FINANCE — PUBLIC AND PRIVATE.
THE COMING FALL IN PRICES ?
[To The EDITOR or TIM " SPECTLTOR "1 SIR,—The man in the street who is a diligent reader of the daily newspapers may fairly be excused for feeling some perplexity as to whether-the cost of living is about to rise or to fall. In last Monday's papers, for example, we had the Food Controller giving clear and definite warnings as to the high price of food for the coming winter, the family man being told in plain terms that hie housekeeping would cost him more than ever in . the immediate future. On the same day a leading article in the Times dealt with the Coming Fall in Prices, and demon- strated the probability of a general fall in the near future ; indeed, the only fear of the writer seemed to be that the
fall might be so extensive and so rapid as to occasion financial trouble. Without in any way presuming to step in between such authorities as the Food Controller on the one hand and the Times newspaper on the other, I think that there are some points arising from these two views with regard to the probable course of prices in the near future which have an important bearing on the present situation, and may be usefully considered. Needless to say, the statement of the Food Controller was immediately seized upon by those organs which have more or less championed the cause of the miners against the Government as offering thoroughly good ground for satisfying the fresh demands of the miners for an increased wage, although, humorously enough, in the manifesto put forward about a fortnight ago by the miners, when they were clamouring for the reduction of 14s. 2d. in the price of coal, Messrs. Smillie and Co. announced that they were out to break the " vicious circle of ascending prices." Now, however, the claims of the miners are centred on increased wages only, and there is no more talk about the vicious circle. As a matter of fact, however, there was probably never a case when the true meaning of this " vicious circle " was more apparent ; and whether by the time this article appears in print the miners' threatened strike has been averted or not, I would like to refer in very simple terms to this question of the vicious circle in prices and wages as it applies to the present situation, for, in my judgment, it constitutes the crux of many of the social and economic questions with which we are now confronted.
I will suppose for a moment that the Food Controller's view of the situation is the correct one, and that for the next few months, at all events, the cost of living is likely to increase rather than diminish. In that case, how is the situation to be met ? Naturally, perhaps, though probably wrongly, we are all inclined to desire that it shall be met by the wherewithal in the shape of increase of income so that at least we may be able to enjoy the same comforts as at present, if we do not actually add to them, and in the case of the wage-earner this desire expresses itself in a simple demand for more wages. Now, if this desire for increased income or increased wages took the form of a longing so intense that the individual was prepared to give increased labour, it is conceivable that the situation might be solved along those lines, though even then, amidst present conditions of scarcity of commodities, there would be the danger of the real problem being unsolved because of the lack of economy in consumption. When, however, the demand is for increased wages, followed by diminished rather than increased output, we have the whole viciousness of the vicious circle most dearly revealed. Why, for example, is it that two years after the war we have prices of commodities at the present moment higher than ever ? The explanation is not far to seek. At the time of the Armistice extreme scarcity of commodities, comparative scarcity of labour and a prospect of new buyers in the shape of the devastated countries of Europe indicated that unless there was immediate economy in consumption and an increase in production in the more prosperous countries, such an advance in com- modities was bound to come. And now, looking back upon the two years, we know very well that consumption has increased with every rise in wages, while as a result both of the higher wages and the shorter hours output has steadily diminished.
When we translate these problems of national and political economy into an individual case, it is not very difficult to perceive the principle involved. Let me then imagine the case of an individual who, by reason of some great and unexpected financial claim upon him, has had to borrow extensively, and because he has not even the necessary amount of liquid security to give to his creditors he has had actually to mortgage his future earning power. Let me further suppose that by reason of long delay in payment the creditors begin to press the debtor, and suggest that solvency will never return until he has economized in his own personal and unproductive expendi- ture, and until he gives more freely of that labour which had been mortgaged as security for repayment of the debt. Given the acceptance of this advice from the creditor, it is conceivable that the debtor may see the prospects becoming
brighter, first of a repayment of the debt and a return to solvency, and later, as a result of the practice of these two virtues .of economy and industry, of an actual return to prosperity itself. But perchance this imaginary individual may, in his determination neither to abandon one whit of the comforts of life nor to increase his activities, seek the assistance, if it be possible, of the usurious money-lender and for the moment escape some of the inconveniences and irksomeness attaching to the unaccustomed use of industry and economy. In this case no great gifts of prophecy are required to indicate the final result !
To apply' this imperfect parable to the present national situation, it may be said that the only escape from the vicious circle lies along the path of self-discipline, self- sacrifice, and intense effort. The Government, unfortu- nately, has been slow to set the example as regards the national expenditure itself, and its example has been bad for the country as a whole. Nevertheless, the fact remains that the longer this process of economy and increased industry is postponed the deeper shall we get into the morass of social and economic difficulties. Just as with the individual the moment of brighter hopes begins with a realization of the real position, so in the case of the nation the mistake on the part of its rulers has been not to place the magnitude of the task before it in a manner not to be mistaken and likely to appeal to all that is best in the community. It always has been and always will be in the history of this nation, that the greater the appeal to effort and to duty the greater is the response.
Two years ago the Premier made the fatal mistake of basing a General Election upon a programme foreshadowing the millennium, when as a matter of fact he and those who supported him must have known that the years immediately following the war would be amongst the most trying in our history. Assuming, therefore, for the moment that the prophecies of an increase in the cost of living during the coming winter are well based, it is for the community to realize that the position cannot be solved by a mere increase in income or wages unless such increase as the direct result of increased labour and output. But because the times are serious and the issues are great, it becomes every section of the community to act in accordance with these principles. If the miners and if the wage- earners in general are to be told thetruth—namely, that the only possible way to better things is by instant economy and increased industry—those who may not be, in the ordinary sense of the word, wage-earners, and who may even have the wherewithal to continue the present rate of consumption no matter how high prices are, must hold their hands in the matter of wasteful outlays, or take their share of responsibility for the calamities which will follow through not having given the lead which the nation so greatly needs at the present time.
I have left myself scant space to deal with the apparent contradiction between the Food Controller's warning as to the increased cost of living and the utterance by the Times and other authorities as to a likelihood of an early fall in the price of commodities. As a matter of fact, both authorities will probably be proved right. A number of circumstances, well recognized in financial circles, seem likely to produce a considerable fall in the prices of many leading commodities. To mention one circumstance alone, it may be stated that there is at the present moment such a congestion of goods in India ordered in excess of present capacity to make instant payment as to impose a severe check upon trade in Lancashire. In many other directions, too, although production is still far short of the world's requirements of goods, it has gone well ahead of the present power of various communities to pay for the goods of which they stand in need. These are conditions which may well produce a substantial fall in many commodities, and in some directions the consumer will no doubt experience a certain amount of benefit. Yet it is to be feared that the Food Controller's warning is justified, and for two reasons. In the first place, the set-back in trade resulting from diminished orders for certain commodities may occasion a great deal of unemployment and distress, while in the second place it seems probable that the very last articles to show a decline in value will be foodstuffs themselves. It is quite conceivable, therefore, that in the coming
winter, should foodstuffs remain high, we might have a situation in which the fall in other commodities meant increased distress through unemployment, whilst prices of the bare necessaries of life were still standing at a very
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