1 MARCH 1930, Page 6

Prosperity Without Protection

Rationalize Markets—II

APREVIOUS article suggested that if rationalization, now so commonly invoked as the remedy for unemployment and depression, is to avoid the perhaps insuperable difficulty of creating what might otherwise be at first more unemployment than ever, the emphasis of effort must be thrown on the rationalization of the marketing rather than on the production end, by schemes which secure more stabilized prices, some adjustment of production to consumption, and some nullification of tariff barriers by arrangements about prices and the sharing of markets like those made by one or two of the great international cartels.

But the article concluded with the warning that if marketing rationalization was conceived merely or mainly as a price-fixing, quota-arranging, sales-rationing, monopoly-creating device, it would ultimately, like Protection, defeat its own ends. It will succeed only so far as it is a means to new markets, viz., enlarged consumption, capable of keeping pace with enlarged production.

New markets do not necessarily mean foreign markets. They may arise as fruitfully from an increased con- sumption at home. Such increase obviously can only come to a limited extent from mere salesmanship in the sense in which that term is generally used. You cannot go on selling goods to a man unless he is earning money- i.e., is, in his turn, producing something, something which is needed, which can be sold. Salesmanship, in the sense of persuasion directed 'solely at inducing people to spend incomes already inadequate, will not carry us very far. And that is as true in respect of foreign as of home trade. If expansion in foreign trade is to mean merely transferring, by improved selling technique, sales made heretofore by, say, Germans, to sales by ourselves, the permanent results will be disappointing. For the Germans will have less money to spend, either with us or with other people. In either case, it will mean ultimately a loss of trade for us to balance against the trade won. We shall grasp neither the nature nor the possibilities of the problem if we conceive of world trade as something fixed and limited in amount, so that what one gets another loses. It would be truer to conceive of industry as the production of things, the possession of which furnishes the buyer the means of paying for them, as a tractor, by bringing into existence food which could not be produced otherwise, may enable the purchaser to pay for it—with food which ultimately feeds those who made the tractor.

The organization of the market, of consumption, means the making of innumerable contacts of that nature ; discovering all possible combinations by which the purchase of A's products by B so increases the latter's productivity, that he is able to pay for them. This increased productivity may, of course, take the form of the better cultivation of the soil or the better filling of teeth ; a better method -a typing letters, a business mind made more alert by better amusements ; a working population made more efficient by better edu- cation or better housing.

The kind of technique which industry needs to develop was indicated by a story which Mr. Norman Angell told a year or two ago in the pages of the Spectator. He related how his efforts to secure certain simple appliances for the purposes of farm development had failed, and how, in consequence, a given piece of British soil did not employ and feed the British town workers who would have made the appliances ; and compared this failure of co-ordination between producer and consumer with certain developments in American industry. He related how in America the metal industries had found an entirely. new market for their wares by co-operating in• a campaign of education to make more widely known the fact that metal could be advantageously substituted for wood, not alone in constructional work but on the farm and in such things as ceilings, window frames, shelving for warehouses, furniture of all kinds, and other appliances. The American public had not easily and " naturally " taken to the use of metal in these particulars, but had been . systematically educated by the metal industries themselves. In order to develop this new home market those industries had (1) levied upon themselves a toll for the purpose of maintaining an educational campaign bringing home to the public (the architect, the builder, the warehouseman, the shopkeeper, the office man, the housewife) the way in which recent industrial improve- ments and inventions could render their work more efficient. Furthermore, the industry had (2) agreed upon certain standardizations so that, for instance, the warehouseman using metal shelving could always buy new ,shelving, supports, bolts, &c., in standard sizes, thus making the products of one factory interchangeable with those of another, securing the economies of mass production and, so, exceedingly low prices.

The significance of that story lay in its sequel, Upon his return to England—this was some, years ago—Mr. Angell went to the managing director of one of the greatest iron and steel concerns in Britain and urged that British industry ought to develop more systematically this particular technique of creating consumers by teaching them how certain products could so improve the purchaser's efficiency, as to pay for themselves, suggesting a number of ways in which the. principle could be applied. Among them was the application of the telephone to the farm in such a way that there might be direct contact between certain types of farm and certain types of buyer, cutting out middlemen ; a combined move by interested firms, for dividing up the job of thoroughly modernizing English hotels by persuading the hotelier to substitute for the hand basin and the freezing room a standardized central heating, running water systems, &c. ; the persuasion of municipalities in certain cases to undertake what American cities in considerable numbers are now undertaking, the distribu- tion of hot water and steam heating from a common municipal centre, as gas and electricity are distributed. With an extent of orders for piping, light castings and other material, such as work on that scale would involve, prices would be cut enormously, especially as sections of the iron and steel industry would with such markets assured be able to undergo rationalization. The pre- arranged expansion of markets would prevent reduced employment as the result of rationalization. The prospect then would not be one of producing the same quantity with fewer men, but one of producing • the greater quantity with the same or more men, getting that greater quantity sold, and raising the standard of life.

• In reply to proposals along those lines, he was told by the director in question that nothing would ever induce British industrialists to come together for this sort of co-operative action to the degree to which American industrialists had .done ; that the Englishman simply would not lend himself to that type. of team- work, and that it was no use even suggesting it. (We need not concern ourselves here with the particular American examples cited, standardized central heating, &c. It is the underlying idea which we wish to emphasize.) But fortunately, as we know, this particular industrialist was too pessimistic. National characteristics are not im- mutable. People can change their habits, and even the individualist and conservative English industrialist is beginning to change his. But the process of adaptation to new conditions needs acceleration. If, indeed, it is true, as some still suggest, that British industry is incapable of unification even in the limited sphere of marketing, then we may be sure that Governments will be pushed to do for industry what it cannot do for itself. But common action for the expansion of markets should come from industry itself. British industry might establish a Home Marketing Board as a supplement to its Empire Marketing Board ; set out to educate the public— which means, of course, other industries, the business man, the farmer, the municipality, the housewife—in the more rapid adoption of the new methods and new instruments which British industry can provide.

It is not possible, within the limits of an article like this, to develop in detail how this general principle of creating the contact between the consumer and the producer might be enormously accelerated by what has been called here " the rationalization of the market." The first emphasis should be at this end, for experience has shown that once the market is assured, industry can, as a rule, be depended upon to expand production to meet increased demands.

Before we can talk of Empire rationalization we must have national rationalization. And having that, the Empire would not desire to limit its markets by refusing to enter into international agreements. Lord Aber- conway has described the coal industry as already beginning to make a move in this direction. In this matter the nation, the Empire and the world are not rival units. They are in an ultimate sense, or can be made, complementary and co-operative to the enormous advantage of all alike.

If, therefore, we must have a policy which the man-in-the-street can readily grasp and encourage his rulers to pursue in this matter, that policy might be described as " rationalization of the markets first."