PURCHASING POWER.

Waikato Times, Volume 121, Issue 20270, 12 August 1937, Page 19

PURCHASING POWER.

THE NATIVES LAND. PRODUCTION AND DISTRIBUTION. THEIR RELATIONSHIP. (By J. R. Hlslop, Waitomo.) “ Purchasing Power,” These two words have been made great use of by economists and politicians. “We lack purchasing power ” and 44 we must create more purchasing power,” have beoome stock phrases. But what does this simple phrase mean? When we purchase we exchsnge our labour for the services rendered to us by our fellow men. We may develop man's purchasing power by a greater division of labour, scientific methods of production, or by decreasing the cost of production in other ways, but we cannot claim to create man’s power to purchase, for it is embodied in his ability of brain and muscle and that was created when man himself was brought into being, and has merely been developed through the ages. We see, therefore, that to enable us to purchase we must render services to our fellow men, so that the individual's purchasing power is his ability to serve the community and is relative to his power of production. It is’this latter fact which has been lost sight of by our Labour Government in most of the legislation passed during their first two years of office, for any measure which increases the cost of production must decrease purchasing power. The Problem. To solve the problem of purchasing power it is necessary to understand the production and distribution of wealth. The first and primary mode of production Is that of adapting the raw materials, supplied by Nature for the satisfaction of human desires. The best examples of this are such industries as mining, manufacturing and transport. Adapting is the mode employed by savage peoples. They hunt their food hut make practically no provision for future isupplles other than the natural increase supplied by Nature. The second mode of production is that of growing whereby we maintain and increase our supplies by the use of the reproductive forces. By this method one man can produce food and raw material for clothing for many people and this liberates labour for the production of other articles. Our great, agricultural and pastoral industry of New Zealand is production of wealth by growing. To gain the greatest benefit from the use of the reproductive forces of nature it is necessary, however, to exchange the surplus of production. Division of Labour. It Is here that the third and Anal mode of production comes into play —production by exchange. In a oivilised community such as we know today, the exchange of commodities and servioes makes possible the wonderful division of labour which Is the main factor In the increased production of wealth. Without the facilities for exchange we must degenerate to a lower strata of civilisation and it is only by increasing our production by exchange that we can hope to raise ourselves above our present standard. Not only is this the oase with individuals but it applies equally to nations. All three modes 'Of production. adapting, growing and exchanging play their part In the production of a nation's wealth and of the three production by exchange plays a most Important part. It was by a free exchange of goods and services that Great Britain raised herself to Ihe status of the groatest trading nation of the world.

The farmer of New Zealand Is referred to as tile backbone of the country and the secondary industry may claim to be the flesh, but It 'is the trader who represents the heart which pumps the blood through the arteries of trade and give life to the country. When the heart stops beating the body soon decays. The farmer produces butter, meat and wool, of which we in New Zealand consume only about 5 per cent, the remaining 95 per cent being exported to our overseas markets. What then is the true consumable wealth oT our oountry? Surely not that which we send overseas to be consumed by other people but what we import 'for our own use Our export trade is New Zealand’s oapital, that Is, It is that portion of wealth set aside for the production of more wealth or wealth in the process of exchange. Barriers to Trade. So for a nation to be wealthy she must produce as cheaply as possible and exchange the surplus of her production with other nations to her greatest possible advantage and all barriers to exchange (or trade as we may r aU it), such as tariffs, and‘high artificial exchange rales, must detract from the nation’s wealth and decrease the individual’s purchasing power. There are some people who would ha\e us bello\e that the individual’s standard of living is dependent upon Ihe amount of money lie receives in the form of wages or salary, but this is incorrect. The standard of living is dependent upon the exchange value of the service which the individual renders to tha community. A man who works in a New Zealand boo» factory may reoeive £5 a week as his wages but his standard of living may be lower than a man earning £3 a v.eek in an English boot factory. The imposition of tariffs and high exchange so decrease the value of the New Zealander's £5 that it becomes of less value than the Englishman's i he mass of peo P l9 In New Zealand do not enjoy a better standard of living is In no way due to the stan•dard of peonies in other countries, hut is due to a maldistribution of the wealth brought about by a fnniHsystem of taxation. } Throe Factors, The three factors necessary for the production of wealth are ' land labour and oapital. hand is a free girt, from Nature and includes all lli e earth’s and natural resources and onporiun"CS Other than man and his - duels. 1 Labour is all human exertion dr voted lo the production of weallii capital is that pari of wealth usr d for the production of more weal I, This is thrir natural order r,,,• without land man rmild 'e v s! Labour first produces wraith from ihr laud and a portion of that wealih i.-

set aside to aid labour In future production.

'By this It Is seen that labour and true capital must be In harmony with each other because capital Is the product 'Of labour. As land, labour and capital are the three factors which take part in the production of wealth it is reasonable to expect that the wealth produced should be distributed in a Just proportion to each of these three factors. The avenues through which the distribution takes place being rent, wages and Interest. Rent is that portion of wealth paid for the use of the bare land. Wages are the return to labour for its exertion. Interest Is the return to capital for the aid which It gives to labour. In speaking of rent it is as well to be clear that this is the return for the use of the bare land and all returns for the use of buildings and other improvements would be interest (e.g. If a farmer Is working a property on which the mortgage is £4OOO and hls improvements are assessed at £ISOO, then the interest which he pays on the remaining £2500 Is In reality the rent and hls true Interest is payable on the £ISOO. What little remains after these commitments Is hls wages for working the property.) If we take from the total wealth, that portion paid for the use of the bare land, what remains is available for the payment of wages and interest. The Nation’s Land. But there is one fact which we must not overlook and that is, the more labour and capital produce the greater becomes the value of the land and the larger Is the portion demanded as rent. Thus as rent rises, wages and Interest must fall. Increased population, roads, bridges, railways, electric power, new and Improved methods of production, all Internal and external transport and communti'palb?ons, education; in fact, the whole ‘forward march of our civilisation tends to increase the value of a nation’s land. To allow individuals to collect the rent of land Is to place in the hands of such individuals the power to tax the community for the use of facilities created by that community. This gives the private •owners of land a material advantage over their less fortunate fellow men. The rent of land is the natural source of revenue for every State because it is created by the community as a whole and not by Individual effort. As the population of a nation Increases so the benefits provided by the community increase and the rent of land rises. But for everyone to enjoy these benefits It, Is necessary to collect the rent of land for revenue, purposes, to maintain and increase the facilities provided by the community. To allow the rent to be collected by private individuals makes It necessary for the State 10 collect revenue in other ways and the landowners become the sole beneficiaries of community created values. Taxation on trade and Industry coupled with high speculative ialue of land, both of which are caused by private ownership of land so raise the cost of production that labour and capital cease to produce. This curtailment of supply means a decrease in the demand and this Is the true reason for our periods of depression. 6ervloe In Return. To colleot the rent of land in lieu of taxation on trade and Industry would mean that every man would earn according to hls abf*4y and desire and would receive as a member of the community the full benefits of the facilities provided by the State. All labour legislation -for a 40-hour week, award wages and lloensing of industry would be unnecessary for if a man rendered a service to "his fellow men he could command service In return. Every Industry In New Zealand which works under the protection of a tariff lowers the standard of living of the New Zealand people. By maintaining high tariffs, high exchange, creating artificial rates of wages and obstructing trade and industry with taxation our Labour Government have decreased the national wealth and increased the cost of production. This cost must ultimately be paid by the consumer and as we are all consumers we must all pay so that the individual’s purchasing power is diminished. The only method of restoring the purchasing power of the people Is to remove all restrictions on trade and industry and collect our revenue from Its natural source, the rent of the land. This would mean real freedom and true democracy. • A story was told recently In the House of Commons about a wealthy Scotsman who bought the houses that neighboured his for £IO,OOO, In order that he and hls wife could quarrel without Interference. Prepare at home. Heenzo (Hean’s Essence) best for oolds eto. Safe for young or old. 10 A Lithuanian woman has given birth to her sixth child within a period of a year by becoming the mother of triplets for the second time within twelve months.