PRODUCTION AND TRADE.

Otago Witness, Issue 3994, 30 September 1930, Page 14

PRODUCTION AND TRADE.

ILLUMINATING COMPARISON.

The Memorandum on Production and Trade covering the period from 1923 to 1928-29, which has just been complied by the Economic and Financial Section of the League of Nations, reveals some remarkable' increases in output that offer a ready explanation of the fall in prices. It is estimated that the world’s population in 1928 was 10 per cent, greater than in 1913 and 2 per cent, greater than in 1926, the total in 1928 being 1,962,300,000 The rate of increase was highest in South America, and so, too, was the rate of growth in the output of raw materials and in international trade, which is another instance of the link between population and production. World production of foodstuffs and raw materials increased at a much higher rate than population. In 1928 it was estimated to have been 25 per cent, greater than before the war, and about 8 per cent, larger than in 1926 For both periods, it will be seen, the increase in production was much greater than the growth of population, which might seem to deny the truth of Malthus’s doctrine that population tends to outgrow the means of sustenance, out this period is both too short and too abnormal to afford any real test of the doctrine International trade is calculated to nave increased by 22 per cent, since 1913 and by 11 per cent. since 1926. Europe has made steady progress since 1926, and her production. of foodstuffs between 1920 and 1928 increased to a greater extent than in any other part of the world New records in production and tradewere established in the United States and Canada, but last year there was some decline.

The world’s production of foodstuffs has increased, it appears, in recent years at a slower rate than that of industrial raw materials. While the discrepancy was reduced in 1928 by exceptionally heavy crops, it was accentuated again in 1929. for a 6 per cent, increase in foodstuffs was accompanied by a 17 per cent in crease in raw materials. Manufactnnng production, however, has increased at an even greater rate than industrial raw materials, which is attributed to the introduction of more scientific processes, which year by year bring new economies and enable a larger production to be obtained from a given supply of raw materials. The iron and steel, the mechanical, and the electrical industries have been particularly prominent in .this advance, their production having peen expanded by 25 per cent, or more in th? period from 1925 to 1929. A slower' development of the cotton and wool indus-

tries is attributed partly to the increased use of the new textile, artificial silk, as well as of natural silk. It is significant that, in spite of the greater increase in manufacturing output, prices of manufactured articles remained in 1928 and 1929 relatively higher than those of raw materials and foodstuffs, though the discrepancy has been less pronounced since 1926. This would indicate that the advantage of increased production was not passed on to the consumer to the same extent as with foodstuffs and raw materials. Agricultural produce, on the other hand ruled higher between 1926 and 1928 than raw materials, but this position was afterwards largely reversed by the heavy fall in prices of cereals and textiles As already pointed out, the memorandum offers a natural explanation of the fall in prices of commodities —namely, an increased supply (says the financial editor of The Times). In terms of real wealth the world is better off than it was during the war and early post-war years, when prices were high,, because commodities were scarce. Short-sighted producers were doubtless happier in the period of scarcity and high prices. That the abnormal experiences of the war caused them to lose their proper perspective is obvious from the many efforts—all of which have proved to be in vain—to curtail production in order to check the fall in prices, and if possible bring about a rise. It is true prices have fallen from an index number of 320 in April. 1920, to 113. but they had risen from 100 in 1913. War created the scarcity and resultant high prices, but if there had been no war the 1913 trend of prices might have been continued and brought prices slowly up to their present level. A normal survey of prices would omit the war period. No doubt the process of readjusting costs to a lower level of prices is difficult, and partly explains why a large part of the fall in wholesale prices has not yet reached the consumer. To the extent that it has not been passed on to the consumer the fall in wholesale prices is largely meaningless, since it has been ineffectual in stimulating consumption. As the primary cause of the fall in prices is a greater abundance of commodities, there is no reason why the community generally should view the decline pessimistically. Producers have the difficult task of reducing costs to the new level of prices, but they were obviously running a grave risk in assuming that the exceptional rise in prices would be maintained. They would be unwise to assume that they will recover to the old levels.