GUARANTEED PRICES

Taranaki Daily News, 16 November 1935, Page 12

GUARANTEED PRICES

SCHEME IMPRACTICABLE CRITICISM BY MR. W. A. SHEAT. ADDRESS AT LOWER MANGOREI. “You must have something better than good intentions in connection with any political scheme,” said Mr. W. A. Sheat at Lower Mangorei last night in criticising the guaranteed price scheme advocated by the Labour Party. In addition there must be something practical, which he held did not exist as far as the guaranteed price scheme was concerned. It was certainly a fine scheme as far as theory was concerned, but it was hopelessly out of the range of practical politics. Mr. W. Purcell presided over a fair attendance. Opening his address on the same lines as at other centres, Mr. Sheat explained at some length the reasons why he was standing as an independent, whereas at the last election he had stood as the official Labour candidate. He said he considered many members of the Labour Party secretly agreed that the stand he had taken was right and he hoped that before the campaign ended some of them Would publicly admit that he had been right in taking the stand he had in upholding what he thought was right. Mr. Sheat said that he wanted that night publicly to challenge Mr. Frost to say why the party which did not want him as a candidate for tire New Plymouth constituency had offered him nomination as the official candidate for a neighbouring constituency. The only explanation that Mr. Sheat could think of was that the Labour Party realised that he was in the right and were afraid of the disclosures that he might make. They were therefore anxious to get him out of the district and “on side” with them again, so they offered him nomination somewhere else. STAND EXPLAINED. Mr. Sheat went fully into the question of guaranteed prices to make it perfectly clear where he stood. As a farmer, he said, he was interested in any proposals for improving the position of the farming community. As one who to some extent enjoyed the confidence of his fellow farmers he felt a special responsibility in discussing the matter. He had been honoured by being selected to represent the South Taranaki executive of the Farmers’ Union before the Dairy Commission and through the slump he followed closely the developments in connection with the farmers’ financial problem. From personal experience he knew what price fluctuations meant to tire farmer. He had always favoured the general idea of price stabilisation. It had to be recognised, however, that insofar as this applied to commodities sold in external markets the problem was largely outside New Zealand control. He had hoped that the lessons of the slump would lead the leading nations of the world to co-oper-. ate to bring about a greater deal of monetary stability. He had, however, little faith in the possibility of local remedies for what was an international problem. The Labour Party’s present scheme, if it had one, said Mr. Sheat, was of comparatively recent 'rigin. When he was a Labour candidate he had not been obliged to subscribe to the guaranteed price idea. Its origin was obscure, but it apparently originated in the rather vague’ proposals for State trading and bulk purchase of imports which were being put forward by a section of the British Labour Party four or five years ago. These proposals had, however, been discarded and to-day even the British Labour Party no longer advocated bulk purchase of imports. The proposals put forward by Labour were vague and contradictory. On most vital pomts candidates were hopelessly at variance. For instance, there was a glaring divergence of views on the basis of the guaranteed price. Some said it would be a price “sufficient to cover the cost of production.” Others said it was to be based on “the average over the last eight or ten years.” A third school said it was to be based on “definite trade agreements.” Obviously these three principles had nothing in common. On the first question of importance, then, there was no agreement. DISCREPANCIES IN DETAILS. On the question of how the scheme was to be financed there were similar discrepancies. Some said it was by taxation, others by borrowing and others again by “the use of the public credit.” The first, while perhaps practicable, was hardly likely to appeal to the public. One could promise any price at all provided one was prepared to take part of the price back again in taxation to keep the scheme going. As the taxation would come out of the national income it involved in an indirect way the producers of the country’s wealth guaranteeing themselves a price. With regard to the third method of finance it suggested inflation, and if carried out it must lead to currency depreciation, which meant a high rate of exchange to which Labour professed bitter antagonism. He knew efforts had been made to reach agreement on such points as the prices to be guaranteed and the method of finance to be used, but no agreement could be reached. This meant that while Labour talked boldly about its guaranteed price scheme it really had no scheme at all but only a vague belief in an idea with no plant for giving effect to it. It behoved every farmer to note that if an attempt were made to carry out the idea it would involve complete surrender by the farmer of all control of marketing. This was perhaps the most serious aspect of the matter. The individual farmer had little direct control to-day. Under j_,abour’s scheme he would have none. Labour was telling him, “Your business is to produce the goods. We will guarantee you a price and look after the marketing.” In the Labour weekly paper of November 6 Mr. Walter Nash stat i that a beneficial effect on overseas prices “could best be achieved by the Government or its authorised agents buying the farmers’ production and arranging for its marketing.” Mr. Nash apparently believed that the farmers had made a mess of thenbusiness and .hat a political party could handle it more successfully. Apparently one of the first acts of a Labour Government would be to despatch some of its Ministers overseas to negotiate trade agreements. While it would be very fine for the farmers if an agreement could be made with the Governments of the countries that took New Zealand produce under which they agreed to take definite quantities of primary products at definite prices fixed for a period of years, Mr. Sheat said he was very sceptical

of the prospects of securing such agreements. It had to be recognised that in the present unsettled conditions of world trade it was hard enough to get an agreement on the question cf quantities, let alone take the further big step of fixing the price as well. Mr. Coates could arrange a meat agreement, but it went no further than to provide for the admission of a definite quantity during a given period. It did not touch the question of price. Mr. Sheat was emphatically of Ute opinion that any agreement covering prices as well as quantities was out of the question for years to come.' World trade might develop along those lines. At present there was no indication chat it would. If this view was correct then the whole scheme was based on a false foundation. The party would find it impossible to negotiate the necessary agreements and the whole scheme would fall to the ground. It was certainly true that the principle of guaranteed prices was applied to-day in a modified form and on a limited scale. Labour quoted the position of the wheatgrowers, but obviously there was a vast difference between the control of the price of a commodity consumed locally and the case of a commodity sold in overseas markets. The only people really in a position to guarantee a price for a commodity were the people who consumed that commodity. If the British Government on behalf of the consumers was prepared to provide the guarantee the scheme might be feasible. Otherwise there was no real prospect of effect being given to the proposal. Electors should be on their guard against proposals which, while superficially attractive, were not based upon sound premises and were likely to break down if an attempt were made to apply them. Speaking as a farmer and with a full sense of responsibility towards such of his fellow farmers as he might be capable of influencing, Mr. Sheat definitely declared that the guaranteed price proposal at present being advocated held no solid hope for the farmers in their financial difficulties. If those difficulties were to be successfully surmounted the solution must be sought along other lines. There must be further readjustments of the farmer’s financial ourdens to enable him to carry on. New Zealand had already gone a considerable distance in this direction and he believed that further effort along the same lines would ultimately place the primary industries on a sounder foundation than any fanciful and indefinite promise of guaranteed prices. READJUSTING TAXATION. Mr. Sheat briefly outlined his policy, stressing the necessity for readjustment of taxation, favouring direct taxation such as income tax and opposing as far' as possible indirect taxation. In view of the enormous burden of debt and the expensive Government machine with its host of services for the country he did not see much hope of a substantial reduction in taxation in the near future. He strongly , advocated local body reform, reducing the number of local bodies and giving those that remained greater administrative control free from bureaucratic interference. He was opposed to the setting up of commissions and criticised the increasing cost of Government. Parliament should do the work that it was elected for, and the method of procedure should be brought up-to-date to suit modem business requirements. There was need for an overhaul of the unemployment legislation and the elimination of the unemployment subsidy system. He held that it would be far better to pay sustenanc® rather than force surplus labour on to the normal labour market. Replying to Mr. Jordan, who asked whether he thought guaranteed prices was only a catch cry for tire farmers’ vote, Mr. Sheat said he thought that the view that it was a bait to catch votes was probably correct. However, if the Labour party gained power and evolved a practical scheme of guaranteed prices he would be prepared to give it his support. Mr. F. T. Davis asked whether Mr. Sheat considered that the rate of exchange would necessarily have to rise in the same proportion as the added free money necessary if the guaranteed price was above the London parity, particularly when New Zealand had a favourable trade balance with Britain. He pointed out that at present 25 per cent, was not the true ratio of exchange. Mr. Sheat held that the issuing of the necessary money to make up for the difference between London parity and the guaranteed price would depreciate New Zealand currency and proportionately increase the rate of exchange. Mr. Davis held that the rate of exchange depended on the trade balance. ADJUSTMENT OF TRADE BALANCE. Replying to a further question by Mr. Davis, Mr. Sheat said he did not dispute that it might be possible to adjust the trade balance in such a way that the rate of exchange would settle down at a lower ratio than the difference between London parity and the guaranteed prices. He did >ot know that that difference would be to the internal benefit of New Zealand. The first effect of raising the rate of exchange was to give the farmers additional money. Had that money been put into circulation it would have’erea' 1 such a demand for goods that there would not have been such a favourable trade balance. He thought farmers who were in difficulties used the money to reduce their liabilities and those farmers who were better off placed the money in the banks on fixed deposit. The extra money, therefore, did not provide an extra stimulus for goods as expected. In the course of time, however, it became free money and increased the purchasing power. There was no certainty that guaranteed prices would give an immediate stimulus to business. Mr. Davis cc. idered it had been proved that even if it were done by inflation there was nothing impossible in guaranteed prices, providing that overseas debts could be paid by sterling. Mr. Sheat considered that if the additional. money were available for expenditure there would not be half the opposition to raising the rate of exchange, which he considered was simpler than the guaranteed price system. The discussion developed into a debate between Mr. Davis and the candidate, Mr. Davis saying he had discussed the matter fully with Mr. Sheat as he realised Mr. Sheat was one of the candidates from whom he could obtain such' detailed views from the economic aspect. Throughout Mr. Sheat was listened to attentively and at the close he was aca vote of thanks by acclamation on the motion of the chairman.