Committee on Finance. - Banking Commission Report and State Finances. – Dáil Éireann (10th Dáil) – Thursday, 6 Jul 1939

Committee on Finance. - Banking Commission Report and State Finances.

Debate resumed on the following motion and amendment:—

Motion:—

"That the Dáil is of opinion that in view of the contents of the Majority Report of the Banking Commission steps should at once be taken—

(1) to reduce the burden of direct and indirect taxation;

(2) restrict the creation of further dead-weight public debt;

(3) and so order the administration of public finance and policy as to stimulate profitable production and abolish poverty within the State.

—(Deputies Dillon and Mulcahy).

Amendment:—

To delete all the words after "that" where it first occurs and substitute:—

"in view of the serious depression in agriculture, the existence of widespread unemployment and the impoverished condition of large masses of the people as disclosed in the reports of the Banking Commission, Dáil Eireann requests the Government to submit to the Dáil at once proposals for the better development of agriculture and industry, the utilisation of the credit of the nation to stimulate such development and the absorption of the unemployed workers in productive employment at adequate rates of wages."

—(Deputies Norton, Keyes and Davin).

Minister for Finance (Mr. MacEntee)

When the debate adjourned last night, I was endeavouring to set before the Dáil some of the results which had attended, to my mind, ill-judged and ill-advised proposals for solving this major social problem by schemes of monetary expansion and financial manipulation. I should like to say in regard to that matter that I follow all those attempts with great sympathy, and with the warmest possible desire to see them succeed. If those who have attempted to better humanity in any country, by no matter what means, were to succeed in that endeavour, undoubtedly they would deserve our gratitude, and I am sure would be remembered through the ages. Accordingly, if I endeavour to set before the Dáil what I conceive to have been the results of their endeavours, it is not because I lack sympathy with their objective, but because my judgment—based upon such information as I have succeeded in obtaining in regard to the results of their measures—has led me to certain conclusions in regard to the experiments in the particular countries to which I am going to refer.

I dealt last night with the position in the United States, and I was dealing with the position as it existed in France during the years 1936 and 1937. I was pointing out that, notwithstanding the recovery measures which had been initiated in France—measures aiming at the raising of money incomes in order to increase production and employment through increased demands for goods and services—the measures had failed of their objective in so far as it had not been possible for France to regain even the 1929 level of employment and production. I pointed out that, notwithstanding those measures, employment and production had continued to decline in France until the autumn of 1936, when the franc was devalued, or, if you like to put it another way, when the currency was inflated. Since then the position has been both hesitant and uncertain. The term of office of the expansionist Governments was marked by an enormous increase in the national debt, a persistent rise in all prices, in the cost of living, and in the import surplus. The rise in internal prices undoubtedly was due to a number of factors, but it was largely occasioned by an undue credit expansion arising from increased advances from the Bank of France to cover budgetary deficits, to devaluation, and to the independent rise of external prices. In France during this brief period the public debt increased, as I have said, very rapidly. In fact, it increased by as much as 42,000,000,000 francs in the course of the year 1937. In France they did what the movers of the amendment have suggested. They utilised the credit of the nation with a view to stimulating the development of agriculture and industry, and the absorption of unemployed workers in productive employment. It happened, however, that this huge increase in the public debt, this utilisation of the credit of the French nation to the extent of no less than 42,000,000,000 francs in one year, was offset by the increase in money wage rates and by other adverse factors.

As I have already indicated, in the case of the United States of America, the stimulus to production which devaluation caused is only temporary; it could only be permanent in its effect if the rise in price offered for commodities is not fully offset by increased cost. That, of course, is the dilemma in which all expansionist countries and all expansionist authorities find themselves.

Perhaps it might be said that the statement which I have given to the House is the statement of an outsider, a person who is not intimately aware of the conditions which exist in France. Lest that might be said, I propose to quote for the benefit of the House an authoritative statement by two of the leading French statesmen of the day. I propose to give some extracts from the report of MM. Daladier and Reynaud which was presented to the President of the French Republic on the 12th November, 1938. It is a very important State document and contains a great deal of information about what has happened as a result of expansionist policies in France, which I do not think the House, and which I certainly do not think the movers of the amendment have been aware of. This is what those gentlemen have stated in regard to that French experiment:

"The financial problem is thus dominated by—and is in fact the reflection of—the economic. All the efforts made to improve the French financial position since the depression have been fruitless in face of the failure to achieve first a solution of the economic problem.

"In 1936 the hope was to increase the purchasing power of the masses and to bring about an expansion in the demand for the products of industry, which would itself have brought about a reduction in unit costs and eventually of the cost of living. Success would have been obtained if prices had not risen, if the increase in the purchasing power of the masses had been lasting and if production had increased. The gravest failure, from which the others follow, has been the persistently low level of production. Contrary to every hope and after many years of depression economic activity has shown no sign of revival and remains stagnant. Industrial production in 1938 is at a level 25 per cent. below that of 1930. Railway car loadings are 35 per cent. down. These conditions are all the more disappointing in the face of increased activity abroad. In England production has risen by 20 per cent...

"Certain special branches of our economic activity which may be considered particularly indicative, betray even more definitely the state of affairs. The volume of manufactured exports has fallen 46 per cent. compared with 1930, and this figure would be much greater if our relations with foreign countries alone were considered and no account were taken of our empire, which is protected by customs barriers. Some of our export markets have been almost completely lost. Exports of motor cars have diminished by 70 per cent., exports of cloth are down by 87 per cent., of cotton piece-goods by 94 per cent.

"At home, the index of building activity has fallen by 40 per cent., while in ...Great Britain it has risen by 100 per cent. This is particularly alarming. While France has stopped building, the English countryside is being covered with new houses.

"The unemployment statistics are also disappointing. There are 360,000 registered unemployed. Including those who are unassisted, there are probably 600,000 without work, or 5½ per cent. of the working population. If account is taken of about 2½ per cent. of partly unemployed, it can be said that 8 per cent. of the available labour supply is at present unemployed. A particularly sad result, when in the same period an additional 250,000 persons have been taken on permanently in various public services. Moreover, nearly 20 milliards of francs have been spent in great haste by the State and public authorities on public works, in addition to the great increase in national defence expenditure.

"What can one conclude," the report goes on to say, "except that the speculative purchases and turnover in stocks induced in 1936 by the fear of a rise of prices have been, taken together, without effect. Our successive devaluations, greater than those of the dollar and pound, have resulted in pure loss to the national economy. The home market has not been permanently enlarged. The disequilibrium between agriculture and industry has been accentuated, and purchasing power, which it was hoped to increase, has once again declined.

"For four years the State has absorbed the whole of our national savings, mainly for unproductive purposes. Despite all the artificial measures taken to reduce interest rates, to grant advances to traders and industrialists, the French loan market has become one of the dearest in the world. Everyone knows that in practice it is impossible to obtain mortgage loans at under 9 or 10 per cent. Everyone knows that if there is the slightest risk a private borrower cannot obtain capital at less than 10 or 12 per cent. Between 1928 and 1937 private issues of shares fell from 8.3 milliards of francs to 1.2, while private issues of bonds fell from 6.4 to 2.3 milliards. The drop is large enough, but would be even greater if account were taken of the depreciation of the franc. This collapse of private borrowing is due to the scarcity of available capital, a scarcity due principally to constant appeals from what has become almost the one and only borrower, the State.

"The conclusion of this survey is that for several years our substance has been melting away. Despite tariff measures, the devaluations have not prevented a constant deficit in our balance of payments. Taking only one element, the balance of trade, it is to be noted that the deficit has not ceased to increase in real terms, rising from the equivalent of 325 metric tons of gold in 1935 to 460 in 1936, and 580 in 1937, in three years an increase of 83 per cent.

"We have entered, in fact, into the vicious cycle of an indefinite rise in all prices. The fundamental fact which has raised the cost of living, and is raising it further, is the impoverishment of the country. The losses suffered during the depression weigh heavily on our retail prices, whether it be because, as a protection against international competition, customs duties have been increased to the detriment of the French consumer; or because devaluation has increased the prices of imported goods; or because the State, in the attempt temporarily to protect a large number of individual interests from the consequences of national impoverishment, has increased its expenditure, thereby rendering necessary, sooner or later, a recourse to inflation or to taxes, and consequently a new rise in the cost of living.

"Rise of prices, rise of wages, devaluation of the currency—that is the vicious cycle in which our economy is being carried along. The problem, then," the report concludes, "is not to choose between preserving or repealing the recent social reforms, whose generous inspiration nobody disputes. The problem is to prevent them from automatically dwindling to nothing, to prevent their benefits from evaporating in the high cost of living, to prevent employers and employed, in a country which is still poor, from having nothing to share but poverty."

That is the considered judgment of those who have had actual practical experience of the sort of policy which has been advocated in the Labour Party amendment, and I would like those who may think there is something in statements such as those we have heard from the mover of the amendment to mark the conclusion to which those who have been responsible for the report have been driven:—

"Rise of prices, rise of wages, devaluation of the currency—that is the vicious cycle in which our economy is being carried along. The problem then is, not to choose between preserving or repealing the recent social reforms, whose generous inspiration nobody disputes. The problem is to prevent them from automatically dwindling to nothing, to prevent their benefits from evaporating in the high cost of living, to prevent employers and employed, in a country which is still poor, from having nothing to share but poverty."

I have dealt with the United States and with France, and perhaps I ought to come now to Germany.

Mr. Davin

Tell us about Denmark.

Mr. MacEntee

I am not prepared to keep the House interminably, but I can go to every one of these countries. Notwithstanding what was said about cobwebs being on our eyes, we very carefully scan the course of every one of these experiments that have been made elsewhere, and the only thing about it is that we cannot look at everything through rose-tinted spectacles. I dealt with the United States, and I have just been dealing with France. Perhaps I should now go to Germany. It has been sometimes said, even by those who start out as avowed democrats, that after all there must be something in the Totalitarian system, because in Germany it is said that there are no adult males unemployed. I should like to say that, in my view, even Germany, with all the authoritatarian and dictatorial powers which her Government has, and with the full and unchallengeable control which it exercises, not merely over her national resources, but over every individual in the nation, has not solved the problem of creating productive employment for her unemployed. It is true that by adopting a war economy, by military expansion, in the construction of fortifications, in the making of munitions, in building munition factories, in large schemes of public works, with military objectives, and the construction of factories designed to replace essential commodities by synthetic products, manufactured at many times the natural cost, the population, which would otherwise remain idle, has been put temporarily, and very temporarily, into employment.

The mere obliteration of the unemployment register in the manner which I have just indicated is no guarantee of economic well-being. The financial difficulties of the Third Reich are, in my view, sufficient evidence of that. The mobilisation of labour for the purpose of intensive rearmament is no more a cure for the social and economic evils of unemployment than the causes which precluded unemployment in any of the great States during any of the war years, 1914-1918. The increase of employment under the Nazi régime has not ensured a correspondingly increased purchasing power in the community. Under the present system, there, it is possible, as my Parliamentary Secretary said last night, to conscript labour at a low level of wages. I do not think the mover of the amendment would for a moment tolerate the conditions in regard to labour which prevail in Germany.

The gain in employment, in so far as there is a gain in the actual number of people given work, or at work sometimes unwillingly, has resulted in no corresponding increase in purchasing power. On the contrary, I think it could be contended that the standard of living in Germany has steadily declined. It can be said, undoubtedly, that by heavy increase in taxation and by short term borrowing Germany has managed, for a time at any rate, to undertake and carry through very huge work schemes; but the future in Germany has been mortgaged by the creation of an enormous floating debt, and there exists there a situation which can easily lead to inflation and which, in fact, as the monetary proposals set before the Reich in February or March last proved undeniably, has already led to inflation.

The architect of this huge system of expansionist expenditure in Germany was Dr. Schacht, and I should like the House to bear with me while I give one or two brief extracts from a very important statement which that authority made before the Economic Council of the German Academy in November last. The statement is a long one, and I am not going to detain the House by reading it in full, but I recommend it to the study of people who believe that the Totalitarian regime in Germany has managed to find a solution of the major economic problem of the age. I will read one or two extracts from it. It is clear from the amendment which the Labour Party has moved, that they believe poverty could be cured and employment provided if we could adopt some of these theories which presuppose that by financing consumption we can permanently stimulate the demand for consumption of goods so that all those who otherwise would be unemployed will be absorbed in production. This is what Dr. Schacht had to say in regard to that matter when he was set the task of trying to restore economic prosperity to the Reich and to enable it to rebuild its strength:—

"After examination of the position, the ideals of financing consumption which at first attracted much attention and had in mind the indiscriminate distribution of money by the State, were all swept aside. In this way the mistakes were avoided which we have seen in the present time in the economic policy of the United States of America and France, and which show how closely related are deflation crisis and inflation crisis."

After proceeding to detail the monetary measures which were adopted, he goes on to say something which should be borne in mind by those who think that after the adoption of such policies as I have referred to, normal trade and business, the relations between individuals as producers and individuals as consumers, between individuals as importers and individuals as exporters, could continue to prevail; who think that we would continue to have the same freedom within our economy here as at the moment we have, and that the system of rigid State control which is in operation in Germany, which is in operation in Italy, and which is in operation in New Zealand, is a mere accidental development of their principles, and could be dispensed with if only we could get the right machinery to give effect to the theories in regard to credit control and social credit, which are sometimes submitted to us. This is what Dr. Schacht has to say on that point:—

"With National Socialism, however, came State-controlled economy in its widest scope and becoming more intensified with time, which made it possible to avoid rises in prices and wages. Thus one of the chief objections to financing production by credit was overcome."

Perhaps we ought now to see how Germany, by the exercise of State control in its widest sense, was able to avoid rises in prices and wages. Dr. Schacht gives us the answer to that:—

"Reduced to a simple formula, the problem may be stated as follows: The credit money supplied for the purposes of rearmament, or for any other purpose, produces through payment of wages and salaries a demand for consumers' goods. Armaments manufactures, however, supply military goods which, though produced, are not consumed. This has two consequences: In the first place, care must be taken that besides the manufacture of armaments, a quantity of consumers' goods should be produced"

—that is to say, that the workers should be put upon rations—

"that is adequate for the existence of the population."

A person cannot go out and buy as much of one commodity as his desires may dictate, or as much of another commodity as he may like. He has to take that quantity of consumers' goods that those who are in authority over him consider to be adequate for the existence of the population, including all those occupied in the armaments industry. What is the corollary of that? According to Dr. Schacht it is this:

"The less that is consumed, the more labour can be used for rearmament; but on the other hand, the higher consumption rises the more labour must be applied to the production of consumers' goods. The standard of living and the extent of rearmament stand, therefore, in inverse ratio to one another. The less I consume the more I save, and the more I save the more I can put into defence. This means that rearmament cannot ultimately be financed by creating money, but only by a policy of saving."

You can paraphrase that and you can say that this means that national development cannot ultimately be financed by creating money but only by a policy of saving. The only thing is that whether you are going to have a policy of voluntary saving, such as we have, or a policy of compulsory saving, such as they have in Germany. In the latter connection you have to remember that only a sufficiency of consumers' goods, only that quantity of consumers' goods which is adequate to maintain the working population is to be produced, and that the more you can restrict the consumption of consumers' goods by the working population the more you will have for whatever purpose the State may think desirable.

"The new plan is the logical realisation that it is not done with money alone, but that it is merely a question of what goods, and how many goods, I can get for my money. Guns cannot be forged nor bread baked from printed bank notes."

That is what every one of these expansionist policies which have been advocated in this country want us to assume, that you can forge guns or bake bread from printed bank notes.

"The one important thing is the ability to obtain sufficient goods, and if you do not produce sufficient quantities of these goods yourself, you must get them elsewhere by exchange."

Dr. Schacht went on to get a system of internal economy. He built up a huge system which was for three or four years regarded as almost a miracle by outsiders. It is well to hear his own view of the system which he had to build up there, in order that some effect might be given to some such principles as are enshrined in the Labour amendment. He says:

"I have in my time described my own new plan as horrible, and I still stand by that judgment. I really do not imagine that the merchant exists mainly in order to comply with the demands of an economic bureaucracy"—

and undoubtedly such a bureaucracy would have to be set up if we were to try to give practical effect to some of the proposals bruited about the country in recent times—

"Rather am I of the opinion that he should conclude as many good business transactions as possible and fill in as few forms as possible. But so long as our need of foreign exchange still exists the control of foreign trade must remain in force."

Ultimately every one of the proposals which have been advocated from time to time from various quarters must result in the complete control of foreign trade.

We heard a great deal in this House during the past three or four years of the position in New Zealand and what has been done there. I do not think that any person who knows, the measures which the Government of that State have taken to ensure that they and they only would control all the instruments of public and private credit in the country, could say that they had left anything undone. They have amended the whole banking code in such a way as to give them complete and absolute control over the public and private credit of that community, and they have utilised it for the very laudable purposes which they have in view. They have tried, I should say, by the unlimited utilisation of the power which they took when they got an absolute majority in the country—a majority which, by reason of its size, could not be gainsaid in anything it may have thought wise to do in the interests of the State. They have utilised that power in order to give effect to the social programme which put them into power. I might question the wisdom of the means, but I am in full accord with the end. They have tried to improve the position of the primary producers; they have tried to improve the position of the workers; they have endeavoured to get building going again, and they have done everything that they could conceive ought to be done in order to improve the position of those under their rule, and, in some ways, signs seemed to indicate for a time that they were moving upon a good road.

As we have heard here, there was, simultaneously with the measures which they were introducing, a rise in prices, so that if we proposed to express the total production of that community in money values, undoubtedly, it might be said that the total production had been increased. There has also been an increase in money wage rates and in earnings. That is only natural because the marginal productivity of labour and capital is high in a new country, but even into this evidence of increased economic activity and increased incomes, severe qualifications must be introduced. In terms of the average family budget of 1930, the cost of living has risen very steeply since 1935, and its upward trend is, in fact, steeper than at any time since the war years.

Mr. Davin

What is the figure?

Mr. MacEntee

I have not got the figure available at the moment, but the Deputy can take that as being an authentic fact. It is so high that the Prime Minister of New Zealand himself, speaking on May 12th, said that "by controlling prices the Government is controlling the necessity for increasing wages." He said:

"We want to see that there are funds provided so that prices are not raised against those whose wages are expected, for the time being, to remain somewhere about where they are. Generally speaking, (he said) stability is sought both by those controlling prices and those demanding higher wages. These sentiments have only a temporary application while we are dealing with a difficult situation, but the situation is inevitable to anyone who does any serious thinking."

Mr. Davin

Hear, hear!

Mr. MacEntee

Unfortunately, that happens to be true. If you start on the sort of widespread expansionist policy which has characterised the Government of New Zealand, wages and prices are going to rise to such a height that you are going to be caught in an inflationary spiral; but, as I have said, we have here, in the statement of the Prime Minister of New Zealand himself, a proof of my assertion that prices in New Zealand have been rising very rapidly, and that since 1935 the upward trend has been steeper than at any time since the War. Manufacturing costs have also risen steeply, because of the effect of the Government policy and because of the increased cost of raw materials which, even between 1936 and 1937, rose by as much as 11 per cent.

We have heard that the Government in New Zealand has done a great deal to restore the dairying industry to something like its former prosperity, or, at any rate, to put it on its feet. Now, in spite of the Dairy Produce Act which was passed by the Government in 1936, there has been a decline in the production in the dairying industry, and in the seven months ended February, 1939, butter exports were lower by no less than 9 per cent. than in the corresponding period in 1937-38. Not merely that, but the number of dairy cows has fallen steadily since 1936. We have heard that we ought to utilise national credit for the purpose of stimulating national production, and it has been so utilised in New Zealand. A guaranteed price for butter has been given to the dairy farmer. That guarantee has not been made good out of taxation, as we have made it good when we have had to meet the guarantees which we have given to our farmers. On the contrary, it has been financed by overdrafts on a special account held by the Reserve Bank, and the financing of any deficits that may arise on that, the dairy produce account, undoubtedly can only be done by an inflation of the currency. What is the position in regard to even this one industry? It is true that there was a slight deficit in the first year of working, of £290,000, and a surplus of £500,000 odd in the second year of working; but for the present year, as we ourselves heard the other day from a gentleman who had authority to speak on the matter, there was likely to be a deficit on that account of something between £1,500,000 and £2,000,000.

Mr. Hickey

He said that the drought was responsible for some of that.

Mr. MacEntee

Whatever was responsible, there was the fact that there was going to be a deficit. He said that the drought was responsible for the fall in production, but not for the deficit on the account, because the account had only to pay for what it was able to sell—that is, for what it compelled the producers to sell to it—because, remember, in New Zealand, under this system, the produce of every creamery must be sold to the Government, and the Government then disposes of that produce as it thinks best and at whatever price it can get. In the early stages, as in the case of this particular experiment, it guarantees a price, and if what it gets for the product does not fill the guarantee, then it finances it, as I have said, by means of an overdraft upon the reserve account: that is to say, by inflation. That money must be put into circulation in the country, and, of course, the moment that money is put into circulation and there are not goods against it, the prices must tend to rise, and do rise.

Now what, in fact, is the position of the dairying industry in New Zealand? I do not intend to weary the House by reading for Deputies the proceedings of the 7th Dominion Dairy Conference which was held in Wellington on April 19th and 20th of this year. I shall only quote two extracts from it. There is a number of other blue-pencilled passages here which would be very enlightening to any person who is interested in this matter, but I shall just read what the Minister for Finance and Marketing said to the farmers at that conference. He said:

"There was need inside a country like New Zealand to secure stability if you had provided certain facilities in connection with the betterment of all sections of the community."

Now, what is that except another way of saying that there is a limit to what you can do by credit expansion. But, if what we have been told by those who advocate these measures is true, there should not be any limit. Why, if it would be possible by adopting these facile proposals to improve the present status of the whole of the population, why if it would be possible to do that by adopting machinery of this sort must that improvement cease? Why should it not go on and continue? Why, if we improve the status of our people to-day so that they enjoy a better status, should not to-morrow a further improvement take place through this operation?

I believe the status and the economic condition of the people can be improved from day to day. I do not say it should cease or that there should be any cesser of our efforts to improve it, but there are those who say that it can be done overnight by adopting some of these proposals. Certain of these proposals have been adopted in New Zealand and then after a short period of time one of the principal sponsors of them—a man who is undoubtedly very sincere and very honest and, I have no doubt, a very enthusiastic protagonist of these proposals —addressed the dairy farmers in New Zealand in these words: "There is need inside a country like New Zealand to secure stability if you have provided certain facilities in connection with the betterment of all sections of the community." Then he goes on to say: "He saw an imperative need for the restriction of the imported commodities which we normally enjoy." What does that mean? It means that in regard to certain aspects of our life, the standard of living must be lowered. If you enjoy certain commodities, then by reason of that enjoyment you have a certain standard of living.

Mr. Hickey

He did not say it in these words.

Mr. MacEntee

He said, at any rate —these are his words:—"He saw an imperative need for a restriction of the imported commodities which we normally enjoy." He went on to say later—"The evidence was clear and concrete that we could not bring into the country this year a lot of imported products which we normally did bring in."

Mr. Davin

Why?

Mr. Hickey

They could not pay for them.

Mr. MacEntee

Here is the answer in Mr. Nash's own words: "If they therefore extended purchasing power by paying a higher price to the farmer, and higher wages, there would be greater purchasing power for a smaller quantity of goods and inevitably price rises would take place. If they did that they would come to a spiral." A voice here said—the voice of a very intelligent and wide-awake person—"Are not we in that spiral now?" I have merely quoted these extracts in order to show that what further I am going to say about New Zealand is corroborated by the statements which were made by a responsible New Zealand Minister, speaking to the dairy farmers gathered at the annual conference this year.

It was said here in the Dáil that there had been an increase in the value of exports from New Zealand since 1935. The value of New Zealand exports over the years since 1935 is as follows: In 1936, 56.8 million pounds; in 1937, 66.7 million pounds, and in 1938, 58' million pounds. I should like to recall for the House the figures which I gave last night for the expansion in our agricultural exports over the same period, that is, between the years 1935 to 1938. There has been a marked decline in the value of exports from New Zealand in 1938 as compared with 1937, so that the position now is almost what it was in 1936. The value of New Zealand exports in 1936 was 56.8 million pounds, and in 1938 they were value for 58 million pounds. These values are in New Zealand £s. I have shown that our exports, expressed in terms of sterling, rose from £13,800,000 in 1935 to £19,657,000 in 1938. There has been a continual rise in the value of agricultural exports from this country since 1935, and there has been no recession. In New Zealand, due to various causes—probably, I should say due to the improvement on the London market more than to anything done in New Zealand—there was a heavy increase in agricultural exports as between 1935 and 1937, but there was a recession to what was the equivalent of the 1936 standard in 1938. But the significant thing for us to remember in our case is that our exports have steadily increased until to-day. The figures show that there has been an increase of almost 50 per cent. as compared with the exports in 1935.

It has been said also, by Deputy Norton, I think, that there has been an increase in production in New Zealand. I know it is very boring to have to listen to these details, but this is one of the things to which we must listen when we are dealing with a problem such as is before us to-day. It has been stated that there has been an increase in the volume of production in New Zealand as compared with 1935. The latest figures I have are for the years 1935, 1936 and 1937. 1935 was undoubtedly a bad year here and elsewhere. But in 1935 the index for the physical volume of exports in New Zealand was 2,783; in 1936 it was 2.925, and in 1937 it was 2.906. The basic 1900 price has been taken as one.

Mr. Davin

Give us the value.

Mr. MacEntee

I have given the value of the New Zealand exports already. They rose from £56.8 millions in 1936 to only £58 millions in 1938. The most important feature, however, of the external trade of New Zealand is perhaps not the slight increase which has taken place in the value and volume of their exports, but the abnormal increase in imports which has taken place since 1935. This increase is due to the natural desire of the New Zealand people to use their apparently increased purchasing power to raise their standard of living. The visible excess of exports for 1933 was over £12,000,000 sterling. It had fallen in 1937 to £8.7 million sterling, and last year was only £3,000,000 in New Zealand currency. This decline, as well as the abnormal increase in imports, points to the inflationary tendency in New Zealand, and is of particular significance for a debtor country which must rely upon excess exports in order to discharge its current liabilities.

Concurrently, with this adverse movement in the balance of external trade, there have been heavy losses in the sterling assets of the New Zealand Banks. In 1936, when the visible trade balance was £12,500,000, the overseas assets fell by £8,000,000. In 1937 when the visible trade balance was £10,600,000, the overseas assets fell by a further £4,500,000. In the two years which ended April, 1938, they had fallen from £45,000,000 New Zealand to £28,600,000 New Zealand, and by November, 1938 they had fallen as low as £8,000,000 New Zealand. At present, I think they stand at about £13,000,000, but the increase is largely seasonal The main exports are at their height during this period of the year.

The fall in the export surplus which I have described has of course had its very drastic reactions upon the New Zealand economy, and the system of restriction of imports which was introduced by the Government last December indicates the importance that is attached to this matter. In fact, by imposing those restrictions upon imports in New Zealand the New Zealand Government has been endeavouring to stay the trend towards the deterioration of the national economy which has set in. Those restrictions are in fact very drastic. Not merely are commodities only allowed in under license in reduced quantities, but the Government has even gone to the extent that not only are they controlling imports in New Zealand but the exports are also subject to licensing control. What is more, the exporter has not the right to dispose freely of what he gets for his exports.

The sterling exchange which is earned by the exporter is not his to dispose of as he wishes. It is appropriated by the Reserve Bank, which has been relieved of the obligation to give sterling in exchange for New Zealand bank notes. New Zealand, so far as her internal economy is concerned, has gone off the sterling standard, and she has only gone off it because she has been driven off it internally by the dislocation in her general economy which the operation of the present Government's policy there during the past three years has brought about.

Such a drastic system of import and export control, of course, has had its reactions on the internal position of the Dominion, and the criticism is now being freely levelled against the Government there that this new system of control will force many traders out of business, and will promote unemployment in the wholesale, distribution and transport industries, while the community naturally will have to pay higher prices for a narrow range of goods, perhaps even of poor quality. In any event, I think it may be taken that this system has been forced by necessity upon the Labour Government in New Zealand by reason of the policy which has been operating there for the past three years. In the face of heavy capital exports, and a precipitate fall in the sterling reserves and balances which are vital to the finances of the Dominion, the temporarily inflated standard of living had to be reduced either by the direct reduction of incomes, or by the indirect methods of rationing imports, or by increasing import costs by further depreciation of the New Zealand pound.

The first and last course, that of reducing incomes by increasing taxation, and that of depreciating the New Zealand pound, were prohibited by the declared policy of the Labour Government. In fact, one of the objectives which the Government set itself when it came into office in 1935 was not merely to retain the then existing parity of the New Zealand pound with sterling at £125 New Zealand to £100 sterling, but even to improve and restore the original parity when the New Zealand pound would buy as much goods as the sterling pound anywhere. As I said, both the direct reduction of incomes by increasing taxation and the restoration of the economy by the depreciation of the pound were forbidden to the Government by its declared policy, and instead they have adopted this system of import and export control which is already in operation in the Totalitarian States in the world. The Labour Government in New Zealand—this is what it comes to —has been compelled to adopt the Totalitarian mechanism of Germany for the control of the Dominion's export and import trade.

The effect of the expedients to which the Labour Government has been driven in New Zealand, moreover, is not going to exhaust itself merely in a momentary dislocation of trade conditions within the Dominion. It is going to have very important reactions upon the financial position of the Government itself. If the State derives a large part of its revenues from customs duties upon imports, and if you start off by drastically restricting those imports, particularly those which bore heavy rates of taxation because they were classified as luxury imports, then, undoubtedly, those restrictions are going to react adversely upon your receipts from customs duties. Incomes, of course, also will suffer from the decline in receipts from the external balances. Yet we have been told that the public works programme which has been financed by borrowing in Australia, cannot be abandoned. If that is going to be the position, then the service of public debt is going to grow. We have been told, however, that a large part of the difficulties which New Zealand is confronted with arises from the fact that the Government there has to remit to London or elsewhere no less a sum than £10,000,000 per annum to cover the charges on the national debt.

Mr. Davin

£14,000,000.

Mr. MacEntee

£10,000,000 is the figure I have.

Mr. Davin

What is the amount of the loans floated in London?

I have been diverted from the main trend of my argument. I was pointing out that these restrictions upon imports were going of themselves to create budgetary difficulties for the New Zealand Government. I was going on to say further, that if the Government has to impose those restrictions and by that means has artificially to reduce the standard of living of the community taken as a whole—perhaps, indeed, reduce the standard of living most of all of those sections in the community which have never enjoyed the luxury of those imports—its revenue is undoubtedly going to shrink, and if it cannot get the necessary revenue by taxes upon what are described as luxury imports, it has got to get the revenue by taxes upon commodities which are necessary and essential to life.

When I was making my financial statement here, I tried to indicate to our people what would be the consequence of an outbreak of a European War, if we were compelled to restrict the importation of those commodities which yield us taxation and a large part of our revenue, and I said that if the inflow of these commodities ceased, then inside this island we should have to tax where and what we could. That is going to be the position here in case of a European war. That has already become the position in New Zealand. In order to make good the deficit on customs revenue other taxes, direct and indirect, will have to be imposed in New Zealand. And not merely that, but it has been suggested that New Zealand can go on and develop, even if it has to forego certain things which some people classify as luxuries. Even if it has to forego these things, it can develop inside its own bounds and, therefore, we are told they are going to go ahead with public works and are prepared to finance them by borrowing. If that is the case, they will have to remit £10,000,000 per annum to Great Britain; they have undoubtedly to pay over to their own internal lenders almost an equivalent sum—I do not know what it may be. I have not taken out the figures but, judging by the distribution of the debt, as between internal and external debts, it must be about six or seven millions. What is going to be the position then? The present position is that for every £ collected in taxation by the present New Zealand Government only 13/4 can be devoted to the internal requirements of the Government. Out of every £ collected only 13/4 can go to maintain public services and to discharge the obligations of the New Zealand Government to its own citizens within its shores, while 6/8 has to be remitted abroad.

Mr. Gorey

Hear, hear!

Mr. MacEntee

I am only saying that whatever may be urged about New Zealand no one can allege that the New Zealand Government is under the control of the bankers. It has shown what it can do with its monetary and economic system by what it has been doing for the past three or four years, and I am only trying to put before the Dáil the results of that experiment. I cannot help it if people think it might have an adverse effect on other countries. I think it would have a disastrous effect here. All I am concerned about is to let the people of this country know the truth, as far as I have been able to ascertain it, about New Zealand.

Mr. Hickey

Because the other countries are against it.

Mr. Gorey

Surely France and the United States are friendly countries.

Mr. MacEntee

I shall try to conclude this long speech.

Mr. Davin

You have only taken 3 hours.

Mr. MacEntee

I will sum up by saying once again that we have got to remember what Dr. Schacht said, that it is not the quantity of money as expressed by bank notes counts; it is not the rate of wages or the amount of income that matters, it is what goods can be got for those bank notes and what goods can be purchased for those wages that count. It is not the few pounds or shillings that may be in the workers' pay envelope at the end of the week that matter. They are of no value as long as they are there. Their real value comes to be measured the moment they are taken out of the envelope by the worker or by his wife, when they try to pay for the necessities of the household for the week. There has been a very heavy increase undoubtedly in the money incomes in New Zealand. We were told that it had risen from 98 millions to 166 millions between 1935 and 1938. Accompanied by that depreciation of New Zealand currency, there has been a general increase in the level of prices and costs. Has that brought happiness and prosperity to New Zealand? What has been one of the marked characteristics of labour conditions in New Zealand even since the last general election which, I think, took place in August of last year. What has happened since then? Would not one think, after all the stories we have been hearing in this House about conditions in New Zealand, that everyone there would be happy and contented, and that there would be a full output from every productive worker?

But that is not the position in New Zealand. There has been strike after strike in New Zealand. Strike after strike has been precipitated by the fact that even though wages were rising prices were rising very much faster. New Zealand has not been at all the sort of workers' paradise that members on the Labour Benches would have us believe. There have been strikes on the waterfront and on the transport system, a strike by one section of workers after another, and all the time there has been a decline in output, so that the members of the Government have had to go through New Zealand trying to stimulate production and imploring people to produce more.

Mr. Davin

And they succeeded.

Mr. MacEntee

No, they have not succeeded, and the fact that they have not is evidenced by the decline in the export surplus from New Zealand.

Mr. Gorey

There is nothing further left to them but to whip John Bull.

Mr. MacEntee

We have been told that everybody has been getting richer in New Zealand. What is the position in regard to the deposits in the savings banks? During the last 12 months there has been a heavy withdrawal from the savings banks. Trade has been subject to rigid control by an exchange and licensing system. The burden of the public debt has been overwhelming, and, above everything, the New Zealand dairy industry, about which we have heard so much, has been crippled by rising prices and costs.

We have had some experience here of the difficulty of fixing producers' prices, where there has been a monopoly control involved, and we have had disputes in that regard with our sugar beet producers on a number of occasions. When we could not find agreement at the council table, we have set up a tribunal to try and strike a fair price as between the producer and the factory. There was a dispute in New Zealand only last year, a dispute regarding the price which the Government should pay to the dairy farmer. And remember, the dairy farmer is the backbone of all the New Zealand economy. They contended that because of the rise in costs, the price which had been fixed under the Act which governs that industry was not remunerative, and the matter was ultimately solved in this way. A Dominion conference on February 16th, 1938, gave careful and lengthy consideration to the fixation of the guaranteed price for dairy produce, which is part of the policy of the present New Zealand Government, as outlined in the Primary Producers' Marketing Act and its amendments. It finally passed the following resolutions:—

"This conference is of opinion that during the operation of the guaranteed prices scheme the price should be determined for each season by a tribunal consisting of equal numbers of assessors appointed by the Dairy Board and the Government, and presided over by a Supreme Court judge."

"That this conference is of opinion that the tribunal's order of reference shall provide for payment on a basis that will enable the producer to pay competitive rates of wages, allow the producer a reasonable interest on capital invested in his farm and stock, enable the producer to meet any increased costs, and allow the producer a remuneration commensurate with the services he renders to the community and with that obtained by other sections of the community rendering equal service."

No person would deny or endeavour to assert that these resolutions did not afford a fair basis upon which to fix a price. Anyhow, as a result of discussions with the New Zealand Government, a board was set up consisting of three nominees of the dairy farmers, of three Government nominees, with a gentleman named Sir Francis Fraser as chairman. This board met, and, mark you, it consisted of three nominees of the Government, three nominees of the industry and an independent chairman. It fixed a certain price. The Government were unable to give that price and the matter was referred to this board again. The board considered the matter for a second time, and it fixed that certain price again. When we referred a question about sugar beet to a tribunal, the Government, whatever its view may have been about the price awarded, in the light of its obligations to the consumers and the other people interested in the industry saw that the company honoured the award and paid the price.

Here was a board set up by this New Zealand Government which is held up, not merely to the admiration of members of this House, but to the representatives of the dairy and agricultural industry here and in the country; here was a board set up by this Government to consider this question and to ascertain what was a fair price to pay the dairy farmer for his produce. Remember, the New Zealand dairy farmer has only one buyer. He is not able to sell in the open market. His creameries cannot sell to merchants in New Zealand cities; his creameries cannot sell to any customer outside New Zealand. The New Zealand farmer has only one buyer, and that buyer is the Government. And this board met, not once, but twice, and fixed a fair price. What did the New Zealand Government do? Did they pay the price? Not at all, they paid less than that price; they paid approximately only two-thirds of the increase recommended. And this was done by a Government that had carried through legislation which placed the whole dairying industry, every dairy farmer in New Zealand and every member of every dairy farmer's family, every worker employed by every dairy farmer, under the control of the New Zealand Government; and yet that Government would not honour its bond to those who were working in that industry.

I have a very interesting memorandum here which describes the means to which the Italian Government has had to resort recently in order to balance its Budget and to provide for the sort of expansionist policy that has been running there. What do I find? There has been a capital levy upon every section of the population. Deputy Davin might not object to that if it were confined to bankers, to those brutes in human form to whom he, like the rest of us, entrusts his savings and hopes, as we all do, that, on occasion, they will honour our cheques. It is not confined, however, merely to bankers or to those who are rich enough to have investments in public or private companies; nor is it confined mainly to the big business men. There has been, due in principle to the same sort of policy as I have been dealing with here, a capital levy, upon the private property of every individual who has property in Italy, within the past two years. It started, of course, with the big man, but it has come down now to the small man, and the small farmer on his farm, and the peasant on his piece of land— they have had to surrender 5, in some cases 10 per cent. of their property to the Government.

Mr. MacEntee

Hear, hear!

Mr. Cosgrave

They are very grave admonitions to mankind, not separate sections of them, but the whole encyclicals from beginning to end, and they provide themselves no detailed solution for either Governments or States to follow. They should be read in that kindly, paternal manner in which they were written. Now, we are here to discuss a motion and an amendment, both of them arising out of a very long report furnished by the Banking Commission. It is a very valuable report, exhaustive and very full of information, and it gives, to the best of their judgment and ability, the considered opinion of a number of experts. So far as this country is concerned, it owes a debt of gratitude to the gentlemen who gave so much of their time and industry to it; who made such an exhaustive survey of the whole field of our economy, considered probably every phase of the national life, and gave us their considered opinions. In nearly all cases in which they gave their opinions, they gave reasons for them. It would be only fair to them if we are criticising what they have said, at least to give them credit for the reasons they have put forward for whatever decisions they have come to.

Seldom has it been my fortune to read a report with which I was in such general agreement. There is, at least, one recommendation with which I am not in agreement. Generally speaking, it is a report which ought to command and receive from the Government of the country very careful consideration. Criticism has been expressed here in this House, and outside it, in connection with one proposal, that is the proposal to continue the link with sterling on a parity. I wonder if those who criticise that, read on page 4 paragraph 8, the following:—

"Firstly, it is important as an aim of monetary policy that the real wages of workers may be kept unimpaired, and that the value of accumulated savings shall be preserved, and that there may be a firm foundation for future contracts in matters of business, life insurance, etc. On the other hand, the burden of past debts should not be aggravated by an increase in the purchasing power of money. It is necessary to pursue a credit policy that will be favourable for the progress of agriculture and industry."

I take it that it was not merely because sterling was the British unit of value that the Commission decided to recommend the continuance of a link with sterling at a parity. Occasionally through the course of the report, in their examination of agriculture and of industry generally, they focus attention upon imports. In recent months, when there was a danger—in fact some people even thought a likelihood—of an outbreak of war, the importance of those imports seemed suddenly to seize the public imagination. If those who criticise the parity with sterling would consider for a moment what is the unit of value that they would recommend, and put forward what in their view should be the value of the Irish pound, it would be much easier to deal with their side of the case. Considering the care and attention—one might almost say the exhaustive care and attention— with which the commission dealt with this matter, it is only fair to the public that they should know whether the proposal is that our pound should be worth 15/-, and that we would have to pay a corresponding increase for the English pound if we wanted it. If we depreciate our own pound here, our imports —the raw materials which are necessary for industries in this country, whether they are new or old—will increase in cost. Wages at the present level would not be worth the face value of the payment that would be made for them. It is quite true that we would get more value for those goods which we would export.

We are entitled to hear upon what grounds this recommendation is going to be made, if it is going to be made at all. We are entitled to be able to tell any person who has money in the bank, or in the Post Office, or in Savings Certificates, what amount of discount this new proposal is going to occasion in the savings he has made. Let us once and for all clear our minds of the idea that the money which is at present in bank in this country belongs to the rich. The average value of a deposit in our banks is little over £200. There are very few large depositors; there are very many small depositors. One of the most disastrous of the consequences that beset at least one country on the Continent which had to depreciate currency during the last 20 years was the baneful effect upon the younger people of that country when they considered how many years it had taken their parents to put a few pounds in the bank, and how it had all gone in a few days, or a few weeks, or a few months, as the case may be, by reason of the change in the currency.

On the other hand, there is the danger of what is called a fluctuating currency. That is even worse, because it always hits the poorer section of the community. During the economic war it so happened that competent farmers with capital might survive, and might even do better during that period, with initiative and industry and business knowledge. I know one of them who did, but it would not have been possible for every one of them to have done it. So it would happen in the case of a fluctuating currency. The disadvantages are always on those least able to bear them, while the advantages are with those who are most competent to deal with a situation of that sort and have capital behind them. If one were to examine this report with a view to finding out what was the main theme running through it, my answer to that would be that it was on the balance of payments. There are people who affect not to understand what is meant by the balance of payments. In essence it means balancing the accounts of the country. You put on the one side all the moneys that are received either for goods or in respect of dividends for investments, tourist expenditure, pensions, and various other items. The receipts are on one side, and on the other the payments out for imports, in respect of tourists from this country who go abroad, dividends to people who have money invested in this country, and so on.

If my interpretation of the report is correct, the members of the Banking Commission were rather impressed with the dangerous trend that has been evident during some of those past years. Those who are directing their criticism towards what is called the conservative mind of the Banking Commission should go further and deeper into the question, and see why it was that they committed themselves to what is called a conservative policy.

They would find that the main theme, the main idea at the back of the minds of the vast majority of the members of the Banking Commission was that we should balance our accounts. They made no objection to an increase in our imports. They made no objection to an increase in our industrial activity here. They stressed and emphasised the importance and the necessity—the absolute necessity—of increasing our exports. They took the line that it was upon the agricultural produce of this country that its success, its prosperity, its stability, its future, the happiness of its people and our standing as a State, were going to be determined. Right through the report, from one end to the other, however much they may have departed from it in detail, that was the guiding principle. It is unfortunate to my mind that there were not at least two farmers on that commission. There does not appear to me to have been one. There were two holders of land, very considerable holders of land, but they were on the Banking Commission one as a banker and the other in his capacity as a holder of some office to which he was appointed by the Government. I say that for this reason, that there does appear through some paragraphs of the report to have been a certain optimism at the back of the minds of the commission generally about the situation of agriculture, which, as far as the information which we could get from the available statistics is concerned, does not appear to have been justified. But a statement of that sort, coming from what has been described as, an ultra-conservative body, shows that at least they were not in any way pessimistic about the possibilities of the country.

In paragraph 88 they say:—

"An important alleviation was moreover given to certain charges to be borne by agriculture by the halving of the land annuities and by State grants towards relief of rates on agricultural land. On the other hand, the increased burden of State taxes has affected farmers as well as other classes.

"The establishment of home industries under the industrial programme has led to a higher price of many of the goods which the farmers have to buy than would have been the case with free imports; and this is not only felt by them in their capacity of consumer, but to some extent also as an element in their cost of production. Likewise the agricultural policy while conferring direct benefits on some farmers, has, in certain respects, affected the costs of other farmers, for, as mentioned above, the admixture of home-grown oats and barley to replace at least partly imported maize has led to an increase in the price of certain feeding stuffs required for animal production, including the feeding of poultry. As the export of live-stock products is a most important credit item in the balance of payments of the Free State, the possibility of agricultural production at a cost level which will permit reasonable remuneration to those engaged in agriculture is, of course, of predominant interest. From this point of view it may be emphasised that any serious increase in costs would be particularly harmful in a period when any advance in agricultural production must be expected chiefly from an increase in efficiency, which is only another name for reduction in costs per unit of output."

In the course of their report they give us exact figures regarding the money to the credit of agriculturists in the banks and the money owed by agriculturists. Something like one-half of those who are styled agriculturists in this country are indebted to the banks —the exact number is 125,000—and they owe approximately £14,000,000. The period of the economic conflict with Great Britain was a rather difficult time for farmers who were in that position, and the report says, in paragraph 93:

"But even apart from these special advantages, the farmers have shown themselves willing to tighten their belts, when their income went down. ... There has undoubtedly in many areas been a deterioration in farming methods, a decline in the use of fertilisers, and a slowing down in the acquisition and replacement of machinery and other agricultural implements.

"A reduced income earned in agriculture not only affects the farmers, but has wider repercussions. When the farmers are in reduced circumstances they cannot to the same extent pay for the services of the professional classes or purchase the commodities produced by industry. World trade is in a large measure an exchange of commodities between industry and agriculture, and this is particularly true of Ireland. Indeed an industrial development programme has hardly a fair chance of succeeding at a time when a large section of the market for industrial goods is severely curtailed. Fortunately, world economic tendencies seem to be moving in a way more favourable to agriculture, and the Free State, noted for its output of important specialities, should be able to share in a period of renewed agricultural prosperity."

They go on to examine generally the industrial activity which has taken place here in recent years, and they inquired into what used to be described in this House as the change-over in agriculture. It transpires from their examination and from the facts—I must distinguish in this case between facts and arguments—that the change-over was responsible for but a marginal alteration in agricultural economy, and that it could be only that; that the main source of agricultural production in this country was, is, and will be the production of live stock and live-stock products. That is borne out even more conclusively by the returns furnished to us for the last year or two years. As to the extension of tillage, nobody is opposed to it so long as it is a policy pursued and operated by the farmers in a manner profitable to them and of benefit to the country. In 1935 we had 918,000 acres under corn crops; in 1936 it advanced to 946,000 acres; in 1937 it contracted to 926,000 acres; and in 1938 to 920,892 acres. Roots and green crops showed a reduction in those three or four years of about 30,000 acres. There has been a rise, not a considerable rise, possibly 10 per cent., during the last few years from the time when this policy was inaugurated.

The commission stress the fact that live stock and live-stock products are and will continue to be the main source of income for those engaged in agriculture. I have taken out the figures showing the exports of agricultural products, deducting from them the imports of agricultural products, for the last eight years. In 1931-32 there was a balance of net exports, deducting the net imports, of £13,425,257; in 1932, a balance of £6,062,816; in 1933, a balance of £4,585,311; in 1934, a balance of £3,417,444; in 1935, a balance of £6,401,463; in 1936, a balance of £8,079,290; in 1937, a balance of £6,454,513; and in 1938, a balance of £9,986,915, showing an average over these seven years of £6,426,822 as against £13,455,227 in 1931-32, or a drop of £7,000,000 over seven years.

It so happens during that period that consumption at home was fairly regular, there being scarcely any change. It may have varied a few hundred thousand or even as far as a million. I did not take out the complete figures for the whole period, but any I got showed no comparable alteration in the amount, which came to £49,000,000 less on the average over that period. Is it not inevitable that an industry having suffered such a loss would not be in a position to stand any extra strain? It is quite true that during these years, from 1933 up it had to pay half the annuities. There has been an increase in the rates, amounting in the warrant issued in the present year to something like £825,000, so that if that were to continue it has absorbed almost half of whatever advantage one could claim in respect to the reduction of the annuities. That is the industry we have to consider. That industry is now struggling in competition with highly efficient products from all parts of the world. That is the main reason and purpose for which the motion was put down:

(1) to reduce the burden of direct and indirect taxation;

(2) restrict the creation of further dead-weight public debt;

(3) and so order the administration of public finance and policy as to stimulate profitable production and abolish poverty within the State.

Looking over these seven years to see how we stand to-day, we find that we owe more, we can export less, we have fewer people, taxation is at the peak point, and production is far below the point of efficiency. Is it not only fair and right that the Government of this State should consider how it is possible to reduce overhead charges imposed upon industry and aid it by decreasing the costs that are falling upon it?

The commission's report is a very instructive one for many reasons. I think there are three reservations on the part of the signatories of the Majority Report, and that four or five of those who signed it put in addenda. In one of the minority reports reference is made to "turning Pat Murphy into a market." That is very reminiscent of some political slogans of seven or eight years ago, when efforts were made to turn Pat Murphy to agriculture. Agriculture has not been made any better off. Dealing with the attitude to the secondary industries in the State the report continues on page 62:—

"Net output per head fell from £304 in 1929 to £256 in 1936, or by 15.8 per cent. The figure of net output is not likely to have been affected greatly by changes in wholesale prices, but reflects more directly changes in wages. This is in accord with the fact that the recent industrial expansion has been most marked in those industries in which the net output per head and as a consequence the ability to pay a high wage is small.”

Is there not reason in that paragraph, simple as it is, for lessening the costs? Is there any industry that can possibly escape the effects of high taxation? If it has the good fortune to do so in one form it would meet the impact in some other form. The Report states on page 94:—

"Non-agricultural imports are more likely to advance than decline if the standard of living is maintained or improved, that is, if the real incomes of the workers are preserved or increased. As indicated elsewhere in this Report, wages in a number of important occupations show an upward trend, but the state of the balance of payments shows that such a trend cannot be continued with safety or prospect of permanence if it is not correlated with favourable conditions for the cheap and efficient production of agricultural commodities for export on an unsubsidised basis."

Is there anything very conservative about that? Throughout the Report it is the desire of the members sitting on it to see wages maintained and to see value got for wages when paid. I wonder what would happen in the event of this country going off what is called "the peg to sterling". Nobody in this or any other country would support the peg to sterling because it is British. The British Government has made many efforts during the last 15 or 20 years to arrive at some degree of stability with regard to currency generally, and when the last agreement was come to, `three or four years ago, between the French, British and American Governments, it was with a view to ensuring that stability in their currencies would be maintained. The remarkable terms of the agreement were that every effort would be made to prevent any one of the three countries depreciating its currency so as to get a trading advantage over the other. The Report proceeds at page 111, paragraph 181:—

"In the first place, it is almost impossible that the export trade will remain uninfluenced by higher costs and prices on the domestic market. It has been explained in earlier sections of this report that smaller countries especially have found it advantageous to pursue a policy of comparatively low tariffs which has enabled them to build up strong export industries."

The next paragraph states:—

"In the second place, a system which involves widespread regulation of costs and prices introduces an element of rigidity into the country's whole economy. It tends to reduce the effect of changing prices, and is therefore apt to be less effective in the elimination of uneconomic enterprise, and a less sure guide for the direction of economic activities towards remunerative employment. Danish agriculture, it may be noted in this connection, has been conspicuous for the rapidity with which it adapted itself to changes in relative prices."

Is there not there an indication of the desire of the commission to ensure remunerative employment? In paragraph 187 the report states:—

"Once a dangerous development of costs and prices has occurred a correction may prove very difficult, and it is therefore of the greatest importance that full consideration should be given to the possible effects of any proposed measures affecting the cost and price structure, and that, moreover, some general views should be taken as to what price movements may be considered justifiable for a country in the position of the Free State.

"It is impossible not to be struck by the multiplicity of agencies through which prices may at present be fixed. The price of wheat is fixed by the Minister for Agriculture; the price of sugar is a matter for determination by the directors of the Irish Sugar Company, which has a statutory monopoly of this trade; the price of pigs is fixed by a statutory board, and the price of bacon by another board; the price of butter is also fixed by the Minister for Agriculture, who, in this way and through participation in the dairying industry by means of the Dairy Disposal Company, largely determines also the price which the farmer obtains for milk from a creamery.

"It would seem to be in the public interest to establish a greater coordination of so much of the work of the different price-fixing agencies as it may be necessary to retain. More attention ought also to be paid to the monetary repercussions of all the measures taken affecting the level of costs and prices, a question to which we shall revert in later sections of this Report."

While it is quite true there was no representative of the farming industry on this commission, they say in paragraph 328:—

"There is another aspect of the subject of bank loans for agriculture to which it is necessary to make reference. The Banking Commission of 1926, in its Second Interim Report, commented in strong terms on the moral risk of loans for Irish agriculture, and urged the need of a more reasonable and businesslike view of the collection of debts secured on land or incurred by farmers. It is to be feared that, so far from any improvement having taken place in this matter during the past ten years, there has been a further deterioration of the position. A contributing factor to this result has been the extension, from time to time, by legislation, of the discretion conferred on the Land Commission to acquire land by compulsion and to re-allot it to new occupiers."

Later on, on page 315, paragraph 509, it is stated:—

"Great importance attaches to the question of security of tenure."

They go on, in the course of their observations in connection with the question of the compulsory acquisition of land by the Land Commission, to direct attention to the fact that a man in the occupation of land cannot have the interest or the heart in it that he should have, nor would he be advised to put his capital into lands which were likely to be acquired by the Land Commission; nor, as they say, in another part which I cannot remember just now, is it likely that the farmer as such will be able easily to acquire capital for the working of his lands.

As I have said in the beginning, right through the whole report there runs the one warning, the balance of payments. It is almost a direct admonition to the country that they have to improve and extend their agricultural production and their exports. Bear in mind the very small incomes and the very large inroads that have been the result of the events of the last few years—the large inroads upon what farmers were able to earn. This is obviously the time when efforts should be made to assist them. No greater assistance is asked in this motion than to reduce the burden of direct and indirect taxation and to restrict the creation of further dead-weight public debt.

The commission points out many ways in which the question of public debt could be dealt with. I do not propose to go into the matter at this late hour, having regard to the long time this discussion has taken, or rather to the long time that has been occupied by some of the speakers. I have looked up returns showing the Post Office deposits and Savings Certificates, and I find that in 1931 the sum total of the two amounted to £1,340,000; in 1933, it was £1,000,000; in 1934, £525,000; in 1935, £685,000; in 1936, £975,000; in 1937, £940,000, and in 1938, £574,000. There is a reduction there; it may be a temporary reduction, and there may be reasons for it. But the position does not appear on its face to be improving. The country must advance. The success and prosperity of the more stable countries have depended upon the capacity of the people to save. According to that figure, we do not seem, in respect of those who use the Post Office Savings Bank and the Savings Certificates, to be able to do it.

We have been asked, in the course of this discussion, to give some information to the Government as to where they can effect savings. I gave it here on a former occasion. I cited something like 24 services in which the expenditure has gone up since 1931-1932. They are not social services. The first one is the Prime Minister's Department; the second is the Department of the Comptroller and Auditor-General, and the list goes on to the Minister for Finance, the Revenue Commissioners, Commissions and Special Inquiries, the Public Works Office, the State Laboratory, the Civil Service Commission, Rates on Government Property, Secret Service, Miscellaneous Expenses, Stationery and Printing, Law Charges, the Department of the Minister for Justice, the Gárda, the Supreme Court and High Courts of Justice, the Minister for Education, Science and Art, National Gallery, Industry and Commerce, Marine Services, the Army, External Affairs and the League of Nations, taking out the salaries of Local Government and Public Health, National Health Insurance, Forestry, and the Land Commission.

I estimate those represent a sum of approximately £3,000,000 over what they were in 1931-32. Has the country been run so much more efficiently during that period that we can afford to spend that extra money? Perhaps I should not say "afford to spend", because the calculations are from estimates in both cases. In the Budget discussion I disputed the claim of the Minister for Finance that the social services were responsible for the great increase that has taken place in public expenditure. Last night the Minister compared the expenditure for 1931-32 with the expenditure for 1938-39. I must refuse to take part in a discussion of that kind. If we are dealing with the taxation for this year, we have to talk about the expenditure for this year. If we are dealing with last year, we can deal with the taxation and expenditure for last year as such. But we ought to be up to date about those matters.

In the course of the criticism of the Budget I went to the trouble of taking out the figures relating to civil servants, the Guards and others over and above those employed in 1931-32, and I found there were 5,000 extra. It may be there is one section in this House anxious to see the policy in operation during the last seven years carried out successfully, as distinct from those in another part, on the Government side of the House, those who want to continue with that policy.

The leaders of the Labour Party, and the Labour Party generally, would seem to be wedded to this policy of high expenditure and, possibly high taxation. Some speaker here, in the course of this discussion, said that expenditure scarcely mattered if it were well spent. I should like to know who has discovered any Government method of spending money well. It is all extravagant. It must be extravagant. It costs money to collect it and it costs money to spend it. The more that is taken from the pockets of the people, no matter in what walk of life they may be, the less there is for those people to spend, and they generally manage, in the ordinary course, in most countries, to spend their money better than the Government can afford to spend it.

The Minister disputed a figure, which I took from the Estimates under his name, of 6,000 Guards. That is the number that is in this year's Estimate and in last year's Estimate. In 1931-32 the number was 5,443. The Minister, in the course of his remarks, said that he had phoned up the Guards and discovered that there were not 195 more than in 1931-32. It does not appear to be easy to see how public business can be conducted if the documents can present one figure and the Minister presents another. Apart from that, however, I take out the sum of money collected in tariffs only in the last year in which the Public Accounts were furnished. That would be the year 1937-38, since the accounts for last year are not yet published. I find that the Government collected, approximately, £500,000 in tariffs over and above what was collected in 1931-32. Then, on looking up the Revenue Commissioners' Estimate, one finds that the extra costs involved amounted to £200,000. Now, that is very considerable. One page is taken up in the Report of the Public Accounts of 1931-32, and seven pages are taken up in the report for 1937-38 by customs duties. I am speaking now of Estimate as against Estimate, and yet one Department is up £200,000. That is very expensive and it bears out what we have said: that the more money a Government collects the more extravagantly the money is collected; and the more money it collects to spend-well, the more extravagantly it is spent.

Looking over what are called social services in this country, one is struck by the very large figure that is down for unemployment insurance and for unemployment relief. In a country which had a sound agricultural economy, which had the expansion which we have been told has been marked here during these last six or seven years, it is extraordinary that two such sums of money should be required. It is no credit to us that we have social services of such a magnitude and that our control of the business of the country and of the national economy is such that the industries we have got, whether the primary industry of agriculture or the secondary industries, are incapable of employing all these people. Then, when one considers what sum of money each individual gets from that fairly large distribution, one gets rather appalled. There are something like 46,000 persons who get employment on relief schemes, and dividing that 46,000—if the number be correct—into £1,290,000, I think it gives a figure of about £28 a year, or less than 11/- a week. Of course, there is more than 11/- a week paid, but there would be only 11/- a week for the year, or £28 for the year in any case. That does not appear to be remunerative employment, and it is a question whether it is good business to employ people and give them such small sums as to give them no great hope of being able to rehabilitate themselves or get into an economic condition. I do not think there is much hope of a man being able to rehabilitate himself if that is all he can earn.

However, the sum and substance of the efforts that have been made to industrialise the country and improve its agriculture show a large emigration from the land, large numbers of people in the cities, unbalanced Budgets, and high taxation. Was it not well, and was it not time, that some such report was made to this House and this country as is there? Is it not obvious that, if we are going to try to get employment for these 46,000 people, who have to be assisted annually by means of Government grants, some effort must be made to make industry profitable, whether the primary industry of agriculture or the secondary industries? It is for that purpose we have put down the resolution. My opinion, for what it is worth, is that this country is living beyond its means in so far as public and local expenditure is concerned.

Whatever may be said in condemnation of other countries for pursuing an inflationary policy, the policy that has been pursued here, and that is now continuing, leads only in that direction, and leads in a direction in which the people are denied even whatever satisfaction there might be involved in an inflationary movement, as such.

The Minister went to great pains to deal with this inflationary policy, or rather the line that is in the amendment proposed by the Labour Party— to utilise the credit of the nation. Of course, it may have very many meanings, and I think we ought to have the meaning explained. The nation as such would not refuse to lend its credit to proper spending. Nobody has put forward any spending scheme. We heard many years ago the great schemes that there were for putting thousands of people into employment, but only a few months ago we were told that there were none, and the Labour Party have none.

Mr. Davin

Yes.

Mr. Cosgrave

The Labour Party have?

Mr. Davin

Yes.

Mr. Cosgrave

Well, I should be very glad to hear them. We did not hear them the other day. If, however, the proposal be either to print money or indulge in any of those experiment's which have been dangled before the people's eyes, the results will be disastrous not only for them but for the whole country. I should not like to discuss the economic conditions or financial affairs of other countries here in this House, and we need not do so. We need only go back a little bit in history. From my little historical knowledge, the first instance of this sort of development occurred during the period of the French Revolution, when, in the General Assembly, or the Constituent Assembly, or whatever it called itself, a proposal was put up for the issue of 400,000 assignats. The people were assured that, once that was done, everything would be all right. Well, the assignats were issued but it was not very long afterwards until 400,000 more assignats had to be issued, and so on.

Who suffered the most? The people who suffered the most were the unfortunate working people of that country, and some of the richer people made money out of it. That has happened all over Europe, and the racial disturbances that have occurred in Europe during the last couple of years are traceable to the fact that certain people, during the tribulations of some of these great nations, made money while their people starved.

If you interrupt for once in this country—a country, old and all as it is, in its infancy, one might say, in connection with these matters—the policy of thrift that is characteristic of our people, if you shake their confidence in the banking institutions of the country, and if you keep them from looking to the future when they will have something for themselves, you will be doing them a very grave disservice. When people are talking about money and credit, I should like to see some of those who believe in Government policy who have £100 to their credit—they need not part with a penny of it—and who have a business or employment, so that if anything happens there will not be a dead loss; something will be left, going into a bank and signing a bill whereby the bank will accommodate them with £100 to put into one of these schemes that you talk about. But do not go on with the business of producing something for which there is no sale. We have not been able to turn Pat Murphy into a market for the last seven years, and we will not turn him into one for the next seven either unless we increase the production of this country, increase the number of persons in profitable and gainful occupations, and do something towards building up the country instead of talking about that sort of thing.

No, and that is the mistake that is made in connection with money. In my opinion it would pay the

Government, and certainly pay the State, to devise a scheme for assisting the agricultural industry; to assist it, mind you, non-politically, to assist it economically and get more out of it. One of the first things to be done in that connection would be to carry out what is in this resolution which is put forward with the intention of improving this country and the condition of the people who are in it.

Mr. Davin

The Minister for Finance, in his lengthy and weary speech, lasting 3½ hours, quoted from statements made by our late Holy Father, but in doing so he did not relate the statements in any way to the majority or to any of the minority reports of the Banking Commission. I listened very attentively to the whole of the speech made by the Minister. The most regrettable part of that very lengthy speech was the uncalled for condemnation which the Minister poured out upon the New Zealand Government, a Government that he knew— we know that he knew it—was at the moment engaged in the most delicate negotiations with the British Government, and with those who control the London Money Market. It was not necessary for the Minister, in order to make his own case, to condemn, in a speech lasting over an hour, a Government which he admitted to be a friendly Government, whose Minister for Finance was the guest of this Government within the last week. As a matter of fact, the Minister for Finance himself was responsible for moving a vote of thanks to the New Zealand Minister for Finance for the address which he delivered within the precincts of this House less than three days ago. I hope, at any rate, that the delicate negotiations which have been going on for some time past, and which are about to conclude in the very near future, as far as I am informed, will be in no way prejudiced by the uncalled for attack made by our Minister for Finance on the policy of the New Zealand Government.

I remember the Minister for Finance when he was sitting on the Opposition Benches, and when he was a most eloquent speaker from those benches in condemnation of the activities of bankers, of landlords—both ground and land—and of profiteers of every description. We have listened to his speech, opened last night and concluded to-day. I am sure that any person interested in the continuance of the existing banking system would say that he was the most eloquent advocate for the callous, capitalist classes in this country that has been ever heard speaking in this House or outside this House. The Minister for Finance, if he has ever looked at certain sections of the Constitution of this country, must have forgotten the meaning of what is contained in them. The Taoiseach, who, I presume, will speak in this debate before it concludes, claims credit and full responsibility for the latest baby Constitution of the world, which has been described inside and outside this House as the greatest Catholic Constitution in the whole world. Article 45 of that Constitution deals with "directive principles of social policy". Sub-section (2) of it states:—

"The State shall, in particular, direct its policy towards securing

(i) that the citizens (all of whom, men and women equally, have the right to an adequate means of livelihood) may through their occupations find the means of making reasonable provision for their domestic needs."

Further on:—

"III. That, especially the operation of free competition shall not be allowed so to develop as to result in the concentration of the ownership or control of essential commodities in a few individuals to the common detriment."

And again, and this has a very direct bearing upon the subject matter of this motion and amendment:—

"IV. That in what pertains to the control of credit the constant and predominant aim shall be the welfare of the people as a whole."

Will the Taoiseach, or any other member of the Government Front Bench who may speak later on this debate, give us some indication as to how far this Government has, within the seven years it has been in office, made any attempt to implement those articles in this much boosted Constitution? I suggest that the Minister for Finance throughout his speech forgot, or must never have read, those Articles in the Constitution. If he ever did read them, he certainly completely ignored them in the lecture which he delivered to this House and, through it, to the people as a whole.

The Minister for Finance, although claiming on behalf of the Government a further period of time in order to enable them to make up their minds as to what was going to be done in connection with the Banking Commission Report, pursued a line of argument which made it quite clear to everyone who was listening to him that he was standing over and defending the so-called Majority Report. There is a very close relationship between the language in the motion moved by Deputy Dillon and in the language used by the Minister for Finance not alone in his speech in this House last night and to-day, but in the language of the speech—it is on the records—which he delivered in the Seanad on the 28th June last. Compare the language in Deputy Dillon's motion with the following statements made by the Minister for Finance. Deputy Dillon in his motion speaks of seeking "to reduce the burden of direct and indirect taxation." Dealing with that matter in the Lower House the Minister for Finance said:—

"Undoubtedly, I make no concealment of the fact that it would be advantageous if a retrenchment in certain non-productive expenditure could be made."

He did not proceed to indicate what he referred to as non-productive expenditure. He is leaving us to guess as to what he meant in that direction, and I hope that, if the Taoiseach agrees with that line of thought, he will indicate what his Minister for Finance meant when he referred to non-productive expenditure and the desire of his Minister to make economies in that direction.

He made some remarkable statements further on in the same debate. Dealing with the provision of credit as called for by certain farmer Senators, when he was addressing them in that House he said: "My own view in regard to this matter is that by all means we ought to increase production". Every Deputy in this House is in favour of increasing production, but the problem is, how is agricultural production to be increased? What is the means whereby the lands that are in a semi-derelict condition are going to be occupied by stock and machinery obtained in order to increase production? Much of the land that is derelict to-day is derelict because there is no working capital or credit available for the purpose.

He goes on: "My view is that once prices are right, the production will follow". That comes from our Minister for Finance, who accepts responsibility for the fixation of the prices of agricultural produce. The Minister for Finance is responsible for the establishment of the Irish Sugar Manufacturing Company and inferentially responsible for the activities of the beet growers and the fixing of the price to be paid to the farmer for beet. There is no Deputy sitting for the constituency that I represent in this House who can deny that there has been a considerable reduction in the acreage under beet in the last two years. I asked for information on that point myself from the Minister for Finance in a question addressed to him a couple of months ago, but he told me it would not be in the public interest to give that information. However, I have information from a reliable source, which is to the effect that the acreage of beet, in the case of the constituency which I have the honour to represent, is about 50 per cent. of the acreage there was when there was only one beet factory in this country, the one in Carlow.

Is it to be suggested therefore by the Minister for Finance, who is responsible for the price of beet, or by anybody in this House, that farmers are going out of beet cultivation because they are earning too much by growing beet? I suggest they are not I think the only reason why they are getting out of beet is that they are not getting an economic price for it. Therefore, if the Minister has any grounds for saying that production will increase when prices become economic it is his business to increase the price of beet.

Dr. Ward

Is the Deputy prepared for an increase in the price of sugar?

Mr. Davin

I am just dealing with the Minister's remarks. He goes on to say: "I feel that once prices are right, the credit for which Senator Baxter has been clamouring and for which Senator Counihan has asked, and which Senator Johnston has begged me to extend, will be extended by the normal organs which have been built up over generations for the provision of such credit—by the banks." Is not that a clear acceptance of the Majority Report of the Banking Commission, that it must be left to the banks of this country, who place no value whatever on the land as a security, to provide money for the increase of agricultural production?

The Taoiseach spoke here two weeks ago, and told the House that he accepted the principles enshrined in the Third Minority Report.

Dr. Ward

The social principles.

Mr. Davin

Well, the social principles enshrined in the Third Minority Report. Does the Taoiseach contend that the social principles enshrined in the Third Minority Report can be rightly related to the Majority Report of the Banking Commission? I am hoping that Deputy O'Loghlen, who signed the Third Minority Report, will honour the House with a speech before this serious and interesting debate concludes. If the Taoiseach is in any doubt as to the machinery which should be provided for putting that report into operation, Deputy O'Loghlen will, I am sure, oblige the House and the country with the information, and help the Minister for Finance to make up his mind as to what he is going to do inside a period of two years.

The Minister for Finance went on further, and, concluding his speech in reference to the provision of credit, he said: "This cry for credit for this section or that section of the population is fast becoming, in the mouths of Senator Baxter and those others who follow him, a cry for confiscation and expropriation." That is certainly an outlandish statement for the Minister for Finance to make, and is tantamount to saying that those who are pleading for the provision of working capital, for better credit facilities, in order to increase our agricultural production are standing for the policy of Communism and confiscation. No such thing; and he knows that perfectly well.

That is the line followed by the Minister for Finance, in the lengthy, weary and depressing speech which he made last night and to-day. It would be interesting to know whether it is in conformity with the policy and the ideals which are contained in the Third Minority Report, in the opinion of the Taoiseach. The Taoiseach, at any rate, has made up his mind to the extent that he is prepared to subscribe to the social principles in the Third Minority Report, but the Minister for Finance wants two years more to think the whole matter over. Listening to his speech, and to the way in which he condemned the policies of other Governments—and the New Zealand Government in particular—one knows in what direction the Minister's mind will be finally made up. Everybody in this House, regardless of Party affiliations, believes in increased agricultural and industrial production. Do the Taoiseach and his Ministers believe, with their experience of seven years, that the existing bank policy will provide the necessary capital and credit for that very desirable purpose?

Deputy Dillon wants the House to accept his motion, and with it the Majority Report of the Banking Commission. What does he propose to do? He proposes to do things other than the matters referred to in the motion. We know he has been advocating—and I quite agree with him—the adoption of the social services provided by the New Zealand Government for the aged and infirm and for widows and orphans, and that wages be paid on the scales presently paid by the Governments I have referred to.

How in the name of goodness can Deputy Dillon or Deputy Mulcahy reduce indirect taxation or provide social services for the people of this State on a comparative basis with the people of New Zealand within the lines of the Majority Report of the Banking Commission? If some other Front Bench speaker will give us more particulars as to how that can be done, I would be inclined, with my colleagues, to reconsider the terms of the amendment standing in my name and in the names of other members of this Party.

Deputy Cosgrave kept away from that. We all know that Deputy Dillon was in New Zealand, and after he returned from his Continental tour he came back here and in the recent bye-election in South Dublin he advocated the extension of our social services in the direction I have referred to. I suggest that Deputy Dillon's motion is a silly motion, since he is calling for the reduction of direct and indirect taxation, and at the same time allowing such other things to be understood from his speeches. I say that these things cannot be done within the limits of the Majority Report of the Banking Commission. However, there seems to be no difference whatever between the line of thought followed by Deputy Dillon and the speech delivered by the Minister for Finance, and there is every indication, from these two speeches, that on questions of financial policy we will have Deputy Dillon and the Minister for Finance in some new Party before the lifetime of this Parliament comes to an end.

The members of this Party are in agreement with the Second Minority Report, but, personally, I see no fundamental difference between the three Minority Reports, and if the Parties responsible for issuing these reports had been given sufficient time to put their heads together, I am sure they would have blended their thoughts into one report, instead of issuing three. I hope we shall have the pleasure of listening to Deputy O'Loghlen on that aspect of the work of the commission, and that he will indicate the difference, if any, between the report he signed and the other Minority Reports.

There is one thing we must all appreciate, and that is the courageous speech made by Deputy Dowdall. Deputy Dowdall is a comparatively old man, who indicated, by the terms of his speech, that he has a very youthful and modern mind. He has given good advice to the Minister for Finance, if the Minister has the pluck to adopt it. The main report of the Banking Commission can be summarised very briefly. The Majority Report recommends quite definitely the abolition of bodies like the Agricultural Credit Corporation and the Industrial Credit Company, and the cessation of borrowing from the Road Fund.

If that type of recommendation were to be adopted by the Government, I think the number of unemployed would increase instead of decrease, and I cannot see how, under a recommendation of that kind, agricultural or industrial production could be increased. They recommend the reconstruction of State and semi-State undertakings, such as the Sugar Beet Company and the Electricity Supply Board. I wonder if anybody on the Front Opposition Bench would confirm the statement I heard some time ago, that one of the principal signatories to the Majority Report resigned from the public service some years ago because he opposed the then Government in the promotion of the Shannon Scheme? If that is so, it is an indication of the line of thought which was generally pursued by those responsible for the Majority Report, and explains the position of that individual in associating his name with recommendations of this kind.

Deputy Dillon, in supporting this motion, said that he could reduce taxation, direct and indirect, and provide all the credit necessary for improving our social services out of the increased revenue which was bound to come from increased production under the terms of the policy indicated in his motion. Deputy Dillon appears to think that everything spent within the year should come out of revenue. That apparently is the line pursued by the majority of the members of the Banking Commission, but it is certainly not the line adopted by another, and, in the opinion of Deputy Dillon, a greater country, which is supposed to be the master of mankind in regard to financial equilibrium and sound financial policy. Is Deputy Dillon aware that £350,000,000 are being spent by the British Government this year in the provision of armaments which is not coming out of revenue, and will he, when replying, tell the House where the British Government are getting that amount of money? That kind of policy was condemned by the people who signed the Majority Report, but, on the other hand, it is applauded by some of the leading British economists.

People talk here very often about this being a small country, with limited resources. So far as I can understand the position of this country, it is high up on the list of creditor nations, unlike some of the other nations whose policy was severely criticised here by the Minister for Finance.

This country is not in the same position, with regard to international debts, as Britain with America, New Zealand with Britain, or other countries. She has a clean sheet, so far as that is concerned. The resources of this country depend, and will depend in future on the ability of the Government elected by the people to make use of them for the best possible purpose, and if our resources are limited, it is because we have not got a financial policy which can develop these resources for the purpose of providing increased production, increased employment and increased spending power for those who are prepared to give service to the country. The British Budget revenue has been mounting up very considerably for the past few years, in spite of the fact that her principal exports were being gradually wiped out. Does Deputy Dillon know, for instance, the extent to which British cotton exports to certain colonial countries have been reduced within the last ten years? I recently read a British official document which set out that the cotton exports of ten years ago to certain colonial countries have been reduced from £200,000,000 to £31,000,000.

Does everybody not know that British coal exports to foreign countries have been considerably reduced, and is it not a well-known fact that British shipping tonnage has been considerably reduced, and that the iron and steel industry, one of the key industries of Britain, has been in a precarious position for a considerable period? The British Government, however, in spite of decreased exports, so far as their principal exportable commodities are concerned, are able to justify the doubling of their Budget revenue within the period I have mentioned.

The Minister for Finance, in his reply, and in justification for doing nothing in connection with the Banking Commission Report, claimed a period of two years more in order to consider what was likely to be done, and he endeavoured—I do not say deliberately—to mislead the House in connection with the effect of the settlement of the economic war. He read out the figures indicating what he referred to as the increased value of our exports since the settlement of the economic war. He quoted a number of figures in regard to the value of live stock and in regard to the value of the exports of butter and eggs to Britain. I suggest that in quoting the increased value of our exports he was endeavouring to mislead the House. I say that because, as far as I can find out from the information supplied to Deputies in official documents, the volume of these has decreased while the value has been increased. The Minister should have said that the increase in exports was due mainly to the abolition of the penal tariffs and not to any increase in the quantity of live stock, eggs or butter exported to Great Britain since the settlement of the economic war.

I am satisfied from any examination that I am capable of giving to the condition of affairs in this country that we are not going to solve the problem of unemployment or to increase production under the present system. The credit system available during the last five to ten years has been considerably restricted, compared with the system in operation 20, 30 or 40 years ago. Every farmer in this country 20, 30 or 40 years ago was well able to carry on between the time he sowed his grain crop or put in his other crops by the facilities provided for him by the shopkeepers in the local town. The farmer got his tea, his sugar and his tobacco on what some people might call the credit system provided by the local shopkeeper between the time he bought the cattle and sold them, or between the time he put down his crop and the time in which he was able to market it. That system has been completely wiped out as a result of the refusal of our banks in the last ten years to give any facilities of that kind to the local farmers. The shopkeeper is unable to give the facilities he used to give in the past.

It is asserted also, and I do not know if anybody can deny it, that the real reason for the refusal of our banks to advance money for the purpose of agricultural production has been the passing of the Land Acts. It was stated to myself by bankers, when I was making an appeal for farmers who were threatened with eviction or the sale of their land, that the cause of the refusal to give credit facilities to farmers was the passing of the Land Acts, including the Land Act as far back as 1923. These Acts, the bankers said, destroyed the security of land in this country so far as the making of loans by bankers is concerned. Does the Taoiseach subscribe to that particular objection? If so, either this Government or its predecessors, both of whom were responsible for the passing of these Acts which have destroyed land as a security for advances, are bound in duty to come in and put that matter right. Bank managers and bank directors will tell you that the reason why land is not good security or why it is useless as security is because there is now no such thing as free sale—if the banks want to sell a farm. I do not know very much about that operation so far as the farmers and bankers in my constituency are concerned, but I know of cases where judgments have been marked by the banks on land during the last 10 or 15 years. It is a fact, at any rate, that the borrowing power, so far as land is concerned as security for advances, has been destroyed. Well, then, that being the case, it is the duty of the Government to step in and put things right.

When talking about increasing production either for home consumption or for export, we have to associate with it the provision of credit. We must associate that with increased production for export purposes, and we must insist on providing machinery so as to help to put our exports on the foreign markets. When I speak of foreign markets, we all know that the British market is really our foreign market. Now we are being gradually driven out of the British market by the highly organised methods of countries like Denmark, and unless we copy the methods adopted by Denmark we are not going to increase our exports to the British market. We must, in order to do that, have a more efficient marketing machine than we have at the present time.

Mr. Belton

What about the collapse of Denmark?

Mr. Davin

I am prepared to admit that Deputy Belton has a keener knowledge of these things than most Deputies. At any rate, we did not hear anything about the collapse of Denmark from the Minister for Finance when he was talking about a policy that he does not like. Deputy Belton knows that there has been a reduction in the quantity of butter and eggs exported to the British market. I have some contact with people engaged in the marketing of produce on the British market. I have contact with people of that kind by reason of the position I hold in the shipping world. I agree that the Government passed a very useful Act here some time ago for the purpose of increasing egg production. I have heard, however, from people engaged in the egg trade and people who are in touch with that trade why it is that there has been no increase in egg production following the passing of that measure. The reason is that if we are going to increase our exports in connection with butter, or eggs, or other agricultural produce to the British market we will have to put these exports on that market in an organised way, in large quantities and at a price that will meet the requirements of the people who are prepared to purchase our produce.

Mr. Davin

It was an internal loan of £4,500,000 at 4 per cent. I suggest that the people of New Zealand must have complete confidence in the Government and the policy of the Government, otherwise the loan would not have been so substantially oversubscribed. A good deal of play has been made also with the object of the visit of Mr. Nash to London. The Minister for Finance indicated, from official records from which he quoted, that the amount of loans floated in the London market by the New Zealand Government—I mean the Governments which preceded the present New Zealand Government—amounted to £156,000,000 or £157,000,000.

The figure which I had given to me was £200,000,000, but in any case the New Zealand Government, as a result of their refusal to repudiate the liabilities of their predecessors, are obliged to find an annual interest charge of £14,000,000 on the loans that were floated on the London money market. The fact that luxury articles and machinery have been imported into New Zealand in such quantities during the last few years, and the fact that the British Government had depreciated the price of agricultural exports from New Zealand, compelled the Minister for Finance of the New Zealand Government to enter into negotiations with the British Government and the leaders of finance in London for the purpose of getting an economic price for the commodities that were being imported into Great Britain from New Zealand, so as to help, by way of money received for these exports, to find the £14,000,000 which they are obliged to raise annually for these loans. Is that not the position?

Mr. Dillon

£14,000,000 annually— tut, tut!

Mr. Davin

That is the position as I understand it. Certain negotiations have been going on between representatives of the New Zealand Government and the British Government for the purpose of levelling up prices of commodities exported from New Zealand to Great Britain.

Mr. Dillon

They have to fund the debt.

Mr. Davin

Mr. Davin

Of course if the Minister for Finance pinches most of the money in the Road Fund for the purpose of balancing his Budget, it will not be there to be used for that purpose. I suggest to the Taoiseach and to the Government that money could be usefully provided for bog reclamation work, and that most of the counties throughout the country would benefit by the carrying out of work of that kind. I am informed by experts associated with the Land Commission, men of experience in the farming business, that reclaimed bog land can be made very useful and productive. I suggest that money could also be usefully provided for drainage, fencing and improvement of land; for the organising of marketing schemes for agricultural produce—a very essential part of any scheme which will provide money for increased production for export purposes; and for the building of houses, which I understand has been suspended in some of the principal parts of this country through lack of money.

The Taoiseach, when speaking on this matter the other day, said that the trouble was lack of proper organisation for pushing their policy forward in the way in which the Government desire to do it. If that is a fact, will the Taoiseach state whether the original application of the Dublin Corporation for the sanctioning of a loan not merely to complete schemes that were being carried out, but to carry out further schemes, was turned down by the banks as a result of an application made by the Ministry of Local Government? Was the original application for a loan of £3,000,000 reduced to £1,500,000? I do not speak with inside information of this, but I was so informed by a member of the Dublin Corporation, and I should like to hear Deputy Belton, who is Chairman of the Finance Committee, say something on this matter when he comes to speak in this debate. If the loan which was applied for by the Dublin Corporation for the purpose of carrying out its housing policy was turned down by the banks, what action does the Ministry propose to take, or in what other way do they propose to find money for that very deserving and laudable purpose?

Some time ago, I think it was on the 8th of last December, the Government set up a tribunal for the purpose of dealing with certain matters referred to it by the principal railway company of this State. The principal railway company of this State, which was then and still is, I think, in a bankrupt condition, applied to the Government in June of last year—over a year ago— for a further very large sum in money in order to enable it to carry out certain reorganisation work which it felt had been passed on to it as a result of Acts passed by this House. Will the Taoiseach admit that the electrification of the railway lines of this country is a desirable work, and should be carried out if the railway system is to be maintained at all in this country? Will he, for instance, agree that it is necessary to renew the permanent way so far as the railway lines are concerned if the railway service is to be maintained? If the railway service is to be maintained I am sure he will admit that it is absolutely essential that modern rolling stock should be provided for the purpose of carrying on an efficient and modern transport system so far as the railway is concerned? Those are works of a kind which, if the money could be found to carry them out, would provide employment, in the opinion of the members of this Party, for 50,000 out of our present unemployed population. If the Taoiseach and his Government cannot find the money under the system advocated in this amendment, under the system that has been successfully operated in New Zealand for purposes of the same kind, then let him indicate to this House when he is speaking in this debate any other way in which the money can be found for purposes of this kind. We think it will be generally agreed that the carrying out of works of the kind that I have mentioned and, perhaps, other works of a useful and productive nature, would provide employment for 100,000 or so of the unemployed that we have in this country at the present time.

Mr. Hughes

Is this another new plan?

Mr. Davin

Well, we are challenged to produce proposals, when we advocate a policy such as that put forward in this amendment, and I have indicated to the best of my ability the works which I think could be usefully carried out to the benefit of this nation, works which would give employment to those who are looking for work, and which would put increased money into circulation to the advantage of the farming community. If Deputy Hughes has any other schemes in his mind, schemes of a kind which would provide work for our unemployed population on a more profitable basis, then let Deputy Hughes indicate what is the nature of those works. At any rate, I am taking the risk of submitting those proposals, in the hope that they will receive some consideration from the people who have the responsibility for the good government of this country. The Government told the people of this country that it had a plan, or would produce a plan at any rate, and put it into operation in such a way that it would provide useful employment for all our people.

I do not want to harp upon or to quote from the promises which have been made by the Taoiseach and by his Minister inside and outside this House prior to and since 1932, but I do suggest that there is something radically wrong—and it is associated with the money machine of this country—when the Taoiseach and his Government are unable to carry out the promises they made to the people of this country regarding the provision of work for the unemployed, and the production of better credit facilities for the farming community. At any rate this amendment requests the Government to submit to the Dáil at once proposals for the better development of agriculture and industry, the utilisation of the credit of the nation to stimulate such development, and the absorption of the unemployed workers in productive employment at adequate rates of wages. That is the duty of the Government, in accordance with the pledges and promises made by them. It is their duty particularly in view of the clear majority they got from the people of the country at the last general election. I hope that when the Taoiseach speaks in this debate he will give us some indication of the extent to which improvement has been effected in the economic life of this country since the economic war was settled, and also, what is far more important, some better indication of the methods which the Government propose to adopt to implement the many promises which they have made to provide useful employment for our able-bodied population and to improve the general position of the community as a whole.

The Taoiseach

I suppose it is inevitable in a debate of this sort, ranging as it is bound to range over the whole of our economic life, that the speeches should be long. The Minister for Finance has dealt very exhaustively with the nation's finances. He has dealt with some of the proposals which have been made and challenged those who are responsible for the motion and the amendment to indicate in what way they expect that what they propose should be done. Although we are supposed to be discussing this particular motion, we are discussing the whole of the national economy and we are discussing matters with which this volume only partially deals, and this is but one of the three volumes presented to the Government and to the country for examination.

During the debate we were asked why it was that we set up a commission and why it was that we set up a commission of this particular sort. We set up that commission because we were anxious to get for the Government and the country as close an examination of the financial and economic position as we could get by people who were not likely to take any particular Party point of view and who could be depended upon to point out any dangers which they saw. In choosing the personnel of the commission we took good care that nobody at any time could cast a stone at it from the point of view of an objective approach to the subject.

I think it will be admitted that we were wise in doing that, if we were setting up a commission at all. If a commission such as some people would have liked to have set up had been selected, if the personnel had been selected as some people here would like, from the first day on which they sat we would have either the findings discredited in advance or, worse still, there would have been people running around the country trying to create panic. "Wolf, wolf," was being cried when there were certain dangers; but the cry of "wolf, wolf," would have been repeated ten times as often if it could be suggested for one moment that we had packed a commission which would bring in a report suggesting devices such as these people we had in mind would wish to suggest. I think we were wise in our selection of the personnel.

It is not true to say that it was a bankers' commission in the sense that we packed it with representatives of the banks. We did nothing of the sort. They were a minority on it, but it was right and proper that those who were acquainted with the banking system of the country or acquainted generally with banking methods should be there, so that they might have their say when any recommendations were being made. We had people on it, the best we could find in the country, who were acquainted with public finance and who were likely to approach this subject from an impartial point of view, at least so far as any inclination to favour our Party or, if you wish, any Party is concerned. It may be objected that their training, that the nature of the work in which some of them had been engaged, might make them unduly conservative or unduly biased in a conservative direction. I think that is the worst that could be said of them.

We are not bound to accept their report or any of their recommendations. The report is of value only in so far as the facts which it reveals are true with regard to statistics and so forth, and so far as the reasoning on which any of the recommendations are founded is sound. It is for the Government and for every Deputy, when the question of any of these recommendations comes up, to examine the reasoning and the basis on which the conclusions are founded and to ask themselves are they sound or are they not. It is something, at any rate, to know that the worst that can be said of our position has been said of it, and that we have no fear in approaching this subject that we have a report presented to us which is intended to give us a rosy picture of our situation or to hide from us dangerous tendencies or dangerous facts.

It was an examination that I believe should be made, and we had the courage to make it, and to begin it in the middle of an economic war, in which we were trying to defend the rights of this country, and, at a time, when the people on the opposite benches were trying to get the people to believe that we were ended economically. We set it up under these conditions. I think the report was mainly written, and actually presented, before the Economic Agreement was made. At least, it was written, and it is from the depth of the position we were in, and the depth of the biggest agricultural depression the world has ever known, that these volumes were presented, so that the most pessimistic person in the country can know that nothing worse need be apprehended, and that there is nothing worse in our situation than has been revealed in the report.

I want to say again about the personnel of the commission that I believe they approached their work, not for the purpose of serving any interest, except to get the truth, and to serve our people, by presenting an examination of the economic situation which we were in. Thanks has been expressed also from other quarters to those people who served on that commission over a long period, and who gave us in this report their views on the facts of our economic situation, and their views as to the steps that should be taken to improve the economic situation of our country. I think that is due to them. I think it is most unfair to have talk about this being a conservative report. We may say that individuals approach these things with a certain bias, but it is most unfair to say that they had any ulterior motive in mind when making their recommendations. It is in that spirit the Government and the Department will examine this report. When we come to consider specific recommendations, or other recommendations of our own, to deal with the situation in which we find ourselves, it is in that spirit we will approach it.

We have been listening to talk about this country's position at the present time. The Deputy who introduced the principal motion said that the one mistake they made was that they cried "Wolf, wolf," too soon. I suppose they would like now that "Wolf, wolf" would have a better effect than when they cried it in the middle of the economic war. There is no need to cry "Wolf, wolf." This nation, compared with other nations in the world, is in a sound condition financially and fundamentally. We have a number of evils which we ought to devote all our attention to try to remedy but, as far as the fundamental financial situation is concerned, we are in a sound position. If "Wolf, wolf" was cried too soon, and if it was not justified in 1934, it certainly is not justified to-day. None of the facts of the situation justifies any such impression, that we are worse off to-day than in 1934. The year 1934 was the worst point in a general world economic depression. During the period of our struggle with Britain to maintain our rights in regard to the land annuities, to retain for ourselves what we believed was our own, it was the custom for those who were trying to break the Government on that issue, to pretend that all the losses on agriculture were due to the economic war, and to nothing else. That was quite untrue. Already from 1929 and an earlier period there was a fall in agricultural prices.

Already, long before the Government came into office, it was quite clear that the dairying industry was going to be doomed, unless the State, as a whole, came to its assistance. The fall in prices was even more steep during some of the years before we came into office than it was actually in the year we came into office. It was steep, and the index of agricultural prices in Britain showed quite clearly that the bottom of that depression was not reached until 1934.

It is true that British tariffs were imposed against us with the object of breaking the Government, and thereby compelling the Irish people to pay £5,000,000 a year which were not due. We were certain that at least £3,000,000 were not due, and the other part was open to dispute. These tariffs did add to the depression here, and did put upon our farmers extra burdens over and above those which they would have to bear owing to the depression, but it was the depression more than the additional tariffs that caused the trouble, and our agricultural industry would be in a desperate plight in any case. Deputy Gorey smiles, but it is well known that the failure of the Government of the day to come to its assistance was one of the reasons why that Government was turned out of office.

The dairying industry was trying to carry on with a price for butter which did not cover cost of production. It is well known that it did not cover the cost of production, and when people talk of an unlimited market, I should like to remind them that an unlimited market is not much good if you are not able to produce for that market at a profit, and if you do not get back at least the cost of production. When people talk about unlimited external markets, they should remember that, at the present time, although we have an open market in Britain for butter, that market would not be sufficient if we did not help it from the general State resources. I think 120/- roughly is what producers get in the open market for butter. They get 135/- from us. They would only get 120/-, and would have to pay all the cost of transport and marketing in the open market, but they get 135/- in order that it might be profitable for them to produce butter. When talking about these external markets, please remember that, if these are to be of any value, you must arrange to produce so as to get a profit or, at least, to cover costs. If you are not able to do that, these markets are no good. It is not the proper thing to arrange our economy so as always to try to keep external markets. They may fail at any time. Anything may change the position from a profitable market to an unprofitable one.

Mr. Belton

What is the good of subsidised markets?

The Taoiseach

If the Deputy wants to say that external markets are not the "be-all and end-all" of our existence, if that is what he means, then he is coming very much nearer to our point of view than I thought. We have approached this whole question of national economy from a very simple standpoint. We are anxious to produce for our own people the things which are necessary for life here. That is the primary purpose we have in mind. In any scheme we have, we must always relate it back to that. Is it a scheme best fitted to give to our people the material necessities of life, and to provide other amenities which are necessary for decent living? Do not think of this question as if the "be-all and end-all" of our existence was to supply goods to foreign markets. Only in so far as that can be shown to serve the well-being of our people, is it a thing to be aimed at.

As Deputy Belton has remarked, if you have to go on and subsidise everything the question is, why would you do it? You would only do it for one reason, and that is to enable you to buy the things which you could not yourself produce and, if you could yourself produce them, then you would not have to resort to expedients, because you would not have to buy them elsewhere—you would not have to turn to expedients such as that of subsidising. We have to sell if we are going to buy. The more we have to buy, the more we have to sell, even if we subsidise and, therefore, not merely are we in a more independent position if we produce as much as possible of the things that we require—not merely are we in a more independent position here in that regard, in times of crisis, but we are also saved from any casual changes there may be in external markets.

We cannot produce reasonably here everything we want, but we can produce a lot that we are not trying to produce or that we have not tried to produce. Before we came into office we were not producing as much as we are producing now and, so far as I can see, there is not likely to be any change in the fundamental policy of this Government in that regard. The fundamental policy of the Government is to produce here from our resources, by our own labour, as much of the things we require as possible. We will not be able reasonably, without a great deal of economic loss, to produce some things, but the things we have tried to produce and are producing, we hold that it is in the national interest that they should be produced. When I say in the national interest, I mean in the interest of the general welfare and security of our people and their ultimate prosperity.

During our period of office we have proceeded along these lines. We have produced things which were not produced before we came into office and, in the production of them, we have directly employed tens of thousands of people who would not otherwise be employed. That is my view. So far as I can see, the tendency of the policy which is advocated by the Deputies on the opposite side is to go exclusively into production for an external market, keeping that all the time in mind.

If we do that we will find ourselves many a time in straits, and I see no chance whatever of building up this nation or changing the situation to which we were reduced by a century or so of that particular practice. That is what happened this country. It was turned into an exporting country, exporting agricultural produce, and it was deprived of all its industries. Under that policy our population went down.

Mr. Coburn

Has it increased since?

Mr. Hughes

Has it increased since you came in?

Mr. Keating

What industries? What about our main one?

I have seen the Banking Commission Report. I have gone through most of it and, having gone through it, and seen the things that are in it, and the danger signals that are pointed out, I, for one, would not change a tittle of the fundamental programme which we put before the people as our industrial programme when we got into office. I believe that that old policy, which we have been fortunate enough to be the people to put into practice, the policy of Sinn Fein, is fundamentally sound and there is nothing in this report that shows anything to the contrary

Of course, there are no people who are completely satisfied with their condition. There is no country in the world at the present time in which there are not evils. There is no country in which there will not be evils which it will be desirable to remedy. No matter how long this world lasts, in my opinion, there will be debates exactly like this debate. The subject matter may be different, but there will be debates as long as you have parliaments of this sort. There will be debates as to what is the best way to get rid of these evils and improve the general welfare, because that is what parliaments are for. I move the adjournment of the debate.

Debate adjourned accordingly.

The Dáil adjourned at 10.30 p.m. until 10.30 a.m. on Friday, 7th July.

Dáil Éireann díospóireacht - Thursday, 6 Jul 1939

Committee on Finance. - Banking Commission Report and State Finances.

Dáil Éireann díospóireacht -
Thursday, 6 Jul 1939