The Press MONDAY, FEBRUARY 28, 1938. National Income and Taxation

Press, Volume LXXIV, Issue 22338, 28 February 1938, Page 10

The Press MONDAY, FEBRUARY 28, 1938. National Income and Taxation

Since we published, about a fortnight ago, the arresting figures and comments of Mr Colin Clark, the English economist, on New Zealand's taxation and national income levels, we have endeavoured, as we promised, to obtain from him an explanation of the way he arrived at his figures. Unfortunately, Mr Clark issued his statement just before he left New Zealand; and the only reply it has been possible to obtain is the necessarily brief cablegram, dispatched from Canberra, which was printed in " The Press" on Thursday. This is unfortunate for a number of reasons. In the first place, although Mr Clark says that his national income figures were " compiled on a basis strictly uniform with that used in other countries," that is no great help. What it was particularly desirable to know something about was the .itemisation of Mr Clark's totals. Since he declared that the national income has been "much "higher than is generally supposed "—his figure for 1936-37 was £200,000,000 and his estimate for 1937-38 £220,000,000—-it became important to learn from what statistical sources and by what calculations and estimates he built up distinct items to reach the higher totals. It was all the more important to learn this because, as we pointed out, a quite recent investigation in this field by Mr F. B. Stephens, of the London School of Economics, produced results which, so far as collation is possible, appear to diverge widely from Mr Clark's. A conspicuous example, which we quoted, is that Mr Stephens estimated farming income for 1928-29 at £25,286,000, while Mr Clark puts it at £42,000.000. Referring to this, Mr Clark says that he has been "working throughout" with Mr Stephens, whose previous estimates he describes as " demonstrably too low." They may be. The point is. however, that Mr Clark's figures were published without the demonstration and it is still wanting. They are of such importance, and the interpretation he put upon them is of such importance, that discussion should be thorough; and it cannot even begin, with much profit, until he lays out the statistical evidence. We need hardly say that we hope to obtain from Mr Clark, at his greater convenience, a fuller reply than he was able to cable.

One reference to the nature of Mr Clark's figures and inferences is sufficient to show why they need to be studied in as clear an evidential light as possible. His central contention wa» that New Zealand farmers are " the best off "in the world," their standard of living being by far the highest, and their advantage over the urban community in New Zealand being measured statistically in the statement that. " numbering 20 per cent, of the population, " they enjoy at present. 30 per cent, of the " national income." Three observations must be made. First, statistics thrown as those are into the arena of sectional dispute are above all the ones that require to be explained and substantiated. Second, although Mr Clark deducted from the gross farming income of £63,000,000 (his estimate for 1936-37) items of wages and mortgage interest totalling £13,000,000, the sense in which he called the remaining £50,000,000 the "net income" of farmers will certainly not be generally understood. It means nothing like working profit, or taxable balance, or any kind of net surplus; it is an amount reducible by many more sorts of charge and out-going than the two mentioned by Mr Clark before "profit" appears. Yet it cannot be doubted that his words, though such as no economist would misinterpret, must tend to convey to the ordinary man the false impression that farming has been an immensely prosperous and profitable industry. Third, and in the same connexion, Mr Clark's references to the New Zealand farmers' favourable position and high standard of living are founded on figures which, though they may be verified by every test, only precariously support inferences about the farmers' standard of living, which is, in itself, an abstraction. The realities for which it stands vary widely. But that is a matter less to the point than the broad fact that the farmer's standard of living is determined, not by " farming income," in Mr Clark's sense, but by the relation between farming income and farming costs; and Mr Clark had nothing to say about costs all. His generalisation about 20 per cent, of the population " enjoying " 30 per cent.' of the national income may be statistically just; it does not follow that the farming community is " better "off." Other measures need to be applied. And that the population itself applies some of them in its own rough and ready way appears in the drift to the towns.