ECONOMIC TRAGEDIE

Evening Post, Volume CXXVIII, Issue 4, 5 July 1939, Page 9

ECONOMIC TRAGEDIE

OUR BUYING LIMIT

NO STERLING, NO IMPORTS

CAN WE MAKE OUR OWN?

Economists are not dramatists, but Dr. Roy Gardner almost imparts dramatic values in his 110 pages essay t "The Basis of Prosperity in New Zealand," published in Dunedin with a foreword (approval with reservations), by the Hon. W. Downie Stewart.

The dramatis persona© are Exports, a Benevolent Gentleman;- Interest, a Voice out of the Past; and Imports, a Crafty Person who comes and goes. Exports can never get rid of Interest, who clings to him closer than a brother, and who is his First Responsibility* The Second Responsibility of Exports is Imports. Together they taka all that Exports possesses. When Exports waxes fat, Imports takes from Exports all his margin (except what has already been taken by Interest). Exports is obsessed by two great Worries: (1) that he will become too thin to satisfy Imports; (2) that he will become even too thin to satisfy Interest, This latter is the Supreme Tragedy that overhangs the drama like the drums of fate on the Greek stage. The Supreme Tragedy never happens (at any rate, not in Dr. Gardner's essay) but all through there are the Minor Tragedies of the successive fattings and thinnings of Exports, reflected at once in the leech-like Imports, who is in a sense the Heavy, Villain.

One of these Minor Tragedies resulted in the restricting (or "selecting")] of imports by the New Zealand Government. This realism can hardly ba expressed in the lyrical measure of classic drama. Dr. Gardner puts it this way: "Overseas conditions, do. control one factor—by controlling the yield of export trade they control the volume of imports. But it is within our power to choose the sorts of goods we import. . . ." Assuming that exports wax fat, and produce in a given year an extra million pounds, Dr. Gardner writes: "A point of great importance is that the extra million pounds cannot in any circumstances be brought to New Zealand in any form other than, imports. It cannot be changed into New Zealand money and used to pay for services or goods in' New; Zealand.* (It can, however, be applied/to reduction of external debt.) , IMPORTS: UPPER AND LOWER LIMITS. The net result, in existing conditions, is that as exports go tip, so also imports go up. Imports..gofright up to the limit set by exports (minus interest) and not beyond - (unless by increasing the external debt). Imports, an embarrassingly variable have that upper limit. To c quote Dr. Gardner's own words, "the value ia oversea markets of our exports, tQgether with the effect of;theexistences of the overseas debt, fixes an impassable upper limit to the total of goods we can import (without going further into external debt) irrespective of whether these imports,, are raw! materials or manufactured gop^a ready; for use." ... ?" That is the upper-limit of imports. What is the lower luxiit? The import limit on its lower side is "the cost, ta their cheapest form, of materials which we need and cannot .(on. account of physical limitations) produce,'^ This lower limit excludes, q|\jfour|e, the possibility of the partial jot cSinpleta deprivation that would overtake New Zealand if it could not payj for lower; limit imports through lack of the only means of payment—the; proceeds o< external sales of our exports. The proceeds of exports sold in external markets being uncontrollable by New Zealand, the amount of external currency that is available to buy; imports up to the upper limit is also uncontrollable. But it is contended; that New Zealand can select its imports, increasing local . manufacture and substituting more or less-stabil-ised imports for the widely-fluctuating! imports that now rise and" fall with uncontrollable export values. BUYING UP TO THE LIMIT. Dr. Gardner writes:~ MWe can buy] ready-made goods right up to the limit of available overseas currency from year to year, or we can restrict im«» ports to absolute necessities and to completely raw materials, pay off our National Debt as soon as possible, and thereafter import an absolute minimum and export just sufficient to pay, for those imports. Or, of course, we can adopt any intermediate policy.'" (Reverting to the earlier concept cf an economic drama, it is now clear that Dr. Gardner's plan is to slim the variable Imports, abolish Interest and that external debt which Interest represents, and thereafter slim the Benevolent Gentleman Exports to his appropriate proportions. By x degrees to good angel Local Manufacture i* appearing on the stage.) To quote again: "Under present con* ditions when all; available external money is being spent in imports, a drop of, say, a million pounds a year in export values must be followed by, a drop of a million pounds a year im imports. The only other courses open are default in interest payment and further borrowing abroad." But "by; altering the nature of the imports to less completely manufactured goods and by manufacturing more ourselves,*' we might have "the same total of goods for consumption." NO HASTY ADJUSTMENT POSSIBLE! Such a change i'toight even s . owing} to fuller employment and better cir«* dilation of money within New Zea* land, result in a higher level x>f prosperity. Unfortunately, the necessaryj adjustments are complex and cannot bar made either easily or quickly." Whether these complex changes cait be accomplished at the speed rate assumed by the Government's industrial expansion plan the author does notj say. He agrees that local manufacture! might be on a higher cost level than! the imports cost'level that would exists when (if): exports show a sufficient surplus, which exports may not alwayg show. But, he asks, "is it better to make things ourselves and be sure ofj having them, or to buy^theh\ cheaply] when the export yield>is high- and go: without them> altogether when-vtHe export yield is low?. For we caiinbt have* it both ways.*'MH^ thinks exports a* a future date may fall to a point at} which New. Zealandl can buy only the most necessary Imports., Dr. Gardner does hot attach perfect tlon to imports restriction by licensing* "Probably the best way is to have aIH three methods working—a moderately! protective Customs tariff, to be raised! if the present level is not found suffU cient, an exchange rate stable at about) its present level, and a system of licensing imports tan-be* used with restrictive effect if necessary." The unknown factor, is, ■of course, what, New Zealand manufactures will cost the consumer, and on this xt 4 can. throw any complete Xignj* j

ANSWER TO CORRESPONDENT.

"Once a Tory."—Such a general condemnation would start an acrimonious discussion. Any •suggestion of interference from New Zealand would be thoroughly resented.