Evening star., 1935-04-28
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sunk to some $50 billions. fiscal TAX
ings absorb no less than 100 billions. If
local taxes of all descriptions are in
cluded in the picture. To such a state
of affairs the revision or the abolition
of the gold standard certainly would
bring some relief.
But the essential reservation must
be made that the remedy will prove
futile If retail prices begin to rise
because. in that case, as salaries would
have to keep up with them, producing
costs, too. would be swollen and their
adjustment to selling prices would not
be carried out. The great task to be
performed is, then, to make use Of
the devaluation of the currency to
bolster up wholesale prices and the
price of raw materials, and, Simulta-
neously, to leave retail prices more
or less where they are. How can it
be expected that such contradictory
movements shall be combined and
harmonized by the application of a
single policy of devaluation"
The answer is that the price of raw
materials and agricultural products
has fallen disastrously, out of all
comparison with retail prices, for the
simple reason that salaries play
negligible part. as far as they are con-
cerned. Wholesale prices, too, which
depend mainly upon the relation be-
tween supply and demand and are not
closely governed by salaries, have
been much more severely affected. AS
a result, there is big margin where
those two sets of prices can freely re-
bound before they rejoin the retail
prices of today.
Profits Would Solve Problem.
But were retail prices to ascend as
we'll as the others, the disparity would
persist and the purchasing power of
the community would not be really
restored. Of course, once industrial
profits have reappeared, the economic
crisis can be considered to be at an
end and the economic forces to have
resumed their free play. They can
be left to take care of themselves. 1t
can be granted that the problem has
solved itself somehow.
The above remarks, incidentally.
explain why, in the United States and
in England or Belgium, for instance,
a policy of devaluation is seen from
different angles. In America, which
is a great producer of raw materials
and foodstuffs, devaluation has been
welcomed by most as conducive to
rising prices; while in England, Japan
and Belgium, which live principally
on industry and exports. it has been
hailed as a means of budgetary relief
and lower producing costs.
Moreover, devaluation was delayed
In Belgium. and so far has been
avoided m France, by the apprehen-
sion many have felt lest. on the whole,
the cost of living would become more
oppressive, owing to the special psy-
chology of the people. If this were
the case, the main advantage of the
process would be missed. In that re-
spect it must not be overlooked that
in both countries, less than 10 years
ago, the currency was deprived of a
large proportion of its gold content.
All who had to live upon fixed in
comes and were unable to recoup
themselves by commercial or indus
trial gains-such people were dras-
tically fleeced.
New Deal" Seen in France.
In the mind of all those victims
devaluation not unnaturally means
the issuing of bad money and con-
tinuous advance of all prices. Now.
let the professors epdeavor to make
them realize that in 1926, the cur
rency permanently lost most of its pur-
chasing power because it was too high.
owing to the overflowing stream CT
bad money which had been released to
defray the costs OF war and recon-
struction; but that at the present time
the economic organism suffers because
the purchasing power of the currency
has become too small. Tell them that,
in consequence, devaluation-which
formerly expressed itself In high
prices-ought, if tried again in the
new circumstances, to produce low
prices. The professors who put forth
this argument would be laughed at.
And, mind you, Notwithstanding ali
those fine theories. it is quite possible
that the "profiteers" would success
fully exploit the monetary reform
and make killing"
Nevertheless, in France and other
countries, after methods similar to
those of Herbert Hoover have been
put to the test and found inade-