!>.—2,

XIV

On tlie other hand, New Zealand has made a world's record in the absorption of motor-vehicles during the last two years, the increase from 1925 to 1927 representing a gain of 58 per cent., the greatest increase (from thirteen thousand to twenty-three thousand) occurring in the demand for commercial motors. This might have been regarded with satisfaction from the national standpoint, asjindicative of enterprise in the adoption of new ideas and of the fuller exploitation of the country's productive possibilities, had a considerable proportion of them not engaged in direct duplicative and wasteful competition with the railways — much of this competition being possible only because advantage was taken of the developmental purposes which the railways served. For the Railways to have met the position with a full commercialized programme and methods might have been effective so far as conquering the competition was concerned, but it would have played havoc with the national developmental work which, through a long period of years, they have been moulded to perform, and under the shelter and protection of which production has been greatly aided and industrial enterprise encouraged. The absence of competition in the earlier years had this general advantage: it enabled the Government to use the railways in such a way that by dividing the railway tariff into two broad grades, the higher (Classes A, E, C, and D), consisting of general commodities and being rated (in general) somewhat above the actual cost of transit, and the lower (products of relatively low unit value, such as coal, firewood, shingle, fertilizers, &c., and the general necessities called for in the prosecution of primary industries) being conveyed at rates producing a return often considerably lower than the cost of production —the combined effect, however, of the total business transacted producing what was generally considered to be a sufficient average return for the work done. Under this plan it had also been possible to protect New Zealand as against overseas industries by arranging discriminative rates in favour of the former. Motor competitors, however, who, naturally, as individuals, had no direct concern with the national developmental aspect of the country's transport, have been able to do quite well by taking only one class of traffic —the high rated—thus disturbing seriously the equilibrium produced under the Railways tariff scheme. A similar position has developed in the matter of suburban passenger traffic, the ordinary passengers being attracted away from the rail by the extra convenience of the motor " pick-up " and " set-down " facilities, while the low-rated traffic —suburban workers and season-ticket holders (all carried below cost owing to the previously existing balancing factor of a full traffic) —is left for the railways. As previously pointed out, full commercialism applied to the railways would result in the adoption of methods and rating practices similar to those of motor operators ; but this would, besides having a generally detrimental effect upon the country's welfare, bear with especial hardship upon those who had been encouraged to go on the land or settle in the suburbs through the existence and operation of the above special tariff arrangements. Complete adandonments of these developmental functions by the Railways, although the proper course if the Department had been a private enterprise concerned principally in the protection of its own immediate interests, cannot be thought of when, as a State business, the full effect of such action upon the general progress and stability of the Dominion has to be considered. A striking instance of this condition is found on the manufacturing side of the Department's activities, where, through the adoption of better methods and the setting-up of new machinery, it would have been possible—during the recent unemployment crisis—to carry on without the services of several hundred men, who were kept on, in the public interest, after their services could have been economically dispensed with. It will thus be seen that the peculiar dual nature of the Department's functions has actually provided special protection (against direct retaliatory competitive measures by the Department) to motor competitors, who have also gained tremendously by the heavy expenditure in road-surfacing (in some cases at the rate of £10,000 per mile) undertaken by local bodies. These circumstances point definitely to the necessity for such action as will at least equalize opportunity for the Railways in their business-getting efforts with