LABOUR FALLACIES

Evening Post, Volume CXXV, Issue 23, 28 January 1938, Page 5

LABOUR FALLACIES

MR. NASH'S POLICY

VCRIPPLING OF INDUSTRY

"UNSOUND FINANCE"

, Fallacies in the Labour Government ccenomic and financial policy wei pointed out by Mr. W. L. Barker i an1 address given at Upper HuV. la . evening under the auspices of .tt National Party. Ho contended In; - the Minister of Finance (the Hon. V Nash) was using public credit to smas private industry, and strongly crit cised the 'principle of spending hug • sums on public works in a period c rising prices. Mr. Barker claimed that improve ecqnpmic conditions overseas wer solely responsible for ,the increase i the national income in New Zealanc He said that he was prepared to mcc Mr. Nash on any platform in the cour try and prove J.O any audience ths t the Minister's national finance wa unsound. FINANCING OF PUBLIC WORKS. ."Most of the measures followed b, Mr. Nash to alleviate uncmploymen have been financed out of budgetar, . .resources, in other words out of taxs tion, which means that it has not ii ahy way produced an addition to th purchasing power of the country," sail Mr. Barker. "The purpose of heav; spending on public works as carriei out; by Mr. Nash was a twofold one The first was to reduce unemployment and the second was to raise the inter rial-price level and relieve the burdei of private indebtedness. Now publii works can produce these two effects but it all depends on the method bj which the public works are financed If they are financed mainly by infla lion they will tend to serve this dua purpose. , But if they are financed ou of taxation the dang>r is that norma' productive activity will be greatly discouraged 'couraged owing to heavy taxation, am thaf is just the position in New Zealanc today. In this method lies a fallacy . "Large public works should not b< encouraged in comparatively gooc times. When a State is moving intc prosperity it is better for industry tc absorb the unemployed than for the State to strangle industry by taxatior so as to obtain money, to create cm plojrment for men who, if taxatioi: had-.been reduced, would have automatically been absorbed into private industry. Population and employ- • merit follow capital and profit. Bui if .a 'Minister of Finance imposes heavj taxation on industry he must in the long run create more unemployment —which is exactly Mr. Nash is heading to do todaj\ I MONOPOLISING OF CREDIT. "Is am prepared to admit that in a period of. depression . public works . should become ah integrals part of oui economic system, but they should' be financed essentially by borrowed money or through an unbalanced Budget which could be carefully ', balanced when good times came round again. . Butiit is not wise or sound for a Minister of Finance to spend' huge sums on public works during a period ' of • rising prices, because *by so doing he is monopolising credit .which ■ would otherwise be absorbed in private enter- '• prise, and thus private industry, which normally absorbs about .65 per cent, of our people, is starved by a shortage.of credit and excessive -taxation which i prevents industry' ' from^ expanding, '" frightens the necessary capital out of • the country, and keeps capital from being invested in"'New'Zealand. "However, to allow private enterprise in comparatively , good times to absorb the unemployed-would not suit Mr. Nash, because' lhat v would not be working towards Socialism.' ' For Mr. Nash to establish Socialism he knows that he must first cripple private enter- . prise and the easiest way to do that is to impose,heavy, .taxation ancT other burdens like the 40-hour week on industry so that our private industry, competing with thte rest of the world, must break down, leaving the way . clear for Mr. Nash to establish largescale organisations'under the direction ; and discipline of the1 Slate. That-is : what Mr. Nash calls constructive Socialism! ".;';>. JROMISES AND RESULTS. "Sections .within a'community may thrive temporarily at the expense of another section, but in the long run they all suffer, and that was where Mr. Nash and his colleagues made their big mistake in 1935. They promised to make the fanner prosperous by' a rguaranteed price. They promised to make" the" manufacturing industries prosperous by protection. They promised to make the labouring section prosperous by higher wages and shorter hours. They promised to makethe investor wealthy by reducing taxation. But what have they done? They ] have 'commandeered the farmers' produce; given him depression prices for his produce but boom coste on which to work. They have crippled the , manufacturer by taxation and high costs: They have frightened the investor' away by taxation. They have given the working people higher wages and shorter hours, but their policy has caused costs to soar so high that the worker today is realising that the position is rapidly developing where he will soon be worse off financially / than he. was under the old order. "Mr. Nash was going to release bank credit" left and right and at the same time lower the'exchange :rate," said Mr! Barker in.a reference to Labour's plans foVcohtrol of the Reserve Bank. "But he soon discovered that he has no hope of reducing the rate of exchange while external prices and costs are rising and he has also discovered that 'if he throws too' much bank •credit about he will be in the awkward position of haying to allow the rate of exchangeito'break and go upio about .135-40. 'Of one thing you-'can rest assured, Mr. Nash cannot lower the rate of exchange while he,is permitting costs to rise. "The' only way that Mr, Nash can hope to achieve his ideal where he can be more liberal with bank credit is by' establishing State .control of imports and exports so that he can eliminate the rate.of exchange and start a system of State bartering. Then he woulcj. be able to use his Bank credit a little more-fully but at the same time such a scheme would require a degreeof State planning and State cojntrol over business'and industry in New Zealand that we would. not tolerate. But unless Mr. Nash is prepared to plan industry and control this country along the lines of Russia he cannot do much except break one important election pledge after another; and they Mr. Nash Minister of. Finance! He has a lot to learn yet, but New Zealand 'is paying for Bis education."