A STUDY IN ECONOMICS.

Taranaki Daily News, 2 November 1917, Page 2

A STUDY IN ECONOMICS.

"SISKVIOK VIiRSUIS BOBBERY." (By Sydney Wyndham Fitzherbert. A review by P. O'Dea, M.A., LL.B., Hawera). This little book, which is written as an "open letter to the citizens and soldiers of New Zealand," is from the pen of Mr. ■S. \\'. Fitzherbert, a member of the firm of Fitzherbert and Fitzherbert, barristers and solicitors of New Plymouth and Ilawera. In tlie preface the author tells us that like many young men he "passed between the ages of 17 and 22 from the extreme of State socialism to the extreme of Individualism. This oscillation over ho decided that the truth lay neither in State Socialism nor in Individualism and that there was yet a third social order possible in which the ideals of liberty and equality could be reconciled." The book U refreshing if it be only for the revulsion from the orthodox economics studied in the schools, ft revulsion shared in by all who 'feel that the present economic, fabric is far from being the idealistic, one claimed for it by its votaries. As our author states all who support it "give up hope for humanity." Our author traces this antagonism between the trend of democracy and orthodox economic theory throughout his second chapter, and is led therefroip to an analysis of the connotation of the. term "capital," an analysis ably and systematically carried out. He points out that the schemes so far propounded to the world for the improvement of economic equality are four: (a) Rule of thumb methods of radical experiment such as the land laws of New Zealand, niatiy of the labor laws of *New Zealand, the single tax proposals of Henry George. (b) Stato Socialism. (c) Karl Marxian Socialism. (d) Syndicalism. But lor reasons which we shall consider later, is of opinion that none of these proposals is adequate. In Part 2 lie combats the orthodox theory that money measures vafue and argues that money does not measure value but measures scarcity. His argument is somewhat- in this form. To measure value money must have value, just as a yard measifre must have length, a weight measure weight. Money has value only through its function as a medium of exchange. He ridicules the contention of the economists that the yalue of gold for the purpose of ornament, etc., constitutes the value which would enable it to measure value in all things.

In chapter three of this part he divides the economic classes into three groups: (1) "Maintainers," those who do all the useful work of the community; (2) "retainers," those who do work for the moneyed classes in the production of luxuries, etc.; (3) "usurers," or the moneyed classes. This latter term seems to the present reviewer to be unfortunate owing to the narrow specialised meaning which the iword has obtained in ordinary use. In this respect 1 our author is very severe on our legal system, considering as he does that the law of landlord and tenant, the law of mortgagor and mortgagee, etc., makes possible, to use liis own words "the great system of organised robbery" which he calls relational capital. Chapter four, under the heading "Capitalism Manufactures Poverty," is summed up in the concluding paragraph of page 64:—"The economic struggle thus reduces itself to a. struggle between two classes of consumers, workers and usurers, for the direction of the world's work. This struggle is governed by effective demand, by tho power of a person possessing money to purchase goods and so direct the activities of economic man. But effective demand is weak in the working classes. They compete for work. They are sellers of work. If they don't get work they must starve. They are thus bidders at a Dutch auction in which they are themselves the goods -being sold. Their competition tends to reduce their reward to a minimum. Hence their effective demand as consumors is the lowest possible. The contest, therefore, not only tends to reduce their money wage, but by promoting the scarcity of maintenance units tends to increase the price of all essential things needed for bare maintenance, the things which, in tho absence of any usurer class, would tend to be cheapest. Further, a worker's reward is limited toy his power to work, but the usurer's income lifts no such limitation. A usurer may possess an income equal to the joint earnings of many thousands of men. This is because his income is not the outcome of service, not a reward for his personal exertion, nontal or physical, but the result of the power vested by law in hrm and his class. It follows that fewer men constitute the class of usurer than the class of worker, and that maintenance units bear a very small relation to the totality of the usurer's consumption. The demand of the usurers as a class, is for luxuries, and through their demand the I greater portion of the world's work is. ■ directed into luxury-producing industries."

Chapter five is devoted to "Trade Cycles" in a treatment which is in some respects similar to that of orthodox political economists such as Jevons, Marshal), etc. Jevons considered that every ten years saw a trade cycle. Our author, however, lays greater stress on tho unhealthy movement caused by the increase in the production of luxuries to supply the wants of the relational capitalist. On page 75 he gives us liis idea of the progress of the trade ''The collapse occurred because tho maintenance units of t.h • ;;ld ran short. Prices slumped, foreclosed, landlords evicted tenants, companies failed, wages fell. Everyone has been anxious to sell. No one has been willing to buy. Accordingly, the prices of everything are at bottom ami enterprise is everywhere stagnant. What can save the situation'; What, indeed, does save the situation? The need of the world for maintenance units. Disorganised though the world be, it cannot go on unless food and clothing are produced. Even it men cannot be employed, they must be kept alive in some way. Soup kitchens are opened, charity is organised on a large scale, and efforts are made to find food for the poor and starving. This sets in train a demand for maintenance units Which in time restores health to the maintenance-producing industries. These are the first industries to recover, and as they are the first to recover they are the first- to receive the attention of the investor. But the stimulation resulting from investment results in an increase iin the production of maintenance units, which then begin to fall in price. This gives the workers an opportunity of purchasing goods outside their previous limits. This, again, sends a stimulation to certain industries just bordering on the maintenance unit industries. These, therefore, now begin to progress. Their production in turn increase and tend to

WJ in pries; and the doijland or" the World, then expands a bit' more and' includes ether Industrie;* in its scope. In this way the industries producing maintcn- > ance units and units just beyond bare maintenance grow healthy. Accordingly the usurer who lias invested in these industries develops eoniidenee in the future. He begins to purchase things he had for some months or years refrained from purchasing. In so doing lie stimulates the production of these things. They have become rather scarce because the decline in trade decreased production. Hence they are rather high in price and good profits are to be made from them. Therefore investors begin to take note of them, and these trades, also begin to develop. "The process continues. The demand for luxuries increases. One by one all trades come into the circle of expanding trade. Confidence grows, people buy freely and prices rise. There seems no limit to the growth of prosperity. But, all tlie time, unnoticed and unseen, another process is at work wliioh brings about the ultimate collapse of the boom. The growth of the luxury trades draws men away from the maintenance trades. Bit by bit maintenance units increase in price. This increase represents a profit to the usurer, whose confidence is thereby strengthened and whose demand for luxuries is thereby further increased. As the maintenance unit increases in price ithe worker finds that Ms real wage is decreasing. He buys less, and so begins to cheek demand. Profits from certain industries now begin to dwindle. At first this is not considered serious. Prosperity has established confidence so strongly that this is considered to be merely a temporary cheek. But the process still goes on. Many workers, by joining luxury trades, are receiving higher wages. They therefore are not so much affected by the" rise in the price of maintenance units. But in time" it affects them also. They find they cannot spend so freely as formerly. There is now an appreciable decline in demand and a drop in profits. The tourer now finds his income shrinking and reduces purchases. This results in a further fall in profits. Investors hesitate, public confidence fades away, money is hoarded, prices fall, everywhere {roods are held because they enn'not be sold, and another trade depression is in full swing. In this way relational capital, by breaking the circle of exchange, moves from catastrophe to catastrophe. Sisyphus rolls his tone up ft slope which is very easy at ftrst but grows steeper anil steeper as he goes cm, until the stone escapes from his grasp and rolls headlong down to the starting place." In chapter six- the author summarises his conclusions as follows: "I have endeavored to slujw that the principle of injustice or unfairness at the root of modern unrest is an extension of the rights of property leading to the development of a world-wide system of parasitism, under which a class of usurer liyes on the labor of others without , giving service in return. I have illustrated the principle operating automatically to ereate poverty, lav means of the power of directing the world's work ■which .is vested in the usurer class by law. The whole constitutes a vast, system of legalised .robbery counter-acting the natural evolution of a world-wide work process tending automatically towards cquili- j brium of services and rewards. I This system of legalised robbery opev- j ates by interrupting the process' of ex- j change which under proper conditions J would tend to equalise rewards and ser- I vices. It creates three gi-eat economic I classes, maintainors, retainers, and usur- ! ers. in which the services rendered by ! maintainors and retainers, instead of exchanging with each other are deflected to the services of the usurers. Xot only are these three classes maintained in their relation to each oilier by the force of law, but competition between themselves and against each other itself intensifies and strengthens the relation. We have now to determine how this vicious principle can be destroyed, and to consider the social order that will be realised when it has ceased to operate. Let jus address ourselves to this task." This our author does in his concluding chapters. (To be continued.)