Evening Post THURSDAY, JANUARY 27, 1938. ESCAPE FROM GUARANTEES

Evening Post, Volume CXXV, Issue 22, 27 January 1938, Page 8

Evening Post THURSDAY, JANUARY 27, 1938. ESCAPE FROM GUARANTEES

lii a letter which we publish today a correspondent, Mr. Charles E. C. Webb, comments upon our recent editorial article comparing the explanations of the Prime Minister and tlic president of the Farmers' Union lof the present prosperity. In. this , article we pointed out that both the Prime Minister and the Fanners' Union president had presented onesided, cases (though taken from different sides). Mr. Savage had made no allowance for the influence of overseas produce prices, and Mr. i Mulholland had implied that the farmer was responsible for all the gains. We urged that it was necessary to view the issues in truer perspective, to acknowledge the weight of our primary produce exports in determining our standard of living and yet not go so far as to suggest that the farmer alone should be studied. Only by taking a wider view could a policy fair to all be framed. The correspondent approves the'aim of a policy fair to all, and adroitly suggests that this is to be found in the compensated price which some farmers have lately advocated. We cannot agree with this. The compensated price, from our viewpoint, would be undesirable. It would lead us deeper into State control and subsidies upon a 'system which could not be applied fairly and equitably. It is probable' that different advocates have different definitions of- the compensated price and varying methods of calculating it. The correspondent presents no definition beyond the statements that the compensated price plan is designed to give relief to the settler when costs are high and is based upon the philosophy. "We want to be paid the ( full value of our production, but not one farthing more." It is added: "All that remains is to devise a method of measuring the true reward of the farmer." This is not the simple problem that the correspondent implies. In fact, its complexity, as we see it, is an insuperable obstacle to the adoption of the plan. It may appear simple to say: New Zealand butter sells for Hss£ a cwt ,in .London and Danish for 1255, but- the New - Zealand farmer's costs, "including transport, fertilisers, implements, and supplies, wages and interest are 20s higher than those of the Danish farmer. Therefore^ the New Zealand Government should, add 20s to the guaranteed price. But what .costs' are to be ■ included and what deductions made? Is the farmer to be- compensated because he has capitalised the climate and the fertility of the soil and paid an excessive price for his land? . And with what country are his costs to be compared—with one where wages are low and hours long, or with one where the conditions approximate to our own?

There is provision in the Primary Products Marketing Act for the consideration of all factors that enter into the cost of production and the standard- of living. Under the formula given in the Act, the compensated. , price could be awarded; but we' believe that an1 attempt lo subsidise according lo differences in costs would lead to: greater political complications than we face at present. The farmer's reward would be put up to political auction and political parties would be tempted to outbid each other to secure the farmer's- support. The price paid would have to be met by the community at large and all other sections would claim compensation likewise. The manufacturer, ' the importer, the retailer, the professional man, and the wage-worker would all be entitled to ask for a compensated price for their goods or services.. And if. their political power were sufficient, they would possibly get it. In short, the State would be the regulator of rewards, the controller of all enterprises; for "it would be unthinkable to impose a liability for compensation . without conceding a controlling- interest. It may be said that this compensated price is now available to all except the farmers, as all others can pass on increased costs or obtain compensation in higher protection or higher wages. But this is not . quite correct. Tariffs, prices, and , wages may be raised, but the State can neither guarantee that the people 1 will buy the goods nor- employ the 1 workers. For certain goods and 1 services there is, of necessity, a more or less assured' market. But even this is not fully guaranteed. People must have shelter; but if housing is too costly the demand is lessened. The people huddle together. They I must have clothing, but if prices arc I high they buy leps*°and go shabby.

It can be conceded that. under present conditions the- farmer-, may not be fairly treated. His^costs are raised, partly -through direct Government intervention. He has to help pay for the forty-hour week, and works longer hours himself. But the remedy for this is not to go deeper into the guaranteed price and control system (of which the compensated price is just one form). That must lead either to unfairness to the rest of. the community or to an .impossible scheme in which everybody claims compensation and pays compensation to someone else. The true remedy is to retrace our steps, to review, the addition of costs lo production, and to' introduce a system which will take proper account of the farmer's obligation to sell •in a world market. It will be difficult to do this; but we do not iliink-it is impossible. The National ■Party's policy on guaranteed prices suggests a beginning. "Guaranteed

prices," said Mr. S. G. Holland at St. Heliers, "will be replaced by a sysLcm of assured minima, and the control ,of the produce and the sale of it will be handed back to the farmer." We believe that it was a mistake , for the Stale to become responsible for the purchase and sale of produce on the scale involved in the guaranteed price plan. Political' pressure cannot be kept out of the business and there is the possibility of great State loss. But there is no reason against the producers, in co-operation, marketing their own1 butter and cheese on the lines of' the scheme built up— though they are not entitled to cheap Reserve Bank credit any more than i importers are. If the scheme is , handed over to farmer control k may he operated (except I'or the Reserve Bank credit) as it is now. Mr. Holland's proposal of a system of assured minima certainly is not in conformity willi this. The producers should bear their »own losses and retain their own profits. They could do so by establishing a reserve fund for equalisation purposes.1 But it may be necessary as a temporary expedient to give the assistance' of an assured minimum until sueh1 a fund can be built up. For this there arc precedents in the guarantees for fruit, pork, and honey export. These were never intended to be permanent, but were given to give the industries help in tiding over difficult times until they could organise their marketing systems. Some similar help might bo'afforded, where necessary, with other exports; but it should not be accepted as a permanent substitute for the real remedy—adjustment of costs to a . figure that the industry can reasonably stand. Permanent adoption of the subsidy system can never solve our problems. It merely means that we are either artificially keeping alive industries that are not economic or that we have wrongfully raised our costs so high that we arc imperilling production, and to hide the loss we are juggling money from one pocket to the other.