GOODS AND DEMAND

Evening Post, Volume CXXI, Issue 130, 3 June 1936, Page 17

GOODS AND DEMAND

(To the Editor.) Sir,—l may have "missed the point" of your statement concerning "balanced production," but as I have primarily criticised the assumptions of that statement, obviously based on the operation of the selfish, unchristian, socalled "law" of "supply and demand," the point of your statement is really beside the point. You prove this in the commcnt to my argument, which states: "Within certain limitations imposed by the suitability of land, the balance of primary production is guided by demand as expressed in price. . . etc." In other words, the demand of consumers for primary produce is governed by those who can control priccs in the markets from whence consumers must obtain the production. Hence the operation of the "law" of "supply and demand." By restricting the amount of credit in the market, priccs are forced below the true economic level, producers are impoverished, and consumers generally, previously denied sufficient purchasing power, jointly with producers, are forced to witness the unholy spectacle of the market price manipulators accumulating to themselves the greater share of the fruits of production. Natural law decrees that production is primarily for consumption, and only secondai'ily for profits. The Government's policy of guaranteed prices is the necessary first step in guaranteeing the true amount of purchasing power necessary, and as it must begin somewhere, it is fallacious to criticise it at its start, as though guaranteed prices were designed for partial application only.

In conclusion, you state that it is "not correct" that "a few controllers allot credit to consumers," so perhaps you will comment on the following quotation from the encyclical on "Labour and Capital," issued to the world in 1931 by the present Pope (p. 36): "In the first place, then, it is patent that in our days not alone is wealth accumulated, but immense power and despotic economic domination is concentrated in the hands of a few, and that those few are frequently not the owners, but only the trustees and directors of invested funds, who administer them at their good pleasure. This power becomes particularly irresistible when exercised by those who, because they hold and control money, are able also to govern credit and determine its allotment, for that reason supplying, so to speak, the life blood to the entire economic body, and grasping, as it were, in their hands the very soul of production, so that no one dare breathe against their will." —I am, etc.,

d. Mclaughlin. [Without attempting to follow the correspondent's involved credit argument, we would reiterate the simple statement that "within certain limitations imposed by the suitability of land, the balance of primary production is guided by demand as expressed in prices. If the price of one product is fixed at an artificial level above what the market is prepared to pay, more of that commodity will be produced and less of the unguaranteed commodity." This means that if the people have sufficient butter and wanfc more wool and mutton they will pay a better price for wool and mutton and marginal dairying land will be used for sheep-farming'. But if the butter producer is guaranteed a price greater than the demand warrants, he will continue to produce butter instead of meeting the demand for wool and mutton. The consequent disturbance of balance can be corrected only by extending the guaranteed price system first to all forms of primary production, and then to manufacture and service—in other words socialising everything. The correspondent appears to anticipate this as he writes that it is fallacious to criticise the system at its start "as. though guaranteed prices were designed for partial application only." But the Prime, Minister last week said "It is all humbug," when statements, made by Mr. Poison that meat and wool were to come under the guaranteed price! scheme within two years were referred to him. Mr. Savage said meat and wool were doing all right, and there was no need to worry about them, if they should get into difficulties, then would be the time for the Government to act. We are justifiied, therefore, in judging the guaranteed price plan on its present scope. Concerning the control of credit, the facta beyond dispute as concerning New Zealand are that there are not hundreds but thousands of small investors, and the greatest influence on credit (apart from the great mass influence of these many small investors) is exercised by the Government with its several powerful financial departments, by the Reserve Bank (under Government control), by one of the trading banks (partly owned by the State), and by a mutual insurance company, controlled by many thousands of policy holders, which the Minister of Finance said was probably the greatest lender next to the State. This is not control by a few. We mention these facts so that an erroneous impression may not be taken, but we cannot further extend the discussion.— Ed.J