« PreviousContinue »
In 1920, however, there was a sudden collapse. The output had for some time past steadily exceeded the demand, stocks were accumulating at an alarming rate, there was a financial crisis in America, and it was rumoured that the market for motor-cars was approaching saturation-point. Dividends dwindled, in many instances to vanishing point. Many balance sheets showed losses. Expenses were cut to the bone, and numbers of estates were illkept up. American interests, it was averred, were watchfully waiting in the expectation of taking over a typically British industry as a bankrupt concern. At one time the London price of rubber touched 6d. per lb.
When over-production first began to be seriously felt, in 1917, the Rubber Growers' Association-a body embracing all companies of importance-propounded a plan for the voluntary restriction of shipments, with the twofold object of maintaining the price, and of keeping the trees in health by abolishing overtapping. This was carried out for a year and was revived two years later, when the principal planters restricted their shipments of the 1921 crop by 25 per cent. Many growers in Java and Sumatra, where the plantations are to a large extent under British control, participated. This voluntary scheme relieved the congestion of the market; but when it was proposed to renew it for a further period of six months, there was only a bare majority in favour of continuation. Malaya, in the main, was willing, but Ceylon and Java dissented. The Chinese and the native smallholders, who had planted freely during the war and owned about one-third of the acreage, were also an obstacle to success. It was in these circumstances that the demand for a compulsory restriction scheme arose.
The planters in Malaya demanded that the Government should step in and restrict the exports by 50 per cent. The Council of the Rubber Growers' Association supported the appeal, and sent a deputation to the Colonial Secretary, Mr. Churchill, who, at first, declined to assist. But the Planters' Association of Malaya persevered and met with a sympathetic reception from the Government of the Federated Malay States, with the result that in October, 1921, Mr. Churchill appointed a committee " to investigate and report upon the present rubber situation in the British Colonies and Protectorates . . and to advise what remedial measures should be taken to improve the present
position." The chairman of the committee was Sir James (afterwards Lord) Stevenson, the Managing Director of John Walker & Sons, who, at the time of his appointment, was acting as Hon. Personal Adviser to the Colonial Secretary.
A great many plans were brought before the committee, including one by the Rubber Growers' Association, in which it was proposed to cut down the production by one-half, to fix the quantities to be offered at the London auctions, and to fix minimum selling prices. In the end, however, only two schemes survived. One, by Mr. Duncan, a leading man in the trade, was to prohibit the production and exportation of all rubber in excess of a certain figure; the other was the Chairman's, and this, in its material points, is the scheme now in force.
The Stevenson Committee in its first report issued in June, 1922 (Cmd. 1678), stated that the depression could not be relieved otherwise than by a substantial reduction of the stocks; and that a restriction to the extent of at least 25 per cent. of the normal production of plantation rubber would be required. The committee further expressed the opinion-and this view of what was a crucial point of the whole controversy has since been proved mistaken-that consumption was not likely to overtake potential production for some years. The report went on to state that the committee had examined the problem before it from four points of view: (a) stimulation of new and extended uses; (b) voluntary restriction; (c) the laissez-faire argument; (d) Government action.
As regards (a), much could be done, they reported, to extend the uses of rubber, but this remedy did not afford immediate succour, especially as improved methods of manufacture were prolonging the life of rubber tyres. As regards voluntary restriction, this had been tried for over a year by an association representing 37 per cent. of the plantation rubber interest, but it had been found impracticable to continue it. Passing to (c), we find a broadside aimed, apparently with relish, at the old but irrepressible enemy of alien name. Mr. Churchill must have enjoyed it :
(c) The advocates of laissez-faire desire to see a survival of the fittest. They rely on being themselves amongst the survivors and disregard entirely the hardships which must fall on the many tens of thousands of shareholders in this country alone, and the many thousands
of European and Asiatic owners and shareholders resident in the countries of production, if the industry is to drift along unprofitably until the weakest have been eliminated. It must be borne in mind that, even though a proportion of existing proprietors are forced to abandon the estates, the rubber trees thereon will remain a potential source of rubber and will be brought into production again by someone as soon as a margin of profit can be secured. The committee could not therefore advise you to leave things in their present unsatisfactory state unless all efforts to find a positive solution of the problem fail.
While thus attacking laissez-faire, the committee seem to have had an inkling of the objections that would be raised to their proposals on the ground of public policy, for in their fourth finding (d) they “recognized the grave objections to Government interference with industry, especially when it takes the form of restricting the output of an important raw material." With this meed of lip-service they passed on to business, and set out the two schemes (that of Mr. Duncan and Sir James Stevenson) which had survived their scrutiny, making no recommendation as to which of the two-if either-the Colonial Secretary should accept. They did, however, point out that the world's output of plantation rubber was, at that time, distributed among the several producing countries in the following proportions :— .. 57.5 per cent. .. 12.5
and they found that "no scheme, however excellent in itself, could be properly recommended unless it commended itself to the authorities of the Dutch East Indies."
On receiving this report the Colonial Secretary approached the Government of the Netherlands, inviting it to co-operate by introducing compulsory restriction in the Dutch Indies. But the Dutch authorities, after taking counsel with the GovernorGeneral of those Possessions, declined" at present" to take any legislative measures. In view of the categorical declaration of the Stevenson Committee that Dutch co-operation was essential, it might have been thought that compulsory restriction was dead. Nothing of the sort. The leaders of the rubber industry in London and Malaya at once started an agitation for the adoption of a scheme independent of foreign participation, and
the matter was referred back to the Stevenson Committee for further consideration. That committee, in October, 1922, published a Supplementary Report (Cmd. 1756), which definitely proposed the adoption of the scheme devised by its chairman, with some slight modifications. The change of front, it explained, was due to assurances of voluntary co-operation having been received from the Dutch-Indian rubber-growing companies under British control.
The essential features of the Stevenson Scheme of 1922 were as follows:
The output of plantation rubber in the year ended October 31, 1920 (equal to 330,000 tons of dry rubber), was taken as the standard, and was declared to be the actual production of each grower for that year. If a plantation-owner was unable to declare his quantity, he was to be assessed on the basis of his acreage and the number and age of his trees. Certificates of standard production were to hold good for twelve months, and unexhausted allowances could be carried forward from year to year. In lieu of the ad valorem export duty previously in force, which varied according to the market price of rubber, and in good years was equal to about d. per lb., a minimum export duty of one penny a pound was to be levied on all rubber exported by growers up to the "exportable quantity" permitted during the current quarter. In theory, a grower could ship as much as he liked, but if his shipments exceeded the quantity allotted to him, a higher rate of duties, varying from twopence up to 1/2 per lb., was payable, not only upon the excess, but upon the whole of his shipments. These higher duties proved to be prohibitive, as was intended. An Assessment Committee was set up to revise annually the assessments of the exportable quota of each estate, and a standard system of tapping was prescribed.
The exportable quantity at the initiation of the scheme was to be 60 per cent. of the standard-330,000 tons for the yearand future alterations in this percentage were to be governed by the price of standard quality smoked sheet in London. The exportable quantity for each quarter was to be governed by the average price during the preceding quarter, according to a definite scale :—
When the average price during three consecutive months has been maintained at not less than 1/3 per lb., London landed terms, the
percentage of production exportable to be raised automatically by 5 in the ensuing quarter. If the price has been maintained at not less than 1/6 per lb. for three months, the exportable percentage to be raised by 10 for the ensuing quarter.
If in three months the price has not averaged at least 1/- per lb. the exportable percentage to be reduced to 55, and if that is not effective in raising the average to 1/3, then to 50 per cent., and so on by 5 per cent. until an average price of 1/3 per lb. is secured. The exportable percentage, once it is lowered, not to be raised until an average price of 1/3 per lb. is secured.
It was recommended that the scheme should be applied by the Governments of Malaya and Ceylon, and that there should be an Advisory Committee in London to co-ordinate its working. This committee, when appointed, consisted of representatives of the Rubber Growers' Association, two manufacturers' associations, the Association of British Malaya, the Ceylon Association, and the Colonial Office.
The policy of compulsory restriction was strongly supported by the Rubber Shareholders' Association (it was discovered that there were a quarter of a million holders of rubber shares), but the makers of rubber goods emphatically disapproved, and in October, 1922, the India Rubber Manufacturers' Association published a searching criticism of the proposals. They held that the scheme was economically unsound, that efficient plantations which could produce at 7d. per lb. would be forced to raise their production cost; that the Stevenson Committee did not appear to have enquired into the disparity in the cost of production, which varied from 6d. to 1/6 per lb., nor into inflated values and unsound finance, and that restriction would place a premium upon inefficiency in administration. They also thought that the scheme was ill-considered from an international standpoint, that America might retaliate by controlling cotton, and that thereby a vicious circle of reduction in the supply of raw materials would be set up. The non-co-operation of the DutchIndian planters would prejudice the position of the London market. Equipoise in supply and demand, they declared, could only be secured by natural processes, and the only solution of the problem lay in collaboration between manufacturers and planters.
The Stevenson Scheme was, however, approved by Mr. Churchill, who explained that he had been greatly influenced