Wairarapa Times-Age MONDAY, SEPTEMBER 12, 1938. THE PROBLEM OF PROSPERITY.

Wairarapa Times-Age, 12 September 1938, Page 4

Wairarapa Times-Age MONDAY, SEPTEMBER 12, 1938. THE PROBLEM OF PROSPERITY.

JUDGING by the brief quotations which were cabled last week, this year’s League of Nations “Economic Survey,” which has just been issued in Europe, deals with conditions of world production and trade not by any means as encouraging as they might be. According to the League publication, the events of the next few months will decide whether current conditions of world trade amount merely to a recession, or to a definite trend towards depression.

Very recently, however, the general outlook has been brightened by a measure of economic recovery in the United States. That country since early in 1937, in spite of or because of the New Deal policies, has experienced a deplorable sag in economic activities and a very serious increase in unemployment. Now, however, reports tell of a distinct revival in American industry. It is being predicted con- . fidently that this revival will extend in the United States and ultimately will exercise a beneficial influence on international trade. In the latter part of August, the American Federal index of industrial production touched 83, as compared with 76 to 77. in May and June. Some revival in retail trade has also been reported and an appreciable extension of recovery is anticipated in the United States before December,

Some grounds thus appear for entertaining the moderate optimism indicated in the statement that the writers of the “Economic Survey” do not fear an extensive banking or financial crisis similar to that'of 1931. In the conditions of limited and lagging recovery that have supervened on the great depression, the possibilities of further collapse no doubt are limited. Value and significance are more reasonably to be attributed to some normal recovery in production and trade, even on a modest scale, than to most of the supposed remedies for depression that have thus far been suggested.

It is mentioned in the “Economic Survey” that monetary authorities are readier than they were to adopt an expansion policy to offset depression. On the whole, however, the effects of monetary expansion, where it has been tried, in the United States and elsewhere, as an antidote to depression, have been extremely disappointing. There is some conflict of opinion among economists as to the validity of this policy and it has been attacked on what appear to be reasonable grounds. The declared object of monetary expansion is to raise prices, but it is contended with apparent force that since powers of production in some branches of industry are expanding- apace, a progressive fall in costs and prices, where these conditions rule, would lend itself both to economic stability and to general social betterment. The questions involved are complex, but a policy of inflation, under which rising costs and prices inevitably pursue and often outpace risingwages, has its obvious limitations.

Much emphasis is being laid by many authorities on a disastrous decline of world trade, but the root of the matter perhaps is that even the greatest and wealthiest nations are at present groping for the means of establishing within their own borders a satisfactory balance and unhampered expansion of economic activities. It does not seem unduly venturesome to believe that if the nations were able to solve their internal economic problems the problem of expanding international trade to its desirable limits would be solved almost automatically.

For New Zealand and other primary-producing countries, the most disturbing fact brought out by the “Economic Survey” is that “relations between export and import prices are more unfavourable to raw producers” and that “the trend of trade has moved advantageously for industrial countries.” The paradoxical position exists that countries getting relatively poor returns for exports of primary produce are at the same time faced by restricted or contracting markets in the countries with which they are trading on not very advantageous terms. ,

Although it is an important factor, the huge current expenditure on rearmament does not wholly account for the comparatively poor development of purchasing power and of consumption in some at least of the highly industrialised countries. Britain, for example, making really effective use of her latent powers of production, undoubtedly could expand greatly the purchasing powers of the mass of her people and incidentally would then afford a much better market than she does today for the food and raw materials exported by the Dominions. Nothing but serious and deep-rooted economic maladjustment will account for the rather sluggish flow at the present day in channels of both industry and trade. Even in a country of light and tentative industrial development like New Zealand, there is room for a much more direct and practical study and treatment of the problems involved than is commonly being attempted.