Evening Post. FRIDAY, AUGUST 23, 1935. A CONSUMPTION PROBLEM

Evening Post, Issue 47, 23 August 1935, Page 8

Evening Post. FRIDAY, AUGUST 23, 1935. A CONSUMPTION PROBLEM

The miraculous distribution of manna in the wilderness gives the perfect rule for consumption: "And when they did mete it with an omer, he-.that gathered much had nothing over and lie that gathered little had no lack." But over 3000 years numerous civilisations have been unable to repeat this equalising of consumption and production. There is now not even ' complete agreement upon the form of the failure. "Poverty in the midst of •plenty" is the phrase by which it is unhelpfully described. We say unhelpfully, for this description does not even 'declare definitely whether the crisis is wholly one of underconsumption or partly over-produc-tion. Such a declaration depends partly, upon the point of view. Economic nationalism carries with it the inference that there is over-pro-duction, so barriers are erected to keep out the flood of surplus products of other countries, lest the local producer's industry be submerged. That in itself may guard the local producers against ruin and poverty, but it means also that a section of local consumers are deprived of their share of the plenty. Because effort is directed to keeping out the produce of other countries which have gathered much, some in the local country where little is gathered must lack. • New" Zealand must view this problem from different angles. As a great producer of meat, butter, and wool she is interested in solving what is to heir a crisis of under-consump-lion. She does not admit that there is over-production. .Nor in view of the world facts would such an admission be correct. Mr. Coales gave a few of these facts in .his speech at the Town Hall on Wednesday. The consumption of meat products in Great Britain, he said, was about 1401b per capita per annum in 1933, as against over 2301b in New Zealand last year. New Zealand's consumption of butler was 371b, against Britain's 261b of butter and 81b of margarine.

The low consumption of butter arid meat products among wage-earners and others 'of low incomes, said Mr. Coates, as well as the importance of the price factor, is shown by recent inquiries in Great Britain. . . , Seventy per cent, of., the .people covered in the investigation, or, say, 31,000,000 out of . a population of 45,000,000, spend on the average 21. pence per 'week on meat, and 5.2 pence on butter. On the other hand, those with incomes of over 14s per head, or about 4,500,000 (?) people, spend 51 pence on meat per week, and 10.2 pence on butter. .

There are two 'ways in which consumption can'be increased: by giving a greater income lo 'those with a low income, and by reducing prices so that the low income will buy more.

The provision of larger incomes for the people. of Britain is not within our power except to a strictly limited extent. Whether we should use such power as we have more or less is a question which we cannot discuss in detail here. We may just note, in passing, that Britain's inability, to maintain the income of her own people by her former policy of ■ manufacturing for export has contributed in no small measure to the change of policy which is directed to the salvation of the land industries. ' Our influence oh the pAce factor is greater, however, than our influence on the,income factor. If we put.all our effort into a price-reduction campaign we help to stimulate consumption, and the complete absorption of our surplus products. But there comes 'a stage, and it has come already, when this process goes too far and the consumption level is raised only by reducing prices to / a point at which ,they are not payable to the producer. It must be remembered, however, that this point would probably not yet have been reached were it not for economic nationalism. If Continental countries," particularly, had been prepared to allow, their consumers to buy butter and meat at a low price, the price level would have .remained profitable to our producers. These countries have refused to permit this moderate price reduction because it would bring prices down to a point payable for us but, unpayable for their own farmers.

The distribution of modern manna, therefore, is primarily a problem of reconciling high-cost production in one country with low-cost production in another. Rough-and-ready reformers may propose ready and extremely rough methods. They may say, for example, why keep poor land in cultivation at high cost when the need, of the population can be supplied more cheaply by importing? But every country to which it is proposed to apply this solution must ask itself: What shall we do with the producers that we put off the poor land? The British policy appears lo be to make a levy upon the lowcost producer and give it to the highcost farmer at home. Of this policy Mr. Coates said:

While we continue to regard with apprehension any suggestion of a levy on our exports to the United Kingdom, a levy is. clearly less objectionable if its proceeds are directed to extend consumption than if they are used'to subsidise production by the competitors of our producers.

But is there a real difference In effect as. well as in form? If the subsidy

goes directly to the home fanner, thus encouraging him to maintain competition, is it essentially different from using the fund lo buy surpluses and distribute them at a loss so that the price may not be forced down? There is - a difference of method, but both systems mean the modification of the economic process governing supply and demand so that producers may not be crushed by a forced and 100 sudden adjustment. The difficulty is to prevent this modification becoming an obstacle lo progress, and not merely ;i brake on the wheel; We wish to wipe out the poverty with the'plenty without creating new poverty in the process.