Evening Post SATURDAY, OCTOBER 28, 1939. WHEN THE STATE STEPS IN

Evening Post, Volume CXXVIII, Issue 103, 28 October 1939, Page 10

Evening Post SATURDAY, OCTOBER 28, 1939. WHEN THE STATE STEPS IN

It is the Socialist theory that the State can direct and do things ever so much better than the individual. Private enterprise, the Socialists contend, is competitive, duplicative, arid wasteful. Only the Government can avoid these faults and institute a system of perfect co-operation, with supply always equal to demand and nothing short, and demand ahvays absorbing all supply with nothing over. By repetition of the slogan: "Production for use, not profit," the advocates of State control have come to believe that it expresses a profound truth and that the slogan can become a reality if the Government has a hand in everything. Actually the slogan is a specious distortion of economic reality, since it suggests that profit may be divorced from usefulness. It may be occasionally, but never for long. Though the meaning of profit has been obscured by modern jargon, such as the misleading words "profiteering" and "profiteer," originally it was closely related to use. St. Paul advised Timothy to perfect 'himself in all virtues, "that thy profiting may appear to all." Rightly understood, even in the economic sense, profit is the reward of service rendered, and where service is inefficient, or non-existent profit will soon be nonexistent too. Of- course there are anomalies and inequalities, but in the long run the commercial system tends to correct these. Where the Socialist differs from the non-Socialist is that the latter would employ State intervention where he is satisfied, on thorough investigation, or by trial, that it will make the existing system more efficient, whereas the Socialist, obsessed with a theory, thinks the improvement so certain that he would substitute State control for private everywhere. Where the theory fails is that it regards the commercial system as haphazard, whereas it is really finely regulated by numerous factors, and it rejects the idea of profit without admitting that profit must rest on service. In New Zealand we are having an opportunity now of seeing the theory tested out, and we should profit by it—in knowledge, for material profit seems unlikely. Perhaps the most striking instance of the failure of State management is in sterling control and import restrictions. After almost eleven months' Government action—aided by export credits—the position demands more drastic restriction than at the beginning. Relaxation is not in sight. It may be said that this control was forced upon the country Iby circumstances and not deliberately | undertaken. That is so, but the Labour Government long before held that this would be the ideal way of regulating trade. The use of a tariff, it was considered, was a senseless way of regulating trade. The Government should decide what goods could be made in the country, and should prevent imports of those lines from entering. Goods that could not be economically manufactured ! should be admitted without a tariff. Control of sterling funds would, of course, permit the Government to regulate all imports. Experience of this control system in operation, with all its schedules and anomalies, permits and licences, should convince anyone that private trade with all its faults does the job much better. It is difficult, nevertheless, to convince the theorist that his system is undesirable in practice. He usually says, as the credit advocates are saying now, that it has not been successful because it has not been carried far enough. Knowledge of this tendency to go further and further in socialisation in an attempt to retrieve or cover up past mistakes is responsible for the present fear that the Government will seek to perpetuate in time of peace its wartime control of primary products. By becoming the sole seller of exports the Government would tighten its hold upon production and trade, including imports. It could dictate the whole policy of industry and manufacture. Recent experience is anything but favourable to a policy which would have such results. But apart from this bulk buying and selling between Governments has other undesirable features. Wartime negotiations do not reveal them sharply, but suggest them. It can be seen, for instance, that there may be a conflict of interest between buyer and seller. Pursuit of a common aim—the prosecution of the war— enables the negotiations to rbe carried to a successful conclusion. But would this be so certain if there were no war? New Zealand, m peace, wants the highest price possible for her exports —to support a high-cost system. Britain wants raw materials and foodstuffs at prices which will en-

able her tor carry on fyer manufactures in competition with other countries. In Avar New Zealand may agree to sell so that costs of living willnot rise in Britain, but in peace, the argument would be used (as it has been used) that Britain should pay higher wages so that workers could buy more New Zealand products and pay more for them. A good argument if Britain were not dependent upon exports which have to be sold in competition with the goods of other countries. Of course, this conflict of interest arises under conditions as they have existed hitherto, but the question has not been wholly, or mainly, one between Governments. World prices, subject in recent years to some modification by tariffs and quotas, have settled the issue. Quotas and tariffs have been responsible for an element of antagonism introduced into Empire relationships. This would be more acute if the whole business were done by Governments. What would be the effect, for instance, if the British Government were presented as responsible for farmers' difficulties because it would not agree to buy wool or meat or butter from New Zealand at a higher price than it could buy elsewhere? Certainly bulk buying and selling has been undertaken by some other countries, but chiefly by the totalitarian States and partly with political objectives, partly because the ordinary channels of trade have been blocked. The experience has not shown that such State-directed trade fosters either good feeling between nations or material prosperity within the countries practising it. Rather, it has the opposite tendency. Examination of the results strengthens the conviction that Governments can make the best contribution to peaceful trading and harmonious progress, not by taking more into their own hands, but by clearing the channels of trade so that there may be a freer exchange of goods.