WELLINGTON NEWS

Hokitika Guardian, 29 November 1930, Page 7

WELLINGTON NEWS

FUNCTION OF PRICES. (Special Correspondent). WELLINGTON, November 25. Many people speak rattier loosely regarding prices, and again and again we hear of schemes for stabilising prices, as though this can be achieved by legislation. Prices have distinct function to perform, and they do perform that function when left alone, but when Government step in and with political nostrums endeavour to “stabilise” prices they create fresh and very big troubles for the community, for legislative intereferencc invariably is loss of public money, with the inevitable consequence of increased taxation. When prices are high it is an indication that the commodity or commodities that are selling at high prices are not in sufficient supply to meet the demand and natural result is that production is stimulated. When prices decline then it is obvious that the commodities affected are in excess of supply and Reduction of those commodities should be curtailed. While to increase production is comparatively easy, it is not quite so simple a matter to bring about a reduction.

The world war was responsible for very high, prices for very many commodities and those high, prices were made possible by the excessive and extensive use of credit. Inflated values followed upon inflated credit, and the post-war deflation of 1920-21 was what was to have been expected and what had happened after previous grent wars. The deflation of 1920-21 was, however, arrested hv various expedients, but now 7 it can be seen that the deflation was only postponed. What is going on now is a readjustment same as in 1920-21 but at a greatly acceler-

a ted pace. If the earlier readjustment process had been allowed to proceed Unmolested it would have been gradual and would therefore not have ' caused the distress that is now being experienced. During the war countries not involved speeded up production to take the place of the shortage created by nations involved in conflict. When the war ended countries longest involved in the contest gradually got back into production, and outside of those countries there was a further increase in production In the meantime, despite the reduction of costs through more intensive use of machinery, there was widespread artificial control. Tn industrial undertakings there have been cartels and mergers and rationalisation, and in agriculture we have had the Stevenson plan in respect of rubber, the Paterson plan in respect to butter, wheat pools, control boards, subsidies, etc. Because of this artificial control of prices the price trend was no longer a. reliable indication whether or not the world was running into over production. An example or two 'will illustrate this. When hostilities began in Europe the production of beet sugar automatically censed. The production of cane sugar was speeded up in the West Indies, Cuba and Java, arid in Australia sugar growing in Queensland and New South Wales was stimulated by a system of subsidies. The production of the countries named is still on a large spale, and now Europe lias resumed the production of beet sugar, and what is more, England is now producing about 300,000 tons annually, while before the war she produced no sugar, The production of cane sugar at present is more than sufficient for world consumption, and in addition there is the beet sugar production, Sugar is cheap in every country except Australia, where Government control has penalised the people. The war put Russia out of action as a wheat exporter, and before the war she was equal to furnishing the rest of Ear-' ope with about 225.030,000 bushels annually. Wheat held its high price in the post-war period through pools and whatnot. Tn North America the price was for a considerable time over a dollar, and on occasions it was as high as 1 dollar 50 cents. Now Russia is again a factor in the wheat situation and the importing countries in Europe have imposed high tariffs for the purpose of stimulating production, also to avoid buying wheat in the United States as that makes it all the more difficult for the debtor nations to meet their obligations to America. Wheat has slumped everywhere. The world has been fooled by the artificial control of prices, and is now confronted by over production. If the 1920-21 slump was allowed to run its course we would long ere this have made the necessary adjustments; now the deflation and adjustment will be a long drawn out process inflicting considerable hard-' ships on communities. Even now there are many people who advocate tariffs, subsidies, pools, etc., to stabilise prices, so that the lessons of the past ni'e ignored. It would he ns .veil for evi •y----nne 1 o realise that it is impossible by legislation to prevent the action of economic laws or to evade the consequences of their operation. These laws are inexplorable,