CHAMBERS OF COMMERCE

Otago Daily Times, Issue 22716, 31 October 1935, Page 2

CHAMBERS OF COMMERCE

ANNUAL CONFERENCE THE PRESIDENTIAL ADDRESS The annual meeting of the Associated Chambers of Commerce was opened in Napier yesterday, the president, Mr A. H. Allen, occupying the chair. Mr Allen in his presidential address said that never before in the history of the world had there been a time more necessary than the present for Chambers of Commerce, public men, and students of national and international affairs to get together and discuss the serious problems that now confronted all countries. These problems related to such questions as money, tariffs, production, markets, purchasing power, consumption, price levels, capital, wages, unemployment, forms and functions of government and the world's peace.

In this disturbed and critical period there were unstable forces, many of them disintegrating and challenging old political and economic forms or systems. These forms or systems were passing through the furnace of severe criticism and drastic and radical changes were being demanded. As in other lands, there were in New Zealand agitators,

disturbers of the peace, promoters of class war and leaders advocating such extreme revolutionary ideas and action as would, if not checked, absolutely destroy the political, economic and social structures established in this and other nations. There were other leaders of thought and influence who recognised that real progress was slowly but surely achieved by the forces of evolution—political evolution and social evolution. Humanity was responsive to evolutionary growth. Turning now to matters more directly concerning New Zealand, Mr Allen said he was pleased to be able to say that during the past year there had been encouraging signs of improvement in New Zealand's economic conditions, leading many to conclude that the tide had turned and that our country was now safe and secure on the waves of prosperity.

INTERNATIONAL CO-OPERATION

In dealing with the domestic policy or programme of New Zealand, or that of any other country, the president said he desired to assert strongly that no such policy by itself could assure any such country entire freedom from the effects of the depression and a complete return of confidence and real national progress. He agreed with those who declared that unless adequate account was taken of the international aspect and of the urgent need of international cooperation in the solving of problems such as were involved in the marketing and monetary systems, much of the work done on a national basis and making for national economic isolation would ultimately tend to defeat itself. What was urgently wanted to-day was a wider outlook and a policy of national action supplemented by a certain amount of international action. Since the Great War there had been a considerable decline in international trading, which could be attributed largely to artificial obstacles placed in its way —such as high tariff or trade barriers, quotas, subsidies and exchange restrictions. The consequent great changes that had taken place in the economic relations between nations had been in a. great measure brought about by the policies of. extreme economic nationalism pursued by many countries during recent years. The world as a whole was suffering as a result of such problems. There was, for instance, no stability in its currencies and exchanges. Only by concerted action on the part of nations could such stability be established. Economic nationalism or economic isolation seemed to spring from a determination to suffer hardship rather than do business with anyone else. It had developed throughout the world an unbalanced condition in trade which had greatly contributed to the economic instability they had suffered from in recent years. In supporting these views and condemning policies of extreme nationalism, Mr Cordell Hull, in the course of a very eloquent and illuminating address given about a year ago to the American section of the International Chamber of Commerce, said " Every nation must have a policy which will be in the nature of a broad movement for world recovery. That is to say, that each nation must supplement its domestic programme with' a basic international economic programme of remedies for business recovery. These would embrace the reduction of trade barriers, the stabilisation of exchanges and currencies, also monetary standardisation, all of which would permit a healthy increase of prices of commodities bought and sold in the world's markets."

Mr Allen said lie quoted these views as having a bearing upon the political and economic aspects of our relations with other nations, and as showing that there were a number-of difficult problems on the horizon—notably Customs tariffs, currency laws, and trade agreements. The va]ue of our internal investments as measured in gold had been cut down by half and our cost of living had been considerably increased through failure to adjust our Customs tariff to the devalued currency. This problem required attention in the near future, and it was to be hoped that a fair adjustment of conflicting interests would be effected 60 that this grave question would not become a matter of barter between parliamentary parties. The past year had not brought any noticeable increase in the volume and value of world trade, nor an expansion of international credits, but, on the whole, there was apparent a slow, if painful, progress towards the stabilisation of trade in the individual national economies by devious and even contrary means. In some cases Government subvention was given and in others the currencies were de-valued and bounties and restrictions were given in an effort to bring the national economy back to working order. These efforts had brought improved values for some raw materials, a greater gold production, reduced rates of interest and loan conversions. but there was no sign of united action. The world still awaited a courageous lead towards a united effort to solve the many pro-

blems affecting all nations and all mankind alike. Some progress had been made but there would not be a return of confidence nor a return to prosperity until international politics had been regulated and international war debts wiped out. Our exports for the year ended March 31 last were valued at £44,918,000—a decrease of £1,124,000 (excluding specie) compared with the previous 12 months. There was a fall in both the volume and value of wool and butter, but the fall in wool values was offset by an increase in prices for meat. The prices we received for our primary products in the world's markets were an index to our land values. Whilst it would be obviously impracticable to establish a fixed rate between prices of produce and land values, it would be a decided step forward towards our economic stabilisation if land values were reduced. A sound valuation of the land was the basis upon which settlement of several of the problems facing us depended, not only unemployment, taxation and wages, but also the general cost of production.

It had been known for a long time that land in New Zealand was too highly valued. With the fall in produce prices that occurred over the last five years, the law of supply and demand would, in the ordinary course, have brought about a readjustment in land values and prices, but this had been largely prevented by the different mortgage relief measures that had become law. Generally speaking, land was still too highpriced, and over-valued, and it was in the general interest that the parties concerned should get together in an endeavour to adjust land values and prices to a proper relation with the realities of the situation.

Our Government had recently entered into reciprocal trade agreements under the most " favoured nation " treatment with several nations, and was to be congratulated upon endeavouring to facilitate trade between New Zealand and those countries which buy our produce. 11l view of the fact that our main market in Great Britain was contracting, a much more energetic effort must be made. If it were left to private enterprise without legislative arbitrary interference, our merchants and traders would soon find markets and a profitable selling basis, but legislative interference with free trading through tariffs, currency devaluations, import and export restrictions had gone so far in all countries that there wns not a shadow of free international trading left in the world. To-day international trading was directed by political, not economic, interests and was subjected to political party strife, which did not form a basis for confidence and progress.

When wool prices were high all sorts of artificial products were introduced to take its place, but when prices fell artificial silk alone remained. This material had been so reduced in price and improved in quality that it now took the place of wool to a considerable extent. Who would deny that further improvements in artificial silk would not take place? As it was generally thought that the world could not do without our wool, we did not cater for our customers. In fact, we considered that, as they must buy from us, we need not buy from them, and we adjusted our tariffs so that their sales to us were practically prohibited. A fact of importance and significance that should be noted was that England and other manufacturing countries had instructed the Indians and Japanese in the art of manufacturing, and sold to them their newest machines. Now these countries were not only underselling British manufactures in their home market, but were manufacturing the machinery and offering it to Great Britain at less than their own cost of production. We exported our stud rams and best sheep to other countries without care as to how this would ultimately affect us. Our policy should be shaped so that our customers and potential customers would be our friends, and thut we might look to them for favourable treatment in time of need. Our Customs tariff required a very exhaustive investigation in relation to our devalued currency. Our preferential tariff was rightly designed to assist the British manufacturer, but if competitive goods were imported from gold standard countries, the added cost of the two imposts, namely gold to sterling and sterling to New Zealand currency, gave considerably higher protection than was originally intended by our Legislature and was to a large extent the cause of our increased cost of living and production. On the other hand, countries whose currencies were more devalued than our own benefited unduly. RESTORATION OF GOLD STANDARD

To permit the natural flow of commerce between nations, not ouly was it imperative that existing tariff walls be substantially reduced in height, but that all currencies be stabilised on u gold basis. As the world was suffering from a lack of stability in its currencies and exchanges, concerted action on thu' part of nations was urgently required to bring about stability. A return to the gold standard was indispensable for such a purpose and to ensure sound economic reconstruction. UNEMPLOYMENT A nation could not be looked upon as sound and healthy if a large percentage of its citizens were unemployed and kept from starvation only by doles taken from the wages of the working. This problem was an exceedingly difiicult one to solve satisfactorily. Many solutious were presented, but they could not be said to be of a curative nature. The buying and consuming pow?r of thousands of our working farmers and of their dependents was taken from them, and it followed that the baying and consuming power of those employed in our industries, trades and businesses were also reduced, not to mention the many who were thrown out of employment. "It is my conviction." said Mr Allen, " that there can be no substantial diminution of our unemployed numbers unless and until the farmers in the Dominion recover from the ruinous effects of very low prices recently ruling in the markets of the world." SHORTER WORKING HOURS There was close connection between labour-saving machinery and unemployment in certain related industries, continued the speaker. One of the remedies or reforms submitted for dealing with those displaced in some industries by machinery was the shortening of working hours. There were many who believed that working hours would ultimately be reduced. At present it would seem that this might be done only in industries capable of organising their operations on that basis and capable of competing successively with the imports from rival businesses in other countries. Of all industries the farming industry was the outstanding one that he foresaw would ho unable under present conditions of working to shorten hours without suffering great financial loss and other attendant disastrous effects, one of which would be an increase in the cost of production, thereby making the farmers less able to complete successfully with their rivals overseas.

As in the dairy industry, in particular, it would be quite impossible to alter the existing hours of labour, a shorter day in the cities and towns would create difficulties in the procurement of farm labour. Therefore pleasant, and even desirable in some respects, as a reduction in working hours might be, our inclinations should be governed by the needs of our great primary industries. PRIMARY AND SECONDARY INDUSTRIES With a view to absorbing our unemployed labour, which was due largely to the' repercussions of our economic nationalism, the opinion was expressed

in some quarters that a forward move in the development of our secondary manufacturing industries would bo of substantial assistance. Though the proposal might seom promising at first glance, it seemed to tho speaker that our future success and prosperity depended mainly upon the intensive development of our fertile lands and remunerative prices for the farmers' products when sold in the markets of the world. Local manufacturing was fully justified where we produced the raw materials so that the finished commodity might be sold to the consumer cheaper than the imported article The tendency in agricultural countries, including New Zealand, seemed to be towards industry, and in the more highly industrialised countries towards greatei specialisation within those industries. This resulted in mass production methods and lower production costs, with which our manufacturers could never hope to compete without tho aid of high protective duties. He did not suggest that we should disturb our present ratio of secondary to primary industries, but we must keep them properly balanced. The reduced demand for our soil products and low prices ruling for some time past was due largely to industrial countries, notably Great Britain, increasing their agricultural output as a means of finding employment for their workers who had been displaced in industry due to diminished orders from former agricultural countries, such as New Zealand and Australia, which were now actively engaged in industry. If, as a result of this increasing competition, Great Britain, by stimulating the expansion of her soil products, diminished her import requirements in these commodities from her dominions by, say, a further £50,000,000 per annum, it surely followed that our present export trade would decline proportionately. The products of our factories would then meet with a lessoned demand from a decreased purchasing power and reduced export markets, and our economic recovery would be seriously impaired. Our agricultural or primary industries alone formed the basis for the establishment and development of our secondary industries. BANK EXCHANGE RATE For the last two years and threequarters our £1 had been pegged at a discount of approximately 20 per cent. in relation to sterling. This step- was taken to assist our primary producers, but it was questionable, if we could not then have maintained our £1 at its true value and have rendered an equal service to the man on the land by some internal taxation, equal in total to the cost of purchasing London exchange. This would have enabled us to meet all our external debts without loss, whereas devaluing our currency had cost the Government and local bodies a huge sum of money and had increased the cost of importing commodities from all countries, exception Australia, by 25 per cent, on manufacturers' invoices and all charges to ships' slings New Zealand ports. This obviously added considerably, not only to the cost of living, but also to the cost of production, so that the benefit the farmers obtained on the one hand was immediately diminished on the other.

The president eaid his purpose in introducing this vexed question was again to draw attention to the unfair advantage it gave to Australia over Great Britain. Many commodities hitherto imported from British manufacturers were now being supplied by Australia as a result of British invoices and shipping expenses being loaded with 25 per cent, bank exchange, whereas imports from Australia escaped this impost entirely. Australia now found New Zealand a valuable outlet for the surplus production of many of her new industries, to which we would not object if it were not at the expense of our best customer, Great Britain. Though our imports from Australia might not as yet show any marked increase, they would rapidly do so unless this unintended advantage were rectified. It was surely an anomaly that whereas in our exports to Great Britain Australia was our greatest and keenest competitor, we should enable her by this advantage to rob Great Britain of her former market in New Zealand for many manufactured articles. He felt that the Government should take immediate steps to ensure a balanced trade with Australia, and if necessary to impose on Australian invoices for goods now displacing similar articles of British origin a duty surtax equal to bank exchange, Australia on London, and then on invoice values plus surtax to add relative Customs duty. This would place both countries on a more equitable footing.

HIGH COST OF GOVERNMENT The high cost of State and local body government was a subject that continued to give cause for strong adverse criticism, particularly from those who were not employed in such services. The tremendous increase in the borrowing and spending of State and local governments during the past 20 years, the great increase in tlie cost of government, together with the substantial increases in State taxation and local rates, had been mainly responsible for the people of New Zealand being oppressively overtaxed. The sources of taxation —the working capital of many private enterprises—were now drying up. Taxation which punished constructive and efficient initiative and enterprise on the part of the individual retarded commercial and industrial activities and was injurious to the prosperity of any country and the welfare of its people. Furthermore, in considering the causes and remedies for unemployment and wage reductions it must not be overlooked that this crushing burden of taxation was definitely a contributing cause of unemployment and wage 1 eduction.

The more government was centralised or invaded the field of private enterprise, or the more the tentacles of the governmental octopus of control were allowed to spread the greater would be the advances made along the road which led to the destruction of the liberty of the individual, the ability of private industry to develop, and of those principles that made for the real progress, comfort, peace, and welfare of a great nation.

Reasonable restraints or regulations were necessary to prevent abuses, but they should be adopted only in co-opera-tion with private enterprise and private capital and not in such a way as would tend to destroy confidence and ruin the successful prospects of private business or industrial enterprise. THE CAPITALISTIC SYSTEM Whether industries or businesses would be nationalised gradually or all at one time was difficult to say. What did this mean but the destruction of the capitalistic order and an all-embracing and tyrannical Communistic State erected on its ruins? He did not eontend that the capitalistic system had not its weaknesses and defects. With all its faults, under it had been witnessed remarkable changes making for striking material, moral and social progress. He did not believe that the great, mass of intelligent and thinking people in any enlightened and democratic country would support any policy of government under which individual freedom of choice and action would be taken away and the individual placed in a straight-jacket. A nation whose people were without individual liberty, individual initiative, individual incentive would soon come to grief.