THE AUSTRALIAN LESSON

Hokitika Guardian, 6 August 1930, Page 8

THE AUSTRALIAN LESSON

During July there appeared in the Melbourne Herald a series ot Letters tp John Smith, written by Mr L. F. Diblin ltitchie, Professor of Economics, in the University of Melbourne. These Letters, “telling in simple language the “facts of the economic situation that “has arisen in Australia, and showing “how our problems can 'be solved,” have been reissued in pamphlet form, and altogether they illuminate a situation with which that of New Zetland corresponds at many points. This Dominion is of course fortunate in having to make up 'for follies less grievous than those that have unfitted Australia to meet competition in present conditions. But both are of the same kind, and it would be wrong-head-ed to fancy that New Zealand can'afford to ignore Professor Giblin’s advice—as it is ignoring, of course, the similar advice of its own counsellors. He begins in the most elementary way by exploring the relation between wages and production, and the bearing of this on industry and employment in countries which, like Australia and New Zealand necessarily depend upon unslieiterable exnoits.

Thr> first f:irt is that, if wages go up “faster than efficiency,” the cost of the product must go up and prices be raised, so that the real value of wages s lowered. The second fact is that “higher wages in the sheltered industries mean, lower wages in the “unsheltered industries.” Because tin sheltered (and the protected) industries in Australia have 'been payin'.’ liieh and higher wages, “the wheat, “farmer for the last year or two has “not been getting the basic wage 'for “his labour.” If sheltered wages go up, the cost car be passed on j but the passing on i« nor interminable. “In the end all the increase in wages in sheltered industry ‘is passed ou until it all falls on unsheltered industry. The amount that “so falls will he roughly the amouni “by which real wages on sheltered industries were raised.” While production favoured by natural and other advantages may bear this more or less! easily, production operating on a Dare margin of profit can only be extinguished: “You get unemployment or “poverty in the unsheltered industries' "and unemployment in the sheltered “industries must follow in its train “This unemployment you can isee “round you to-day.” Why we do no do without unsheltered industries and concentrate ou the sheltered ones, is a rather innocent questioi though protectionists in their morenn restrained moments quite lose .sight o the answer and are never fond of facing it. The general answer is that workers can get more in sheltered industry onl\ because unsheltered industry stands tin cost and therefore receives less. Sheltered industries can only pass costs or and round, wages arid prices constantly evening up at higher levels, like tin water in a U-tide. But in the particular form that most concerns Australia and New Zealand the answei is that both dominions “must have a “great deal of unsheltered industry “because we must have- large exports” : exports to pay for loans and to pay for imports, .which We cannot do without and which nothing else will pay for. Now when organised wages have risen in prosperous times to what Professor Gihlin calls the “upper limit” —the- maximum which production can uphold—and of course other costs with them, then any considerable setback, such as a fall of prices, brings losses and a reduction of income which can he endured only “by sharing it all round.” To develop greater efficiency is of course to offset, the loss ,but gradually and until that process is complete, unless there is a fall in wages to , ‘sb»re “the loss all round,” there wi'l be unemployment. • In Australia, which has been living on more than it has earned, there can be- no recovery without a fall in real wages. Against the Dominion, the charge is less grave, and the penalty will be lighter. But instead of striving to reduce costs in every possibleway without reducing wages, eve have done nothing but continue to increase costs and to debar producers from obtaining labour at economic rates. In a session still only a few weeks old, the Government lias introduced proposals to increase costs, in the Unemployment Hill (as well as in its increased relief subsidy offer), in the Tariff resolutions, and in the Budget. This cannot go on without intensifying difficulties at present sufficiently 'rnous; and if John Smith is levelheaded lie will see it. He will stand firmly against any proposal that means an increase in costs, even to his own apparent benefit, and stand as firmly for measures to reduce costs, even to his own apparent and temporary loss. T t must be understood that, "in “general, the wage that can be paid in “unsheltered industry should be set the the “limit in sheltered industry also.” As the two exhibit greater disparity economy is more and more dangerously dis'oeated ; and the attempt to readjust if l>v bounty and tariff and other interfering aid only worsens ill consequence by postponing it. When production is embarrassed by excessive costs, there is only one cure for its distresses: a do-<■T-oa.se in costs and prices, “passed “right, through to the export and other “unsheltered industries, so that they “can stand up to the increasing eom- “ pet it ion of other countries:”