The Depression.

Feilding Star, Volume XVI, Issue 191, 12 February 1895, Page 2

The Depression.

The Wesleyan Advocate, in an able article on the above subject says : — The increase of civilised population in the world during the last fifty years has been beyond all example, and it has brought the law of diminishing return very powerfully into play. Profitable employment is no longer available for the whole population at present rates of wages. Hence there is competition for work, and a tendency to reduce wages. But the employed majority resist such a reduction, for though an all round reduction of 10 per cent might allow all present claimants to be employed, in a few years there would be a fresh surplus and another reduction, and so on, till the point of bare existence was reached. The depression is further intensified and curiously complicated by what is known as the appreciation of gold. Gold has gone up in value — not in price per ounce — but in ralue as a medium of exchange. Thus, the produce of an acre would buy as much thirty years ago, as, say, the produce of two acres will now. Hence the man who mortgaged his land long ago to such an extent that it required a fourth of it to pay the interest, finds now that it requires half his land to pay the same interest. This rise in gold is hard on all who have interest to pay, and especially hard on a young country like New Zealand, that has borrowed forty millions from the outside world. It probably takes more produce to pay for forty millions now than it would have taken to pay for sixty millions when the great borrowing policy began, twenty years ago. In order to understand the subject fully, it is necessary to grasp what is known as the law of diminishing return. Take, for example, M the labour bestowed upon land. There is a point at which it does not pay to increase the number of labourers. A thousand acres with only two men employed on it may produce, say £1 per acre. But if four men be employed, it will not produce £2 per acre, but, say, only £1 10s. Yet it will pay to employ the second two, because they produce £500. If six men be employed, they produce may be £1 15s per acre, so that the th.ird pair produce £250. These also will pay. But a fourth pair will, say, only raise the produce to £1 17s 6d. Hence they only produce £125. Evidently, the additions must stop somewhere, for another pair would only produce, say, L 62 10s, and yet another pair only, say £31 ss. The same thing is true of every industry. There is a certain maximum number that ■;an be employed in it with profit. Every additional man above that number though he produces something, and works as hard as the rest, is to some extent making bricks without clay, and must consume more than he produces.