WHERE SUBSIDIES LEAD.

Evening Star, Issue 21821, 10 September 1934, Page 8

WHERE SUBSIDIES LEAD.

“ To-day the Government seems to regard itself as a kind of Divine Providence that must watch over the welfare of every industry—with the aid of the taxpayers’ money. It seems to have become the policy of the Government to give subsidies to every industry that complains that matters are not going well.” This was written—by Mr Harold Cox in 1 The Times ’ Trade Supplement—concerning the British Government, but it might apply with equal force to Australia, and with nearly equal force to New Zealand, llepeatedly we have sought to draw attention to the very questionable results attendant on our own Government’s general subsidy to primary production for export by its currency manipulation, and we know that the appetite grows by what it feeds on. At present the community is awaiting the presentation of the Dairy Commission’s report, and wondering whether one of its recommendations will be the granting of a direct subsidy on top of the present indirect one, this having been unblushingly advocated from within the dairying industry. A Government which loudly called for increased production to countervail low prices may be in a difficult position when confronted with the natural results. Nevertheless, it has a plain duty to the, community as a whole. A subsidy, once granted, is a most difficult thing to discontinue. And, help having been granted to one particular industry, it is difficult to deny it to another industry, especially as this country is not deficient in special pleaders capable of putting forward the most specious and plausible of cases. With the community taxed as it already is (and, according to Mr Stewart, showing a spurious rather than a real resiliency under the pressure despite Mr Coates’s claims), no conscientious Cabinet can surely contemplate an incalculable increase in that taxation in pursuit of a policy of encouraging a surplus production that would make doubly certain of all production being at a loss even greater than any of it may be already. One learns from one’s own experience and that of others, it is cheaper to learn from that of others. For that reason we would like to draw particular attention to Mr Harold Cox’s examination of the British Government’s policy of subsidies and whither it leads. There are Subsidies for the production of sugar (from beet) and of wheat, to be followed by subsidies for beef and for milk (if dairying quotas fail), and loans for producers of bacon and herrings. There is also a subsidy for tramp shipping, and Mr Walter Elliot indicates that many more subsidies will soon form part of the official programme. Mr Cox investigates a few results. The seven years of the beet subsidy, 1924-31, for which full results are available, cost the State £30,000,000; the damage done to the sugar cane industry in British West Indies is incalculable; and so is that done to the British shipping formerly engaged in sugar transport. The wheat subsidy was promised at a time when the United States Government was buying up wheat to be burned and .the British Government itself was urging a reduction in wheat production. Showing how one subsidy leads to another Mr Cox points out that inevitably the beet subsidy, the beef subsidy, and the wheat subsidy have led to the subsidy to tramp shipping—let alone other subsidies demanded on the ground of fair play. There is no logical stopping place. “ If,” says Mr Cox, “we are to continue to provide out of the Exchequer money to meet these various claims, soon we shall find that in the attempt to make the unfortunate rich we have only succeeded in making the general body of taxpayers poor. There is good luck and bad luck in life; there are ups and downs in trade; but no Government can smooth out everything by smiling benevolence with other people’s money.” It may engender hope in the New Zealand producer for export to learn that the further Mr Walter Elliot goes with his British agricultural programme the more opposition he encounters. This is particularly so in the beef industry. “No one but Mr Elliot,” states the 1 Observer,’ “ could have obtained Government sanction for a further £3,000,000 subsidy for beef, but it is quite inadequate.” It represents 10 per cent., as against 100 per cent, for wheat and sugar beet. It represents £1 a beast to rearer and feeder, whereas in 1933 the feeding entailed a loss of £3 to £4 a beast. Moreover, it is doubtful if that £1 (or what part thereof) will roach the feeder or rearer. The ‘ New Statesman ’ takes up, along with many other journals, that side of the question. It describes Mr Elliot’s Cattle Industry Bill, with its £3,000,000 subsidy, as a makeshift, and a poor one at that. For the vast sum of public money which will be dispensed under it is not all going into the pockets of the unfortunate British farmer. A great part of it is going, as Mr Wilmofc, M.P., put it, ‘‘to maintain the unjustifiable profits of those who prey on this industry, the middlemen.” Mr Elliot, in the House, made some smart debating points, but he did not dispose of this charge. He scoffed at the idea of some “ highly organised trust wringing profits out of the industry,” and suggested that “ the difficulties of the distribution of home-killed meat . . . show the faults of small businesses,” and that “ there is inevitably some waste.” There is, indeed, a great deal of “ waste ” ; whether it is inevitable is another matter. But the immediate question (to which most of us would like Mr pllHot to give a plain answer if be can) is who exactly it is between the farmer and the shopkeeper that has been “sucking away the difference between profit and loss,” and is going to get a handsome share of this £3,000,000 subsidy.

It is, however, the hard-hit British shipping industry from whom the bitterest internal opposition to Mr Elliot is coming. This year, for the first time in forty-one years,- Furness, Withy, and Co. “ passed ” the dividend on the ordinary shares, wisely transferring diminished profits to depreciation reserves. In the course of his speech at the annual meeting Lord Essendon, a recognised high authority on. shipping problems, said that the

competition of foreign vessels which were subsidised was easy to explain and understand, but they bad had to contend with more insidious difficulties which had arisen out of the nationalistic policies of various Governments, including the British Government, all of which had tended to reduce the volume and the natural flow of international traffic. The Government had introduced a series of restrictive quotas, with the result that shippers were compelled to restrict their output, and their ships were consequently unable to obtain the cargoes which they bad hitherto carried. Deferring to the Argentine meat quota, he said it had failed to raise prices of home-grown beef. Argentine beef was still considerably cheaper than the home product. Therefore, without doing any good whatever to the farmer, grave injury had been done to other industries, and the measure of the injury suffered by the shipping industry could be estimated from the fact that the restrictions imposed and announced would represent a loss of freight in the first two years of controlled imports of over £500,000 sterling. That was only part of the injury, as the restrictions had also involved loss of employment for officers, engineers, and seamen, and export manufacturers had suffered from the reduced buying power of the Argentine. And, it may be added, what applies to the Argentine applies with equal economic force and far greater sentimental force to Australia and New Zealand. The fact admitted by many British investigators, that Mr Elliot’s “ reorganisation ” has complicated, not solved, the farming problem in Britain is being reinforced continually by reports of complications in many spheres other than farming. Surely their cumulative effect on Mr Elliot—or his Cabinet colleagues—should soon he visible. Subsidies accentuate chaos.