TIMELY WARNINGS.

Hawke's Bay Herald-Tribune, Issue 67, 6 April 1937, Page 4

TIMELY WARNINGS.

In nearly all countries where economic recovery is making progress those in authority are issuing warnings against th& dangers of artifically created "booms." Of these we bear, in the first instance, from the Old Country, where apprehensjon has been particularly aroused owing to the abnormal rearmament expenditure forced upon its Government hy Continental aetivities in the same direction. The immediate result has been that, beginning with raw material and ending with retail supplies, prices are advancing rapidly to what are regarded as altogether unsafe levels. When the National Government first, took office there some five or six years ago it was recognised that an effort should be made to gradually raise prices to a remunerative plane that would admit of the expansion of productive industries and lead to the reabsorption of the unempiloyed into permanent employment. The policy thus adopted was steadily pursued and with the good results which we have seen reflected in the dawn of prosperity in the British oversea dominions. The great fear now is that the extna impetus given by rearmament expenditure will carry the process of recovery along at an altogether too rapid rate that cannot possibly be sustained once this factor comes to an end. In short, this exceptional feature seriously threatens the industrial and commercial stability which it was the aim of the British Government to achieve. Just as our own sound prosperity depends very largely ' upon that of the Mother Country, where the only substantial and reliable market for our exportable produce lies, so it is to be feared that boom conditions started there. may also spread to the dominions. More especially may this be the case in our own little country where every effort is being made locally by our own Government to promote like artificial conditions. In the United States sound economists are voicing the same apprehensions, and the Gdvernment there is taking steps to check the tendency already becoming apparent for recovery to take on a speed that cannot be maini. 'ned and can lead only to early exhaustion. Even in Australia we have issued from experjenced and regponsible quarters words of caution against an assumption that the return of prosperity has been firmly established. There the reactions from the depression have hitherto proceeded upon fairly sound lines with every prospect of attaining permanency. Latterly, however, there has shown itself an inclination to go too fast that is occasioning some anxiety among those who have seen the dire effects of booms of one kind and another. cTt is, of course, difficult to impress this upon the younger generations and upon those who live only for the day as it passes and are eager only to make the most of what it offers. It is therefore for those in authority to take thought for them and to see that the pace is not made too hot to last. In our own case it has to be recognised that as yet our apparent prosperity has not been given any very sound foundation. In the first case it arises in great measure from governmental expenditure, of which much will yield no vitalising return at all and most will give returns only at some more or less distant date. Compared with this, industrial expansion, the only true basis of prosperity, has advanced but little and it has yet to be learned whether our industries will be able to stand up to the extra burdens that are being laid upon them. It has also to be realised that the dairying industry, from which a great deal of the national income is derived, is being kept on its feet only by a heavy subsidy, which is next season to be materially ( increased and which must eventually fall upon the p taxpayers to provide. Our Government is making much of the fact that for the financial year just ended there is likely to be ia surplus of some £100,000 in revenue over expenditure. It is as well for us, however, to remember that this results from an increase in taxation collections that will be at least 45 times that amount. And that does not take account of the loss so far incurred by the Government on its Dairy Industry Account, which may be roughly guessed at another couple of million. What, too, of the financial year on which we have just entered, in which provision will have to be made for a full year's State pensions at the increased rates? The prospect of our industries securing auy much-needed relief from taxation certainly does not look very bright.