AMERICA’S PROBLEM

Taranaki Daily News, 4 June 1935, Page 3

AMERICA’S PROBLEM

COST OF UNEMPLOYMENT. • . “HAMPERED RECOVERY.” A grave view of the unemployment problem in the United States and present measures to solve .it is taken by the Guaranty Trust Company of New York. This company is the fourth largest bank in America. In its latest review of business and financial conditions it is recognised by the Guaranty Trust that “the main problem facing the country to-day is that of re-employment and its solution, which can only come , about through private business expansion.” The bank holds that “unemployment ,is crucial from every point of view, social, political, and financial. It is the greatest cause of human suffering and degradation. It is the most dangerous breeder of. social and political unrest, and it is the most prolific source of Budget deficits, crushing tax burdens, and monetary disorders. In the United 'States, the situation has already taken on some of the aspects of a race between business recovery and re-employment on the one hand and inflation on the other.” . . Reference is ’made to the Government s attempts to solve the problem, but these so far, it is stated, have been “without much apparent success.” It is admitted that factory employment has increased markedly since March, 1933, and is greater than it was in 10 of the 12 months of 1934; current estimates of un- . employment likewise reflect considerable improvement since 1933, although they indicate a present level that compares unfavourably with the total a year ago and is approximately equal to the average for last year. “But the number of persons on Governmental relief rolls has almost doubled since the beginning of 1934, while the average cost per person has risen even more rapidly, with the result that relief expenditures have reached a point where the financial resources of State and local governments are wholly inadequate to carry the burden and where more than three-fourths of the cost is borne by the Federal Government with borrowed funds.

“On the whole, the business situation seems distinctly better than it was two years ago, although it is very doubtful to what extent the improvement is a result of natural recuperative forces and to what extent it is a consequence of the Government’s recovery programme. Attention is directed by the Guaranty Trust to disquiet in American business circles caused by the methods now being followed by the Administration, which methods cannot for long continue. It is stated that “the public debt is increasing at a rapid rate, mainly because of tire cost c£ caring for the unemployed. Such a situation may be defensible as a temporary expedient, but not as a permanent policy. “The only escape from the dilemma is through private business recovery. This the sole alternative to the financial

disorder and the moral disintegration that lie in the direction of long-contin-ued unemployment relief. “It follows that the greatest task of Government and business at present is to co-operate in every possible way in helping private industry and trade to put men back tej work. Legislative and administrative proposals that threaten business enterprises with heavy loss, or with the sacrifice of such legitimate profits as they, might reasonably hope to make, should be abandoned, states the Trust. Labour legislation that threatens to upset established relationships and to precipitate controversy is particularly harmful. Government competition not only has disastrous effects on the branches of business directly affected but extends its undermining influence through the entire field of industry, commerce, and finance. “Threats of taxation designed to effect a redistribution of income sap the confidence of business men and investors alike. Measures providing harsh penalties for vaguely defined offences or in-r volving the deliberate destruction of established- values paralyse the spirit of enterprise and the mechanisms through wliich it works. '

Recovery legislation, it is shown, has been ■ responsible for attacks on the safety of the investor with the result that his confidence has received a rude shaking. “The obligations of debtors have been modified by amendments to the bankruptcy laws; the profits of business enterprises, from which the income on securities is derived, have been threatened; and the value of the currency, the bedrock of all values, has been placed in question. Of all these influences, this last is perhaps the . most destructive of confidence. Whether inflation comes about as a deliberate policy designed to offer a recovery panacea or a consequence of public extravagance makes little • difference. As long as it remains a significant factor in business calculations, sound recovery will be deferred.”

As to industry and commerce it is argued that upon their freedom and success solely depends the satisfactory solution of the great unemployment problem in the United States. Recent experience has tended, states the bank, to confirm the view that no human agency can provide a satisfactory substitute for the natural interplay of economic forces in directing the course of business affairs. “It should be clearly recognised that the. prospect of profit is indispensable to business recovery, and all existing and proposed recovery legislation should be reviewed with this thought in mind. The principle of diverting purchasing power into consumption channels by arbitrarily reducing hours of labour and raising wage rates has been tried and found ineffective.” Artificial interference, it is contended, reduces demand and diminishes employment by raising costs. Closely related to the question of profits is that of freedom of initiative. No less important than the prospect of profits and free exercise of business judgment is the safety of principal and income to the investor.