The Southland Times. PUBLISHED EVERY MORNING. “Luceo Non Uro.” SATURDAY, JULY 20, 1935. MR JONES’S FIGURES

Southland Times, Issue 25341, 20 July 1935, Page 4

The Southland Times. PUBLISHED EVERY MORNING. “Luceo Non Uro.” SATURDAY, JULY 20, 1935. MR JONES’S FIGURES

When Mr Jones presented figures to show the growth of unemployment in New Zealand from 1930, he selected dates in 1931, 1932 and 1933 for his comparisons and mentioned that the dates in 1931 and 1932 were after the first and second cuts. The inference he wished to be drawn was obvious. In fact, the Labour Party has made no secret of its view that the cuts in wages caused the growth of unemployment, a popular declaration which can be employed usefully in an election campaign, and Mr Jones in presenting the figures in the way he did was keeping in step with his party. Now, Mr Marchant has asked us to give the evidence which we say suggests that the rise in unemployment was not due to cuts in wages; but that they have a common origin in the economic depression. In the first place he will find in most of the economists, including most of those who oppose the capitalist system, that high wages are given as important factors in bringing about economic crises. John Strachey in “The Nature of Capitalist Crisis,” citing Marx to support him, declares that in the inevitable crises under the capitalist system increasing wages are an important cause. It follows that when the crisis has come the retreat of the wages level is essential to. the vital effort for recovery, which involves the shift of money to the producer from the consumer. All this sounds like so much nonsense, but it is merely the cold fact that when prices fall wages -become too high for industry and they must be cut back to permit production to become profitable once more. In one place Strachey says: There can be no question, as Professor Robbins, at any rate, seems to suggest sometimes, of constant money wages and ever rising real wages once equilibrium has been re-established. Such a wage policy would soon produce new crises by way of declining profits and declining employment. . . . The only way of maintaining equilibrium will be continually to cut money wages as technical costs fall. Thus "real wages will be kept constant

and the rate of profit will be continually sustained.

While costs drop as fast as, or faster than, prices the rate of profit is sustained and trade is kept at a constant rate, but if costs lag or if they rise and destroy the profit unemployment must result. Strachey says:

A declining rate of profit .and a declining level of employfnent are clearly the same phenomenon looked at from different points of view.

In Volume 11. of “Capital,”. Karl Marx says:

It is purely a tautology to say that crises are caused by the scarcity of solvent consumers, or of paying consumers. But if one were to attempt to clothe this tautology with a profounder justification by saying that the working class receive too small a portion of their own product, and the evil would be remedied by giving them a larger share of it, or raising their wages, we should reply that crises are precisely always preceded by a period in which wages rise generally and the working class actually get a larger share of the annual product intended for consumption. From the point of view of the advocates of ‘simple’ ' (!) common sense, such a period should rather remove the crises.

Marx recognizes that a crisis is usually preceded by a rise in real wages and that this rise is “a harbinger” of the coming storm. The facts of the great depression which struck the Old World in 1929 support this argument. The approach we have employed may be regarded by Mr Marchant as unduly long; but it is necessary in order to indicate that the relation of wages to profits has an important bearing on economic crisis, and that if the margin between cost and prices is enlarged unemployment will ensue, the decline in the rate of profit and in the level of employment being “the same phenomenon looked at from different points of view.” The economic storm hit Europe in 1929, preceded by a period of rising wages, and the full blast of it struck New Zealand later. No one will suggest that New Zealand could remain immune. Russia felt it, and her people suffered through insufficiency of food. Thus the unemployment register shows its first jump towards the end of 1930, when the effects of the depressed market were felt in the Dominion. There was less money coming into New Zealand, people were buying less, prices were falling and money wages were stationary, so that real wages were rising. The rate of profit had already started to decline, and the level of employment being “the same phenomenon” also fell. Mr Marchant will agree that if prices fall and money wages remain constant, the effect is a rise in real wages, and a reduction in the rate of profit. This is what occurred in 1930 and early in 1931. New Zealand was feeling the increasing force of the economic blast which hit Europe in 1928-29. The New Zealand unemployment figures for - this period are interesting, and it is a pity that Mr Jones did not quote them in full. They show that at the end of 1930 there had been a jump of over - 4000 and the total registrations reached 11,000. In January, 1931, there was a jump to 16,607, and by March the registrations totalled 38,028. It was on April 1 that the first cut in the Civil Service pay was made. The figures for that month were 36,981. May''3l the Arbitration Court’s order making the 10 per cent, cut in wages was made effective. Let us look at the registrations of unemployed before and after that date:

1931. January 16,607 February 27,602 March 38,028 April 36,981 May 42,523 June 45,264 July 47,772 August. 50,033 Is it not clear that unemployment was rising before the cuts were macle, and that the rate of the rise was, if anything, slower than it was before? On April 1, 1932, the graduated cut in Civil Service pay was made, but the registrations showed no influence of this. The Arbitration Court’s order was effective on May 31, and prior to that date registrations were going up by leaps, but after May 31, 1931, the rate of increase was slower. In the face of that how can Mr Jones or Mr Marchant contend that the wages cuts cause unemployment or increased it. Unemployment was increased by the contraction of the national wealth due to the fall in prices and the diminution of profits. From this cause, too, came the cuts in wages. It was necessary to cut costs, and if there had been no such cuts there would have been more registrations. One thing is certain, the unemployment figures do not support the suggestion made by the statistics Mr Jones produced, and a glance at those we have cited will, we think, support our contention that Mr Jones did n<3t use them properly in his speech. The other points raised in Mr Marchant’s letter we will deal with later.