PRICE DISPARITY.

Auckland Star, Volume LIX, Issue 92, 19 April 1928, Page 18

PRICE DISPARITY.

INFLUENCE OF ARBITRATION

COURT.

FARM ECONOMIST'S VIEW. A MINOR FACTOR. I (By Telegraph.—Special to "Star.") WELLINGTON, this day. Has tho compulsory fixing of wages the Arbitration Court been an important factor in causing depression in our rural industries? This question is discussed in a paper submitted to the Industrial Conference by Mr. D. 0. Williams, M.A., economist of the Massey Agricultural College staff. He comes to the conclusion that the Arbitration Court's influence in causing price disparities is unimportant, and that if its abolition is to be urged, this should be done on other ground*. To condemn the Arbitration Court as an influence in causing price disparities which have prejudiced the farmer in New Zealand is not justified, stated Mr. Williams. He submitted that our rural depression is largely due to the fact that prices of our primary products have fallen faster than other prices, and that this gap between primary and other price* is brought about partly by deep and persistent causcs related to the peculiar nature of tho demand for, and the supply of, primary products. "The Act is conspicuously placed and vulnerable to attack. My object is to show that the importance of the Act, as a determinant, has been vastly exaggerated, and that the same price disparities occurred where Arbitration Courts do not exist. In doing this I hope to reduce the Act to its proper dimensions in the picture. The Act is not an economic Goliath to be slain by a valorous David." Where tbe Farmer Gains. Ths speaker proceeded to discuss the differences in the rate of movement of primary apd other prices, pointing out that in a period of rising prices, farmers gain more rapidly than other sections of the community unless Government intervention in the form of price control checks the movement. But in periods of falling prices, farmers lose more rapidly and to a greater extent than the other producing groups. Whichever way prices move, a gap occurs between the prices of primary products and the prices of ether products. When prices are rising, the gap is in favour of the farmer; when they are falling, the gap is against the farmer. Tracing the movement of prices in New Zealand, Mr. Williams showed that the peak of the farmer's purchasing power was reached in 1017, when it was about 22 per cent higher than in 1014. After 1917 other prices began to catch up, and the farmer's purchasing power to decline. After 1010 the farmers' prices began to fall, while the other prices continued to rise and did not fall until about 1020. Thus the break in farmers' prices occurred about a year before the break in other prices. If primary products are the first to rise, they are also among the fl?st to fall, and on the whole they fall further than other prices. Mr. Williams ■bowed that from 1010 onwards the average purchasing power of the farmer was only 80 per cent, that of 1014. The most obvious fact that emerges from these considerations is that primary producers have less resistance to price falls than have other groups. The reason for'this is explained by Mr. Williams. It is difficult for the farmer to meet a time of rising prices by rapid increases in supply, and correspondingly, when prices are declining, it is even more difficult to decrease supplies, as capital investments undertaken in the rising price period nay not come to fruition until the time of lower prices, hence surpluses are most lilcely to occur at the worst moment for the farmer. A surplus in primary products has more effect in depressing values for the reason that the demand is fairly constant, and does not increase much in response to lowered prices. Production programmes must be made well in advance, and it is difficult, often impossible, to change over from unpr6fitable to profitable forms of farming. v Sheltered Industries. , As for the effect of tariff protect ion on other industries, Mr. Williams pointed out that while some interests are able, by similar movements to protect themselves by their bargaining power and by maintenance of tariffs, the farmer is defenceless. "Prices are raised against him; his own prices he cannot raise. For consolation he is offered that venerable joke which relates to 'keeping money in the country,' but the farmer has become Impervious to the humour that resides in ■uch obvious sophistry." As for the influence of the Arbitration Coqrt in pushing up prices against the farmer, Mr. Williams expresses the opinion that the Court has merely registered; changes (more or less quickly) that would have come about in any case. If so, then the, Court has introduced no novel element in the price situation. "Suppose that wages bkd been lower. Would that, for the community at large, hav* been a better thing? I do not answer that question. I ask it. It would have to be answered definitely before the Court could be abolished on the grounds that wages are kept by it at too high a level. ... In the up* 'shot I think it is impossible to say that 'the Court bias had an arbitrary effect on wages; it is impossible to say, that is, that the Court has bad any material influence in promoting price disparity."