MONEY PROBLEM

Southland Times, Issue 22461, 22 December 1934, Page 12

MONEY PROBLEM

FARMERS’ DISCUSSION REPORT BY STUDY CIRCLE MONETARY SYSTEM Some time ago the Southland Executive of the Farmers’ Union appointed a study circle to inquire into the monetary system and submit a report to the executive. At yesterday’s meeting the presentation of the report was followed by a brisk discussion before it was adopted with a resolution to forward copies to the Dominion Executive. The report stated:— “We were appointed some time ago to bring down a report on the economic position which would get down to “tin tacks,” as one prominent member of the executive suggested, and in submitting this report, which has been compiled after reading and studying the opinions of various experts in economics, bankers, business men and of men who are giving much time and thought to the problem of poverty amidst plenty, we wish to point out that it is only possible to more or less summarize, in a somewhat brief manner, the main features of the situation. “When this committee was set up, it was not suggested that the members were to do more than delve into the subject, search for information, and pass that information on for the benefit of other members of the union who have neither the time nor inclination to study the causes why the civilized world is glutted with real wealth and the majority of its people comparatively poor. This, in our humble way we have done, and we find the position so very serious, that we are sure no real improvement in the economic position is possible, until every thinking member of the union becomes alive to the gravity of the question, and to that end we herewith submit our report. Historical Review.

“There is no effect without a cause, so it is necessary to look back into the past to the time when primitive man had to exercise his strength and cunning in his fight for existence against the forces of nature, and we find that as time advanced those forces, by experience and co-operation, were gradually overcome, and the standard of living improved, though progress was slow, and men, women and children had to work long hours for a bare existence. The struggle was against scarcity. Then we come to the industrial revolution and the invention and adoption of power production which made it possible to produce more with less human labour. Populations increased. Industries began to specialize and the population massed round the factories. Raw materials and foodstuffs were imported by the industrial countries and machinery, textiles and other manufactured toods were exported. Commerce grew 'mormously, and before the Great War he fight for markets was keen, every 'ountry desiring to sell more than it bought. “Then came the war of 1914-18. Mil'ions of men were taken from the ranks of producers and makers of manufactured goods and this huge army had to be fed and clothed and transported. Millions of other workers were diverted to the manufacture of war munitions which were destroyed as fast as they could be turned out. The abnormal conditions stimulated invention. More and more production was called for and labour was scarce. Machines were improved to produce more with less labour. Countries cut off from the source of supplies started to manufacture and produce for themselves. After the war, ■ millions of potential workers returned. The intensely improved methods of production in every field of economic activity was accompanied by a decreasing demand for human labour. With the highly improved methods of production countries looking for markets found their one time customers now competitors. Tariff walls were raised to support home industries. Though there was no difficulty about production, there was a partial stoppage of distribution. Spending power was decreased; manufacturers in their efforts to make a profit introduced further improved methods to cut down costs, with less and less labour and less and less spending power. Many Sellers, But Few Buyers. “This is the state of affairs in which we find ourselves to-day: A superabundance of foodstuffs, clothing, housing, etc., and a potential superabundance which is incalcuable, when we take into consideration the millions of unemployed workers, idle machinery, etc. The position is intensified by the fact that all countries are anxious to sell to each other, but will not buy. They are anxious to send out real wealth, but will not take real wealth in return, and we see the wholesale destruction of real wealth taking place and the deliberate restriction of production, when millions of people are Starving for the very things that are being destroyed. This condition of affairs is not natural.

“There is a flaw or flaws in our system. In a leading article of The Times, London, is the following paragraph:— The professed authorities on these questions have expressed many conflicting opinions, and have given such contradictory advice, that the best hope of success seems, indeed, to lie in candid examination of the facts by

men not professing to be experts and consequently unhampered by pre-

conceived theories. “Space forbids our quoting what many prominent men have said on similar lines, but it is a fact that the situation of the world to-day is a challenge to world statemanship which statesmen must take up for themselves and not shift the responsibility to so called experts who differ so fundamentally amongst themselves.

“The purpose of an economic system is to deliver goods and services as they are required, when they are required, and where they are required by members of the community. The objective of an economic system is not the provision of work. The tendency of human progress has been to release men from the necessity to toil. Yet we find that national leaders all over the world are concentrating on the problem of finding work and ignoring the main consideration of making available the abundant supplies of goods and services, when and where they are required. Science and engineering skill is directed towards the elimination of human labour, and we are forced to the conclusion that unemployment will continue to increase. It is reasonable to assume that an unemployed person is without work because we are already producing sufficient without his services, in which case he is poor because there is an abundancy of goods and services available. Or it is also reasonable to assume a man is poor and in want because the available goods and services are insufficient for the satisfaction of his needs, in which case it is difficult to understand why his services are not being utilized to produce more. We therefore have the widespread industrial stagnation, with producers capable of production, and millions in want of the very things that can be produced.

Money. “The link between production and consumption is MONEY, so we now give

consideration to the monetary system. “Money is a man-devised means of replacing the cumbersome method of barter, and has been described as a ticket or token system. If money is to function as an efficient token system to enable goods and services to be exchanged, the monetary system should be so adjusted as to reflect the facts of production and distribution. It the economic system is to provide the community with the goods and services feet the distribution must be regulated by the goods produced. The monetary system has its roots in the ability of the community to furnish itself with goods and services. To function smoothly the quantity of money should always be sufficient to provide purchasing power for the community to have access to the goods and services available. “Money is any ticket, coin or token, which is readily acceptable in return for goods and services. Money in itself is not wealth, and need not be of any intrinsic value, and paper banknotes are to-day legal tender. Much misconception is common in regard to 'money matters, and we wish to emphasize the fact that currency, in the form of bank notes, silver and copper coins, forms only a very small part of the total money of the country. The bulk of money is created by the banks. By granting loans, allowing money to be drawn on overdraft and by purchasing securities, banks literally create money. This form of money is intangible,and consists of figures in bank ledgers, which are transferred from one account to another by means of cheques. To illustrate this fact, a quotation from the Macmillan Committee’s report, para. 74, will be helpful:— It is not unnatural to think of the deposits of a bank as being created by the public through the deposit of cash, representing savings or amounts which for the time being are not required to meet expenditure. But the bulk of the deposits arise out of the action of the banks themselves, for by granting loans, allowing money to be drawn on overdraft or purchasing securities, a bank creates a credit in its books which is the equivalent of a deposit. Indebted to Banking System.

“Without going into too much detail, it is apparent that the bulk of our money consists of intangible financial credits created by the commercial banks and lent to the community, and the community is indebted to the banking system for practically the whole of the money in use. We find there is no indication of the amount of money being dependent on the needs of the productive system to supply the community with goods and services. But rather it seems that an arbitrarily fixed amount of money demands the restriction of production to the quantity of money. Again, we find the control of money is in the hands of private monopoly. We find the following confirmation of this in the Macmillan Committee’s report para. 50:— The Bank of England is ... a private institution . . . independent of any form of legal control save in regard to its powers of issuing bank notes and granting loans to the State. “In the same report, para. 51:— The restrictions, so far as there are restrictions under which the Bank works its operations, are restrictions which the Bank has imposed on itself, and which, of course, it has the

power to alter. “We now come to the consideration of the monetary system in regard to our economic life, and as we find that the bulk of money originates as credit loans from the banks, practically all production must be financed from this source, it is apparent that the producing side of economic life has to pay a toll to the monetary side for the use of money or credit which the money monopoly has the right to issue. It would be .possible to give lengthy illustrations as to how this works out in practice, but for the purposes of this report we do not think it necessary, as the facts are obvious to all who care to give the matter carefull consideration.

“There is one phrase of the situation which cannot be too strongly emphasized, and that is the fact that all industry is dependent on a privately controlled monetary system. The weaker units in the industrial and financial system must become eliminated or absorbed by the stronger units. We see evidence of this going on all over the world, and here in New Zealand. The stronger units become stronger by virtue of their ability to eliminate competitors. Thus a process of centralization develops quite naturally in both industrial and financial fields. “The control of financial policy carries with it the control of economic actixity means control of the welfare of the community. Recommendations. “Our recommendations are, that every member should realize the absolute necessity for him to follow the lead we have given in preparing this report, to learn all he can about money and what it means; about tariffs, restrictions, and quotas, and above all to realize the absolute control the privately owned monetary system has to-day over industry and even governments. Individually and collectively we are in debt to the monetary system, with no possibility of ever being free from debt. With the ever-increasing supply of labour-saving machinery, all talk of solving the economic poverty by finding employment for men is a waste of time. We are satisfied that until the creation of credit or money is brought into line with the increased production of real wealth in the way of goods and services, so that the goods produced and services available can be distributed, the present chaotic condition of affairs must continue. The restriction of production and the destruction of what has been produced in the hope of raising prices is only tending to more and more confusion.

“Whether we like it or not, there has to be more State interference with the economic control of the country, and we are satisfied that until the control of the financial system is taken away from private monopoly, there can be no definite steady progress in the welfare of the people as a whole, but only a continuance of a wealthy minority and a majority which is becoming poorer every day. It is not conceivable that young boys leaving school and growing up in a world of plenty are going to be content with relief work, unemployment camps, shortage of the necessities of life and the luxuries that the science of man has made possible. “This report is brief, but we earnestly _ commend every member of the union to give our findings their careful consideration. We recommend that the report be made the subject of discussions at branch meetings.” The Discussion. Mr J. R, Haigh said he thought a report had never been before a meeting where the members had such an opportunity of study. He did not think in the circumstances that there was any need for him to explain the report at length, A reader would find all over the world that the consensus of opinion was that something had to be done. Until the money question had been solved and until that monopoly of credit had been taken away from the few who used it for the few, nothing could be done. He moved the adoption of the report. Mr W. Couser seconded the motion, saying that he endorsed Mr Haigh’s remarks.

The report was adopted. Mr Arnott said it seemed that they had got themselves into a peculiar position with the report. They had adopted it. Did that mean they supported money reform? It was a result of a remark of his that the report had been brought down. He had asked them to get down to “tin-tacks,” but he could not find

a “tin-tack” in the report. It was a readable, nice report, but until the study circle got down to “tin-tacks" it would get itself and the executive nowhere. Some monetary reformers were losing their influence in other directions. He had been instrumental in having Mr Mclntyre, of Ryal Bush, put on the circle. Mr Mclntyre, in season and out of season, had advocated a State Bank, but since the formation of the circle he had said nothing about It. He was “lost in the uncharted seas of monetary reform.” (Laughter.) Man-Made Slump.

Mr B. Clearwater said Sir William Hunt had declared that the slump was man-made. That was strange coming from a man of standing, but they did not pin themselves to Sir William Hunt or anybody else. There were two great schools of thought: the one that would destroy goods and the other that would expand credit to allow the consumption of all the goods. The idea of a State Bank was to have a currency board with men of the standing of the Supreme Court judges. Mr E. K. Sim asked if the setting up of the Reserve Bank was not the first step in getting down to “tin tacks.” Mr Clearwater said it was not the setting-up of the Reserve Bank, but who was in control of it and in whose interests it was managed. The Reserve Bank was just a link in the chain of great reserve banks throughout the world. It was managed in the interests of the great financiers of the world. Mr R. Sim said the report stated that a great number of people were comparatively poor. Were the civil servants poor?. Mr S. Shaw: You said here before that some of them could not pay their board. (Laughter.) Mr Sim asked if the farmers were poor. Voices: No. They’re rich! Mr Sim: Well, where are these poor people? Clearing Itself. Mr Sim went on to say that the position was clearing itself. After the war the primary producers had been struck first and so on. Who would be struck next? The capitalist. If he could not get interest he would have to use his capital and it would get back to its normal channels. That would clear the position before any wild-cat monetary schemes. Mi- Shaw said Mr Sim had stated that money would get back to its normal channels. Should it not always be there? Money had been invested at a medium of exchange. Evidently Mr Lloyd George did not think that things were all right. Mr J. O’Shannessy said it would not be hard to find the poor people. They were all bankrupt. New Zealand was bankrupt and the world was bankrupt, bankrupt in terms of money. The Dairy Commission had said that 50 per cent, of the dairy farmers could not meet their obligations. It was obvious that machinery had increased their goods and sendees and their monetary system had not kept pace. The people who controlled the monetary system refused to open the gates. The system was killing itself, but what would happen in the meantime? This was the greatest problem ever before the Farmers’ Union; indeed before the world. If something were not done there would be a revolution. The nations of the world were jealous of one another and the capitalistic system might bring about a war. They would use the unemployed to kill the unemployed and they did not want that. Amount of Sabotage.

Mr Clearwater asked how Mr Sim could justify the amount of sabotage that was going on. Wheat had been burned in Canada, and in Manchuria people had starved to death. Mr Sim replied that cases of the destruction of food were isolated. Mr Clearwater had made mountains out of molehills.

The president (Mr W. J. A. McGregor) said he thought that money was following the way of produce. Produce had dropped in value and money was following. What hope of reciprocity was there if their elder brother, Australia, turned them down with a favourable trade balance of £2,000,000? With every country except Great Britain New Zealand had an unfavourable trade balance.

Mr Haigh said Mr Sim had stated that there were no poor, but everybody from the Mayor of Invercargill to the Mayor of Auckland and the President of the United States, where there were 11,000,000 on the verge of starvation, showed that there were poor. However, Mr Sim must have his little joke. Mr Sim had referred to the natural law, but that meant that if human beings had no food they starved. If the animals had no food they lived on one another. They wanted something better than natural law.

Mr Sim: You mistake me. Natural law makes it expedient for man-made laws.

Mr Haigh: It would take a Supreme Court judge to define that. (Laughter.)

Seeing the Light.

Mr Haigh said that some of those around the room had not seen the light. They held screens in front of them, but it would force its way in. The problem was to bring consumption up to production. The problem was simple. It needed exchange. Some treated the whole subject as too difficult. In the morning’s paper they would see the statement of the Reserve Bank. It would appear mysterious that £29,000,000 of assets had been acquired in nine days, but they left it and did not delve into it. He moved that the report should be sent to the Dominion Executive with a recommendation that copies be distributed to other provincial executives. Mr E. K. Sim, in seconding the motion, said there was no _ doubt that monetary reform was lagging behind. The motion was carried and a vote of thanks to Mr Haigh was passed.