STATE AS TRADER

Poverty Bay Herald, Volume LXIV, Issue 19374, 12 July 1937, Page 13

STATE AS TRADER

REVIEW OF ACTIVITIES ARE THEY ECONOMIC? DISADVANTAGES TEWED (Special lo the Iluralil.) 'WELLINGTON, this day. The extent to which the State has of late increased its activities as a trader, and the degree to which the Government is apparently still prepared to go in this direction, is probably not generally appreciated by the public, says a statement by the Associated Chambers of Commerce of New Zealand. The Government has commercialised broadcasting and made if a State business; made a State bank out of the Reserve Bank; become the sole trader in New Zealand’s dairy produce for sale overseas, and tire proprietor of a produce-distributing business in the domestic market; become a lender on a large scale by nationalising the Mortgage Corporation; entered the house-building and joinery business; made arrangements to add substantially to its road transport fleet; and again become a timber-miller. There are additions to those established activities of the State which impinge on the field of private enterprise. The State generates and sells electricity; mines and sells coal; owns railways, buses, ships, hotels, workshops, quarries and labour bureaux; is the largest lawyer and trustee; is a designing, manufacturing and constructional engineer; is a moneylender, printer, publisher, tourist agent, bookseller, banker, architect, doctor, dentist, barber, forester, winemaker, and restaurateur; trades in (ire, accident and life insurance, wheat, conducts household removals, and even sells advertising space, oysters, ammunition and poisons. It employs more than 31.000 persons to carry on its trading activities.

Still More Enterprises

However, long though the list of State enterprises is, apparently it is to be made even longer. It has been stated on behalf of the Government that it will probably establish modern cement works; that it is quite possible something will be done as regards the Government taking over the Onekaka iron works; that the Government. and not private enterprise, should own all air services. In the Legislative Council last year, when the Industrial Efficiency Bill was under consideration, it was stated that on behalf of the Government by the Leader of the Council that “the day might come when it would be necessary, in the public interest, for the Government, which after all was a Socialist Government, to strike out on its own account in the realm of private enterprise.” Does the Government intend lo continue expanding the field of State enterprise regardless of the question of the ability of the State to trade efficiently and economically? The taxpaying community are directly concerned with any such trading ventures, because while a private trader who fails goes bankrupt, there is a contingent liability on the taxpayers to foot any losses incurred by State enterprises'. It. is axiomatic that the State" is not constituted to trade as efficiently as private enterprise. _ A fair example is provided by life insurance—and a popular one, since New Zealand occupies third place in the world on the basis of the sum assured per head of the population. The New Zealand Government Life Insurance Department began operations in 1870 as a State enterprise. Sir Julius Vogel, on whose initiative the step was taken, said he believed the only way to popularise insurance among the working-class was to place the security of the State behind it. The time was particularly opportune since there were no established interests to contend with—no local life assurance companies; all the insurance business was done by agents working for outside companies. In 1803 the Government Office held 40 per cent, of existing policies, and carried a greater total of insurance in New Zealand than any other office. From 1807 to 1007, while the business of the Government Office, as measured by the amount of insurance in force, increased by 20 per cent, the business of all the private companies taken together increased by 78 per cent. Reflections for Taxpayer Comment on this decreasing percentage of total business held by the Government Office is made by Professor Le Rossignol and Mr. W. Downic Stewart in their book "State Socialism in New Zealand,” published in about 1910. The writers, after dismissing as doubtful the argument that the range of the Government office was too limited because of its business being confined to New Zealand, and after agreeing that a factor which might account in a slight degree for the slow progress of the Government office was the large number of compulsory Civil Service superannuation schemes, said the department needed to display the same energy, conomy and efficiency as private offices. “Unless it does so, and does it quickly.” they said, “there will be an increasing tendency to stagnation, and the opponents' ol' State enterprise will be furnished with another illustration and that in a field which seems more adapted lo State enterprise than almost any other.” The progressive decrease in the percentage of total policies held by the Government office in recent years is shown bv the following figures, which bring the position up to date: —1803, 40 per cent; 1907, 38 per cent: 1015. 32 per cent; 1020, 30 uer cent; 1025. 28 per cent; 1930, 20 per cent; 1035, 23 per cent.

The purpose of this examination is not. to attack the Government Insurance office, which has been fairly conducted in its competition with private offices. Indeed, it is this very fact which makes this comparison of State enterprise versus private enterprise invaluable for the lesson it teaches, and makes the conclusions to be drawn as regards the ineffectiveness of the State in business inescapable. A fair and useful comparison is not possible where State concerns enjoy privileges over their private competitors. or where the State has a monopoly. The Government, life insurance office is no charge on the taxpayers' money, but alt Stale enterprises are not in that happy category. It amounts to this, that the taxoaver does not want State trading enterprises <l> if they can give him advantages no greater than, or only as great as, those which" private enterprise can give him; (21 if any unfair privileges are given to State concerns over private competitors; Cl) if he has to foot bills for State enterprise; (4) it' the growth of State trading minimises his opportunities to earn an independent living, or engage in a business: (5) if, by the exemption of State trading concerns from the same rates, taxes and other charges and conditions

which are imposed on private enterprise, the taxpayer's own tax load is increased through the narrowing of the field of taxation. The fact is that most of these things run in harness with State trading, anyway.