The Press TUESDAY, MARCH 12, 1935. The Monetary Committee's Report

Press, Volume LXXI, Issue 21420, 12 March 1935, Page 10

The Press TUESDAY, MARCH 12, 1935. The Monetary Committee's Report

We print this morning a review by Mr J. M. Keynes of the report of the Monetary Committee set up last year by the New Zealand Government. Mr Keynes's appraisal of the report and his discussion of certain issues which it raises are valuable for two reasons in particular. One is that a determined effort has been made in New Zealand to persaude the public that the report is valueless. On the one hand it has been represented as a skilfully contrived attack on the banks and an ex parte justification of the Governments policy. On the other hand, and this form of criticism is the most common, it has been condemned as a lame apology for the existing monetary system, an attempt to discredit currency theories popularly supposed to be " advanced." The truth is that very few of those who have criticised the report have read any more of- it than the necessarily brief newspaper summaries of its more important recommendations. It is not sufficiently realised that the report provides the only authoritative, complete, and analytical study of the New Zealand .monetary system and that it is on this account one of the most useful official papers ever issued in New Zealand. Mi Keynes's high estimate of its worth should do something to persuade intelligent citizens that the report is worth buying and reading carefully. The second reason why Mr Keynes's review is useful is that it lays emphasis on what should be, and unfortunately is not, an obvious tiuth about New Zealand's economic position. Before 1929* New Zealand's per capita wealth was the highest in the world because her per capita trade was the highest in the world. The rise in unemployment during the depression, the world trend to economic nationalism, and the restriction of access to the British market Lave led many New Zealanders to (ueny the validity of the connexion between trade and prosperity and to assert, half believing and half hoping, that a policy of drastic import restriction in the interests of local industries can more than compensate for a decline in exports. Mi Keynes's opinion on the point is worth quoting, particularly as he is no doctrinaire free-trader. For a country in which foreign trade occupies so large a proportion of the national economy as in New Zealand, an attempt to change o\ er on a large scale from wjrktng for export to working for home investment or home consumption would probably involve too severe a reduction in llie standard of life. There is, in truth, no rerriedy for New Zealand except a recovery in her terms of trade with the rest of the world to a more normal level. It is probable of course that Great Britain's agricultural policy will com-pel some restriction of New Zealand's exports and in consequence a greater development of domestic secondary industries. What is important is that there should be no stampede into extreme economic nationalism. Even if thp present British quota proposals are put into effect external trade will still be easily the most important source of New Zealand's wealth.