The Guardian And Evening Star, with which is in corporated the West Coast Times. WEDNESDAY, JULY 15, 1931. BUSINESS ECONOMY.

Hokitika Guardian, 15 July 1931, Page 4

The Guardian And Evening Star, with which is in corporated the West Coast Times. WEDNESDAY, JULY 15, 1931. BUSINESS ECONOMY.

In discussing further the task of solving the unemployment problem, an American authority which has been quoted previously, proceeds to consider the financial issue in relation to business and profits, and urges thrift as a prime factor to meet stringent periods. As it remarks the old saying about the: wisdom of saving for a "rainy day” is evidence that life always has been subject to vicissitudes and emergencies against which the prudent have thought it prudent to accumulate reserves,. If everybody accumulated reserves and avoided in debtedness except for temporary and emergency needs the whole problem oJ‘ crises and depressions would practically disappear. It is useless to talk in such abstract terms as the “living wage. 1 ' the significance of which changes from time to time. Everybody will agree that a higher standard of living for the wage-earning population, is very much to be desired, hut it is also true that there must

be earnings for capital and savings for capital, or there will be no growth of capital for the important part it must pay in maintaining and improvingnthe industries. Furthermore, the costs 'hf distribution from producer to consumer must come out of the product. The only way all these demands can be met in the adequate degree desired is by contank efforts to improve the methods both of production and distribution, so that there will be a larger product per capita to divide. The attested rise of about 27 per cent, in real wages in the manufacturing industries between 1919 and f 929 is indicative of the results that may be had from harmonious and ' effective efforts to improve the industries.

Professor Morris i . Copeland, of Harvard University, in his article, “The National Income and Its Distribution,” in the second volume of the work “Recent Economic Changes,” writing of the division of the total realised income of the! manufacturing industries, says that “The share of hired labor has been over 80 per cent, since the war.” Professor W. I. King, in Ills book “The National Income and Its Purchasing Powor,” published under the auspices of the National Bureau of Economic Research, Inc., calculates the share of employees, including salaries, from 1918 to 1925, as ranging from 82.8 in the former year to 87.8 in the latter year. By “realized, income” is meant income actually withdrawn from these industries. Tt does not include ““net earnings retained by the industries, as is frequently done for

the purpose of enlarging capacity or working capital. Funds so retained are recognised ms devoted primarily to the industries, and while so employed are serving the public, by affording employment and producing goods for the market. It is only as profits are withdrawn and used for private purposes that they are devoted to the service of the owners. Also it should he considered that an important part of the less than 20 per cent, of total income withdrawn as interest ?nd dividends was disbursed to employees and other small holders of the stocks and obligations. When allowance is made for these, it will be seen That a compnrativey small part of the earnings

of the manufacturing industries has gone to ’ the proprietors as compensation for their services 'and supplying the capital employed. Moreover, this share includes the much talked of “rent” or return upon land' values, also whatever investments are made out of income withdrawn. There is a continuous flow 'of capital, received as income back into industry somewhere, thus increasing the capacity of the various services which supply the public needs and minister to the general welfare. It is mainly by the investment of new capital that the gains in productivity and wages ./are accomplished. Again it is important to emphasize that profits are not uniform among the producers in any branch of in industry. The industries may he divided into four groups,'' of which the lowest, in position is the group whose members are making losses. This group is important both in numbers

and value of products, its gross output in 1929 being 18 per cent, of the total value of all manufactures. Next above these ls the group which is showing small profits but Is not in assured position, third from the bottom the group which is making what may - he called normal profits for the manufacturing business, and finally is a group making exceptionally large earnings. The members of the latter always have exceptional, and usually temporary, advantages of some kind. Their products may he new and protected from competition in some way, perhaps by patents, or for good reasons they hold a leading position in the trade. • However, there is no assurance of permanence in any position,* and without progressive management

a leading portion cannot be held. As ,high-cost producers are crowded out and competition restricted to low-cost producers, profits decline, except to the organisations that are able by new methods to- reduce costs still lower. Large profits are significant of low costs rather than of high prices., They indicate industrial leadership and a downward tendency of prices to consumers. All of these facts must he taken into account in considering the above showing of the net earnings of the manufacturing industries.