INCREASE IN PURCHASING POWER.

Southland Times, Issue 25315, 19 June 1935, Page 3

INCREASE IN PURCHASING POWER.

To the Editor. Sir, —I have been a very interested reader of the letters upon the above subject which have appeared in your columns, particularly those of your correspondent “F.N.R.,” who has very patiently and carefully put forward what he considers a very good scheme for increasing the purchasing power of the community, thereby considerably reducing (if not eliminating) unemployment and all its attendant evils. If I am wrong in assuming that reason for the letters, then I stand to be corrected and with your kind permission, Mr Editor, I would appreciate space in your valuable Press in order that I may correct wha£ I think are errors in their conclusions. In my effort to point out these errors I do hope that I shall not be branded by “F.N.R.” as another one suffering from “mental sclerosis.” My effort is offered in good faith and I think they, will find it is something different to the usual run of criticism such as, Where is the money to come from? ■

The first point I wish to impress upon the various writers is their hazy idea of economic terms and the loose method of using them, and it is owing to these facts that many schemes on their part, are found to be useless when examined. For instance, “F.N.R.” writes as follows regarding the experiment:

“This analogy is quite applicable to our present problem—“the community as a whole is starved for purchasing power, with the dual result that not only do many citizens become famished, but also the very

goods they so greatly need are accumulating and wasting around them, while the ‘producers’ of these goods, unable to sell and so recover costs and margin of profit are likewise faced with impoverishment.” A little later he writes: “For instance it is demonstrably true and even generally recognized and admitted that the ‘community’ in this country as in practically every other country to-day is possessed of insufficient purchasing power to buy the total of goods and services available.” These two statements at a first glance seem quite in ordei' but I must plead guilty to the fact that my studies, ponderings and researches have not yet revealed this situation. Suppose we examine these statements a little more, by starting to locate those “producers” who cannot sell their goods. It is very essential that we should do this because the whole of the scheme propounded by “F.N.R.” and others stands or falls on this question and answer, as to who are the producers and it is a very good instance showing the hazy ideas (concerning economic terms) of the various writers. Proceeding with our investigation the general outline of modern business production is as follows: A Mr Smith, or several individuals, or a limited company, decide to go into the business of producing boots or clothing. Having sufficient funds they purchase machinery and raw material. I should also mention that they would also either own or lease a suitable building to work in. We will now assume that everything is ready for the production of boots. No doubt our Mr Smith or other individuals could make a few pairs of boots. There is also a great possibility that so far as the investors in the limited company are concerned they do not know anything about bootmaking. But that does not worry them. Why? Because they know that there are a lot of expert bootmakers seeking and eagerly awaiting an opportunity to make boots in return for a weekly wage. Therefore, some of these experts are engaged and the production of boots proceeds. This process of engaging labour obtains in every industry and these hired persons (sometimes called hands) produce the goods. My question then is: Are these thb people “F.N.R.” had in mind when he wrote that the producers could not sell their goods? luthink not, because as a matter of fact the goods do not belong to them but are the private property of those who own the productive forces and raw material. It is also obvious that the producers are the employees. When your various correspondents note that fact I think some of their schemes will be considerably modified. Bearing in mind the fact that people go into business with the idea of making profit and not for the benefit of their health, it is easy to understand that the wages paid are not sufficient to buy all the goods produced otherwise there would not be any profit for capital, and there would not be any sense in risking one’s capital for nothing. I will now deal with the remedy proposed by those advocating increase purchasing power or Douglas Credit. As outlined by “F.N.R.” I understand the idea is to create a social credit fund consisting of the difference between the total wages or salaries received and the total price of all goods produced. If I am wrong in my idea I shall be pleased to be corrected. This fund I presume would be used to increase purchasing power by credit being issued to the community (consumer’s credit). In other words it means a general increase in wages or salaries and so on. Now what is likely to be the result of this procedure? There is a considerable difference between wages and salaries paid, and the total prices of all goods produced and services rendered. So there would be created a very large sum of money as social credit. I am not going to ask the stupid question where is the money coming from, but will try to show the possible result of this increased demand for goods.

Again bearing in mind the fact that business is carried on for profit something like the following would occur. The whole of the working class spend most, if not all, of their wages in food, clothing and shelter. With an increase in money wages there would be an increased demand for food, clothing and shelter. Wj will pass over the possibility of a temporary rise in prices and keep to the increased demand. Immediately these particular industries will become very busy and probably not be able at short notice to cope with the increased orders. Our man of capital will then look around for more machinery and producers to catch up with the increased demand and in a comparatively short time will overtake it, with the result that there will be a surplus of goods, employees will be put off and we arrive at the same position as we are in to-day. Therefore, another issue of credit will be needed and off we go again and so on and so on. No. M- TiMffor. the idea of increasing purchasing power is not so good as if a°ems and I am afraid some other Tno+hnd will have to be adon+ed. It is verv often stated that _ destructive criticism is all very well in its -nlnce and if one would only nut forward sonw+hing of a constri’ctive nature it would he mnoh hotter. Thanpfore I will state what I *s needed to solve our goonomie d’ffi-i’lfles. As I wrote in an earlier passage the actual producers

are not the owners of the goods they produce. . . To-day in industry we have social production. In very few instances does one individual make a complete article from the raw material to the finished product. All are more or less specialists in one narticular part. As you know in printing, whether it be newspaper or commercial work, there are compositors, linotype operators, machinists an u various other specialized workers. Each one is like a cog in a wheel, all doing their little bit in the process of production. We also have social distribution of the various products by means ot ships, trains, motor vehicles etc., but curiously enough we have private ownership of the various products. This arises from the fact that although the productive forces are socially operated, these same forces are privately owned and as I noted earlier the owners of these productive forces become the owners of the products. Therefore, it seems to me, if the whole community wishes to obtain the whole of the products it is only necessary that the Productive appliances should be socially owned. —I am, etc.,