisional Committee and bearing as an address the Post Office box number of the Auckland provincial branch of the New Zealand Farmers' Union. "The text of the circular condemns the present political system and postulates that a member of Parliament should owe allegiance, not to a political party, but to his own constituents. The league, in fact, is described as an " anti-party " organisation. Reformers Disappointed " The question of money reform agitated New Zealand before last election," the circular states. "Money reformers supported the present Government with wild enthusiasm, believing in the apparently earnest protestations of men who now hold Cabinet rank and hoping against hope until the presentation of this last Budget that something would be done with regard to money reform. Even the present programme that is defined by so many as Socialism is merely an extension of the regimentation of the farming industry which the establishment of the Executive Commission of Agriculture initiated and which the original legislation made clear was to be extended to other industries." The circular sets out the objective of the league as "the establishment of a Christian order in which self-government, social justice, and economic security is assured."

Platform of League

The suggested principles embrace the personal responsibility of a member of Parliament to his constituents rather than to a political party; the restoration of currency control to the constitutional authority of the King and Parliament, with full use of the public credit as ascertained by an independent board of statisticians; provision for a reduction of taxation; a cessation of national and local body borrowing, and a gradual extinction of national and local body deb}; the payment of compensated prices in the exporting industries; and the adoption of preferential voting. A questionnaire on the general political situation is attached to the circular, the objective apparently being to ascertain the measure of support which might be received in various electorates by independent candidates advocating complete monetary reform. Douglas Social Credit

It seems that ardent monetary reformers have been roused to action partly by a passage in the booklet written by Mr J. A. Lee, M.P., on " Money Power for the People." One of the most striking quotations from this pamphlet is as follows: Although the Douglas Credit movement withered away almost as rapidly as it had blossomed, nevertheless it can be said finally that the Douglas Credit movement's activities were the corridor through which tens of thousands of voters entered the Labour Party. The Douglas Credit agitation must have a big share of the credit for Labour's success, although the Labour Party is thoroughly Socialist in its policy. Several members of the Labour Party inside the House of Representatives have stated publicly that they would like to see greater use of the public credit in the financing of the Dominion's activities. The latest movement may be calculated to capitalise their restiveness, but with the general election . still 12 months away its prospects of success cannot be accurately determined. "LABOUR'S WAY OUT" MR J. A. LEE'S VIEWS ON FINANCE "No democratic Government has ever advanced so fast or so far in the world of money policy, and certainly no possible alternative Government is likely to go further.*' This statement appears in the author's foreword to a booklet entitled "Money Power for the People," by Mr J. A. Lee, Parliamentary Under-Secretary in Charge of Housing in yie Labour Government. "At the last general election, the Labour Party promised much in regard to monetary reform," Mr Lee writes. " To-day, there is criticism that Labour has achieved little. In this pamphlet will be found the record of what Lrbour has promised and the nature of the magnificent foundation which Labour has established." Mr Lee states that in discussing the future he sets out to express only his own personal opinion, and is " alone responsible for the views expressed, though the views coincide with Labour's promises." Mr Lee says he believes that internal loans —except those held by the Post Office Savings Bank and superannuation funds —should be redeemed with Reserve Bank credit, and not re-issued to the public; that, though there is no immediate likelihood of the power to refuse exchange being used " short of an attempt by gangster finance to raid London funds, a day may arrive when Governments will seek to influence the direction of trade; that at some stage Labour must make credit available to secondary industry, and that, while nothing has yet been done to provide money at lower rates for the farmer and house builder, " maybe reduction of principal is a prelude to a cut in mortgage interest." Douglas Credit Describing the Douglas social credit movement as an agitation which swept New Zealand like a religious revival. Mr Lee states that " while no one could outline any Douglas credit constructive proposals, nearly everyone was able to understand and agree with the Douglas credit movement's criticism of the orthodox financial machine. The very difficulty of understanding Douglas and his algebraic symbols and theorems rendered Conservatives more willing to listen to the Douglas movement's critical and able analysis of capitalistic

finance. Thousands who because of past political hostility found the Labour Party altogether too vulgar an organisation, rallied to the Douglas credit movement which in a few months reached extraordinary proportions, and sold a huge amount of literature. These thousands, after being won to a position of scepticism in regard to capitalist finance, could not rest in the Douglas movement, but started to study the practical and positive proposals of the New Zealand Labour Party. And though the Douglas Credit movement withered away almost as rapidly as it had blossomed, nevertheless it can be said finally that the Douglas Credit movement's activities were the corridor through which tens of thousands of voters entered the Labour Party. Douglas Credit agitation must have a big share of the credit for any Labour success, though the Labour Party is thoroughly Socialist in it? policy." Powers of Reserve Bank After referring to the new powers conferred on the Government by the Reserve Bank of New Zealand Amendment Bill, Mr Lee states that certain of the bank's powers which conform to orthodox practice have been used from the raomen' of the bank's establishment, but the new unorthodox powers are only starting to be used. " For instance," he writes, " the bank is compelled to grant overdraft accommodation to the Dairy Industry Account in such quantity and on such terms as the Government may direct." Referring to the guaranteed price scheme and the methods of financing the purchase of dairy produce for export, Mr Lee says: " The probability is that c, entually the cost for overdraft accommodation to the Dairy Industry Account will be reduced to a figure sufficient to cover bare accountancy costs. Here, then, is a direct transference of money issuing authority under which £6,146,667 has been temporarily issued from the State office instead of from private banking interests. "It can be readily seen that if other primary products were also incorporated within a guaranteed scheme the State-issued overdraft for marketing would swell tremendously to the private banker's disadvantage. On every penny piece of the overdraft issue there is the assurance that credit is being made available for the benefit rf all of the people, and not for the purpose of bringing profits to a few private banking interests." Control of Exchange On the question of ownership and control by the State of sterling exchange, Mr Lee says: "The power to refuse London funds is a necessary power, and allows an opportunity for the bank to be used at a later date for the purpose of a planned economy in New Zealand. . . . While at the present moment the bank is selling exchange freely in the manner of all caoitalistic banking institutions, a day may arrive when Governments will seek to assist New Zealand industry and maybe assist the industry of Great Britain or any country with which New Zealand has an exchange balance, through a more careful scrutiny of the use to which external funds are put. At the present moment the power to refuse exchange is not being utilised, and there appears to be no immediate likelihood of its use, short of an attempt by gangster finance to raid London funds." Underwriting Loan Scrip In a section of the booklet dealing with the underwriting of New Zealand's loan scrip appears the following:— " I believe that the Labour Party 'ooks toward the day when the complete refinancing of loans falling due will be performed by the Central Reserve Bank, and that the bank will not merely act as agent for funds borrowed from private individuals. P' rt of some such action the debt will be .compounded for ever. If there is to be an -■ interest on public finance a Labour Government must secure that interest for the people. Given time, the Reserve Bank must, and will, arrange our finance, or at some future date the capitalist bailiff will liquidate New Zealand's social experiment. "Certainly I want to see the new powers utilised to the maximum. Personally, I should like to see every conversion or new loan underwritten at a rate too low for capitalist subscription. The Future "My own opinion," Mr Lee concludes, " is that as far as possible loans falling due in New Zealand should be taken over in their entirety by the Reserve Bank. There should be no reborrowing from the private lender for State purposes except in regard to the Post Office Savings Bank, where interest ceases at an amount, or of superannuation funds. "We have no desire to expropriate or repudiate. All that we desire is to free the State from future liens on national development. The alternatives are confiscation, which Labour repudiates, or an agreement to condition Labour finance nolicy to Reformism within the private enterprise money system; that is. development of the nation out of loan moneys with interest compounding more rapidly than the service."