MAIN PROBLEM

Evening Post, Volume CXXX, Issue 9, 10 July 1940, Page 9

MAIN PROBLEM

TO PRODUCE MORE

REMOVING SHACKLES

LIVING STANDARDS AT STAKE

In its latest bulletin the Canterbury Chamber of Commerce, in association with the Department of Economics of Canterbury University College, emphasises the importance of greater production in wartime. New Zealand's most urgent needs are to provide a maximum war effort and to minimise as far as possible the reduction in the standard of living which war makes inevitable. Both these ends can best be served by greater effort, more efficiency, and improved direction of production.

"The distribution *of expenditure by both Government and people will determine the kinds of things that are produced, for it is this expenditure that creates the demand to which production responds. If the Government continues to spend large sums on public works that are unproductive and unessential, then productive capacity will continue to be used for public works, and the war effort and the standard of living of the people, which depend on real and essential production, will be correspondingly less." Import control, rationing, and pricefixing may restrict the people's expenditure in some degree, but such devices are seldom creative and do not stimulate production of the right kind. MORE STIMULATION. The bulletin reviews the Government plans to stimulate, and assist production but concludes that these cover only a small part of the adjustment required to give a real stimulus to total production and to permit of a maximum war effort combined witlv a minimum fall in consumption. Therei are other possibilities to be explored, j Production is guided by net returns, j Such net returns depend on the mar-! gin between costs and prices. Given j stable prices, the area of the field for payable production is determined by i the level of costs. Lower costs widen the profit margin and reduce losses, increase the area of payable produc-' tion, and so provide the strongest stimulus to increased production. Higher costs have the opposite effects. The surest and simplest way therefore to increase production and to secure real economy and efficiency of productive organisation is to remove all impediments to lower production costs. IMPORTANCE OF COSTS. "There is much room for cost reduction by the removal of many factors which at present obstruct production. The legal limit imposed by the 40-hour week provides a useful example. It should be obvious that, i other things being equal, more can be produced in longer than in shorter hours. Longer hours and more production would spreac! the overhead costs of production over a larger output and thereby reduce total costs per I unit of output. Similarly, if production is to be increased, there is a real need for the suspension of restrictions and regulations which- hamper enterprise and increase its cost. Industry, trade and transport of all kinds are today shackled by regulation to an extent greater than ever before. The cost in time, effort, and money wasted by industry in conforming with regulations, in the curtailment of enterprise and production, and in the maintenance of public servants responsible for regulation and inspection, is very considerable, and almost certainly exceeds substantially any gains that may accrue from such regulation. If industry and the community it serves were freed from these costs, a much more real economy would be possible. This would permit the expansion of enterprise and employment and would liberate money,and men for more useful activities. The restoration of a much greater- measure of freedom from regulation, within the limits imposed by war conditions, would go far to restore flexibility to private enterprise and enable it to adjust itself much more readily to the changes which must accompany the reorganisation necessitated by war. GREATER FREEDOM. "To free industry from present restrictions which impede production involves not only the suspension of the present limitation of hours, but also of trade union restrictions, and of the rigidity of Arbitration Court awards, together with the modification of regulations untier the Factories Act and of the present import control. Jn the field of production, voluntary co-opera-tion, directed towards the common end of more effective organisation, aiming at more production, and freed from the inflexibility of legal regulation, would itself do much to stimulate the increases in production that are so vitally necessary. In the field of import control, it is realised that exchange control, must be continued, and that foreign "exchange, as distinct from sterling exchange, is in very short supply and must be closely rationed. But if importers were left free, within the limits of the sterling and foreign exchange allotted them, to buy goods not competing with home products when, where, and how they chose, their long experience and special knowledge of sources and channels of supply for the goods their customers need might be fully utilised for the benefit of the community and of national production." It is emphasised that, while high costs bear directly on town industries, primary production would also be helped by measures which reduced costs or increased efficiency in ancillary industries. URGENCY OF ACTION. New Zealand, the bulletin concludes, has not yet faced fully and frankly the question of how to concentrate every effort on securing the greatest effectiveness in the production of what is most needed, and to remove all obstacles to such concentration. "Manpower and resources constitute the bases of wartime economic policy. At present both man-power and resources are in some cases idle and wasted, or directed into unproductive channels \ such as relief works and unnecessary public works. The situation demands the redirection of the latter into genuine, and necessary production, and provides opportunity for the employment of the former. New Zealand is rich in certain resources, she has as yet been little affected by the war, j and reduction in her man-power is relatively small. There is, therefore, ample scope' for increases in production. It is realised that time is needed to make the necessary adjustment and to revise existing organisation, but time is short, there has already been delay, and the need for speedy and decisive action is urgent."