COSTS AND PRICES

Hokitika Guardian, 25 July 1932, Page 3

COSTS AND PRICES

READJUSTMENT PROBLEMS OF

TO-DAY

MR. J. M. KEYNES’ VIEW:- nr

Reviewing the proposals ot. the experts’ committee now 'under ..considera-, lion by the'Australian i , ieriiie-« J’Vhifcssbr J. M.. Keynes,.the eminent Engiisu economist; envisages’ Ami. am s problem in a setting.of tne. w„.Jd crisis.

He remarks that while the imp-.n-derablds" rib' orie can weigh who is not 011 tne spot must govern the i aricKrir,' of the purely local pro. Hem, it is- ntf ie.ss important to know the jungle outside, which those duelling among their own trees can scarcely hope to' see. 1 sympathise intensely . with the general mjtnod of appro i,h wbi-h underlies the new proposals of the economists and under treasurers. I am sure the Premiers’ plan last yt.ai saved the economic structure f Australia. I ant riot prepared to Misrule that another dose of 'the same medicine may be necessary, hut there are some aspects of the expo -tV report which cause me heeitii' in. 1 f-.n fearful lest a degree of .readjustment should be attempted which is impracticable in the environment ot pr0.0r.:., world conditions.

What is, perhaps,; a mine vo id , apprehension of affairs outside Aiis.ti'.atin may enable me to'contribute to .the discussion by shifing the emphasis ;vi little. It is a Serious. mistake, judgment, for" any '.'country to attempt a complete adjustment to the presprf level of wholesale, prices whether, measured by gold, tir sterling. Long continuance of this; level of prices is not a practicable working, hypothesis. It is one of ttie.'.things, File the end of the world, against which although possible, it is not se’risth'e. to insure, for unless prices rise, tie ex.e'i'iig f'nancal structure, between nations n.t possibly survive. Evert county,j in the world 'ms the saute pribli-J.n, as Australian in some shape or form. If .each attempt to solve it bv competitive currency, depreciation nobody tvq jiv'd he better off; There is. no exit along that route. r Indue 1, llie tcrid->. ericy cf wage, .reductions nnWt riee-: essa-rily tie to revet more security the; level! of prices; for, in the long-run, it is the wage ..level, especially < with currencies riot • rigidly linked-. - with (gold. :• •'

HIGHER- PRICE LEVEL,-:; -;';;

Do not suppose Ham so foolishly optimistic -as co rely on. adequate--or even material arise of prices ih the near future; 1 .am pessimistic regarding the . progress',of the time-table.'hi otiiteve. *ihe . leading financial', tenti.Cs of the'world willi have to enjoy■ r k t ’-sr'o-' longed period of ultia-cheap money before enterprtse^lil'c?'lts head krgain. Until enterprise puts more spending poWer' ( iiito ’circulation prices cannot rise. I 'am' saying that’ a prudent couiitry will lay its plans for orderly reconstruction, ori the assumption of a riiucti higher: world priqe-level than tlie' present, because tuilesu this as-, -sumption is realised so much else will 'happen, so many other things will lie. tir.okenj and the whole structure ot, j national arid in’tefna’bidhal' indebted-, ness will have collapsed so completel,)-. that its pains will have been wasted; if therefore, I were an Australian economist advising Mr Lyons 1 should he decidedly moderate iff' my ideas. I should recommend him to ride hi difficult suffering steed with as light a rein as. he dare. I should not pres.-, for heroic measures. It is a time to chastise gently. Morever, I should: have sufficient confidence to take this line precisely because Australia has., done so much already, and has been relatively so successful' in the programme of necessary readjustment... ;L only, in spite of disappointment?, the, | could, by comparison' with the utate qi.j others, know it, there is more chanye of proving the profitableness of: h.usi- , ness by fostering enterprise and meqs.' ures like pubfic works-.than by, furtjt*' er pratsure on mtiney wagts, or, ftU'-; ther forcing exports. Problems of budget and uriemploymerit -are more , pressing than balance of trade. The, latest .figures plainly indicate .that theAustralian balance to-day is a result of the measure? already taken, which are not unsatisfactory in the circumstances.

n.s.w. wage anomalies; I understand that the reduction .61 wages so far effected has been unequal It is of the essence of what has been .happening in Australia 'that there should be equality of sacrifice. H would seem obvious that New. Soutl Wales should be brought into line with the rest of the country. Indeed, ..thi millsfc be in her own interest if ahe_,U not to suffer more than her share jP; unemployment, but a policy of. a, further general reduction in money, ..wage Would be a double-edged weapon. 1. would tend to curtail purcß'shu; power, and consequently, aggravate., rather ‘than assist, the problem of. tli Budget.. I do not dearly see iq,wha way it would help the general c.itua■fciem, unless it were to expand tb uhysical volume of exports. J.;shqulhave supposed, in .the present circ.um. stances, that it would have no cou-'id enhle effect in that direttion. .. j

So far as the internal pvocluc-tio ■ind .consumption are concerned, sale receipts would fall off just about -a* much as..coots have been cut. The ex .')"rts recognise that it is impractic able to reduce costs and debts by a further 40 per cent., but I go fnrthethan this. I. do not believe that unemployment would he remedied b measures of this kind, even ■ if they

could ba enforced. I wk, I think,. the | first to propose what. I • hove'-' sonn-tiine's j coaled a “national treaty,” namely, an all round cut in costs and debts such j as Australia has already had' courage ; to adopt and, except in New* South, \Y Jes; to apply * but I proposed this j as. an alternative to exchange deprec- j i jan for remc-clyi.ng maladjustment | between one country and the rest Of I in Improving tile trade balance.Apart frbni local anomalies, 1 do. not. believe that a further general cut Lri money wages could no anything which a further • .exchange depreciation could not do better, nor is the' f, ai t of an {"increased real .;wa'ge for tlio: unemployed, in spite of the .reduced '’ national wealth, sufficient,' argument for cutting money wages. For ijliis is a wdria-wide phenomenon today, which, indeed, is an inevitable accompaniment of the' slump.