AGRICULTURE IN THE NEW ZEALAND ECONOMY

Press, Volume XCVIII, Issue 29021, 9 October 1959, Page 2 (Supplement)

AGRICULTURE IN THE NEW ZEALAND ECONOMY

IN the last two decades a remarkable change has taken place in the structure of the New Zealand economy.

Before the Second World War (and even more so before the 1930 depression) the New Zealand economy was characterised very largely by the export of agricultural produce in return for the import of finished goods of both a capital and consumer nature.

The change which has occurred is in the direction of producing for ourselves a far greater proportion of the goods we formerly imported so that the dominant sector in the economy has now become manufacturing rather than agriculture.

This, at any rate, is the superficial conclusion we reach if we measure the relative importance of the two sectors in terms of persons employed or, alternatively, in terms of gross value of output.

This rapid growth in New Zealand manufacturing is of course largely the result of a conscious official policy of protection and encouragement of industry. There are, I think, two main reasons for the

policy. First, ever since the 1930 depression there has always been the desire to become less dependent on foreign trade with the continual risk of declining terms of trade peculiarly characteristic of an agricultural exporter like New Zealand. Coupled with this has been the necessity, in any case, of lowering our dependence on imports because of a continuing, though disguised, balance of payments problem, which though it has always been with us since the war, has been suppressed by varying degrees of import and exchange control and has on occasions become quite serious. Dependent— The surprising thing about our economy is that, in spite of all that has been done to substitude locally - produced goods for imported varieties, we are still as dependent on imports as ever before, though our dependence is now on imported raw materials and manufacturing equipment rather than .on finished consumer goods.

Of the goods currently flowing from our factories a very large proportion of the value represented by the raw material content has in fact been contributed by the farm industries and so, when we

come to measure the contribution to the country’s national income made by agriculture and manufacturing we must use the net value of output (i.e. after deduction of costs of raw materials, equipment, etc.). On this basis we find that as compared with, say, 1939, agriculture’s contribution has remained unchanged at 20 per cent, of the national income.

The second and more fashionable reason fpr the encouragement of secondary industries is the feeling that with our rapidly increasing population and labour force, encouragement of industry is essential if full employment is to be assured.

In spite of the much superior productivity of labour in farming compared with manufacturing, it is contended that undue reliance on agricultural development (especially with New Zealand’s type of farming) will not absorb all the available labour in the next 20 years.

In support of this hypothesis it is pointed out that the farm labour force has declined from

24 per cent, of the pre-war working population to its present level of about 18 per cent., and this decline shows no sign of tailing off. There is, of course, some truth in this argument, but it must not be carried too far. .

Cause And Effect-

In the first place it is very easy here to confuse cause and effect, for it is quite likely that part of the relative decline

in the farm labour force in recent years is itself an effect of the industrialisation policy.

For this has led to an excessive industrial demand for labour and very high money wages, and a not surprising reaction on the jJart of farmers (who are unable to pass on their costs to the consumer) has been to do with as little labour as possible, to substitute labour-saving machinery and labour-saving methods of farming, and to concentrate as much as possible on products which do not require a lot of labour.

Nor is this attitude confined to the farmers themselves for we find the Director-General of Agriculture in the Department’s 1959 report, warning us that we must be very wary of those types of diversification in our agriculture which would tend to increase the use of labour.

It is, to say the least, a little confusing to find one Govern-

ment department exhorting us to avoid the use of labour in agriculture while another — Industries and Commerce —is exhorting us to accept high cost local industries as the only means of absorbing the labour which is not being absorbed by our agriculture!

The second consideration is that the relative decline in the direct farm labour force has been partially offset by the remarkable increase in what we might call the indirect farm labour force, i.e., persons who are selling their services to farmers either as farm contractors, carriers, aerial topdressers, etc., or whose labour is embodied in the goods and

Other Labour—

There is abundant evidence to show that the increase in these types of farm input has been carried to the point where for every man employed directly in farming, there are the equivalent of two others employed elsewhere in the economy and engaged indirectly in producing farm output. In trying to assess the labour requirements of agricultural expansion over the next two decades, it is necessary therefore to take .careful account of the required increase in this indirect farm labour force.

A further factor of a similar nature concerns the labour force in the industries transporting, grading, processing and marketing our farm products. Surely the time has come when we can no longer afford to regard the labour requirements of our freezing works, wool stores, dairy factories and our transport system, as a sort of residual to be filled by whatever seasonal and unskilled workers there are available after other industries have had their pick.

The over-riding consideration is, however, that the value of output per man in agriculture—especially in sheep farming—is much higher than in

manufacturing industry especially if the products of our industries are valued at import prices and not at the inflated internal prices.

This means that it is still more economic to use labour to produce more exports with which to purchase imported finished goods than it is to use the same resources trying to produce the goods at home. .

While the maintenance full employment must certainly be regarded as the first priority of our economic policy, we must not allow it to cloud, the equally important question of the deployment of our labour force and other resources in the most efficient and productive manner. f

Consideration— For these reasons it would, in my view, be wiser for us to pause awhile in the breakneck speed of our industrial!sation and to inquire whether we can’t induce more of our labour force particularly some of the new entrants—to move into the farm sector and into the many ancillary industries.

Perhaps it would pay us handsomely to spend a little* money in finding out what im- 1 pediments farmers see to the 1 'employment of more labour; and, equally (because one sus--pects that many farmers are not good employers) what pediments our young men see to working as skilled farm labourers. It would also probably be well worth while trying ta

improve the status and prospects of farm labour in order.* that we might attract to this occupation recruits whose quality is equal to the exacting nature of the job and to the responsibilities it carries under modern farming conditions.

Finally, an attempt to solve the future labour problem, if there is a problem, along these lines would be consistent with our current drive to find new markets for our export produce, requiring, does, a willingness to accept more im* ports in return. ... . Can we, for example, J ever expect to sell more produce to a potential market like Japan while refusing to accept in return imports of low priced goods which we fear may affect our employmentcreating industries?

This article ha» been specially written for "The Press" by

B. P. PHILPOTT.

Professor of Agricultural Economics at Canterbury

Agricultural College, Lincoln.