The Dominion. THURSDAY, JUNE 28, 1919. THE COAL PROBLEM

Dominion, Volume 12, Issue 233, 26 June 1919, Page 6

The Dominion. THURSDAY, JUNE 28, 1919. THE COAL PROBLEM

J In its report on the coal industry an extended summary of which aj pears in our news columns to-dai the Board of Trade has covered tt ground of inquiry in a thoroughl workmanlike manner. As an orclei ly and'comprehensive presentatio of the essential-'facts hearing on tb development and conduct oi the ir dustry and its present conditio: and. prospects, the report is model of what such a. documen ought to be. It is so obvious'!, based on painstaking research tha it carries its own recomraendatio; as an authoritative pronouncemen on the immediate problems of coa production and distribution, am it will hold permanent value 1 as ; ■ record of coal-mining developmbn in the Dominion to date. At th same time serious disappointmen awaits those, ■ if there are any; whi hoped that the .Board would be en abled as a result of its investiga (■ions to point to some easy or as sured method of bringing down tin price of coal and relieving thi scarcity that is felt acutely all ove: the Dominion—nowhere more acute ly than in Wellington at the pre sent time. The Board-finds tha there are no grounds for a charge o profiteering'. either by the mininj companies or in the related indus tries of transport and distribution It finds, on the contrary,, that tin mining companies in particular ari getting considerably less than a fai: r.etui'n on their invested capital The heavy increase in'the price o coal during the war period is showi to be justified by greatly increase! mining and transport costs. Littli hope is held out of a reduction ii price as time goes on, but it i: urged that unless certain improve inentsare made, particularly in tin organisation of the industry, , tin price of coal in relation to that o: other commodities will continue t( rise, and'probably rise rapidly Apparently it is chiefly in tho hopi of preventing such a rise that th< Board recommends what may b< described as a half-way stop toward: nationalisation—the unified organ isa'tion of tho coal industry undo the control of a "Dominion Coa! Board," to which the mining com panies would appoint two members the coal-workers two, and the Cr'owr one, the latter to be president. The idea that miniug companies and those engaged in the transporl and distribution of coal have taker advantage of war conditions it exploit the public is, or has been, so widely prevalent that some people may hcsita c te about accepting the Board of Trade's explicit assurance to the contrary. It will be seen, however, from tho published summary, and still better on reference to the elaborately detailed tables in ■he full report, that the verdict oi the Board in this matter is supported by an overwhelming mass of evidence. In itself, the increase in the price of • coal during the war period 'was,' of' course, heavy.. From January, 1014, to :Septcrrib'cr, 1918, the price of standard household coal in Wellington, for instance, showed an increase of 14s. per ton, or 30 per cent. This increase was made up of 9s. Gd. in the wholesale price to the coal-dealer, and 4s. 6d. in the increased cost of retailing, As they are analysed, these additions to the price of coal seem in no way extravagant. Of the amount added to the wholesale price, 4s. was due to a rise in shipping freight, 7d. to railway increases, and the remainder, about 4s. 5d., to a rise in cost of production at the mine. In regard to the latter item, the report [ shows that_ approximately one-third is due to increased wages and the rest to other necessary items of expenditure. Strong evidence that these increased charges do not entail profiteering is to be found in an examination of the profits earned by the mining and transport companies. The hots supplied in this connection are striking. The average profit earned by a selected group of mines increased from nincpenec to tenpence per ton in-1018 as compared with 1913, but this meant a drop of one per cent. in. tho rato of profit in relation to cost of production. More comprehensive figures show a drop in ?mning profits from nincpence to fivepence per ton in the same period. As to the shipping factor, it is instructive to unci that in a period in which shipping freights rose by 4s. per ton tho profits of the Union Company in carrying coal in the New Zealand coastal trade fell from Is. 3d. per ton to Is. per ton, As regards coal freights from Australia, the Union Company s rates are 35 per cent, lower than those asked by the Australian Controller of Shipping and 56 per cent, lower than those of the Imperial Controller. Since the comparatively modest profit earned m the coastal coal trade has to cover depreciation, sinking fund, -find -overhaul charges, it would appear that there is much less promising scope for saving and economy in this direction than many people had supposed. In connection with the operation of_the mines, it is a very material point that, the heavy reduction in output occasioned during the-war period by a shortage of Labour and other pauses is in itself a big factor in raising the cost of production and the selling-price of coal. This, of course, is due to the fact that heavy standing and overhead charges have to be. met on tho 'reduced output, which would be littlo, if at all, heavier on a considerably greater output. A similar factor operates in connection with the retail distribution charges, which account for something like a third'

of the total increase in the price of coal. In this department of the industry, ■ as in others, wages, of course, have increased, but in addition delivery costs arc increased by the fact that men, horses, and vehicles are partly employed, or are employed spasmodically, in coal distribution in conditions inimical to methodical and economical working. It may be agreed with little hesitation that the Board of Trade has made out a good case for its view that any appreciable improvement in the. existing condition of the coal industry, whether from the point of view of the public or of those engaged in it, must follow upon. its organisation on entirety new lines. The broad position disclosed is that , the cost of producing and transporting cqal is soaring at least as rapidly as its selling price, and that on an average the profits .of the mining companies arc so low as to leave nothing like an adequate margin for the depreciation and other charges that must be met in dealing .on sound' lines with a vanishing asset like coal. On broad grounds, there is much to be said for the idea of reorganising the industry under a single authority. The section of Ihc report clcaling with this matter, however, in contrast to those which deal with concrete and ascertained facts, is somewhat vague and inexplicit. The Board finds adequate reasons for refusing to recommend the State purchase and direct management oi the mines. It considers, and no doubt on valid grounds, that such'a change "would not foster the highest degree of enterprise, initiative, and resourceful management," and would in other respects fall short of essential standards. But. the proposal it puts forward will have to be elab"brated before it can be considered as a practicable, alternative. It is, of course, obvious that there is much to bo gained by the methodical organisation of the industry from the mine to the consumer, with/ an efficient concentration of labour and capital to the best . advantage, a block system of retail delivery in the centres of population, and other improvements on existing conditions.. But in , view of the fact, that the proposed means of securing these ends is to enforce the co-opera-tion of the present employers and employees in the industry in a Coal Trust, with a measure of State control, the financial readjustment designed to meet the claims of the companies and shareholders affected can hardly be regarded as adequately recognising the property rights of investors in mining property. This at least appears to be the case on the facts disclosed. The average .dividend paid by the principal' coal-mining companies during the wav period was 4,8 per cent., and the. average • total gain per annum (including undivided dividend) was 5.1 per cent. Since these rates, as the Board justly observes, fall far short of providing a fair return on the capital invested, it is difficult to understand why an interest rate of 4 per cent, on the new stock to be issued in substitution for the old shares can be regarded as adequate. It is true that this guaranteed 4 per cent, may bo supplemented, but on the basis proposed it seems extremely doubtful that the shareholders would benefit thereby to any material extent... Possibly the idea is that an equitable adjustment could be reached in the process of valuing existing interests, but this and other matters would require to be made quite clear if the main proposal found favour. There arc apparent weaknesses, for instance, in the constitution proposed for the controlling authority, The leading aim, presumably, is to secure unhampered expert control and co-op-eration. It is not shown, however, in what proportion authority would be divided between the members representing the industry and the Government member. If the representatives of the industry were supremo it might become 'a difficult matter to'protect the consuming public from exploitation by the organised monopoly. It would certainly be to the interests of the representatives of both the companies and the employees to make as large a profit as possible out of the consumers of coal. On the other hand,' it might be as difficult to reconcile effectual control by the State of the factor of selling price with the efficient and profitable conduct # of the' industry. The Board mentions coal importations from other countries as a factor that would provide a certain safeguard against tho abuse of monopolistic powers. But who is to control these importations? Since transport and distribution bulk so large in the total scope of the coal industry, it .is obvious that the establishment of a separate control of importations would do away witli some of the greatest benefits to be' reached by organisation. These and other matters , call for a good deal of explanation. At the same time it is quite evident that the coal industry is in a state from which nothing hut bold and enterprising measures will extricate it to the satisfaction of those engaged in it and the benefit of the public, and the proposals of the Commission deserve careful and sympathetic consideration.