TAXATION AND UNEMPLOYMENT

Timaru Herald, Volume CXXV, Issue 18659, 30 August 1930, Page 9

TAXATION AND UNEMPLOYMENT

TWELVE POINTS. (BY A.E.M.) Socialist-Labour speakers indulge in cheap appeals to the gallery when they declare that unemployment can be cured by increased consumption or spending. The economic needs of the day is not for increased consumption or spending, but for increased saving and re-in-vestment. The basic fact to be recognised is that more labour cannot be employed unless a certain necessary amount of new capital is available in advance. Before any labour can be employed, somebody must possess and invest the capital required, (a) to purchase the plant and materials, and (b) to pay the workers’ wages week by week. (Note: The worker must be paid cash down, though it may be many months or even years, before the finished product can be sold, and the capitalist can recover the money he has advanced for weekly wages). Employment is absolutely conditional, then, upon capital being available in advance. No new jobs can be provided unless new capital is available. An increase in population, which means an increase in number of workers looking for employment, requires an increasing amount of capital to employ them. If the amount of capital does not increase at the same rate as the increase of population, then some of the people are bound to be felt unemployed. The great economist, J. M. Keynes, states the position as follows: “To maintain the growing body of worn * ers at the same standard of life as before, we require ... an increasing amount of capital. In order to keep our heads above water, the national capital must grow as fast as the national labour supply.” Another of the world’s leading economists, Sir Josiah Stamp, says: “It is not a question as to who owns the capital. . . . The existence of the capital is the thing that matters for this purpose.” Even Mr Phillip Snowden accepted this principle and declared: “Lack of savings is greatly hindering the trade recovery of Britain. Trade revival is vitally dependent upon capital saving.”—“London Times,” 19th October, 1927). The leading British economists estimate that the amount of saving and re-investment needed in Britain is about £700,000.000 a year. For Australia it is estimated (by Mr J. T. Sutcliffe) that the amount required is about £56.000.000 a year. No detailed calculations seem to have been made yet for New Zealand; but we may be sure that there the amount of saving and re-investment (new capital) needed is at least £15,000,000 a year. Comparatively small portions of this amount are provided by investments in savings banks and premiums on small life insurance policies. But it is evident that the great bulk of savings and re-investment must be done—the great bulk of the new capital required each year must be provided—by the class which receives incomes of £IOOO a year upwards and especially by the small section enjoying incomes upwards of, say, £3OOO a year. Probably 90 per cent, of all incomes in excess of £3OOO is re-invested every year. Heavy direct taxation on large incomes is likely to reduce, not the amount spent, but the amount saved and re-invested by the super-taxed class. This in turn must inevitably, by reducing the amount of new capital available, reduce the number of new workers who can be financed into employment. Yet, with our increase in population, we have about 10,000 males every year needing to be absorbed in business and industry. So insufficient saving and re-investing (a result of excessive taxation or otherwise) is bound to cause over-increasing unemployment. It is easy for demagogues to cloud the cold logic of the question by cheap appeals to ignorance, prejudice, and emotion. But if they cannot follow f this as an abstract arugment at least they should be willing to profit by the experiences of Mr P. Snowden and the Labour Government in Britain. The higher they have raised taxation, the greater has become the number of unemployed until the figure to-day stands at nearly two million, nearly twice as many unemployed as there were when the Labour Government went into office fifteen months ago. Even in New Zealand the number of unemployed has increased enormously —the number of registered unemployed has increased threefold—since the Uni-ted-Labour alliance came into power and increased the burden of taxation by £2,300,000 (that is comparing the first year of United with the last year of Reform). Excessive taxation and increasing unemployment go hand in hand—or, rather, the latter inevitably i and invariably follows the former.