THURSDAY, APRIL 22, 1937. THE VICIOUS CIRCLE

Dominion, Volume 30, Issue 176, 22 April 1937, Page 10

THURSDAY, APRIL 22, 1937. THE VICIOUS CIRCLE

It is expected that as from the beginning of the next export season there will be an increase in the guaranteed price for dany produce, with a consequent increase in the wages of faim workc s from £2/2/6 to £2/5/-, with keep. Referring to this in a statement to the Otago Provincial Council of the Farmers Union Mr. F. , M.L.C., indicated that they might expect corresponding increases in the wages of other classes of farm workers not at present covered by the Agricultural Workers Act of last session. The point about these increases is that they exemplify the operation of the vicious circle. When prices rise a demand or increased wages follows. This means higher costs, with a consequent further rise in prices, and once more a demand for higher wages. In the end neither the workers nor their industries are any better off, and those sections of the community which are not sheltered by awards are a great deal worse off. In The Dominion on Tuesday it was demonstrated by a contributor in detailed figures showing increases in grocery lines that the average family budget had been loaded with an extra 5/- per week—£l3 a year. If the head of the family were asked to pay that amount in increased income tax he would make a vigorous protest. But because the money is extracted from him in small driblets here and there, he fans to realise tha. actually he is being taxed—and by no means lightly—to assist industries of one kind and another to carry increased costs resulting from the Government’s legislation and other causes. And be it noted that this increase refers only to one department of the family budget—the food commodities. If the examination were earned into all branches of domestic expenditure and service the result might be surprising. . Another aspect of the effect on the community of increased operating costs was referred to in a statement at the annual meeting of the Farm Accounting Association of New Zealand .in Dunedin. “As one of the direct results of rising costs,” said the vice-chairman, Mr. Arthur Craig, “farmers throughout this province are endeavouring wherever possible to do without men.” He added that there had been an unprecedented demand for tractors, and other laboursaving devices. There was definite evidence of limitation of cropping. Many dairy-farmers were reducing herds rather than employ laboui at existing rates. “Rising costs,” he declared, “are now the order of the day. It now costs more to replace wheels on a dray than it cost for the original dray.” At the top of this ascending spiral of costs and prices a deadlock ensues. People begin to sense the fact that this process cannot go on for ever and draw in their horns. Demand falls off, prices begin to drop, business slackens and then comes unemployment. “Labour costs,” it was pointed out in the annual report of the New Zealand Federated Ironmasters’ Association at its meeting in Wellington on Tuesday, “have substantially increased, and while there has been increased activity there may be some doubt as to whether a fair margin of profit is being maintained generally.” This means that there are inadequate resources either for sound business expansion or for setting aside reserves for lean times. The good prices received during the past year for most of our primary products have assisted us to meet most of our increased burdens with some measure of equanimity, but the vicious circle of costs and prices is making itself felt with increasing force in all directions.