FREE MARKET DESIRED

Evening Star, Issue 21007, 22 January 1932, Page 13

FREE MARKET DESIRED

THE FARMERS’ ATTITUDE SACRIFICED FDR SHOPKEEPERS [Per United Press Association.] WELLINGTON, January 21. The Farmers’ Exchange Committee, appointed by the recent joint conference on producers’ interests, in replying to Sir George Elliot’s comments on the exchange question, as quoted in tho Press, states that tho interview as given contains a misstatement of fact. Sir George was reported as saying: “ The proposition that has been put before the Government is that the New Zealand exchange rates should be placed upon tho same level as the. Australian rates.”

“This is not the proposition,” says tho committee. “The proposition put forward by the farmers’ deputation to Cabinet Was that the Order in Council fixing the rate of exchange should be withdrawn and the exchange market left free, in tho same way as it is in other parts of the British Empire. The farmers’ deputation added that if the Government would not do this it should fix the rate at that level which it would reach under a free market. Sir George further stated that ‘ any interference with tho exchange rate is r dangerous experiment.’ In this we entirely agree with him.” Tho stateraent_ continues: “Farmers don’t want any interference in the exchange rate. They simply want it left to a free market. Sir George, while objecting to interference, then goes on to support interference, and gives a qualified admission of such interference by the banks by saying: ‘ The present rates have been determined to a large extent by the operation of supply and demand. The same forces will continue to regulate them.’ Tho farmers want tho exchange to be fully, and not only partly, determined by the law of supply and demand. Supply and demand have been affected in the past by largo Government borrowings in London, which have been to tho great disadvantage of New Zealand farmers. Now that overseas borrowing cannot continue the Government has. by Order in Council.

slopped all competition for exchange. It is idle to say that supply and demand will continue to regulate the exchange when the demand is confined by Government action to one buyer. “ Sir George again says: ‘ Can our merchants and shopkeepers pay the extra exchange costs themselves or add them to their prices?’ Sir George is this special pleading on behalf of importers and retailers is advocating taking the farmers’ property from them at less than it is worth in order that the merchants and shopkeepers may buy cheaply. Can we not reverse his statement and put it this way: Can farmers afford to accept those low prices fixed by an unfair exchange rate in order that merchants and shopkeepers shall buy cheaply? The answer is definitely No, and unless free exchange is applied the farmers are facing inevitable disaster. “ The eifect of the Government Order in Council is to stop all competition for export exchange, and thus prevent it from finding its own proper market level. The farmers are the only suppliers of export exchange from New Zealand, and the action of the Government is taking the farmers’ property from them at less than it is worth. “ The situation is summed up thus; The farmers sell their export goods for English money; they then sell that English money for New Zealand money; the Government is taking from them their English money at less than its market value in New Zealand, and the effect of this is to hold down the price of the farmers’ export products, and as the price of the farmers’ products sold for local consumption is fixed by the export prices that action also holds down the prices the farmers get for their products in New Zealand cities and towns. The result ■is that the farmers are now, on the average, getting for their products the lowest prices for forty years, and are fast drifting to ruin. “ Sir George says he is sympathetic with the farmers’ difficulties. The farmers would like to see that sympathy shown in a practical fashion by the liberation of the exchange, so that they could secure full value for their products on the world’s market as reflected in New Zealand money. They want nothing more than that. Unless they get that they will infallibly he ruined. Statistics show that for flu ten months January to October, IfMI. the farmers’ export price index las fallen to 874, while the farm cost index remains at 1,500. Farmers earn-.: continue like this. They have cm their costs inside their fences to the bone, but their chief costs are muside their fences and are beyond their control. These costs, which are inelastic, move slowly. “ The free exchange rate is a natural corrective, spreading the effects of the slump over the whole community. The action of the Government, which Sir George Elliot is supporting, is fastening the whole effects of the slump on the necks of the farmers, in order that merchants, shopkeepers, and others can buy imported goods and farmers’ products cheantv.”.