The Wanganui Chronicle FRIDAY, FEBRUARY 10, 1939. GERMAN FINANCE

Wanganui Chronicle, Volume 83, Issue 34, 10 February 1939, Page 6

The Wanganui Chronicle FRIDAY, FEBRUARY 10, 1939. GERMAN FINANCE

is experiencing a period of intensive activity, and as a result unemployment declined in November last for the first time in history. This is no great achievement, however, because it is the result of the fiat of the Government and does not represent a genuine enlargement of demand for goods and services by the publie.

Despite all previous accomplishments, Germany is pressing forward with its armament programme and its building programme. Hitler may have been only an architect’s assistant, but he has become one of the biggest planners the world lias seen. He is rebuilding Germany, and doing it very well indeed. He is, therefore, making an instrument for destruction, for he cannot possibly conceive of any other nation wantonly attacking modern Germany. He is also building up a national heritage for his people whieh is publicly owned, and which is likely to suffer severely if a large-scale war were to be staged in Europe.

How long will this dual programme last? The answer is that it will last while the money can be found to finance it. In respect to finding lac money German economists point to the increase in savings which have occurred in recent years, as proof that Nazi economics are sound. The German Institute of Business Research estimates the formation of new capital in 1938 at 10.190 million reichsmarks, against 6308 million in 1937 and only 1598 million in 1933. Banks and saving deposits,‘as well as other forms of capital accumulation accounted for about. 8 million marks, while the balance of 2 milliard marks was accumulated in the form of direct investment of the public in securities, bills, etc. Savings deposits alone show an increase of 2630 million marks in 1928. against 1823 million a year ago. Wages paid have certainly increased, but this appears to be notably due to the longer hours of work in the building, engineering and other trades.

It must, be remembered, however, that this impressive total of savings is swelled by the enforced savings which occur when a manufacturer is prohibited from enlarging his business or plant, and a trader is unable to secure merchandise and has to deposit his capital in the bank. In such circumstances the capital does not represent an increase, but a blocking of its normal use. In this way life in Germany is becoming less pleasant. The use of such bank deposits is to provide loans from the b; . to the Government.

This process, of course, cannot go on without exhausting itself. The shortening of supplies to the spenders results in the lowering of the standard of living just as much as a reduction

in money wages would be. This is what is happening in Germany to-day, and the workers are discontented and making demands through the Labour Front for a higher wage level. This, in fact, is no more than asking for a higher standard of living than is available to them at the present time. It is probable, that there will be an increase in money wages granted, but as the demands for goods will continue to be only partially satisfied, the position will not be materially altered insofar as the general income-receiver is concerned

The distortion of the general economy of the Reich through heavy governmental expenditures on public works and rearmaments. is having the same effect in Germany as has been Witnessed in New Zealand, farm labour has been attracted to the public works. It has been officially admitted that since 1933 no less than 800.000 farm hands (labourers and members 01. farmers’ families) have found more profitable employment in the building trade, chiefly on •the gigantic construction schemes, such as the Herman Goring Steel Works and the “Volkswagon Werk.”

The concentration of credit in the hands of Government departments is also causing a congestion of orders, but the manufacturers are worried because they have been saddled with orders extending to as long as five years ahead before deliteiy can be achieved. This results in fixing prices info the future but leaving the question of costs undecided. A battle royal is going on between the various departments, and the appointment of Dr. Funk as Minister of Economics has been arranged for the, purpose of straightening matters out by empowering the Ministry of Economics to decide the priority Io be given to the various Government, departmental orders. It will be necessary for Dr. Funk to allocate notxmly the order in which works shall be completed, but it will probably be necessary to cut some of them down because rising- costs will entail an increase in taxation. This is already near to breaking strain, and further increases may result in a diminution oi the tax yield. Germany is hastening the process of preferring guns to butter, and in so doing she is marching straight to an internal crisis. It was evidently this crisis whieh Dr. Schacht foresaw and endeavoured to avoid by suggesting that more attention should be paid to foreign trade.

Dr. Funk has endeavoured to achieve this by means of barter agreements, but a modern State like Germany must purchase large quantities of goods in the open market, and barter agreements, consequently, are not sufficient for her requirements. The probability is that the Government will be forced to engage in currency inflation in order to pay higher money wages, and to scale down its obligations to repay the loans when it becomes necessary to do this.

It is obvious that a country cannot engage in mass public works, draw off its food-production workers, cripple its export trade, and not experience a deterioration in the peoples standard of living. It is most likely that through similar causes New Zealand will be confronted with an experience which will be similar to that of Germany.