Finance—Public 6c Private

The City and Industrial Depression

INDUSTRIAL depression continues, but it has been some relief during the past fortnight to get away from some of the complex theories of our professional economists with regard to the causes of our troubles, and to listen to the practical utterances of leading bankers. It may be noted that, with perhaps one exception, there has been almost complete unanimity on the part of bankers, and, indeed, of business men generally, as to monetary policy playing a very small part in the causes contributing to industrial depression. Indeed, as has been pointed out on many occasions in these columns, many of the causes are so obvious that to hunt for more-abstruse explanations is to undertake an unnecessary task.

WESTMINSTER BANK CHAIRMAN.

Particular interest attached to the address which was delivered on Wednesday to shareholders of the West- minster Bank by the Hon. Rupert Beckett, by reason of the fact that it was the first occasion of his meeting the shareholders of that institution, Mr. Beckett having quite recently succeeded Mr. Hugh Tennant as Chairman of the Bank. Mr. Beckett, however, has the great advantage of a long banking and business experience, and his diagnosis of the general situation was of a thoroughly practical and common-sense character.

A " BARTER " CRISIS.

After quietly reviewing the conditions which have prevailed in leading representative industries throughout the past year—a survey necessarily of a somewhat dis- couraging character—Mr. Beckett touched upon some of the possible causes of our trouble, and, while by no means ignoring the effect produced upon many markets by the maldistribution of gold, he preferred to describe the present crisis in our economic history not so much as a credit crisis as a " barter " crisis. The majority of the population of the world, Mr. Beckett pointed out, are producers of the primary commodities, in many of which Nature has yielded a series of bumper harvests, and as a result of these circumstances and of over-production, there has been a great fall in wholesale prices of food- stuffs and raw materials. On the- other hand, and for reasons largely connected with the cost of Labour and Labour restrictions, there has not been a corresponding fall in the price of manufactured goods, while, moreover, there has been a great lag in the movements of retail prices when compared with the fall in wholesale prices of commodities.

COST OF LIVING PROBLEM.

Thus it has been difficult for the exporter of foodstuffs and raw materials to obtain the usual exchange of manu- factured goods on lines yielding an adequate return, and applying this fact especially to our own country Mr. Beckett affirmed that the crux of the whole matter is that British production costs are too high to admit of the possibility of present expansion in trade in com- petitive markets whether-at home or abroad. Somehow or other, he said, " costs have got to be reduced to a level which facilitates effective competition," and the Chairman of the Westminster Bank described as one of the gravest features of the situation the wide and in- creasing disparity between wholesale commodity prices and the cost of living. He showed that the gap between the levels of wage rates and of wholesale prices had been doubled since 1924 and that the widening process continues. The worker, it was pointed out, measures the value of his wages against the retail price level. To the manufacturer the standard for judging the burden of wage costs as an item in production is the wholesale price level, and here again the gap has been widened. How, says Mr. Beckett, can this gap be narrowed ? Unless retail prices and the cost of living can be reduced there is the danger that every attempt at a readjustment of nominal wages will meet with resistance.

I agree entirely, therefore, with Mr. Beckett when (Continued on page 164.)

Finance—Public and Private

(Continued from page 162.) he says that there is a strong case for a sweeping investi• gation of all the causes contributing to the maintenance of the big gap between wholesale and retail prices. Such an inquiry would probably have been more useful than the inquiry now proceeding with regard to the relations between banks and industry.

ANOTHER BANKER'S VIEW.

Even when the diagnosis reveals serious conditions there is always a certain amount of satisfaction to the patient when eminent specialists are in agreement. If an operation is to be performed, the patient may well be excused for desiring a second opinion, and is encouraged when he finds that it corresponds with the first view, accompanied by reasonable hope of restoration if remedies are applied. I have already referred to the fairly general agreement of bankers concerning some of the causes of our industrial troubles, and in particular some of the views expressed by Mr. A. A. Paton at the recent annual meeting of Martins Bank were in striking accord with those of Mr. Beckett. Without expressing in precisely the same language the supreme importance of the differ- ence between wholesale and retail prices, the same truth was involved in Mr. Paton's insistence upon the necessity for a reduction in costs of production. In the Iron and Steel trade, for example, he showed that wages in France, Belgium, and Czechoslovakia were about 50 per cent. of those paid here, while in addition longer -weekly hours were worked in many countries, and further, that in most of these countries industry had not to bear so heavy a burden of overhead charges in the shape of taxation.

CouE METHODS.

Mr. Paton laid stress on the fact that restrictions im- posed upon production, together with enormous taxation, have placed upon industry a burden too heavy to be borne. Like some other bankers, he brushed aside all that has been said with regard to the situation being met by a fresh stimulus to spending, for, indeed, one might well ask how it is that, if constant spending were the key to industrial prosperity, the country is in its present state after some years of expenditure, both nationally and individually, on a higher scale than has ever been known in our history. Equally, too, Mr. Paton, I am glad to see, deprecated the cheap pessimism which, scorning the serious attempts made by many to discover and deal with the causes of industrial depression, is proclaiming the doctrine that all that is required is the substitution of a cheery optimism for pessimism. Making all allowance for the importance of psychological influences, this doctrine, in my judgment, is not only wrong, but mischievous, for it diverts attention from causes which require to be courageously faced and dealt with. " I see," said Mr. Paton, at the end of his speech :

" that ono of the Government's industrial advisers is reported as saying that there is too much gloom and self-depreciation, and that confidence and common sense will get the country through. Valuable as these qualities are, I think the picture I hove been obliged to present to you shows that the situation requires more than that, it calls for action, definite, drastic and immediate, for, in the words of the late Sir Cecil Spring Rice in speaking of England, ' If she fails in commerce, she must gradually be extinguished politically and then the rich inheritance can be divided.' " THE ECONOMY DEMONSTRATION.

No better confirmation of the universal opinion of bankers with regard to the supreme importance of economy in the National Expenditure as a first step in the direction of improvement in industry could have been afforded than in the great demonstration which took place in the Great Hall of the Cannon Street Hotel on Tuesday. The meeting was entirely non-political, and so great was the crowd assembled to hear Viscount Grey, Sir Robert Home and Sir Ernest Benn that .it was necessary to hold an overflow meeting. The dominant feature of all the speeches, and especially the one (Continued on page 166.)

Finance—Public and Private

(Continued from page 164.) delivered by Sir Ernest Berm, was the wide and common- sense view taken of all that is involved in the term Economy. The meeting was no mere protest made on the part of Income Tax or Surtax payers ; it was a demonstration by business men who were convinced that the greatest sufferers from the mismanagement of the National Finances over a prolonged period of years were the wage earners of the country, and, as Sir Ernest Benn said towards the conclusion of his speech, so far from economy, rightly considered, being something in any way contributing to a spirit of pessimism, it constituted the one bright hope in a situation which is giving concern to every section of the community.

THE Two ROADS.

If, as has been suggested in some quarters, the present Government is about to adopt a policy of large Loans to provide work for the unemployed, attention to the abuses of the dole being shelved in the meantime, it would seem that those who advocate retrenchment and economy as a cure for our ills are likely to meet with strenuous opposition. Amidst this conflict of opinions with regard to remedies, I cannot help thinking, however, that the Economy Party has at least one strong argument in its favour, namely, that the Spending Policy has had a very fine innings for a great many years with results of a disastrous character. We advocate with unctious rectitude that Australia should practise economy and retrenchment. If our advice falls on heedless ears, it may be for obvious reasons.

ARTHUR W. KIDDY.