Is protection good for the nation?

Frostick, J. A. (James Arthur), Industrial Association of Canterbury, Christchurch, N.Z., 1921

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Title: Is protection good for the nation?

Author: Frostick, J. A. (James Arthur)

Published: Industrial Association of Canterbury, Christchurch, N.Z., 1921

IS PROTECTION GOOD FOR THE NATION ?

An Address delivered by Mr. J. A. FROSTICK under the auspices of the Canterbury Chamber of Commerce ... May, 1921

Reprinted from “THE SUN.” Christchurch, N. Z. May. 1921

Published and distributed by The Industrial Association of Canterbury (Incorporated)

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FOREWORD

THE President of the Industrial Association has asked me to write a foreword to this pamphlet, which goes into circulation at a rather critical period in the history of New Zealand manufactures.

Protection is the settled policy of the Dominion. Under it considerable progress has been made, and Ministers who have been induced recently to make a personal inspection of some of our leading factories in Canterbury have expressed their surprise and amazement at the scale on which successful manufacturing is being carried on. Unfortunately, an agitation has arisen in certain quarters for the adoption of a retrogressive fiscal policy. Absurd fiscal fallacies which did duty nearly half a century, when the exponents of Preetrade tried to prevent the adoption of Protection in the United States, are being solemnly revived as reasons why duties on imported manufactures should be reduced or abolished. We are told in all seriousness that as a community we should devote our energies to raising agricultural products, and buy manufactured goods abroad wherever they can be most cheaply obtained.

Apart from the circumstance that land is now too dear in New Zealand for farming to be an attractive proposition to the man who is looking for an opening for the employment of his capital, it is rather late in the day to advocate a policy which would not only prevent industrial expansion in New Zealand, but would force many of our artisans and their families to emigrate to Australia where, under a more effective system of tariff protection, there is a boom in manufacturing and a keen demand for the wealth-creating services of skilled workers of every description.

No one denies that New Zealand, with its favoured climate and fertile soil, is eminently adapted for agriculture, which has been developed to such an extent that production is far in excess of domestic requirements, and our prosperity depends on our

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ability to market the surplus profitably abroad. The low prices now prevailing for agricultural products, and the high cost of transporting them to European markets, have taught us the danger of lopsided development, and emphasise very emphatically the advantages of an industrial expansion that would provide the farmers with a local market and obviate the necessity of making such extensive purchases of manufactured goods abroad.

To put the position in the form of an illustration: It takes the labour of about 4000 operatives to make the footwear required by the people of New Zealand. At the present time about twothirds of them are here in New Zealand, spending their wages locally. Last year they produced goods to the value £1,443,000, using raw materials to the value £BBB,OOO. Their presence here is a source of profit and of strength to the community as a whole. The other third is divided mainly between Australia and England. In buying imported footwear, we have to pay their wages, together with the cost of importation. But Australia and England get the benefit of that wage expenditure. A boot operative with a wage of several pounds a week tc spend in Northampton, England, is not much use to the grocer, butcher, baker, etc., in Christchurch, but if he lives here in our midst he speedily becomes a valuable asset to the community. If we developed our industries to the point of supplying the whole of our own requirements in manufactured goods, our agriculturists would be much less dependent on foreign markets for the sale of products for which at the present moment there is but little demand.

When the Dingley Tariff was before the United States Congress, the Freetrader of that day argued that America would never be able to compete with English manufacturers. The effect of the American tariff was to draw workers and operatives of every description to the United States, which has become the greatest manufacturing country in the world.

The same process is going on in Australia, where, under Protection, there is a transfer of capital and labour from the United Kingdom to the Commonwealth, and large manufacturing concerns are opening up there in order to enjoy the advantages of the Australian market.

Tariff protection is not a fiscal experiment; it has proved, beyond all possible doubt, to be an efficient means of promoting industrial development to the great advantage of any country which can command supplies of raw material and is populated by a resourceful and enterprising people.

Since the New Zealand tariff was revised in 1907, certain laws have been enacted profoundly affecting wages and industrial conditions. The object of this legislation has been to maintain

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a high standard of living. In the absence of adequate protection, it is quite conceivable that this standard of living mav be incompatible with conducting a manufacturing business at a profit. No one desires to see wages reduced, and, if the Legislature says that a wage, fixed to permit of the enjoyment of a certain standard of living, must be paid, then it must also give the manufacturer whatever measure of protection may be necessary to enable him to pay that wage and make interest on his capital. In other words, reduced duties or free imports spell low wages or complete unemployment for thousands of citizens at present gaining a comfortable livelihood in one or other of the Dominion’s industries, and if a man is unemployed, it is immaterial to him whether commodities are cheap or dear ; his purchasing power will be nil, and he will be compelled to seek some fresh field for his energies.

In the following pages Mr. Frostiek proves abundantly that protection makes for the wealth and progress of the community, and the facts and arguments he sets out are worthy of careful consideration by the Legislature, which will shortly be called upon to review the whole question.

Editor, The Sun.

Christchurch, June 21st, 1921.

Is Protection Good for the Nation?

The subject I have to deal with to-night is most difficult, because it may call upon some of us to eliminate self-interest for the good of the nation.

Numberless books, based on free trade principles, have been written during the last 50 years, usually by university students or professors, but I cannot find any evidence of the writers having applied their particular theories, or by practical results demonstrated the soundness of those theories for the benefit of the nation. The halo which surrounds the university, the professorial status, and the advantage which higher education gives to any man in the powers of expression, have enabled these theories to be presented in such an attractive form that the general reader frequently overlooks a most essential fact, that economic theory and industrial practice may be two altogether different things, or to express it in the more effective language of Dr J. S. Hecht, Fellow of the Royal Economic Society:—

Although we have exposed the delusion upon which the arguments for free trade are based, beginning with the fundamental principles of economics, its apologists have evolved a set of catch phrases wherewith to confound their enemies, and which they have hitherto found very effective, more particularly as their opponents fought with weapons blunted by the acceptance of the law of supply and demand. We propose, therefore to set out the most important of these spurious axioms, indicate their real meaning, and expose the flaws in their present application.

Having faced the battle of life at a very early age, I have had to rely very largely upon what one learns in

the school of experience and observation, aided by statistical facts, rather than upon academic theories cleverly expressed.

Cured of Blindness.

In replying to my friend, Professor Condliffe, I feel somewhat in the position of the man who, nearly 2000 years ago was cured of blindness by a means contrary to anything contained in the medical jurisprudence of those days. The theologians also took the matter in hand and sought by theology to prove that the man’s belief as to the cause of his cure was quite wrong. The only reply the man could give was: “I know nothing of these things: all I know is that once I was blind, now I see.”

I shall try, although perhaps in a somewhat disjointed manner, to show that, with regard to the human element, the teachings of the old school of economics were never right. It may have been that the hypotheses under which the school worked held for a time, but its theories, however specious in argument, have never been demonstrated by practical results for the uplifting of humanity. It is true enormous wealth has been amassed, but little or no regard has been paid to the claims of the human element. Free trade, and poverty for the masses, have always been the result.

If I succeed in showing that the economics of the old school established a working hypothesis which is no longer tenable, it will create no greater divergence than the difference between applied medical science of to-day and that of 20 or 30 years ago—and of many other sciences.

In demonstrating some of the facts I shall, during my address, quote the opinions of professors of the new school of economics (from works

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published within the last two or three years) who have broken away from the old theories to such an extent that their writings on many vital points are the antithesis of the text books of 25 years ago, to which many of the professors of to-day still adhere.

Three principal points for consideration; —

1. That the true or fundamental asset of any nation is its people.

2. That in principle there is no difference between the production of food in any form and the production of manufactured articles of any kind.

3. That anything operating to the detriment, or preventing the progress of any large section of a nation must be fundamentally wrong .

The Nation’s Greatest Asset.

The true asset of any nation is its people. The national value of the asset will depend, first, upon our relationship with each other and, secondly, upon the physical strength and mental ability of each and every unit. The measure of national productive weath will be largely determined by these factors, which are obtainable only through individual education, training in scientific production, and in the higher forms of professional and commercial knowledge. These are the conditions most favourable for the growth of that efficiency on which our personal welfare finally depends and upon which our national life may develop.

The united efforts and industry of our own people, stabilised by protection, would result in the building up of a truly great nation.

It is also our duty to make this country attractive, epecially to the young people, so that by a high standard of education and a stabilised method of national industrial development, there may be no real cause for emigration to other lands.

Need for Higher Education.

New Zealand at one time held an almost enviable position in the

civilised world with regard to its educational system, but it has leaned far too much upon the traditions of the past, and to-day the system falls far short of what it should be. Scientific and industrial research in this country are almost unknown except in a most perfunctory sort of way. The public funds for years past have been grudgingly distributed for educational purposes, although in my opinion squandered in many other directions, and it must be perfectly clear to our legislators, and I hope to the taxpayers, that greater liberality must in the future be exercised, national expenditure on education being a sound national investment, provided it is properly applied.

Our young people are entitled to the same opportunities in life through education as are provided in the older countries of the world. It must be perfectly clear that if we do not educate our people to the highest standard, then we cannot compete in production: if we do not produce, then we lose our population, and the money spent in the educational training of the young people is money lost to the country.

The true asset of any nation being its people, it must of necessity be the duty of that nation to bring each unit to its highest possible value, and then use it for its own national purpose. No doubt I shall come into conflict with some who do not consider that the supreme asset of a nation is its people. Many believe that assets can only be expressed in money, land, cattle, or other goods, but from the point of view I have already given, we must admit that none of these things has any value apart from the efforts of human beings.

Personal Explanation.

It may be advisable, at this particular stage, to make my own position clear. I am a protectionist, although very largely interested in importations. To my mind the interests of the people of this land are of paramount importance.

My earlier training was in the atmosphere of free trade, and I became, through ignorance, a free-

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trader. Like millions of other Englishmen, I took these things for granted—and I will here digress and say, if we could realise how much we take for granted in this w’orld, affecting our own lives and those of our fellow-citizens, many of us would be thoroughly ashamed that we had not investigated for ourselves and formed our own opinions.

Wages Under Free Trade Policy.

In the public Press a few days ago, someone wrote with regard to the wages earned by the agricultural employees in the county of Norfolk, that the wages were at one time 8/per week. Not 8/- per week and found, but 8/- per week, and the worker had to do the best he could for himself and his family upon that miserable pittance. This was perfectly true, and so great was the ignorance of the people that when Joseph Arch, in the middle sixties, agitated for the men to get 14/- per week instead of 8/-, the workers were inclined to look upon Arch as a man who would take away from them the little bread that they had. The poverty was so great that one could not walk many miles in any direction without coming across a poorhouse, with all the degradation attached to it, which was the almost inevitable step between the 8/- per week and the grave.

Dr Edmund J. James, U.S.A., writing in 1902 on the subject of free trade, said the policy of Government aid to industry was justified.

. . . That there has gone on a steady tendency to see in the State a powerful means of promoting the development of trade and industry, and a growing disbelief in the extreme forms of free trade doctrine, such as the type known as Manchesterism. Protection both as a doctrine and policy can be best understood by examining the course of its development in countries adopting it most consistently—Germany and the United States being perhaps the most striking examples.

Now listen to what a Fellow of the Royal Economic Society said, 18 years later, 1020: “A nation which reserves to itself its skilled industries will be prosperous, will enjoy

shorter working hours, etc., etc.; but one which follow the policy of free trade will see itself outstripped by other nations and be condemned in perpetuity to an industrialism such as that of Lancashire, which is a disgrace to civilisation.” The Professor —an Englishman—concludes by saying: “Universal free trade means the most intense economic war amongst all nations, with victory to the one content with the lowest standard of living.”

Let us for a minute or two look at the condition of the people in Lancashire, the birthplace of free trade—not as they were 50 years ago, but immediately before the War. Here are a few figures based upon full-time work only—a week of 52i hours. I have quoted these figures on several occasions, but they are so important to the subject matter in hand that they will bear repetition. The Board of Trade, September, 1906, reported that the cotton industry was one of the best-paid in the great trades:—

40.4 per cent of the adult men earned less than 25/- per week, working full time. 59.7 per cent, of the adult men earned less than 30/- per week, working full time. 23.9 per cent, of the adult women earned less than 15/- per week, working full time. 53.9 per cent, of the adult women earned less than 20/- per week, working full time.

In the woollen industry, 91 per cent, of the women earned less than 20/- per week, full-time working.

The practical application of these facts to New Zealand national life is that like conditions will produce like results. I know that the wages in England to-day are not the same as before the War, but owing to the millions of unemployed, wages are being forced down, and this is inevitable so long as England is the dumping-ground for the world.

I do not suggest that the freetraders in New Zealand deliberately support the principles of free trade because of the cheapness of the articles produced under that system; such a suggestion would be uncharitable, but under normal conditions in Great Britain before the War, the lot of millions of our kinsmen and kinswomen was little better than was described by Thos. Hood

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in the story of the “Song of the Shirt.”

We, the people of New Zealand, are powerless to help our English friends to better conditions, but we are able to prevent these conditions ever obtaining in this country.

As the years have gone by under this so-called glorious system of free trade, the annual bill for pauperism has shown a stupendous increase until the year before the War the British taxpayer had to provide for paupers in a sum seven times greater per head of population than the taxpayers of France, while protected America held the grand position of having a world’s record of only .09 of 1 per cent, of its population recorded as paupers, including the alien and coloured races. In considering the relative positions of England, France and America, we must not forget that millions of people have gone into protected America penniless.

This marvellous country, speaking our own language, has developed under the protective system to a degree unparalleled in history, and in the skilled industries, especially, the wages paid to its workers have been somewhere near double those paid to similar artisans in Great Britain. After a few years of modified protective policy that country has now determined, by a huge majority, to revert to its former policy, which is that if America is good enough to live in it is good enough to support.

It appears to me to be the duty of the people of New Zealand to see that their own citizens are first employed before purchasing products from a foreign land which could be produced in their own country.

In view of the coming demand for a larger measure of national production, we are already in conflict with propaganda which appears to be distinctly hypocritical.

The man who will urge the claims of people thousands of miles away and give this as his sole reason for advocating free trade and utterly neglect the claims of the people of his own country renders himself liable to be charged with insincerity.

No man is expected to impoverish himself, or his family, for the benefit of strangers, and in like manner no nation can he expected to impoverish itself for the benefit of another.

New Zealand is now counted amongst the nations of the world, and has to work out its own destiny, and while it should not infringe upon the rights of other nations, it has the undoubted right to protect its own.

The man who will not give preference to the production of his own country, or fails to encourage its development in every form, by that very act limits the economic wellbeing of his own nation, and, incidentally, of every citizen, other than those who, like himself, find that greater personal profit can be made out of foreign goods.

Such a man discounts the value of the industry of his own fellowcitizens, and when he tries to cover his tracks by the cry of loyalty to the Empire, it gives evidence of sheer hypocrisy. If a man stands for the principles of free trade, relying on what he considers to be sound principles, well and good; but he should not seek to justify his actions by spurious sentiment, for it must be spurious if it forces his own fel-low-citizens into unemployment.

National Standard of Living.

The question of the national standard of living and what we in this country determine it shall be, is inseparable fom the question of protection and free trade. Here I would like to direct your attention to a phase of the subject which is very seldom discussed, namely, the great difference which exists between a living wage and a living income. The official statistics of New Zealand deal with the income for the year, whereas British statistics are based upon the earnings at full-time work, with no allowance for lost time through any cause.

Dr Bowley. the British statistician 'n his investigations at Reading, in 1912, estimated that the minimum expenditure necessary for a reasonable standard of living at marriage would be 16/- per week. I have no

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doubt his estimate was correct, but I wonder what would be considered the minimum expenditure necessary to support and maintain in full effective strength in that country, say a racehorse—certainly more than 16/- per week; and yet Dr Bowley stated that more than half the working-class children live in households where the standard of living already mentioned was not attained.

In view of these conditions, one professor of the old school of economics, in a book recently published, says: “What was wanted from the working-class was not only morals, but grit, stamina, mental energy, steadiness, toughness of fibre, endurance,” and I will add, “All this was expected on 16/- per week or thereabouts.” Just imagine you good people of New Zealand—stamina, grit, endurance, toughness of fibre (available only through proper food) on 16/- per week when at work, and having to pay for fresh butter in the winter time 2/3 per lb; untrimmed fresh mutton chops 1/3 per lb; roast meat, fresh beef, about 1/1 per lb; and bread about the same price as we paid in New Zealand. The working man’s clothing was certainly about half the price, but it was shoddy, and its wearing properties as compared with New Zealand clothing are only about one-third of ours.

It is little wonder that these undoubtedly necessary qualifications were gradually disappearing, and F overly and pauperism increasing, appeal to the good sense of this meeting, could it be otherwise? I say to you freetraders here to-night, these were the norma! conditions of your kinsmen before the War under free trade, which made cheap goods possible. Of course, no one is allowed to starve to death, but it cost the country 30 millions per annum to prevent it.

The Building of a Nation

I want you to keep in mind what I allege to be true, that New Zealand could not remain as it is, or make any progress under any form of free trade, either within the Empire or otherwise. I have already said it probably never will be that the

standard of living, say of the work-ing-classes of India, will be as high as in New Zealand; therefore we have to protect ourselves against whatever may happen in the direction of competition from every country where the standard of living is lower than our own; I will go further and say that, in the opinion of well-informed men in the Old World, unless the greatest care is exercised, the day is not far distant when the coloured races will oust the white in every form of productive effort, trade and commerce.

This opinion may prove to be true —indeed, it has already been demonstrated that when the Chinese or the Indians obtain a firm footing, they prosper where the white man starves. I can conceive of no surer way of hastening this time than to establish universal free trade, or even free trade within the Empire. New Zealand is entitled to, and must determine for itself, as a nation, what its standard of living shall be, and, having so determined, protect itself by an absolutely safe margin, so that the products of those countries where the standard of living is the lowest cannot come into this country to the detriment of our own people.

Before I close question No. 1, I may be asked, “Can you say that after all these years of experience, free trade confers no benefits?” The answer is, “Oh, yes, very great benefits,” and I will ask Dr Hecht to give his answer to the question. He states on page 271;—

“The real beneficiaries of free trade are: Importers, exporters, shippers, carriers, bankers, merchants, shopkeepers, insurance brokers and a mass of middlemen, many of whom are essential. The greater the volume of trade the larger the number of the transactions, and the more often the goods change hands, the greater the total commission.”

I cannot find any evidence that the worker benefits by free trade, or by these commercial operations.

No Difference in the Production of National Wealth, Primary or Manufacturing.

No. 2. That in principle there is

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no difference between the producer of food in any form and the producer of manufactured articles of any kind, fn dealing with this question 1 am not considering what may be described as the non-producing section of the community—they have their legitimate claims for consideration—but the remarks on the point now before us are intended to be restricted to producers, with no distinction of interests between primary and manufacturing.

I would like, before enlarging upon the subject, to remind the farmers of New Zealand what free trade did for the farmer in England. The abolition of the Corn Laws brought ruin to the farming interests: more lucrative industries developed from which to pay for foreign wheat. The War should have taught the people of England the danger of dependence on other nations for the necessaries of life, and we should also learn this lesson and especially at this particular time.

Colvin, in his work, writes of the great necessity for an understanding between agriculture and the other great industries of the nation. The common interests seem to be of far greater moment than the differences which divide them.

Each and every person employed in production is performing a national duty, inasmuch as he is doing something for another section of the community that it is unable to do for itself, and vice versa. It seems to me that on the lines that I have indicated we must concede to each other certain rights, speaking, of course, of producers—the farmer, the manufacturer or producer of any kind who is working for the good of the community has the right to receive interest on his investment in land, plant and buildings, a good wage for his own labour when personally rendered; a good wage to those he employs, a fair trading profit also: a margin for contingencies which occur in every form of production (none more so than farming, where an adverse season or even one bad night, may lay waste the whole season’s efforts). To this end

I am strongly in favour of the principle of national control of prices for home consumption, no matter what those products are, as between the producer and the public. We have a very good example of the soundness of this principle in the present position regarding wheat, flour and bread. The same product in various stages. The people have the assurance and satisfaction of knowing that the price that they are now paying for their bread is a price which is fair to the farmer who produce's the wheat, with all its numberless risks, which probably do not exist to the same extent in any other industry, therefore it is entitled to be protected by a margin for those contingencies to which I have already referred. As it applies to wheat, so it should apply to wool or any other article. The people of this country should not desire those of their fellow-citizens who produce wool to dispose of it at a price which, if continued for any length of time, would result in inevitable ruin, and I am sure that the primary producers of this country, when they understand the true relative position of production of every kind, will be equally willing to protect as they are protected.

With regard to the surplus products. Here again the position is exactly the same, whether such surplus products are primary or otherwise. Having got a fair and proper price for home consumption of the articles required by exchange within the community, anything produced beyond the requirements of the country must of necessity be disposed of in the world’s market, taking the risk for the time being of the prices ruling.

Many of us have yet to learn the true spirit of national inter-depen-dence, or, as a writer recently says: “If we are to secure a plenitude of the things we need we must be prepared to make a good contribution to the welfare of others, for what we receive will be in the measure of what we have given.”

I think it is to the credit of the protectionists of this country that not in one single case, so far as I know, has any objection been raised

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to the principle of controlled prices. The protectionists do not desire to eat their bread at a price which may bring the primary producer on the poverty line, neither will the farmers, when they see the equity of the principle, desire the manufacturer to supply the goods they need at prices which do not bring to the producer reasonable reward for investment and labour.

There can be no real social peace and order until every class of citizens gives more attention to its respective duties and responsibilities, and less attention to so-called rights.

We most urgently need in our national life to cultivate more of the family spirit where the material welfare of each member is manifested under the sympathetic guidance of the head of the family, with the result that the welfare of the group stands before the interest of any one member. This principle permits of the widest expansion—to the workshop, with the employer as the head; the city, with the council as the head; the country, with the Government as the head; and the Empire, with the King as the representative head. If the family spirit is not destroyed by the evil influence of greed and selfishness, we would soon attain a higher degree of social welfare and I cannot think how any fairminded man would desire it to be otherwise. Employers and workers alike should strive to create more than they can consume, for herein lies the source of national wealth, which permits of national progress. To leave this world better for the life we have lived should be the aim of every man and woman. Our duty is to add something to the building of our nation, something that will remain after we have gone West.

All we protectionists ask is to apply the family principle to your own country first, no other country has so great a claim upon you, and I want to remind you that, no matter to what extent you may follow this line of duty, there will be many things you must have by exchange with other countries. Widen the family idea and maintain the integrity of your own nation. Do not

allow anything to happen in this country on the lines of what has recently occurred in free trade England, where many of the mills were suddenly closed because Germanmade goods came into the English market at a price which was far below the English cost of production.

What the Nation Has Already Accomplished in Secondary Industries.

I have, as far as possible, avoided long lists of figures, because I know how difficult it is for a speaker to maintain the interest of his audience when quoting figures, but I have been led to take this risk and have prepared two tables because of the importance of the subject, believing that not 10 per cent of the adult population of this country has any idea of the value of the industries to the Dominion. The probable reason for this is that primary production, which is the very backbone of the nation’s life, because it is its food, is expressed in a few articles and represents huge sums of money, whereas the thousands of things which are manufactured, when considered individually, appear to be more or less insignificant, although in the aggregate they represent the larger sum.

This table, which I shall now quote, shows the results already accomplished by the people of this country in secondary production (and it must be evident how disastrous it would be if we lost anything that we have already secured), and also the margin for expansion in these industries. I have taken the values of the imports, as per table A.A., at the port of shipment values and estimating about two-thirds of these imports as a fair margin for additional manufacture, employment would be found on the general average for 15,000 workers, which on the national average of producer unit to population (1916 census) equals 4.185 equivalent to a population larger than a new Christchurch. It must be remembered that this additional population creates its own demand for food, clothing, shelter, and all other things incidental to civilised life. (See tables A and AA on following page.)

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NOTE. The total value of output for year ending 1916 was £15,154,184. The iigurca above are for the items mentioned, the difference being for those not enumerated.

IS PROTECTION GOOD FOR THE NATION

In addition to the above there would also he over 2J millions sterling earned in wages hy the la.OOO prmlucers. Ihe non-producers would also earn salaries or wages, and, computed on the same scale, this would amount to £l,/00,0()0, making the total wages nearly four million pounds on this additional production alone. This would mean over one million sterling to the farmer in additional food supplies, and the creation of additional population equal to a new City of Christchurch.

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I shall now prove (see preceeding page) that our Government would lose nothing by way of revenue but would gain enormously through intensive manufacture, adding a huge sum annually to the national wealth after replacing every shilling of customs revenue lost through making for ourselves the goods mentioned and which hitherto have been imported. These figures go to show how the manufacturing nations have become rich out of all proportion to those which are purely agricultural.

We now have to deal with the third point, that anything operating to the detriment, or which prevents the progress, of any large section of the community must be fundamentally wrong.

We have seen that producers of all kinds, primary and secondary, are interdependent, that one is essential to the other and their interests are identical so far as the requirements of the nation are concerned.

We have now to consider the interests of that class of the community which, although not producers are essential and are officially described under the terms professional, domestic, commercial, transport and distribution, and see to what extent, if any, intensive manufacture would be detrimental to the interests of these particular callings or occupations. All these classes are essential to national life and although they do not add one shilling to the wealth of the nation, yet they are most essential to the nation.

Professional Services.

I need not enlarge upon this because it must be recognised that the value of professional sendees can scarcely be measured or computed. Without our medical men to keep us in good health, our scholastic people in every grade, technical instructors, etc., production would very quickly disappear, at least to a large extent.

Without the aid of the professors of chemistry, economics, and other sciences, we should probably muddle along in a clumsy, inefficient manner, and I deliberately say this, lest it

should be assumed through my remarks to-night that I have failed to appreciate the value of instruction in economics, no one realises its value more than I do, provided that it synchronises with practical effort.

Commerce.

The commerce of any country must of necessity be restricted to the production on the one hand and the requirements of the people of that country on the other. Commerce demands a very special training—I might even go to the extent of saying that in my opinion successful commercial men must possess natural intuition. They have to exercise very special mental faculties and it is frequently the lack of commercial knowledge or training which is responsible for so many business failures in this world. Although not producers I put commercial and professional men on a very high plane, and when we thoroughly realise how interdependent we are, how the services of one class of citizen are essential to the other, whether engaged in professional, scholastic, commerce, and production of any kind whatsoever, whether as employers or as workers, we shall have gone a very long way towards understanding the industrial problem and finding the remedy for industrial unrest, which again brings us back to the fundamental point that our first care should be the progress and development of our own country, considered in men rather than in money.

Transport.

So long as goods are needed, no matter where they are made, the transport of such goods is a national work and again, although those employed in transport do not add to the actual wealth of the nation, yet but for their efforts the wealth of the nation would not be as great.

Distribution.

This is a class of which, in the natural order of things, might be said to breathe the atrao sphere of free trade, especially when the question of price is the governing factor. Distributors do not appreciate, as I think they should, how

IS PROTECTION GOOD FOR THE NATION

15

dependent they are upon the daily earnings of the producers in their particular districts; they do not, in my opinion, give due consideration as to what goods they desire to handle first—New Zealand or imported. I cannot conceive that it makes the slightest difference to a distributor whether he is distributing a pair of New Zealand blankets or a pair of imported blankets; whether he is selling New Zealandmade furniture or imported furniture, as a distributor, but as a citizen it makes all the difference, because just in proportion as he handles the latter so the employment of the people making those goods is diminished, whereas if he insists upon distributing the former, he is helping to find customers in his own shop not only for furniture but for all other things the people need, because the wages of the people will be spent weekly for the article they require, so long as they remain employed. If the distributors would take the trouble to study the figures that I have given to-night, and ascertain what the employment of the people of this country expressed in wages really means to them in the distribution of those weekly wages, they would more clearly understand the proper balance, and they would see that protection was to their advantage, because the people have their daily requirements to be met as the result of their employment.

Having commenced my address by stating three main points for discussion, it seems to me that I might render some assistance to my hearers by summarising the principles which I have sought to lay down. It has occurred to me that it would have greater weight if the summary were expressed in the words of a man whose opinions might be considered of greater importance on this worldwide problem than my own. I. D. Colvin, in his work entitled, “The Safety of the Nation,” summarises the various points I have tried to make in the following terms.

As Affecting the Nation.

That national security rests on economic security.

That economic security means

the production of all the essentials of hfe in peace and war.

That production depends upon the industries of a nation —in this case, your own nation.

In order that production may be assured, he admits that the security of our inustries implies the security of all concerned in those industries, claiming that this is necessary for the security of the nation. He further emphasises:—

That the welfare of its industries is the chief interest of the nation, no matter what nation.

That commerce is beneficial to a nation when it supports the interests of that nation.

That commerce is injurious to a nation when it injures the industries of that nation.

That the importation of raw materials may be beneficial to the nation.

That the exportation of manufactured goods is beneficial to the nation.

That the importation of manufactured goods is injurious to the nation if these goods can be produced by its own industries.

That the exportation of raw materials is injurious to the nation if these materials can be used in its own industries.

As Affecting the Individual.

As a man lives by work, security of employment is what honest people most value. They value the opportunity for their children, and that opportunity is given by the security of the national industries, and nature offers no security for nations which live by the industries of others.

The Arbitration Court has recently declared in the interest of the workers, and also of the country, it is necessary to stabilise wages. This is of little use unless the industries are stabilised and continuity of employment made reasonably secure.

Before closing the question as to how it affects the individual, we might consider as to how the present financial crisis affects the workers.

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IS PROTECTION GOOD FOR THE NATION

Some people tell us that the crisis is owing to the low price of wool. Of course the wool situation is a very serious one for the producers, and also for the country, but supposing the total export of wmol this year had been of no value, this loss would not have seriously dislocated our national finance.

The root cause of our trouble is the craze which set in after the armistice for foreign-made goods. Forty millions sterling in value were imported, more than the country needed, and the money is not here to pay for the goods, without serious financial disturbance.

Too many boots—result, hundreds of men and women skilled in the production of these goods are now unemployed, and the industry is earning nothing for itself or for the country. The same remarks apply to clothing. Importations of clothing are huge—a good deal of it of very doubtful quality. Again the result is hundreds of people in the Dominion suddenly find their wages stopped, which of course means their power to purchase the goods they need gone.

The foregoing illustrations apply to practically every class of goods, and even at this early stage good, respectable, hard-working citizens are pleading for the right to live, and. although the position has not reached the acute stage, public relief works are contemplated. Public money will have to be spent—not our money, for the Prime Minister has to go hat in hand to the moneylenders of other countries. What a picture for the individual citizen to look at after years of unparalleled prosperity. What does it mean to him? It may reduce him almost to pauperism; it may absorb all his savings, or plunge him into debt, and all because we bought foreign goods, which we could have made for ourselves. The farmer is intensely interested, because the money which would have been available for development work is now locked up in bonded stores. I am conscious that on many public questions either the working man or the farmer is frequently used to demonstrate some

point or other, but I am quite satisfied that when the economic side regarding New Zealand manufacture is properly understood, the primary producer will recognise that the home market is the best one, and that the feeding of the nation is his particular care, and if the principle to which I have already referred, is adopted, that every producer is entitled to interest on his capital, to receive and to pay good wages, a trading profit, and a proper margin for contingencies, then the farmer of all others will no longer be worried by the vagaries of the foreign market, at least so far as home consumption is concerned. The only risk that he will take is in regard to the surplus which the nation is unable to absorb, and this will gradually right itself under protection of the industries which will create a large additional population of food consumers.

Professional Opinions.

Earlier in my address I pointed to the fact that many professors of the modern school of economics have apparently broken away from the old school to such an extent that their expressed opinions are the antithesis of the old theories, and I give the following instances taken from the work of Dr .1. S. Hecht. F.R.E.S., entitled “The Real Wealth of Nations,” published in 1920.

Fallacies of Free Trade.

“Only England of all civilised and industrial nations, has surrendered her vital industries at the bidding of the free trade despots, and persistently exports the products of unskilled labour in exchange for those of skilled, thus losing leisure or wealth at each transaction.

“That the British working classes have never realised the fraud foisted upon them, and have accepted free traders as philanthropists, is due to the fact that each worker has been so busy thinking about his antagonism to his own employer that he has failed to see that all employers are not alike, and that his interests are identical with those of skilled labour.”

IS PROTECTION GOOD FOR THE NATION

i:

Delusions of Free Trade.

“Although we have exposed the delusions upon which the arguments for free trade are based, beginning with the fundamental principles of economics, its apologists have evolved a set of catch-phrases wherewith to confound their enemies, and which they have hitherto found very effective, more particularly as their opponents have fought with weapons blunted by acceptance of the law of supply and demand.”

The Sham Law of Supply and Demand.

“From acceptance of that horrible delusion the law of supply and demand arises, also the delusion that wealth, save that of an individual or nation at the expense of another, is due to trade, and that it benefits the majority to buy in the cheapest market, yet we have proved that the whole nation loses when it imports the products of foreign skilled labour because they are cheap, and pays for them by exporting the products of its less-skilled labour, and, consequently, it can only be the individual who benefits by such cheap prices at the expense of his fellows.”

The Objects of Protection.

“The most important object of protection, the prevention of underselling and interference with production, is not entirely achieved by the imposition of duties, because the system still permits a mass of men to be engaged in import trading for their personal profit, or, it puts the workers of one nation in competition with those of another. The object of Protection being admittedly the prevention of trespass upon a nation’s production, it follows that behind this barrier a nation must be able to live its own life and produce what it likes —as much or as little as it deems necessary. So long as it admits that which it cannot produce efficiently a protected civilised nation need lack no material commodities whatsoever. The world, however, is now turning away from this search after ever more material wealth, ever new and unnecessary luxuries, and clamouring for shorter working hours and less

work, and here also a protected nation is at an advantage.”

The Benefits of Protection.

“The real benefit from Protection, obtainable also from prohibition, when there would be no revenue, arises from better conditions for production—that is, security for capital, return for enterprise, certainty of the home market, and continuity of output.

“For skilled industries and modern methods of manufacture such conditions are essential, no efficient production being possible if they be not observed.

“Protective duties thus increase the wealth increment of a nation, not by the amount of revenue, but by reserving to itself its home market in the most profitable and competitive industries.”

Nation Entitled to Receive for Itself its Whole Market for Its Own Skilled Labour.

“No civilised nation covets the unskilled industries of another, nor does a farmer build walls or fences on barren ground, but protects his crops.

“Similarly a nation is justified in reserving to itself its whole market for the products of its skilled labour, for otherwise its industries cannot be efficient.

“Thus, prohibition of imports of all such products, to the extent of the nation’s utmost capacity to produce for itself, is right and desirable, and this right being exercised, a mass of unnecessary and wasteful competition would be obviated.”

I have previously stated that a tariff does not in itself increase the price of the article. Professor Hecht gives the reason why protected countries can compete with British or foreign markets.

“As protected countries compete with Britain successfully in foreign markets, particularly in goods of high value, the export of which alone benefits a nation, it is obvious that duties cannot be a real handicapin fact, it is because they have protected their skilled industries, and

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have thus been able to develop them, that protected countries can cheaply produce a surplus for export.”

In facing national problems we must be honest in respect to fact. It certainly should not be necessary for me to do more than mention what all the world should know, that the unskilled, sooner or later, becomes the servant of the more highly-skilled, be it individual or nation.

To export goods, the result of the labour of unskilled men, and import goods, the product of skilled labour, is distinct evidence of national decadence.

We dare not shut our eyes to the fact that it is becoming increasingly difficult to induce the young people of this country, boys or girls, to enter employment where study and years of training are necessary to become skilled and efficient citizens. Young men are becoming more and more willing to enter the ranks of unskilled labour because of the comparatively high wage paid for. such labour. Even skilled adult men have left their employment and taken on unskilled work, and in do-

ing so they have not realised the danger to their own lives, to the lives of their children and, incidentally, to the nation.

I feel sure that if those who are responsible for the governing of this country do not take these questions more vigorously in hand, New Zealand will gradually become a less skilled nation, and just in proportion as that takes place, so shall we become more and more the servants of some more highly skilled people. If we continue selling our primary productions at their lowest world value and taking in exchange articles produced by the skilled labour of other countries, the process will keep New Zealand eternally poor.

The whole question is one of principle as it applies to a nation. If these pregnant truths to which I have given utterance do not or should not apply to New Zealand, if this country should not use its own raw material for its own needs, for the benefit of its own people, and if it should not aspire to be a self-contained nation ■as far as it is possible so to be, then the answer to these vital points must come from lips other than mine.

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APPENDIX A.

REVISION OF CUSTOMS TARIFF.

The Executive of the Industrial Association of Canterbury, in issuing this pamphlet, desires by figures, facts and argument to assist the public in arriving at a correct conclusion, and that the members of Parliament may be in possession of facts and comparative figures the result of experience in other countries compared with our own, which will assist them in forming a correct judgment when the revision of the Customs tariff comes before the House.

The address given by Mr. Frostick meets the main points, and has the entire approval of the Industrial Association. There are, however, additional facts that are herein given, and to which your careful consideration is invited.

It might be advisable to state briefly the basis upon which a national protective policy is built, remembering that this country is now a nation, and must no longer be unduly dependent upon others.

It is necessary to promote national stability in every form of production, thereby securing the largest possible measure of economic independence.

This is the problem which the Parliament of this country will be called upon to solve within the next few months to determine for New Zealand what its fiscal policy shall be. The same question has occupied the attention of the Parliaments of the world at various periods during the last quarter of a century, with the result that to-day the policy of protection operates throughout the whole world. The latest convert is Great Britain, although apparently at present protection is to be restricted to particular industries described as key industries. This policy can be only temporary because it discriminates against particular sections of the people. Apart altogether from England, there is sufficient evidence to guide this country as to the policy it should pursue.

We wish to emphasise the fact that protection of one’s own country’s industries does not act detrimentally to the true interests of

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20

the people. The protected countries are not only able, and do maintain their own standard of living, but also compete in the world s markets with their surplus products.

These remarks should not be taken in a too restrictive sense, because whatever happens there will always be a very large exchange of commodities between countries. Something that other countries can supply better than our own country can produce. This is seen in the tables herein given regarding the imports of goods into Lnited States of America. This is not at all singular to America, because in other protected countries where the balance of trade is largely to the credit of the country, the imports have increased during a period of years, but the exports in a very much greater ratio. It is not Imperial patriotism when we give preference to the products of countries outside our own empire simply because the goods are a little cheaper.

If our patriotism means anything at all, it should be first directed to our own country, and secondly, to the productions of the Empire. Having discharged these duties in the order mentioned, there should be unrestricted choice in the purchase of goods from foreign nations in regard to such things as the Empire cannot supply.

To enable our readers to understand the class of goods imported and exported by America, the following table gives the necessary details:—

MERCHANDISE ONLY.

1914. 1919.

IMF GETS. EXPOBTS. IMPOETS. EXPOETS,

$ $ $ $

Food stuff, crude 234,725,244 275,275,909 545,287,773 678,470,920

Food prepared 256,483,300 308,852,352 555,691,255 1,962,720,033

Crude materials turing™urposes 597,920,626 490,496,949 1,674,255,094 1,610,142,68:

Pa tured manUf °. C ? 275,585,099 344,983,510 610,323,873 922,407,603

CO Sctured manU ? 407,047,570 628,909,678 492,333,058 2,564,089,165

Miscellaneous .. 17,514,162 22,539,346 26,515,274 12,950,778

$1,789,276,001 $2,071,057,744 $3,904,406,327 $7,750,781,182

Equal £ sterling £357,855,200 £414,211,548 £780,881,265 £1,550,156,236

E over “imports*? £56,356.348 £769,274,971

A further proof that the trade of the world is not secured by the operation of free trade is given by the following figures for the United

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Kingdom, which show that whereas America had increased her credit balance enormously in five years, the British figures show an alarming increase in the debit balance as between the two years:—

1914. 1919.

£ £

British Imports from all countries. 697,432,649 1,631,901,864

British Exports to all countries. 525,720,311 962,694,911

(Including re-export of foreign and colonial products.)

Debit Balance £171,712,338 £669,206,95:

A still further proof is given by the following figures, that in the exchange of commodities between the United Kingdom and America, a protected country can compete successfully with a free trade country in regard to productions which require skill: —

1914. 1919.

£ ’ £

American exports to United Kingdom 138,616,000 543,057,000

American imports from United Kingdom 34,170,000 33,921,000 (Not including foreign and colonial

products shipped to America, through England.)

Credit Balance £104,446,000 £509,136,000

The Customs tariffs in protected countries have promoted the stabilisation of the industries where they have been carried on on the principles of the highest efficiency; this applies particularly in America. The degree of skill possessed by the workers in that country is probably the highest in the world; strict economy in every stage of production and the adoption of the most economic methods of handling and distributing goods have enabled them to be sold in successful competition with the whole world.

In order that the position may be clearly understood, the following tables show the expansion of trade in the United States with the world, and it will be seen that whereas in 1914, in exchange of commodities, she had a credit balance due to her of 56 millions sterling, in 1919 this had risen to 769 millions sterling, whilst Great Britain’s world’s exchange of commodities left her with a debit balance of 669 millions sterling in the same year.

It must be perfectly clear that these export figures could not have been attained had the price of manufactured articles, produced in the United States, been raised beyond fair and competitive prices by reason of her Customs tariff, therefore the argument fails that the increase of

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a Customs tariff raises the prices of the articles in the country where they are made:—

1914. 1919. !• r>

£ £

American Exports to all countries. 414,211,548 1,550,156,236

„ Imports from all countries. 357,855,200 780,881,265

Credit Balance £56,356,348 £769,274,971

It is not claimed that any system of protection will secure, under any circumstances whatsoever, complete immunity from lost time, yet the American figures establish a world’s record in this respect, and for all practical purposes there are no paupers in America.

The economic problem with which New Zealand is faced is exactly the same as that of any other country, differing only in degree, and it seems perfectly clear that if New Zealand is to grow, if it is to be able to raise itself to a fair measure of economic independence, then its industries must be stabilised—be they primary, secondary or manufacturing.

This can be accomplished only through a recognition of the fact that every country has the right to its own industries. The farmer has the right to be protected against the importation of the class of goods he produces. Thirty years ago, a self-reliant policy was the slogan, and the necessity for it is greater to-day than ever before in the history of this Dominion.

W. J. JENKIN,

President,

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APPENDIX B.

Showing the progress of New Zealand manufactories and works since the last census taken from the Statistics of New Zealand, 1919, Vol. 3, for the year ending 31st March, 1920;

The significance of the above figures and their value to the nation is four-fold—first, that 18,000 more people were employed in 1920 than in 1916; that 5| millions extra was distributed in wages for 1920

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in excess of 1916; that nearly 15 millions extra value of raw materials was consumed in the latter year as against the former (a very small percentage of which would be imported material). After the payment of wages the added value or created wealth by the industrial operations of our own people gave a balance of nearly 21 millions sterling for the one year 1920, which was more than 7| millions in excess of the wealth created in 1916. The actual increase between manufacturing, results of 1916 and 1920 respectively, was

Materials used £14,784,515

Wages paid 5,513,161

Created Value, or Gross Profits through Manufactures 7,814,138

£28,111,814

All this the result of one year’s work, in excess of 1916. Remember, this created wealth remains in the country after the goods have been consumed. None of it would have remained had the goods been imported.

W. J. JENKIN,

President