Wool & Welfare

The most complete welfare state in the more or less capitalistic world is having economic trouble. Protest marchers with banners ("We Demand Guaranteed Employment") were out demonstrating in cities and towns throughout New Zealand last week. So far, only some 6,600 people (out of a labor base of 1,000,000) are looking for work, but to New Zealanders, who had known no unemployment for decades, this was a matter for deep concern. Union leaders darkly predicted that there would be 20,000 jobless before long.

The artificially high wool price that New Zealand maintains with its vast government price-support scheme is mostly to blame for the country's present plight. Last season the government wool commission, which protects domestic sheepmen, had to buy and store 650,000 bales, a third of the total output, at 47-c- per lb.--80 higher than the average open-market price for Argentine wool. Buyers from abroad were unwilling to pay the New Zealand price, which they considered outrageous.

Prime Minister Keith J. Holyoake's Cabinet decided on drastic measures to recoup some of the loss. These include ending state subsidies on such staples as bread and butter, longtime features of New Zealand's elaborate welfare system. Taxes on gasoline, tobacco and liquor have gone up. The nation's imports and bank loans have been curtailed, and down payments for installment buying increased.

Economists do not like to contemplate the future of the welfare benefit system without full employment. Even without increased unemployment benefits the social security fund does not balance, and must be subsidized from other taxation. As it is, the government takes a whopping 7 1/2% from everybody's pay packet to finance the welfare state; as the number of unemployed rises, there will be correspondingly fewer to contribute--and therefore higher charges for everyone else.

No one in Parliament dared to call for the welfare state's demise, for such a proposal would be political suicide in New Zealand. But something had to be done to get wool sales going again. So, after weeks of deliberation, the wool commission decided to lower its protective floor price 8-c-, to a more realistic 39-c- per lb., for the coming year. It hopes that with a bit of luck, the state will have to buy little of the next crop.

Meanwhile, to their annoyance, New Zealanders were being reminded of George Bernard Shaw's comment when he paid the island a visit 30 years ago: "Altogether too many sheep."

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