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The Pamphlet Collection of Sir Robert Stout: Volume 61

Part I. — The Attitude of the State

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Part I.

The Attitude of the State.

In an essay treating of the practical side of the progress and future prospects of New Zealand industries, it is desirable to avoid dwelling to any extent upon the politico-economical or theoretical views which are held in regard to the comparative merits of absolute free-trade and modified protection. The question cannot, however, be avoided altogether; and before practical working suggestions are made, and before a fair retrospect of the past can be taken, the ground must be cleared by laying down certain theoretical lines to work upon.

It is still a fallacy to believe that a country is necessarily the poorer because its imports exceed its exports, or richer because its exports exceed its imports. The doctrine of the economists, stated in its naked simplicity, is still that "the only direct advantage of foreign commerce consists in the imports. A country obtains things which it either could not have produced at all, or which it must have produced at a greater expense of capital and labour than the cost of things which it exports to pay for them."* It is still a "vulgar theory" to disregard this advantage; though it is to be feared that theorists, whose ideas are "caviare to the general," have too frequently disregarded page 4 the indirect advantages of diminishing the imports by means of native industries, and have, especially in the case of a new country, treated the matter upon the strictest principle of individualism, and as though it were entirely one between the consumer and the importing merchant. It is true that a "country produces an exportable article in excess of its own wants from no inherent necessity, but as the cheapest mode of supplying itself with other things." If this he so, then the older economists—had they been acquainted with the conditions of life in a colony such as New Zealand—should have paid more attention to the theory of trade which seeks to foster an extended market for its produce, an abundant consumption for its goods, and a vent for its surplus. If a colony is in that earlier stage when its exports are increasing, and new markets are looming for its produce, it is fair to expect that the imports of articles such as there is no inherent obstacle against producing in the colony itself should begin to decline. It is only common-sense to imagine that, if they do not decline, there is something wrong in the social system. National wealth docs not consist merely in the saving of price to consumers of imported goods. It would be easy to show by New Zealand instances that large imports, low prices, reduced wages, and insufficient employment too frequently go together. "A people "—to again quote John Stuart Mill—" may be in a quiescent, indolent, uncultivated state, with all their tastes either fully satisfied or entirely undeveloped, and they may fail to put forth the whole of their productive energies for want of any sufficient object of desire. The opening of a foreign trade, by making them acquainted with new objects, or tempting them by the easier acquisition of things which they had not previously thought obtainable, sometimes works a sort of industrial revolution in a country whose resources were previously undeveloped for want of energy and ambition in the people; inducing those who were satisfied with scanty comforts and little work, to work harder for the gratification of their new tastes, and even to save and accumulate capital for the still more complete satisfaction of those tastes at a future time."

All this is true to a great extent of a new country with large natural resources, a population increasing by native growth and immigration, and a rising generation from whom employment cannot be withheld without greater dangers to the social fabric page 5 than would attend a similar want of employment in an older country.

And here it may be well to remark upon the fallacy of the argument that, because—upon a more or less imperfect calculation—New Zealand contains 323,000 people engaged in agriculture to only 11,400 artisans or workers in factories, State encouragement to native industries must necessarily be for the purpose of protecting the latter and keeping them in employment at the expense of the former. Of the 323,000 in question a very large proportion consists of general labourers, having neither interest in the soil nor special knowledge of agriculture. It is a mere accident that such people rank among the farming class, and they are more likely to carry their labour to factories and such-like industries were such in existence for them. New Zealand needs population, and under liberal land laws would be certain to get the kind she requires. Of the mass of men it is probable that a minority alone is fitted to settle on or till the land; local industries' and factories would find employment not only for all the surplus labour in the colonies, but for a very much larger number of hands.

The strict enforcement of the laissez faire principle on the part of the Government of New Zealand may encourage low prices for the necessaries of life—though not to the extent which has been supposed—for a few years to come. A judicious fostering of colonial industries, whether as means of producing articles for colonial consumption or for foreign markets, will tend to increase national wealth and the happiness of the individual, by developing profitable employment and encouraging thrift, without interfering unduly with the labour market or the natural ebb and flow of trade, and without affecting to any appreciable degree the prices paid by the consumer.

The object to be aimed at is, that the foreign demand for New Zealand commodities should exceed the New Zealand demand for foreign commodities. However different the conditions of this problem may be in an old country, it can only be solved in a colony by developing every possible form of native industry, and by gradually and judiciously bringing every national resource into play.

We cannot force the consumer to buy domestic commodities in preference to foreign. The consumer is justified in buying page 6 the foreign article so long as it is either cheaper or better, even-though this plan, if persisted in, might throw the social conditions of a colony entirely out of gear by presenting the strange anomaly of large fortunes, large bodies of unemployed, and low prices all existing at the same time. But the State is equally justified, without prohibiting importation or imposing duties which prevent it, in encouraging the native production of goods so that they can be sold to the consumer as cheap and as good as the foreign article. Practically speaking, whatever the economist (writing almost entirely about life in an old and settled land) may say, the limited amount of State interference which is now advocated simply means that colonial goods must be produced for a short period, until the industry is firmly established, at a cost which the whole community will have to pay in the shape of bonuses, or which must fall upon the consumers by means of a Customs tariff. In the one ease the cost, being spread over a large population, would not be felt: in the other case the consumer would suffer very slightly, and it would be at his discretion, in many instances, whether he suffered at all.

Under this view of the matter the Government of New Zealand would be justified not only in encouraging colonial industries by imposing protective duties temporarily, and where such industries are suitable to the circumstances of the colony—a policy admitted to be defensible—but in doing so by bonuses as well as tariffs. The Government would also be justified in using its influence, on behalf of the nation, in obtaining information from foreign countries regarding particular industries, in establishing a system of technical education in the colony, and in taking steps to open up markets for New Zealand produce, whether in portions of the British Isles which it has not yet reached, in the Islands of the Pacific and the Malay seas, or amongst the teeming millions of the Indian Empire.

If the view already advocated be not conceded, then the Government is not justified in doing anything else but buy in the cheapest and sell in the dearest market, and sec that everything is done to encourage and nothing done to hinder its people from doing so also. It would be a violation of free-trade for the State to limit the hours of employment in factories, or do anything else which might tend to restrict production or interfere with the law of supply and demand. It would be equally page 7 wrong to employ the funds of the whole community in maintaining an agricultural college in order to teach one particular part of it how to earn their living or acquire an advantage over the rest.

The strict doctrine of free-trade may be scientifically correct as a paper theory; but, in a new country, it is a reductio ad absurdum, even although an array of economists may break a lance in its favour. The circumstances of New Zealand, require wiser and more generous treatment: a policy which shall seize opportunities and look ahead, and a Government which shall not continue to "let well" so severely "alone" that it ceases in the end to be "well" at all.

Having defined the attitude of the State towards New Zealand industries, the matter can be dealt with in its practical aspects.

* J. S. Mill's "Political Economy," Book II., chapter 17, section 4.