The Dominion. THURSDAY, JULY 23. 1936. THE FARMER, THE STATE AND BANKRUPTCY

Dominion, Volume 29, Issue 254, 23 July 1936, Page 8

The Dominion. THURSDAY, JULY 23. 1936. THE FARMER, THE STATE AND BANKRUPTCY

According to the estimate made by Mr. H. D. Acland, president of the New Zealand Sheepowners’ Federation, increased wages and reduced hours of work along the whole line of his export activities from mustering to loading the ship may cost the New Zealand sheep-farmer almost a million pounds a year. “Without a substantial subsidisation to meet the extra costs, ’’ said Mr. Acland in his address at the annual meeting of the federation yesterday, there is risk of a recurrence of the position which obtained from 1930 to 193-, when the gross proceeds from many high-country runs were not sufficient to cover the cost arbitrarily laid down by court awards for bringing in sheep off the country, taking off the wool and delivering it into store.” Mr. Acland surmises from the Government’s activities in the dairy industry—and the Government’s leaders have said as much on ffiany occasions—“that similar guarantees are to be given to other primary producer exporters, with a view to enabling them to meet the additional production costs within the Dominion caused by recent legislation and sell on the world’s markets against overseas competition, while still leaving a sufficient balance in hand on which to live and provide an inducement to increase still further production for export. Here we have the conditions —or at any rate can see them forming—which have been responsible for the Government s experiment in the purchase and handling of our dairy exports. On the one hand high costs of production (being sent higher every week by the Government’s legislation); on the other hand world prices kept low by intensified competition upon a more or less impoverished market. The farmer is caught between the upper and nether millstones :he can neither lift his prices nor lower his costs. Faced with the prospect of large sections of their people being placed in such a position as this, Governments naturally exert themselves to try to improve matters. Three courses of action are possible. A Govei nment may use its influence to lift world. prices; but this, in the absence of combined international action, is almost inevitably foredoomed to failure. Approaching the problem from the opposite side, it may try to reduce costs of production. That was what the Coalition Government did in New Zealand from 1931 onward, and with very considerable success. But when so many of our charges are fixed and statutory, there is a point below which costs cannot be reduced: a point, indeed, below which-it is socially undesirable they should be reduced. Yet in the absence of a corresponding measure of fixity in prices, the gap between the two remains an obstinate one to bridge. This obstinacy has led in recent years to a third, approach to the problem—through currency manipulation. The Coalition Government raised the rate of exchange on London beyond . the. economic level, so that an exporter selling his produce for sterling in London (where prices were low) should be paid here (where costs were relatively high) in New Zealand pounds, a quarter as much again as the sterling equivalent. Whatever may have been the merits or benefits of the appreciated rate of exchange, it was a tax upon the whole New Zealand community for the benefit of that part of it depending upon exports. The justification for. imposing the tax was the dominant part which exports play in the national economy. When the farmer is prosperous New Zealand is prosperous; when the farmer is poor New Zealand is poor. Therefore, although the people had to bear the cost, it seemed to the Government of the day wise to give prosperity to the farmer, and through him to the community as a whole, by artificial means. Any such stimulant, of course, either economic or physiological, works itself out in time, until, in the end the country finds itself with an inflated currency but no lasting benefits. That is roughly the position in New Zealand to-day as. the new Government enters upon its attempt at currency manipulation: this time by way of guaranteed prices for dairy products, but ultimately, it has been said—and the law already gives the authority—for all exports. Mr. Acland, although he draws attention to the farmer’s new costs and suggests that some form of subsidy may be. helpful in meeting them, points also to one of the dangers of subsidies. The United Kingdom, our principal customer, may, in an effort to protect her own farmers from apparently unfair competition, impose dumping duties. So far that danger cannot be said to be imminent, and the Government’s repeatedly declared intention of making two-way trade agreements with the United Kingdom may enable it to remove the possibility of duties against us. At the feame time we may have to make further concessions in our duties on British manufactures, and at some points it may be hard to reconcile that policy with the Government’s desire to protect and expand manufactures in New Zealand. There is, however, a more, imminent and a much more serious danger inherent in the proposal to pay New Zealand farmers one price and then to sell their produce overseas for a lower price. Reduced to its simplest terms this merely takes the farmer out of his dilemma and plunges the State into a similar but very much larger dilemma. The individual farmer is threatened with bankruptcy because he cannot get for his produce a price sufficient to repay him for the cost of producing it. It is now proposed that the Government shall pay him enough to cover his costs and leave a comfortable margin, and shall itself stand the loss between that price and what it is able to get by the sale of the product overseas. The fear of bankruptcy is removed from the farmer and transferred to the State.