PRICES AND WORK

Rotorua Morning Post, Volume 3, Issue 691, 17 November 1933, Page 4

PRICES AND WORK

"If goods are to be dearer, then — so rpns the ^rgument — a smaller quantity will b,e bought with the same amount of money, and the consequent decline in production will cause unemployment and depression," says the Yorkshire Post in a recent article. "This argument would be sound," continues the Post, "if the community always had the same amount of money to spend regardless of what happened to prices. But this is not the case. "Incomes of all classes of the community change in response to movements in prices, and, if those changes are violent, profoundly disturbing consequences will ensue. We may first consider a moderate decline in prices over a period resulting from increased industrial efficiency. "Such a decline involves no industrial dislocation, because the lower price received is counterbalanced by the lower costs of manufacture, and, leading to increased consumption, is thus socially desirable. "A sharp distinction, however, must be drawn between this kind of price reduction and that arising from a falling off in demand. We are not here concerned with the causes of the present fall in demand, but with the consequences. These are, as every one is aware, a collapse in prices and international trade, a steep fall in production and in employment, widespread default, and an international currency and financial crisis. What ,then, has gone Wrong that the cheapness of goods should visit such evils upon us ? "The answer is that the fall in j prices, resulting from a decline in demand, has rendered many fields of production and manufacture unprofitable. Costs could not be cut in response to so severe a downward movement in prices. "Over a period during which wholesale prices fell 40 per cent. wages declined by only 2-^ per cent, while other contractual ob- j ligations entering into costs | could not be reduced at all. So j long, therefore, as the producer cannot get back in the price at ; which he sells his article the l costs which he had to bear, in- { dustrial stagnation will persist; j for profit, the mainspring of in- ! dustry, will be absent. It is not | a question of filling the pockets ! of the few. "What is advocated is a price j level which will allow expenses of production to be eovered by receipts. On what other basis can industry generally hope to experience any activity? "In brief, industry, besides providing. goods, has to provide the incomes to buy those goods, such incomes being in the form of wages, salaries, interest, and dividends. When prices so fall that production is for many firms not worth while, these incomes are no longer provided; hence declining prices, declining demand, declining production, and declining employment go hand in hand."