THE FARMERS’ PROBLEMS

Taranaki Daily News, 24 July 1929, Page 15

THE FARMERS’ PROBLEMS

HIGH COSTS OF.PRODUCTION RESULT OF ARBITRATION SYSTEM. WHERE PROTECTION PINCHES. (From Our Own Correspondent). Wellington, Last Night. In the course of his address to the New Zealand Fanners’ Union to-day, Mr. W. J. Polson (president) dealt at length with the problems confronting the farmers of the Dominion, and put forward several suggestions for the improvement of economic conditions. He said:— There is already a demand that the increased taxation foreshadowed by the Government shall be placed upon the shoulders of the farmer. A proposal emanating from men who represent city interests purely has been made that the farmer should pay dual taxation instead of merely land tax. It is true that the pill is gilded by the suggestion that only the large farmers will feel- , this additional burden. No doubt tlie small farmer would escape largely, if not entirely, but those who talk of taxing the large farmer forget that every small farmer hopes some day to be in a position to increase his holding just as the shopkeeper hopes to enlarge his business in order to- give a fair start to his sons and daughters. It must be understood that while farmers as a class are in favour of closer settlement, opposed to land aggregation, and reconciled to the principle of a graduated land tax, they will solidly and unitedly oppose any proposals for dual taxation. It is true that as the one class in the community who can pass nothing on they ultimately pay all taxes; but a cynical attempt to load them directly with the double burden of land arid income tax every farmer in the Dominion will determinedly resent. ■

THE PROBLEM OF COSTS.

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 can get costs down we cannot get ahead with-primary production. We have great areas of land in New Zealand which are only capable of being successfully farmed when costs are kept down. We are busy with fertilisers and careful breeding, increasing the yield upon our good country, but the first setback in prices will see a greater reduction in the output of our deteriorating lands than can be overtaken in the increased output of our high-class areas.

a. I am as confident about the future of New Zealand as any one but we cannot continually expect high prices. If the economist’s are right the return to the gold standard means a steady fall until we get back somewhere the prewar level. We have seen remarkable prices this year in respect to all our , main industries with the result.that we have reached record export figures. Not only were prices good, but we have had one of the most bountiful seasons for a number of years to still further inflate . our exports. But we cannot expect a : repetition of these conditions. Already there is a serious drop in wool and suggestions of greater competition in dairy products. Assuredly, unless we can cut down our costs of* production, we will not be able to march ahead in the future with the extension of our industry. 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. LABOUR 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 ' .rgely,’ if not entirely, responsible. Until the industrial conference last year threw a flood of fresh light on the question, lie was quite certain .that. all that was necessary to pave the way for the millenium 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 smaller proportion of the total costs of farming expended upon the farm than most people imagine. As I have pointed out elsewhere, a ten per cent, fall in farm wages would not mean anything like a five per cent, fall in farm costs. A ten 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 ten percent. 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 oi 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 organised, can ignore the court. The Miners’ Union, for example, refuses to recognise 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. , A FUNDAMENTAL DIFFERENCE. AH these questions were very fully , considered by the recent Industrial Con- , ference. The fundamental, difference there, was that Labour wanted to create tribunals equally representative of em- , ployers 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. Lab- j our feared to lose the protection of the ( Court until their plan had been sub- . stitutea and the employers, although ( not unanimous, generally feared to sub- \ 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 Melehett) commission were given to the world. British employers more longsighted 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 in-, telligent interest in the management of industry. I will be able to appreciate the problems which confront business and to realise the difficulties of management. It is hoped' by this means to create efficiency and 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 organised and most efficient boot factories in New Zealand might by a re-arrangement of its machinery alone reduce the cost of manufacture by 12| per cent, speaks for itself. A complete stocktaking 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 millenium, 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 free trade. 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 j wake up and find what happened last tiriie—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 ou the side of Imperial preference, which is another name for an adjustment t-j enable the British Empire to trade within itself without such tariff barriers as may he 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, amount to practical free trade. Britain to-day is much as the German States were before the genius of Bismark welded them into one composite whole, ininstead 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 requirement 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 thia respect which is right under our own noses. The traveller from Auckland to the United States comes first to Fiji—beautiful island 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 on, equi-distant from the Equator, the traveller reaches Hawaii, not with such good soil, without many of the glorious advantages Fiji possesses. Bur what a change I Here are teeming populations, extensive harbours, up-to-date factories, and Honolulu, a modern city filled with hurrying traffic. One country is just- a j unit amongst British possessions; the ! other is inside the comity of American , States. One stands lookin'g 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 Governments 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 migat grant preference to C in return for concessions given it by B, which in turn would . receive benefits from C. The Canadiaii Chambers of Commerce some years'ago proposed a round table conference cof the Empire’s business men to explore this aspect. Such a conference could achieve nothing but good. . VICTIMS OF CIRCUMSTANCES.

We have got to make up our minds that until we can solve bur own difficulty and reconcile bur' members-to a policy of the greatest good' for the greatest number, we will make no headway. We are the 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. Recently I was interviewed by a newspaper, and I would like to include that interview here because it probaoly covers the ground from my point of view as completely as I could do it any other way. It reads as follows: — “If you are asking me to justify flour selling at £l7 in-New Zealand, when its price is £lO 15s in Australia, I cannot do it,” said Mr. Polson, when, interviewed on the subject of wheat duties by a Chronicle reporter yesterday. “But if I am asked to justify the southern grower obtaining a reasonable price for his wheat, in order that this country shall continue to produce wheat, that is another question.” ... .. -' /’You have been discussing the que&-

tion of costs on various public occasions, Mr. Polson, and pointing out the handicap of high costs. Is not this tax on wheat and flour one of the causes of increased cost?”

“Quite obviously it is,” replied Mr. Polson. “A duty which may rise to £5 or £6 a ton, as flour and wheat cheapen must increase the cost of the bread. It is, in fact, a bread tax.”

‘“Then why not abolish it?” asked the reporter. “A large number of northern farmers, practically all of them, definitely antitax in their viewpoint, have just been on a tour through the wheat country of the south. Ask them what should be done with that land. I think most of them will tell you it is more suitable for growing wheat than anything else. It. will produce wheat, and may be made to produce better wheat, with a higher protein at a still less cost. That aspect of the question has not been sufficiently investigated. Recent research, I am told, reveals that the old low grade hard straw’ Tuscan, which the miller paid the lowest price for, has a better protein yield than high-priced varieties, .such as Hunter’s and Pearl.

“But let us assume that it could profitably be employed growing something else. Is New Zealand prepared to adopt such a policy and say, ‘We will import all the flour and offals we require and grow no more wheat?’ That would be a grave reversal of national policy, and in my opinion would require very careful consideration indeed. It is hardly necessary to recapitulate what might : happen in a period of foreign shortage.” WHEAT GROWING COSTS. “Cannot wheat be grown at a less price than 5s 6d .a bushel?” “Carefully compiled figures convinced Mr. Coates that it could not. The firms I financing the wheat growers declared at that time that 60 per cent, of them could not meet their liabilities if pushed and that unless protection to ensure 6s a bushel was given to the industry, 50 per cent, of them would have to give up growing wheat. The statement showed

that the cost ran from £7 10s an acre on light land to £lO 10s on heavy land. The average cost was set down at £8 10s per acre and the average yield for ten years at 32 bushels—3’2 bushels at 6s, £9 12s; cost, £S 10s; average profit at 6s, £1 25.” “Wheat growing is a risky business, with numerous blights and diseases and subject to weather conditions. Such a profit does not work out on that class of land much over 3 per cent.”

“What about the cost of distribution?”

DISTRIBUTION COSTS.

*T have, said that scientific investigation may show us how to grow wheat. I am satisfied it will need no scientific, intion to show us how to. distribute it cheaper. It costs the Australian miller at least £1 per ton less to mill his product, because his system is more efficient. One combination runs all the New Zealand mills; many of them don’t work full time, and some of them in the past have not worked at all. One small mill in the south, with a capacity of 100 sacks an hour, in 1927 was turning out 80 tons per week and underselling Distributors, Ltd., by from 5s to ,10s a ton, and showing a good profit. Again, I have seen flour quoted at £l6 per ton in Auckland and £l7 10s in Timaru, where it is/grown. Undoubtedly our mills are not efficient. There are too many of them for the job. But it is not possible to blame any one process of distribution. I gave -figures some time ago to show tliat flour which the farmer sold at £ll per ton ton cost the consumer £32 to £35 as bread. Bread made from Australian flour sells in the counties of England at from 34d to 4d the 21b loaf. Our bread is too high and the reason is that high costs are affecting other sections of the community as well as the farmer. I' the Press would concentrate on this great problem of higher costs they would be helping more than by particularising upon the price of flour.” NATIONAL STOCKTAKING URGED.

’•What remedy do you propose?” ‘■Remedy! There is no remedy, except a national stocktaking and the use of bard work and national common sense. It is proposed to reduce the tariff. If it could be done it would be an immediate relief, but how is it to be done? Sir Joseph Ward is fore-shadowing more taxation, not a reduction. The only way to reduce taxation is to reduce expenditure by economising. There must be no wasteful public expenditure of any kind —every shilling must be looked at twice. A nation-wide reduction in costs of production to enable us to maintain, high and increasing export figures for our primary products, in the face of the falling prices of wool and meat particularly, although butter and cheese are still reasonably good, is the only remedy. Australia is in a precisely similar position, as may be gleaned from Mr. Bruce's momentous speech at Canberra a few days ago. He pointed out that the situation, due to increased costs of production, called for the closest investigation of the causes of the present difficulties. That is equally true in New Zealand.” “The whole question is,” said Mr. Polson, in conclusion, “that circumstances have been too strong for the farmers. Some of them—wheat growers, maize growers, potato growers, tomato growers and others have been forced to ask for protection and now that demand, is being made use of as a weapon to bludgeon the whole body of farmers who can pass nothing on, having to accept world paid prices for their products, while paying through the nose for everything they use by means of the Customs tariff. Protective tariffs, I am afraid, are sometimes made use of (o bolster, up inefficiency in our secondary industries. We need secondary ind istries, but. they must be efficient ones. To establish them we mustfirst have a sound and successful base of primary industries.” We do not want politician-made palliatives or remedies applied piece-meal to one industry at a time, but eomprebensive, practical and. scientifically sound remedies arrived at after a sufficient study of the whole question of fiscal taxation.

We have recently had published on behalf of the Manufacturers’ Association or 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,” ami 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 or people wh'• 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 plat-

form unanimously adopted by this goiiy fercnco last year —a proper, practical'and?; scientifically qualified tribunal created, from specially 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 hurly burly of : party politics of ascertaining, what are the essential industries of the Dominion, the order in which they shall be developed. hether that development shall be assisted by protection or otherwise, and if so whether that assistance, shall be temporary and permanent, nad most importantly whether it shall be by way of fiscal taxation or bounty. COMBINATION COSTS. 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 organisations which handle much that we use nowadays do pass into the sell- : ing price (to quote from one of the ar? , tides appended to this address) we have , little control over them in New Zealand. . But we are not altogether powerless. Al-. ready as you .-will have seen from . the , Press it 'has been realised in the great birthplace of combinations —America-— , that combinations in control of distribu?./ tion are playing a greater part in the building up of costs than the public imagine. It is actually proposed to re- :/ store prosperity to the farming tion 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 particularise. Most of us have ideas abou.t this question. We believe that reductions in costs can be brought about by these means also.

ROOM FOR 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 iny 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. " . i;

A ten per cent, reduction in costs (to uso 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. La- . hour would find employers competing for/., its services, in all probability at rates which would further improve the standard of living. - ■ . ..../-.J, 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 unani- .< mously demanding of our rulers that . the importance of this matter merits mare 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.in?/, tend to devote time to the question here. , There will ne a suitable opportunity , during the progress of this conference,. The great question of land settlement,/ particularly m relation to our deterior- ; ating 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 . before Parliament.