The Press Saturday, March 5, 1932. The Economists' Report.

Press, Volume LXVIII, Issue 20488, 5 March 1932, Page 14

The Press Saturday, March 5, 1932. The Economists' Report.

The report of the Committee oi Economists, as released by the Government, is robbed of its full importance bv the omission of two sections dealing with the Budget. These are to be laidbefore Parliament with an early statement by the Minister for Finance; but it is difficult to see why a delay should lave been considered necessary which prevents the report from being studied at once and as a whole. Even if the Committee had considered itself bound to offer specific recommendations, :t duty which it disclaims, they could not have been road with any degree of certainty as anticipations of Budget proposals, while guessing would have done i:i. more harm than guessing whether the Government will tiy to peg the exchange at 40 per cent., ox* reduce fixed charges by 20 per cent., or act on any of the other suggestions in the published parts of the report. These, 't j 3 to be hoped, the Minister for Finance will with the least possible delay permit to be taken in their proper connexion with the two sections withheld; but in the meantime they are of great interest and importance as they stand. Although the Committee disclaimed the duty of submitting a programme to tlie Government or of answering for it the questions of political expediency that may arise, the report is neither abstract nor barren. For example, the Committee makes perfectly clear its opinion in favour of action to reduee all fixed charges—mortgage and other interest, and rents; to cut wages by 10 per cent, and relax the conditions governing employment; to cover the dc-ficit and the cost of essential public works, otherwise impossible to finance, by the issue of Treasury Bills; to cut local body expenditure, other than interest and debt charges, by 25 per cent.; to confine borrowing, when it is possible at all, only to the completion of essential works in hand, and then t> eliminate it; and to maintain a high exchange rate. All of these recommendations —it is absurd to describe them otherwise —are very ably supported, both by general argument and by a wealth of statistical evidence, which gives the report extraordinary and permanent value; but reference must at present be confined to two or three of them only. The case for allround reduction of fixed charges, including rents, is rested upon the ground that the loss of income cannot be left to be borne largely by the export producers, the unemployed, and wageearners but must be spread widely and equitably; that money contracts are fixed in terms of a variable commodity; and that since fixed-money creditors gain by the reduction of all costs they ought to contribute' something to the reduction. This is a strong though not conclusive case; and it is strengthened by the suggestion of a method similar to that which the Dominion has already accepted and put into operation under the Mortgagors Relief Act. Second, there is the definite recommendation o" a further cut in wages, in supporting which the Committee deals sharply with the "reduced spending power" fallacy, referred to in another article. But the long section devoted to the exchange problem is curiously disappointing, in the main because the Committee concentrates upon the benefits of a high exchange—as high as 40 per cent.—without plainly saying whether such , a rate would be artificial or the expectable result of existing or prospective conditions. But the addendum to the report, signed by Mr A. D. Park, Secretary to the Treasury, leaves very little doubt that his colleagues, in demonstrating the net gam of a high rate, are setting up a plea for the pegging of the rate to secure it; and he says a great deal to shake confidence in such a policy. It should be said, finally, that the Committee has done a tremendous, service to the Dominion in two general respects, in clearly exposing the antecedents of the depression, especially the . shortsightedness and ex - travagance of the Dominion's finance, and in insisting on the first and last condition of recovery. ",The funda- " mental issuq," it says, " is to restore '' the spending power of the exporting producers by causing to " emerge." If this is remembered, by the Government and by all sections of the- community, present sacrifices will be-more confidently imposed and more easily borne, beciause their ultimate utility to everybody will be more clearly seen.