THE New Zealand Herald AND DAILY SOUTHERN CROSS WEDNESDAY, SEPTEMBER 1, 1937 WORK, WEALTH, WELFARE

New Zealand Herald, Volume LXXIV, Issue 22822, 1 September 1937, Page 12

THE New Zealand Herald AND DAILY SOUTHERN CROSS WEDNESDAY, SEPTEMBER 1, 1937 WORK, WEALTH, WELFARE

The sound economic doctrine that currency and credit must be supported by production if they are to be effective was livid down by Mr. Nash in his broadcast to dairy farmers. Ilis remark came as an aside from the Minister of Finance while the Minister of Marketing was talking. Nevertheless what he had to say was timely. There are still many who believe and some who preach that national wealth and prosperity can be produced by some sleight of hand with money. Such manipulation cannot bring plenty. It is as empty as the vacuum out of which the money is supposed to be created. As Mr. Nash puts it: "All the issues of money in the world will be of no use unless they lead to the production of more commodities and the provision of more services." In other words money must be related to real things. It must be based on past accomplishment, or on present goods, or pledged to future production. Otherwise it is barren. The presses might work overtime printing notes and the bankers spill seas of ink in writing credits, but the people would be no better off. Should they be deluded into thinking they were simply because they had more money counters and should they cease work in farm and factory, they would soon starve. But commonsense saves the majority of the people from being taken in by currency cranks and money manipulators. They continue at their honest daily tasks, earning their living, knowing that it cannot be conjured, cajoled or contrived out of paper. They agree with Mr. Nash that "it is only the increased production of commodities and services which can raise the standard of living in New Zealand. In no other way can a higher standard be achieved." In its turn, production depends on work. "In the sweat of thy face shall thou eat bread." So has it been since ever Man went out from the Garden of Eden and so shall it be for ages yet, though Man has fashioned himself tools to ease his back and save his hands. He has accumulated capital by improving land and making machines and building storehouses. Capital is the fruit of past labour and effort, the seed and helpmate of future accomplishment. By its aid work is no longer the curse lurking outside Eden. For most normal men, and in spite of the Prime Minister, work is a boon, giving salt and savour and meaning to life. Productive work is a high calling, the calling of service. And yet work may not yield its full fruit unless it be well directed. Mr. Nash entered a sound caveat here. Labour must be directed to producing "the right kind of things." The Minister was appealing to the dairy farmers for quality production. His words have a wider application, however. Production or supply must be related to markets or demand. It is useless to continue producing goods when people already have enough or—and here is an unsolved problem—turning them out at a cost or price people cannot afford to pay. Mr. Nash must be aware of this difficulty, although the Government is inclined to ignore the costs side of the economic equation. When in England, Mr. Nash may have heard Lord Leverhulme state the cardinal rule of marketing—to provide the right goods in the right places at the right price in the right quantities and at the right time. Certainly a moist complex rule, but no more so than the subject—marketing—that it governs. The question is, how far does Mr. Nash's guaranteed price scheme.conform with this cardinal rule?

Hi? schedule of prices is helping him to supply the right things and his shipping and distributive organisation is taking care of places and times. Unfortunately his cost prices are being put out of key with his selling prices by the Government's inflationary policy and his quantities are determined by a price guarantee that has no relation to what the produce will fetch on the British market. The: price he pays to New Zealand farmers has no reference to what he receives from British consumers. Supply is not linked to demand. Therein lies the fatal weakness of the scheme, the weakness that soon or late will bring the whole structure down. It is true that in the past season the buying price has been so adjusted to selling price that, on a turnover of £22,885,000 for butter and cheese, the deficit was only £650,000, or less than 3 per cent. That was no small achievement, although it should be remembered that the guaranteed prices were fixed on the average of the previous ten years. In the current and future seasons, past prices comprise only one factor out of the six taken into consideration and the ruling consideration—a reasonable living standard for the New Zealand farmer —is not recognised in British market prices. These latter, based on demand, exercise no influence on Dominion output, which may easily be stimulated beyond the limits of effective British consumption. Moreover, should dairying on the guarantees become more profitable than sheep farming, which is governed by real market values, dairy quantities would receive another boost. The present artificial prices therefore carry plain risks. Unless Mr. Nash is prepared to control quantities by relating his guaranteed prices to roa.l market values, the governor of supply and demand, his scheme faces certain failure and, in failing, it may involve the dairy industry in consequences not pleasant to contemplate.