I want to add, if possible, to the collective wisdom of the House, as expressed in the speeches that have preceded mine, and to do so in a spirit, I hope, of constructive criticism and with not more than the necessary minimum of recrimination—in fact, with no recrimination at all, because I think the present situation is one which calls for constructive action and suggestion on the part of everybody in the House and criticism should be, as far as possible, devoid of recrimination. This Bill seems to give scope for any amount of discussion on general financial and economic policy, and it seems to be almost impossible to go out of order in discussing any of these questions. But I do feel, with Senator Foran and other speakers, that, in a time of real emergency like this, we should put what I might call the financial point of view in the very subordinate position where it really belongs, try to approach our problems from the point of view of economic and human realities and treat financial methods simply as a handmaid for the realisation of the most desirable economic and social policies. In my opinion, countries can be ruined by a combination of sound financial policies and unsound economic policies. In fact, if I had to choose, I should prefer that sound Ministers should apply unsound financial methods in a time of national emergency rather than that unsound Ministers should use, perhaps with inadequate judgment, sound financial methods in a time of national emergency. The worst situation of any would be one in which unsound Ministers would apply unsound financial methods. I am not specifying whether the Minister falls into any one of these three categories or whether there is a fourth category in which he himself would like to regard himself. I am saying this by way of emphasising that I regard financial policies and methods essentially as a means and as something which, in a time of revolutionary emergency such as the present, should be treated not with a kind of breathtaking respect and reverence, but entirely as something which is amenable to human policy and human control.
If the Minister is open to any criticism at all in the department of pure finance in the past couple of years, it seems to me that he is open to the criticism that he has relied too much on taxation and on borrowing from the capital market and not enough on the inflationary financial method of borrowing from the banking system. Inflationary finance is, of course, a deadly poison but so are opium, cocaine and strychnine, and all these deadly poisons, in the right hands and administered in doses appropriate to the occasion, may tide an individual over a difficult emergency. In the same way, in a time of national emergency, some small dose of inflationary finance is a desirable method of swinging the national economy into the new orientation needed by completely unforeseen circumstances. Inflationary finance is, of course, if carried to excess, disastrous but if Government resorts to borrowing from the banking system in circumstances in which the banking system finds a diminished outlet in other directions for banking funds, I doubt whether that kind of borrowing from the banking system is inflationary at all. Even if Government borrows from the banking system in circumstances in which the banking system still finds a normal outlet for banking finance, if the effect of that is to increase, or prevent from diminishing, the money income of the community and if that increase in the money income of the community is, at the same time, accompanied by a tendency for unemployed factors of production to be brought into production, for economic processes to be brought back into employment, such inflationary methods of finance, up to that point, so far from being dangerous, are positively advantageous. Until the moment has arrived when inflationary finance tends to increase the real income of the community, that method can be used without serious danger.
I do not think that our economy has yet reached the stage at which all available factors of production are absorbed into productive employment, and I think that some measure of inflation would have been a helpful means of bringing that about. Of course, I am aware that inflationary finance tends to cause an increase in prices, tends to create dangerous bottlenecks in production, but these are dangers which wise Government policy would take proper measures to safeguard. They would prevent the persons concerned in the bottlenecks of production from exploiting that situation to hold their fellow-countrymen up to ransom, would rigidly control all prices, especially the prices of the elementary necessaries of life, and ration all supplies so that there would be little possibility of prices getting out of hand. In that case, then, with a little does of graduated inflation, you would have a situation in which taxpayers would have, in the aggregate, larger incomes than they were able to find an outlet for in the purchase of real goods. Consequently, they would afford a suitable market for the Minister's tax-gathering and loan-gathering activities at a later stage. Until our economy has reached the stage where all available factors of production are fully occupied and the stage where real income has risen to whatever is the maximum possible limit under emergency conditions, I think it is not good public policy to be too active and too progressive in raising the level of taxation.
In a situation such as we have had for the past two years, it is necessary for many individuals, both as private individuals and as business men, to incur capital expense in adjusting their lives to new conditions—by procuring A.R.P. equipment, by buying bicycles where, perhaps, they owned an old motor car, by obtaining producer-gas plant for their motors where they formerly used petrol. All these things involve a drain on the capital and credit of the private individual. Consequently, it is not sound policy to diminish that capital and credit of the private individual too much by excessive Government action in this transitional stage of the national emergency. In fact, excessive taxation at that stage, so far from supporting or maintaining the credit of the State, to my mind, might undermine that credit if it had the effect of preventing the economy from adjusting itself to the new conditions and preventing that increase of the national wealth, under those new conditions, which would otherwise be possible if private credit was left unimpaired.
It seems to be agreed—at all events the statement is made by a Cambridge professor—that at present, and for the last two years, Great Britain has been acquiring, by the method of issuing new money—in other words, by downright inflation—as much as one-twentieth of the real income of the nation for Government purposes, and that the effect of that moderate degree of inflation was to raise the money income of the community only by some 20 per cent., after two years of war. Now, one-twentieth of the real income of the United Kingdom at present is a sum of the order of magnitude of £400,000,000 or £500,000,000, and one-twentieth of our real income, if we take our national income to be £160,000,000, would work out at £8,000,000. I would not go so far, however, as to suggest that we should acquire as much as £8,000,000 of the money necessary for Government purposes by a downright inflationary method, but I would go so far, however, as to suggest that we might perhaps acquire something of the order of £2,000,000 or £3,000,000, or even £4,000,000, for a year or two, of that necessary finance, by downright inflationary borrowing from the banking system until we have reached that stage where all available factors of production are fully occupied and pulling their weight.