LETTERS TO JOHN SMITH

Taranaki Daily News, 27 August 1930, Page 12

LETTERS TO JOHN SMITH

ECONOMICS FOR ALL AB»6‘T PROFITS AND WAGES? ’ THE AVAILABLE INCOME. ' This is the sixth of a series of letters written for the Melbourne Herald by Professor L. F. Giblin, Ritchie Professor of Economics in the University of Melbourne. They ara an attempt 'to tell plain men in plain words why-Austra-lia lias drifted into economic trouble ai;d ( how she may recover. Readers will have no difficulty in making the necessary mental adjustments to apply the lessons to Nevy Zealand. VL '>... , Dear ■ John,—We come now to the ■ b.g question whether the ' profits of capital \ and enterprise are not big enough to cary our present'; loss with-, out touching wages. ; And that leads on ’" to' the. general question' whether profits do not generally get too big a share of the value of all the work done in the country. ■ • .

’ Now. this is a matter in which. we must get down to figures; and not very easy figures,- and we cannot hope to .clear .it up in a letter. We shall have to spend a good many evenings .talking over it round a-table before we get a really, good answer;’ and I hope we shall do that. Meantime, we will get as far as possible here.

You see her© in Melbourne plenty of signs of people having too much-, money and spending it on all kinds of luxuries —expensive clothes, and furniture, fine ■ houses and gardens, high-* priced motor-cars, and many .other things. There is no doubt of a great deal of extravagant spending, very often by people who have not. done much to earn the money they are ’ spending. All this is bad in any case when others are going short, and particularly bad at the present time. I do not want to make out that it is a. small thing and does not matter. But for our present purpose,. what we vvant to know is how big ifj this amount of superfluous spending? If "it were cut out, would it meet the loss of income we are suffering from? . If it were divided more evenly, how, much would it raise wages? ’ - z We all get. a strong .impression of a great deal of- extravagant or luxurious spending. ’ But it is mot easy to size it up, and the impression may be exaggerated. It' is concentrated in one small area, and that makes it look big. It indicates the expenditure of visitors from the country, and other States, who are perhaps making their one w r eek’s splash in the year. - And one. motorcar, which is perhaps not paid for, can cover a lot of ground in a day and make a great show. Consider, too, the nature of profits. -The people who earn profits arc the people, who get production going, who run factories qr shops o& mines or farms to. give employment. Without these people there would be nothing to da in Australia but scratch a hard living from a one-man farm. Profits go up and down much more than wages or salaries. Often they disappear altogether, and often the whole enterprise fails and leaves the man or the-coni : pany without even the savings they began with. There' is a big risk, and .therefore profits have to be big' at times, or no one would take the risk. Besides, the job requires • special qualities of resourcefulness and good judgment, which are not required for most jobs, and therefore we have to pay well for ihis very necessary job or we should not get done at 'all. So we naturally have lavish expenditure at the times when profits are good. Even when there are no profits at all, many men will try and make a good show in public for business reasons, though at homo they may be at their void’s end to pay the butcher. It is ilo good saying luxury expenditure is large; wo have to find out how large. We want to get some measure of how much superfluous big income there is. We can get an idea in this way. . ...

Suppose we reckon first how much it would take to pay everyone who was working at the average wage and see liow much is left. There were last year in Australia about 1,854,000 men over 21 earning their living in some way, and 865,000 women and girls and boys ard men under 21. Let us allow the men the average weekly wage paid in all organised trades, which was 100 s 5d weekly at the end of 1928; and to the others the average weekly wage for women at the same time, ,53s 10d. Work this out and you will find that the total required to pay wages at these fates is £607,000;000. Now the total income of al|. the people of the country a year ago (before the drop in income)., was about £650,000,000. Out of this had to come £44,000,000 paid in income tax and other direct taxes. When this was taken away, there was not enough to pay every worker the average wage paid in organised • trades. And there would be no savings at all, except what was saved out of incomes of £5 a week. This result is so staggering—at least, I hope you will find it so—that I will give you, the night to recover before we go on to see where it leads us. — Yours, etc., L. F. Giblin, Ritchie Professor of Economics, University of Melbourne-. July 14, 1930.