PRICES AND COSTS

Wairarapa Times-Age, 2 June 1938, Page 10

PRICES AND COSTS

PUTTING FARMING INDUSTRY ON ITS FEET. (To the Editor.) Sir, —Last year the butter subsidy was raised by 6s 8d per cwt. That meant a million pounds on an average crop of 3 million cwt. Why was it raised last year, and why will it have to be raised this year again, and probably every succeeding year afterwards? Rising costs are the ■ answer. And why are the costs rising so rapidly? Why should costs not be stable? A very good reason why. Our currency, being unstable and continually falling in commercial value, can it be otherwise than that costs should rise? Whenever the currency falls in value, prices always rise in much the same proportion as the currency falls. And why should the currency fall, if it is not because it is paper, without any backing of real money? A bank note must always be an order for money. And if it is not an order for money, then it is impossible for it to maintain its face value. That explains the rapid rise in costs of production. But why should it be necessary to have a subsidy at all? The qnswer is that for years and years the farmers the world over have been getting less for their produce than it cost them to live and produce the goods as well. No. industry can live if it cannot pay expenses and provide a living. So to prevent the producer from going out of business, instead of giving the farmers a rise in prices, they have been giving them loans at high interest. That has kept them going up till lately. But as anyone can see, that cannot go on for ever. The position all over the world now is that the debts owing on the farms are, in most cases, out of all proportion to the value of the land or the produce. The banks and the merchants hold mortgages quite beyond the real value of the security, so that they cannot go on advancing any more. What then? Close on the farmers and get someone else to take on the farms. What would be the use? Seeing that the next lot of farmers would get no better prices than the present ones are getting.

So now Major Douglas has come to the rescue with a plan by which the Government, instead of the banks and the merchants, will carry the farmers on by subsidies that are not raised either by taxation or loans, but by the issue of what the Major calls new money. This money costs the Government nothing except the paper and the printing. Isn’t that splendid? What a genius to think of such a thing. There is just this one fly in the amber. These costless credits refuse to maintain their value and so more and more money is needed. The subsidies have got to be raised every year. The first year it was about 2J millions, last year it was 31 millions and this year the country will be lucky if it gets off with between four or five millions. So much for the Douglas Credit plan. So long as the country’s finances can stand the strain, it will go on, but no longer. What is to be done then? Let the farmers be dispossessed and start them on the same lines as the farmers in India, who, when there is a good harvest, get such low prices that after all expenses are paid there is only enough left to give them one good feed a day? Or put our currency on a stable metallic footing; deflate both currency and debts and then start them afresh? That is what Solon did for the Attic farmers in Greece and the Emperor Majorian did for the Roman provincial farmers. Should it be impossible to do the same thing here?—Yours, etc, H. C. THOMSEN. Masterton, May 31.