LABOUR FINANCE

Poverty Bay Herald, Volume LXIII, Issue 19133, 30 September 1936, Page 12

LABOUR FINANCE

CAUSTIC ECONOMIST "DANCER Oh 1 A FIASCO" MR. KEYNES' COMMENT "It seems to me as though the aims of your new Government are partly admirable, but in serious danger oi provin" a fiasco from the excessive mixture of muddled thinking which lies behind them." writes Ihe eminent economist. Mr. J. M. Keynes, at the close of a letter to a New Zealander who lately sent him a collection ol reviews of his hook "The Ceneral Theory of Employment, Interest and -Money, published'in February last. \fter a reference to passages in. tho book dealing with Slate control of mvestment Mr. Keynes writes: "It- IS not unnatural, therefore, that people of different views should dispute as to precisely how socialistic the implications oi' my book should be considered to I.e.

"On the other hand, the, teaching of my book is clearly opposed to the view that a, country's troubles can he solved merely by distributing higher money Wl . s \\\ a i foments ire. chiefly directed against, the opposite view that lower money wages will Mire iho country's economic troubles. But most of tbein are equally applicable to a proposal to increase money wages. "Furthermore, mv book mainly deals with a. closed economic system where foreign trade problems can be ignored, and T only deal with the foreign trade complications in passing. Vet clearly lor such a country as New Zealand foreign trade problems arc in the essence of the matter, and that is a grave obstacle in the way of drawing any simple conclusions as to the ultimate effect of higher money wages. 1. should expect that sooner or later the exchanges would have to bet modified by more or less the same percentage as wages. "As, however, 1 have pointed out on previous occasions, much the same results as those which would lie produced hv exchange depreciation can be achieved by the combination of a tariff on imports' and a subsidy to exports. The technique of "a guaranteed price which you mention in your letter appears to be a method of subsidising exports. Tin l policy of financing this by an overdraft would seem, to be in the nature of a temporary expedient. But I can imagine the new equilibrium being reached on the basis ol higher money wages, a subsidy to exports and a tariff on imports', the principal effect of which would be to diminish tho real incomes of those individuals in the country whose money incomes iu terms of money are not easily changed'."—-Auckland Herald.