PRICES FIRST.

Auckland Star, Volume LXVIII, Issue 48, 26 February 1937, Page 10

PRICES FIRST.

FARMERS' DEMAND.! DOMINION CAMPAIGN. A "COMPENSATED" BASIS. THE PROPOSALS ANALYSED. (T.) Amon; the fanners of the Dominion an active campaign is in progress in support of a demand for a "compensated price"' for dairy produce. What is the compensated price? A~k the first farmer von meet, and he will look at you blankly. Xot more than a handful can make themselves intelligible for five minutes; the few who know something about it will lead you into an interminable argument. Of course, the farmer who has not acquired a ta=te for figures is hopelessly lost at the start. He has eat at farmers' meeting, he will tell you, and has listened in wonderment while some professional platform advocate has produced slogans, graphs, brightly-coloured diagrams and intricate price schedules; then he has voted for the motion, and has gone home. That is his part in the compensated price campaign. The term is recent, but the idea behind it is not new. It is simply the old free trade argument dressed up in a. new form. At this moment it is being tinted to muster farmers' votes in support of a demand upon the Government to raise the guaranteed price of bntterfat. Of course, its advocates and exponents don't put it exactly like that, hut that is what it is. Selling at World's Price. Briefly, the argument is this. The farmer has to. sell what he produces in the unprotected market of the world, and he should be allowed to buy what he ' needs in that market. If he is not allowed to buy in that way he should be compensated for any loss. He says further that for years past he has been steadily losing ground because the prices in the world market where he sells and the prices in New Zealand where he buys have been moving apart; in short, that inflation has been occurring in New Zealand relatively to Britain, "which is the market he has in mind. There is the kernel of the farmer's argument. If it be pointed out that every other section of the community Is exposed to the effects of this price situation, he will reply that they can pass the burden on, but he is at the end of the line. Up to a point this is true, the farmer as an exporter being in a different position from other people; but the day when he stood entirely defenceless has long passed. In various ways today, through the high exchange, through subsidies on this, that and the other, and through special grants for research and factory improvement, he is ' far from being a "forgotten man." Confronted with these facts, the farmer will declare and maintain that he and those in his employment are still underpaid in comparison with other sec- ] tions of the people. He .-will contend ! that he has been given back only a part of what has- been taken-from .him-iir various forms by the Government unit the townsman.

What are these additions to his costs which appear to be his chief complaint? Tariffs and Costs. First of all he points to tariffs. "The effect of the tariff," he says, "is to raise the price leTel in New Zealand, so that New Zealand costs of production become much higher than the costs in Britain, where New Zealand is compelled to sell." He adds that the farmers do not receive the oversea* value for their produce, but only a part of it; only jpjit;' part which is left after the deducting of the added costs of various kind* -at- - the New Zealand end. The townsman then puts the question "You ask for the right to buy British; * goods at the British price, or to be pro in the same position as if you- were J allowed to do that?" r • Farmer: Exactly. < Townsman: But the tariff docs Mt < amount to more than 35 per cent on. ad' ' average, andmany goods are duty free, j Further, you get the benefit of tlie 25 per cent exchange, and the. difference, can't be more than 10 per cent at- the • outside. * •'' • Farmerßut you forget the ether items. Forinstance, there is the 10 per cent added on 'to the Invoice prices of goods for freight,' insurance and ether costs before the Customs Department makes its calculation. The importer next advances-the prife of the goods by 25. per cent, or - possibly by a little mor?, to eover the exchange; then he puts the 5 per cent sales tax on top of that, and. our figure of 35 per cent becomes 70 per cent. Remember, too, that the wholesalers and retailers add their own profit on to the selling prices of their goods. So we get a long way above the British price level at which we began. T: Have you worked out the difference between the overseas price level and the price level in New Zealand? F: No, I have not been able to arrive at that definitely. There is taxation to be taken into account, and after that local rates. These inflate prices -further. Then the cost of the shorter working week and the higher, wages now being paid would have to be brought into the calculation. T: You seem to forget that much of the money taken in taxation goes back in various ways to the farmer, but we shall leave that for discussion later. Are you aware that New Zealand is one of the low-tariff countries of the world, and that the farmers here are among the most prosperous in the world? High Standard of Living. F: Yes, I know that in a comparative sense a case can be made out in New Zealand' 6 favour, but no two countries are alike in the character of their farming, so I think that, as our time is limited, we had better confine our discussion to New Zealand's case. Besides, New Zealand is the world's best example of a primary producing country which maintains a high standard of living on.; a basis of expanding production and an s increasing volume of exports. T: But New Zealand cannot develop indefinitely.:. along these lines. If Britain had been content" to remain an agricultural country she\ could never have attained her present position in y, ' ■ the worldl • ■V-*'. F: Between Britain and New Zealand •; :'?v, • we have idealconditions for trade, New Zealand, as a highly efficient farming country, exchanging its products for the manufactures of Britain. T: I can see you overlook some vital changes that are now in progress. First .- of all, Britain is now a congested mar-1 ■ "> ket, and is no longer eagerly buying all the butter, cheese, meat and other . foodstuffs we have to offer. Next, we Id- have keen rivals, both inside and outjgip side the Empire, and the British farmer is continually making an outcry against

the flood of imports which is spoiling his market. Further, we have the population problem, but that k too complicated to be discussed just now. British People Underfed. F: Your suggestion that Britain has all the food she needs is far widf. of the mark. so I must remind you that half the population i& to-day underfed. But let us return to the question of tariffs and farm costs. 1: \ou were saying that the Actual burden of added costs is much jrreater than appears on the surface. Do you suggest that the only way out is. to reduce tariffs? F: Xo. but that would be effective, and will have to be faced some day. T: But if the tariff were drastically reduced would not the secondary industries have to close down, and we would have more unemplovment ? F: Not necessarily. Some of the most parasitic of our local industries would be eliminated, but there would 'be a beneficial reaction ujwn other industries through a reduction in their costs. The efficient units would be stimulated, and the Dominion would reap the advantages of mass production which are lost to-day through too many small concerns. Farming would be stimulated and more labour would l>e wanted on the farms. T: \ou appear to exaggerate the capacity of the farms to absorb the unemployed, so let us consider the possibility of some other solution of the difficulty. F: Yes. I have an alternative to suggest. but we shall have to leave that for our next talk. (To be continued.)