The Dominion. SATURDAY, OCTOBER 16, 1909. PUBLIC AND PRIVATE EXPENDITURE.

Dominion, Volume 3, Issue 639, 16 October 1909, Page 4

The Dominion. SATURDAY, OCTOBER 16, 1909. PUBLIC AND PRIVATE EXPENDITURE.

-Some, weeks .ago DitV Flndlay told' an audience of trades .unionists that if the Governmont had been ablo.to'take one-, firth of the unearned, increment''of .land \ allies it would have received, since 1891,; something hLc a million pounds in '■. respect of Wellington alone. Wo felt it necessary to deal with' this; statement along the lines of an inquiry into what would lnwo become of that million had tho Government takon it and 'what has actually been its fate. Db.Fimdmv's object, apparently, was to'load his audience to behove that the sum in question has been lying in tho cofferß of the capitalist, but it is pretty obvious, •as we showed, that it has been circulating continuously as current capital. Tho point is an important one, and wo reiurn to it in order to introduce a lucid and able discussion of the goneral question by tho London Spectator of August 28, which has just come to hand. The test of the Spectator's article is the Development Bill,'which, in an amended and much-, improved form,' has been passed by the Commons. Put briefly, the object of the Bill is to make State grants arid loans for the development of forestry, agriculture, and rural industries, tho reclaiming and draining of land, tho construction and improvement of.harboursand "any Other purpose calculated to promote the cconomio '< development • of the ■ United Kingdom"—in short, as the Spectator says, "to attempt to enrich the country by Government action." Tho motherthought of tho Bill .is that tho State knows how to spend people's money bettor than they know how to spend it themselves. It is based, that is to say/ on a most mischievous error. Supposing.that a great number of large public works and "developmental" projects are carried out by a Government at a cost to tho taxpayer of ten millions sterling, what is the gain or loss to the community.!, l When, The Domimok, or any other critical New Zealand journal, puts forward an argument on an economic question, Dft. FisDUt will not admit validity in it. Ho ascribes the argument to-the ingenuity of political prejudice. He can hardly accuse tho Spectator of hostility to the Government of which ho is an Ornament, nor do we think ho will oppose his authority to that of what is probably the soundest newspaper in the world. Wo would therefore invite his attention to tho following passages, in which the famous London weekly forward the argument in much tho samo shape as that in which it was advanced,in our columns:

Vic must not suppjse that those ton million pounds, if they • hud not b«n seisod by the tax-collectors and swept into the' Treasury, would havo romained idle. On tbo ( contrary, wo know very well that they would, havo boon used for a thousand industrial and productive purposes. Some of tho money would ,Jiavo been spent by railway or other'companies in making .dooks or.tramways. .Some would havo gone in making, factories or improving tho cultivation of the land. Other portions would havo been tlsed ill developing foreign trade,, in building cheape* homes for working men, ot- In countless other- forms of. useful:; human ■'activity. Bines wealth is strictly., limited,- and since it is Impoiilble to sat jour .cake - and have it,

tho fact that'ten millions is spent by the State must always mean that ton millions loss has boon spent by private' individuals, and that i all sorts of enterprising business men have had! to go short of money which they could -have turned over, oither : by themselves or. in cooperation with others,,' for their own, and thoreforo for the public benefit. No man can spend money on any.sort of enterprise without directly or indirectly benefiting the public as well as himself. ... What wo want to omphasise is, the certainty that if instead of raising money for public developments the Government fcavo that money in the pockets of the taxpayers, it will not bo lost or wasted, but will bo employed in a number of useful undertakings. In fact, it will,'according to tho old but now discredited maxim, fructify In the pockets of the. taxpayer.- Here, then, is . another way of putting our proposition. Will money be likely to fructify moro when used by individuals or when used by the Government? If the answer is that it will fructify more in the private pocket,'then if our object is tho increase of the wealth and prosperity of tho community—a? it undoubtedly is—it is obvious .that we had better leavo it there. A Government may bo able to spend money moro magnificently than nny individual or collection of individuals, but when the question is one of ,profit-i.e., an incroaso of the world's goods and the stimulation of exchanges—the private man will always beat the Government, and beat them : hollow. . . . Unlearned as wo may be in the new economics, wo are sure that the greatest source of human wealth is human- energy and enterprise. The- State ;whose inhabitants are most energetic, resourceful, and enterprising'will bo tho richest State. But to encourago those qualities in mankind 'an'incentive i? required, and all experience shows that the best incentive is tho hope of being ablo\ to make a profit—i.e., the posses-. sion of money to spend, not as the Slato or some prim ofheial wills, but as the man wishea to spend it himself. '

To New Zcalandcrs the "theory" hero set forth will appear. rather a statement of actual' facts than'.' an abstract statement of economic principles. During the past fifteen years the public has had abundant proof of the: wastefulness of State expenditure—waste, of course, consists simply in. "doing thingß, productive and unproductive, less well than they can bo done." Our railways administration is by iteelf sufficient to prove the case. But in nearly every direction State enterprise ha 3 shown itself to be imprudent and wasteful, las one would expect it to bo from tho absence of any special incentive to those entrusted with the State's expenditure to do the spending wisely, and well.'-The" taxpayers whoso money has been so misused that the Government admits -that ■it can without any loss of efficiency effect retrenchments, in the public sorvico to the; extent of £250,000 a year.have simply been deprived of ±1250,060 a.year without getting ahy return; With tho quarter of a that, has .yearly been wasted in tho maintenance of superfluous officials the community could have done a great deal of valuable developmental work. The position of New Zealand in respect of naval defence affords an excellent illustration of the sterilising ■effect of heavy, taxation for the prosecution ;of a wastoful .policy of mingled paternalism.and patronage.; If the taxa : tion per head had; not risen above the high figure at which Mr. Seddon left it, tho community would have in its pockets,; available for the financing of a real naval policy, the'better ■ tfart'of a million a 'year. ■■~) '.•.■..': ;,,'\ .;'/.' ; .'' :..