ECONOMIC APPEASEMENT.

Waikato Times, Volume 121, Issue 20230, 26 June 1937, Page 15 (Supplement)

ECONOMIC APPEASEMENT.

WHAT MUST BE DONE. :: PURPOSEFUL ACTION

(P. W. Martin in the International Labour Review.)

With THE JOINT STATEMENT of monetary and commercial policy issued by the French, United States and British Governments on September 26, 1936, the world entered into a new phase of economic development. The adjustment of currencies thus initiated opened the way for economic improvement in a number of countries. The great depression, in its most acute manifestations is now definitely a thing of the past. Not so its consequences. The seven between the autumn of 1929 and the autumn of 1936 have wrought fundamental changes in the economic outlook of the nations. The full extent of these changes timo alone can reveal, but one outstanding feature is already evident. In strong contrast to the prevailing sentiment of the immediate War period, there is now no marked desire to attempt to put the clock back and return to ‘normalcy.’ It is intuitively recognised that some vital modification has taken place in economic relationships rendering this impracticable. It is not always aS Tn! rea ßsed in what this modification consists. The Governments in the various countries are now one and all committed to economic action. There is No Department of Economic Life which has not been invaded by the State; and although in some cases the Government would willingly withdraw if it could, there seems no reasonable prospect of this becoming possible to any considerable extent. Even by those who desire it most, a reversion to the quasi laissez-faire system of the nineteenth century is recognised as impossible. Quite apart from any other consideration, no political party can permit economic depression to “take its course” with all that implies in human deprivation and suffering—and still retain its hold on popular support. The prospect of Governmental economic action thus held out, while full of possibilities, is far from reassuring A survey of measures taken during the period of crisis leaves an overwhelming impression of amateurishness, of opportunism, and in many cases of subservience to special interests. That this should be so is not surprising. As emergencies arose they had to be met by whatever means were available. The organisation and data required for seeing and understanding the situation as a whole were non-existent. The men most expert and influential in the questions at issue were usually those who had large interests at stake. Under these conditions, economic interventionism, bearing little resemblance to anything that could be justifiably looked upon as “planning,” was the best that could be expected, and, in most cases, all that was achieved. The question now before the nations is whether interventionism is to continue or whether economic planning in some form is to take its place. More explicitly, it has to be decided whether such economic action as the State finds it necessary to take shall be governed in the main by chance circumstances, short-run views and political considerations, or whether an attempt shall be made to Devise More Systematic Methods. In putting the choice in this form there is no underlying inference that planning must necessarily prevail. There can be no such certainty. Planning has ite problems; and they are not to be overcome by good intentions only. The essence of the matter lies in whether the nations are determined to take the measures necessary to solve these problems . . . The fundamental issue on which a decision is at present being taken is not, as is sometimes still supposed, between economic planning and laissez-faire. That question was decided in the years following the collapse of 1929. For good or ill, Governments are already exercising and must continue to exercise an active influence in economic affairs. The question now is whether such action shall be coordinated or haphazard. If, taking the world as a whole, it continues to be haphazard, there is the possibility—not to put it higher than that—of planning in its most sinister form ultimately being forced upon practically all countries by the Fear or Fact of Armed Conflict. The alternative to haphazard intervention consists

in positive, co-ordinated, purposeful action on the part of the various countries, with tne prevention of war and the advancement of social well-being as the principal aims in view. From the standpoint of economic planning two main conditions repeatedly appear as essential to the attainment of this aim. These conditions are: Adequate and sustained buying of goods in general, so as to keep production and employment at a high level; freer world trade (and the freer circulation of capital that goes with it) so as to extend to all countries the higher standards made possible by modern industrial technique. These conditions in turn call for four main lines of action: Specific measures in all of the major countries to sustain effective demand and thereby maintain internal prosperity; agreement on the general principles to be followed in maintaining internal prosperity, so as to obviate international disequilibrium arising from the application of incompatible principles in the different countries, on the basis of this maintenance of internal prosperity, freer buying abroad on the part of the great creditor and gold-holding countries, leading the way to a general increase of world trade and a reduction of trade barriers; and setting up of national planning organisations by which the necessary co-ordination, national and international, may be secured. There are, of course, many- other measures required, certain of them of the very greatest importance; but these four-would appear to be fundamental. Without monetary action, designed to sustain effective demand, production and employment are subject to disastrous fluctuations. Without international co-ordination of monetary policy, world economy is in Constant Danger of Disruption. Unless measures to sustain effective demand are being applied in all of the principal countries, and at the same time co-ordinated internationally, nations cannot and will not trade freely with one another. On the contrary, in their attempts to meet the difficulties arising from inadequate demand, they wijl endeavour to export to the utmost and shut out all goods that can possibly be produced at home —a course detrimental alike to world peace and to higher living standards. Finally, while it is true that the movement towards a co-ordinated monetary policy and towards freer trade may go some distance without specific organisations being set up, the permanent running of such a system cannot be satisfactorily assured on a make-shift basis. In all the major countries, at least, there must be the necessary machinery without which economic planning remains no more than an aspiration. The possible outcome of measures such as these should not be exaggerated. They touch the material side principally; and the psychological elements are at least as important as the material. At the same time their efficacy should not be under-estimated. Adequate effective demand and freer world trade do not guarantee world peace, but they provide an economic basis making world peace possible. Neither do they guarantee social justice, but they furnish the essential foundation for a general improvement in the standard of living and all that goes with it. These the possibilities, the Potentialities, of Economic Planning. How completely they will be realised during the next few years there is no means of judging. The three positive factors in the present situation—economic recovery in the majority of countries, the general change-over to expansionist methods, the statement of September 26, 1936—are encouraging, but far from decisive. Everything turns on how they are followed up. For this reason the action taken in the immediate future is of critical importance. But again, not decisive. Economic planning is not a short-run issue. It is, rather, a new phase of the age-old struggle for control between man and his environment. Applied science has enabled man to ftse himself to an extent never before known from th domination of material necessity. It has now to be seen whether applied science in its turn can be controlled.