TE AWAMUTU COURIER. Printed on Mondays, Wednesdays, and Fridays. MONDAY, 17th AUGUST, 1936. THE PROBLEM OF SPENDING.

Te Awamutu Courier, Volume 53, Issue 3796, 17 August 1936, Page 4

TE AWAMUTU COURIER. Printed on Mondays, Wednesdays, and Fridays. MONDAY, 17th AUGUST, 1936. THE PROBLEM OF SPENDING.

EVER since the clouds of depression descended economics have had a prominent part in public discussion. Many and various theories were put forward by groups which seemed to spring to activity over-night, and people were encouraged to believie that it needed only a plunge into some new order of society to relegate troubles to a bygone day. Most popular has been the idea of a manipulation of the currency to speed up spending power as the quickest restorative for economic health. The unrest which inspired the desire for change culminated in the overthrow of a Government last November. The then regime held to the belief that New Zealand’s destiny was interwoven with the exchange mechanism of the world, and that security could be found only as a part of a world system in money and commodity interchange. Signs of recovery were beginning to show over the horizon, hut the process was slow. Popular opinion yielded to the belief that internal circulation could be hastened and that a few simple devices could ■>e made operative by a Parliament pledged to speed up spending power. That, in the main, was the issue in the elections.

The country now passes from theory to practice of these beliefs. We pass from the advocacy of ideals to a practical testing of economics. Already the Government has plunged deeply into currency and trade bartering. Spending has been pegged at a higher level through many devices which are designed to place more money in the hands of the people. We stand on the threshold of a great experiment a forcing of trade by legislative decree. Ideals are surely taking shape, and the people have a practical testing of the economies so persistently preached as being easy of attainment. The first shock of the new order has been the discovery that if the theory does produce added spending in terms of money, it leaves no tangible advantage when expressed in goods or services. Costs and value have moved in sympathy, with a result that higher wages are not necessarily an added channel through which more goods and services may be purchased. For the average household the problems cf budgeting are not relieved since the income, if greater, is only in ratio to the increased outgo. The effect is higher spending but no greater spending power.

A menacing situation is reflected in the costs of Government servicing. The public exchequer has shared the tendency which legislative interference with the worth of currency and commodities is heir to. The Budget has foreshadowed a much greater tax on the community, and it is too early yet to measure the effects. Well might the primary producer, however, face the prospect with feelings of doubt. Around him on every hand are increasing costs, and whereas by the trade cycle those in other industries can adjust cost and prices in equal ratio to each other, no such opportunity comes the way of the farmer. The new regime is victim to the same condition as the former Government when it comes to primary products which must share the internal movement of costs and at the same time rely entirely on the external level of prices. The irony of the guaranteed price scheme has been that the farmer’s produce on his home market actually moved downward when every other price index was travelling in the opposite direction. It certainly explodes the theory that it should produce such a paradoxical condition in the economics of the farm. For that section of the community, too, with fixed incomes there is little in the present great experiment to grow enthusiastic over. In this great section there is neither increased spending nor spending power but rather an enforced economy to meet the tide of rising costs. With an adjustment of debt obligations in the offing the prospect plainly suggests a dwindling cf spending power—an inverse movement to that which is the keynote cf the whole policy. The effect of the theory, so far as it has yet been brought into operation, is to make it a class doctrine giving nominal and not real advantage to those who share higher spending, and developing new troubles for those who are beyond reach of the legislative devices.

Will the theory collapse 7 The answer to this question rests more with the people than it does with Par-

liament. It depends entirely on the inode of employing the increased spending. New Zealand industry generally faces higher costs and is thus more subject to challenge by import agencies. Other countries, on a lower level of costs, can vie more keenly for the trade offering. Thai is an obvious truth. People, however, have had years of schooling in economic theories, and in the first lessen they will have learned that money moves in circles. If our spending or spending power moved in a circle which extended no further than our coast-line it would matter relatively little at what level it was pegged. But no such circle can be drawn. The fact is plain that if New Zealands’ .high spending is needlessly diverted overseas our theory will soon destroy itself. This, then, places the whole issue in the hands of the people. All that the Government has done is ail that it could do. It has created a level of spending. By so doing it has placed in the people’s hands a device for more activity or a weapon for destruction. The people have it in their power to will it either way, and those who so keenly advocated change have a greater duty to-day in the task of educating the spenders into a code of spending which assures the fulfilment of the whole theory which relies on the belief that more spending is the real cure for the economic ills we have known.