The Southland Times. SATURDAY, OCTOBER 29, 1938. Industry Faces A Troubled Future

Southland Times, Issue 23652, 29 October 1938, Page 6

The Southland Times. SATURDAY, OCTOBER 29, 1938. Industry Faces A Troubled Future

In his presidential address at the annual meeting of the NewZealand Employers’ Federation in Wellington Mr A. C. Mitchell referred to difficulties and problems that are now being faced by those engaged in productive enterprise. “Individual control of one’s business, on which the prosperity of the Dominion has been built up during th past century,” said Mr Mitchell, “is making way for a system of bureaucratic and oppressive Government control, not only of our business activities, but of the entire social system.” It is obvious, of course, that social changes are inevitably accompanied by changes in the industrial system: in a sense the two processes are complementary. A policy that •aims at the “redistribution” of the country’s wealth depends on two methods: higher wages and shorter hours for the workers, and heavier taxation. In times of unusual prosperity the policy shows every sign of being successful; and it was this evidence of increased spending power that won many thousands of votes for the Labour Government at the General Election. The average elector is not greatly interested in theory. He .agrees with the Prime Minister that “isms” are misleading names for tendencies and influences at work in this country, and he is unwilling to look too far ahead or to believe in the symptoms of recession until they are plainly visible in his own household. To a certain extent this unwillingness to think seriously about the future was a psychological survival of the depression years. Things are going well at present, says the plain man: why not leave them alone? And so the Labour Government is in power for a second term; and the economic dilemma looms nearer.

The redistribution of wealth would be a practical possibility if it could be arranged without causing a decrease in production. Although taxation affects the wage-earners, . directly andj indirectly, to a degree unknown a few years ago, it rests most heavily on the, employers and shareholders wliose money hitherto has provided the means of industrial expansion. At a time when wages and costs are rising together the Government is taking a greater proportion of the profits, especially of the profits that under more favourable conditions would be going into reserve funds. This means that the employers are unable to expand their businesses and that less money is available for investment in new industries. If that were the end of the story it would not be impossible for the management of a factory or workshop to stabilize its finance on a new basis of higher costs and higher returns. But there is a limit beyond which prices cannot move without a falling-off in business, and that limit is determined by market conditions in other countries. If goods manufactured in New Zealand under a system which adds appreciably to costs while at the same time shortening the hours of production have to compete with goods made elsewhere at much lower costs it is obvious that the consumer demand for local products will show a decline. This has already happened in some cases. In the boot industry it became necessary to apply to the Government for higher tariffs, and this is almost certain to lead to falling off in the demand for New Zealand primary products in at least one populous district in Britain. The vicious circle cannot be broken unless the Government makes bold experiments. It should be realized, however, that currency inflation—which seems the only alternative to a more conservative policy—is not an experiment, but an imitation of methods that have already been tried, with disastrous results, in less fortunate countries. Interference with the social system is sometimes made necessary —as in France, and possibly England at the present time—by the pressure of outside events. But New Zealand is exposed to no immediate danger, and preparation for a possible crisis in the future can be made effectively on a volunteer basis. Social changes are therefore being brought about as the deliberate expression of a socialist policy. The Government has had the immense advantage of fair weather conditions, the principle of State control has been extended tinder the guise of benevolence rather than coercion and only minorities have suffered. It is true that the doctors are under the threat of a socialized profession, and a system in which the doctors themselves have no confidence may be imposed on the community. But the voters who accepted the Social Security Act apparently see nothing to complain of in this arrangement, . possibly because their attention has been occupied with benefits rather than costs. Yet there is an important principle at stake. If the medical profession can be socialized against the will of its members the process can be carried further without much fear of effective opposition. And a Government

that deliberately shapes the country’s economy in accordance with an optimistic theory will be forced to interfere still more at the first sign of a fall in . overseas prices for primary products. State control can be a comparatively painless process in prosperous times. It is when prosperity ends that there is need to turn the screw, extending the scope of authority and attempting new and risky expedients. Under those conditions the machinery of State interference, now assembled in a series of legislative Acts, might prove to be far more formidable than was expected. And it is then that the conflict between rising costs and falling prices will be joined in real earnest. The Labour Government is in office for the second time, and the next three years will almost certainly confront it with problems of the utmost importance. It is to be hoped that the Government has accepted the people’s mandate with a full sense of responsibility, and not as a sanction for political experiment.