THE SUBSIDY SYSTEM

New Zealand Herald, Volume LXXVII, Issue 23791, 19 October 1940, Page 10

THE SUBSIDY SYSTEM

Among the • findings of the Economic Stabilisation Conference is one which emphatically condemns the use of subsidies to stabilise prices. It is not a popular line to take. Subsidies have been employed extensively in many parts of the world for various purposes. The object has not always been to prevent prices from rising unduly. In many instances before the war, producers have been given this form of relief to bridge the gap between prices, which could not be increased because of the state of the market, and costs. Either these could not be reduced, or the measures necessary for the purpose could not be faced. The subsidy was seized upon as the easy way out. The report found subsidies undesirable because they reduced the impulse to seek for improved methods and higher output, they discouraged the use of substitutes for goods which commanded scarcity values, and, if used too freely, they became ineffective. Expert opinion overseas also condemns them, and gives further reasons. It is pointed out that in providing funds for such a purpose, the State cannot avoid setting in motion those inflationary influences which it should be alert to avoid. Moreover, the artificial easing of prices discourages that very economy in the use of commodities which grow scarcer and dearer that should be exercised by the whole community as a war measure. Further, in war as in peace, resort to subsidies means taking the easy road, and a war has never been won by people who do this in preference to facing the sacrifices which must be made in the cause of victory.