Evening POST. FRIDAY, JULY. 30, 1937. "COST OF PROSPERITY"

Evening Post, Volume CXXIV, Issue 26, 30 July 1937, Page 8

Evening POST. FRIDAY, JULY. 30, 1937. "COST OF PROSPERITY"

I\'o Government willingly takes the blame for bad times; but-when good limes come the Government in power attributes the prosperity to its own beneficent administration. It is not surprising, therefore, that the Hon. P. Fraser should claim for the Labour Government the larger share of credit for the Dominion's apparent recovery. Indeed, Mr. Fraser may be considered politically modest in not claiming all the credit. He did not do so, but attributed the revival partly to relatively good prices for our exports. That is undoubtedly a fact. It is also a fact, which we would not attempt to deny, that the Government's programme of higher. wages, heavy spending from revenue, loan, and credit, liberal relief and sustenance, has effected a redistribution of income which is for the present shown in greater spending power, bigger imports, and rising sales. The question we would raise is not whether this is mainly attributable to better export returns, to the drastic reduction in. mortgage and other interest and rents made by the previous Government (at the expense of one section) or to the present Government's legislation. More important than this is the question how far the present revival, in so far as it is attributable to Government legislation, is a permanent foundation for prosperity,, and how far it is merely an unstable basis upon which a tcm-. porary business boom is being built. In his speech of welcome to Mr. Savage yesterday, Mr. Fraser admitted that there were complaints. "I do not overlook a certain amount of voluble dissatisfaction of which the most is being made by those opposed to the Government," he said. "I am bound to say. however, that much of it can fairly be described as an anomalous protest about the cost of prosperity." What Mr. Fraser meant is not clear. He may have intended to 'imply that people who have higher wages should not protest against resultant increased prices, or that it is anomalous to mention higher taxation when the Government points with pride to an expenditure from revenue £5,000.000 greater than the previous year. Whatever ' Mr. Frascr's meaning, his phrase "the cost of prosperity" deserves some attention. As Acting Minister of Finance, Mr. Fraser knows that the present prosperity lias a cost. Those who make the "anomalous protest" do so, because they fear that, in the end, the cost may overshadow the prosperity. The growing complaints of higher production, manufacturing, and living costs reveal beyond question that the prosperity has not been induced without incurring a liability which is heavy now, and would have been hard to bear had it not been for the recovery in export returns. It may yet become so burdensome as to offset the gains accruing from both the export returns and the Government programme. We do not require to go for proof of this to the complaint made this week by the secretary of the New Zealand" Manufacturers' Federation. the accuracy of which'is disputed by the Minister of Industries and Commerce. Mr. Sullivan himself admitted several months ago to the Labour Conference that he had received numerous complaints regarding costs and lie warned the conference not to press for benefits which would retard industry. Apart from this admission we have other warnings of the growing volume of imports, leading to. fears .that the market for domestic manufactures will be undermined through inability .to absorb existing stocks. The effect upon primary industries must also be taken into account. Dairy farmers now arc clamouring for an .increase in the guaranteed price to meet higher costs. It may be granted to them, hut whether in sufficient'measure to satisfy their demands is doubtful. But what of the export producers who have no guarantee? As the president of the New Zealand Sheep Owners' Federation correctly pointed out security by guarantee for a particular group "would be an unobtainable objective without undue hardship .on those sections of production whose product would lie required to make up the difference between profit and loss to the individual section of-.farmers guaranteed security of profit by this method." . • Not the least important question related to the "cost of prosperity" is its bearing upon the Government's programme. When interviewed oii Wednesday the Prime Minister paid that be_ had stated in England that if New Zealand could find no market for her expanding primary produce it would be/essential for us to endeavour Lo fad-Hfate a more balanced economy

by building up local manufacturing industries and thus extending our internal market. Plow can this possibly be achieved if one part of the Government's policy operates'directly lo raise the costs and reduce the competitive power of domestic industries? The Government will be confronted with a conflict of policy similar to thai which it discovered when it pursued an internal inflation policy that hindered, and still hinders, fulfilment of its definite promise lo reduce exchange. Expansion of domestic industries would be difficult enough in any circumstances in a comparatively small market. Tf that market is weighed clown with high costs the task threatens to become impossible. In fact instead of.the promised expansion, the Government may have to resort to all kinds of doubtful devices such as price control and licensing to avoid severe contraction. There is, indeed, the gravest reason for1 the Government to calculate anew the "cost of prosperity," or else we may find the cost becoming steadily more and the. prosperity steadily less. '