AMERICAN TRADE

Hokitika Guardian, 20 September 1930, Page 7

AMERICAN TRADE

OVERPRODUCTION OR. UNDERCONSUMPTION.

(From New York Banking Journal.) The argument rages as to which o'l these conditions is responsible for the accumulation of apparently surplus stocks of many kinds of merchandise, and the fall of prices to levels that are agreed to be below production costs. It is conceded that maladjustment exists but where lies the responsibility and what can he done about it? Such a .situation affords a great opportunity for reformers who have schemes for the fundamental reorganisation of society, and who hope that discontent with unsatisfactory conditions will got them a hearing. Well meaning people send out vague appeals to the “leaders ol business” to remedy the ills off the situation, lest .some dire conseqences befall them as a result of neglect of public duty. All of these leaders of business of course are involved in a .situation so far beyond their control that they scarcely know liow to manage their own affairs in it, to say nothing of joining in a round table conference for the purpose of setting the world to

rights. Incidentally somebody might compile a list of the world conferences that have been held, say since, the war, and the results achieved by them. Some of them have been very helpful, many have been fruitless but surely there is no lack of conferences, conventions, congresses and the like. The truth is that the affairs of the world do not lend themselves very readily to overhead management chief-

ly because the people of the world do not readily accept management from above and have the greatest possible difficulty in agreeing with each other upon policies off democratic manage-

ment. Here is the fundamental problem in all efforts to improve the management of world affairs. It is agreed among economists that the modern industrial organisation depends for' efficiency upon a balanced production of all the goods and services that enter into trade. Although goods are sold for money, what is really accomplished is an exchange of services; The purchasing powers of each per son is in his own services, which, he must sell in order himself to be a buyer. If it were possible to distribute the working forces in all the industries and employments with such precision

that the various products and services would be offered on the markets just in the varieties and quantities wanted it is . true that production might he increased indefinitely and the markets would be cleared and nothing left over. Every possessor of surplus goods has wants unsatisfied. It is all a problem of making the exchanges. Here is the basis of the dread of socialism or communism of having some overhead authority manage the whole industrial system, assign each person to the work selected for him and apportion to lum his alloted share of the results, It contemplates that the people shall bo either educated up to a voluntary acceptance of the plan or that it shall he established by force. The people as yet are a long way from voluntary acceptance and no system of forced labour ever yet has been an efficient system or is likely to bo, THE EXISTING REGIME. The existing regime is one of voluntary organisation controlled by the price system, The individual is free to find his own place in the organisation, but ’if too many attempt to render the same service the compensation falls and some of them look ifor something else to do. The system is kept in a failstate of balance by this automatic regu lation. Complications occur, in that new commodities or services are constantly being offered, methods of production are changing, prices are always changing, and the endless variety of products and services are wanted in constantly changing proportions. The theory that there can be no overproduction so long as all products are offered in right proportions to each other is a perfectly sound theory as the economists state it is a guide to production, but obviously cannot be fully realised in a free society. It shows the folly of deliberate or heedless production of any com •modify' in excess of market demands and points to the condition under which the highest state of welfare for the population may be attained, to-wit by intelligent co-operation and well-bal-anced, production. SUCCESS OF FREE INDUSTRY.

It may be thought that as a means of regulating the plans and activities of hundreds of millions of people scattered over the globe, whose products are being offered in competition and for trade, this idea of balanced production is impracticable or absorb, but in fact so effective are the working of a free price system, based on common gold standard, that the results are mar velously good, considering the uncertainties of production, the interference oif governments, and the changes resulting from development in the 'industries Just now it is agreed that the world is badly disorganised and out of balance, hut the maladjustments probably do not a fleet the volume of production to as much as 10 per cent of the normal total. So much for the efficiency of voluntary trade, hampered though it is in many ways.