The Guardian And Evening Star, with which is incorporated the West Coast Times. FRIDAY, JANUARY 15th, 1926. A STUDY IN ECONOMICS.

Hokitika Guardian, 15 January 1926, Page 2

The Guardian And Evening Star, with which is incorporated the West Coast Times. FRIDAY, JANUARY 15th, 1926. A STUDY IN ECONOMICS.

TirnuK are I hose who al e ever .seeking by reiorm efforts to adjust the situation created by wealth. That those efforts (often the host iutentioned) are misdirected is noted in a recent New York linaneial journal which remarks that tile activities of well-known religious organisations in the lino of social agitation ate .sometimes entrusted to people who although doubtless well equipped with zeal mid good intentions, al‘e mil hY|| qualified to discuss Cvonoinic questions. For example, it continues, the Department of Social Action of the National Catholic Welfare Conference is made to

appear as eriteising re.ont, remarks by President Coolidgc upon the subject of taxation. To the President’s

contention that the whole people, will I*' benefited I»v the reduction of taxes

oil large incomes hecaucs iiivestments in product Ivo industry will increase, the .st.ntcineHi says: “it is doiihtful whether any competent economist accepts tliis theory. Our industries today .are suffering from tt*o much capital rather than inti little. This proposition is absolutely irrefutable. Oohseipiontly. Ihe money which lower income taxes would divert to industry will do more good to the public if it continues to he expended in some form of public work or in the payment of salaries to government employees.” This comment is «■ i v additional circulation by the Federal [ Council of Charcher. With the great I y-h'r olilv a lew years behind us, and 1 the whole world still suffering from the waste of capital which it caused, it would seem that the theory that an oversupply of capita! exists would he distrusted oven by a person without economic training. The idea pro-

bablv originated in a miseonception of what is capital. It Consists wholly of wealth in productive forms; in other Words, of property and equipment used in supplying the wailts of the population. Evidently there can he ho general oversuppiy of tlie means of production so long as tlie population has wants ufisatisfied, and the spokesman ol a welfare organization .should know that this point has not been readied. The wilief ()i iiu? quoted paragraph may have hern influenced by reports of over-production in certain lines of industry, resulting from unbalanced expansion in war-time and the disorganisation of trade which has been a world wide result of the war and illadvised agitation. The view, how-

ever, is a superficial oilo. The danger of over-production in the stcei "industry wotihl quickly disappear if the railroads were provided with the capital required to prepare for the growth or traffic ns they would like to do. The demand for housing iicooinniociations is a demand for capital; the hope of higher wages, shorter workifig hours and a higher standard of living for the masses depends upon increased productivity throughout industry, which can he had only by means of new capital in the form of equipment. The old capital equipment is continually replaced by new. and new ideas without end are always waiting on capital to piit them into effect. The current rate of interest i.s significant of the relation between the demand for and supply 0 f capital, and it is significant that the general level

of interest rates is not yet as low as before the war. On the continent of Europe where tlie results of the war are mast felt, interest rates are very high as compared with the pre-war 'ate, and millions are sought in the U nited States to restore tlie industries of those countries. An increasing simply of capital seeking investment would give the United States greater power to aid in the rehabilitation of Europe, and at the same time mean declining interest rates upon mortgage indebtedness at home, and lower returns to capital generally as compared with the earnings of labor and all personal effort. As against this general tendency an apparent oversupply of capital in certain industries signifies only that more capital is needed in others to restore the industrial equilibrium.