Letters to the Editor

[Correspondents are requested to keep their letters as brief as is reasonably possible. The mon suitable length is that of one of our "News of the Wee: " paragraphs.—E1 SeE-:!raraz., HOW TO MAKE WORK [To the Editor of the SPECTATOR.] Sin.—In your leading article in the Spectator of November 11th,

Workless Millions," you ask : "Are there any directions in which without expending sums it has not got, and cannot get without resorting to wholly imprudent finance, the Government can wisely foster employment." Will you permit me to attempt in outline an answer ?

It is clear, of course, that, so long as the international financial system is hopelessly out of gear, the volume of world trade shrunken, and while impediments to commerce are still being erected on almost every hand, there are very definite limits to the extent to which this country can pull herself out of the morass by its own exertions alone. But we can do something by ourselves without waiting for the co-operation of others, and if we formulate a sound, progressive policy, there is no reason to despair of others following our lead.

The core of the trouble lies in under-investment. There is no lack of savings, but capital investments are not being made. The business man, after five years of disastrous deflation following on the reversion to the gold standard in 1925, now sees the purchasing power of the people shrinking further as the result of the curtailment of our foreign trade and the general drive for economy.

The fact that the business man refrains from investing is pregnant with danger, for as long as the wheels of production are not turning they fail to perform their normal functions of creating more material wealth and distributing profits and wages to those who create it ; and if wages and profits are not distributed in the course of the production of new wealth, the mechanism whereby savings are created is destroyed.

Though there is to-day a glut of liquid capital awaiting investment, there are real grounds for the fear that in a few years' time we may find ourselves with an actual shortage of saved capital unless steps are taken now to secure its investment, and thus a harvest of fresh savings.

Savings do not " fructify " in the pockets of the people unless carefully and unremittingly tended : they merely waste away.

For fifteen months the " economisers " have had their way. They have argued that, if the Government cuts down all forms of public expenditure, funds available for investment in the hands of private persons will multiply, and find outlets which are bound to stimulate employment. This is a profound fallacy. Not only has private enterprise not availed itself, and shown no sign of availing itself, of the funds which, according to this theory, the curtailment of public works should have released, but the cumulative effect of this " economy " has been the intensification of depression, stagnation and defeatism.

In these circumstances what should the Government do ?

I suggest there are two courses open to it : First, it should "reverse the engines" and re-establish the flow of capital expenditure by departments and municipalities, and, secondly, partly by its eicample and partly by positive action, it should give a definite stimulus to private enterprise.

Let me take these separately.

At present the policy seems to be to veto or discourage capital expenditure however reprodu Aive and well con- sidered. But merely to relax the screw, and to restore the normal pre-crisis rate of expenditure on roads and so on will not be enough.

If the essential object is to be achieved, that is, if a great and fruitful impetus is to be given tp production and employment, more positive and bolder action is required.

am not suggesting that we should pile up Budget deficits or that we should add to the present onerous burden of rates and taxes. To finance capital expenditure out of taxation or rates would be of doubtful value as a means of stimulating employment—for the increase of purchasing power brought about would be balanced by the decrease in the consuming and investing power of the taxpayer.

But I do suggest that the Government should initiate bold and timely schemes of reproductive capital expenditure financed by borrowing. With interest rates at the present low level, there is little reason to fear any appreciable addition to the burden of the taxpayer and ratepayer : for a net loss 'need never arise.

Even if there were to be some small addition to the Budget by way of interest charges, I am convinced that this would be far outweighed by the expansion of the national income which a stimulation of employment would bring about, and which must be brought about unless the task of balancing the Budget—even on present before very long to become intolerable.

Last week in a few hours the Government borrowed 1300,000,000, at a fraction over three per cent. I should like to see another loan of similar size raised now, as it could easily be, for the specific purpose of national development under the auspices of the Government. There is a vast pro- gramme of work calling out for fulfilment part of which you indicate in your article.

• Now I come to the manner in which the State can encourage and stimulate private enterprise. I suggest that some Governmental authority shoulck be charged with the duty of consulting and advising leaders of our various industries. This authority should examine and encourage all plans submitted to them for the re-equipment of industry and the expansion of industrial equipment. In the case of schemes approved by the authority, I suggest that the expenditure approved should be chargeable against revenue—in other words, that the capital so expended should be completely relieved of income tax. But I should limit this relief to a period of two years, as an incentive to immediate action.

Then I suggest that trade facilities loans should be available under Government guarantee for all schemes of a

more general development type. The sort of projects I have in mind as suitable—and these are merely examples—are electrification of railways, extension of London Tubes, con- struction of an underground London goods railway, placing of twenty-ton wagons on main-line railways, the fulfilment of the Charing Cross scheme.

In the case of all these, and similar schemes, I should like to see the Government pressing for action with as much drive as was applied to munitions in the scarcely less dangerous crisis of the War.

One general word. The Government have balanced the Budget and have succeeded in bringing down the rate of riskless borrowing by twenty-one per cent. In the present economic paralysis, however, we cannot afford to wait for the benefits of this purely negative financial policy to filter slowly down from entrepreneur to wage-earner. Unless we are to face the prospect of an almost indefinite continuance of vast unemployment in the midst of a glut of loanable capital, the Government must make a beginning of its professed aim of reflation by well-considered capital expenditure on its own account.

If the Government will take bold steps in this direction and make it clear that it is giving a lead which it hopes will be followed not only by industry in this country, but by Governments and industry abroad, the mere announcement of such a policy will have an enormously stimulating effect psychologically ; and to overcome the psychology of fear, under-spending and under-investment is the crucial task of the

present situation.—I am, Sir, itc., H. L. NATIIAN. House of Commons, S.W. 1.