Taranaki Herald. DAILY EVENING TUESDAY, JUNE, 17, 1919. PRICES AND PRODUCTION.

Taranaki Herald, Volume LXVII, Issue 16464, 17 June 1919, Page 2

Taranaki Herald. DAILY EVENING TUESDAY, JUNE, 17, 1919. PRICES AND PRODUCTION.

A gi’eat deal of the existing industrial unrest is duo to a want of understanding of economic law. The Bolshevist rulers in Russia think that by the issue of unlimited paper money they can restore plenty if not peace. They don't want peace, but they do want their followers to be well provided with the necessaries of life, so they set the printing machines to work to create money to buy those necessaries. If that were sound economics it would be an easy matter in any country to bring about abounding prosperity by the simple process of the issue of unlimited paper money. But money alone will not support life. In fact the more money there is the greater becomes the cost of living. It is the common impression in New Zealand that the high cost of living is the result of the war and, among the workers particularly, of the profiteering that has taken place. That, of course, is true to a great extent, but there is another factor that is generally lost sight of, and that is the abundance of money. This, too, is largely an effect of the war, but it would be the same if it were due to an immense increase in our gold production. Had a great alluvial goldfield been discovered two or three years ago the cost of living would have increased greatly. That is invui’iably the experience because it increases the ability to purchase food and other commodities in a greater proportion than the increase of the production of food, etc. But someone may ask how then it is that meat and dairy produce are so dear in New Zealand while the cold stores are overflowing with those products. That, however, only affects the local application, not the general soundness of the economic law. Besides, meat and dairy produce are only two items in the lohg list of necessaries. The position, here, as in many other countries, is that, concurrently with the war and one of its effects, there has been a great expansion of credit. The bank returns show that New Zealand has never had so much money to spend, the note circulation has never approached the totals of the last three or four year’s. At the same time production of foodstuff's and other commodities throughout the world has declined as a result of the war. In other words the means to purchase these things have increased, while the commodities themselves have decreased. Therefore the prices had to go up. ' A little thought will suffice to show that the proper way to adjust these matters is not to create more money by the issue of more notes, but either to reduce the supply of money or to increase the production of commodities which money buys. It would not relieve the situation in the least, exept to fortunate individuals, if all the gold held by the banks were distributed amono- the people, or if the printing machines were set to work to provide more paper money. The only effect of that would be to bring about a greater rush for commodities and higher bids for them, hence a still further increase in the cost of living. If the paper money in cir-

dilation were steadily withdrawn and credit stopped, the prices of commodities would fall because people would not hare the price of them. But that would involve hardship, possibly starvation. The only real remedy is a great increase in production and a halt in the issue of paper money and credit. If the world’s output of foodstuffs and other commodities which money purchases were suddenly increased by 50 per cent., prices would come down with a run. That is obviously impossible, but it is possible to steadily increase production and thus gradually bring about a better balance between money and commodities and a consequent gradual reduction in the cost of living. It is the only practicable and safe way to readjust matters. But it cannot be done by everyone doing less work. Restriction of output can only make matters worse, especially if at the same time there is a redistribution of the wealth which gives the masses greater purchasing power. By all means let us have a more equitable distribution of wealth and purchasing power, but with it we must have a greater output of those things which people require for their money. Unless we have this the position will not be relieved. In a word, the only feasible, and sound remedy is a greater production and better facilities for transporting the products from the countries which produce them to those which stand most in need of them.