STATE CONTROL

Poverty Bay Herald, Volume LXIII, Issue 19099, 21 August 1936, Page 13

STATE CONTROL

POLICY OF LABOUR THREAT TO COMMERCE SAFEGUARDS URGED i Discussing the financial policy of the Government in nil address before the annual meeting of the Dunedin Chamber of Commerce, the lion. W. Downic Stewart expressed the opinion that steps should be taken to provide safeguards against, the dangers arising from State control. “My own view,” he, said, “is that we should try to divorce, commercial and trading activities from political control to the greatest possible extent. It is true that the dominant political opinion runs overwhelmingly the other way at present, and so the Railway Board and similar corporations have, been abolished, but, judging from past history, I feel certain that before long accusations of political favouritism, nepotism and unfair political influence will arise. In fact, I think it is only a question of time until, both Ministers of the Crown and the Public Service would themselves seek to revert to non-political boards as a result of practical experience. RESERVE BANK CHANGES “This leads me to refer to the changes recently made in the constitution of the Reserve Bank,” Mr. Stewart continued. “It is true I hat one of (he functions of such a bank, broadly speaking, is to interpret and give effect to the national credit policy, and this necessitates cooperation with the Government, but unless the bank can pursue a consistent policy unaffected by changes of Government, you may have violent fluctuations between inflation and deflation, according to the changing Ministries. “The experience of the reserve banks in Europe appears to show that, those which were under political dictation were tlie ones which got into serious difficulties. The Minister of Finance says that it is an indictment of every member of the House to suggest that political control is dangerous, as it infers that members' of Parliament, have, not the same integrity as the. people engaged in private enterprise. But that is not. the point at all. It is not a question of integrity. Tt is a question whether political and electoral considerations may not over-ride the soundness of banking principles. “Again, the Minister of Finance lias frequently declared that, while the Now Zealand trading banks were well conducted, his chief objection was that they were run for profit. But that difficulty was expressly guarded against when the Reserve Bank was founded by providing that the profits of the Reserve Bank belonged to the Government. USE OF PUBLIC CREDIT “So far as the use of public credit is concerned,” said Mr. Stewart, “the Minister has stated that what, he is advocating is in line with standard orthodox economics. If so, in that respect, his views conflict with the preelection statements of some of bis colleagues and supporters, it- is right to say that the views he now holds are substantially in accordance with the evidence he gave before the Monetary Committee in 1934. “So far, he appears to have been successful in making the best of both worlds. By that 1 mean that on one hand lie has satisfied his party by his large extension of social services in the way of pensions, etc., and although this may have been rendered possible by rapidly expanding revenue, his followers are not likely to demur merely because these increases have come of orthodox methods. “On the other hand, while business men view with some dismay the increased burdens imposed by the Budget, it is counted to the Minister for righteousness that no violent, change in monetary policy has been launched. .So far, therefore, as the present Budget is concerned, it is gratifying that the Minister hopes to balance his accounts at the end of the year by orthodox means, but ! am sure thu! the Minister will filler oil realise that the graduated land tax is unjust and inequitable. 1 was responsible for the abolition of this in 1931, and J pointed out that the tax was operating with extreme harshness, both on rural and urban lands. It was not based on any principle of ability to pay, and bad been condemned for many years. I hope, therefore, that the Minister will reconsider this proposal.” EXPORT OF CAPITAL In conclusion, Mr. Stewart said lie thought it was probably because of the danger of inflation t,liat the Minister had taken tho power to prohibit the export of capital, for if too much money was issued it would tend to depreciate the value of our currency. Jf the currency threatened to depreciate, people would try to transfer their funds abroad. It would lie regrettable, however, if an embargo on the export of capital became, necessary, because in the past New Zealand had been largely developed by private capital from overseas. If an embargo wore imposed it was reasonably clear that no more capital would come in, lost it might not be able to get out again. 11l fact, the exercise of this and similar powers would tend more and more to isolate New Zealand and make it- possess n. closed financial policy, which was by no means possible or desirable in a nation which lived so largely on export business.