OUR INDUSTRIAL CONDITION

Wanganui Chronicle, Volume 73, Issue 428, 20 November 1930, Page 8

OUR INDUSTRIAL CONDITION

N.Z. ECONOMY DIAGNOSED HON. T. S' WESTON ADDRESSES EMPLOYERS [Special to “Chronicle.”l WELLINGTON, N’uv.l9. Addressing the twenty-eighth annual general meeting of the New Zealand Employers’ Federation at Wellington today, the Hon. T. Shailer Weston, M.L.C., the president, who has just returned from Europe, reviewed the conditions of the Dominion, and advocated industrial discipline, likening the present conditions of the country to that of an army in retreat, quoting the military maxim that the retreating army that maintains its discipline minimises its losses.

Tin- last six months have been trying for New Zealand, and although 1 have been absent, I can well appreciate the difficulties you have experienced,- observed the Hon. T. Shailer Weston commencing his presidential address. The future, although there are silver linings, is certainly clouded. The prices of all our primary products have fallen heavily and the national income has been severely reduced. Unless this fall is not only checked but replaced with a decided rise, this must inevitably result in reduced prices for landed properties (city, suburban and rural), lessened returns from all businesses and a fall in money wages. In fact, the whole world, burdened by heavy taxation. will have to make the sacrifices necessary to get back to pre-war prices and standards. Individuals and also the organised sections of the community will naturally endeavour to protect themselves from the burden of these results. Their efforts may delay, but will certainly not avert the inevitable.

It is a military axiom that in retreat the best disciplined army, even though that discipline, in the interests of the mass, may be pushed to harshness, suffers the least. Bo it will be with the nations in the present world wide depression. Those countries which maintain order and discipline and whose members avoid strikes and trade disputes ami practice universal self-denial will conic through the best. To those of us who find it difficult to practice self-denial it may bo some consolation to realise that if we do not do so voluntarily, circumstances in a short time will forte it upon us. Looking back upon the past ten years in Great Britain, the thinker must ask himself how muct better off employers and employees would be now if there had been no textile, engineering, railway, coal and general strikes. Most of those strikes, and certainly the general strike and the coal strike, resulted in terms being accepted by the workers worse than those obtainable by negotiations prior to their commencement- The same conclusion holds good for New r Booth Wales. Nowhere in the world has there been such a succession of stoppages as in New South Wales since the conclusion of the war. At Broken Hill and in Newcastle mines were closed down for months and on the waterfronts and in shipping one dispute was no sooner settled than another began. In the end, what permanent good has resulted from this insane condition of things, yet even now in the midst of the greatest crisis in that State’s history. this insane condition apparently continues. Even to-day. in New Zealand two small coastal vessels arc being held up because the owners will not employ one man whose service is not required. Labour contci ds that where improved machinery dispenses with workers, the saving must be shared. In the present cases, the services of two men in each vessel are no longer necessary. Labour says, “Be content to save one-’’ The effect is, that five men who are necessary are now idle. Apart from this the owners of these vessels have not received any dividend .tor some years. The change was made at considerable expense to prevent these vessels going out, altogether. The margin between present earnings and out-goings even after saving the two men’s wages, is small. The owners are not financially strong enough to keep a man employed whose services are absolutely unnecessary. Besides there is now an Unemployment Fund. To this the employer, through the Consolidated Fund, will have to contribute very heavily —more heavily than perhaps popular opinion realises or expects?. Jf no profits arc made by employers, from whence is income tax to come to maintain the Consolidated fund. lu the next few years public opinion in New Zealand would be wise to discountenance strikes •»r t\en threats of taeiuMoney Wages Must Fall L have said money wages must fall. The prices of our primary products are now in the neighbourhood of pre-war prices, and tlie secondary industries must be. indeed are being affected, in their turn. When money wages were raised during the war those rises were the logical- result of the rise in prices of primary products, now mat prices have fallen again, how can the primary industries be carried on if money wages remain unaltered? Right through the world every country is now engaged in bringing money wages into line with present prices. Even in France and Belgium wnere, until recently, there has been no unemployment. decrease:, in money wages during the last six months have been quickly <ig.iced upon, in Germany and in the United State. the same course is being pursued- The example of the United •States is important because th etc the fallacy preached by Labour leaders in New Zealand and elsewhere was strongly pressed after the Stock Exchange collapse last November ‘Maintain even increase money wages and the

situation will be saved.’ A year’s experience has proved the incfficacy of this remedy. Let me emphasise that this reduction of money wages that must be faced is not a reduction in real wages. This federation has, since

the war. always endeavoured to maintain money wages at a high rate. It has realised the advantage of workers

being w ■'! j aid and contented. I am satisfied that the standard o'" money wages in New Zealand last April, having regard to the quality of the work paid for, was as'high as that in the United States, and as here the cost of living was lower and conditions of work and living cheaper, our standard of real wages was higher- I think, therefore, that, the members of this federation will be prepared to qualify <ny claim for a i.?<;ucUon of money wages by stipulating that? every effort must be made to r event the reduced

money wage having a Jess purchasing value, than the old, Arbitration Act Amendment A deputation of Trade Union leaders to the Prime Minister a few weeks back strongly opposed the request made by this federation for an amendment of the Arbitration Act to enable the Arbitration Court by general order to make a reduction in the money rates of wages. Let me emphasise that this federation was only asking what was given to the workers at a time when the values of commodities in money—that is prices—were rising and hence reducing the real value of money wages. The case for the workers was well put by this deputation, even if Lie arguments were fallacious. First, it was urged that money wages should ue maintained and even increased beet use by so doing the purchasing power of the community would be maintained or increased and hence more of the products of its primary and secondary industries could be purchased within New Zealand. The answer to this argument is that it was put forward in the United States after the collapse last November. Many manufacturers gave it a trial. To-day. a year after, money wages in the United States are being reduced contemporaneously with retail prices- If money wages paid absorb so much out of the returns in money from a farm, factory or business that sufficient is not left to provide for the requirements in money of taxes, rates, reasonable wages of supervision, repairs and maintenance and a reasonable return on capital invested, either money wages must be reduced proportionately with the other charges on the business or the concern must gradually go down. To-day, the fall in prices has been so severe that after providing for money wages at the old rates in many cases, however good the management, little or nothing is left after payment of taxes, rates, repairs and maintenance for wages of supervision or interest on capital invested. You will note I have said “reasonable” wages of supervision and “reasonable” return on capital invested. This meets the second objection urged by the Trade Union leaders which J will deal with presently. There is a further objection to this argument that in the interests of the producers, money wages should be maintained or increased. Two-thirds at least of our primary products are exported, and hence their price is not affected by the local demand. It is determined by world competition. The amount of these primary products consumed locally would be altered so little by an increase in money wages and the amount to be exported in consequence so little reduced, that no alteration would be made in the export prices of these products. In New Zealand, owing to the small proportion of our primary products consumed locally, local prices are determined by export prices, and if money wages are to remain the same the workers will be benefiting by the reduction in local prices of these primary products, due to a fall in world prices- What help is it to the farmer if slightly more of his products are consumed locally, when the price he reI reives locally is the same as ho gets for that portion o.f his products h<> has to export. Besides, if this contention of Labour leaders is correct, why has this remedy not been tried? It would be so easy. Prosperity would be as- ( sured at once by an increase of say, twenty-five per cent, in the present money rates of wages. I shudder to think what the actual result would be. There is another answer to this contention of Labour leaders. Every economic student knows the distinction between productive and unproductive expenditure. Money, for example expended on amusements, luxuries and articles not actually required to keep his dependents in good health and efficiency or to assist in the production of other necessary articles, is unproductive expenditure. Articles or benefits so purchased, once consumed and enjoyed, nothing remains. If, however, that money were spent for example on improvements to farms or factories or even tn maintaining men while working upon experiments resulting in inventions or improved industrial methods, you have something permanent as a result of the expenditure and something which will assist in the further production of* wealth- This is productive expenditure. Now there is no higher standard of money wages in the world than that of Now Zealand. Part, it mav be small, of these money wages is spent in unproductive expenditure. If these money wages were reduced, this unproductive expenditure would be the first to go. In times of economic difficulty like the present, unproductive expenditure must be reduced and productive expenditure increased. Tt is better for the nation and in the long run for the workers, that its members should be compelled to do without a few luxuries and amusements if in this way there is more available to the customer of the bank or building society, who requires a loan for productive expenditure- That Is why France whose citizens are saving almost to miserliness is so prosperous. Her unproductive expenditure is small. T don’t want to be misunderstood. Tn prosperous times a certain amount of unproductive expenditure is natural and in a way to the advantage of everyone. It helps to make people good-tempered if nothing else. b*ut in times like the present it is productive expenditure which has to be encouraged and pro- • ided fur. If to keep our industries efficient we all have to become Spartans and confine our personal expenditure to necessaries and not luxuries, by so doing we will all assist to bring back again moi • speedily prosperity to our eounfry. Capital The secund arguii’cnl pm .'unsaid by this deputation was that capital ami

management must make sacrifices first, and this tout cut ion was supported by the suggestion that many, if not ail undertakings in New Zealand were over-capitalised. The deputation was quite right. There must be universal self denial practised, but it failed to recognise that heavy sacrifices have already been made by capital. There has been a fail of from ten to fifty per cent, in the value of shares in different undertakings varying according to the soundness of these undertakings, the efficiency of their management and their potentialities- Not only have values fallen, but dividends declared are less with the exception of the few concerns who have accumulated big reserves (declared or secret), by excellent and conservative management. As to the fall in the value of dwelling houses, workers throughout New Zealand, and even in Dunedin and Wellington know this from their owu experience. Bo far, the saver in the past has already lost heavily on the average, although naturally individual losses have varied considerably according to the soundness of the judgment shown in their respective investments. As to the over-capitalisation of freezing concerns referred to by this deputation, owing to the necessity during the war for increased storage for meat, new freezing companies sprang up and , existing companies altered or extend- . ed their works. When the war was over so much storage was, not required. The extra profits made during the war were not sufficient to pay for the new works and extensions required thus for a comparatively short time. Thu result was that most of the new companies were forced into liquidation and lost not only their shareholders’ capital but some of their bankers', depositors’ and ordinary creditors’ besides. The older companies fared somewhat better but found themselves with works that bad to be solidly written down. One. company, indeed, which had made good profits, overlooked this point although it did not distribute all of these profits in cash, issued new shares in lieu of cash payments. When, however, shortly afterwards it was seen that plant and buildings created during the war must be written down, these shares fell and the reduced market value of the old and new shares combined was less than the nominal value of the old shares. It has not been able to pay a full dividend upon its increased capital, and certainly dividends declared by it have never interfered with the wages paid to its employees. Companies in New Zealand have increased their capital from time to time but in the ease of no company of importance has this new capital been issued except cash has been paid by its shareholders to the amount at least of the nominal value of its shares or the shares have been paid out of the savings of the company and distributed to their shareholders in preference to declaring cash dividends. By this latter method those companies which have prospered their resources to keep up with their increased business. Moreover for one company which has been able to do this you will generally find another company which has been unfortunate and if it has not lost all its capital and disappeared, is struggling. How can any company whose nominal capital is represented by paper assets make profits. Its shares may be sold to innocent investors at an over-value but. once tested by the acid of active business a company with paper assets must come to grief.

If it is any consolation to the worker who finds his money wages. reduced he can rest assured that if prices for our primary products do not improve the owners in New Zealand of property. however well selected, will lose substantially, and where bad judgment has been shown will be lucky to have any left at all. He does not need to have any doubts whether the man who has saved and the managers and higher paid men in business will suffer more than himself. Circumstances will ensure this. Workers Owning Homes 1 am sorry workers owning their owu houses will be affected also. It is bad luck that this fall of prices has been so sudden and so steep. If it had come gradually (as up to last year x had hoped it would) its effect would not have been so distressing and bewildering. Silver Linings There are, however, in New Zealand some silver linings to the clouds. This country has certain natural advantages peculiar to itself. It can grow grass better and more plentifully than any other country in the world. .It has a wonderful climate. We have already a very high and easy standard of living compared with other countries. Even though wc all have to simplify it we shall still be much better off than most other countries. Moreover, 1 find that in Europe the primary producing conn tries were all complaining that the prices of their products were less than costs of production. It is probable, therefore, that present prices for our primary products will inipove somewhat. It would, however, be unwise to expect this improvement to be very substantial. Competition in primary products must increase and become keener. You have cnly to look at the increased exports of food products from the various countries to recognise this. Still our trade competitors and ourselves start on the same handicap. Ail of us have to reduce our costs of production and the nation who does so most successfully will come out on top.

Railway Construction We have the land, we have the climate and L believe we have the men to do this, but Parliament must also do its part. At the present time three rail ways are being completed which as far as the expert testimony goes will when completed involve this country in a loss of interest on capital cost and working expenses of £735,000 a year. With the position of Australia before us largely due to the expenditure of loan monies upon unproductive public, works, with a public and local body debt per head ciosely approximating to that of Australia. with an anticipated Budget deficiency on last year of £3,000,000 which has to be provided for by increased taxation, with a doubt thrown upon the solvency of our superannuation funds, with the burden of taxation already approaching the limit, when increases must mean simply decreased returns, with a threatened return to prewar prices for our primary products, the construction of these railways is still proceeding and the question of whether thev should be stopped is being allowed to drift. £735,000 is ore than one fifth of the amount at present derived from (•in- income tax. Surely Parliament could rise above party differences, forget past promises ami opinions, local self interest and that of individual members, and in the interests of the whole country stop the imposition of such a ghastly burden upon New Zealand. The terrible ex-

penditure necessitated during the war lias dulled our senses towards amounts. In .1913 with an annual Budget of say £11.1)00.000, the annual loss of £735,000 would have raised unanimous condemnation. Although to-day we have to bud get for an annual expenditure apart 1 rom Railways of approximately £24.000.000 this loss is'just as stupendous and the country is far less able to bear

Supposing tiic expenditure on these railways gives employment to 4,000 men for four years. It would be cheaper to these men at the rate of £l5O per year for doing nothing for those four years

than to continue the construction of these lines. The amount paid then would be only £2.400,000 and interest on this sum of 5A per cent, is only £132.000 a vear as compared with £735,000 a year, the annual loss on tho railways constructed. Wheat Production If in the interests of our jnimary pro dueers costs of production and money wages are to be Tcduced, the cost of living in fairness to the worker and also of everybody else must be brought down. Personally, 1 believe that New Zealand should be self-supporting as regards wheat. This has necessitated pro Section. The method adopted was to fix a basic price which Parliament considered wheat farmers should receive and to impose protective, duties increasing proportionately with the. decrease in prices outside Now Zealand below that basic price. That basic, price was fixed at 6s 9d e being Is 3d over 5s 6<l, which was then considered likely to be a fair average standard price of wheat at the world ports of export outside New Zealand. Now. however, world prices of wheat have fallen well below 5s 6d per bushel. The present price may advance but if. say, 4s and not 5s 6d should become the fair standard world price of wheat at ports of export, then it will be necessary for the present price for wheat in New Zealand under the protective tariffs to be fixed at Is 3d plus 4s and not Is 3d plus 5s 6d. Wheat farmers cannot expect to escape the fall in world prices which the grazier and the dairy farmer has had to face. More over, a reduction in the price for wheat in New Zealand, as also a reduction in the price of meat and dairy produce, will assist that fall in the cost of living required to facilitate the reduction of money wages. There is this also to consider. Already the competition between wheat farmers in New Zealand is reducing the price of wheat below 6s 9d per bushel, the protected [nice for New Zealand wheat. The market price is now a little over 6s. If. however, wheat prices in New Zealand are to be maintained while tho prices of all other farm products fall heavily, so many farmers will be induced to grow wheat that the price in New Zealand will be soon forced down by internal competition well below the protected price. This, ot course, might take one or perhaps two seasons to bring about, but it would give rise to many eomplieations and in the long run the wheat farmers niigh* be well advised to acquiesce in any necessary adjustment required next year after present, crops have been harvested than to force, an indiscriminate rush by all and sundry to grow wheat. Mav T thank the members of the .\>l visory Board. Mr Bishop and his stall’, the presidents, executives and secre tarics of tho various associations for their work during the year, especially the last six months. As an onlooker, through absence, may I say members have every reason to be thankful for the good work done by them and not only members but everyone, worker or non-worker. who is dependent for his standard of living upon the prosperity of New Zealand.