ECONOMIC ARGUMENTS.

Evening Post, Volume CXII, Issue 96, 20 October 1926, Page 14

ECONOMIC ARGUMENTS.

(To the Editor.)

Sir, —Your correspondent who signs himself "Broad" is wrong in saying that the policy of not protecting secondary industries leaves the New Zealand worker open to competition with sweated labour. No New Zealander could desire that, hut the way to prevent it is not protection, which will lower the standard of living. throughout New Zealand for the benefit of a few, but to devote our capital to those industries (not necessarily primary) ■which can be made to flourish and to pay a good wage without protection. At the present time many of our industries are not protected, but the employees are not reduced to living like the Japanese. So far from encouraging such a thing, I would make the only condition on which any factpry can exist, the ability to pay a proper wage. If it cannot do this, money should not be invested in it, when there are so many industries which can. If, not being able to pay a good wage, it desires protection so that it may charge an increased price for its products to be paid for by all the other industries and workers in New Zealand, I eossider it not only a bad investment but a positive imposition on the public. Such an industry would really exist on tho charity of New Zeajand, and if it suddenly ceased work wo would be better off by being able to purchase the article it manufactured at a cheaper rate. Also a large amount of capital and labour would be relieved to be used in channels which would benefit all New Zealand, not just a small section. "Broad" argues that if we manufacture-! more in New Zealand our imports would be less, therefore the balance between exports and imports in favour of New Zealand would be greater. Now, this assumption appears to be as obvious as that the sun goes round the earth. At the same time it is equally untrue and is only held by those who have never studied economics at all. Suppose with the aid of protection wo set to work to build factories and to manufacture, say, £20,----000,000 worth of goods per year. To do this wo have to invest millions of capital in our protected industries which, ■as they cannot exist without protection, are self-admittedly inefficient. When we have produced our £20,000,000 worth of manufactured articles our imports will be reduced, and if our exports remain stationary wo shall certainly be in a much improved position. But the question is what has happened to our exports'? "We' have taken millions, which should have gone to our primary and efficient industries, to invest them in inefficient industries which have produced £20,000,----000 worth of manufactured articles which we could have imported for probably about £15,000,000, Our efficient industries have suffered the loss of these millions of capital which, had they been invested in the industries natural to Nov.- Zealand, would have produced more than £20,000,000 worth of produce, probably a percentage more, equal to the percentage of duty necessary to protect the inefficient industries! that is to say, about 25 per cent. We have then reduced our imports all right by £15,000,000, but at the same time the transfer of capital has resulted in our exports being £25,000,000 lower than 'they would have been had the capita! not been absorbed by the protected industries. The result is therefore that our trade balance is adversely affected by tho amount of £10,000,000. It is true that protection would have given work to those who produced the £20,000,000 worth of products of the inefficient industries, but it would also have taken away work from those who would have been employed in our efficient industries and who with no more exertion would have produced £25,000,----000 worth of products. To put the matter in another way, if we import £100,----000 worth of rails, what pays for them? Surely £100,000 worth of New Zealand products. Well, does not the production of this £100,000 worth of New Zealand goods to pay for the rails give as much employment as if tho rails themselves were manufactured here? We can more easily produce £100,000 worth of butter, meat, wool, and products indigenous to Now I Zealand than we can the same value of v

rails. It is obviously better business to use our capital and labour in those industries and exchange the products for the rails than to transfer our capital to the manufacture of rails. Strange though it may seem to a protectionist, the more we import the more work there is in New Zealand. I wonder how "Broad" accounts for the extraordinary fact that for fifty years before the war England's trade balance was always adverse and grew larger and larger every year, yet she grew richer and richer every year too. Before the war she was, comparatively speaking when we consider her size and natural resources, the richest country in the world, yet according to the New Zealand protectionist theory of trade balance, as depicted on numerous hoardings, she ought to have been bankrupt. The point is that tariffs are not tho simple obvious things they appear, and if a man is contented with merely a cursory glance at the subject he niay easily bo . load to side with those who desire to raise the tariffs next year and thus defeat the object of more work and better living in New Zealand. Since writing the greater part of this letter I have read a communication by Mr. Edmonds, the secretary of the Wellington Industrial _ Association, published in your last night's issue, which links me with Mr. Hugh Jenkins in a ' '[ presumptuous " endeavour to prevent the association's ambition to increase the tariffs. As I am already indebted to "The Post" for granting me space in its columns, I must limit myself to arguments which I hope are to the point, so I will leave Mr. Jenkins to answer the letter of the association's secretary if he thinks it worth while.—-I am, etc., GEOEGE WINDEE.