Wairarapa Times-Age MONDAY, JULY, 4, 1938. INSULATION THEORIES.

Wairarapa Times-Age, 4 July 1938, Page 6

Wairarapa Times-Age MONDAY, JULY, 4, 1938. INSULATION THEORIES.

much has been heard in detail from Ministers of

the present Government ip support of their claim that if need be they will insulate the' Dominion against a fall in the oversea prices of its export products.' <A_- private Labour member (Mr C. M. Williams) dealt freely with that question, however, when he spoke in the noconfidence debate on Friday last, incidentally denying that insulation need entail monetary inflation.

The Labour Party believed that it could to a very considerable extent, but not absolutely, insulate New Zealand from the effects of a serious decline in the value of exports, Mr Williams stated. Adding that if the value of our exports fell, the obvious effect would be that unless we resorted to a borrowing policy we should have to reduce ■the amount of our imports, he went on to argue that it did not follow that we should reduce the standard of living of the people of New Zealand so far as that standard was • supplied by goods or services produced in this country.

Declaring further that it was fallacious to believe that most of the goods consumed in the Dominion were imported, and that actually most of the consumable goods were or could be produced in New Zealand, Mr Williams said that in the event of a fall in oversea prices there was no need to raise the exchange rate. Probably the best effective method was that followed by Germany of exchange control and rationed imports. .

It may be agreed out of hand that in the extent to which the standard of living of the people of New Zealand is supplied by production and services in this country, the standard need not be lowered by a fall in overseas prices. Mr Williams made much too however, of the degree in which possible standards of living in New Zealand are governed by our trade dealings and by the necessity of meeting our oversea obligations, which) he observed, the Labour Government had no intention of repudiating.

In his book, “Recent Economic Changes in New Zealand,” Dr W. B. Sutch points out that the proportion o£ our total exports required to meet interest payments on overseas debt rose from 14.42 per cent in 1928-29 to 26.09 per eent in 1931-32 (one of the slump years). This was not the whole of our deadweight burden. The percentages just quoted took no account of interest and dividends on the private investment of overseas capital in New Zealand. Our oversea freights, again, are paid largely in sterling, and during the recent depression we had the unpleasant experience of having to pay twice or three times as much produce as had been paid formerly for a given amount of shipping service. It has also happened before and may happen again, that the prices of the goods we import fall much less than those of the items we export.

A very large proportion of the industries and economic services other than farming carried on in this country are directly auxiliary to farming, as in processing, transporting or distributing farm produce, and in providing and conveying the supplies needed by farming industry, or look in other ways to those engaged in farming as an important part of their available market. People occupied in these auxiliary industries and services are just as much dependent on export returns as those who are actually engaged in farming.

While New Zealand’s dependence on external trade continues on its present scale, any serious fall in oversea prices must correspondingly undermine the prosperity of virtually all sections of the population. To that it has to be added that there are no apparent means of modifying our present dependence on external trade otherwise than slowly and gradually. Those who have theories of insulation to expound should be prepared to deal frankly and fairly with all the relevant facts and it is more than time that this was done by our present Ministers of the Crown.

'While it attains very serious proportions indeed, the reduction of our power to pay for imports is only one of the factors of loss to the Dominion entailed in a serious fall in oversea prices. In the recent depression, the gross returns obtained by farmers on export products fell to onehalf and even to one-third of their former proportions. \ There was here another and a crippling loss, not only to the farmers, but to all with whom they were accustomed to trade, or whom they were accustomed to employ, within the Dominion.