The Dominion MONDAY, MARCH 14, 1921. PRICES AND PROSPERITY

Dominion, Volume 14, Issue 144, 14 March 1921, Page 4

The Dominion MONDAY, MARCH 14, 1921. PRICES AND PROSPERITY

Extended accounts of the trade depression in the United Kingdom which have arrived by mail show that as one of its resuite it has led for the time being to a phenomenal lowering in the prices of many classes of goods. In recent days British consumers have had an opportunity of buying textiles and various other classes of manufactured articles at the lowest prices recorded for a very long time —not infrequently at less than the cost of production. It is clearly emphasised, however, that trade in these conditions cannot continue for any length of time. Indeed, the mere statement of the position demonstrates that it cannot last. If goods are sold at less than cost it is only for the reason that traders are under the necessity—owing to the combined effect of financial stringency and weak demand —:of disposing of them for the best price pbtainable. It is, of course, obvious that no tl-ader, if he can help it, will restock in order to continue trading under the same conditions. _ The collapse of prices in Great Britain manifestly cannot be regarded as a rapid return to normal conditions. It is merely an incidental feature and result of a serious, paralysis of trade amfeindustry which will be. relieved only when goods are readily saleable at something more than what it costs to produce and place them within the reach of consumers. These facts arc the better, worth considering since the existing situation in the United Kingdom is reflected, though with modifications and generally with less extreme developments, in this country. The position at the moment in Great Britain is fajrly summed up in the statement that the trader’s necessity is the consumer's opportunity. Prices in many case's have fallen to a minimum for the time being,, not because there is any real justification for Such a fall, but because manufacturers and traders find themselves left with heavy stocks which they must sell even at a sacrifice in order to meet their financial obligations. The inevitable concomitant to forced sales in these circumstances is. seen in the closing down of many industrial establishments and resultant wholesale unemployment. It is self-evident that one vital condition of a return towards normal prosperity in the United Kingdom is an improved demand for goods at appreciably higher prices than have lately been obtainable there for some important classes of manufactured goods and other commodities. A period will soon be set to forced sales at nonremunerative prices, and thereafter the revival of industry and the reduction of unemployment will, of course, be governed absolutely by the demand for commodities at payable prices. A belief on the part of consumers that prices can be stabilised at such levels as have lately been reached m the United Kingdom is at variance with well-established facts, and servos only to delay the process. of industrial revival and trade, stabilisation. There are fairly definite indications in Britain and in other countries that the peak of high prices has been passed, but there is a clear distinction to be drawn between a sudden collapse of prices duo to forced sales, and the much less extreme, Wut lasting decline which may reasonably be anticipated. No one who has even cursorily considered the effect of war and post-war developments on the economic situation will expect to see prices in Britain or elsewhere decline, except in the course of violent fluctuations, to anything like the pre-war level. Such fluctuations —exemplified at present in the case of the' chief items ,of export from this country as well as in that of British manufactured goods—.serve only to intensify what is unsatisfactory in existing conditions and to •delay the establishment of conditions that can henceforth be regarded as nornial. So far as readjustment on a basis of permanence is concerned, the whole outlook >is governed by the fact that stabilisation is only possible with prices and values at a much higher level than before the war. As compared with the pre-war period, money-wages ha ve been . enormously increased, with cumulative effect on prices, and at the same time account must ho taken of a serious decline in. production, which even in Britain is still far from being overtaken. The accumulation , in British warehouses of stocks which cannot be sold. atpayable prices does not mean a high level of production. It means only that for the time, being the effective demand for goods at home and abroad has fallen away to a Tninimum. The. extent to which the volume of production in the United Kingdom is still below. the pre-war level is suggestively indicated in the following statistics of shipping engaged in foreign trade: — , Entered Cleared

In a. country which relies as largely on foreign trade as the United Kingdom these, figures are of representative value as indicating the relative volume of production, and it will bt- noted that although last year’s record is a great improvement on that of the previous year, it'is a long way behind that of 1913. With limits set in any ease by wageincreases and’ diminished production, world-wide inflation of course materially affects the possibility of bringing down prices in a given country. In Britain and other coun-

tries, including our own, consumers are apparently unwilling to recognise the limits set to the possible reduction of prices and inclined to hold off in the expectation of impossible redactions. It needs to be realised that while prices considerably higher than those of pre-war days are made inevitable by increased costs of production, the monetary resources of the consuming public have in a great measure been adjusted to these changed conditions. In New Zealand this becomes apparent, not only in com.l- - pre-war and present-day wages, but in referring to such barometers of national prosperity as the Post Office Savings Bank returns. The total amount to the credit of depositors at .the end of each calendar year has risen rapidly since the outbreak of war. Standing at just over nineteen millions for 1914, it had increased by the end of 1919 to £38,393,000—that is to say, it had more than doubled. The total to the credit of depositors at the end of 1920 is not shown in the official returns, but taking the same ratio of interest to deposits as in 1919, it amounts approximately to £42,400,000. With wages greatly increased, and the power of saving extended in the measure here indicated, it is evidently irrational to expect prices to fall to anything like the level at which they stood before the war. Increased purchasing power has in a great measure' balanced increased prices, and in 1 their own interests consumers ought to realise that if they abstain, in the expectation of impossible pricereductions, from satisfying their normal requirements, the only result will be to hinder the establishment of the settled conditions of trade and industry by which all would profit.

with with cargoes. cargoes. Tons. Tons. 1913 49.0fil.233 67,819,701 1919 29.570.fi90 34,562,107 1920 30,518,236 36,589,406