MONEY AND BUSINESS AFFAIRS.

Manawatu Standard, Volume LVIII, Issue 49, 26 January 1938, Page 5

MONEY AND BUSINESS AFFAIRS.

WORLD ECONOMICS. (By 'S.K.") Leading economists in reviewing the trends of 1937 all agree that it presented a curious series of economic ups and downs. It was also a year of complexities. Professor Condliffe points out that in Britain it is true that employment remains high, production is at high levels, and exports are-in-creasing. But costs are creeping up, wages arc higher, the cost of Jiving is rising steadily, and interest rates are firmer. Therefore, when a company presents an. excellent balance-sheet, and declares a good dividend, the Stock Exchange is apt to put the price of the shares down'on the ground that the best has been seen, and with rising costs profits are now bound to decline, or at best not increase. This is what is described as "pessimist prosperity." Admittedly there is a recession in some countries in business, or as Professor Condliffe puts it a "dip in prosperity" and this dip originated in the United States. It could be easily checked, if the politicians and business leader there would co-operate. The trouble is that President Roosevelt's New Deal which he set in operation early in 1933 has collapsed, and capitalists, both large and small, have no great confidence in the situation. It is up to the President to devise a new scheme for bringing economic recovery to the country. But, instead of developing an entirely new plan he desires to hold to the features of the New Deal, and expects big business to co-operate. The business leaders have expressed their willingness to co-operate with the President provided there is a radical revision of the Wages and Hours Bill. The President, however, insists that Congress must pass it. The two undertakings in the New Deal that were sweeping in their purposes and applications were to make farming profitable by taxing the rest of the population to contribute to its support, and a programme of higher wages and shorter hours throughout industry with greatly increased power exercised by labour organisations. The latter have exercised their power in no uncertain way, for there have been innumerable strikes, especially in the iron and steel trades and the motor industry. If the Wages and Hours Bill is passed by Congress that would strengthen the power of labour organisations and lead to more trouble and expense, state industrial leaders.

The key to the whole position is held by the United States. If ordinary economic rules are observed there would soon be a recovery, but if politicians are to impose their own economics, .recovery must be delayed. It is not a question of money but of economic machinery. A fresh outbreak of labour strikes towards the end of next month is held to be possible, for quite a number of agreements have been entered into by the Committee of Industrial Organisation and some of the agreements expire on February 28. But there is no reason to fear a major depression, though it is annoying that the world has to dance to the American tune. Except for the bus drivers’ strike there have been no labour troubles in Britain during the past two years, and Britain’s prosperity is an antidote to America’s business recession.

Notwithstanding that prices have fallen.-there is fair business passing in .all the raw materials. Base metals show fluctuations, but within narrow limits. It cannot be said that there is no profit at the present level of prices, but the profits are not as large as some producers desire. The uncertainty of the whole position may continue for at least the first quarter of the year, but there is every probability of a recovery.

AUSTRALIAN POSITION. The Australian economic conditions are quite satisfactory, according to Professor Copland, and therefore he does not think it is necessary to revise the wages scale. The chief problem in Australia as in New Zealand is to avoid any tendency to give way to pessimism. But the professor utters a warning, and that is that the time to prepare for adversity is during a period of high prosperity. The less the speculation and the excess production of capital goods, the less severe will any reaction be. The same thing applies to New Zealand. There is some speculation, as for example, when a wool grower withdraws his wool from sale, but on the' whole there is very little in the Dominion and there is scarcely any production of capital goods. On present appearances world business this year may be on a somewhat lower scale than last year, but in view of the economic ups and downs, even such a prediction may easily be falsified. Anything may happen to alter tlyr whole situation as was the case V.st year. During the first half of 1(137 there were all the indications of a boom which did not wholly follow in the second half of the year. This year may see a reverse movement for economic conditions are-sound. The issue depends - upon President Roosevelt, and liow he handles the American situation. The pending Anglo-American trade pact may, and probably will, introduce a new influence of great importance.