The Guardian And Evening Star, with which is incorporated the West Coast Times. FRIDAY, MAY 22, 1931, SHYNESS OF CAPITAL,

Hokitika Guardian, 22 May 1931, Page 4

The Guardian And Evening Star, with which is incorporated the West Coast Times. FRIDAY, MAY 22, 1931, SHYNESS OF CAPITAL,

It is being realised in Australia that capital is growing very shy, and until confidence is resorted, the condition of affa rs will grow more stringent, An ox State Treasurer, Mr B. A. Stevens has been moved to speak publicly on the matter, for there lias be> 11 the suggestion of devising means whereby the Government might force an investment of capital. This is a very difficult problem Lo tackle and achieve equitable results. Confidence is so shaken in public affairs in parts of Australia that moneyed people are content to place their money on deposit in the banks, and allow it to earn moderate interest. Even that course <s not safe definitely as the depositors in the New South Wales State Savings Bank have found out. At the same time, even while deposited the money is not idle, and the Bank is able to use jt in temporary advances and overdrafts for the benefit of its clients. Actually money so deposited is used over and over again for the good of the community, though the actual owner of the money can gain only a modest rate of interest. Were the money taken forcibly by the State, the lender would probably derive a better rate of .interest than the banks give, but the money would go into the public exchequer, and soon he dissipated, and the State remain the debtor of the lender, But the average man of imoatip is not keen to lend to a defaulting Government and so wo bear of capital departing for other States, and folk buying overseas bonds. In the case of Now Zealand Government bonds, they . re realising a much better price than Now South Wales Government sfi-urities, and confidence is again the main spring to this action, The, Labour Government of New South Wales has made a mess of the national finances, and the Labour Federal Government is also gobbling seriously in its policy methods dealing witn linanca. As Mr Stevens lias put it. The thing that influences the investment of capita! is what we call scour jty —-that 'confidence in the willingness and ability of a creditor to meet obligations, qr to show a return. If that element be missing, capital 1s “shy,” and will either seek to find the level of productivity somewhere else or lie dormant or even exhaust itself by being "eaten tip.” I believe, he said, that to-day, because of sheer nervousness and fear that are born of existing conditions, thousands 0/ pee Die are living on their capital. That is a had tiling for industry, To “evilscript” capital—or force it into tin willing channels—would act as poison to the whole system of investment. To change the metaphor, it would acre) erate its flight from us, and leave us poorer than ever. When dealing with the problem of unemployment wo are accustomed to speak only }u berms of the human factor. Wie say, for instance, that there are 300,00 Q men and wompn out of work, and that is the only feature of the problem wo an* accustomed tp deplore. We appreciate, of course, that the existence pf this huge army means that 300,000 human nnifs of production are withdrawn from production, and that the community j« impoverished because of fhat But we are prone to forget that there is another factor that is unemployed That factor is capital, There is capital available in Australia and overseas waiting, almost impatiently, to bp put to work in Australia. Tins j.s not capital "jn posse,” such as these c-rcdda vvhic)| the banks a He accused of withholding, but capTal “in esse” actual cash which is lying idle under the paralysing efi’o't of present conditions. Capital is literally one of the unemployed in New South Wales at present, and, like the rest of the up employed, rpn only hope to get useful and profitable work again when confidence is restored. The credit wo need is mono a matter of quality than quantity. We do not need something that may he released or expressed in terms of a fiduciary note issue; neither do we need capital that is “conscripted” for the purposes of government. Capital will flow to industry naturally as soon as the investor has confidence. There is a lesson for New Zealand in

all this, and that is to restore political confidence to tin* Dominion, whereby the Government of the country will be carried on in regard to the economic situation, and the financial lortnnvs of the nation not made the play tiling: of political parties., A union of the political forces so that end would be the salvation of New Zealand at this juncture.