Fixation of Prices

Dominion, Volume 27, Issue 146, 17 March 1934, Page 21

Fixation of Prices

Sir, —The crisis persisting in the butter industry focuses public attention upon a situation the fundamental causes of which are obscure, and from which the way of escape is as persistently being heralded as "Restriction of Production. ’ In a stimulating article in the February issue of the “Nineteenth Century,” a writer challenges the accuracy of this remedy and pertinently suggests that its advocates are limited in vision to the immediate problem, and overlook the future consequences involved. Locally, in current discussion, the emphasis appears to be upon the decline in prices in London of primary products, and upon measures such as that mentioned for bringing relief in increased prices, with consequent re-emergence of the profit motive and easement of debt burdens. Price is considered to be a prime cause of the trouble, whereas it is in reality the symptom of a cause more basic and deep-rooted. In essence price is the measurement of value and money, as the medium for expressing prices, must of course increase or decrease in volume as values fluctuate. Our real problem, as was emphasised during recent sittings of the Monetary Committee, is that the value of our primary products has fallen, i.e., a greater volume is required to exchange for the same volume of commodities imported, and no monetrv manipulation can alter the position. What is the cause of this decline? "Market values are governed by the relation, of demand to stocks actually in the market, with more or less reference to future supplies and the influence of trade combinations.” (Marshall, 372.) The demand for primary products is well known to be relatively inelastic, and any fall in price is not marked or offset by greater consumption. Production from all countries exporting to England has shown a phenomenal increase due to a combination of technical improvements in method and the bounty of Nature. With

a declining birth rate, stable consumption, increasing local production ana unregulated overseas imports, a decline in value is inevitable, and so long, as these conditions exist must continue. What of the remedy? . . , It is aimed primarily at maintaining in solvency and operation existing productive units with existing debt structures. Were our export surplus to be reduced compulsorily a lowered standard of living would result, whereas a progressively improving standard is. not only a reasonable expectation, but is also a corollary to increasing productivity. I consider that more attention should be paid to the fundamental conceptions and determinants of va’lue, that prices should be fixed at a guaranteed level where they tend to fall below ascertained costs of efficient production, so that sound internal economy need not be sacrificed to the anarchy of competitive markets. —I am, etc., ONLOOKER. Wellington, March 14.