MR LANG’S GOODS STANDARD

Hokitika Guardian, 27 April 1931, Page 7

MR LANG’S GOODS STANDARD

(Auckland Star). One of the numerous pre-election promises made by Mr Lang to the people of New South Wales was a plan to abolish the gold standard and to substitute for i.t what he termed a “goods” standard, based upon the alleged value of the country's primary products. Belore discussing this project, it may be pointed out that New South Wales is debarred from making any such change l>v clauses in the Federal Constitution, which vest all matters concerning currency in the Federal Government and forbid any State from making anything hut gold and silver legal tender. But Mr Lang just now, is not disposed to submit to any external authority whatsoever. What, then, is this “goods” standard which is to replace gold in 'New South Wales? A few weeks ago, when Mr Lang was electioneering on behalf of the Labour candidate for East Sydney, he made an attempt to explain his 'currency scheme. “Primary producers of non-perishable commodities” will sell to the State all they produce at a previously guaranteed price. They will be paid ill notes which are to form “an addition to tl-e cuweucy. 1 If tile selling price of these goods in the world market is below tin? State-guaranteed price, they will remain i.u the State stores and will not he exported until outside prices rise or until “in spite of the loss of exchange, they must he exported to pay for purchases abroad or to settle debts.” In this way the resources and the credit of The State will he made to stand between the primary producer and his customers, and will ensure for him a fair price, while Securing for the State, in times of depression, an opportunity for waiting till conditions improve.

Tt- should lie pointed out, in the first place, that “the Lang Plan” is r.o bo limited to “non-perishable” primary products. The dairy iarmors are already complaining that apparently they are to be left out hi the cold, and that the whole benefit, if any, accruing from die .scheme will fall to the producers of wool and wheat and possibly frozen meat. Hut this is a small matter compared with the effects that must inevitably he produced by the notes with which the State will pay lor the goods that it purchases and which will form, in Mr Lang’s words, “an addition to the currency” already circulating through the channels of trade.

For these “additions to the currency”—- which the “Bulletin” has irreverently described as “promises to pay more than the goods ai'e worth’ —represent It Very obvious lOi'itl of inflation, which must of necessity raise prices and disorder commercial and financial conditions wherever the “money 1 ’ circulates. It has been Calculated that, if the scheme were applied to the whole continent, a guarantee of what might be termed “fair” prices, based on 1928-9 conditions, for wool and wheat, wine, hides and skins would require an “addition” to the currency of about £9 : >.090,000 in the first year. This would multiply Australia's circulation of paper at least three-fold, and would produce consequences in the wav of inflation incom parablv more serious than anything that could b? expected of Mr 1 heodore's “fiduciary” issue.

Apparently Mr Lang has made no provision for redeeming or cancelling his vast superfluity of inconvertible paper, which would naturally accumulate upon itself with-every upward movement of prices. Tt should b p unnecessary to emphasise the disa fi! trous consequences of a. system of inflation conducted in this reckless fashion on such a gigantic scale. But this brief analysis of Mr Lang’s plan shows that, like all Ids projects, it is marked by utter ignorance of economic and financial principles. An unkind critic has pointed out that the scheme is not even original, as it uas suggested some litt-lo time ago in an issue of the “British Australasian,” to which Mr Lang probably had access. But all such schemes for “goods” standards of value are based on the profoundly fallacious Marxist conception of exchange value as regulated by cost of production, estimated from the standpoint of Labour alone. Tills preposterous doctrine, which the more enlightened and progressive followers of Marx have now entirely rejected, is quite good enough, in Mr Lang's opinion, to form a foundation for a new currency system, and the rest of the plan is simply inflation “naked and unshamed.”