FARM PRODUCTS

New Zealand Herald, Volume LXXV, Issue 23067, 18 June 1938, Page 12

FARM PRODUCTS

POLICY OF LABOUR ITREND to collectivism GUARANTEED PRICE SYSTEM AN AUSTRALIAN'S CRITICISM The view that the guaranteed price and. external trade policies of New Zealand's Labour Government must inevitably lead to the establishment of a collectivist State is advanced by Mr. W. K. McConnell in the monthly circular of the Sound Finance League of Australia.' Mr. McConnell recently toured the Dominion and his impressions of various aspects of Labour rule are given under the heading of "Hecent Economic Changes in New Zealand." "Under the Primary Products Marketing Act," says Mr. McConnell, "the Government assumed the right to make both internal and external marketing of all primary produce a State monopoly. This right has already been exercised in varying degrees over a number of commodities. The most farreaching instance is the complete monopolisation of New Zealand's principal export —dairy produce. Since 'August, , 1936, the Government has acquired the ownership of the whole of the butter and cheese for export at its own prices—the 'guaranteed prices.' Problems ol Policy "The most profound problem which arises is the opportunity which this change provides, along with others, for the 'collectiVisation' of the farmers. The immediate problem is the play of other forces on the guaranteed prices. "The loss to the Government on the first season's buying and selling was £338,000, which 'it is not proposed to liquidate.' The other activities of the Government, particularly increased wage rates, the shorter working week and public works policy, have increased farmers' production costs. In consequence, the farmers were able to extract higher guaranteed prices from the Government for the 1937-38 season. "In fixing these prices, the Government admitted the possibility of losing £2,000,000. Subsequent increases in overseas prices, due to shortages in other butter-producing countries, are proving extremely fortunate for New Zealand. But already the farmers are preparing a strong case to show that whatever the world prospects are for 1938-39, the guaranteed prices must be higher than those of 1937-38 to cover .the increase in production costs. Retarding Efficiency

"Yet overseas prices will not rise just because 90sts in New Zealand rise. Indeed the high butter prices at present prevailing overseas are already causing the consumption of .margarine to increase. New Zealand butter made headway 'against margarine in the past because of the efficiency of the Dominion's farmers. Guaranteed prices are more likely to retard than accelerate efficiency. , "The prospect is that guaranteed prices will result in increasing deficits with the Reserve Bank that cannot be liquidated, except from taxation. That method will mean partly that the farmers' incomes will be reduced because they are taxpayers themselves and partly- that the rest of the community, through taxation, yill be paying a subsidy to the farmers. Menace - oi Inflation "The taxation to liquidate these deficits will be enormous. If they are not liquidated they will amount to inflation of the most glaring type. Costs and prices will rise and those least able to expand their incomes will be subsidising those basking in the sunshine of guaranteed prices. The farmers themselves will be enjoying the sunshine only in the early morning. Already they find that the guaranteed prices, which are satisfactory at the beginning of the season, soon become unprofitable, because costs rise as the season advances. ' "The Government's attention has frequently been called to these possibilities. The ultimate remedy—so Ministers have already proclaimed—is to 'insulate' New Zealand. That means in plain English the complete control of exports, imports and exchange. That in turn , would demand the complete reorganisation of the internal economy by centralised control of production and distribution. That will be the collectivist state. Whether it will be of the fascist or socialist variety may be of moment to socialists, but it will make little difference to the comfort of those who want neither. Effect on Living Standards "Even if such a planned economy worked with the utmost efficiency that could be expected, it could not preserve existing living standards. To talk of insulating New Zealand is just as foolish as it would be for a skilled , artisan to abandon his trade in order to grow his own food, make his own clothes and build his own hut. "In its general external trade policy the New Zealand Government is pinning its faith to the already discredited principle of bilateralism. The countries that follow 'it to-day do so because they must. This principle should be New Zealand's last refuge, not its firsthope. Its only justification for New Zealand is that it accords with, indeed is a necessary complement to. the policy of internal economic planning. "A country with the history and characteristics of New Zealand should have been the last to lose sight of the virtues of multilateral trade. She should be looking for wido open markets; but few countries have done less to find them. The way to prosperity for New Zealand is her traditional attention to efficiency and costs and loyalty to multilateralism in trade. Guaranteed prices are not in harmony with these. For the present, New Zealand is committed to guaranteed prices."