PROBLEM OF COSTS

Southland Times, Issue 20834, 24 July 1929, Page 8

PROBLEM OF COSTS

THE NEW ZEALAND FARMER.

PRODUCTION AND PROTECTION.

DOMINION PRESIDENT’S ADDRESS.

Wellington, July 23.

The problem of costs was one of the vital problems dealt with this morning when Mr W. J. Polson, M.P., Dominion President, delivered the inaugural address at the opening of the New Zealand Farmers’ Union Conference. He said:

During the past few months, as many of you will have seen from the Press, I have been devoting myself to drawing attention to the most pressing of our problems—the problem of costs. It is not a purely New Zealand problem. It affects most of the countries of the Empire. Australia suffers from it as severely as we do. But it is the vital one. Unless we can get costs down we cannot get ahead with primary production. There are three ways in which we are directly affected by high costs which are susceptible of some alleviation if we can get our political machine to function intelligently. These, three are: (1) Labour costs, (2) fiscal costs, (3) excess profit costs.

The average farmer is firmly convinced that the chief cause of his troubles is the high cost of labour, and that the Arbitration Court is largely, if not entirely, responsible. Until the Industrial Conference last year threw a Hood of fresh light on the question, he was quite certain that all that was necessary to pave the way for the millennium was to abolish the Arbitration Court in New Zealand and get back to the good old freedom of content of bygone days. A closer investigation, however, reveals the fact that, labour in the aggregate represents a much sipaller proportion of the total costs of farming expended upon the farm than most people imagine. As I have pointed out elsewhere a 10 per cent, fall in farm wages would not mean anything like a 5 per cent, fall in farm costs. z\ 10 per cent, fall in wages would have a tragic effect upon the standard of ’living, which as the result of a century of struggle the workers have built up for themselves —a standard which in an age of progress no man wants to see cut down. A fall of 10 per cent, in the purchasing power of the workers would immediately react upon the rest of the community. Trade would fall off, imports would be affected, taxation would be affected, and there would be a general dislocation far greater than the amount of relief the farmers would obtain. In any case attempts to drastically reduce wages would result in serious consequences to the whole community. The Arbitration Court cannot be held responsible for high wages —-the responsibility of the court is for the network of restrictive conditions imposed upon industry which add enormously to costs. An understanding with labour, which would abolish these trammelling and often impractical conditions, even if it meant an increase in wages, would in many cases be an advantage to the community. But it must not be forgotten - that labour, being thoroughly organized, can ignore the court. The Miner’s Union, for example, refuses to recognize the Arbitration Court or to have anything to do with it, and imposes conditions and wages upon the industry which are said to be harsher than anything imposed by the court. The. Fundamental Difference. All these questions were very fully considered by the recent Industrial Conference. The fundamental difference there was that Labour wanted to create tribunals equally representative of employers and workers who should not only settle disputes, but consider conditions, while the employers sought for little else than the abolition of the compulsory provisions of the Arbitration Act. Labour feared to lose the protection of the court until its plan had been substituted and the employers, although not unanimous, generally feared to substitute the devil they did not know for the one they did, feeling that councils of industry might lead to greater interference with the rights of employers than the Arbitration Court had already been responsible for. But shortly after the conference terminated the conclusions of Sir Alfred Mond’s (now Lord Melchett) commission were given to the world. British employers (more long-sighted than their New Zealand brethren) after a full and frank discussion with the leaders of Labour in the Old Country had agreed to a joint plan for mutual investigation which provided for councils of industry. Labour will be given an intelligent interest in the management of industry. It will be able to appreciate the problems .which confront business, and to realize the difficulties of management. It is hoped by this means to create efficiency and to so cut down cost. We have sufficient evidence already that much might, be done in this direction in New Zealand. The discovery that one of the best-organized and most efficient boot factories in New Zealand might by a rearrangement of its machinery alone reduce the cost of manufacture by 12$ per cent, speaks for itself. A complete stock-taking in conjunction with labour might easily reduce costs and actually at the same time increase wages.

It is necessary that the investigation, which promised so well and achieved many excellent results, should be continued, and I imagine one of the functions of this conference should be to discuss this question and come to a decision upon it. The Price of Protection.

But nothing so seriously affects the costs of the primary producer as a protective tariff. Some form of tariff is, of course, essential. We have not yet reached the millennium, and, while nations are building up tariff protection against one another it is worse than useless for this small and isolated community to cherish any illusions about freetrade. It simply cannot be done. All that we can hope to do is to secure that our interests as primary producers are not neglected when tariff revisions are made, and that while noisy groups are creating clamour and confusion, we do not wake up and find what happened last time—that a whole list of farm requisites had an extra tariff placed upon them. But while we may be unable to materially influence the tariff, we can throw our weight on the side of Imperial Preference, which is another name for an adjustment to enable the British Empire to trade within itself without such tariff barriers as may be raised against the foreigner. Imperial Preference does not necessarily mean free trade, but it is a long way nearer it than the existing plan, and might in the long run amonut to practical free trade. Britain to-day is much as the German States were before the genius of Bismarck welded them into one composite whole, instead of a group of communities each with a tax barrier against his neighbour. She has the great advantage over Germany that within her widespread realm she can produce all her own requirements and many of the requirements of the nations. An Interesting Comparison.

America, with all her high protection against the foreigner, has absolute free trade within her own borders. I have referred more than once, and will refer here again, to an outstanding example of the difference between American and British policy in this respect which is right under our own noses. The traveller from Auckland to the United States comes first to Fiji—beautiful islands ideally situated south of the Equator—and with a small, dispirited, and languishing population, and even the sugar industry, which is her main staple, apparently struggling against decay. Further bn, equi-distant from the Equator, the traveller reaches Hawaii, not with such good soil, without many of the glorious advantages Fiji possesses. But what a change. Here are teeming populations, extensive harbours, up-to-date factories, and Honolulu, a modern city filled with hurrying traffic. One country is just a unit amongst British possessions; the other is inside the comity of American States. One stands looking idly on, while the other annually growing richer and more important takes her part in the life of a great nation. The proposal of the Canadian Government to bring about a conference between the Gov-

ernments of the Empire is surely a forward move. It is quite obvious that while two Governments may find it impossible to arrive at a satisfactory mutual preferential arrangement, a greater number may do so. A, while not able to deal with B, quite conceivably might grant preference to C in return for concessions given it by B, which in turn would receive benefits from C. The Canadian chambers of commerce some years ago proposed a round table conference of the Empire’s business men to explore this aspect. Such a conference could achieve nothing but good. “We Must Get On Side.”

But how is it possible for this organization to place itself on side in an agitation for Imperial Preference. Let me read this clipping from the leading columns of a wellknown North Island newspaper, which not. only fairly sums up the position, but offers a viewpoint of the general public:— The great need in the Dominion to-day is for better understanding between the producers in the primary and secondary industries. The secondary industries, though carried on generally on a small scale, are in a favoured position because, by means of tariffs, there exists a very severe handicap on the importation of goods similar to those they produce, and they lose no opportunity of pressing their demands for higher duties, which would make the cost of living dearer for the whole of the public. The farmer who produces butter, cheese, wool, or meat is in a much less favourable position, because the prices he receives depend on the London market and dominion tariffs are of. no use to him. But the farmer is just as ready as the manufacturer to make use of tariffs if lie gets a chance. The wheat growers of Canterbury have secured protection, which raises the price of wheat and bread and restricts the development of the poultry, pork, and bacon industries; they raise a great outcry if any suggestion is made that their protection should be removed. Similarly the growers of fruit and tomatoes and poultry-keepers are constantly demanding embargoes on importations which tend to reduce prices. The only means of securing general prosperity is that there should be give and take on both sides and that self-interest should not be all powerful. People must see the point of view of the other man and be content with less than they could wish. Victims of Circumstances. We have got to make up. our minds that until we can solve our own difficulty’ and reconcile our members to a policy of the greatest good for the greatest number, we will make no headway. We are tne victims of circumstances. The fact that a section of our primary producers cannot grow essential crops without some form of protection has been made use of by the manufacturing community to demand protection and more protection, the cost of which is unfailingly piled on to the farmer. We have made a rod for our own backs. The thing to consider is what we are going to do about it. The first thing to do is to make a thorough investigation of our own position. Is wheat growing essential to this nation, for example, and, if it is, are we growing the most remunerative wheat in the cheapest way? If we are not, what must be done to remedy it, and how far will that lessen the necessity for protection? If we are, is there too much spread in our distribution? Are our mills efficient and economical, and are our flour and offals retailed at fair and reasonable prices? No committee of politicians busy with the affairs of the country can settle these questions, and no finding by any such committee however impartial, and however anxious to do the right thing, will get at the root causes and offer a sound and effective solution. The Farmers’ Union, with the wheat growers within its ranks, is asking for a scientific and practical investigation by a qualified and quite impartial board, and is prepared to stand by the decision of such a tribunal, established with statutory authority. Such a body would first ascertain what are the essential industries to this dominion, what measure of protection they are entitled to, if any; whether that protection shall be temporary or permanent, and whether it shall be by way of Customs duty or bounty. It would be a better plan. We have recently had published on behalf of the Manufacturers’ Association, or by the 1928 committee, or some other body of secondary or financial propagandists a mass of literature all with one object—more protection. One gentleman has gone so far as to describe his proposal to enforce the purchase of New Zealand-made goods exclusively by Legislative means as “the modern economic solution,” and his pamphlet gravely setting forth this “plan” has been broadcasted from one end of the dominion to the other. These things would be ludicrous if it were not necessary to take them seriously. Many thousands of people who do not investigate these questions for themselves take such arguments at their face value.

The Remedy. The remedy we seek to apply is along the lines indicated in our political platform unanimously adopted by this conference last year —a proper practical and scientifically qualified tribunal created from speci-ally-selected men of the quality of the men whose report has been prepared for the guidance of the Commonwealth, and to whom shall be given the task quite apart from the burly burly of party politics of ascertaining what are the essential industries of the dominion, the order in which they shall be developed, whether that development shall be assisted by protection or otherwise, and if so whether that assistance shall be temporary or permanent, and most importantly whether it shall be by way of fiscal taxation or bounty. I have made passing reference to the local operation of combines in control of commodities in the inflation of costs. While the predatory gains of the great organizations which handle much that we use nowadays do pass into the selling price we have little control over them in New Zealand. But we are not altogether powerless. Already, as you will have seen from the Press, it has been realized in the great birthplace of combinations —America—that combinations in control of distribution arc playing a greater part in the building up of casts than the public imagine. It is actually proposed to restore prosperity to the farming population of the United States, not by increasing the price of the product, but by reducing the cost of distribution. Are our distributive costs reasonable in this country? Are there no articles of common daily consumption which, through the manipulation of combinations or the inefficiency of our system are costing the consumer too much ? It is not necessary to particularize. Mast of us have ideas about this question. We believe that reductions in costs can be brought about by these means also. Room for National Adjustments. It would appear, therefore, that in each of the important questions we have been considering there is room for national adjustments which would affect costs. It is my own firm belief that a national stocktaking along such lines as these is a first essential to the restoration of sound and prosperous.conditions. The effect of a substantial reduction in costs throughout the dominion would be enormous. A ten per cent, reduction in costs (to use a purely arbitrary figure) would mean not only an increase of 10 per cent, in spending power, but an increase to a very much greater extent in development through the increased confidence created by healthier conditions. Unemployment would instantly disappear. Labour would find employers competing for its services, in all probability at dates which would further improve the standard of living.

“How are we to bring about these results? It can only be done by solid educational propaganda in the first place; by sticking together and unanimously demanding of bur rulers that the importance of this matter merits more than party political consideration, and finally by concerted action on our own part that will leave no room for misunderstanding. There are other ways by which costs may be reduced, such as a sound system of agricultural banking. I do not intend to devote time to the aues-

tion here. There will be a suitable opportunity during the progress of this conference. The great question of land settlement, particularly in relation to our deteriorating lands is one which we will also, I hope, further thresh out here. I believe the opportunity exists for achieving reforms. We have strong opinions here, and we must see that those views are not overlooked when the question is before Parliament.