PRODUCTION AND PRICES.

Evening Star, Issue 20582, 6 September 1930, Page 14

PRODUCTION AND PRICES.

As the days go by it is becoming increasingly evident that tho trade depression in New Zealand and Australia extends to tho majority of tho other countries of the world. That being the case, we need, to look beyond mere local causes to find some big general factor operating on a wide scale. It is fairly clear that this general factor is a practically world-wido decline in prices. Recent figures show that in the course of twelve months wholesale commodity prices declined 16 per cent, in Great Britain and America, 13 per cent, in France, 8 per cent in Canada, and correspondingly great amounts in other countries. The fall is the most rapid since 1920. Tho cause of this fall in prices seems to be closely related to tho great increase in world production in recent years. A paper recently issued by the Economic Section of the League of Nations gives some illuminating figures. From 1913 to 1928 tbo world’s population increased by ID per cent.; the production of foodstuffs and raw materials, however, increased 25 per cent., and world trade is estimated to have increased some 22 per cent. Incomplete figures also show an oven more striking increase in 1929. One notable figure is that of electricity production, which between 1925 and 1928 increased no less than one-third. South America seems to be the country in which the increase is greatest, for from 1913 to 1928 investments of American -capital had increased from £40,000,000 to £440,000,000, and in six years the total foreign trade of South America increased from £493,200,000 to £895,800,000, exports increasing £200,000,000 in one year. This means a strong competitor to other raw material producing countries. It is hard to believe that everyone in the world is satiated—that there is overproduction. Obviously there is not. Yet somehow or other the 1 world scorns to have too littlo power to absorb plenty when it succeeds in achieving it. Theoretically, the more any country produces tho greater should be its purchasing power for tbo products of other

countries. So also with the individual. But for some reason no sooner does increased production take place than the producer is dismayed to see the price of his product fall. Of course, in time he also comes to pay less for what he himself uses. But the time of transition is a very trying one. It is apparent we are living in such a period now. Prices will probably fall still further. It is painful, however, to bring them down, and the process should be made as gradual as possible. In this connection finance institutions should play their part. The Royal Bank of Canada, in a recent review, suggests tho need of further control and easement of credit conditions before tho deflation in market values can bo stopped. The central reserve banks in America and Europe aro co-operating to reduce their discount rates. How much further they will go remains in doubt. In such a maelstrom of world forces does our small country find itself involved I