INFLATION PERIL

Dominion, Volume 37, Issue 229, 24 June 1944, Page 6

INFLATION PERIL

Stabilization Seen As A Necessity BANK CHAIRMAN’S WARNING “The weapon against inflation is some form of economic stabilization, such a scheme as we have had in New Zealand since December 15, 19'42,” said Mr. A. T. Donnelly, chairman of directors, in his address at the annual meeting of the Bank of New Zealand yesterday in Wellington. “At the present time people in positions of responsibility and authority, both capital and labour, both Government and Opposition, have urged and are urging the cancellation of the regulations ami the abandonment of the principle. The object of stabilization is to keep the buying power of the pound as near as possible the same all the time, so as to defer or prevent the arrival of the day when the ordinary man will take a Reserve Bank note out of his pocket, look at it and wonder doubtfully what it will buy. It is not a popular principle, because it is not a selfish principle, because it requires citizens of all classes to give up, during the war, opinions, habits and ways of life which are deeply cherished and have been hardly, won. If the day comes when the ordinary man runs away from his currency and wants to get rid of it at any price, for anything at all, then we will have panic, disorder and perhaps revolution. “One of the surest ways to destroy, a civilization,” continued Mr. Donnelly, "is to debauch its currency so that u people loses faith, first in its money and then in its society. All citizens agree on the principle of stabilization for other citizens, and will put in the peg as soon as thev have had the last rise in prices or wages to which they, say they,, or their class, or trade, or business, are justly entitled. In the face of troubles, some unavoidable, the scheme has. bad a reasonable amount of success. Compared with some countries, it has beeu a splendid success. As iu every human institution. it has to have some flexibility about it to survive at all, but the line of stabilization must bend and not break, The danger of a break is now real and close because what the new economists call ‘pressure groups’ on both sides of polities, both capital and labour, are using voting and economic strength to break down the principle, at least enough to let their own prices or wages rise and go more or less free. The philosophies and interests of the ‘pressure groups’ are in strong opposition on many points. Their contentions sometimes have this common denominator, they give all the reasons why these groups should get more, do less, lose nothing and yet win the war The ‘pressure groups.’ like Sairson of old, are strong, strong enough to puli down the pillars of the temple of society, but if the temple falls they will be buried under it with everyone else. “It is true that what is asked for in each instance seems little enough, perhaps only a fdw pence a pound, or an hour, or a bushel, or a garment, or so on, but the total of these increases lain and does amount to large stuns. We all have seen in the rivers of this country great floods which have begun as tiny trickles, continue to grow and expand till they break through their banks and defensive groynes—so it is with inflation. It is easily checked at its source, but in full flood is irresistible and can destroy a people and its society.

“Capital exists in many forms and can be destroyed in many ways. Destruction of capital in a building can be caused by war or earthquake and the broken fragments are there for any man to see. Destruction of capital in a bank account or a life insurance policy can be caused by inflation. The destruction is just as final, just as sure, but is not so plain. There is no cure for the destruction of savings or capital by violence, inflation or any other cause. “It has been said against the stabilization scheme that it was brought in too late; that it should have been adopted after the Economic Conference in 1940 or when the war began. We should never forget the simple truth that no matter where you are going you have to start from' where you are now. If stabilization was necessary in 1940 it is all the more necessary in 1944. If we are over the brow of the inflationary precipice we can stop and climb back, or at least stop where we are. There will never be an easier time to stop than the present. We most certainly must stop if we hit the bottom, and we will stop there for good. The Fixed Income Classes. “While I am discussing .inflation and stabilization, I would like to refer ■to those citizens who will suffer most if stabilization fails and inflation runs wild. These people cannot be labelled as capital or labour, Government or Opposition, because they run across other social divisions and are included in all of them. I refer to the middle and the small fixed income classes whose rewards have gone up little, if any, since the war began. The fixed income classes are vulnerable because they have no great organizations, no strong, eloquent leaders, no easy access to Parliament or the Press. They are pinned down' on the economic battlefield, while the ‘pressure groups’ fight on them and over them. “In these classes there are those who depend upon war pensions, old age pensions, disability pensions, and there are superannuitants, private and State. There are many people under middle age with large families and young families. There is also one helpless section, with a paramount claim on our gratitude and our sense of justice—they are the wives, the children and the mothers of our fighting men, who live on allowances and on that part of a serviceman’s pay which he leaves behind. It is right to speak on their behftlf, because the men whp could speak for them are away fighting for them anil for us. "The failure of stabilization with its consequent inflation would cheat the wives, the children, and the mothers of our fighting men of part of what is their due and of part of the means whereby they live. The value of thfir money can be halved with a pretence by us that the amount is just the same. The women whose men have gone away are an example to us, for they live in anxiety and loneliness, but they are always hopeful, and remain proud and silent. “From recent public statements, resolutions. and reports in the Press and elsewhere, it would almost seem that certain members of the ‘pressure groups,’ both capital and labour, on both sides of politics, are on the way to believe that our society is the private property of all or some of these groups, and that these groups have a priority over other people for special treatment. Our society is a delicate mechanism, more complex than any engine of war, made up of individual human units and sets of units, some more important than others, but all with their uses if the mechanism is not. to seize and stop, but is to run smoothly and well. “The fixed income classes, squeezed as they are b, tween the ‘pressure groups.’ now find their money bringing less and less. They are silent and easy-going, and prefer not to he disturbed. They lack ‘solidarity.’ They move slowly to protect themselves, but when lhev do move, the experience of politics and history tells us they are hard to halt. 1 '