New Zealand’s Problem

Dominion, Volume 28, Issue 81, 29 December 1934, Page 13

New Zealand’s Problem

Sir, —I would remind “Equity” that the £4,000,000 additional credit that the dairy farmers would receive through the purchase by the Reserve Bank of the output of butterfat at 1/- per lb. was his calculation, which I have accepted. In making payments from a national credit scheme one must bear in mind that equality and justice must be the guiding principle.. Should only a subsidy be granted the dairy industry alone would benefit. My better judgment tells me that I must go further ilijjn a subsidy and buy the total output. By so doing the local market can be easily controlled, thus enabling the Government not only to help the industry, but the consuming public as well with a controlled price at, I suggest, four pence per lb, whereas the present price is eleven pence. This policy would make for greater consumption in New aud, of course, shorter supplies overseas. It would be quite within the realm of possibility that the overseas price for the surplus, after the Dominion had had its fill of cheap butter, would equal the present total price, due to regulating supply to demand. But in policy building 'guesswork must not be considered, and the position to-day is that the supply of sterling exchange, to meet visible and invisible imports, has no need of the dairy output at all. The only things to be considered are that our children should have ample supplies to build up a physically strong rising generation and also that the dairy farmers should have New Zealand credit to compensate them for their labour in producing supplies. .

The Labour Party has been talking of a guaranteed price for dairy farmers, and the mobilisation of New Zealand’s finan- < rial resources with State flanking. Australia has its State Bank but it appears not to have the control of credit that our Reserve Bank, as founded by our Minister of Finance, has! For “Equity” to suggest that the Labour Party could lose Mr. Coates’s Reserve Bank—well —it is not becoming! The declared policy of the Labour Party is to finance industry from a £25,000,000 internal loan, which, to me, means borrowing credit, at interest, from the trading banks’ deposits. The Reserve Bank just controls the issue of . credit and in no way interferes with the enterprise of the trading banks in keeping the credit accounts of the business ... community, or their private lending of credit to industry, and further, the Reserve Bank can make those industries a safe investment for deposited capital by buying the output at a set price. I am disappointed that my motor-sales illustration was not up to the mark, but I thought I was making a clear contrast between the working pt the proposed scheme and the old financial system. I . can quite understand the seller of the car that I bought with my own cash having a financial headache for the usual method of sale is a small deposit and so much per week under a hire-purchase agreement, which, more than often than not, enables the agent to sell the same car time and time again at considerable profit to himself., As “Equity” says, the British fiduciary - issue 1914-1922 was used to pay munition wages, buy war raw material and pay. soldiers, and the only class to raise its voire in complaint was the munition workers, as they had not sufficient time off to spend what they earned. It is a close study of the methods used by Mr. Lloyd George to finance the Great War that is responsible for my proposal that the Goveminent should purchase the dairy output. Mr. Lloyd George, during the early stages of the Great War, bought the production of practically every manufacturing firm in Britain and financed the purchase with cheques drawn, bn the Bradbury note issue. A great mistake made in British wartime finance happened when the British Government mixed its financial drinks and started borrowing the issued credit back to the British Treasury. Had the British Government taxed its credit back the munition workers would have been on the same financial footing as the men in the trenches; there would have been no war profiteers or internal war debt, and it would have been to no one’s financial gain to prolong the Great War one moment longer than necessary. About 90 per cent, of the huge wartime production of Britain was sent overseas and was not sold! Far from wartime production being a different suggestion to handling our dairy produce, as “Equity’’ says; to my mind, provided the dairy produce was bought with our note issue, there would be no absolute necessity to sell any of it overseas. Under these circumistanctes our Dominion would be in the happy position of selling its dairy produce overseas not by auction to the highest bidder, but on the same system as British goods are sold on our market, and if overseas markets did not like our price—well—they would not get the goods. In 1922 the British note issue was handed from Government control to the Bank of England, and it is most probable that it is the necessity that this note issue should be again under Government control. and knowing that it was capable of buving the whole production of Britain in ‘1914. that is inspiring Mr. Lloyd George to make another effort to set the wheels of industry moving, again in Britain. this time in commercial production. The questions asked relating to the high exchange I will answer briefly in a further letter, as the questions are hardly relevant to the theme of this discussion. Believe me, “Equity, the Reserve Bank is well and truly under Government control! The problem is not ■ bristling with difficulties in itself, but is so surrounded with bias, prejudice and custom that one has great difficulty in forcing one’s way through to give plenty in this land of plenty., I must thank “Equity for seasonal greetings which are heartily reciprocated. I am. ete., G. H. WILKIN. Wellington, December 28.