CHAMBER OF COMMERCE

Otago Witness, Issue 3467, 24 August 1920, Page 15

CHAMBER OF COMMERCE

ANNUAL MEETING. I Tho thirty-third annual meeting of the Dunedin Chamber of Commerce was held last evening in the Savoy Lounge. Iho president (Mr J. B. Waters) occupied the chair, and there were about 50 members present. i ANNUAL REPORT, on the ISth in the Savoy Lounge. Tho The thirty-third annual' report summarised briefly the principal questions considered and dealt with by the committee during the past year. In' moving the adoption of the annual report, the outgoing president (Mr J. B. Waters), after dealing with questions which arose during his term of office, went on to say:— TRADE AND COMMERCE. As islanders exporting foodstuffs and raw materials they naturally turned to their export statistics to ascertain how they are fulfilling their chief function. The salient .feature at present was, of course, the great increase in the value of their exports, and the figures for the three-year periods, 1912J 4 and 1917-19, gave them tho following comparison:— 1912-1914, average annual export value ... .?. ........ ... ...£23,525,304 1917-1919, average annual export value ... 37,208,297 This showed an average annual increase of £13,682,993, and they found the ultimate results of this rise in value in increased bank deposits, advancing land values, higher wages, higher local prices, and in some directions in the increased purchasing power of the people. Free deposits in the banks of issue, for instance, increased from £13,475,771 on March 31. 1914, to £3B 354,182 on June 30, 1920, but it does not follow from this that the actual wealth of the country has been augmented to a corresponding extent. In the first place these credits, which were the strategic reserve of the trading community, have like wages and salaries, increased on the ' very low commodity value, and from an importers point of view the' purchasing power of 13 fillions in 1914 was probably as great as e purchasinig power of 30 millions to-day. In the second place these free deposits represented to a large extent realisations of trading stocks of goods, which must be replaced at the earliest opportunity; so that between low commodity values, and the rjrgent need for replenishing the general stock of goods, the great increase in bank deposits was more apparent than real. EXPORT AND IMPORT VALUES. Again, the phenomenal increase in export value did not signify' an equivalent increase in production. Indeed it was' self-evident that owing to war conditions there could have been little increase in production since 1915, and in considering the .question of exports they must be particularly careful not to confuse value with volume. —(Hear, hear.) As regarded imports, values rather than quantity again dominated the position. Every trader confessed to curtailed orders and reduced stocks, and this shortage of goods largely explained the growth of 'unused credits to which ho had already referred. Money was one of the tools of commerce, and, owing to unfavourable conditions, 'it was- a tool which in recent years they had not been able to employ to its full extent. The average annual import values, for the years 1912 to 1914 wa3 £21,124.-813, and that for 1917 to 1919 £25,050,920, showing an average annual increase in the value of the imports for the two periods of £3,936,107. Taking the great advance in values into consideration this certainly indicated a seridus falling off in the quantity of goods imported. The plain fact was that throughout the world goods and services were scarce while money was plentiful, with the inevitable result of /high prices. SECONDARY INDUSTRIES. From exports and imports they turned to their secondary industries. In pre-war days cheap freights poured the products of Cheaper labour into their ports, and New Zealand manufacturers were seriously handicapDed. These conditions have changed. The disorganisation of European industry, increased wages in Britain and America, adverse exchanges and the higher cost of shipping and of bunker coal enormously increased the landed cost of imported goods, and improved to a considerable extent the position of their manufacturers. It was true that in many lines they could not hope to compete with the mass production of the north but in those industries which were complementary to their primary products or closely related to their essential needs, then our manufacturers might confidently expect to improve and consolidate their position. In establishing dominion industries, often under most .adverse circumstances, they had rendered signal service to the community, and it must be gratefully admitted that without their textile and leather trades, their implement and engineering shops, their building and allied industries they would have been in a sorry plight during the past six years. TRANSPORT.

• In all essential industries, both primary and secondary, there was an insistent demand for increased production. The appeal had been worn threadbare, yet production •alone was of little value. A hundred tons of wheat in Central Otago, or of coal at Westport, or of bar iron at the port of London was of no value to the ultimate consumer without transport. As an island community, 11,000 miles from their principal market by the Panama route, 1500 miles from their nearest neighbour, with a. coastline of 4300 miles and no possibility of centralisation at any one point, they fetched and carried in proportion to their population more than any other country. Their economic existence was therefore peculiarly sensitive to any change in transport conditions. In the threa years 1912 to 1914 their average-annual tonnage overseas and Coastwiso was 13,875,508 tons. In the three years '917 to 1919 the average had shrunk: to 8,990,134 tons—a decrease in shipping facilities of practically 5,000,000 tons per annum, or nearly 36 per cent. Add to this a deplorable shortage in railway rolling stock, a scarcity of transport labour, premeditated and stupid "hold-ups" at every port in loading and discharge, and a shortage of coal both for railways and steamships, and it apparent that this Country suffered as seriously from transport disabilities as from shortage of "goods. The *asy-going New Zealand publio never realised that every rise in bunker coal or shipbuilding costs in Britain, every stop-work fcneeting on New Zealand wharves, every bit SI "go°slow" in mines or repairing shops, very nasual delay over firemen added in-

evitably to the cost of living.—("Hear, hear.") Here let him say that the man who gave less service or worse service today for fair wages was as much a profiteer as the man who demanded more than a fair price for his goods.—("Hear, hear.") The one made an unfair exchange of services, the other of goods. Both were robbing tne public. But Labour was not the sole offender in regard to transport. They had spent money on public 'buildings when they should liave built railway rolling stock and "wharf and dock accommodation. They had neglected social conditions in certain colliery districts till the- had driven decent miners to other employment. They had gone short on wheat'production till they had had to use precious freight to carry four million bushels from Australia.—("Hear, hear. ) They had done, and were doing, many things which directly restricted the supply and added to the ultimate cost of goods, but they are far more concerned over some petty prosecution about the price of a clock or a pair of fancy shoes. —("Hear, hear.") Truly they strained at a gnat and swallowed a camel. STATE FINANCE.

New Zealand engages in so many State enterprises that a brief reference from a commercial standpoint ' to the principles underlying State finance as indicated in tho Government Budget might not be out of place. The fundamenatl difference between Government policy and sound commercial practice was apparently that in times of high values as at present the one was expansive, optimistic, ambitious; the other was contractive, pessimistic, cautious. Democratic Government, impelled by popular pressure and depending upon* a foundation of easy money, renewed old debts, contracted, new ones, enlarged its responsibilities, and" increased its expenditure. The prudent trader, on the other hand, acutely suspicious of inflated values, discharged bis debts, built up reserves, reduced his stock, wrote down his assets, eliminated non-productive expenditure, and generally , curtailed his .responsibilities. Were these different policies severally pursued by two opponents in trade or finance there would be little doubt as to the result so soon as a period of falling values or commercai stagnation occurred, and all along they would find the prudent man of affairs keeping himself and his enterprises well clear of those conducted by his optimistic neighbour, lest he too should be involved with him at the final day of reckoning. Unfortunately it was not possible for the producer or the man, of business to take up this detached position in regard to State enterprise and finance nowadays. They are more intimately concerned than they ever were before, not merely because of increasing taxation, or because of their dependence upon State services, but bocause to-day they were lenders, nolens volens, while the State Was the borrower. Which of them having financed a client into a farm or a sheep run, a trade, or a business, did not keep a very watchful eye upon his management? Did he commend himself to them if they fotmd him renewing old bills at higher rates, signing promissory notes for fresh loans, enlargng his operations on the strength of paper credit, increasing his expenditure, and exhausting his resources? Did they accept from such a client, as a satisfictory explanation, fine phrases about general prosperity, ' prudence, economy, selfreliance, industry, and thrift"? —(Hear, hear.) FORCED LOANS. But there was a more serious phase than this in our relations with the Government of New Zealand. In private affairs the lender could please himself whether he found accommodation for the borrower or not. To-day the taxpayer was in some danger of making acquaintance with forced loans, those charming transactions of the times of Charles I, where the option as to the amount of the principal, the rate of interest, and the time of repayment all rested with the borrower. Now they fully recognised the obligations and reponsibilities of government, and he thought tho mercantile community would not complain of increased taxation were it coupled with economical administration or with a substantial reduction of State liabilites, nor would they be so ungenerous as to cavil at providing money for repatriation'purposes, or so short-sighted as to refuse it for absolutely necessary and profitable development work; ■ but if the principle of compulsory loans in time of \peace at a price below current rates oL interest ! was to obtain, it would certainly prove' a source of danger in the long run both to the Government and to the community. In the first place it rendered State borrowing fatally easy, with the consequent inflation of values and inevitable increase in the cost of living; in the second place, it swept into the Government coffers those trading credits, the result of personal industry and thrift, upon which individual enterprise and permanent employment alike depend, and finally, and very speedily indeed, if export values fell, it arrived at that sinister situation where the finance of the country became saturated with Government bonds onlv negotiable at a price considerably below their face value. GOVERNMENT WAR BONDS. Investors in this country already held £53,748,780 of Government War Bonds or War Loan Inscribed Stock. Credits in the form of fixed and free deposits in the banks of'' issue certainly amounted in March last to £50,665,091, but of this credit a large proportion was earmarked for the increasing I payments required for necessary imports and i for industrial developments and replaceI ments hung up during the war, and if a series of compulsory loans was put on the New Zealand market, coupled with an annual payment of over seven millions for land and income tax, it might easily be imagined how soon available credits might be absorbed, and how quickly the country might arrive at saturation point. The success of the present financial policy of the Government depended entirely upon a very full exploitation of the lending powers and the taxable capabilities of the ! people. Lending power and fiscal possibili- : ties in turn depended upon a continuance of ; high prices for wool, meat, and dairy produce, and upon the uninterrupted and increasing flow, of these exports BUDGET PROPOSALS. In basing such a superstructure as the Budget proposals upon such a foundation tho Government had taken very great and I serious risks, much greater and more serious, in fact, that any mercantile or financial | institution would care to contemplate. 1 Anxiety and responsibility were, however, no State monopoly. Commerce and industry hod only been carried through during the past six years by increasing care arid strenuous exertion. To-day pre-war mercantile conditions were but a pleasant memory, and the economic outlook showed little prospect of anything but hard work and unremitting

vigilance. Daily, in Carlyle's phrase, they were to be found "grinding in the mill of industry." Oui bono? To what end? Wero they really any better off for this devil's dance in prices? Aa a people, probably not. Values had gone up certainly, but in the four essential factors in the production of wealth—Land, Labour, Capital, and Organisation—they were very little better off than they were six years ago, while they had added to their national indebtedness some £80,089,025 of war debt, and increased their taxation from £5 103 per head in 1914 to £l2 7 S 8d in 1919, and £l4 12s 2d in 1920, with an estimated £ls 7s 6d in view for 1921. It was true that, measured in terms of the face value of money, tho country was prosperous. There was more Work offering than there were hands available. Prices, wages, profits, bank deposits, and land values had gone up and up, till they seemed to have reached their zenith, anq. daily they told each other that the sky was dark with portent, and that the fall in values must begin tomorrow. To the farmer and the trader, "to the man in the street, and even more urgently to the woman in the house," this was the greateconomic question of the horn-. When would prices fall? In order to answer this, even in the most general way, it was necessary to state briefly the conditions under which trade and commerce were conducted to-day. EFFECTS OF THE WAB. Let them take as a basic fact the solidarity of modern humanity. No nation lived unto itself to-day. * They were all members one of another. Scarcity and disorder in one country therefore immediately affected perhaps 20 other nationalities. Imagine, then, the effect upon the delicate and interdependent economic organisation of the twentieth century of a war which involved all the great white nations, and "ploughed European society to the roots." Consider the conditions arising from and during that war. Currency inflation, destruction of man power and material, decreased production, and disorganised transport. Follow these conditions to their logical and inevitable conclusion: high prices, adverse exchanges, social distress and industrial unrest, culminating in a general dislocation of the- production and distribution of wealth. Such was the environment in which traders throughout the civilised world, to-day lived, moved, and had their being; and to the nuestion as to when prices would begin to fall they could only answer: just so soon as the remedies which were being applied began to. take effect. INFLATED CUBIIENCY. Unfortunately these remedies were exasperatingly slow in their action. For instance, the inflation of a currency was arranged with fatal ease and celeritv. It was a pleasant and insidious form of financial intoxication. Deflation, which was the appropriate remedy, was painful in its operation, and must not be carried out too quickly or applied in too drastic a manner lest the patient succumbed altogether. Deflation was a remedy, too, which could only be administered by > Government in cooperation with banVing' institutions, and they must imagine hciw loth a popular Government was to curtail its extravagant expenditure, abate its powers of patronage, or apply the country's revenues to paying off the country's debts. Imagine financial conditions in countries where Governments were still printing currency notes to cover the deficits in their Budgets, and they might judge how difficult it was to get rid of currency inflation, and to restore the gold standard, and _ how long would he the period of financial convalescence. ADVANCE IN VALUES. Competent authorities told" them that inflation was only for about 25 per cent, of the advance in values, and that decreased production, disorganised transport, .and adverse exchanges largely accounted for the remaining 75 per cent. The remedy was, of course, increased production and better services. This again w.as a slow business. Four and a-half _ years of war and 18 months of uncertain peace wrecked, or at least greatly impaired, the mechanism of production and exchange in most, of the belligerent countries. To-day, according to the June number of the British Trade Review, Britain's production was clown to 75 per cent, of its pre-war" level. "In Germany it is down to half, according to good authorities. The case in France is worse, for it was precisely the leading; industrial districts of France that were ruined by the enemy. Russia has to all intents and purposes gone out of business. Even in America output is staggeringly low." ECONOMIC PEOBLEMS. Britain and America, however, were steadily forging ahead; France, Italy, and Belgium were energetically reorganising, their industries. Mines were being rei opened, factories and steel works were relighting their furnaces and mustering their operatives. There was the ring of hope and energy in their trade' reports, even where they emphasised the seriousness of their task. The crux of the economic problem lay not so much with the Allies as with Central and Eastern Europe. In 1914 the population of Germany, AustriaHungary, and Russia was nearly three hundred millions. "Round Germany as a central support," says Keynes, the author of "The Economics Consequences of the Peace,'' "tho rest of the European economic system grouped itself, and on the prosperity and enterprise of Germany the prosperity of the rest of the Continent mainly depended. Germany was the best customer of Russia, Norway, Holland, Belgium, Switzerland, Italy, and Austria-Hungary. \ She was the second-best customer of Great Britain, Sweden, and Denmark, and the third-best customer of France. She was the largest source of supply to Russia, Norway, Sweden, Denmark, Holland, Switzerland, Italy, Austria-Hungary, Rumania, and Bulgaria, aild the second largest source of supply to Great Britain, Belgium, and France." She organised and financed to the extent of nearly £500,000,000 trade and industry in Russia, Austria-Hungary, Bulgaria, Rumania, and Turkey. "The whole of Europe east of the Rhine thus fell into tho German industrial orbit, and its economic life was adjusted accordingly." EUROPEAN SITUATION. Here they had an excessive population dependent tor its prosperity _ upon a complicated and artificial organisation involving a great importation of raw materials, and for an adequate food supply upon the exportable surplus of' the New World supplemented by the surplus wheat of Russia and of Rumania. This was the economic position of Europe six years ago. Germany was overthrown. How terribly the Allies never knew till long after the armistice, and with her fall came chaos. "Europe," says Hoover, "must work or sfcarvo. How could men work without j food or raw material; How could they obtain these without credit? How could

credit be established without some stable form of Government? "An inefficient, unemployed, disorganised Europe faces us," says Keynes, " torn by internal strife and international hate, fighting, starving, pillaging, and lying. Jn Russia, Poland, Turkey, Hungary, and Austria, famine, cold, disease, ■war, murder, and anarchy are an actual present experience."

Such was the problem of Central and Eastern Europe. Bid they wonder that the world for goods exceeded the supply; that the Qld World called to the New as she had 1 never called before, for

food and industrial materials; that the New World was short of the manufactures oi tne U'ki, and had to pay three prices for them? Did they wonder that the process of rehabilitation was slow? And that in reply to the question as to when priced would fall they could only point to present post-war conditions, to inflated currencies, to disorganised transport, and impaired prq* duction, and say that in proportion as conditions were remedied, not in, one or two countries, but in all, so prices woulq move towards that point where the market* of the world were in favour of buyerji

rather than of sellers. It was, however, rjot sufficient that Britain and her Allies should reorganise their industries and partially recover their financial equilibrium. The dense population of Central and Eastern Europe must share in the general re-estab-lishment. The way was difficult, the pace was slow, the economio price and penalty of war was appalling, and, like any other debt e> it could only be discharged by selfdenying exertion and self-sacrificing energy. There was no short cut, no easy way out. Civilised humanity must work or starve. NEW ZEALAND'S DUTY. Under such conditions it was their clear duty as primary producers to increase their exports—to do their utmost to supplement the world's supply. This was necessary from a purely local and selfish standpoint, |or only by so doing could they pay their way, develop this country, and increase their standard of comfort. Not to do so would be. not only an • incredible stupidity, but, in view of the needs of the Old World, a inhumanity. . To this national task, then, they were called as a community, both by self-interest and by social obligation. In that task it was their part as directors of trade and industry to eUpply, so far as lay. in their power, the fourth element in the production of wealth —the element of organisation. Without that factor land. Labour, and Capital were 'parren of result; and let him say that organisation was no cold and mechanical ewience concerned merely with piling up material advantages. It demanded from its exponents not only a practical knowledge of the functions and capabilities of money and of material, but the fullest sympathy and the most intimate acquaintance with the limitations, the needs, and the aspirations fif those who were co-workers with them owards this end.—-(Loud applause.) OTHER SPEAKERS. Mr T. Somerville seconded the motion. He congratulated . Mr. Waters on the thoughtful and instructive address which he had just given them —("Hear, hear"), —and referred to the immense amount of work he had done during the year. He said that as qnairman of the local Advisory Committee of the Wheat Control Board Mr Waters nad done invaluable work —work that deserved the gratitude of the whole community.

Mr G. L. Denniston said he had listened to many addresses by presidents of the chamber, and, without making any invidious distinctions, he would say he had never listened to any that showed such thought and care in preparation as that given them by Mr Waters that night.—("Hear, hear.") Mr James Brown also complimented Mr Waters on his address. He thought it would have proved most valuable to their members of Parliament.

A Voice: They would not listen to it. — (Laughter.) Mr H. K. Wilkinson and Mr Lethbridge both strongly condemned the proposal to introduce compulsory loans in peace time. Mr Lethbridge said there was no doubt the Government was setting the country a very bad example in extravagance. _ Hp considered the people were being blinded by the gold dust that was being thrown about. If the Government could easily borrow money by compulsion there was no means of stopping financial excesses. They had all been bribed by the hug© amount of money that was floating about, and he did not see where it was leading them. Mr Peter Barr said he could honestly state that Mr "Waters's address stood out amongst those he had listened to at annual meetings of the chamber for 30 years past. The community should be grateful to Mr Waters for the work he had done on the Wheat Control Board —work which had been carried out without fee or reward.

The motion for the adoption of the re port was then put and earned.

OFFICEBEARERS. The following office-bearers were elected: President, Mr T. Somerville; vice-president, Mr O. S. Owen; honorary auditor, Mr David Crawford 5 members of the committee to replace those members who have to retire under the Articles of the Association, and who are not eligible for re-election for 12 months —Messrs ' Henry, Hnlliday, H. Henderson, G. W. Gibson, A. Ibbotson, W. W. Mackersy, and D. Phillips. On the motion of Mr E. C. Hazlett, a hearty vote of thanks was passed to the council of the obamb-er for the excellent work it had done during tho past year.