A TWO-SIDED BARGAIN

Evening Post, Volume CX, Issue 37, 12 August 1930, Page 8

A TWO-SIDED BARGAIN

When the Prime Minister said that he would be interested to hear the proposals for bulk purchase and stabilisation, he said as much as it was safe for him to say. Naturally. Mr. Holland and his followers favoured the proposal more strongly, for it is the British Labour Government's alternative to those fiscal preferences which it dare not give while it has a free-trade Chancellor of the Exchequer. It would be unwise to condemn the idea until it has been expounded more fully; but it may be said at once that it is not a system which will confer one-sided benefits. "Stabilisation" is a blessed word for producers who interpret it in a time of low prices,* as an assurance of fixed returns on the former high level. But if the staple prices were to be set at the present level what would be their opinion? Stability is difficult to attain at the start, because it means artificiality —such a position as we have in New Zealand at present, with wheat prices maintained at the expense of the consumer far above the world figure. Such fixation involves sacrifice by producer .and consumer at different times. If the world production of butter be high, for example, the British consumer, who is committed to a bulk purchase plan, must forego the advantage of a reduction in price. If the production is low, the New Zealand producer must forego the advantage which he would gain in a free market. Whatever the circumstances there would be complaints, for world production of foodstuffs cannot be regulated, even by Labour Governments. Some members of the House appeared to be of the opinion yesterday that the scheme could be made to benefit both producer and con* sumer "by the elimination of the middleman." Blessed words again. But who is the middleman? He is to be found in every walk of life, and he is there as merchant, retailer, and general ■ distributor, not because a benevolent community allows him to take a parasitical profit, but because the community has not yet found a cheaper way of securing the service he performs. We all rail against the middleman from lime to time. When we hear the warehouse price of an article we say: "Fancy the shopkeeper taking 25 or 50 per cent.! But the warehouse would require the same profit if it were to sell in small lots instead of ciozens, to establish numerous sale depots in convenient positions, and take all the risks of small credit accounts. Similarly with the middlemen who handle butter, cheese, meat, and other produce lines. They buy and sell in big lots. They take the risks of the market, and if they sometimes make profits they also make losses. New Zealand producers do not talk of the middleman too much when they find, as they did not many seasons ago, that he had bought their produce nt a price for which he cannot recoup himself on a falling market. The distribution must lie undertaken by someone. Is il: supposed that a Government Depart-

meni, subject maybe to pressure from various quarters, will do it more economically and more wisely than the men who have the experience of a lifetime-to guide them? We do not say that from time to time trusts and combinations may not arise which wili for a while enrich their members and play havoc with the law of supply and demand. But it has been found that even a trust, if it be greedy, will be challenged by another combination. It is wholly fallacious to assume that for any considerable period combinations can control markets unreasonably. It is equally fallacious to suggest that the producer and consumer are regularly robbed by the speculator. The average merchant is not more speculative than he is compelled to be. He buys on the best information he can obtain, and he prefers a steady, reasonable profit rather than a run of big gains and big losses. Taking a broad view, the speculator in commodities does not grow rich at the expense of the community any more than the speculator on the totalisator grows rich at the expense of the machine. There is a certain cost to be paid for the service of distribution, and this must be paid no matter who performs the service. The elimination of the middleman might lead to saving the fraction wasted in speculative operations, but it might lead also to less efficiency and enterprise in distribution.