The Guardian And Evening Star, with which is incorporated the West Coast Times. MONDAY, APRIL 27, 1931. CAUSES OF ECONOMIC DEPRESSION.

Hokitika Guardian, 27 April 1931, Page 4

The Guardian And Evening Star, with which is incorporated the West Coast Times. MONDAY, APRIL 27, 1931. CAUSES OF ECONOMIC DEPRESSION.

Sin Henry Strakoseli. liie well, known European economist, does not believe that over-production is soleiy rosponsilile for the ]ovsent depression, ImL that me major cause ol the lad m eo-nimodity prices is monetary policy, in support of this view he refers to the work of the Economic Section of the League of Nations covering the period from 1923 to 1928 inclusive. '] lie fall in the price of foodstuffs in 1929, he says, is generally attributed to vast over-production in the preceding year, hut it' is only necessary to go back to 1925 to find that in that year the production of cereal crops increased by 8.8 per cent., despite which there was no general slump in prices. The economist mentioned admits that over-production or under-production of individual commodities can and does take place, but contends that anch n condition is usually checked by a movement of prices of the commodity affected relative to those of other commodities, Sometimes' this corrective js neutralized by artificial means. In maintaining that monetary policy has booiii an important cause ol the present economic conditions, it would .seem, soys a London financial journal, that Sir Henry Strakoseli makes insufficient a flown ml 1 for such factors as iho collapse of Stock Exchange speculation in America, which was followed by a great reduction in. the purchasing power of that country, the political settlement in India, and China, and the effect upon the trade of the two last countries of the great fall in the nrice. of silver. It is difficult to believe that much of the decline in oommody prices would have been prevented had the central hanks of the world adopted a different monetary policy, and it is also difficult to believe that cooperation among those- institutions in a settled puli'y would in itself bring about an appreciable recovery from presint, day conditions. When economists urge the need for a change in monetary policy they presumably mean an addition to the amount of banking credit available for trade and other purposes, but if such a policy were enforced there would surely be some- risk of inflation, thus bringing about an unhealthy rise in prices; in other words, a decline in the purchasing power of gold. Sir Henry Strakoseli points out that, if the general level of prices falls, the circumstance benefits those who have claims to money, including the wage and salary earners, but the burden of providing this benefit falls heavily upon those whole livelihood, depends upon, profits made in manufacturing and trade, a section that- includes all holders of Ordinary or Deferred shares in joint stock companies. Tt would certainly he helpful if the purchasing power of gold, the latter being the standard of value practically throughout the civilized world, could he maintained within reasonable limits. Sir Henry Strakoseli says that a large and influential section of ecu no mm opinion believes that intelligent cooperation among central banks would achieve this, and in his view the stock of gold available for monetary purposes is amply sufficient to sustain prices considerably above the- present level, provided a reasonable amount of economy is exercised in its use. Among the causes other than monetary policy that contributed to the great fall in prices in the last two years, he instances the existence of pools or rings formed to prevent the- natural adjustment of production of new commodities to real needs, attempts at controlling prices, innumerable impediments to the free movement of goods, capital and man. power and the rigidity of wages. To regard to the last named factor, it is well known, of course, that wages form a big percentage of the total cost of production, and a good many people believe that costs cannot be brought down to u level at which this country will be able to compete with foreign manufacturers until there lias been an adjustment in wages. Railway companies have moved in the matter, and tn some other cases steps have been taken to reduce the remuneration to omnlovees. The wage question, however, bristles with difficulties, and must be considered from various standpoints, particularly the relation of wages to the level of prices in so far as the latte ' affect the cost of living. Some of the leading hankers at the recent annual meetings emphasised the fact that «n far the fall in retail prices has lagged behind that in wholesale quotations. Tt would seem, therefore, that a general reduction in the scale of puv cannot be oxected until this gap has been diminished and real wages are increased. There is the further circumstance that labour is disposed to contend that excessive pro. dnotion costs are not wholly clue to high wages, but- in some measure are the result of managerial and mechanical inefficiency, undue profits by intermediaries, and high transport and distributive charges. Yet another aspect of the problem is the readjustment of wages as between . various in- , dustries. For example, the miner

who is asked fo accept a cut in a wage of £2 a week is likely to resent this when he knows that less skilled men engag'd in les-, dangerous occupations continue t> receive mmli more than lie does.