THE New Zealand Herald AND DAILY SOUTHERN CROSS FRIDAY, JUNE 10, 1927. THE WHEAT SUBSIDY.

New Zealand Herald, Volume LXIV, Issue 19659, 10 June 1927, Page 10

THE New Zealand Herald AND DAILY SOUTHERN CROSS FRIDAY, JUNE 10, 1927. THE WHEAT SUBSIDY.

The Government has proclaimed a policy of encouraging wheatgrowing by maintaining prices at a constant level. It has not defined a precise objective for this policy, but by implication it would appear to be the expansion of production to an equality with domestic requirements. Before this programme is adopted, there should be convincing evidence of the wisdom of committing the country to such an undertaking, and equally convincing demonstration that the measures proposed are likely to produce the contemplated results. During a period when independence in regard to breadstuffs was more important than it is now, or is likely to be in a peaceful future, similar efforts were made to stimulate production, and, except in a few seasons, the results cannot be regarded as warranting further experiment. Even in the exceptional years, economic conditions, rather than the State's arbitrary methods, were responsible for the expansion of wheat-growing to such an extent, in one season, that there was an embarrassing surplus. In the light of this experience, extending over many years, including those in which material motives were supported by patriotic appeals, it is a reasonable assumption that the area of land in New Zealand which can be economically devoted to wheatgrowing is limited by influences that are not amenable to State interference. If more wheat is to be grown, the increase can be obtained only by sowing land which, under present conditions, is either too poor or too rich for wheatgrowing. The farmer who has decided that his holding can be used more profitably for other purposes will require substantial inducements to divert it to wheatgrowing, and since those inducements must be offered generally, not merely to farmers, any considerable increase in the production by State encouragement inevitably involves raising the price of wheat and the cost of bread. That appears to be a heavy price to pay for independence of importations. The principal objection to the Government's proposals is that they cannot be permanently effective. They are apparently based on the dogmatic assertion that 6s a bushel is a remunerative price for wheat. It may have been during the past season ; there is no guarantee that it will be a fair price five years hence. During the last two decades. the duties on wheat and flour have been multiplied several times. Every increase has been accompanied by an assurance that the additional margin of profit would enable farmers and millers to expand production without fear of competitive imports. Yet this margin has not been preserved." The additional duty has enabled millers to raise the price of flour and to pay a correspondingly higher price for wheat, so that within a few years of the alteration the margin between local production and importations has been as fine as before. Any theoretical advantage to wheatgrowers has similarly been absorbed. No obligation was imposed upon them to increase the production of wheat by using land for which they could find more profitable employment. Consequentlv, apart from a temporary stimulation of the volume, the only effect of raising the duty has been to make wheatgrowing on the naturally limited area more profitable ; the additional profit has been a tangible factor which has inevitably been capitalised as an addition to the value of the land. There can be little confidence that there would result a greater production of wheat. But since land suitable for wheat cultivation would have attached to it "an assured return," while all other farming operations would still be subject to market risks, there would lie artificial competition for it, which would quickly result in its valuation on the basis of that artificial return. Since the fundamental feature of the scheme is the maintenance of the determined price against a decline in world values, the inflation of land values would be agcraivated as the margin increased. NewZealand has surely had sufficient experience of the perils of inflated land values not to embark upon anv experiments calculated to create them.

What is proposed is unquestionably an indirect subsidy, of indeterminate amount and without reciprocal obligations. It is difficult to discover by what reason this one industry claims privileges and concessions that are neither sought by nor offered to any other similarly sectional and limited interests. Its claim cannot be justified on the ground that self-sufficiency in wheat production is essential to t.he national welfare, since for many years the country has not been independent of supplementary importations. Even if independence is desirable or practicable, it does not follow that the only means to its attainment is an expensive system of subsidies. Other branches of primary production are striving for improvement in quantity and quality, but the Government does not propose wholesale subsidising of them. The industry has been misled by its leaders, who, instead of concentrating their attention on the technical improvement of the industry as the leaders in woolgrowing and dairying have done, have devoted their energies to seeking political interference artificial inflation of prices. •ii ■ " ave been encouraged in their illusions for many years by succes-

sive Governments, until the country is paying an intolerably heavy price for its faith in this fallacious conception of the State's relation to production. About two years ago the present Minister of Agriculture declared that the Government had decided it would not again interfere with the ordinary course of business in wheat and flour. Nothing has happened since then to justify departure from that position, far less to warrant the impracticable proposals recently outlined by the Government.