LOOKING TO THE FUTURE

Evening Post, Volume CXXI, Issue 1, 2 January 1936, Page 8

LOOKING TO THE FUTURE

The complele political' change wrought by the electors on November 27 made a break between the past and the fulure of New Zealand. At first one is inclined to say that the events preceding this change have, by the change, been thrust into the limbo of the past; that the election has opened a new volume of New Zealand history and that all that has gone before is now of academic interest, but no practical importance. This is only partly correct. The change of Government involves a new approach to (he economic problems of the day; and the difference in the method of approach means that the problems are viewed from a different angle, but fundamentally they arc the same as those which the Dominion faced at the beginning of 1935. Then, however, the Government was known, its policy had been for the main part revealed, and, though it proposed new and untried measures for the emergency, it contemplated no drastic and far-reaching permanent alterations of the economic and social system. Its plans were either for gradual change, or temporary suspension of principles for the period of the emergency. Now we have a Government which is committed lo alteration of fundamental principles, but the commitment has been made in terms that admit of widely varying interpretations. Indeed, it may be correctly said that the authoritative statement of the Government's. intentions has been so worded that the actual policy is in a great measure unknown. Equally it may be said, with no disparagement of the members of the new Cabinet, that the capacity of the Government has yet to be tested.

With two unknown factors — policy and capacity—it would be rash to venture even the most general .prediction of the course of events for 1936. We cannot do more than restate the problems which confronted the Dominion in 1935 and consider what progress has been made in their solution and what remains to be done. At the beginning of 1935 the Coalition Government entered upon the task of giving permanent form to the relief which had been afforded lo producers previously by temporary measures. It proposed to make a final adjustment of the liabilities of rural mortgagors, by voluntary means as far as possible but with compulsion in the background. That compulsion, in the background in the Act and liable to be brought into the foreground in the practical application of the legislation, vitiated the contracts to which the new law applied, for voluntary adjustment under a threat of compulsion is not truly voluntary. The contracts were further affected by the provision of a new basis, the productive valuation, for ascertaining the mortgagors' liability, and by saddling the mortgagee with liability for a wagecompensation if the farm were vacated. A second part of the permanent adjustment was the establishment of the Mortgage Corporation, a semi-private organisation but with a majority of Government directors. The purpose of the Corporation was to stabilise the low interest rates which had been achieved by direct compulsion, by conversion under threat of Compulsion and by the sudden redemption of Treasury Bills with Reserve Bank notes and credits which released for private use a great volume of credit.

These were the Coalition Government's permanent recovery measures. They were supplemented by a balanced Budget (with a large fortuitous surplus last year), by efforts made through the Unemployment Board to direct labour into permanent employment, by preparatory work through the Executive Commission of Agriculture for better organisation of production and marketing (aided by the favourable meat agreements negotiated by Mr. Coates), and by partial restoration of wages and pension cuts and reduction of unemployment taxa-. tion. The net result of these various recovery measures cannot at tin's stage be accurately assessed. On some of them a fair judgment cannot be given for years. For illustration, the transfer of State Advances securilies to the Mortgage Corporation will give an immediate benefit to State borrowers through reduction of interest at the expense of the whole community, but in the long run the mobilisation of mortgagors may lead to political pressure upon an institution which is still under State control. Wriling down mortgage debts; also, may give relief for the time but hinder the return of confidence in rural land as a security. Generally, however, it may be said that the temporary effect of the recovery programme has been to aid producers, but to militate against full return of public confidence because so many of the methods adopted have been unorthodox, impermanent, and productive of misgivings. In all of this there is useful guidance for the Labour Government il it will be guided by ihe experience in the past. The Coalition Government was no doubt a victim n(

public depression discontent. But its defeat would not have been so decisive and complele if it had not Itself destroyed or weakened the principles for which it originally stood. It was formed as a National Government; it fell as a parly which had placed a section first. It inherited adherence to certain principles opposed lo monetary manipulation and compulsory interference with contracts; bul il departed from these principles and prepared the way for a parly which frankly advocated credit and currency control and adjustment of mortgages. By some of its measures the Coalition Government tin-

doubtedly gave relief lo producers and others hard hit by the depression. It reduced the burden of excessive capital costs so that a moderate recover)' in prices gave promise of returning prosperity. But the means adopted weakened confidence—the confidence of the trader, the confidence of the investor, the confidence of the spender —and finally the confidence of the voter. Labour enters office under conditions resembling those, in which the Liberal Party look oflice in 1891. There are indications that the long depression is ending, and that, with good navigational skill, New Zea- ] land may float on a rising tide to better times. The Liberal leaders of llic nineties followed the advice of Brutus: There is a tide in the affairs of men Which, taken at the flood, leads on to fortune. On such a full sea arc we now afloat, And we must take the current when it serves, Or lose our ventures. Making most use of the tide lhey brought their ship inlo safe and pleasant waters. Will Labour now be content lo do the same—lo use the tide, and not to attempt more spectacular progress at the risk of shipwreck? Will the Government, to drop the metaphor, be warned by the experience of its predecessor that neither cheap credit nor any other seeming benefit is worth half so much to the country —and lo the Government of the country —as the confidence of the community and will it shape its policy accordingly? The caution and moderation of the Prime Minister, and the discretion of the deputy leader of Ihe parly (Mr. Fraser) and the Minister of Finance (Mr. Nash) encourage us lo hope that the policy will lie so moderately planned and implemented that misgivings will be dispelled and prosperity built up on the only possible foundation — public " trust, and a nationalism which knows no class favour.