RESTRICTION OF OUTPUT.

Press, Volume LXVI, Issue 20100, 2 December 1930, Page 12

RESTRICTION OF OUTPUT.

EFFECT ON DEPRESSION. (By Hartley Withers.) As everyone knows, restriction schemes as a cure for depression in industry have lately been as plentiful as blackberries, and have generally failed to produce the desired result. An interesting survey in the September issue of the Westminster Bank s "Review" showed that this policy far from novel, and that its wide apapplication is the only new thing about the recent development. It is, perhaps, this W!de d.stribution in the fashion that ex P l . i J ) l " s * fc ' failure to help. those who adopt it. As the Westminster Review says -a single industry which introduces a j restriction scheme acts, openly or implicitly, on the that aU other industries will inamtamtheir output, so that tbGvemamderoftho world can be, in effect, som for one particular The larger the number of industries practising restriction, therefor , less {heir chanco of success. The Westminster writer also showed, very effectively, the disadvantages of restriction schemes as recently conceived—that they add appreciably to costs, since the burden of overhead charges always varies inversely with the volume of output, and that they bear most hardly on the most efficient producer; if they fail, there is a frantic tumble in prices, while if they succeed in screwing prices up considerably, outside competitors reap the benefit except in the rare cases in which the scheme is watertight. And the economic disadvantages were shown to be even more striking, because if everybody restricted the world's wealth would be seriously diminished. "If, through some temporary maladjustment, the circulation of the world's wealth (i.e., of its useful goods and services) is impeded at any point, the remedy is not- to restrict the production of wealth, temporarily or permanently, but to remove the cause of hindrance to its flow.''

This is admirable doctrine, but what is this cause of hindrance and hew are wc going to remove it? Sir Henry Strakosch. has shown good reason for believing that Trance and America, by sterilising gold, have caused the fall in prices and the consequent depression. Free traders say that economic nationalism, and tho desire of most countries to keep out foreign goods, have choked the stream of international trade. Pacifists tell us that international bad temper, by keeping up expenditure on armaments and checking confidence in peaceful progress, is making enterprise shy; and most of us in England, with our high rate of taxation, think that the ruthless hand of the taxgatherer seizes so large a slice of any profits that can be snatched in these hard times, that all the heart and driving power are taken out of indu.strv.

Other explanations can be provided, but tho above-mentioned will do for a beginning. All of them, I believe, are contributing causes, and the cure of any of them is going to take a formidably long time. In the meantime what is industry to do? May it not bo true that restriction has failed, not because it is the wrong policy, but because it has been applied in the wrong way and with the wrong object? According to the old theory of supply and demand, a fall in price corrected itself, by forcing those producers whoso cost of production was highest to cease production. This was restriction acting through the unfettered Working of' economic law. Unfortunately, the law did not and docs not work, as was shown long ago by Dr. Hadley, the great American economist, who has lately died. In his book on "Kailroad Transportation," first published in 1885, he points out that "Ricardo's theory was based on the assumption that when payment fell below cost of service active competition would cease. His theory fails, because, far below the point where it pays to do your own business it pays to steal business from another man." And he gives examples, including that of the American iron industry, which during six years produced millions of tons of iron and sold them below cost, "their owners being thankful if the price paid would cover raw materials and wages, without any regard to interest or renewal."

Since, then, the inefficient producer, liko Charles the Second, takes "such an unconscionable time about dying," the modern policy of restriction gets to work and tries to secure all-round reduction, with the evil results already noted and with the object of raising the price. The efficient producer is thereby damaged, and he is the party who should in the interest of the industry and of consumers be encouraged. The sounder policy is surely that which is aimed at under certain schemes of rationalisation, such as those that are being carried out in the British shipbuilding industry and in the Chilean nitrate field. In these cases the redundant shipyards and the nitrates that are most costly to work are being absorbed with a view to extinction, and the result will be that work is concentrated in the places where it can be don© best. "When restriction is applied on such lines as these, cost of production is lowered instead of being raised, and instead of an effort being made to screw up the selling price by reduced output, consumption can be stimulated by cheapness. DAIRY PRODUCE. LONDON QUOTATIONS. Tho New Zealand Dairy Produce Board has received tho following market report from its London office, dated November 28th:— Butter—New Zealand, 'salted, November 29tli, 1930, 98s to 104s (last week 104s to 308s), unsalted 124s to 130s (146s to 148s), llrst whey 925, (945), second wliey 88s (02s). 'Deliveries New Zealand this week 2100 tons; in store New Zealand this week 2450 tons. Australian, salted 95s to 100s (100s to 106s), nnsalted 118s to 122s (118s to 1245). Deliveries Australian 1066 tons, in store Australian 1000 tons. , Argentine, unsalted 96s to 104s, ex. 110s (100s to 108s Jl2s) ; Danish, 119s f.0.b., 130s to 132s spot (128s, 138s to 140s) ; Dutch, unsalted 136s to 138s (144s to 146g) ; French baskets, salt 136s to 138s (136s to 138s). New Zealand retail price unchanged Is 2d; Danish detail prico reduced to Is 4d. Market weak, irregular. Cheese—Now Zealand, "white 63a to 665, ox. 67s (71s to 735), coloured 59s to 635, ox. 64s (67s to 695). Deliveries New Zealand this week 12,000 crates; in store New Zealand this week 47,500 crates; Australian, white 64s (70s), coloured 62s (66s to 675). Market weaker, irregular. Canadian, white 76s to 78s, ex. 80s (76s to 78s, ex. 80s), coloured 75s to 78s. Market quiet. Deliveries Canadian 19,279 boxes; in store Canadian 255,477 boxes. English, finest farmers* 100s to 106s (100s to 106s). Messrs A. H. Turnbull and Co. are in roceipt.of the following: cablegram from their principals. W. Weddel and Co., Ltd., dated .London, November 28th:—too t . er ~T Danish 130r to !32s (last week xdSs to 140s) ; New Zealand, unsalted 124s * 3os (146s to 148s), salted 98s to 104s 2if. s Market weak. Cheese—White 63* to 68s (71s to 735), eol--2X5! r?J* s *° 638 < 67s t0 69s >: Canadian, TJ Jo 78s t0 78s )» coloured 75s 78s (76s to 78s). Dalgety a nd Company, Limited, have refollowing: cablegram i'rom their London office, dated November 29th:— changed* Bctter demand. Quotations un-

IMPERIAL TRADE. THE CONSERVATIVE POLICY. DISCUSSIONS WITH DOMINIONS. (raOK OTTR OVW CO&RXSFOKDENT.) LONDON, October 03. Mr Stanley Baldwin has written a letter to Lord Beaverbrook concerning the lattcr's speech, in Paddington on Monday night. In this he points out that his official declaration on Thursday of last week could have only one meaning. It was this; "I am asking the country to give me a completely free hand to disouss with the Dominions all the alternative methods, including taxes on foreign foodstuffs, by which, our common object may be achieved." , "In the recent statement of policy which : I issued," he says further, *'l declared categorically that in our negotiations with I the Dominions with the object of developI ing Empire economic unity, no method j which offered a favourable prospect of achler- , mg our purpose ought to be ruled out 1 beforehand. I "Those words can bear only one meaning, and that is that the Conservative Party should be free to negotiate with the Dominions on an unrestricted basis, free to adopt any methods, whether it be tariffs on foreign foodstuffs or any other plan which would seem to us and to the Dominion representatives to be best calculated to achieve our object. Quota System. "If the Dominion representatives, on examining our system, find that there qf4 any objections which prevent tliem from adopting it, we are ready to di&cuae any other scheme that may be put up. It is, however, for the Dominion representatives in ; the first instance to decide whether they regard the quota system as a practical ex- ; pedient, calculated to give their wheatgrowers the guaranteed market which they deeiro. "As regards the offer which you made to me yesterday, when you asked whether I would leave the interpretation of Mr Bennett's offer to the Dominion Prime Ministers themselves, I oan only *ay that it would bo impossible for the leader of a party in this country, which may soon come into power, to delegate to the Dominions the decision in regard io matters which involve domestic taxation. "A matter of this kind must be decided bv . the Government of this country, which I would necessarily have to consult the Dominions in forming its policy. Conference at Ottawa. "My one desire is that the Conservative Party should bo returned to power as soon as possible in order that there may be no | delay in embarking on those negotiations. 4 '1 7 " urthermore, I take this opportunity of declaring on behalf of the Conservative Party that if wo are in office we will gladly accept Mr Bennett's proposal that we should attend another conference at Ottawa nest year, subject to the concurrence of the other Dominion Governments, in order that definite plans for giving effect to the principle of Empire economic unity may be worked out in co-operation with them.'' GREY VALLEY COLLIERIES. PAST YEAR'S OPERATIONS. The annual report and balance-sheet issued by the Grey Valley Collieries, Ltd., disclose a net profit for the year ending September 30th of £19,070. The sum of £522 was brought forward from the previous year, making £19,592 available for distribution. Depreciation and taxation, together with the 3 per cent, interim dividend paid in May, totalled £11,500. The directors have recommended that the balance of £6092 be dealt vith as follows: —Transfer to general reserve, £4500, bringing that account to £7000; payment of final dividend of 3 per cent, (making a total dividend of 6 per cent.), £3000; carry forward, £592. The output of coal for the year amounted to 125,059 tons. This represented a small reduction on the tonnage won the previous year. Plant and equipment had been maintained in first-class condition, and had been considerably added to during the year. Development work had been well advanced and the colliery was well equipped to produce an increased tonnage. The quality of the company's coal continued to be good. An additional area of 19 acres was acquired from the adjoining owners, who also released a further six acres. The coal from this area could t\e conveniently worked at a low cost through Dobson colliery. Net profits for 1928 amounted to £14,663, with which the company liquidated accumulated losses and made allowances for depreciation, leaving £272 to be carried forward. Profits and appropriations over the past two years have been as follows: 1929. 1930. , Brought forward ~ 272 522 Net profit 20,358 19,070 m 20,630 19,592 To reserves ~ 2 ,500 4,500 JJiviaend, per cent. „. 8 6 Amount .. 7,999 6,000 depreciation and lax .. 9.610 5,500 Carried forward 522 593 CANADIAN SALMON PACK. * Recent reports from British Columbia indicate a record pack of canned salmon thi3 season. To the end of the first week in ; September 1,679,638 cases of tinned salmon | been packed—almost twice as much as 1 in the corresponding period of last year, , and about SOO,OOO cases in excess of the pack to that date in the record year, 1926. It is expected that the total production of canned salmon this year will exceed the record pack of 2,065,198 cases produced in 3926. A feature of the operations for the first part of the season was the exceptionally large proportion of the valuable sockeye salmon in the pack. To early September 416,103 cases of sock-eye salmon had been packed, or more than tho total pack of this variety in any year since 1915. The output of pink salmon has already exceeded all previous records, amounting i* oases to the en 4 of