"PROFITEERING"

Evening Post, Volume XCIV, Issue 59, 7 September 1917, Page 10

"PROFITEERING"

BOARD OF TRADE'S r STATEMENT

CHARGES OF EXPLOITATION NOT

JUSTIFIED

ENQUIRIES INTO PRICES.

REASONS FOR INCREASED COST

OF LIVING.

The Prime Minister, in the House of Representatives last evening, read a statement from the Board of Trade dealing with exploitation and profiteering. "On various dates," said the report, "you have requested the Board of Trade to enquire into charges that have been, made in regard to 'profiteering and Exploitation' and to report to you any cases that may have been brought to the board's notice or that the board discovered in the course of its investigations. Under memorandum of 28th August, which reached the board on 3kt August, you again, requested the board to ascertain as soon as possible whether the general charges that had been made from time to time are correct, and, if so, to furnish you with the 'names of persons who hare been responsible for | this sort of thing.' "GENERAL CHARGES." "These general charges have been the subject of much consideration, by the board. They are undoubtedly 'the outcome of the continuous rise of the level of prices that has taken place since the outbreak of the war, but as the board has pointed out in its annual report, the phenomenon of rising prices was already attracting wide attention at a period long antecedent to the war. Indeed, in 1912 a proposal had been mooted by the leading countries of the world to set up an international commission on the cost of living to enquire and report on this very subject, and the New Zealand Cost of Living Commission^ which sat for a period of three months in that year, recommended that New Zealand should seek representation on the proposed International Commission, one of whose chief functions was to be the 'consideration of the influence of money systems on the level of prices and to advise. if possible a better medium of exchange.' "As pointed out in our annual report, the chief cause of the higher level of prices and, therefore, of the increased cost of living, is the fact that the supply of money has been outstripping tbo volume of trade, and since the war erery belligerent power has been forced to create new supplies of money to finance its gigantic purchases of every sort of munitionment, and ai t»ie same time has withdrawn from productive work huge armies beyond anything ever contemplated in Ithe past, with the consequence ■that, even after eliminating the waste of food resources due to military exigenci*, tihere has been a serious diminution in the production of the prime necessaries of life. A SURPLUS SUPPLY. "New Zealand is one of tho countries of the world that has a surplus supply of the primary products, wool, frozen meat, butter, cheese, etc., and these have been in great demand in Great Britain, where, on account of the worldwide shortage due to the conditions created by the war, record prices have been obtained. "The .action of the belligerent Governments has had a twofold effect in raising prices; (1) the belligerent Governments have themselves been keen purchasers of supplies, and have depleted the markets, thus causing an intense competition for primary products between th^ military and civil authorities, and (2) they^ have also created large earns of money drawn from the accumulated savings of the past and mortgages of the future. Herein lies the explanation of the abnormally high prices of the war period. The question still remains as to whether individuals, firms, or companies have been guilty of so arranging market conditions as to abstract from the consuming public inordinate gains by illegitimate methods, as this we take it is what 'exploitation' means. "A GROSS ABSURDITY." "We desire to state that our investigations throughout New Zealand have revealed nothing that can justify a charge of this nature. Indeed, our investigations have led us to the conclusion that high prices are not a source of gain to the trading community, as, owing to 'the check they have given to consumption, turnovers are relatively less and profits correspondingly decrease. In addition to the rise in the prime cost of goods, the costs of handling have gone up, and the whole of these charges have not bee,n passed on to ithe public. Where economies in distribution could not be effected profits have been reduced. To charge the trading community with exploiting the consuming public, because prices are phenomenally high, is not only an injustice but a gross absurdity. The board has investigated two specific com-. plaints.that the market has been 'rigged' to the detriment of the consuming public, (1) in regard to sugar, (2) in regard to petrol and kerosene. The methods complained of were .submitted to the SolicitorOeineral for his opinion as 'to whether they were illegal." REQUIREMENTS INFRINGED. In both cases, the statement added, the Solicitor-General had advised that no statutory requirements were being infringed by the methods of marketing that had been adopted. The Board had already reported on two occasions to the Government that, despite the fact that the Colonial Sugar Company had-at present a monopoly of the sugar trade of the Dominion, it. was making no use of its economic advantage to " exploit" the public. Indeed, it was 'disposing of its produce to New Zealand at a price considerably below its market value. If, I for any cause, the Colonial Sugar Company withdrew from the New Zealand market, it was doubtful if sufficient supplies could be obtained elsewhere even at twice the sum paid to-day. The wholesale price of sugar was £22 f.o.b. Auckland, and the consumption of sugar was . approximately 64,000 tons per ■mnura. In respect to petroleum and kerosene, the increases in price were due to causes over which the companies operating in New Zealand had no control, and had their origin in the country of production plus increased freights. The investigation had necessarily involved an enquiry into the profits made in New Zealand, and the companies had satisfied the Board that the profits during the war period in the New Zealand business were considerably lower than before the war. A MUCH-USED TERM. "Profiteering," a term much used in recent years, had never been accurately defined." If it meant creating a.n artificial ecarcity by holding up supplies with the object of forcing up prices, then the board could definitely say profiteering had not been practised to any extent in New Zealand. For example, it had been alleged that some farmers had withheld their wheat from sale in New Zealand, as they deemed the price obtainable' for wheat not sufficiently attractive. This might have been done in a small way, but not on a sufficiently large scale, since the Board of Trade had had control of wheat pritßß. to nutwMly iSwt th» poKtlon, If, ob &• .<*hu h*o& U»,

Steering meant taking advantage of the market to make money without any illegitimate manoeuvring, it is certain/ tha many dealers had made money by sales of stock which were purchased cheaply and sold on a rising market, but which in many instances could not be replaced for sale at even the advanced selling prices obtained 1. Profiteering had also been charged against the primary producers of this country, and undoubtedly the largest share of the record prices that had been received for our primary products had gone to the primary producer. But had the primary producers received full market value for their products? Take butter (the price of which up to the present had not been determined by negotiations between the Imperial and Dominion Governments), the price received! for butter sold on the London market had been determined by the state of the world's supplies. As pointed out in the board's report, on the 11th October, 1916, there had been a shortage itt the London market up to 30th June, 1916, of 74,439 tons, and in consequence of the short supply the price had been correspondingly high ; but the local consumer during the first two years of the war, by the voluntary action of the butter factories supplying the local trade, had received his butter at from id to l|d per lb lower than the export equivalent of the London price. This had represented'a loss to those factories of approximately £115,000, and during the year that closed on 31st August, 1917, under the scheme which the Government sanctioned last October, the local consumer had received his supplies at a price representing a saving to him of approximately £200,000. In regard to wool, meat, and cheese, the prices had in the main been determined by negotiations between the Imperial and the Dominion Governments, and in each case full market values had not been insisted upon by the New Zealand producers. EFFECT OF FOREIGN COMPETITION. In no case had the New Zealand producer of these commodities received as high a price as his foreign competitor, but in every instance he had been satisfied with a price considerably lower than the true market value. The board had attempted to estimate the amount that he had sacrificed under the scheme of purchase arranged for him. In regard to wool ho had received' from 2d to 4£d per lb less than would be obtained on an unrestricted market. This represented; a loss to the wool producers on last Season's clip of £1,400,000. The meat producer had disposed of his product at *n average of 3d per lb below its market value. This during the two seasons the purchase scheme had been in operation represented a sacrifice of £6,000,000. The cheese producer during the same period had received from fd to 2d per lb below the market value. This at Id per lb represented a sacrifice of £1,200,----000. The consumer in New Zealand of these commodities had also saved on his consumption a proportionate Bum. The board was not in a position to state the amount of wool annually consumed in New Zealand, but in regard; to meat, a Id per lb saved on the local market represented a million of money annually. Thus, not only had the producer in New Zealand not been guilty of taking advantage of the state of the market to get the best price obtainable for his products, which he is legitimately entitled to, but he had been oontent with a sum considerably less. The following table showed approximately the disadvantage the primary producers had sustained during the war period :— £ Butter (local sales) 315,000 Cheese (export sales) 1,200,000 Meat 6,000,000 Wool ' 1,400,000 Total ; 8,915,000 The question still remained as to whether the local consumer of primary products should pay the high, prices due to the insistent and growing demand in Britain for these commodities, and if a lower price than export vaJiie was determined upon for local consumption some interests must bear the disadvantage, some scheme must, be devised whereby such disadvantage would become a distributed chaTge on all exports. As this was a policy question for the Government to decide, the Board of Trade would, if requested, work out such a scheme in full detail. PRESIDENTSHIP OF THE BOARD - .OF TRADE. The Hon. W. D. S. Mac Donald explained that he was only asked to take over the presidentship of the Board of Trade while the Prime Minister was absent. He wished to deny the reiterated statements in regard to the New Zealand Government seeking the last possible farthing from the Imperial Government, and he had no hesitation in saying that the price obtained for wool was a fair price. He wanted to make it quite clear that no Minister had interfered with any portfolio lie held.

The Prime Minister said he did not pretend to say 'that the Board of Trade was "in the first rank," but it was endeavouring to do its duty in the work it had taken up. He denied the suggestion that there was any "profiteering." Mr. Massey added that the Enance Minister had expressed an intention of making an increase of Ss a week in pensions, and the tea tax would only supply a small 1 part of the increased expenditure. The Government Statistician had supplied figures to show that as against the purchasing value of 20s (pre-war) the value was now considerably less. Many of the men who indulged in wool-grow-ing had been discouraged by the criticism levelled against them, and had gone in for wheat-growing. Wool had been sold on different conditions to what it was sold last year. Even in consequence of the shortage of shipping the shippers were paid as much as they were last year. The first of the State-controlled-ships would leave "this country loaded to the hatches —— '

A member: Does it belong to the country ? Mr. Massey: No, it is controlled by the country.