AMERICA’S PROSPERITY.

Star (Christchurch), Issue 17569, 20 June 1925, Page 5

AMERICA’S PROSPERITY.

To the Editor. s . ir . —l was very interested in your article on •* The Cause of America’s Prosperity.” One writer claims that America’s unemployed problem lias been solved, quite naturally, by an internal boom jn trades; but the internal boom itself is onlv an effect and the cause of this is high wages.” Compare America and, ,\etv Zealand. Jn 1900 Xew Zealand reduced wages with the result that jNetv Zealand traders, who mostly held heavy stocks, suffered as the result of the Government’s suicidal policy in reducing the spending power of the people. In 1922 the United States Steel Corporation without application from the men gave their workmen an advance in wages, and early in 1923 the corporation gave a further advance of 11 per cent. Amongst other industries that increased wages after March, 1922. tho following may ho cited : Boot and shoes Ss a week, cotton ma nufacthrers 12s, men’s clothing IDs, silks Its a week, iron and steel £2 4s per fortnight. Taking representative IVeW York factories, the average weekly earnings in March, 1922, was £4 ISs, May, 1923. £o 10s. or 12s increase per woek in thirteen months. High wages and prohibition arc reasons for America’s prosperity. Both are closely related as causes and related in the effects. High wages help to, keep money in circulation, and prohibition prevents money being diverted from the useiul trades and industries. Every enlightened trader knows that high wages means increased spending power. Retailers who were in business in New Zealand in the ’nineties will remember the trade depression. They will also*remember that trade immediately began to improve when wages were increased as the result of BaJla lice's and Seddon’s industrial legislation. The Workers spend their wages week by week with the shopkeepers, and the money thus spent has a greater velocity” or rate of turnover than money spent on luxuries or deposited in banks. Every sovereign spent in wages may give rise to ten, twenty or thirty pounds’ worth of trade, as the money passes from employee to trader and from trader to employee. As wages a sovereign may attain a weekly turnover and £3O worth of business may be transacted in th c year. If the sovereign were diverted to other channels the “velocity” or rate of turnover would be much slower. (Of tho eight and a half millions spent on drink a very small proportion of it goes in wages.) Thc liquor traffic is a pirato on the sea of commerce. Every* economist knows that, speaking generally, the sovereign attains its greatest “velocity” and is responsible for the greatest amount of trade when' the sovereign is paid as wages and* expended on the every-day necessities; production is accelerated and trade is prosperous. Competent observers state that America saved herself from thc after-war slump bv keeping up and by increasing wages. Because of high wages, because cf prohibition and because of the resulting internal trade boom there lias been increased efficiency and increased output. In support of his high wage polciv Henry Ford says: “T have learned through the years a good deal about wages. I believe, in the first place, that, all ■other considerations aside, cur sales depend in a measure on the wages we pay. If we can distribute high wages, then that money is going to bo spent, and it will serve to make storekeepers and distributors and manufacturers and workers in other lines more prosperous, and their prosperity will bp reflected in our sales.”' Ho says: “Country-wide high wages spells com itry-wide prasperi tv. s ’ Contrast America's prosperity and breadth ot outlook with the narrowness of vision displayed by Hie New Zealand Government. In 1921-22, in order to reduce wages, tlio Government deliberately created an unemployment problem by dismissing hundreds of men from the Public Service, besides dismissing hundreds more who wero engaged on urgent public, works, which ha-cl been delayed during the. war period. AVc know how* disastrous this short-sighted suicidal policy was so far as the traders and manufacturers in this country wore concerned. Tt brought privation and distress i o hundreds of workers’ homos and trade slumped badly. In 1922 by two special pieces of legislation tlio Government reduced the wages of practically all tlio workers in the Dominion, and every trader and every manufacturer in the Dominion suffered in consequence. What matters it to a trader if bis wages bill is reduced bv 10 per cent if as a consequence the spending power of his : customers and his turnover is reduced by 15 per cent. 10 per cent reduction in thc retailers’ wag e bill only amounts to I or 1\ per cent on his turnover. AY ages in a grocery business are less than 10 per cent on the

turnover and 10 per cent of fli© 10 per cent is only I per cent on the total turnover. In other businesses it may* be Ji per cent. But this 1 per cent saving in costs on th e turnover may easily result in a 15 per cent loss in the total turnover, and the rent and all tlio standing charges will then have to come out of the 85 per cent. It is on the last 20 per cent, of his turnover that the trader makes his profits. A 10 per cent reduction in wages means a 15 per cent reduction in the spending power of tho people so far as the traders are concerned, because house rents are not coming down, and' if one-third of the workers’ wages goes in rents the total reduction in spending power must come out of that portion of the workers’ incomes which are ."pent with the traders and manufacSinee 1913 the accumulated private wealth, of the Dominion lias increased by 44G million pounds sterling, or 160 per cent, but with all this accumulation of wealth the spending power of the people measured in 1914 values lias not increased. "Why? Because tlio wealth is in a few hands and wages have been reduced. In 1914 tlio skilled worker received 12s a day. The increase in the cost of living to-day is 62.1 per cent. Skilled workers receive 2s 2d per hour, or J7s 4d per day. They should receive 19s Gd. "With the present-day cost of living’ skilled workers arc 2s 2d a day short of an amount sufficient to maintain their 1914 standard of livin-. Unskilled workers are still worse off. Is if any wonder that traAr. is dull? AYliat is remarkable is that traders and manufacturers pay an annual fee to the Employers’ Association for tho purpose of keeping down tho spending power of their customers, which in* turn reduces thc “velocity” or trading value c.f the sovereign.—l am, etc., J. M’COMBS.