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NEW ZEALAND SCENE.
STATE CONTROL OF IMPORTS.
A "PLANNED ECONOMY"
No. 2.
(By HJ.Lx)
WORLD attention was focussed on New
Zealand when, in December last it
adopted without preliminary warning a
drastic policy of State control of exports
and imports and of exchange. The shock
that this action produced was probably
much greater outside the Dominion than
within it; for the steep and continuous
decline in the overseas funds held by the
New Zealand banking system must have
convinced any intelligent person in New
Zealand that heroic measures of some
kind were impending.
What Control Means.
How completely the Government dom
inates all transactions of New Zealand
citizens with the outside world may be
briefly indicated. In the first place a
Government licence must be obtained for
all exports. The object of this is to en
sure that all receipts for exports shall be
paid into the trading banks, which, in
turn, must transfer them to the Reserve
Bank
Much more drastic is the control of
imports. Before any single article of
commerce can be imported a licence must
be obtained from the Government, for
without this licence not a penny of the
funds accumulated abroad in payment
for exports will be released to pay for
imported goods. The Minister for Fin
ance (Mr. Nash) has announced that-
apart from the sheer necessity of con
serving funds to meet obligations to the
British bondholder-the control of im
ports is designed to provide facilities for
the purchase of capital equipment and
raw material for the extension of manu
factures within the Dominion.
Furthermore, the Minister has pointed
out that as Great Britain is overwhelm
ingly the best customer for New Zealand's
exportable products, the import licens
ing system will be used to ensure the
expansion of reciprocal trade with the
United Kingdom. It must be somewhat
discouraging to the Minister that since
he expressed those entirely laudable
sentiments Great Britain has imposed
quota restrictions on the import of meat,
one of the principal products on which
New Zealand relies for building up her
external credits. For since the United
Kingdom can scarcely discriminate be
tween the different Empire countries, the
penalty of the British policy of protect
ing the home producer falls alike upon
the just and the unjust among the
Dominions.
Early Reaetions.
When the policy of restriction of im
parts was suddenly and dramatically an
nounced in December last there were
vehement protests from those engaged in
the business of importing. The policy
was condemned as a Fascist measure
and indeed it may be said that there are
many points of resemblance between the
New Zealand- Government's actions and
those of Mussolini before he linked his
economic policy with ideas of military
conquest.
But apart from importing interests, the
criticism now most generally heard of
the Savage-Nash policy of restriction is
that action was left too late, with the
result that it had to be sudden and harsh
instead of gradual and less sweeping.
There is much more substance in that
contention than in the original objec
tion to the imposition of control For
control, when it was instituted, was really
inescapable. Importations far in excess
of the ability of the national income to
sustain, had so reduced the London bal
ances of the New Zealand banking sys
tem that there was the gravest- danger
that the Dominion would be unable to
service its overseas debt, with disastrous
consequences to its credit abroad.
A Seeming Paradox.
Curiously enough, the criticism that
action to restrict imports was delayed too
long comes alike from Oppositionist-be
lievers in orthodox finance and from the
powerful left wing of the Labour Party.
which wants a full measure of socialism,
not in ten years or five but Now. But
the paradox is more apparent than real.
For while these two widely-separated
schools of thought are at one in con
demning the Government for procrastin
sting, the grounds upon which they base
their objections have nothing in com
mon; and the methods which they would
have employed to limit imports are wholly
dissimilar. The orthodox school, when
it became apparent that New Zealand's
London funds were falling at an alarm
ing rate, would have had the Govern
ment seek the co-operation of the trad
ing banks to bring pressure on their cus
tomers by curtailing advances for imports,
to the end that London balances would
have been conserved to ensure an ample
margin of safety. The left wing of La
bour, on the other hand, would have had
the Government take complete authority
over imports when London funds were
at their maximum, in pursuance of the
socialist policy of State control of pro
duction, distribution and exchange.
Where the Government Stands.
That brings us to the point of what
was in the mind of the Government when
it belatedly assumed full control over
imports and exchange. Was I merely a
temporary panic policy dictated by the
financial emergency of the moment, or
was it the conscious application of a con
sidered socialist policy intended to be a
permanent feature of New Zealand's eco
nomic structure?
I put this question to a spokesman who
is fully qualified to speak for the Gov
ernment. "The answer," he said, "is Yes
and No." In that apparently evasive
reply there was in fact no evasion. He
proceeded to explain that while the ac
tion was forced on the Government by
the depletion of the London funds it was
also a part of the Government's aim to
secure a planned and balanced economy
by means of State control Import re
striction--even to the extent of complete
embargoes on certain commodities-was
being systematically directed to securing
the expansion of existing secondary in
dustries in New Zealand. and the es
tablishment of many others which could
be brought into being. Control would be
a permanent feature in the sense that no
future Government--whatever its politi
cal complexion-would dare to remove
from established industries the shelter
which had made their creation possible.
At the same time, he pointed out, con
siderable strides had been made in the
socalisation of the export industries by
the system of licensing exports, not with
a view to their restriction but to assist in
their expansion by the regulation of the
export trade. The Government was now the
sole buyer of butter produced for export,
which it purchased at a guaranteed price
and sold abroad. That system was be
ing extended.
Why the Delay?
"Why," I asked, "if the control of
imports was designed as part of a calcu
lated policy, was it not imposed when
tondon balances were in a healthy con
dition, and when, in consequence, the
prospects of success would have been
infinitely greater?"
The reply was that, comparatively early
in the Savage Government's first term
of offce, Mr. Nash had visited England
to enlist the co-operation of the British
Government in securing the unrestricted
importation into the United Kingdom of
New Zealand's primary products, in re
turn for an expanding share of the New
Zealand market for selected British manu
factured goods. His mission was unsuc
cessful, and the Ottawa Agreement im
posed a bar to the policy of restricting
British imports until sheer necessity
forced control in the interests not .only
of New Zealand but for the honouring
of its pledges to British bondholders..
Political Expediency?
That reply did not seem to be entirely
convincing. The Ottawa Agreement still
stands. One was forced to the conclusion
that political expediency played a domi
nating part in delaying application of the
policy of control. Such a policy neces
sarily subjects New Zealand traders and
consumers to many inconveniences *hich
would have created widespread dissatis
faction if they had been imposed merely
in pursuance of a political creed. This
dissatisfaction might easily have been em
barrassing to the Government at the
election which was held towards the end
of last year. As it is, it can now be de
monstrated that the Government had no
alternative; and upon the foundation of
Necessity a socialistic structure may be
raised with less political opposition, even
though with greater economic difficulty.
The Banks' Part.
We return to the more orthodox con
tention that the Government should have
entrusted the trading banks with the job
of conserving London funds by rationing
credit for imports. Given like circum
stances-the threatened reduction of Lon
don funds below the safety limit-that
is almost certainly the course which
would have been adopted by a National
Government. It is equally certain that
the rationing would have been done with
less friction and more competently by
the financial institutions. I suggested to
a prominent banker, however, that the
banks would havd been reluctant to assist
in implementing a policy the motive of
which-the governmental control of in
dustry--they might be assumed to dis
approve. His reply was that, when ap
proached, the banks had never failed to
co-operate with any New Zealand Gov
ernment for political reasons. And it
may be added that informed opinion
outside the deepest hue of red-is gene
rally disposed to concede that claim.
. But the Labour Govetnment aimed at
something more than the conservation of
London funds. Its objective wa. a policy
of rationing consciously dlrectet to a
political end-a selective restriction de
signed, among other things, to assist the
development and expansion of secondary
industries. The banks could scarcely have
undertaken a mission so distinctively
political.
Trial and Error.
And so it happens that the licensing
of imports-which connotes severe restric
tion and in some cases prohibition-is
being carried out by prentice hands on a
basis of trial and error. It was instituted
suddenly, with no preparation in advance
(The apparent justification for this preci
pitancy lies in the fact that preparation,
which could hardly have been kept a
secret, would have been a warning of
which importers would have taken advan
tage to place excessive orders in antici
pation of the restrictions.) At the outset
this unpreparedness resulted in a maze
of confusion, but gradually a coherent
system is being evolved. A departmental
committee is almost continuously engaged
in the task of drawing the line between
essentials and non-essentials and in ex
amining local manufacturers as to their
capacity to fill the gaps left by the pro
hibition or limitation of certain Imports.
On the report of this committee the Min
ister for Finance and Customs and the
Minister for Industries act. The griev
ance of Importers at the moment-end
it is a real one-4s that they can get no
detailed statement from the Government
in regard to its intentions for the future,
and that this uncertainty results in the
dislocation of their businesses. The Gov
ernment's view is that elasticity is essen
tlal and that details must be determined
as circumstances arise.
That there is substance in the Gov
ernment's contention may be illustrated
by two examples. There are two match
factories in New Zealand whose control
lers.were asked if they could supply the
whole of the local market in the event of
imports of matches being prohibited,
They undertook to do so, but experience
proved that they were unequal to the
task, and a limited Import was permitted.
In another case examination showed that
New Zealand was importing annually
£80,000 worth of a certain manufactured
commodity. The local factory owners
were consulted and agreed that they could
"take up the slack" with their existing
plant if they were granted licences to
import the requisite raw materials. They
were told that there would be no difi
culty on that score, and were invited to
put in their requisitions for raw mate
rials. In the result applications were
made for licences for the import of
£150,000 of additional raw material for
the production of an extra £80,000 of
the finished article!
Manufaetarer~ Atiuat?
It would probably be safe to say that
90 per cent of New Zealand manufac
turers favour the .-Government policy of
selective restrictions on importations.
They see the local market secured to them
by this means, aid' where they can naeet
the demand with existing plant and equip
ment their outlook Is particularly rosy.
Many, however, are planning extensions
to buildings and plant on a large scale,
for they share the Government's confi
dence that no future Ministry will sweep
away the sheltering wall.
But there are a few who shake their
heads dubiously. "Why," they argue,
'"hould we double the capacity of our
factories, double our liabilities and wor
worries, only to find the proceeds of our
enterprise taken from as in higher taxa
tion?and higher wages, and with the re
duced output per unit which is the inevit
able accompaniment of the enforcement
of the rty-hour week?" . At present
these pessimists are a small minority
among manuahcturers
But forebodings are widespread among
those engaged in primary industry, who
find their costs mounting and their re
turns diminishing. They entertain hopes
of a return to better prices; but none of
relief from the crowding anxieties which
steadily rising costs have brought them.
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