PURCHASING POWER

New Zealand Listener, Volume 35, Issue 894, 21 September 1956, Page 5

PURCHASING POWER

Sir.-In the discussion between Mr, R. O. C. Marks and Mr, F. W. Holmes (Question Mark, August 30) both speakers treated the subject as a political policy, and left Social Credit, as propounded by its author, fairly severely alone. I can force myself to pass over points evaded by both speakers, but as Mr. Holmes is a lecturer in economics I cannot ignore three unscientific assertions he made, Mr. Holmes stated that purchasing power can be cancelled in only three ways, of which spending was not one, Purchasing power, the only valuable property money has, is that attribute which enables the holder of money to obtain value without giving up value;--all he gives up is the money. If I have £1 and I want to buy from Mr. Holme something of value, say a set of economics lecture notes worth £1, Mr. Holmes can only get my £1 by buying from me every farthing’s worth of purchasing power there is in it. When he gives me full value he cancels my purchasing power, It’s true he then has £1, but he wouldn’t have had that if he hadn’t himself imparted new purchasing power to it by trading value for the money, Secondly Mr. Holmes asserted that a certain sum of money (£90 million I think it was) would be spent more than

once in a year, and would therefore have greater purchasing power, The sum spoken of was money which would as a matter of course pass to industry in exchange for goods and services, If: we assume that industry is able to put that same money back into circulation by using it fer working expenses, the £90 ‘million is soon back in the hands of consumers, But alas, Sir, those consumers haven't got one pennyworth of extra purchasing power out of it, because they have had to sell £90 million worth of labour. So they spend it on further products of industry. But does industry get any purchasing power for nothing? Oh no, the consumers aren’t foolish enough to give the money away either, but on the contrary they demand £99 million worth of value, Mr, Holmes then abandons the some-thing-for-nothing philosophy which so ill becomes a lecturer in economics. This time he makes a much more becoming allegation, namely that there is no discrepancy between consumer incomes and prices, Consider a block of capital assets put into commission N pricing cycles ago and now fully depreciated. The only consumer incomes distributed by any capital processes in the present cycle will be’ the expenditure, on new capital, of money collected during the past N cycles to make good depreciation and set up a new investment, Prices charged to consumers by industry are loaded in the current cycle with depreciation on the whole of the previously existing assets, plus those just put in commission,-i.e, the full amount of the payout to consumers; and plus money for investment in future cycles (including an Nth of the increase in investment planned to take place in N cycles time). For Mr Holmes’s allegation to work out, it would be necessary to make good depreciation and add all additional capital assets in dribs and drabs at the same rate as depreciation, and step by step with the charging of investment into prices. Not something-for-nothing this time, but just as impracticable.

K.

O'BRIEN

(Hastings)