The Dominion. MONDAY, JANUARY 14, 1935. COSTS, PRICES AND QUOTAS

Dominion, Volume 28, Issue 93, 14 January 1935, Page 8

The Dominion. MONDAY, JANUARY 14, 1935. COSTS, PRICES AND QUOTAS

' 4 . Included in this morning’s cable news is a quotation froni the London Economist attacking the principle of quotas. The Economist has been consistent in its opposition to restriction of imports fro the very beginning of the new policy at Home, and there are i. doubt many Dominion producers who take comfort from its stat of the case for complete freedom of trade. It should be lemembe e . however, that British opposition to quotas is not based on the sat arguments as Dominion opposition. . • , “The restriction of Australian meat supplies,, says the Economist, “can only be justified as a subsidy to the British producer at the expense of yet another inroad on the British consumers standard i living. In a rationally-conducted world Australian meat expansion would be the natural means of raising the standard of living of Bn i consumers.” That is to say, the effect of restrictions will be tc> laisc the price of meat to British consumers, whereas expansion of output in the producing countries,' if allowed to flow unimpeded through the ordinary channels of trade, would cheapen prices to the consuming There is here a conflict, not of interest —-for in the long rim the interests of producers and consumers are identical—but of approach to the question of restriction. And it is not so apparent in meat as in dairy produce. The Economist and those who. support its view desire unrestricted importation so that the selling price of daily produce at Home may be within the means of a largely increased nublic. The restrictionists, on the other hand, propose to limit the supply to the market in an attempt to raise prices for the bene of the producer: primarily the United Kingdom producer, but also to some extent the producer overseas . . “Your choice,” says the British Minister of Agriculture to the New Zealand dairy producer—in effect, if not mso many words “is between an open market and prices unpayably low, and a restricted market at payable prices,”, What producers would like, of coutse, is an open market and payable prices; and under Free Trade proper that is what they would in the fullness of time make for themselves. By increasing output, or by reducing the unit cost of production they would endeavour to offset the effects of low selling prices, but by retaining those prices retain also the widely extended market which is a direct result. Those of them unable to bring their costs within the limits fixed by the selling price would go out of dairy production., The Economist is right about what should happen in a. rationallyconducted world; for the common-sense end of production is consumption, and the further consumption extends the better it oyght .o be for production. If men’s appetites were to outrun the fruitfulness of the Earth, as sometimes happens fin restricted areas of its surface, that would be tragedy indeed. If'on the other hand the appetites of all men were satisfied by the present volume ot production, there would be a clear case for restriction. Any further production toi food ends would be waste. No doubt the ingenuity of man would exert itself to devise new food combinations, and new uses for o.d products, in an endeavour to secure the consumption of more gooos. But the fact of saturation point having been reached, or nearly reached, would put a natural brake upon the classes of production most concerned. " In our present economy money acts as a brake. When moje money is needed to produce goods than can be won back by their sale, production drops. Then, demand gaining the ascendancy over supply, prices rise: and presently production rises too; and then prices drop again, followed once more by production. So it goes on with a seesaw motion: gentle for the most part, but sometimes violent, with consequent disastrous results to distribution and prosperity.. And the trend of the century has been away from the gentle small-scale seesaw toward more violent fluctuations. Many causes contribute to that trend: the spreading area of production, the heavily increased capitalisation of industry, the growth of markets, the rise of substitutes and the fickleness of buyers’ tastes. - ' The increasing complexity of production and marketing, produce a dangerous time-lag m the effect of the. economic brake. It JS . n °t nearly so easy as it once was to tell when the market is in dangei of being over-supplied; and even when the market is known to.be over-supplied it is not nearly so easy as formerly to reduce production to suit. The machine has grown too big for its brake: it lumbern on, turning out millions of tons of butter, or millions of pans of boots which upset the economic balance of the world, long after it should be slowing down. So we have planning. Production and distribution having apparently outgrown their natural equilibrium (as adjusted constantly by the interaction of cost and price) it is pioposed to substitute an artificial equilibrium by estimating probable demand and permitting only as much production as will satisfy it. That seems sensible in theory, but in practice is liable to be complicated by incalculable factors. The only hope of making it a success is to enter upon it with a clear-cut idea of what we wish to achieve, add to disregard every extraneous influence. Which, considering that the new policy will be man-directed as well as man-made, is asking a very great deal. Take meat. The imposition of quotas will have several effects —several already apparent: possibly many more that are hidden. It will raise prices at Home, and may reduce consumption. In the Dominions it will reduce production and/or stifle development. As Dominion development is checked so will Dominion demand for British manufactures be checked; which in turn will mean that the people who work in the factories of the United Kingdom will be less able to buy Dominion food products. Politicians delight in calling such swirls of cause and effect “vicious circles.” Do we want a vicious circle? Do we wish the people of the United Kingdom to pay more for their meat and. to eat less of it ? Do we wish to call a halt in the expansion of Dominion primary industries? We do want payable prices for commodities which it is socially desirable should be produced,, for without, payable prices production will languish. And we do wish to avoid violent price fluctuations. But how are we to prune our planning to ensure that it shall bear only sweet fruits, when it seems to. carry so many bitter buds? Long-term agreements require long-visioned thought.