The Wanganui Chronicle. THURSDAY, OCTOBER 2, 1947. THE FLOW OF CAPITAL

Wanganui Chronicle, 2 October 1947, Page 4

The Wanganui Chronicle. THURSDAY, OCTOBER 2, 1947. THE FLOW OF CAPITAL

’"P'HE Central Bank of Argentina on July 7 announced the removal of the restrictions on the entry of foreign capital, imposed in 1943 to prevent refugee capital from entering Argentina. The Government was then understood to be inviting the entry of foreign capital, machinery, technicians and immigrants. This policy is worthy of consideration by New Zealand.

The widespread growth of wealth and production with its consequent improvement in living standards throughout the last century was due to the freedom of flow accorded to capital, labour and trade. Had this freedom of enterprise continued further adjustments would have become necessary; but the prospect was that the wealth of the world would have continued to expand at an accelerated rate. The retarding effect first of tariffs and other trade restrictions led to the imposition of immigration quotas and other impediments to the free movement of people. The result of these two activities was that restrictions upon the free flow of capital became a necessity. In fine, the world committed an act of bankruptcy; for that was what was implied when the free flow of capital was brought to an end. Left to themselves capital, labour and trade gravitate to the point of highest profit. The profit motive is frequently damned, but its implications are not so frequently understood by those who condemn it. The pursuing of profit is not an act of piracy, and it is seldom left to operate by itself or untempered by other factors. An investor seeking an investment for his capital will find himself for instance preferring to invest in a British community gather than in a foreign one. He is often unwilling to buy shares in a gambling “joint,” while those who will not on any account invest in the brewery industry are more numerous than is generally known. To imagine that men and women will invest their capital in any enterprise that provides a large profit is simply untrue in the overwhelming majority of cases. The profit motive operates subject to moral and other considerations being satisfied. The seeking in a free market of the highest profit for one’s work, goods or capital operates not to the detriment of the community but to the advantage of all. Public demand in a free market is but a combination of preferences for goods and services. These preferences are measured against each other by the pull of supply and demand and greatest preference in relation to supply is made manifest by a high price in the market, but these conditions obtain only so long as the market is free. To sell the goods or services or to supply the capital at the point where demand is strongest is to take steps to bring the “lacking” at this point to an end, or at least to reduce it. Because, as a rule, the flow of labour follows the flow of capital it is clear that where there is no encouragement for an inflow of capital there is a dampening down of the channels of eraemployment. Where the inflow of new capital has been checked the labour market may be kept in a condition of comparative absence of unemployment by the promotion of “works” through the employment of community loans. It needs no demonstration—particularly in Wanganui—to establish that publicly financed undertakings repay their capital outlay but slowly and sometimes fail to provide a profit. The crematorium, and the tramways, of Wanganui are good illustrations of the employment of public capital even to a monopoly with disastrous effects. The more there is of such “investment” the sooner will occur the general breakdown of society.

The restrictive technique which brought about the Great Depression of the 1930’s has recently been enunciated by the Prime Minister of New Zealand as the settled policy of this Dominion. By so doing he has barred the door to any prospect of a customs union being established within the British Commonwealth. If this country, which is to the greatest degree of all dependent upon international trade for its prosperity, is to pursue the path that leads to insulation then there is small prospect of other countries which are less dependent upon the free How of goods for their prosperity doing anything different unless they are led by men of greater knowledge, faith and enlightenment than is New Zealand today. Argentina seems to be going towards the light of greater freedom in trade and production and Argentina is one of New Zealand’s competitors in the meat trade of the world. The inflow of capital, labour and machinery into Argentina bespeaks an impending increase in production and a consequent enlargement of Argentinian living standards. In New Zealand the market is fertile of instances where import licenses are being withheld for goods that are being made at higher cost in New Zealand. This operates to the detriment of the of living in this Dominion. At the present time the incidence of this policy are cloaked by reason of the wartime and post-war shortages, but these incidence, although hidden, are operative and soon, despite the expansion of tlie money supply, the shortage of goods available to each consumer will register upon the minds of the people to make them realise they have been deceived by the appearance of piosperity into accepting it as a reality. Meanwhile it is pertinent to enquire what will be New Zealand’s future if the free flow of het exports becomes impeded.