TRADE DEPRESSION

Southland Times, Issue 21650, 11 March 1932, Page 8

TRADE DEPRESSION

.WORLD OUTLOOK CAUSES OF RESTRICTED BUSINESS EMPIRE RECIPROCITY URGED “The state of trade, values of our exports, cost of living and unemployment are the subject of outstanding interest and occupy in the main the thoughts of most of us. Then we have heavy taxation said to be caused by over-liberality and or mismanagement in high quarters and lastly the equity in the exchange rate. Any one of these subjects, if one were to discuss it with any degree of thoroughness, might easily occupy all the time at my disposal. In reality all the above are but .sections of the troubles afflicting the world, New Zealand included.” With these words, Mr D. Rutledge opened his post-presidential address at the annual meeting of the Invercargill Chamber of Commerce yesterday. “Two main causes are responsible for trade restrictions, they are tariffs and shortage or rather the sterilizing of gold. It is generally agreed that this is so now 'Although it required some considerable time for the world to grasp the fact. In America depression descended upon the country almost in a night, and to-day the. United States is facing social and industrial problems of immense proportion. In England unemployment had almost become chronic. In Germany and Central Europe the masses have been experiencing the privations of absolute hunger, and our own land has been no exception. "When one considers that never in the history of the world have food supplies, and other necessary utilities, not to speak of luxuries, been in such abundant quanti ties, and in addition that transport facilities are better and more efficient than ever before, we can realize how insane is a policy which erects tariff walls against free and natural trade intercourse thereby raising price levels in favour of sectional interests and actually creating, artificially, famine or a surplus. When these influences affect the foodstuffs of a nation, then those whose business it is to ensure as far as possible the maximum of good, have failed the people. Enlightened Governments should ensure for the people reasonably free trade intercourse and keep the medium of exchange circulating. It is because we have departed from these principles that this generation is suffering.

Overseas Trade. Overseas trade for nine months to the end of December shows a continuous decline in both imports and exports. For the year ended September last both imports and exports are approximately 20 millions lower than for the two years previously.

Average per year for interest, 4.1 S millions. “The fall in exports,” said Mr Rutledge, “is due almost entirely to a huge drop in values and the decline in imports is the inevitable result of the reduction in purchasing power in New Zealand consequent U]M>n the smaller returns to the exporters. A decrease in imports may be expected, because since public borrowing must of necesity cease the wells of finance having run dry, a larger excess of exports must be found that heretofore to pay interest, etc., due overseas amounting to at least £8,000,000 yearly. “It is interesting to compare the volume and the values of exports as a proof that up to the present the producer has not failed in his job. For nine months over the five'years 1927-31: —■

“Wool shows a slight decrease in quantity and realised 52 per cent, less in value. Lamb increased 16 per cent, in volume and fell 7 per cent, in value. Mutton fell 28 per cent, in value, butter 8 1-3 per cent., cheese dropped 28 per cent, in value. Over the whole group the fall in total value was 27 per cent., but the five years include the low years 1930 and 1931 which pull down the base of comparison. The fall from the levels of 1928 and 1929 as shown is nearly 40 per cent. “The percentage decline in imports for nine months in 1930 show how some business suffered: —

"This shows that the greatest fall is in gcmi-hixury and building construction goods. The foregoing tables also bring home to us the intimate connection there is between the producer or exporter and the merchant or importer. Immediately the income of the former falls, the merchant's ability to both buy and sell is curtailed and incidentally his capacity to employ labour. Less Selfishness Advocated. Does it not follow therefore the truth of the old text 'No one liveth unto himself.' We are each of us units of one whole and the interest of the whole body politic in the interest of each one of us. It is to be regretted that this fact is so often lost sight of more especially in these times of stress when we are so much the more disposed to shut our eyes to the equity of the other fellow’s point of view in the pursuit of our own interests. National interests demand a less selfish attitude,” said Mr Rutledge. “Very important at this time to our Dominion’s well being and indeed solvency, is the manner and spirit in which the diverging interests of debtor and creditor are approached by the principal' parties, in fact it might be said that the national interest should be the supreme consideration when such problems are in conference, and no effort or reasonable sacrifice should be spared that will help to increase the volume of the country’s exports, because it is only along these lines that our eventual financial solvency can be attained. We should cultivate seriously a true spirit of co-opera-tion, cut our recriminations and self-seek-ing, and all as one man take our coats off to the job, for “All have a share in the beauty, all have a part in ‘ the plan “What does it matter what duty falls to the lot of a, man 1 “Each has a hand in the building, no one has builded alone. “Whether a cross he was guilding, whether he carried a stone.” Empire Reciprocity. “It is, I am sure,” he said, “a cause of gratification to all citizens of the Empire to read the wonderful evidence of recovery the Mother Country has shown during the last few weeks. The Mother of Nations, not withstanding all that has been written about senility, decadence of her manhood, out oi date methods

of business, etc., true to her old characteristic of modesty has kept doggedly on tackling and concentrating on her trade and financial difficulties without any great blare of trumpets, and in the matter of a few short weeks we find our faith in the ability and wisdom and determination to win of our people at Home has not been without foundation. It is up to us to reciprocate in the matter of trade and so help her to mount again to the pre-eminent position sho held in trade and commerce before 1914. x “New Zealanders pride themselves on their loyalty to the Empire. I say then let them prove it in a practical way by reciprocating. Figures show that during nine months ending September last the Mother purchased from us 31J million pounds worth, our response was 8 A millions pounds. I think you will admit that it is a poor kind of loyalty. “It is true I think that we have but a poor conception of the burden the Mother Country has been carrying since her troubles began. To try and enumerate would take up too much of the time at my disposal, but perhaps you will better appreciate how difficult it must have been to carry on unless trade conditions alter when I state that during the nine months referred to she purchased 5591 million pounds worth of world products and in return sold 249 J million pounds worth. It is an uncomfortable reflection that the Dominion of New Zealand contributed towards such an enormous adverse balance, and still more so when one considers that we have helped to build up stores of gold in U.S.A., a country that if it were not for her insane policy of impossible tariff walls and determination to shut out trade with other nations, we have such a high fraternal regard for. “I do not advocate a blind reciprocal policy, but one governed by the rule that given reasonable parity, value our patronage should go to our own people more especially as we could not buy did we not first sell to them.

The Exchange Question. “The current controversy aroused over the commandeer of exports has had one beneficial result if no other—it aroused interest in a subject which I am sure many of us just looked upon as one solely for the bankers to attend to. We now find the interest of the banks is, or should be, limited to a mere return for services rendered plus out of pocket. Acting as they do for exporter and importer, they have failed to draw the former's attention to the gain that might be made by merchandising his credits in London. In the main the exporter has until the last two years had to pay for the privilege of bringing money credits out to the Dominion. Had he been conversant with the true position he might have easily received on the average a handsome premium. The policy of borrowing in London to pay interest owing by the Government has been the only deterrent to such a premium. This has only just now reached our consciousness.

“During the years 1925-31 the value of overseas exports totalled 344.55 million pounds, while imports totalled 315.3 million pounds, leaving 29.25 million pounds to pay interest owing by the Government during the seven years. If the average yearly interest payments amount to £6,500,000, and this is understating it, then the balance left over fell short of interest due by 15.25 million pounds. It may be said that every year during the seven did not result in a surplus in value of imports. Only two years, 1928 and 1929, of the seven mentioned showed sufficient credit balance to meet the Government’s requirements. In addition to the Government’s interest bill though there were also those of local bodies. It is apparent therefore that, the exporter has all through the piece suffered unfair discrimination and the exporter in the final analysis means the producer.

Blame for Bankers. “We have therefore to thank our expediency policy of borrowing for more than just helping to establish a fictions appearance of well being over the years. There is a tendency to blame our bankers often I think unjustly. The only blame attachable to them in this regard is not having drawn their client's attention to the facts.

“It has been stated that any advantage that might accrue through an unfettered exchange would be a gift to the producer (or exporter) at the expense of the Dominion as a whole. Let me quote a passage from a booklet by J. M. Keynes entitled ‘The Economic Consequences of Mr Churchill,’ written immediately after the British Government of which Mr Churchill was Chancellor of the Exchequer established the external value of sterling in 1925:— "The policy of improving the foreign exchange value of sterling up to its pre-war value in gold, being about 10 per cent, below it, means that whenever we sell anything abroad either the foreign buyer has to pay 10 per cent, more in his money or we have to accept 10 per cent, less in our money. That is to say we have to reduce our sterling prices for coal or iron etc., by 10 per cent, in order to be on a competitive level unless prices rise elsewhere. Thus the policy of improving (that is pegging) involves a reduction of 10 per cent, in the sterling receipt of our export industries.’

“Now if these industries found that their expenses for wages and for transport and everything else were falling 10 per cent, they could afford to cut their price and would be no worse off than before. But of course this does not happen. “Failing a fall in the value of gold nothing can save the weaker export industries from bankruptcy except a fall in all internal prices and wages. Thus the prolicy of improving (pegging) the exchange was a policy sooner or later of reducing everyone’s wages 10 per cent, or 2/- in the £.

Position in Britain. “The position in Great Britain was the same then as we are threatened with today, and the results of that policy in Britain were increased unemployment and serious depression in trade with a fall in exports, which proves that the contention of those asking for an unfettered exchange is the right one if we are to avoid bankruptcy, for production, our only salvation, will of necessity decline otherwise,” observed Mr Rutledge. “The producer should not be looked upon merely as a hewer of wood and a drawer of water. He is entitled with all his failings to at least an equal reward for his labours as are the town dwellers. In the words of Pope, ‘Worth makes the man,’ and the farmer has by producing some 95 per cent, of our exports proved his worth to New Zealand. It is not human to expect in these days of enlightment that any section of the community should continue their labours practically unrewarded while rewards flow into the pockets of others.”

£ millions. Excess. Exports. Excess. Imports. Exports. Imports. 1925 55.69 50.62 5.07 — 1926 48.47 51.62 — 3.15 1927 45.84 46.17 — .33 1928 56.25 44.14 12.11 1929 56.17 48.19 7.98 1980 47.05 45.79 1.26 — 1931 35.08 28.77 6.31 — 344.55 315.30 32.73 3.48 equals 29.25

9 months average 9 months 1927-31 million million 1931 million million cwt. £ cwt. £ Wool 1.75 10.55 1.72 5.04 Lamb 1.84 6.12 2.13 5.68 Mutton .89 1.64 .88 1.18 Butter 1.14 7.81 1.34 7.16 Cheese 1.2 4.36 1.18 3.14

Per Cent. Motor vehicles 76 Motor tyres 37 Motor spirit 41 Apparel 43 Boots and shoes 54 Cotton goods 34 Carpets, etc. Tobacco and cigarettes 59 40 Musical instruments 57 Hardware 56 Timber 74