COST OF LIVING

Dominion, Volume 12, Issue 39, 9 November 1918, Page 2

COST OF LIVING

A COMPREHENSIVE REPORT . BOARD OF TRADE'S VIEW THE QUESTION OF PROFITEERING. "Our report would not be complete without some- reference to phases of the cost-of-living question that havo come under our notice during the many investigations into supply and price of commodities which were conducted during tho year,-" says tho Hoard of Trade in ils nnnun! report Full and complete- data showing the trend of retail, prices has been Riven by the Government .Statistician, who shows that tho increase in the cost of living during the war .period lins been flO per cent, in Australia, 34 per cent, in New Zealand, 51 per cent, in .the United States, 88 per cent, in France, 107 per cent, in the. United Kingdom, and 195. per cent, in Norway. Tho price- k not the only factor, and the report points out that the percentage increase in tho wages of New Zealand workers during the win- has ranged from 41 per cent, to 37J per cent., the-average being at least 20 or 25 per cent. The purchasing power of the New Zealand people has increased enormously during the war, owing to the big increase in the value of tile export?. i

Pricos Controlled. The fact that food prices have not increased in Kow Zealand to the same extent as in America, although in New Zealand there has been an actual fall in the volume of business, ie duo to the mcasiKcs taker-, by the Government, through the Board of Trade, to stabilise prices (says the report). For instance,' the Government has controlled the price of wheat, and its produces, flour, bran, pollard, and bread; it has controlled the prices of meat, wool, butter, and chce.se,. througa its system of purchases as agent of the Imperial Government; it has controlled the supply and price of sugar'by arrangement with the Colonial Sugar Company; through the Board of Trade it ■Juis controlled.the supply, and price of. petrole'im products under agrennmuts entered into witb the .chief importing coin, panie.-s; it has controlled the price oi inillc, fixing in some instances maximum prices where , conditions warranted such a course of action,- it has controlled the price of bacon and hams by decreeing that the price shall not exceed that ruling on a particular date; and again,..through the Board of Trade, under arrangement with wholesale merchants, it. has. controlled .and steadied the prices of fifty-seven main commodities, a great number of which are imported from overseas and are frequentlj in short supply; and all this at a small expenditure. . . The board desires to emphasise the fact that the continuous rise in- pricessynonymous in the minds of most people with the increased cost of living—has not been peculiar to New Zealand, but has been world-wide. -Moreover, the rise has not been due solely to conditions created by the war, as the upward tendency.was pronounced in ISKKi, and has received no serious check since. jThe rise, of course", has been rapid since-August, 1914, and, in spite of attempts by most Govern-;, ments to cbntrol. and -regulate prices, shows no signs of having; reached its maximum. Botiveen 1906 and July, 1914, the general price level throughout the world increased by approximately 14 per cent. Tho rise was more marked in some countries than in others, and' affected some commodities and groups of commodities more than others; but after allowing for tho fact that price -statistics «re not always collected on a uniform basis, and that even where they are;thus uniform the conditions of living differ so widely ns to mnfte direct comparisons but seldom possible, general trends may be distinguished withsomo clearness.- Nnturally the tendency of price movements is towards uniformity, -

The Causes, .■./.. Tho board. siibniitß the following analysis of the causes.:— J :,'."'.! 1. On the side of..demand— ■(a) The most important of.these.causes: 'is probably the increase in the volume of credits. Belligerent arid neutral*.Qoverii ; ments have been borrowing immense emus of money, and private individuals hayo been- borrowing upon tlieir resources in ord«r to lend money to the Government. The- disbursement 'of.. % these great...sums has resulted iu an increase in demand for certain goods—metals, fuel, textiles, and foodstuffs. The increase of demand has'been made effective through the increase in the volume of credits; in 60 far as the advance of prices has been due to tho increase credits, the advance may be expected to continue eo long as the conditions which produce it continue. Every creation by the Government or by the public of fresh credits means an addition to the purchasing • power, and therefore an increase of prices, until gradually as regards certain commodities a point is reached when increase ot production must experience a check because of the effect upon wages .and upon other costs of production. It is only when credits are redeemed by. an ■equivalent increase in saving or in extra production that their ..effects upon prices are cancelled. , ■•■•■•■•'■ . (b) In so far as the, qredits are news, sary for the conduct, of the war.they must be created, although further extensions 'of them must lead inevitably, other things being equal, to further- advances in general prices. The sacrifice imposed upon the community through the payment of these enhanced prices must be regarded as a portion of the cost, of the war, and as part of the community's contribution to the cause of civilisation. • 0;i the eide of supplyfa) The 6econd important cause of the increase of prices has been ijlio diminution of the available supply of 6ome of the chief commodities. The chief manufacturing countries of the world have withdrawn from the fields of industry the- flower of their manhood, with tho consequence that the supply of commodities has been greatly restricted, and the price lias advanced ehnrply. (b) The needs of the Army and Navy have greatly depleted the available supply of efficient labour, and thereby enhanced the price of labour available for the purposes of production.

Profiteering,

Tho charge of profiteering has also been carefully considered by tlie board. This ie a term t : hat has never been accurately denned. If it menus creating an artificial scarcity by holding up supplies with the object of forcing up prices, then the board can definitely state that profiteering in this souse has not been practised" to any extent in New Zealand. For example, it has been alleged that some farmers have withheld their wheat from sale, as they deemed WlO price obtainable insufficiently.attractive. Thero may bo individual cases where this Mβ been done, but not- 011 a ecnle sufficiently liirgo since the board lias, had control of wheat prices to materially nffoct tho position. If however, profiteering means taking advantage of the market to make money without any illegitimate manoeuvring, it is certain that many dealers have made money by sales of stocks. whicii were purchased cheaply and sold on a rising market, which goods, however,.could not bo replaced for sale even at the advanced BL'lliiij; prices obtained. Tho primary producers of (ho country havo also been charged with profiteering, and undoubtedly the largest shard of tho record prices thnt havo been received for our primary products has gone to the. primary producer; but these prices havo boon determined by negotiations between the Imperial and Dominion Governments, and it is now a matter of common knowledge that the prices so arlanml havo been below.tho pries thai could havo been obtained on tho London market had the shipping.bwn available, to transport these products across the seas. Tn regard to butler, Hie consumer 1.11 New Zealand since the outbreak of war has never paid the export rtiuivnlent price. During the first two years of the war, by tho voluntary action of tlip factories supplying the local trade, .the local consumer received his butter from Id. to I|d. por pound lower than the export equivalent London nrioo; mid-under the scheme which the Government sanctioned in October, 191G, the local consumer rewired' his supplies at a price rnprcsftntinß a saving to him of approximately .CSOO.OiW. A similar saving \ras etloctort Inst year, and during (he current year it

is estimated -that the consumers will benefit also 1:6 tho extent of another ■£100,000. In its- report of September & 1017, tho board estimated; that the primary producers had sustained during the war period a monetary disadvantage of approximately Xf1,000,000 in regard to butter, cheese, meat, and wool. The meat prices, for local} consumption' lmro been based mainly on , the prico received from tliu Impeiial authorities, and this represents ail average- reduction of at lease 2d. per pound Mow Ixindon parity prices, always assuming th«l shipping is available.

". ' Recommendations. Unfortunately, tho burden of rising prices is distributed unevenly over the' I community, and calls for tho greatest sacrifice, on tho part of thoso least able to bear it. Those , with fixed , or comparatively fixed incomes, many wage-earners, a largo portion- of tho small-salaried classes, many of the dependants of thosn at the front, find tho increase in the cost of living during the lust two years peculiarly onerous; but, while it is coin[laratlvoly easy to point to a disease, it is not a-simple matter to find a remedy. The Government has already, taken, power to fix prices, but this is a remedy' that call be applied only with tho greatest cure. The danger of fixing; prices for any commodity is that the supply may greatly diminish, if not cease- entirely. The general nilo should therefore be to avoid the fixation of prices unless tho whole supply of the' commodity i«r controlled; hut when this can be donetho control should oxtoud from the fielc' or' production to the point of consumption, .as has'been dono in the case of wheat, Hour, mid bread. Intermediary, charges should lie limited to fair remuneration for services rendered. The main difficulty in this connection rises in. respect to commodities produced in New. Zealand that can - be' marketed I both within New Zealand-and abroad. In this category belong all our ,-primary products—wool, ■ meat, butter; cheese, hides, and skins. .. * If a prico is fixed for these commodities for consumption in New Zealand below the export value, thoßo producers who supply the local market are placed at a disadvantage as compared with those who are allowed to export. This disadvantage engenders a feeling of dissatisfaction, and results in supplies being diverted from Ihq local" "market to the export trade. -Price-fixing alone ie, therefore, not a remedy. Last year the Board of Trade, in attempting to regulate tie price of butter, was driven-by the logic of circumstances ' to' recommend : the Goverii•menli to establish an equalisation fund. While the incidence of the levy creating tho fund may have been open to ee'rious I criticism,-the board respectfully submits [that tho principle of 'equ'ajisa'lon is sound, and forms, in the ijoard's opinion, the safest method of easing the burden which falls upon our own population because of tho war prices -realised by primary products. . ' ■ ■ In regard to the- cqmmodilies imported from abroad, .it is impossible, ns has . been--pointed out, to control the landed cost, but by airextension of the system o v f permitting import under license, on condition that the licensee-eells at prices deemed reasonable by the Board of Trade, much can-be accomplished to control profits; Indeed,- the control of business profits is:the crux of the problem' as far as controlling prices ■ of articles imported from' abi'ond or manufactured" in; New Zealand -is concerned. The precise determination or' 'legitimate business , profits for any undertaking" is extremely difficult to assess, as allowance must-bo made for enterprise, risk' taken, liliusual' skill in management. Everyone knows that fortunes aro made in industries strictly competitive, and are > often to be ascribed to unusual business capacity. But the difficulty of assessment is not necessarily insuperable in a system of price regulation. After all, only,rough und approximate results can be expected. The board suggests in this comwc tion that the basis of "fair profit" during the war might be the pre-war profit any given" business, but_ power should be given to tho controlling authority to-vary] this basis'-should the pre-war rate prove largely in excess of tho general average or insufficient to encourngo, production.' The board emphasises the fact that the. time has arrived to tako steps to control the manufacture and sale, of goods that might -bo • -considered. as luxuries. Valuable lnlSo'ur" is,-eipcildccl iii the production of such goods, and diverted from ,the production of essential 'commodities. One'of- tho surest- methods of reducing prices of necessities'is to increase their supply, and it is possible that much valuable labour now expended upon tho creation and distribution of luxuries might be employed in the.creation of a greater number of' articles in common demand. . .'..""." "'