LABOUR GOES ROUND AND ROUND

Evening Post, Volume CXXIII, Issue 46, 24 February 1937, Page 4

LABOUR GOES ROUND AND ROUND

(Written by Art]

Let it be said immediately that the first purpose of this article is neither to commend nor to condemn the policy of the present Government, but rather to question it.

The need for this questioning is occasioned by the fact that no previous Government has ever assumed so direct and complete a control over the life of the people. In this respect at least history has been made. Government has interpreted a poll in which it secured only 45 per cent, of the total votes cast as a mandate from the people, all the people, to impose upon this country an autocracy that is tantamount to a dictatorship. Absolute power has been concentrated in the hands of Ministers whose individual personalities must influence to a greater or less degree ihe activities of the particular sphere of life which comes under their dominion. If there were clear evidence of that measure of straight thinking and singleness of purpose which is necessary to the success of any policy a natural suspicion of this form of government might be somewhat allayed and the necessity for question disappear. But is there Cabinet unanimity of policy and purpose? ;

Consideration of any part of New Zealand economic or social life is likely, under the circumstances, to become something of an animadversion of one or other Minister of State. If Cabinet is confused with country it is the fault of Cabinet. If Ministers are sensitive to a criticism which they deem to be personal it is because they have assumed the powers of a potentate. It is certainly not the fault of the public. Arid if their offended sensitivity is expressed by an' outburst of hysterical vituperation instead of a reasoned reply it is simply additional evidence of the true nature of the present regime. GOVERNMENT'S POLICY AND AIMS. Government policy has been announced repeatedly, as the development of the country for the greatest benefit and, happiness to the people. There i.an be no possible quarrel with sentiments such as these. But it has alsobeen stated that the method of development will be the complete socialisation of the country; this is the clear aim of the Government. There is unfortunately no accurately-defined and generally-accepted meaning of the word "socialism." 'The vagueness of its definition is illustrated by the platitudinous generalities thatfor the most part constitute the utterances of its most ardent'adherents. The breadth of its meaning is manifest when it is recalled that Russia is a socialised State, and Germany is ruled by the National Socialist Party. But whatever the local New Zealand understanding of the word may be it is evident that the Government intention to socialise the entire life of the Dominion will involve the whole community. This and the fact that it is as much a minority rule as any of the other dictatorships elsewhere constitutes the need in the absence of any clearly-defined statemerit for some questioning, as much by its most partisan supporters as by those Who are out of sympathy with its intentions. : ' " ' .-.'.■, .New Zealand is in every sense of the word : a trading country. Its external trade <is the highest per capita in the world. More than half the national revenue is derived from exports. The primary industries are the foundation of national economy. Their growth and development have been responsible for the creation of the physical equipment and j local industry of the country. These exporting industries are still the life-blood of the nation. For almost a century there has been an unbroken expansion of the volume of Dominion exports which has led to a consistent programme of development in the physical equipment based upon the idea of uninterrupted progression. Coincidentally with these physical improvements there has been a fairly constant increase in the population. Between 1851 and 1935 there was a gross addition to the number of inhabitants of rather more than half a million through immigration. So long as population increase and the volume of exports continued to expand the country was able to carry a physical equipment greater than its actual need and to maintain a standard of living which by international compari-. son is remarkably high. The buoyant condition of the export trade was reflected internally by a growing demand for local goods and services and for imports from overseas. PKICES AND INTENSIVE COMPETITION. Through the years of the depression the primary industries were faced with two factors which seriously impaired their ability to carry the burden of the nation's relative over-capitalisation: falling prices and more intensive competition. When these two factors' started to affect export revenue the weakness of the Dominion economy manifested itself. The burden of debt seriously affected cost of production, which could not be reduced rapidly enough to retain sufficient margin of profit at "the new low price level. The moment exports declined the demand for internal industry and imports contracted, and because of the relatively small number of people and the nature of taxation the economic life of the country was severely threatened. Costs were incompatible" with prices in all fields of production. At the same time there was a complete stoppage of immigration, a restriction placed upon' the admission of industrial apprentices, and an outflow of population. The recent recovery in Britain, which is likely to remain the principal market for New Zealand produce, cannot be regarded as altogether satisfactory. Unemployment in^that country has to some extent been'absorbed by the industries catering for war purposes. A programme of re-armament which would normally have been spread over a number of years has been compressed into a short period. The immediate result is favourable to .this country; the long-term result calls for serious thought, and preparation for the time when the present armament boom comes to an end. The outlook for primary exports is encouraging. But it is seriously questioned whether this improvement will be maintained over a long period.

The effect of present favourable conditions in the exporting group is a stimulation of internal activities, but it will be fatal to consider the present situation satisfactory. There has been no fundamental alteration in the economic structure of the country. It is still relatively over-cap\talised, still absolutely reliant upon the maintenance, of a high volume of export and still burdened with high internal working expenses which have lost their flexibility through an insufficiency of population that is the more serious because of a revealed tendency to decline. In face of these facts Government policy is, to say the least, disquieting.

. Apparently the vital importance of increased export is realised by the Minister Xor Finance and Marketing.

Ihur Fraser.)

PRODUCTION AND COSTS

SPREADING THE BURDEN

Upon the result of his negotiations in England will depend the fate of the entire financial policy of the Government. Mr. Nash expressed disappointment at the low butter consumption in Britain. The reason is not difficult to find; only 4 per cent, of the population is receiving £8 or more per week. Price is therefore the controlling factor in the volume of consumption. Any falling off of income or appreciable rise in price is immediately reflected in increased consumption of margarine which is "retailing at 7d per lb for the best quality. The British, market is highly competitive, and no patriotism will extend to the length of purchasing commodities at a higher price than is necessary. STATE AND INDIVIDUAL ../. . KE VENUE. An expansion of exports cannot oe expected unless prices are competitive and cost, of production at a level where a margin of profit is still possible.' In other words, there will, be no increase in export if export is not profitable. There is an appearance of compromise between fact and theory in the creation of .what amounts .to a Government monopoly in the dairy industry. It is apparently recognised that export must increase if the welfare of. community is to be improved. It is also recognised that export must compete at world prices. But Government policy is dictated by a determination to force up wages and iiy crease local production regardless of the consequences upon productive costs. In order to meet the effects of the Industrial Efficiency Act by which all industry has been placed under the complete' and final domination of the Minister for Industries and Commerce, and the effects of the Transports Licensing Amendment Act by which, similarly an industry vital to production and an important item in productive costs has beeri transferred to the absolute control of the Minister for Transport the State has had to take over the dairy industry, the largest individual unit in the exporting group.

The guaranteed price by divorcing cost of production from selling price has for the moment saved the export position of this industry- The difference between actual cost of production and world prices is presumably covered by a debit in the Government dairy account. In other words the position remains exactly Cts same -fundamentally except that high internal productive costs are being absorbed by the country at large in order that,a factor vital to national welfare, export, shall not decline. Revision of the guaranteed price is provided for in legislation. But since it is also said that the price will at all times permit of producers obtaining a fair standard of living there is little possibility of a reduction in that price until working expenses are lowered. It seems likely, therefore, that the debit in the dairy account will accumulate from one season to. another. The dairy deficit will probably be a sufficient barrier against any effective or early reduction in general taxation. New Zealand derives practically no income froni sources other than direct production. There is consequently a very- close connection between State and individual revenue. At the pre-' sent time taxation represents more than a quarter of the- total value of all production, and since all income, State and individual alike, depends upon production, which in turn is dependent upon profitable export, it is plain that the. economic welfare of the country is reliant upon exports. ■ ■ SPREADING THE BURDEN. . But taxation is a large factor in the production costs which govern these exports. The economic construction of the Dominion ;is such that the greater portion of all taxation must be indirect.- ■ The fairly even distribution of wealth in New Zealand precludes ■' the possibility of.obtaining necessary revenue by direct taxation on high incomes. <. More than half the receipts from income tax are derived from company earnings which is only another form of indirect levy.; Not more than one-quarter of State revenue is obtained by direct taxes. Government and local body ' taxation .represents something in excess of £80 annually per.family..Expressed differently, this means if the average of all incomes be taken as £300 per annum, then for just one-quarter of the year every family is earning not for itself but for the purposes of State. AH taxation is, therefore, the immediate concern of every individual-in the country and by consequence all expenditure. It follows equally that Government policy is an intimate affair, and when government tends to become monopolistic, the intimacy is intensified. . ' '; The "socialisation" of this country has so far meant a still further increase of taxation. Over a period of three years it is proposed , to-spend £17,500,000 on public works to increase, the physical equipment that is already excessive relative .to numbers. , There is to be an addition to railway milage; in spite of the fact that the railways; are already costing, the .country something in ; the neighbourhood of £2000000 per annum. The effect of licensing and regulation of transport1 and industry is a general increase; m operating costs. Government stimulation of the building industry is unlikely to produce the anticipated effect owing to an acute shortage of skilledlabour due to union restriction of apprenticeship in recent years, and since the export volume must be" maintained the additional costs of production must be absorbed internally, as they cannot be passed on at the present level of world prices. Briefly, the position is that a 1 situation has been created in which the necessary reduction in pro-, ductive costs can be brought about in only one way —an immediate increase: of population. ' : If this is, to use the words of the Prime Minister, the Government's method of preparing the way for itiimi-1 grants, then it would be more reassuring to the general public whose money is being spent so liberally in the "socialisation" of the country if an official pronouncement of its immigration policy were made. Otherwise, such heavy addition to the capita] expenditure and fixed charges of the nation in the1 circumstances may be seriously questioned. New Zealand cannot become a mulberry bush for the vertiginous delights of its Ministers without seriously threatening the very national welfare they proclaim to improve. If the Government is not prepared to reduce the burden of taxatidn which is holding production costs at an unremunerative level and while creating higher prices and larger money incomes is restricting production and lowering purchasing power, it must be prepared to spread the burden over a larger population or run the country into a state of national insolvency. The only visible result of its policy, or perhaps more accurately, the policies of its Ministers, is to create the very problem it sets out to cure. ;