H.—35

3. Price Disparities in Other Countries. The problem involved in a consideration of the extent, and causes of price disparities are exceedingly difficult. Its seems best to set the problem in its proper perspective by a preliminary consideration of conditions in other countries. It should be pointed out that the disparity between agricultural prices and the prices of manufactured goods —of the so-called " sheltered industries " in this country —is general, and is therefore likely to be attributable to general causes. Professor Cassel, in a recent memorandum to the International Economic Conference, discusses the situation as follows : — " The dislocation of prices has inevitably been to the disadvantage of certain classes of producers who have had to pay for the advantages secured by other classes. It is clear enough that agriculture, and to a great extent producers of raw materials, are the chief sufferers. For their produce they get in exchange less manufactured goods and immediate services. In other words, their buying-power for such goods and services has fallen off. As soon, however, as we put the result in this form, it immediately becomes clear that the high prices which other producers have secured for themselves do not represent a net advantage to them ; in fact, the high prices are accompanied by a most serious evil —viz., unemployment. " A similar alteration has taken place in the conditions for the exchange of goods between Europe and the colonial world {i.e., Australia, South Africa, New Zealand, South America, &c.). The main trend of development is a fall in the price of colonial products as compared with those of the manufactured goods which Europe has to offer in exchange."—(" Recent Monopolistic Tendencies in Industry and Trade," pp. 27-28.) Professor A. C. Pigou makes a similar point in reference to Great Britain : " Finally ... we have to note a very remarkable movement in the relative prices of British imports and British exports. In 1924 the general price-level of British exports stood 90 per cent, above the 1913 level, while the prices of British imports stood only 50 per cent, above the 1913 level. The Balfour Committee suggests that the export figures should be reduced from 90 per cent, to 80 per cent, in view of changes in quality, but even so we have the result that a unit of volume of British export goods of the same consistency as a unit volume in 1913 was buying in 1924 Jf-g times as large a bale of foreign imports of 1913 consistency as it did in 1913. That is to say, a representative unit of British exports, unchanged from 1913, was able to purchase 30 per cent, more imports ... It has to be remembered, however, that our imports consist in the main of raw materials and food. Perhaps the explanation may be found in a relative fall in the world value of these relative to manufactured goods, consequent partly upon the expansion of agricultural production in the new world under the stimulus of the war, partly to the falling-off of the European demand for imports of these things."—(" The Economic Position of Great Britain." Memorandum No. I, Royal Economic Society, July, 1927, pp. 28-29.) "We may press the point home by the following table relating to the United States, which shows clearly that the price disparity alleged to exist in New Zealand is also present in the United States : —

Wholesale Prices in the United States. Comparison of Wholesale Prices of Farm Commodities with General Wholesale Prices, 1913-1926.

It is difficult to excuse the neglect of such general conditions on the part of those who blame the Arbitration Court for the disparity in New Zealand. It is common knowledge that the great bulk of our exports are pastoral in origin, while our imports are mainly manufactured goods. The price of exports is determined largely by conditions in the United Kingdom. By what process of logic is it possible to neglect the influence which outside conditions exert on the price of goods produced within the country through the price of competitive imports ? Some of our industries are no doubt fairly completely sheltered from outside competition—for example, tramway services, the laying of sewers, the building of houses, and the growing of wheat; but it is surely the case that over a wide range of our so-called " secondary industries," which are apt to be generally classified as " sheltered " sufficient competition exists to set the price standard. Any general disparity between non-agricultural and agricultural prices may be explained mainly in terms of general conditions which operate both in this country and abroad, the prices in a large proportion of our so-called " secondary industries " being determined by the import price of competitive goods plus the tariff. If this is not the case, why the tariff ? It is true that some industries may be especially sheltered from outside competition, and that in these a price disparity may occur with the price of farm-products ; but every economist knows that such sheltered prices always tend to fall more slowly than unsheltered prices ; while special influences may always operate in respect of a particular commodity or group of commodities.

50

(Base average 1910-14 = 100.) Voir Firm Price.) Wholesale Price of _ Farm Prices "Wholesale Price of ' Y6ar - J) arm Prices. All Commodities. * ear ' J! arm Prices. ah Commodities. 1914 .. .. 101 100 1922.. .. .. 124 152 1915 .. .. 101 103 1923.. .. .. 137 157 1916 .. .. 119 130 1924.. .. .. 140 153 1917 .. .. 180 181 1925.. .. .. 154 162 1918 .. .. 206 198 1926 —Jan. .. .. 150 159 1919 .. .. 215 210 Feb. .. .. 150 158 1920 .. .. 214 231 March .. .. 146 156 1921 .. .. 119 150