EXCUSES NOW

Evening Post, Volume CXV, Issue 106, 8 May 1933, Page 6

EXCUSES NOW

The confident anticipation of wonderful benefits from exchange-infla-tion has now given place to excuses for the failure of the experiment. In admissions and excuses Mr. Coates, in his butter quota memorandum, goes far towards proving what we have long contended—that the inflation gives only partial and doubtful benefits even to those whom it was intended to help. "The promise of better prices, through the higher ex-change-rate, seems to some to have failed to materialise," states Mr. Coates, and admits that "a mood of disappointment has resulted." He argues, however, "that prices at the other end of the world happened to slide still lower just at the time of our raising the exchange-rate," and that the high rate has sheltered the producers from the full effect of this fall. A fair comparison would be, he contends, between prices today and prices as they would have been if exchange had not been raised. . But it is impossible to make such a comparison, for one cannot determine what prices would have been if there had been no exchange manipulation. The inflation movement in itself provokes competition. New Zealand depreciated her currency in imitation of Australia. Throughout the agitation for high exchange there was one leading cry: "Australia has 25 per cent. We want the same." Denmark followed New Zealand, and it is undeniable that the Dominion movement contributed to the Danish decision. The competition in depreciation in three great butter-supplying countries undoubtedly helped to depress prices. Mr. Coates admits this. While arguing that pre-exchange and post-ex-change prices are not fairly comparable, he adds:— Bat it is also fair to admit that, when Australia, New Zealand, and Denmark have all raised tdoLr exchangerates, and when all .must pour their butter into the over-supplied English market,.the buyers there are able to set off one seller against the other and force down prices. It is a "buyers' market," and part of an export-bounty in any form will tend to pass to buyers. In other words, the advantage from the exchange rise is being defeated, in part at least, by the over-supply on the market; and this links the exchangerate with the quota, or with' some other means of correcting the maladjustment between supply and consumption. It is gratifying to have even this admission of the effect of a buyers' market in nullifying exchange gains.. It may not be consoling to the exporters who have failed to receive the anticipated benefits; but what of the contributors of this export-bounty —the merchants, consumers, and taxpayers who have to pay? Surely it is time the Government should realise that this issue cannot be settled simply by saying that it is settled and telling those who object: "It is over and done with; why keep harping on it?"