The Wanganui Chronicle MONDAY, SEPTEMBER 4, 1950 THE RED LIGHT IN INDUSTRY

Wanganui Chronicle, 4 September 1950, Page 4

The Wanganui Chronicle MONDAY, SEPTEMBER 4, 1950 THE RED LIGHT IN INDUSTRY

'J’HERE is something “rotten in the State of Denmark” when in a time of very high prices the export industries are compelled to contemplate drawing upon their reserves. It indicates that the economy of the country is out of plumb. Some serious thinking is called for on the wider subject of the whole economy of the country, without allowing sectional interests to get in the way.

Speaking in the Legislative Council, the lion. O. H. Allen said: “The day is coming when our primary producers will have to be subsidised in order to compete on the world’s markets.” This may state a fact, but it is the product of muddled thinking nevertheless. Too many activities in New Zealand have been subsidised and it is widely believed that this process can be extended ad infinitum. It is only necessary to ask from what fund are the export industries to be subsidised to discover that the contention is unsound. -The domestic industries may be subsidised by the payment of high prices for their products, but these subsidies come out of the national income, the mainstay of which is the export industries. New Zealand may elect if she so desires to make a product rather than to import a better product at a cheaper price. The extent to which the domestic cost exceeds the importing cost is the extent to which the community is prepared to subsidise local industry. This process can go on within certain limits, but the limits arc set by the margin of profits made by the exporting industries. When this margin of profit on exports disappears there is nothing to do but to consume capital to sustain the subsidised domestic industries. The farmers not receiving sufficient to <istain their farms in good condition must witness the deterioration of the land and the reduction of produce output. When it is suggested that the farming industry be subsidised what is actually being proposed? Only that, in order to sustain primary production for a little time longer the internal strength of the community is to be used up. When that has been completed the farming industry must again revert to living on its own resources at a lower level of efficiency and therefore at a lower level of productivity. When exports eventually fall to lower levels there will b? a reduction of funds available in London to pay interest on existing loans and to discharge other current obligations, consequently there will be a smaller sum available wherewith to make purchases of essential imports, including fertilisers, fencing wire, sheet iron, railway equipment, and reading machinery. Imports should not be thought of as comprising luxury goods that could be cut off in a period of dearth. Imports inelude essential products for the continuance of every one of New Zealand’s industries. There is probably not a single industry that could be operated with success in a condition of complete isolation from the outside world. Whatever happens then New Zealand must sell her produce overseas at a profit or the whole country must run down. To suggest that subsidies should be paid on the primary industries is to confess to a condition of bankruptcy in the management of the country’s economy.

The export income of New Zealand may decline for two major reasons: because the prices of the exported commodities fall in value and because the cost of producing exportable produce rises too high to leave a margin of profit to the producer. It would appear that, as at present organised, the dairying industry is in some measure very near to the red line which divides a profitable undertaking from an unprofitable one .-The drawing from reserves in order to sustain, what is regarded as a satisfactory price for the suppliers of butterfat is as has been remarked the showing of the red light to the industry. While there is yet time—for it is certain that the industry must sooner or later face a lowering of the realisation prices—can the industry undertake a reorganising so to lower its production costs? That is a big question, indeed it is a very big question; but it must be answered. It is well known that a well equipped dairy farm which is operating on a sufficiently large scale can provide the owner with a good income under present conditions, but the proviso obtains that such farms must be efficiently worked. There are some small farm units where the production is insufficient to justify a man employing the whole of his time in the farm and whose income is on the low side. Such low efficiency units cannot be sustained on a high cost basis nor on a low return basis, and any deterioration in the farmer’s position may result in his being unable to meet all his outgoings. It does not, follow that such a farm would go out of existence, but it may mean that a process of consolidation would result in a higher measure of efficiency being introduced over the unified or consolidated area, in which ease the area could return to a profit paying level once again. The overall situation must be kept steadily in mind if a satisfactory solution is to be reached and it is not within the compass of the dairy-farmer alone to achieve salvation. In England industries are required to pay for nine working' days in the year, these being statutory holidays. In New Zealand the paid holidays have reached twenty. It is a national loss when a working day is lost but the cost of that lost working day falls on everyone, rich and poor, town and country, alike: nor can this country’s industries compete with the industries of those countries where machinery is turning for more hours in the year than they arc in New Zealand. In a country where “spelling” has come to be regarded as a legitimate procedure on the waterfronts and where the cargo moved per man-hour has consistently declined over the years and where one man watches another working for considerable periods of time the whole structure of that country’s economy requires careful watching. It cannot be too strongly emphasised that during the uptrend of trade prices the primary and food producing countries have the advantage because th? prices of their products rise more speedily than do the prices of manufactured goods. But when there is a period of declining prices the disadvantage rests heavily upon the primary producing countries because industrialists wages, rents, and fixed charges are not easily nor speedily scaled down. Further, while farm production is a yearly job the manufacture lines in factories can be stopped within a few weeks and the operatives laid off from work without any detriment to speak of to the factory as a producing unit. But a farm must be kept in good heart this year and next year if it is to be a producing unit when prices rise once more. A primary industry s expenses ean be reduced to some degree but only by deferring th? outgo. Tn the end it has to be met either in cash or in deterioration of the farm itself. Th? present condition of the primary industries calls for a close investigation notwithstanding the seeming prosperity. This investigation should be undertaken by those who are expertly equipped io prosecute such enquiries in the spirit of truthseekers and not as panderers to either rural or industrial voters. The time for this investigation is now. The red light should be heeded.