TRADE DEPRESSION

Hokitika Guardian, 24 June 1931, Page 5

TRADE DEPRESSION

CAUSES AND CURES. Is tlie trade depression due to “something radically wrong with the currency system” ? Or is it due to overproduction or ill-balanced production ? These are important questions, says the “Manchester Guardian,” but still more important, in the snort mn, are the derived questions—Can trade be advantageously increased by measures of currency policy. Can it also or alternatively be increased by changing the conditions of production? “Yes” to one of the theoretical questions, and. “No” to the other, were the plain answers given by two eminent speakers recently, one clearly affirming what the other clearly denied. The answers to the practical questions were less explicit but thoroughly contradictory. “Yes,” said Lord D’Abernon, addressing the Royal Empire Society. “Every month evidence accumulates to show that the main cause of the trouble, is of a monetary nature, and that the remedy can only be found in measures of monetary reform.” “No,” said Dr 0. Ivl, W. Sprague, American Economio Adviser to the Bank of England, ad* dressing the English-speaking Union “Those connected with the Central Banks are disposed to think that the fall in prices is a symptom in the main and not a thing they can attack direc-. tly. No, said Lord D’Abernon. “Overproduction and disequilibrium are both theories Inadequate to explain the crisis.”

But, said Dr Sprague, “some prices have fallen very sharply indeed, especially in the basic industries and agriculture, where there is evidence of a decided over-production on a considerable range of products. .. .” And 'in another part of his speech: “All the responsible people connected with the great Central Banks of the world hold the industrial equilibrium theory as the true explanation of the present difficulty.” DISCUSSION OF CURES. And the disagreement' over' causes of the depression was carried through into discussion of cures. In Lord D’Abernon’s view “the present deplorable conditions have been brought about by the fall in the price' of staple commodities. Th's fall has been brought about by .the scarcity of means of. payment. The position could bo corrected by combined action between the Central Banks of the gold-using countries!”' .Dr Sprague objeeted (for. although the speeches were delivered at different meeting they can be considered as plea and counter-plea). “The Central Banks could do that if they were convinced that it was advisable. There is no obstacle in the way on the grounds of an insufficiency of gold. Unhappily those in charge of the Central Banks are not convinced that that policy would servo and meet tbs exigencies of the present situation.” r need,, in. Dr Spraguk’a view, ’iV “an adjustment to changing economic conditions.” “We need to be more elastic than ever before." . “The country as a, whole,” he said, “necessarily under political leadership, should envisage the sort of change that must be made ... If a char-cut objective of that kind were put before the country there would be serious difficulty encountered in putting the programme through.” The adjustment indicated is plainly a curtailment of wages, salaries, and return on savings. What we need, in Lord D’Abernon's view, is stabilisation of price to secure “the maintenance of wages and salaries approximately at their present rate. “If” (through failure to uphold prices) “.it becomes necessary to adjust all existing contracts, both those regarding wages and those regarding debt payments ... that must be a very dangerous process.” By a happy coincidence the two speakers have expressed in summary form the two opposing doctrines and programmes. By which doctrine will the nation be * guided .into what programme ?