The Waikato Times With which Is Incorporated The Waikato Argus. WEDNESDAY, FEBRUARY 16, 1921. PRICE MOVEMENTS

Waikato Times, Volume 94, Issue 14592, 16 February 1921, Page 4

The Waikato Times With which Is Incorporated The Waikato Argus. WEDNESDAY, FEBRUARY 16, 1921. PRICE MOVEMENTS

In the lust analysis productive cost is | the final factor in determining prices. ! Other factors temporarily influence prices, but these arc all transitory, whereas productive cost is, under normal conditions. Iho one stable test, j Therefore labour cost, in which are included interest on capital and the cost of management, is the most important permanent element in the cost of commodities. In lids connection the report of the Board of Trade is of more than ordinary interest. The President commits himself to the specific slatcjment that ”a lower price level has delij nitely set in.” The reduction in the prices of ready-made clothing is estimated at from .10 to 50 per cent., and in boots of 20 per cent. If these approximations be accepted as correct it is evident that profits must have been materially reduced, for the reason that, generally speaking, the goods were produced on the high price level. The effects of reduced productive costs for imported goods will be felt later, but in the meantime it would seem that > n respect of certain lines producers have* been compelled to cut their losses in Hie effort to reach normal conditions in business. A complaint has been made in America that retail prices have not fallen to any appreciable extent, anti that in effect flic retailer is standing in the way of inevitable readjustment. The National City Bank of New York, in an i able review of economic conditions, says j that tile fact that a retailor did not promptly follow prices on a rising market will not help film now. The article proceeds to say: ‘Tic cannot afford to block the procession. The producer has had to come down, regardless of the fact that his crops or his goods were produced on flic high level, the jobber lias had to take his loss, and the retailer who gels down to the new level as soon as possible will gain by doing so. He will he selling low-cost goods while his slow-going rivals are tied up with the old stocks. The best policy fot {lie merchant at all times is to turn his stock as fast as he can replace it at lower prices. Furthermore, in times like these every man who is a link in the business chain should do his part to accomplish a speedy readjustment and a restoration of confidence. There can he no restoration of confidence until retail prices arc in line with producers’ I prices." The American experience— I Hie experience of a country where the cost of living doubled in five years—is especially interesting and valuable to the Dominion for (he reason that the United j Slates is highly developed in the indusI trial sense and consequently sensitive to I economic changes. What America has felt on a large scale (he Dominion may ho certain to feel in a modified form. .Mr .hum's S. Alexander, president of Hie National Bank of Commerce in New York, recenlly reviewed money conditions in the United States. While he I prophesies better financial conditions during the coming year, lie makes it perfectly clear that the financial stringency was inevitable and necessary. After referring to the unprecedented conditions of the early part of last year—-and it will be noted that they were not unlike our own—Mr Alexander says: “The initial causes of that era, which might truly he called one of violent business ac tivity, were I lie great shortages in goods of virtually all classes and the impairments of productive forces growing out of the war This condition was I aggravated by unbridled public buying ret tilling from profitable business, high wages and an excess of work over available labour, bringing about an attitude of improvidence toward the future and a tendency |o spend rather than to save. There ensued « course of rapidly rising prices, which were productive of activesi (.'dilation. This speculation prevailed nut only in securities, but also in commodities and real estate, and it even in- | vaded the conduct of ordinary mcrcan- | tile business.” Every cause of the crisis is outlined, each lending to (lie impairment of a’cdil, towards \vhich Hie naHon’s transportation ! i Adown early in 11.*20, due to labour sin a' re, strikes, and inefficient, operation, contributed in ;m small degree. The final development is apparent in Hie information (hat the official unemployment figures for the United Blales show (hat R.iTIi.OOR persons are workless. The number would have been very much higher were j( not for the fact that large bodies of workers have voluntarily accepted wage reductions in order (o keep industries going. The National Uity Bank's review of Hie situation does nnl overlook the imporlanl. faeior of wages. “A reduction of wages which would pul Hie general wage-level below Hie new price-level would throw the situation out of balance in Hie same way that the tall in farm products lias thrown it out. • • Wages and farm products wont up I fairly well together, and it is a mistake to think they are not coming down '( gel her, for they arc lied together by Hie economic law.” 1| has been suggested that mills should run on halftime and that Hie present seal c of wages should he maintained. If that principle were largely adopted prices would remain high while wages, . though nominally high, would actually ho reduced. In essence it would lie economic waste of a senseless kind and i mighl conceivably land Hie nytimi in j bankruptcy. The real value of wages ( is their purchasing power. While 1 prices were rising Ibis fact mnaiiie I ' ° I a uppermost, in the minds of Hie workers, j f An official of the American Federation j v of Uabour is quoted as saying that j i there ninsl he no reduction below ihelevels of 191 t, plus allowances for increases in Ihe cost of living. "That ■ sounds all right,” says the Bank’s rc- i

view, "but it must be borne in mind that the cost of living is not something imposed upon the wage-earning class from above or from outside—it is largely dependent upon the wages they insist upon having and their own attitude towards their work.” They cannot disclaim their proper share of responsibility for the cost of living, it is further pointed out, nor escape their share of the results of ills and calamities that afflict the world. It is reasonable to suppose, therefore, that material price reductions will be followed by wage reductions, on which indeed the former to some extent depend. There arc possibilities of improvements a industry, by which production can be increased and cheapened, but the complete restoration of normal conditions depends in large measure on the workers themselves. It may be possible, for instance, to retain the existing wage scale in large measure in the Dominion if the workers realise the mportnnoe of increased output and the folly of .hindering production. If a policy of “ca* canny,” accompanied hy sporadic strikes, is encouraged comparatively high prices and unemployment are an almost certain result. Nor can all the “close watching” of the Board of Trade or the. efforts of its nrice-flxing tribunals save the people from the inevitable economic consequences of mistaken conduct.