The Press Tuesday, October 25, 1927. Common-Sense Economics.

Press, Volume LXIII, Issue 19140, 25 October 1927, Page 10

The Press Tuesday, October 25, 1927. Common-Sense Economics.

That it is necessary to go on correcting the errors of those who believe that high tariff Protection is a good thing is attested by the fact that otherwise intelligent men can write so mistakenly as the correspondent from whom we print a letter this morning. I It is characteristic of the Protectionist that he will mis-read every exposition of the Protectionist fallacy. When we were dealing with the City Engineer's repetition of the stock nonsense about " sending money out of the country," we pointed out that normally there is no inherent advantage in using locallymade goods merely because they are locally made, and we referred to the commodities—tar, asphalt, etc.—specially mentioned by the Engineer. Concerning these commodities we said that if they could be produced economically here —as there actually is reason for thinking they may—it would be good business to use them. Although this was said in plain language the comment of the correspondent referred to is that there is nothing in our article to prove that our people can beimore profitably employed than in making tar and asphalt. We do not know, nor does our correspondent, whether this is an economically sound industry for New Zealand —although, as we have said, it probably is—and we have nothing to prove except that it is bad business to use in making tar or boots or matches or cloth or anything else a quantity of capital and labour which, utilised otherwise, would produce commodities sufficient to purchase the tar, boots, cloth, matches, etc. (we choose these commodities at random), and to leave a margin for consumption or for exchange into other goods. That is the very core of the problem, and it is a constant source of wonder to everyone who thinks clearly about the production of wealth, that anyone can still maintain that Protection is good in itself, or economically profitable. One feels just as a mathematician feels when he encounters somebody who claims to have "squared the circle." For generations these " circle squarers " came forward with arguments and figures, although the mathematicians demonstrated over and over again, in hundreds of different ways, that the' squaring of the circle is absolutely impossible. So generations of economists have demonstrated the fallacy of the Protectionist theory, but the Protectionists keep on talking. They keep on saying that when we buy any foreign material we "send money out of the "country," despite the fact that we do not send money out of the country at all. We do send wool, and meat, and dairy produce out of the country. Our correspondent has progressed far enough to see and admit this, but he still thinks that even so " the purchasing power of the money is lost to "New Zealand." What he means is not clear, but presumably he shares the belief of Mr MeCombs, M.P.,' that if the standard wage were increased by Statute to £SO a week there would be so much "purchasing power" that everyone would be well off. In. that case bread would cost about 10s a loaf,.and boots about twenty guineas a pair, while a suit of clothes could be had for one hundred pounds,. " Purchasing power" does not mean money, but the power of purchasing—which is, the power to supply one's needs at a price within one's means. All these are elementary facts, which nobody who knows anything of economics would dream of denying. That they must be pointed out means merely that the Protectionists have not given any real thought to the matter. Our correspondent comes near, at one point, to asking a pertinent question. If those engaged in protected industries could bo more profitably engaged somewhere else, where could they be engaged? The answer is that they would be engaged in those occupations in which they would have found themselves if there had been no high tariffs. Possibly the country, in that case, would not have a population of 1,300,000. But it is not incumbent

upon the opponent of high Protection to find occupations for the people; it is sufficient for him to point out that high Protection is economically unsound. It may be worth paying the price of it for special reasons, as even the straitest Freetraders will admit. In some countries the cost of it, the economic loss resulting from it, may be worth incurring, as is the case with America, a large all-producing continent enjoying perfect Freetrade within its enormous area. But the fact remains that it is as foolish to say that wisdom consists in "keeping tie "money in the country" and "keep- " ing the foreigner out" as to say that the wise householder is he who " keeps " the money in the home " by making his own boots and clothes and beds and chairs.