Where the processes of manufacture and distribution are not so simple, as in the case of wheat and wool, the method of making the Government the sole buyer of the output resulted in excessive ad- ministrative difficulties. An example is furnished by the potato crop of 1918, which on Nov. I was taken over by the Ministry of Food. The difficulties were accentuated by the fact that the crop was a large one, rather more than the demand would normally call for, and that it was not as sound as usual, so that in many cases the whole or part of the crop perished in the farmers' clamps before it could be distrib- uted. Under normal conditions the farmer who has potatoes of in- ferior keeping powers makes a sacrifice in order to get them away rapidly. He also looks the crop over from time to time and rejects potatoes that are becoming diseased and therefore dangerous to the bulk of the crop. Once, however, the crop had passed into the Gov- ernment's hands, the farmer naturally ceased to exercise the same care in handling it. The result in this case was a dispute as to the responsibility for the losses that occurred. The Ministry on the one hand alleged that the losses had been due to the initial unsoundness of the crop, for which the farmer must bear the responsibility. The farmer, on the other hand, alleged that had he remained in control he could have disposed of the crop and that the losses were due to the Government's delay in moving it to the consumer. When the Gov- ernment attempts to replace by a new official organization the intri- cate machine which custom has built up for the distribution of any general article of consumption, the result is confusion and increased cost. The "trade" machine may be intricate and illogical, but it has been in the habit of working and it has been shorn of waste by competition.
If the Government does not constitute itself the sole buyer of the production, it yet follows that it must assume the control of distri- bution as well as of prices. Under normal conditions it is only by the offer of a price above the average that any locality distant from the source of supply, or otherwise unfavourably situated, can attract to itself the supplies that it needs. With a flat 'rate of price the producers will endeavour to sell as near home as possible. The near localities would thus become abundantly or even over-supplied, while the distant localities would have to go without. Not only must the Government control the distribution, but also it must fix prices all along the scale between the producer and the consumer. It is not sufficient to fix retail prices only to the consumer, nor, at the other end of the scale, producers' prices only. It was, therefore, found in practice necessary to fix both the price to the consumer and to the producer, and also the percentage that could be taken by each mid- dleman in handling the commodity. This inevitably resulted in an increased margin between the prime cost obtained by the producer and the price finally paid by the consumer, because all the interme- diaries between the producer and the consumer established their claim to a commission, whereas in practice some or other of them are generally cut out by competition, or have to take a lower toll than that for which they are able to make out a case.
Speaking generally, when a Government has to make a bargain, either with producers about price or with the members of a trade for their services, it fails to get good terms. The accounts of the weaker producers or agents are always put forward, and the price is determined according to their needs and their expenditure. More- over, the parties always deal in terms of round pennies and round shillings, whereas in normal working profit and loss is determined by eighths or sixteenths one way or other.
The main difficulty, however, that besets the control of agricultural prices arises from the alternative nature of the farmer's business. As a rule he has more than one way of disposing of his produce. For example, he may find it more profitable to turn his wheat into food for hens and sell eggs or poultry than to sell the wheat itself. He has the alternative of selling his barley crop or grinding it into meal and feeding pigs with it. His milk can be sold as such or converted into butter, cheese or veal, according to which offers the greatest pros- pect of profit. It therefore follows that for no article of agricultural produce can the price be fixed without reference to the prices ruling for other products which may from the farmer's point of view be alternative. The farmer may even though this is more difficult and acts more slowly vary his method of dealing with the land. For example, at the time when the land was most in need of corn production and the Food Production Department was engaged upon a strenuous campaign to extend the area of arable cultivation, the farmer was able to obtain much greater profits from the production of meat and milk on grass land than from corn upon arable land, because a proper parity had not been established between corn and meat. In fact, the fixing of prices of agricultural produce should be preceded by a scientific examination of all alternative conversions of one product into another which are possible to the farmer. It is possible to con- struct a scale of parity which shall show the price relationship of such diverse articles as hay, corn, meat, milk and milk products. Prices should then be fixed in accordance with this scale of parity, weighting those articles which it is desired to produce in the general interests of the community by giving them a rather better price than the scale of parity would indicate.
The neglect of this principle led to many difficulties and much dis- content in particular cases. For example, in 1918 the prices at which the British farmer was called upon to sell his wheat, oats and bar- ley were a good deal below the prices at which he could buy other
articles of cattle-food on which to feed his stock. The farmer was forbidden to use wheat and barley for stock if it was sound and fit for milling. On the other hand he could buy no feeding-stuffs so cheap, and corn which had been damaged in harvesting or was other- wise unfit for milling purposes was more valuable to the farmer as stock food than the price fixed for sound corn. Inevitably this state of things led both to carelessness in harvesting and storing corn and to a certain amount of evasion of the order forbidding the use of sound corn for feeding stock. That the extent of the evasion was not
Greater was due to the general state of public opinion at the time, ut a more careful consideration of the question of parity of prices would have removed the temptation and resulted in more corn being available for the general public. Another example may be seen in the case of butter. It takes from 23 to 3 gallons of milk to make a pound of butter, yet for various reasons at the time when milk was selling at 2s. a gallon or even higher prices, the price of butter was fixed at 2s. 6d. per pound. The result was the almost complete dis- appearance of home-made butter from the market.
A still more noteworthy example of the difficulties arising from price fixation and the alternative use of products is supplied by the later dealings with milk. Prices of milk were fixed at six monthly in- tervals from 1917 onwards and rose steadily from year to year as the shortage of labour and the cost of feeding-stuffs increased. The prices fixed were without doubt remunerative to the great majority of dairy farmers, as can be judged from the expansion of cow-keep- ing and the abnormal rise in the price of dairy cows. Eventually when whiter prices were fixed in the autumn of 1919 the public defi- nitely revolted and the demand for milk declined all over the coun- try. The season was also such as to produce an unexpected abun- dance of milk. All wholesale milk-supply businesses must possess some alternative means of utilizing milk and generally adopt cheese- making in order to deal with their occasional surpluses. The Minis- try of Food, in its anxiety to encourage winter milk production and yet unable to fix a cheese price in parity with the price of milk, had adopted the expedient of offering an allowance to wholesalers for all cheese made in the autumn months. With the refusal of the public to buy milk freely this cheese grew into quantities altogether beyond anticipation; at the same time the allowance did not make up for the wholesalers' losses on the contracts at maximum prices they had made with farmers. The situation became impossible, and eventu- ally early in 1920 control had to be abandoned, with the result of a general breaking of contracts and a smart fall in price. A system of control of prices which will work well enough and secure even distribution during a period of scarcity lacks any power of adjusting itself to the other situation, which is always liable to arise, of supply outrunning demand. The public sooner or later revolts at the price, whereupon the producer demands from the Government a market as well as a price.
The establishment of fixed prices, by obliterating the variations which under normal conditions meet variations in quality, causes the deterioration of the general average of quality. Various exam- ples were seen of this operation of a flat price. For example, in 1919 the finest grade of Cox's orange pippin apples had to be sold at prices below that which they normally obtained in pre-war times, because the maximum price for dessert apples, high as it was in comparison to pre-war prices, still made no allowance for the choicest grades. Nor is it possible under such conditions to remove these special articles from the control. If there are two prices the retailer immediately removes the whole of his wares into the higher category and the consumer is faced with the alternative of paying the higher price or going without.
Another example of the effect of the flat rate of price might be seen in the general deterioration of quality of all kinds of cheese made during the war years. The producer could get no higher price for fine quality, and since storage and therefore the development of flavour is inevitably accompanied by loss of weight, the cheese was sold as quickly as possible without regard to its quality. Again, the fixing of a flat rate of price for mutton and lamb of all kinds resulted in a great diminution in the number of sheep kept upon the arable land, like the South Downs and the Hampshire Downs. These flocks derive their returns chiefly from the sale of lamb at comparatively high prices, but when the extra price for lamb was unobtainable with their more expensive methods of production they became unprofitable. Between 1913 and 1919 the numbers of sheep in England and Wales taken as a whole declined by 11-7%, but the flocks in predominantly arable counties like Hampshire, Wilts and West Sussex lost about 40 % of their sheep. The decline in sheep fell in the main upon the arable land sheep because they could no longer obtain the normal differential prices for their output. One general conclusion may be drawn from the operations of controls during the later years of the war, a conclusion strength- ened by a consideration of the parallel events in Germany and France where the pressure was greater that State action has very little power to compel agriculturists to conduct their businesses along lines contrary to the interests or traditions of the farmers themselves.
For example, numerous orders and regulations were promul- gated from 1914 onwards forbidding the slaughter^ calves, even
