TRADE DEPRESSION

Wanganui Chronicle, Volume 74, Issue 147, 24 June 1931, Page 9

TRADE DEPRESSION

CAUSES AND CURES Js the trade depression due to “something radically wrong with the cur- , rency system?” Or is it due to overI production or ill-balanced production? These are important questions, says the Manchester Guardian, but still more important, in tho short run, are tho derived questions —Can trade be advantageously increased by measures of currency policy. Can it also or alternatively be increased by changing the conditions of production? “Yes” to oue of the theoretical questions, and “No” to lhe other, were the plain answers given by two eminent speakers recently, one clearly affirming what tho other clearly denied. The answers to the practical questions were less explicit but thoroughly contradictory. “Y'cs,” said Lord D’Abernon, addressing the Royal Empire Society. “Every month evidence accumulates to show that, the main cause of the trouble is of a monetary nature, and that the remedy can only be found in measures of monetary reform.” “No,” said Dr O. M. W. Sprague, American Economic Adviser to the English-speaking Union. “Those connected with the central banks are disposed to think that the fall in prices is a symptom in the main, and not a thing they can attack directly.” “No,” said Lord D’Abernon. “Over-production and disequilibrium are both theories inadequate to explain the crisis.” But, said Dr Sprague, “some prices have fallen very sharply indeed, especially in tiie basic industries and agriculture, where there is evidence ot. a decided over-production on a considerable range of products. And in another part of his speech, ‘ ‘ All the responsible people connected with the great con tral banks of the world hold the industrial equilibrium theory as to the true explanation of the present difficulty.” And tho disagreement over causes of the depression was carried through into discussion of cures. In Lord D’Abcrnon’s view “the present deplorable conditions have been brought about by the fall in the price of staple commodities. This fall has been brought about by the scarcity of moans of payment. The position could be corrected by eoiuIbined action between the central banks of the gold-using countries.” Dr Sprague objected (for, although the speeches were delivered at different meetings, they can be considered as plea and counter-plea). “Tho central banks could do that if they were convinced that it was advisable. There is no obstacle in the way on the grounds of an insufficiency of gold. Unhappily those in charge, of the central banks aro not convinced that, that policy would serve and meet the exigencies of the present situation.” What we need, in Dr Sprague’s view, is “an adjustment to changing economic conditions.” “We need to be more elastic than ever before.” “Tho country as 1 a whole,” bo said, “necessarily under political leadership, should envisage the sort of change that must be made. . . . If a clear-cut objective of that kind were put before the country there would be serious difficulty encountered • in putting the programme through. 7 ' Tho adjustment indicated is plainly a curtailment of wages, salaries, and re i turn on savings. What wo need, in Lord D’Abernon’s view, is stabilisation of prices to secure “tho maintenance of wages and salaries approximately at their present rate.” “If” (through failure to uphold prices) “it became necessary to adjust all existing con- ’ tracts, both those regarding wages ami those regarding debt payments. . . that ' must be a very dangerous process.” r By a happy coincidence the two speakers have expressed in summary form the opposing doctrines and programmes. a By which doctrine will the nation be i guided into what programme?