“WAGES AND SUBSIDIES”

Otago Daily Times, Issue 26541, 16 August 1947, Page 9

“WAGES AND SUBSIDIES”

Sir,—Your second leading article in today’s issue suggests very clearly how insoluble, within the limits of the existing money order, is the problem of the cost of living. Wages go up, costs go up: prices go up, sooner or later, since prices represent costs plus profit, and if, as your article puts it, " manufacturers are unable to absorb the difference in costs,’’ production ultimately ceases. An effort has been made both here and in Britain, under war conditions, to mask the sequence of cause and effect by the payment of subsidies, i.e., the meeting of the increased costs and prices from two sources, the consumer's pocket and the Government’s. But since under our wonderful money system, the Government is not supposed to have any money except what it can either b'orrow or extract from the people in taxation, the two sources are seen to be one and the same. The taxation involved is said to have become an intolerable burden—or less clearly, the subsidies to “ involve an inintolerable strain on the national economy.” So Mr Nash, following the example of the Labour Government in Britain—Labour Governments seem to be animated by a kind of group soul—proposes to remove some of the subsidies He may or may not remove the taxation. It is almost certain that under some pretext or other most of it will be retained. Then the Arbitration Court will be expected by the wage-earners to order an increase in wages—out of which, of course, the Government will take increased taxation—and the vicious spiral will mount by another degree or so. There is within the present money order no way out. Twenty-four years ago, Douglas told the Canadians that within this system we have only two alternatives—progressive inflation or an unmanageable unemployment problem consequent on slump conditions. Only a slump under our system can bring down the cost of living. Unfortunately it brings down most other things as well. There will be no way out until it is realised that the State is the proper source of money, just as the railway booking office is the proper source of tickeis, and that the main function of Govern-! ment is to see that money is provided in the right amount and the right place to ensure the production and distribution of goods and services to the maximum desired by the people and rendered possible by the use of their economic resources. Subsidies based not on taxation but on the national credit, free of debt, are the Only way to reduce the cost of living and remove from our national economy the ” intolerable strains ” to which it is at present subjected.—l am, etc.. Truth. • Dunedin. August 12.