MONEY FOR PRODUCTION

Rotorua Morning Post, Volume 2, Issue 337, 26 September 1932, Page 4

MONEY FOR PRODUCTION

A significant statement and one which merita close attention was made recently by Mr. J. T. Grose, chairman of the New Zealand Associated Banks. It was this : "It would be folly, particularly at a time like the present, for the banks to advance money extensively to those who coiild not employ it effectively ; v/hen I say effectively I mean for productive purposes, and in such a way as^ to provide interest and sinking fund on the amount advanced." Mr. Grose was concerned, apparently, to emphasise the reasons actuating the New Zealand banks in the conservative policy which they are following at the present time and which is in conformity with the general attitude of established financial institutions throughout the world. The significant portion of Mr. Grose's comment, however, is his indication that even a conservative banking policy will approve expenditure at the present time for productive purposes. There is in this indication, a hint to which the political financiers of this country should pay close attention. All the talk of deflation and inflation is meaningless to the average individual, but he can understand that extravagance is extravagance whatever financial conditions might prevail, and that a profitable investment would be even more wTelcome in bad times than in good. We fully appreciate the fact that the banks cannot advance mcney for any schemes without thoroughly investigating the prospects, and that 'in the circumstances those who , ontrol them may be more exact-

ing than they would be if a greater degree of prosperity pre- ! vailed ; but what we wish t • stress at the moment is the adI mission that money should be 1 made available when it can be i used effectiveljr. Financiers of experience such as those who eontrol banking aft'airs must be capable of realising the indirect benefits that accrue from enterprise, and it may be assumec that they use the utmost circumspection in estimating • all the possibilities that may affect their investments. It may be that they are prepared to take greater risks when business is good, but why should they consider it safer to chance losses during a l)oom than during a slump, unlcss the explanation is that in the one case failure would be regarded as unfortunate while in

the other it would be condemned as unpardonable. The "effective use of money Mr. Grose has interpreted as its employment in schemes that pay their way. Surely we may place in this category any measures that will place the New Zealand industries in a position to work at full pressure, absorbing labour which at present has to be maintained sometimes at the expense of people who are themselves making a greater sacrifice than is generally supposed. Land sectlemont on economic lines should suggest itself to even such exacting natures as something worthy of trial and so should essential public works which give promise of

returning appreciable profits in a few years, though they may temporarily be operated at a loss. This Dominion would never have been in a position to provide Great Britain with such a consider able proportion of her food if the administrators of the past had been as severely practical as those who deelare that to even judiciously discount the future is to be guilty of inflation, which is at all times a financial crime. . In a developing country such as this development is a necessary function under all circumstances, and to close down public works or place them on a relief basis is something we should deseribe by a much harder name than economy. We would expect the same results as those expected by Mr. Grose, but would not demand securities which are prohibitive if a reasonable chance of success of-

fers. Naturally it is difficult where banks are concerned. They eannot look to the future as governments would be justified in doing. They must safeguard themselves at any cost and eannot indulge to the same extent in sentiment or perspicacity. A government may legitimately back its consider ed judgmant, and that is what it is expected to do. Men who are statesmen can look far enough into the future to realise the prospects of national schemes, and when they miscalculate their errors are put down in profit and loss by a patient people. The fact of the matter is that relief can never come through economies that materially increase unemployment, and money must be sought in new sources in adequate amounts to finance rational undertakings that will gradu•"ally promote recovery. '