Costs Must be Carried

Hawke's Bay Herald-Tribune, Issue 164, 29 July 1937, Page 14

Costs Must be Carried

Our Own" Correspondent.)

PRICES AND WAGES Sheepfarmers7 Leader on "Purchasing Power"

OVERSEAS DEPENDENCE

(From

WELLINGTON, This Day. "It has been the experience of almost every country in. recent . years that the freezing winds of economic depression will hlow Utopian theories and laws to ribbons, and during such periods, the necessary adjustments, in order to maintain a measure of social equilibrium, have had, willy nilly, to be made on a ba,sis calculated to meet the altered .conditions,'' said Mr. H. D. Acland, president of the New Zealand Sheepowners' and - Farmers' Federation, in his annual report presented yesterday to the annual meeting of the federation. He said that it was to be hoped that the present policy of optimistic spending, which had only been made possible by the almost sensational rise in overseas prices received for our exports, would not be unduly prolonged; if it sbould be there would appear to be grave risk of being faced with a repetition of the experience during the years of the slump. ■. «'It is disquieting that our present rclative prosperity is due to capital expenditure in England, providing for war material, and it is to be sincerely hoped that the resnlts of the present expenditure by Britain may be to stabilise the international situation, and promote a peaceful settlement of the many difdeulties being faced. Failure will mean a repetition of the awful experiences of the Great War, and possibly the end of civilisation as we know it." Mr. Acland stressed the point that increased spending power did not necessarily mean increased purchasing power; there was a great difference between them, as he had repeatedly pointed out. When wholesale prices Jiad to be raiscd to meet increased costs imposed on industry by Government edict, or court awards, or otber causes, the increased spending power represented in the raised wages to the workers receiving them, *was almost always accompanied, in the long run, by reduced purchasing power due to th- increase in retail pricc to the consumer. He referred to the statement by the Right Hon. Mr. Savage, while in England, that it was the intention of the New Zealand Government to increase the purchasing power of New Zealand people. The gpeaker was afraid, however, that there was great misconception in the minds of many people, as to the relative meaning of the two terms — spending power and purchasing power — and the Prime Minister had apparently made the difference clear as reported from England, 1

Increased Purchasing Fower. "I' think we can all support the C. -c nment in this aim," said Mr. Acland, ' ' provided the f acts of the c'ase are not lost sight of, the principles oi which are that 'an increase of purchasing power cannot be created by shortening working hours and paying increased wages for less work done'; and 'that statute law and regulation of industry by Government edict, may alter the distribution of the existing wealth within a country, but nowhere has it been shown possible to create wealth by these means. ' The Chief ^ udge" of the Federal Arbitration Court sets out the position very clearly in a statement made by him on the Federal Court last month, when adjusting the basic wage. He states that before a higher wage could be granted, it would have to be fully proved that industry could alford to pay. 'No place, not even a Court, is safe from commonamsfl. '

" 'What can industry afford to pay?' continues the statement. *If we were sure, for example, that during the next 10 years wool would average 18d per lb., wheat 5/- a bushel, and other primary products realise propor- ; onate prices, then we could safely and substantially increase the basic wage . It is easy for certain people to affirm that a high basic wage means a bigger demand and better prices foT our primaTy producers, and to talk abont the home market being the best market. The truth is, of eourse, that with our great primary products the local price is'determined by the export price. If we had a population of 25,000,000 we could view these matters differently. " 'Meanwhile,' the judge concludes, 'it is ,well to keep in mind that it is imposible for even the secondary in-dvst-ies to be prosperons unless, and nntil, the primary industries are making reasonable pToflts. And so the warning is: go slow on increasing the costs.' " Need for a Balance. The remarks of the judge, said Mr. Acland, applied with even more force to New Zealand, with its relatively smallor domestic marhet, and endorsed the need fOT a balanco to be reaclied between costs of production and prices which tho consumei", either in tlio domestic or overseas marlcet could afford to pay. The interests of tbe consumer were often overlooked, not only by omployers and workers in in dustrial disputes but bv tbe .Coriciliation» Council and t'ne Court r.- Arbitration and otliera. After all ' the eon suw?f" wm 4U« pay i» tho

long run, and all wages or other returns depended upon what ' 'the consumer" was willing to, and could, pay for the product of industry. And it had to be remembered that there were only 1,500,000 consumers in New Zealand, who consumed approximately only 2 per cent. of our wool, 10.8 per cent. of our lamb, about half our mutton, 18$ per cent. of our butter, 4 per cent. of our cheese, 24 peT cont. of our pork, and 73 per cent. of our beef. "I mention this in order to show that our domestic market is of minor importance as compared with that overseas," said the speaker, "and when it is rememhered that of our totai exports approximately 97 per cent are primary products, it will "be appreciated to what extent prosperity within New Zealand is affected hy prices received for our exported produce on our markets overseas. "It would appar that the greatost care will be necessary in the carrying out of the Government's policy of rodistribution, to ensure that means aro evoived to prevent detrimental effeet3 to that class of the eommunity in whcse interests the redistribution is being made, that is taking the long riew. Two Separate New Zealands "Under existing conditions the ro appear, s to be a danger that this may be the result, as the natural tcndency will be towards the creation of two sejarate New Zealands — a town New Zealand and a country New Zealand — ■ the lirst starving the second by virtue of :he dis-equilibrium as between returns for service rendered in the one case as against those in the other. This difference has undoubtedly been accentuated under recent legislation, and the reimposilion of the land tax has added still further to the difficulties of the farmer pn>ot:cing for 'export. i ara afraid that 'he effect of recent legislation will be to place the producer for export, and tjie men who work for him on the land, on a definitely lower level of return for their services and labou^ than is the case with any other sectiou of the commuttity. "In short, in a country such as ours, whose exports are almost exclusively primary products, it will be apparent that if carried past the balancing point of equity, the policy of lighter work and shorter hours ih towns can be made possible as a continuing policy only, by harder work and longer hours on the land." Primary production could not bo suecessfully carried on under town fattory rules, he continued, and the costs of production of produce from the farm could not be passcd on to tbe overseas consumer, as could be done with goods sold on the domestic markets. Primary producers for export tvoin New Zealand had a good causo for special consideration under thcso c.rcumstances. Frovision For Export

Mr Acland then referred to tho very groat difficulty of making adequate pro vision for securing to exporters oi? primary produce in its various branches, a money' price for its particular product, sufficient to cover costs of production under conditions obtaining within New Zealand, while at tho same time ensuring a sufficient proiit to the farmer to enable him to* live in comfort and continue production of the particular article he was producing for export. The suggestion had been made that as- costs of production within New Zealand increased, so the prices to the exportmg dairy farmer should also be increased, the object being to establish security of profit. The natural result of any attempt to give preferential treatment to any section of industry would be demands by other sections for similar treatment, and when the national balance sheet is drawn up, it v/ould be found that tho position of thc Dominion as a whole would be that we ltad been foliowing a circle, chasiug nsiug internal costs with an increasing subsidy required within New Zealand on our surplus production for export. "Ultimately," he said, "the adoption of such a prineiple as that suggested in the terin ' compensated price,' if applied to all exports and to production for domestic consnmption, v/ould mean a regimentation of the whole of industry within the Dominion, on a totalitarian basis, which is not practicable in a country like New Zealand, depending as it does • so extensively on, overseas trade. There js also a very grave danger that the British farmer might deeply reseht any suggestion of a subsidised surplus product being dumped on the British market. To my mind, a more equitable approach would be to Teduce the costs t.f production ,by way of reduced cnarges, interest, land values, taxation, ete., to the point justihed by the avexage return for the particular product , over a reasonable period oi years."