Economic Problems

Hawke's Bay Tribune, Volume XVIII, Issue 197, 3 August 1928, Page 9

Economic Problems

The Outlook for the Future

Mr. Bate’s Final Lecture of Series

At Wesley Hall, Hastings, on Thursday of last week, Mr. W. E. Bate, LL.M., delivered the final lecture of his series on the economic problems of New Zealand, taking as his subject “The Economic Outloook.”

Mr. Bate said: “If our studies together during the last few weeks have taught us anything they have taught us that the industrial system —the economic machine—is the most wonderfully intricate and complex machine in all the world. Sometimes it moves sluggishly, and indeed hardly seems to move at all. and we say that times are hard, trade is bad, and depressions are upon the race of industry. Other times we see the machine in a convulsion, almost somersaulting in its endeavour to work fast enough, and we say times are good, and there is a boom. Other times we hear loud clanging noises coming from the works of industry and we say that strikes and lockouts are about, and then again sometimes the machine works sweetly and smoothly, everybody is at work, happy and prosperous, and we say that industrial peace is abroad. Every cog in this vast system, and there are millions of them, is connected in some marvellous fashion with every other cog. It is as true in economics as in physics that every action produces an equal and opposite reaction. No man lives unto himself in either a moral or an economic sense.

“It is quite clear that, if we are to make much progress with our subject, we must not confine our observation to the local conditions alone. It is essential that we consider what factors of importance bear on the problem and are reflected in local conditions. We have in New Zealand the very essentials of a country which must for many years—centuries perhaps—be dependent on her primary industries. Her secondary industries are limited to a small local market on account of the small population. and their sphere of markets abroad is a restricted one on account of the distance between New Zealand and the Old World. While our primary products will aiways sell well in Europe, our secondary products or manufactures will never be able to make the export worth while. So it is that we are largely dependent on the purchasing nower of the Old World and England in particular, since prosperity in England means an increased demand for raw products and higher prices in consequence. Similarly a depression and unsettloment in Europe means a reduced demand and lower prices. A brief survey of nost-war conditions in Europe and England will not therefore be out oi place. POST-WAR CONDITIONS. “In 1919 Europe emerged from the greatest war in history, to find that about 10 million men were out of | action—a set-back which even if it : stood alone would be sufficient to cripple a continent for many years. In addition to this, a colossal amount of capital had been lost; furthermore, a tremendous amount of capital had to be withdrawn and placed into productive avenues again—a readjustment that cannot be made in a day. I The greatest loss of all apart from | the loss of. men. was tho total and ■ utter loss of the organisation of in- ' dustry. Every cog in the great j economic machine was out of gear—every joint in the system was dislocated! Parliamentarians set up committees for the restoration of trade •and the aim of these committees appeared to be to revert to pre-war conditions; a striking illustration of how men in great emergencies look backward instead of forward. It took Europe a few years to realise that pre-war conditions were gone for good and that she was standing upon the threshold of an entirely new era. More recent years, however, have seen a gradual stabilising of trade. “England was the greatest creditor nation in the world prior to the war. Lord Milner in a recent book estimates that England had to sell about £1,500,000,000 worth of foreign investments to carry on the war. This was less than half of her foreign investments, so that although she came through the war still a great creditor nation, she nevertheless suffered a great impoverishment of capital. Furthermore, she lent very large sums to hei allies during the war, and it is very questionable whether the greater part of them will be repaid. Then also, England suffered a loss of many of her most important markets. Prior to the war she had very extensive trading interests in Asia and Japan in particular. During the war, these countries could not get supplies from England and out of necessity developed industries of their own so as to supply their needs. This meant that when the war was over, England found that these markets were gone for ever. Futhermore, the United States of America was serenely developing many of what are now her greatest industries and capturing markets which had been the happy hunting grounds of the English manufacturers, all the time that England was keeping the foe at bay. A MARKED IMPROVEMENT. “Recently a marked improvement has been manifested in conditions in both England and Europe, and this in turn has meant an increased demand for raw products. This increased demand has already been reflected in higher prices for our primary products during tho last two seasons. “It is obvious that if prices rise, even if the volume of produce remains constant, a much better position is realised. With the increasing prices alone, therefore, the immediate future of the Dominion would seem to be a more prosperous one than has been enjoyed for a few years. It is pleasant to note, howver, that the rise in prices does not stand alone. Tho rise has been ac companied by an increase in unit production. These two factors, higher prices and higher production, working together have in the Inst eighteen months produced a very considerable change in the balance of trade. “I said just now Hint unit produ- I lion had increased. Lest we flattci

ourselves too' much, however, it is necessary that I should point out that our unit production is still somewhat less than it was in 1910, and this state of affairs does not co us very much credit when it is remembered what facilities for higher pioduction we possess that were not available twenty years ago. Equating the figures to a 1910 base, it is found that in 1925 our unit of production throughout the whole of New Zealand’s industry was 14 per cent, less than it was in 1910. It was 23 per cent, less in 1920. This shows that there was a great drop in production from 1910 to 1920, but that since that time there has been a tendency towards greater production. If the figures were available for the present time it would not be surprising to find that our unit of production was still less than 14 per cent. lower than in 1910. If we take the primary industries alone, we find that unit production actually increased by 5 per cent, between 1914 and 1925. This is. however, a very small increase in productions over such a long- period. in view of the rapidity with which development is called for in New Zealand.

ROOT OF THE PROBLEMS. “Summed up then, our unit of pioduction fell by 14 per cent, jetween 1910 and 1924, while in the primary industries only it rose by 5 per cent, between 1914 and 1925- To reconcile these -two statements, we are forced to the conclusion that the mit of production in the secondary occupations must have fallen considerably, and that is actually the position This does not necessarily mean that those engaged in professions, administration, finance, transport and other occupations have been resting on their oars, so much as that there has been a marked drift to those <cpations during recent years from the directly productive industries. With the product being spread over many more workers, and there being a need only for a ecertain number of secondary industries, this drift has resulted in a considerable drop in unit production in secondary industries. The following figures are significant in this connection. In 1891, 63.7 per cent, of our population was directly productice and only 23.4 per cent, in the indirectly productive occupations. In 1901 the percentages were 62.6 per cent and 25 per cent. In 1911 they were 57.1 per cent, and 29.7 per cent., and in 1921, they were 54.2 per cent, and 34 per cent. This shows the trend away from the primary industries to the secondary industries, and this is at the root of many of New Zealand’s problems to-day. In particular it is surprising to find that between 1915 and 1925. while our population increased by 18 per cent., the number of people engaged in local body administration and the Public Service increased by 37 per cent. In other words, our weight of administration is increasing more than twice as fast as our population! “I would like to say a few words about the action of the Banks in raising the bank rate about fourteen months ago. I want to say that the action of the Banks was well-advised and of great service to New Zealand, and was one of the causes for the balance of trade swinging into a favourable position again in such a short time. By making money dearer, the Banks gave a direct discouragement to further importation, and with tho falling of imports, an opportunity was given for our exports to gain the ascendancy again as they jiave done. With the improved conditions there must have been a considerable accumulation of bank credits in London which has led the Banks early in July to revert to the old rates. A DEBTOR COUNTRY. “Let us remember, too, that NewZealand is a debtor country. Every year we have a heavy interest bill to pay to England on that part of our national debt which is owing to her. It is authoritatively estimated that we have to provide £2,000,000 annually to meet interest due to the Homeland. This interest, like our imports, is paid not in cash, but in exports. Thus in order that both our import and our interest may be paid, our exports should exceed our imports by about £2,000,000 every year before we can be said tq he paying our way. Of course, this >s not the whole of our annual interest bill, for a large part of our national debt is held in this country, and Interest is paid in New Zealand ont of the Consolidaed Fund, which is built up by taxation in one way or another.

“A few weeks ago there met in Wellington the National Industrial Conference. It was convened by Hie Government, hut apart from the opening of the Conference by the Prime Minister no further action was taken by the Government with regard to its deliberations. There was a full representation of all -iranches of industry and of all interests. It was pleasing to notice how all parties, although their personal interests forced them to take sides at times, came together in a genuine desire to arrive at mutual and useful -aiderstandings. Fellowship in industiy is the high grade oil that is needed in the industrial machine to-day. It may be a remote ideal, but I believe that the spirit which reigned in the National Industrial Conference showed that in New Zealand at any rate it is an ideal which is not as remote as it is in other places, nor is it too milch tn bone that, the time will soon come when that idea] will be realised. If this spirit could be nerpetnated ■and made to permeate tho whole of industry, the outlook for New Zealand would for all time be greatly im proved. THE CHALLENGE. “Otir primary producer has many problems ahead of him, but there Is no sounder and safer remedy than that which works slowly perhaps, bill surely— a eoncontrntr- irteimsed I’lod'.idion. The pi i: >nn is .*• e’mlleiigo not only lo tho primary

producer, but particularly to those who control industry in every branch to conduct their affairs on sound lines and their business with adequate and efficient reserves. There is a challenge, too, to those who govern. I have said something about the abnormal increase of those engaged in administration. If a man’s business grows he must increase his staff, but he wll not double his staff to handle double the turnover. The prnciples of mass produeton should be able to be applied to governmental activities as well as to industry. Finally there is a challenge to each individual to concentrate on the job in hand and employ the same zest in it as he does in his sport. That is a fair test. We need to cultivate an industrial conscience which will make us thoroughly uncomfortable for every minute we loaf on the job. When all is said and done, society is but the individual writ large, and whether or not the outlook for the future will remain as promising as it is at present depends entirely and wholly on the type of indiviual we are developing in our State, and the manner in which he does his task, whatever and however humble it may.”