Tine Professors aid fie Economists

Waikato Times, Volume 116, Issue 19399, 27 October 1934, Page 13 (Supplement)

Tine Professors aid fie Economists

(Current Problems.)

WHEN POLITICIANS start to talk about the present state of the world, they never, of course, lay any blame upon themselves or their profession. Their first charge is that the science of political economy has failed. When economists start to talk about the present position of the world, they never blame themselves or their economics, but put all the blame upon the politicians. They generally describe politicians as interfering in subjects of which they know nothing and exerting an influence, often a force, which is undisciplined and unsuited for the circumstance's with which they have to deal. That is one reason why the efforts to recover from this depression are taking so long to materialise. The fact is that neither the economists nor the politicians have recognised some of the fundamental problems which have arisen of recent years, and which so seriously affect the relations between the state and economic life on the one side, and the relations between politics and political economy on the. other. What may be. called “the new era" dales from the year 19i4, and commenced with the war. The commencement of that era cannot be defined by economic facts. We cannot say, as we can with the era of mechanism, for example, or of electricity, that the era dates from some technical scientific or other discovery, which has altered the whole face of economics. It was the War which commenced the new era. The new economic age dates from a shot' fired in Sarajevo in 1914. Its principal characteristic Is a

Complete Change In Primary, Mental Conditions. The Indication Of that change Is the domination by politics of economics. To some extent, that domination was i inversion. In the period which was ending when the Wat broke out, there had been various social developments, as the result of the increasing ascendancy of politics, but these were assumed to have achieved their object and ended. In England they were exemplified by the Chartists, by the Trade Union movements, by the rise of the Labour Party. In Germany, for example, they were exemplified by the creation of the German Empire, and the control oi tae economic l?fe of that country towards political purposes In America they were exemplified by the . anti-trust laws, and the 'other events which arose out ot the legime of Theodore Roosevelt. The origin of tho world war is often claimed to have been economic, and there are still large numbers of people who believe that. Yet the world war started Rom a .hot fired in a Bosnian village within a monarchy—the AustroHungarian monarchy—which represented the most balancer economic unit in Europe, or in the world. Nor did the rivalry of Germany and France have any economic oiigin. In fact, the territorial changes in the favour of trance which resulted from the Great War, by the transfer of Alsace Lorraine and control of the Saar Valley, have bee ■ a serious Souroe of Embarrassment to the Victor. The antagonism of Austria and Russia had nothing economic in it. It was purely racial hatred. The antagonism between Austria and Italy had no economic origin Italy had acquired two ports on the Adriatic, formerly Austria territory, and these, having no economic background, aie extremely expensive to them. As regards Germany and England, there was an economic rivalry, but there was nothing in the economic relations of the two countries, except funk, to produce a conflict. The rivalry of Germany and England was a naval rivalry, and a colonial rivalry. • If as I suggest, there were no economic considerations in the origin of the war, there "'as just as few sound ones in the manner in which it was ended, lake the AustioHungarian Empire and Russia. These empires have been divided up into no fewer than nine new Independent states. These Succession States are the greatest absurdity of Hie map of Europe imaginable, and one of the fundamental causes of the succession of crises which has P ursu Europe since the war. Of no one of these states can it be said as was said of Austria many years ago, that if it did not exist, it would have to be created. They are an economic absurdity They are either very small or only medium sized with feW resources in themselves, and only able to live by internatiohal trade. But because of the domination of economics by politics, they have simply cut themselves off from one another in order to enjoy the

Superior Feeling of National Self-consolousness. Their political position Is diametrically opposed to their economic necessities. Their political position Is dictated by national ambitions, and to attain those ambitions they are prepared to throw overboard their economic reasoning and their economic interests. What is the gravest evil In Europe to-day is the noneconomic character of the entire European fabric. It is that which is shaking Europe to its foundations, and quite possibly will shake it down. The reason to fear a new war in Europe is not the racial ambition of any particular nation, but the conglomerate mess which the so-called statesmen at Versailles created in 1919. This applies not only to the international situation, but it also applies to the national 'situation. The domestic troubles which have so sensationally altered the characters ‘of nations in Europe since the War have not any true foundation in economics. The Bolshevist movement in Russia, for example, had no economic origin. Before the arrival of Lenin and Trotsky in Russia, the conditions in Russia were of a most primitive kind. There was no highly developed capitalism.. The bourgeois class and the proletarian class were Indefinably mingled. As a state to be affected by the Marxian doctrine, Russia was about the ■ last which should be selected. Bolshevism, which s supposed to be, according to its adherents, an economio system, has Nothing Whatever To Do With Economics, and 1t is at least evidenoe of that that the efforts to reconstruct Russia, made during the last seven years, have had nothing whatever to do with the Bolshevist movement. The latest development in that country suggests, Indeed, that if the Bolshevists have any economio principles at all it is towards capitalism. , The same may be said M Italy. The Fascist revolution in Italy was not economic. The chief aim of Mussolini was to wake Italian self-consciousness. The same thing applies with even more force to the Nazi revolution in Germany. The Nazi revolution last year was not caused by the economic crisis. Hitler’s followers were not composed of the 6,000,000 unemployed; this b,000,000 mostly were in the camp opposed to Hitler. The economio programme of German National Socialism was the very last plank in his platform which Hitler has endeavoured to put into foroe. The second result of the war also had nothing to do

IGNORED FUNDAMENTALS : THE NEW ERA.

with economics. The war aroused the self-consciousness of the masses all over the civilised world. In Europe, in the belligerent countries, the life of every single individual was seriously* influenced and affected by the war. In the neutral countries those lives were also influenced to a lesser extent. But in America the effect was less deep, and, therefore, less inclusive than anywhere else. Nevertheless, America was also affecled.

The intellectual consequences of the war touch every country, far more than the political and economic consequences, because the principle economic consequence of the war was to make people believe that they were going to be wealthy for ever and ever, and to forget all about the fundamentals of economics.

"We, therefore, come to this theory—that for four years, millions and millions of men and women of all nations lived exposed to hazards every day and all day. They were forced back into primitive conditions of existence, and millions of them cut off from social, class, family, and cultural connections. Tills was particularly so of those in the armies and navies, but the influence upon them was reflected upon the more numerous millions who remained at home, and, as a stone cast into a pond starts a ripple which reaches to* the banks, so that influence in the belligerent countries spread all over the world. In other words, we may say that the Traditional Moorings of Soolety Were Lost. Further, the impulse of the war, the urge to victory of either side, produced new methods and new conditions. Factories, unable to obtain the necessary output by the old methods, were converted, and, by new devices, were able to produce enormously. Men were taken away from factories-for the armies and navies, and their places were taken by women. There was a vast depreciation of the significance of social' standing. A result was the blurring of class distinctions, and the abandonment of class prejudices. A new generation has grown up, which may be called the “ post war generation,” which looks upon the blessings of civilisation with considerable scepticism. That generation is hungry for life. It recognises itself and no others. Consequently, it Is inherently revolutionary. There Is a breach between the older and the younger generations, and this is true, not only in Europe, but In America. Traditions, and Traditional Influences Have Gone. The third effect of the war has been the enthronement of science, and the belief that before science no problem Is insoluble. Scientific research has spread from the technical laboratory to the political council chambers. The' genius of the Inventor is often the genius of daring. Science today is a matter of close and intricate investigation; scientific research, and scientific planning have spread 'to fields, which, before the war, were entirely closed to them. You have, therefore, a new' world, the pharacteristics of which are In absolute conflict with pre-war conditions. The war produced the first conscious schemes of national planning. It was quickly proved In Britain;, for example, that It was impossible to carry on the war with any prospect of success by continuing they old, lazy methods. The idea of muddling through gave place to planning for victory. Modem social consciousness has adopted this idea of planning for peace as well as war, but the difficulty which the world has to face is that,-whilst planning may lead to victory in peace, the very conditions upon which the plans have to be founded render them so largely nugatory. Modern social consciousness sees that science, by- planning, can overcome Nature; can force Nature to man’s will, and. demands, that science, by planning, shall'direct the economic and social life of nations. Where, however, it appears a great mistake is being made, is to assume that planning is something new. Economists and politicians talk of “ the planned system of life ’’ as being something new. It is only new in the sense of being national in scope. There is no difference between the planning of economics by a Cabinet Committee and the planning of economics by a capitalistic system or a socialistic system.

It Is a great mistake to accuse capitalism r _.-ig lacked a plan. Capitalism, in its most modern development, is a huge accumulation of capital, which has to be employed, and it can only be successfully employed if it is employed progressively. Capitalism has in the past, and still continues, to liberate the driving force, and, consequently, Is a Very Admirable Instrument of Progress. Planned eoonomy, as it is regarded to-day, Is a contradiction of what it was during tbe war. Planned economy to-day wishes to put artificial restraints upon the driving forces of individualism, and to stop them at. a given point. We had only a few weeks ago Mr Bruce’s statement that the quota system, if imposed on the butter industry of this country, would not be a restriction, but a standstill. That is an example of the folly of planned economy. You progress to a certain point, and are then told, “Now, you mustn’t do any more." Any economy, as a matter of fact, whether it is capitalistic or socialistic requires planning. Every business requires planning. The larger the business, the wider, the more far-sighted, and the more careful must be the plan. Take, for example, a coal mine. That is planned far ahead. It takes so long, perhaps, three or four years, to sink a shaft to the required point, and the whole operations of that concern have to be carefully planned, considering costs, the possibilities of delay, capital expenditure, everyday expenditure, taxation, and the probable price at which the product will be sold when the mine begins to produce. The idea of the -socialist plan is nothing new. The management of every enterprise has to plan. The difference, however, between what is. called the “ planned system of economy ” and the capitalistic system is this. If the capitalist makes a mistake it is his funeral; if the State Planning Commission makes a mistake it is the State’s funeral. The second difference is this —that the capitalistic system is -composed of a large number of concerns. Their leaders cannot all be expected to be uniformly shrewd and capable. The probabilities are that the majority will be shrewd and capable, and their success will offset the failures of -the others, and, in any case, when those failures become apparent, changes will be made. With the State Planning Commission, unless you have the Shooting Proclivities of the Bolshevists, the mistakes of the Stale Planning Commission cannot, be corrected, and the whole community has -to suffer. Thirdly, the ultimate dictator of the capitalistic system is the consumer. The capitalist can never escape the domination of the market. Under the planned economic system, the dictator is the producer, which is generally a pretty poor thing for the consumer.