NO INCREASE OF WEALTH

Taranaki Daily News, 1 February 1933, Page 9

NO INCREASE OF WEALTH

EFFECTS OF HIGH EXCHANGE ONLY REDISTRIBUTION OF INCOME. FAVOURABLE REACTION POSSIBLE. OPINION OF PROFESSOR MURPHY. By .Telegraph.—Press Association. Wellington, Last’ Night. In the course of a reply to questions he was asked concerning his opinion on the exchange issue Professor B. E. Murphy, who occupies the chair of economics at Victoria College, said that if other things remained equal the exchange inflation policy would neither increase nor decrease the real national income, but would redistribute it in favour of the rural section of the commun-. ity and its creditors, as against the rest; of the people. If the redistribution which' was involved exercised favourable reactions,, psychological and otherwise, on business enterprise and confidence, Professor Murphy continued, a rise in the real national income over the level at which.it would otherwise have stood would be effected. If, however, the effect of the policy was to lessen confidence and diminish enterprise then the result would be a fall in the real national income. “In my view,” he said, “an inflation policy will probably, but not certainly, exercise a prejudicial effect. s ‘lt is fallacious,” the professor continued, “to assume that the total addition to the national income is equivalent to the increased taxable capacity. Some increase in the taxable and rateable capacity there undoubtedly will be, but there is no evidence that the whole; of the exchange bonus will be available for this purpose. Much of it will be scattered over thousands of incomes which will- be below the exemption limit for direct taxation and if there is any other feasible form of tax that will tap it at will the ’inflationists have not disclosed it. “ A sales tax would, apart from other objections to such a vicious and unsound impost, miss the exchange bonus and strike with its main- severity on the incomes of those >at whose expense the bonus is being provided, thus shifting the burden of past rural land specula-, tion, which is the real root of our troubles, on to the shoulders of the rest of the community. Any • gain .in taxable capacity will be to some degree set off by reduced taxable, capacity in other directions ’ _ Professor Murphy thought a rise m the cost of living was inevitable. In fact it seemed an integral part of the policy. ■ Professor Murphy lays down three, basic principles. The first is that Governmental Control of the supply and/or value of money,.and credit to secure general social objectives is a dangerous policy for which adequate guiding precedents do not exist and which is fundamentally incompatible with the system ofprivate business enterprise on which we rely and for which at the present there is no practical substitute. The second basic principle is that competitive exchange depreciation by primary producing countries must lower sterling values and- world prices but it is only from a rise in world and sterling prices that we can expect any real national economic relief. The third principle is. that a policy of monetary inflation, coupled with unbalanced budgets involving the creation of a floating, public debt of indefinite, dimensions, is likely, ,if. persisted in, to lead to national bankruptcy..