Finance
Rubber Restriction
IF only in remembrance of the utter failure which attended the famous Stevenson Rubber Restriction Scheme, it is not perhaps surprising that the new Rubber Restriction Scheme announced in the Press on Mom- aj should have had a somewhat mixed reception. Those who had bought, speculatively, Rubber Shares on the hope that some kind of restriction scheme would emerge from the prolonged negotiations, but who had become nervous lest the negotiations should break down without an agree- ment being reached, naturally were greatly relieved to find that their apprehensions had not been realized. The first effect of the announcement of the scheme on Monday was to occasion a,further sharp rise in the price of Rubber to sid. per pound (during the slump it was at one time below 2d.), while there was a fairly long list of gains in Rubber Shares on Monday night. IF only in remembrance of the utter failure which attended the famous Stevenson Rubber Restriction Scheme, it is not perhaps surprising that the new Rubber Restriction Scheme announced in the Press on Mom- aj should have had a somewhat mixed reception. Those who had bought, speculatively, Rubber Shares on the hope that some kind of restriction scheme would emerge from the prolonged negotiations, but who had become nervous lest the negotiations should break down without an agree- ment being reached, naturally were greatly relieved to find that their apprehensions had not been realized. The first effect of the announcement of the scheme on Monday was to occasion a,further sharp rise in the price of Rubber to sid. per pound (during the slump it was at one time below 2d.), while there was a fairly long list of gains in Rubber Shares on Monday night.
FEARS OF PRICE RAISING.
Space will not permit my examining all the details of the new Rubber Restfiction Scheme, but a reference to some of its features may perhaps be useful to those who are concerned with the question whether it is likely to occasion an excessive rise in the price of Rubber, which, however conducive it might be to a boom in Rubber Shares, would on many accounts be a regrettable occur- rence. Moreover, while, as I point out later, the sponsors of the present scheme emphasize the undesirability of any undue rise in the price of Rubber, it is impossible not to be sympathetic with the comment made by a writer in the Financial News of last Monday, who said "the danger of running the price up too, high cannot, however, be stressed too often, since every restriction scheme begins with that misdemeanour being solemnly abjured and three out of four end with it being perpetrated." More- ' over, it might in some respects be urged that the danger of ' an excessive rise being brought about in Rubber is , increased on this occasion by the fact that the scheme covers a much wider area of production than the old Stevenson Scheme; the agreements cover in fact areas representing about 90 per cent. of the world's production ; of Rubber. Not only so, but it might also be urged that- . so far as may be judged from the preliminary details- ; control seems to lie very largely in the hands of those interested in the production of Rubber.
CAREFULLY CONSIDERED SCHEME.
But while it may be well to recognize these possible dangers in the new Rubber Restriction Scheme, and, ! indeed, while also confessing a dislike Of any scheme for artificially raising prices, I think that those most closely in touch with the rubber industry are inclined to approve the scheme, first by reason of the undoubted need for some measure of control to rescue the rubber ; industry from its deplorable condition. In the second place it is also evident that the present scheme is no hurried production, but is the result of prolonged and careful negotiations based upon an examination of the problem of rubber production and rubber consumption, and it must be remembered that while the enlargement of the area of . production undoubtedly increases the power of those conducting operations to raise the price of rubber, it also increases' the power to control the price as distinct from the mere engineering of an upward movement. Consequently we are driven back very largely upon the intentions of those who will be in control of the operations. of the scheme during the four and a half years in whiCh it will rim its experimental career.
VIEWS OF MR. RAY.,
And in this matter I must confess that I am somewhat influenced by the fact. that 31r. J. G. Hay, an authority 1 on rubber and a Member of the Committee which carried I out all the 'negotiations' for the regulations of rubber production, Was, if I am not mistaken, a critic of the ' Stevenson Scheme, and since it was abandoned has been
(Continued on page 722.)
Finance
(Continued from page 720.) opposed to any scheme calculated to raise unduly the price of rubber. At the -meeting which was held on Tuesday last of the Labu Rubber Company, Mr. Hay was asked to make some remarks explanatory of the new Rubber Restriction Scheme as outlined in the morn- ing papers of that day, and in the course of his explanatory address he dealt in very clear fashion with three main points, the first being concerned with the need for a Restriction Scheme, the second with some of the main features of the Scheme, and the third with its safeguards as affecting price regulation. With regard to the first of these points Mr. Hay had, of course, no difficulty at all in demonstrating the • dire condition of the rubber industry as a result of the unrestricted production, worsened by the prolonged trade depression. He made, however, an exceedingly good point in demonstrating that the abnormally, low prices of rubber gave little in the way of compcst adveaniiiges. The period of dirt -cheap rubber has-heen' aThad period for the manu- facturers just as abnormally low prices for all commodities have contributed to the dewession in ahnost all industries, and in this COnnexion Mr: nay not unreasonably referred to the Resolution passed at the Economic Conference in London last year for endeavouring to restore prosperity by improving the' price of primary commodities, while it was also suggested that this improvement was to be brought about by regulating supplies. I think there were a good many who were not entirely in accord with this Resolution at the Economic Conference, but never- theless it was a fair and reasonable point to be mentioned by Mr. Hay. Then as regards the main Restriction Plan itself, Mr. Hay maintained that the quotas were some- thing more than a mere mathematical computation. • They represented, he said, an agreement and, therefore, implied that 'each Country was satisfied that justice had been done to all parties.
Finally, with regard to the safeguards of the Scheme, • Mr. Hay emphasized the moderation of the aims of those responsible for .tile Scheme, and later' in reply to ques- tions as to what might be regarded as afair and reasonable price, Mr. Hay said that while this depended on factors which were variable, speaking elude unofficially he would say at the present time that, basing it on a restriction of 25 per cent., he thought that from 7d. to 8d. would be a fair and equitable price. For my own part, I should be inclined to attach even more importance to the provision of the Scheme under which it is promised that manufac- turers will be consulted in matters affecting their interests, while the steps which are to be taken for stimulating consumption should, if they are successful, tend in time to bring about a natural rise in the price of rubber as ; distinct from the artificial price. For there is no over- ; looking the fact that but for this prospect of restriction, rubber, with the enormous visible supplies in hand, could not possibly maintain even its present price of well under 7d.
The real test of the efficacy of the Scheme, judged from the standpoint of maintaining a stable as distinct from a high price, will come, of course, later when it will be seen whether the same care -is exercised -in preventing an undue rise in the price of rubber as that which has been taken at the outset in raising the price of the commodity to a level leaving the producer at least some margin of profit.
ARTHUR W. KIDDY.
Previous page
