PRODUCTION.

Southland Times, Issue 20011, 27 October 1926, Page 9

PRODUCTION.

To the Editor. Sir, —“Southerner’s” mental legs are beginning to play pranks with him. His ideas about manipulating supplies and price-fix-ing, a high price m course, are not very different from less production, about which he held up his hands in holy horror as being so selfish. When he asks, “How in the name of reason does Customs taxation of duties cause the farmer to leave his farm?” his toes are turned to the rear, and we cannot claim much space to cultivate that ground again. Briefly, Customs taxation raises the cost of commodities and services to the farmer; he pays practically the lot; other classes receive compensation, not so with him. Paying the lot and in addition a tax on New Zealand produced goods and services, he cannot produce profitably, he quits. The farmer does not get out of the pint pot, his land, what he puts in. The other fellow who puts less in gets more. And now the farmer has dropped to the game the other fellow plausibly wants to cheat him into the belief that the pot is only half a pint in explanation of the farmer’s deficiency. We have now to consider the matter of the millions of mortgages which land in New Zealand carries. These mortgages represent the idea of someone at some time or another of the value of the land upon which they rest. The value may have been judged from a speculative, productive or potential point of view, but value nevertheless. We are told they must be written down, but no one yet has told us how they are to be written down, who is to lose in the writing off or how agriculture and New Zealand is to benefit by the process. The question arises as to\ whether these mortgages were rightly entered ihto, that is to say, was the value there at any .time or was the value expressed in the mortgage fictitious or false? We will assume a block of land was worth in 1914 the sum of £2O per acre. Taking land value as the difference between market price and productive cost that land in 1920 would be worth about £3O per acre. To-day on the same principle it is worth probably less than £l5 per acre. Very well, assuming the productive value of that land to-day in £ s. d. is only £l5, the next question is if that land was returned to its virgin state could it again at this time be brought to its present productive state at a cost of £l5. Now, we know the relative cost as between 1914 and 1926 of bringing land to production. We know that it costs 60 per cent, and more to get the same job done. So that on this basis that land ought to be worth £32 per acre. There is then no justification whatever for blaming the farmer who entered into a farm in 1920 for paying £3O and even more per acre for land which in 1914 was worth £2O. The land has not shrunk, it produces as much if not more. It is doing its job not worse but better, the price value of all other commodities and services has increased, why .not land? Why single out land and its guardian, the farmer, for this injustice? Do you want those mortgages reduced? You can have them reduced, the farmer will reduce them, by redeeming them, if only you will give him a chance to declare a dividend. Let him take out of the pint pot what he puts in. Let the other fellow get a pint pot of his own. The mortgages then represent, not past nor future, but present-day values of labour, toil and material which have been put into the land, and the fact is that if the mortgages are written down you are writing down what at once will have to be replaced at a higher cost inasmuch as without the labour and toil which those mortgages represent New Zealand cannot progress. “Southerner” has made a point that a writing down process must of necessity take place when an industry or business is depressed or unprofitable. We will consider the business man with stocks which he has not sold and has no prospect of clearing at-i his purchase price. He writes then down because they have been badly bought, he cannot quit at the price, he can probably replace cheaper. Writing down is the only remedy. A manufacturer writes down his machinery each year owing to wear and tear and usage. If his business is not paying and he could quit that machine for a sum above purchase price he would not write it down. If he still needed the machine and the cost had risen it is clear it: is not depreciation of the machine which i is at fault. Some other factor is at work.; Now, the case of land is not quite lika, that of the business man or manufacturer.. Land is not machinery', it is a living organism, it grows not only crops but actually in itself. Good land or poor land, with good husbandry land is not subject to wear and tear, and usage has only a good effect upon it. Feed it and the food is returned, pressed down in good measure and running over. There is no limit to good treatment except profit. The landed industry is not altogether profitable at present. Put the land back to ite virgin state and New Zealand would require, to turn to and again bring it to production And the cost expressed in £ s. d. would be greater than at any time in the history of the country. Why then be foolish and write down value which if in 1914 was £2O could now not be replaced for less than £32. I concede the point willingly that the people who are carrying the burden may have been somewhat mistaken in their ideas of value, and I go further and say that probably the people who are holding the mortgages are not entitled to all the amount of that large sum. However, is there anyone competent to sort out the man who paid too much and the man who received too much? There is not. And further, is there anyone able to produce a process of writing down which will remedy the position and show how the process will benefit the industry'? It may be said that deflation is alreadycoming about. True, land has fallen, is falling, and will fall on the present prospect. But less production too is coming, has in fact come. Areas have gone out of production, their deficiency has been made good by the efforts of the producers remaining. Their effort may pull them through, but whfen that effort has passed, lack of increase, a form of less production will come about and land values will again rise because an industry cannot indefinitely exist on an unprofitable basis and a rise in land values will indicate a return to a profitable state. Exactly what factor or factors will bring that about cannot be predicted. It may be a rise in market values, but whatever the cause the only real and permanent basis upon which to base a prosperous and progressive agricultural industry is to relieve the lanof the taxation which ought to be levied on all classes and not on the farmer only. The next matter for consideration is that of the speculator and a possible method of stabilising land values.—l am, etc., SUUM CUIQUE.