COST OF LIVING

Southland Times, Issue 18853, 19 June 1920, Page 11

COST OF LIVING

WAY TO BRING DOWN PRICE LEVELS. MR BEAUCHAMP’S VIEWS. In his references to the cost of living Mr Harold Beauchamp, at the annual meeting of the Bank of New Zealand remarked that the fact that prices had continued to ris-e notwithstanding the conclusion of hostilities and the return of the fighting men to peaceful avocations was leading many to wonder how long existing price levels were likely to be maintained. Some affirmed that high prices had come to stay, but, in that view he could not share though he admitted that the range of future prices might be somewhat higher than before the war. “In the Napoleonic War English prices rose To per cent and they took eight years to become normal again," be went on. “In the American Civil War prices rose 100 per cent and took over 12 years to become normal. How long it will take on thus occasion to reach normality it would be impossible for anyone to forecast, hot it seems obvious that the process of deflation has set in. In America, Japan, and, to a lesser extent, in Great Britain, prices of commodities have already slumped, the speculative fever has been curbed by the Banks restricting credit and financial crises have resulted. The changes that have taken place in these countrie-s are bound to have far-reaching effects. “In the matter of regulating prices - , some I>eople are disposed to look for relief to Government intervention and control; but while, as a temporary measure, good may result therefrom, it is fairly certain that no permanent relief can be secured in that way. The generally accepted view among people qualified to judge is that the less the Government interferes with trade and industry the better. This principle was well enunciated by Lord Macaulay over half a century ago when discussing suggestions that had then been made for Government

control of and assistance to trade. He remarked:—‘lt is not by the intermeddling of the omniscent and omnipotent State but by the prurience and energy of the people that England has hitherto been carried forward in civilisation ; and It is to the same prudence and the same energy that we now look with comfort and good hope. Our rulers will best promote the improvement of the nation by strictly confining themselves to their own legitimate duties, by leaving capital to find its most lucrative course, commodities their fair price, industry and intelligence their natural reward, idleness and folly their natural punishment, by maintaining peace, by defending property, by diminishing the price of law, and by observing strict economy in every department of the State. Let the Government do this; the people will assuredly do the rest.’ These views still find general acceptance among the political economists of our day. "In searching for remedies for the existing evils we naturally first make an endeavour to seek the cause of the evils that we wish to remedy. There we find ourselves at once on debatable ground. One school of economists maintains that currency inflation is at the root of all price inflation. Another school affirms that price inflation is solely the result of the operation of the ordinary laws of supply and demand. For my part, I am disposed to attribute the appreciation in prices from which the world is at present suffering, to no single cause but to a variety of causes, including both of those just mentioned. The question is a very complex one, because a multiplicity of influences arc at work to bring about the result arrived at, each exercising a varying degree of effect according to varying circumstances and the nature of the commodify concerned. It would certainly be wrong to ascribe to any particular influence the whole responsibility for the unenviable situation in which we now find ourselves. Hut in looking for remedies, as we undoubtedly must if we are to restore ourselves to more tolerable conditions, we can see broadly individual influences which tend to the perpetuation of price inflation, and if these be dealt with and removed, even though only one by one, we shall be assured that we are gradually traversing the road which will lead us back to more reasonable price levels. Among these remedies the following unmistakably take primary place:--(li The exercise of the strictest economy in public and private expenditure. (2 Honest effort to inemuse production to the utnui't possible extent. (:', l [encouragement and development of every class of industry and uncompromising discouragement of all speculation. (-1) Deflation of the world's currencies, which will to a large extent result from the application of the three remedies first mentioned. "Along these lines it is our duty to proceed if we wish to hasten a return to more normal conditions, and I venture to affirm that, if the above remedies were put, generally into active operation, it would not be long before a welcome and substantial change in the situation would become apparent.”