THE STATE AS A TRADER

Hawke's Bay Herald-Tribune, Issue 150, 13 July 1937, Page 13

THE STATE AS A TRADER

Some of the Disadvantages Traced ACTIVITIES REVIEWED The extent to which the State has of Iate increased fEs activities as a trader, and the degree to which the Government is apparently still prepared to go in this direction, is probably not generally appreciated by the public, says a statement by the Associated Chambers of Commerce of New Zealand. The Government has commercialised Oroadcasting'and made it a State business ; made a State bank out of the Heserve Bank ; become the sole trader m New Zealand' s dairy produce for sale overseas, and tlie proprietor of a pro-duce-distributing business in the domestic market; become a lender on a Large scale by nationalising the Mortgage Corporation; entered the housebuilding and joinery business; made arrangements to add substantially to its road transport fleet; again become a timber-miller. These are additions to those established activities of the State which impinge on the fields of private enterprise. The State generates and sells electricity; mines and sells coal; owns railways, busses, ships, hotels, workshops, quarries and labour bureaux ; is the largest lawyer and trustee; is a designing, manufacturing and constructional engineer; is a money-lender, printer, publisher, tourist agent, bookseller, banker, architect, doctor, dentist, barber, forester, wine-maker, and restauranteur ; trades jn fire, accident and life insurance, wheat, conducts household removals, and even sells advertising space, oysters, ammunition and poisons. It employs more than 31,000 persons to carry on its trading activities. However, long though the list of State enterprises is, apparently it is to be made even longer. It has been stated on behalf of the Government that it will probably establish modern cement works ; that it is quite possible some thing will be done as regards the Government taking over the Onekaka iron works ; that the Government, and not private enterprise, should own all air services, In the Legislative Council last year, when the Industrial Efficiency Bill was under consideration, it was stated on behalf of the Government by the Leader 0f the Council that "the day migbt fcome when it would be necessary, in the public interest, for the Government, which after all was a Socialist Government, to strike out on its own account in the realm of private enterprise."

Liability on Taxpayers. Does the Government intend to continue expanding the field of State enterprise regardless of the question of ability of the State to trade efficiently and economically ? The taxpaying community are directly concerned with any such trading ventures, because while a private trader who fails goes bankrupt, there is a contingent liability on the taxpayers to foot any losses incurrea by State enterprises. It is axionmatic tha-t the State is not constituted to trade as efficiently as private enterprise. A fair example is provided by life insurance — and a popular one, smce New Zealand occupies third place ln tlie world on the basis of the sum assured per head of the population. The New Zealand Government Life Insurance Pepartment began operations in 1870 as a State enterprise. Sir Julius Vogel, ou whose initiaj;ive tlie step was talcen, said he believed the only way to pOpularise insurance among the working-class was to place the security of the State beliind it. The time was particularly opportune since there was no established interests to contend with — no local life assurance companies ; all tlie insurance business was done by agents working for outside companies. In 1893 the Government Office held 49 per cent of existing policies, and carried a greater total of insurance in New Zealand than any other office. From 1897 to 1907, while the business of the Government Office, as measured by the amount of insurance in force, increased by 20 per cent., the business of all the private companies taken together increased by 78 per cent.

Reflections for Taxpayr Comment on this decreasing percentage of total business held by the Government Office is made by Professor Le iiossignol and Mr W. Downie Stewart in their hook "State Socjlism in New Zealand," published in about 1910. The writers, after dismissing as doubtful tlie argument that tlie range of the Government Office was too limited because of its business being confined to New Zealand, and after agreeing that a factor which might account in a sliglit degree for the sloiv progress oi the Government Office. was a large number of compulsory Civil Service superaniiuation schemes, said tlie Dcpartmend needed to display the same energy, economy and efficiency as private offices. "Unless it does so, and does it quickly," they said, "there will be an increasing tendency to stagnation, and tlie opponents of State enterprise will be furnished . with another iilustration, and tliat in a field whicli seems more adapted for successful State enterprise than almost any other." The progressive decrease in the percentage of total policies held by the. Government Office in recent years is .shown by the following figures, whicli bring the position up to date: — 1893, 49 per cent; 1907, 38 per cent; 1915, 32 per cent; 1920, 30 per cent; 1925, "28 per cent; 1930, 26 per cent; 1935, 23 per cent. The purpose of this examination is not to attaek tho Government Insurance Office, which has been fairly conducted in its competition with private offices. Indeed, it is this very fact whicli makes this coqiparison of State enterprise invaludble for the lesson it tPaches, anrl makes the conclusions to be drawn as regards the inelfectiveness oi Lhe State in business inescapable. A fair and useful comparison is not

possible where State concerns enjoy privileges over their private competitors. or where the State lias a monopoly, The Government Lif© Insurance Oi fice is no cliarge on tlie taxpayer't money, but all State enterprises ari not in that bappy catcgory. It amounts to this, that the taxpayer does not want State trading enterprises (1) it they can give him advantages no greater than, or only as great as, those which private enterprise can give him , (2) if any unfair privileges are givei, to State concerns over private competitors ; (3) if he has to foot bills foi State enterprise; (4) if the growth ot State trading minimises his opportunities to earn an independent living, or engage in a business ; (5) if , by the exemption of State trading concerm from tlie sarne rates, taxes and other charges and conditions which are imposed on private enterprise, the taxpayer's own tax load is increased tlirough tlie narrowing of thc field of taxation. 'I'lie lact is that uiost oi these things run iu harness with Si; te tr.ading^ any way,