THE DEPRESSION

King Country Chronicle, Volume XXIV, Issue 3241, 11 December 1930, Page 5

THE DEPRESSION

HOW LONG WILL IT LAST?

(By Helen Wilson.)

Some people are under the impression that the disaster that has overwhelmed the farmer lies in this last drastic drop in prices and they wonder that some of us have not made provision for a rainy day. Now the truth is that the farmer has been experiencing his rainy day ever since 1921. It is true that the prices of his produce were high compared with those ruling to-day but the cost of production was higher and steadily increasing. The reason of this state of things is more easily pointed out than the cure. The World War necessitated enormous inflation. The first act of every belligerent country was to increase its note issue. Money in whatever form has but one use, to enable and facilitate the interchange of commodity and to form a standard value of commodity. So, if the currency of the world be doubled and the commodity remain stationary the price of that commodity—that is of each item of it—must rise, and if in addition the consumption of everything is proceeding at an unheard of rate, as it was in the war the prices of everything, including land and labour, must inevitably soar. Now it is a known thing that after every war comes a period of depression, but some of us argued that though the same thing would come it would not effect the farmers for many years after the war, because people must eat and the stocks of food of the Old World had been seriously depleted. But it did not fall out so. The British Government, having stocked large supplies of primary produce decided to quit before allowing further importations. European nations could not afford tc buy, so a very serious artificial slump came to the landed interests. Land values which had soared with everything else came down with a bump, and the farmer who had bought and the capitalist who had lent at those values lost their all.

The cost of production should then have come down. A steady deflation of everything should have set in, especially in Government expenditure. Instead of that the opposite has taken place. Organised Labour, having once tasted inflated wages, objected toreduction. The holders of stocks ol manufactured goods objected to selling at a loss, so the farmer was made to bear the burden of both the cost of living and the cost of labour. We complained (perhaps not loudly enough) that our costings were killing us but Labour refused to have its wages reduced while the cost of living remained high, and „ commodity would not reduce till it could be produced with cheaper labour. So we went round in a circle, or rather, a spiral, for Labour was always squeezing out a little increase. Even last month, when the crisis was actually upon us, the Arbitration Court made an award raising wages 7 per cent., and as to Government expenditure _ — one can hardly speak about it with moderation.

There is a certain impatience, a certain reluctance among farmers to discuss the the academic causes of slumps and booms, the laws that govern periods of prosperity and periods of depression. All the farmer knows today is that with the utmost economy he cannot possibly meet his obligations and—as far as the dairyman is concerned —that next winter, when even his scanty cheques cease to come in, is going to be a stark tragedy. Yet half the faulty legislation and false moves made by governments and even by private individuals arise from want of understanding of these laws.

History read in the light of economics shows that for many years back, and in all countries alike prosperity and depression have alternated in long waves like the rising and falling of the tides. These waves are from twenty years to a quarter of a century in duration. Smaller cycles often revolve inside the periods, but the general tendency for prices to gradually rise during twenty-five years and then during the following quarter century persistently to fall, holds good. In the earliest times the same phenomonen is discernible, but then the condition was restricted to one country at a time. Now, because finance and commerce are international, the depression is worldwide. Therefore the cure, if there is to be one, must be world-wide also. It may be that the financial magnates of the world, knowing more than they did in the past of the effects of inflating and deflating currency, will check this depression before it has run its course, but if they do not (which is far more probable) two courses are open to us in New Zealand —either to bring all charges, profits, wages and salaries into line with the cost of production—and to lose no time about it—or to drift into a state of chaos, in which all production, both primary and secondary, must cease. After all currency—coinage or money—is only a standard of valuo and a means whereby we carry on commerce. Its scarcity is not really vital. Germany and Austria starved with heaps of money when a million marks would not buy an apple. The real wealth, the good things of this world (commodity) is still undiminished. In fact, it is more plentiful than it has ever been in the history of mankind. It is only this money that has shrunk. Surely any disinterested man of moderate ability (not a Democratic Government) could so apportion the currency that the main articles of commerce and production —including Labour —should share equally in the diminished store available.

The trouble is that though the world is full of food and clothing and all the thousand requisites of civilisation, these have been produced or manufactured at inflation prices. It spells ruin to sell them below cost price.

Let us again cast back to economic facts. To produce at all three things are necessary Capital, Labour, and Enterprise. Capital is the savings, the surplus wealth of a large portion of the population who are too busy earning to handle their savings. Laboui-, too, is singularly inert. Always has been, apparently. As far

back as Scriptural times we find the master of the vineyard asking the men at the street corner, “Why stand ye idle all the day?” They answer, “Because no man hath hired us.” It is the same to-day. To some people the world is full of chances and opportunities, but Labour—typical Labour • —must wait to be employed. So Capital and Labour are. passive. Comes the active force, the would-be Capitalist, the Enterpriser (to coin an English word to take the place of the French “entrepreneur,” that economists use). He unites Capital and Labour in an effort to produce. Now, if this country is to carry on at all, this deflation from which we are suffering must hit, the three factors of production with some sort of fairness. At the moment New Zealand’s principle enterprise is on the brink of ruin. It cannot support the charges against it, and if farming fails what will be left?

From all this it appears that the slump is likely to be of long duration. Won’t somebody try to adjust things before it is too late?

That so many fannex’s have been able to hold on at all is due, no doubt, to improved methods of farming lately introduced and to the wartime depletion of flocks and herds which gave us a return of fair prices. Neither of these advantages is likely to come to our aid this time. Europe has stocked up again and is coxxxpeting with us, and if the land is not now producing at its full capacity the farmer is not in a position to impi'ove it—at least not till the costings come down to the level of prices.