INCREASED PRODUCTION.

Hawera Star, Volume XLVI, 18 September 1926, Page 6

INCREASED PRODUCTION.

(To the Editor.)' Sir—lt must he a rare, if pleasing experience for tt misguided, newspa-pcr correspondent to find that the papci which publishes his humble effort devotes a loading article in the same issue to pointing out “some of the chief weaknesses ” of the argument aclTn fpel that however far one

nijiy have strayed from the path of political and economic orthodoxy there is at least someone anxious to guide one's feet back to the straight and narrow path is indeed comforting in these days when so many are allowed to grope* blindly about in the darkness of ignorance and errors. As my views on the validity of the cry for “more production ” are the result of reading several hundred books and some thousands of articles on every phase of the economic problem, it was hardly to be expected that one short article of less than a column'would suffice to convince me of the error of my ways—assuming

this to have been the object of your Saturday’s leader. Still, I admire optimism wherever it manifests itself and would be guilty of gross ingratitude if I did not reciprocate at least to the extent of exposing the main weakness in your own position. Your “ earnest but biassed correspondent” freely admits his bias, but claims that he is biasesd in the right direction. Out of consideration for your space I do not propose to traverse the earlier part of your article further than to point out two things:— 1. When referring to the possibility of a farmer turning his resources to some alternative use I did not suggest that EVERY farmer would convert ALL his resources to an alternative use, but I did suggest that SOME -would convert PART to some alternative use, and this I think accords fairly accurately with common experience. The case of wheatgrowing is in point. A sharp fall in price finds many prepared to abandon wheat-growing. The consequent reduction in supply increases the price, and

su mu lariiiur exercises some cuuuut over the price. The same tendency will operate over a wider area supplying a world market and does give farmers “some” measure of control. I did not assert that it gave any great measure of control. I was merely arguing against your contention that he exercised “absolutely no control.'’ It is always dangerous in such matters to speak in absolutes. 2. I think you are w'rong in claiming that “the ((Arbitration) Court has power to vary an existing award if increases in the cost of living can foe shown to warrant such variation. ’ ’ Has not the legislation enabling this to foe done lansefl? I think the nosi-

tion now is that any increase found to be warranted by changes in the cost of living can only become operative when a new award is made, which may be as long as two years after the cost of living rises. What I mainly wish to combat, however, are your views on “increased production. ’ ’ Permit me to quote a few cases where the policy of unrestricted production has not stood the test of practical experience:— 1. Speaking in' the New Zealand Parliament some fortnight or so ago on the report of the Parliamentary Committee that considered the petition of the timber industry for more protec-

tion, the Hon. A. D. McLeod said: “It appeared that there had been an overproduction of 25 to 30 million feet of timber in New Zealand, and that there was a tremendous accumulation of timber in the yards. . . What was wanted was to get back to the production of the amount that the country could absorb.” Here is a case where “increased production” has landed an industry in difficulties and “reduced production” is hinted at as the remedy. Will the Star say that the Hon. McLeod’s advice was unsound?

2. Recently Sir Alfred Monel* eminent industrialist and Tory M.P., lias been acting as chairman of a Government committee investigating certain aspects of the British, coal problem. He was reported three weeks ago to have said that 15 per cent, too much coal was being produced in Britain in normal times. He pointed out that when more is produced than is demanded, the surplus causes a price slaughter because the competing proprietors are all under the necessity of converting their output into cash. He proposed that production should be limited to demand. Will the Star say that he was wrong? 3. Recently Mr J. M. Keynes, Britain 's most eminent economist, in writing against the Bill extending miners' hours from seven to eight, stated that "A temporary five-hour day might help the coal industry. But a temporary eight-hour day is a ludicrous plan.” As he pointed out, “If all the miners were to work eight hours we could not sell the coal produced even if we were to capture the entire export trade of Germany and thp United States.” Will the Star say that Keynes was wrong in proposing a restriction of output? . 4. The position of America to-day, especially in connection "with farm products, is a striking illustration of the difficulties caused by uncontrolled production. The problem of disposing of the surplus of farm products is known to every reader of American economic and political journals to be causing the gravest concern, and the next election will be fought mainly round this issue Ojf the disposal of the export surplus of farm products. Any further increase of production would greatly aggravate the position, and everything points to the adoption of a policy of restriction in the near future. 5. There is the clearest evidence that in recent years restriction of production has been systematically practised in almost every country in the world—not out of the perversity of the -workers, but as a matter of high industrial policy at die instigation of the capitalists. Down to the close of 1920 there had been a rise in prices in progress in practically every country. Then owing to the decline in purchasing power among at least two-thirds of the inhabitants of Europe, there ensued throughout .1921 a general fall in prices. No other happening of the post-war epoch had proved so disconcerting to the capitalist class. The capitalists therefore, whose unceasing plea (both as men of business and as humanitarians) had been for “more production,” now suddenly and in cold blood devoted their energies to “the arrest of production.” Between January, 1920, and August, 1921, the monthly output of pig-iron in the United States declined by more than two-thirds, in Britain by about 40 per cent., in Sweden by more than half, in France by one-third, and in Belgium by two-thirds. In the United States the amount of cotton produced in 1921-1922 fell to half the production of 1914-1915. The falling off in Egypt was proportionately even greater. On September 24, 1920, the Rubber Growers' Association circularised its members asking for a 25 per cent, restriction of output. On November 22, 1921, the association reported that, as a result of the advised restriction, or by spontaneous action, the yield of rub-

ber bad been reduced by fully onethird. ' A committee appointed by tlic British Government to explore the possibilities of compulsory restriction attempted to induce the Dutch Government to join in a scheme covering both Dutch and British territories. Iu 1920 the Indian tea growers (British capitalists) resolved to restrict output to S 5 per cent, of the average production of the preceding five years, with the result that the retail price of tea increased by 4d to 6d a pound and dividends rose from 9.3 per cent, in 1922 to 19.2 per cent, in 19,23. In all these cases a fall in prices was met not by “increased production ’’ but by “restricted production.” Ido uot advocate “restricted production” in this sense, but I do claim that the only sound policy of production is to “restrict production” to the amount that the market can absorb. No matter what the product may be, whether it be butter, cheese, cotton, rubber, pig-iron, timber, meat, Hawera Stars, oi T any other indispensable commodity, there does not exist an unlimited market. It is one of the most glaring contradictions of ithe capitalist system that we can have surplus production on the one hand and unsatisfied needs on the other. You defend this system and must explain this contradiction; I do not protend to defend it. To advocate wholesale increase of production under a system which does not allow freedom for consumption to expand, but which definitely limits the consuming power of the great majority by Arbitration Courts and standard wages, is little short of economic lunacy. I again suggest that the root of our economic difficulties lies in the maldistribution of the product of industry or of the power to consume what is produced, and not in any fatal defect in the machinery of production. Look after consumption and distribution, and production will look after itself. Tail to safeguard or increase the consuming power or the purchasing power of the mass of the people, allow their' standards of living to be attacked by lowwage fanatics, and production must inevitably be curtailed, though the editorial inkpots run dry in preaching “more production” as a supreme national duty. I therefore Tepoat my invitation to the Star to drop its advocacy of “more production,” at least until the more urgent problem of securing a more equitable distribution of the product of industry has been tackled and solved, by which time sermons of the need for more production will have ceased to be necessary, and it will be to the interest of all to see that the productive resources of society arc used to the fullest advantage for the benefit of all.—l am, etc., * W. A. SHE AT. Hawera, September .13.