PRICE DISPARITY.

Hawera Star, Volume XLVII, 26 April 1928, Page 9

PRICE DISPARITY.

INFL UENCE OF A HBLTR ATI ON COURT. FARM ECONOMIST’S VIEW. Has the compulsory fixing oi wages by the Arbitration Court been an important factor in causing depression in ou r rural industries ? This question is discussed in a paper submitted to tne industrial Conference by Mr. D. U. Williams, M.A., Economist of tlie Massey Agricultural College staff, lie comes to the conclusion that the Arbitration Court’s influence in causing price disparities is unimportant, and that if its abolition is to be urged, tiiis should be done on other grounds. To condemn the Arbitration Court as an influence in causing price disparities which have prejudiced the farmer in New Zealand, is not jus tilled. stated Mr. Williams, lie submitted that our rural depression is largely due to the fact that prices of our primary products have fallen taster than other prices, and that this gap between primary and other prices is brought about partly by .deep and persistent causes related to the peculiar nature of the demand for, and the supply of primary products. The Act is conspiciously placed and vulnerable to attack. My object is io show that the importance of the Act, as a determinant, has been vastly exaggerated, and that the same price disparities occur where Arbitration Courts do not exist. In doing this J hope to reduce the Act to its proper dimensions in the picture. The Act is not an economic Goliath tQ' be slain by a valorous David.” WHERE THE FARMER GAINS. The speaker proceeded to discuss the difference in the rate of movement of primary and other prices, pointing out that in a period of rising prices, fanners gain more rapidly than other sections of the community, unless Government intervention in the form, of price control checks the movement. But in periods of falling prices, farmers' lose more rapidly and to a greater extent than the other producing groups. Whichever way prices move, a gap occurs between the prices of primary products, and the prices of other products. When prices are rising, the gap is in favour of the farmer; when they are falling the gap is against the farmer.” Tracing the movement of prices in New Zealand, Mr. Williams showed that the peak of the farmer’s purchasing power was reached in 1917, when it was about 22 per cent, higher than in 1914. After 1917, other prices began to catch up, and the farmer’s purchasing power to decline. After 1919, the farmers’ prices began to fall, while the other prices continued to rise and did not fall until about 1920. Thus Hie break in farmers’ prices occurred about a year before the break in other prices. If primary products are the first to rise, they are also among the first to fall, and on the whole they fall further than other prices. Mr. Williams .showed that from 1919 onwards, the average purchasing power of the farmer was only 89 per cent, of that of 1914. “'Plie most obvious fact that emerges from these considerations is that primary producers have less resistance to 1 price falls than have other groups.” The reason for this is explained by Mr. Williams. It is difficult to the farmer to meet a time of rising prices by rapid increases in supply, and correspondingly, when prices are declining, it is even more diffiicuit to decrease supplies, as capital investments undertaken in the rising price period may not come to fruition until the time of lower prices, hence surpluses are most likely to occur at the worst moment for the farmer. A surplus in primary products has more effect in depressing values for the reason that the demand is fairly constant, and does not increase much in response to lowered prices. Production programmes must be made well in advance, and it is difficult, often iriipossible to change over from unprofitable to profitable forms of farming. SHELTERED' INDUSTRIES. As for the effect of tariff protection on other industries, Mr. Williams pointed out that while some interests are able by similar movement to protest themselves by their bargainings power and by maintenance of tariffs, the farmer is defenceless. “Prices are raised against him ; liis own prices, he cannot raise. For consolation he is offered that- venerable joke which relates to “keeping money in the country”, but the fanner lias become impervious to the humour that resides in such obvious sophistry.

As for the influence of the Arbitration Court in pushing up prices against the farmer, Mr. Williams expresses the opinion that the Cburt has merely registered changs (more or less quickly) that would have come about in any case. If so, then the Court has introduced no novel element in the price situation.” Suppose that wages had been lower. Would that, for the community at large ,have been a better thing? Ido not answer that question. 1 ask it. It would have to be answered definitely before the Court could be abolished on the ground that wages are kept by it at too high a level. . . . In the upshot, I think it is impossible to say that the court has had an arbitrary effect .on wages; it'is impossible to say—that is, that the Court has had any material influence in promoting price disparity.”