THE THEORY OF “INSULATION”

Southland Times, Issue 23682, 3 December 1938, Page 8

THE THEORY OF “INSULATION”

Experience Of Eire

DOMINION’S POSITION

COMPARED

EXPERIMENTS IN TARIFF

POLICY

A word very much in fashion among Labour Party men in New Zealand is “insulation.” Many of them hope, by public works and banking policies, to sustain domestic purchasing power even in face of declining external prices and a deteriorating balance of payments, writes Professor W. K. Hancock in The Sydney Morning Herald. All of them hope in varying degrees, to broaden the basis of New Zealand’s economic life in such a way as to reduce the country s vulnerability to adverse external forces. In his trade proposals to the United Kingdom, Mr Nash showed his desire of increasing New Zealand’s secondary production by means of a planned division of the market, which would involve neither an increase in tariffs nor a diminution of imports irom Great Britain.

A similar idea of rationalization underlies the Industrial Efficiency Act, although hitherto the Act has achieved little to justify its title. There are also plans for establishing a steel industry in New Zealand, and there are high hopes of successful oil discoveries, .’.n short, New Zealand has decided that the time has come for taking some of her eggs out of the basket of grassland production. This is nreciselv the task which Mr

This is precisely the task which Mr de Valera set himself when he was returned to power in 1932. It might be worth while for the New Zealanders to pay some attention to the results which Mr de Valera has achieved:

STRIKING DIFFERENCE

Of course there are striking differences between the two countries. It is only by an accident of history that the same title of Dominion was ever given to both of them. The title never really fitted Ireland. She was a country of ancient civilization, a European country, a “mother country.” Politically and culturally, she belonged to a different historical world from that on which New Zealand had grown up. Yet economically, there was an extraordinary resemblance between Ireland and New Zealand. The prosperity of both countries was based on their thriving pastures. Both countries also were overwhelmingly dependent on their sales in the British market. In average years more than 80 per cent, of New Zealand’s exports found an outlet in that market, and more than 90 per cent, of Ireland’s. The Irish have had as good a reason as the New Zealanders for wishing, to diversify their production and to increase the markets in which they sell it. They, too, have noticed with apprehension the tendency of agricultural protectionism to spread from grain to live-stock and dairy produce. They, too, have realized that Great Britain was imitating the restrictive policies of other countries, and that the market which she offered them, though still one of extraordinary dimensions, was by no means without limit.

But the Irish six years ago had ad-

ditional and special reasons for trying < to base their economy more broadly. Mr de Valera and Mr Thomas had led their respective countries into an economic war with each other. By blow and counter-blow they hit at each other’s exports. Whereas the New Zealanders returned from the Ottawa Conference as members of the inner Imperial circle of specially favoured nations, the Irish found themselves put in the outer circle to which foreigners were consigned.

A CHALLENGE ACCEPTED

Mr de Valera accepted Great Britain’s challenge in confident and fighting mood. He told a crowded meeting in College Green that the British were compelling the liish to do in a short time what they were determined to do in any event. The fighting tradition of Irish nationalism had always been a protectionist one. The discontented Irish Ascendancy of the eighteenth century had started the tradition; no less a person than Dean Swift published “A Proposal for the Universal Use of Irish Manufacturers.” Early in the twentieth century, Arthur Griffith, the founder of the Sinn Fein movement, fanned the sentiment of economic nationalism into a rousing blaze.

Irishmen believed that their subjection to England was responsible for their one-sided economic fife. They thought of their country as a neglected pastoral province belonging to John Bull. They had a special grudge against their own grasslands. They believed—quite erroneously—that the nineteenth century had witnessed a general change from the plough to pasture, and that this change was responsible for Ireland’s depopulation. In 1851 the population of the 26 counties which today constitute Eire had been over five millions; in 1926 it was under three millions. Sinn Fein believed that a new economic policy would stop the drain of emigration, and repair past losses. The way to do it was to start industries in the towns and to turn the country from pasture land to plough land. And this was Mr de Valera’s programme. There was an urgency and determination about this programme which New Zealand, a land of happier memories, could not conceive. This should not detract from the value of Irish experience as an object of study in New Zealand. Is it likely that the New Zealanders, with far less emotional drive behind their efforts to modify and “insulate” their grassland economy, will achieve a more rapid and complete success?

LESSON TO NEW ZEALAND

The New Zealanders may possess some advantages in resources and situation. On the other hand, their market of domestic consumers is little more than half the size of Eire’s market. Moreover, the Irish did not have to worry very much while they were making their experiment in economic nationalism about those “net assets in London” which were perforce such a preoccupation of the New Zealanders. As creditors they possessed a freedom to make mistakes and learn from them which the debtor New Zealanders could never possess. What measure of success did they achieve? Their economic life is today a good deal more diversified than it

was in 1932. Many new factories have sprung up in the bigger towns and even in the smaller country towns. The Irish are making for themselves much of the paper, footwear, cardboard, leather, hats, gloves and clothing which in Mr Cosgrave’s day they used to import from Great Britain. They are also growing for themselves much of the wheat, feeding stuffs, sugar and vegetables which formerly they used to import. Their experts are quite confident that they will before long be completely self-efficient in these commodities. •

On the other hand, their very successes have brought home to them a realization of the limitations which they must perforce accept. Industrial and agricultural protection has raised the cost of production; by 1935 the cost of living index had risen to 140, as compared with 125 in Great Britain. Their protected manufacture and agriculture could not hope for a larger market than the domestic one. And hopes of a rapid increase in that market were flatly disappointed. Protection made no difference to the country’s ability to hold its population; in recent years there has been a rapidlyrising efflux from Ireland into Great Britain.

LIMITS OF ACHIEVEMENT

The anticipations of a rapid transition from pasture to agriculture were equally disappointing. Indeed, the limits of possible achievement in this direction can be calculated with a very large measure of precision. Assuming complete self-sufficiency in all crops, a total turnover of about 15 per cent, is the most which can be looked tor. The bulk of the country must remain grassland. This is what it was even in the mid-nineteenth century; this is what it is best fitted for by soil and climate.

In short, Ireland’s economic household has more rooms than it bad eight years ago, but its foundations remain what they were. And the economic war did nothing more than scratch the couplings which bind England and Ireland together. It is this basic fact, together with the persistent adverse balance of payments reported by a recent commission, and a welcome growth of common sense both in Ireland and Great Britain, which has helped to produce the recent agreement between the two countries. The political problem of partition remains what it was; yet it is not too much to hope that with the growth of good sense and goodwill even this problem may in time become a matter for rational discussion. New Zealand, of course, has not as yet attempted nor has she had cause to attempt, such a radical transformation of her economic structure and relationships. Even so, the experience of Ireland, which in some respects she so closely resembles, may teach her something both of what she may hope to achieve and what is outside her power.