WISE SPENDING.

Wanganui Chronicle, Volume 76, Issue 105, 6 May 1933, Page 13 (Supplement)

WISE SPENDING.

Discussing Mr. J. M. Keynes’ theory of “wise spending,” the Times remarks editorially:—“Domestic policy, for obvious and inevitable reasons, comes first in logic and in time; and the generally agreed principles of an ideal domestic policy, as already stated, are the encouragement of capital expenditure, whether from public or private sources, upon remunerative enterprises, and the reduction of taxation. These two measures have for their object an increase in effective demand by securing both an increase and a better use of spending power. The habit of describing this object as “the raising of wholesale prices” is perhaps unfortunate. What is really at the back of the ideal policy is the desire to stabilise prices at a level remunerative .to efficient producers, to avoid agonising alternatives between glut and scarcity, and to keep the rate both of production and of consumption at high, related, and expanding levels. The only way to secure and to maintain.this ideal is to take steps which will result in the more rapid flow of money round the income- expenditure circuit, which is at present choked by lack of confidence. Experience has already shown that the merely academic announcement by the Government that it favours a rise in wholesale prices is quite futile; but, if that announcement were accompanied by definite efforts to increase demand, it would probably be effective. For, in rhe first place, the prospect of an increased demand leading to higher prices would induce buying on a really large scale; in Jhe second place, confidence would thaw out frozen money; and in the third place the increase in and better use of purchasing power would keep the stream of money unfrozen. The next step is to translate these preliminary principles into practice; and the first question to be answered is how the Government can encourage remunerative capital expenditure.”