PLAN FOR NATIONAL RECONSTRUCTION

Timaru Herald, Volume CXXXVII, Issue 19512, 10 June 1933, Page 19

PLAN FOR NATIONAL RECONSTRUCTION

AUCKLAND BIG LOAN SCHEME By “Gresham” A body of responsible Auckland citizens has, according to a recent telegraphic message, approached tne Acting-Prime Minister, with suggestions that may assist the country in the present crisis. A few years ago, the vast body of expert opinion would have condemned the ideas as pure inflation and disastrous economics. in this connection, it may be in season to point out that the great evils of to-day have been caused, not by inflation, but, by deflation, that is, the falling of the price level. It seems to the writer that no criticism of any scheme is justified, unless it shows that the inflation, or rather reflation proposed will take the general price level beyond what it was before the recent monetary crash. The Auckland proposals, in brief, (1) An internal loan of £10,000,000, bearing interest at 3 per cent, with provisions for compulsory contribution. (2) The redemption of the loan, on a limited period by issue of currency under the control of a Board of Control. (3) The money raised to be devoted to subsidising industry, unemployment, and local bodies.

Bogey of Inflation Those who are particularly worried by the bogey of inflation, need not worry any further as to whether this is inflationary or not. It is. Yet, the great miracle for which most of us wait, is a rise in prices that will initiate a movement towards increased industrial activity. We can wait till the world price level rises, always provided that some of us are not starved or ruined before the waiting period is over. There is as much sense in sitting out a winter blizzard in the righteous anticipation of a very pleasant summer, as there is in complacently waiting for the financial miracle to happen during an economic blizzard. The other alternative is to do something, even if economists and others can call it by the ugly name of

inflation. The writer is not a supporter of uncontrolled inflation or of Major Douglas, but feels that any actiop, even if it is not the wisest action, is better during either a natural or an economic blizzard. The factors depressing prices, and therefore causing ruin, are to a great extent international, and not national; but there are things that can be done, to minimise the evils nationally. We have to accept the dead weight of external debt, the low prices of world markets, external monetary chaos, and tariff barriers. But need we accept panic psychology, inertia, and stupidity?

Internal Loan Proposal

Returning to the immediate proposals of the Auckland deputation, we find the central idea of an internal loan. Five years ago, or even less, the idea of an internal loan, may have been a doubtful one. We were chronically short of capital, and competition by the Government with farmers and industry in general for the funds available, might possibly have placed too great a strain on the supply. To-day, there is little demand for money industrially. There is, in spite of the times, a great deal rf idle money; and idle money as far as the community is concerned, is of no use at all. It might just as well not exist as lie locked up in savings banks or in the old stocking of our grandfathers. The loan would draw this money out into circulation, where it could do good, were it could find its way into the pocket of a struggling unemployed man or the till of a struggling business man on Stafford There is a rather more contentious suggestion in connection with the loan, the proposal of force. Historically, all of us, at least all of us who are not “dyed-in-the-wool” socialists, are opposed to coercion in money matters. There is, however, very good precedent to be found for such an action. When the nation was menaced by the armed foe, we thought little of conscripting the blood of our young men in defence of the older and the very young. Would it be a terrible sin to conscript some of the money of the entire nation when we are attacked by the enemy of national bankruptcy? It it is a sm, would hot the 3 per cent., and the promise to pay back the loan at some future date, gain a Government of courage some slight pardon even from those mulcted. The efficiency of the second expedient enumerated above is certainly questionable. There does seem some likelihood of rather violent inflation if £10,000,000, additional currency is placed in circulation in the short period of three years. There is this to be said, however, that reviving industry may be able to absorb the additional currency, without causing too serious inflation. The suggestion is probably tentative and merely a lead that is offered if no better scheme is put forward.

Psychology of the Scheme I take it, that the allocation of the loan as proposed is merely suggestive and not considered the final word in financial wisdom. If the scheme were adopted there would doubtless be much wrangling as to the correct portions. The fact still remains that there are untold works in the territory of every local body, that could occupy our unemployed profitably, and there are incomplete public works such as the Waitaki Hydro Electric Scheme that are, because they are incomplete, so much dead-weight. At present farming is almost impossible on account of low prices. No real prosperity can come to New Zealand unless it is initiated from the prosperity of the man on the land. And, as the additional purchasing power that will be made available, will filter through to all sections of the community, the result might well be a movement towards solid reconstruction.

Perhaps the greatest benefit any scheme could confer, would be a spirit of greater hopefulness, of less desolate psychology.