29 NOVEMBER 1924, Page 8

THE DEAR FOOD "SCANDAL"

FVERYBODY ought to be grateful to the Morning Post for the way in which it has been investigating " The Dear Food Scandal." Representatives have been sent into all sorts of curious places in the City of London, and have returned with blood-curdling tales of trusts and combines, 200 per cent. profits, and £175,000,000 " excess profits " (whatever they may be) paid annually by the nation. But we, with our readers' permission, should like to turn aside for a moment from the facts of " the scandal," and consider the single fact that there is a " scandal "—that the phenomena of dear food is to-day regarded by everybody as " a scandal." Now, the high cost of any commodity is obviously a hardship to a pur- chaser of limited means (for, of course, the term " dear " has no absolute meaning—a 'thing is only dear if people have insufficient money to buy it : and therefore it is really poverty and not " dear food " or dear anything else which is the scandal ;. but this would take us too far).

But why should the rise of eleven points in the cost of food which has occurred since last June be universally regarded not as an ordinary hardship but as " a scandal " ? Undoubtedly the reason is a generally held belief that the rise has been caused not by any decrease in the World supply relative to the world demand, but by an increase in the number and size of the profits made by the dealers and distributing agents through whose hands the food passes on its way from the producer to the consumer. Now, this belief may be erroneous, correct, or partially correct. That is what a Royal Commission has been set up to decide. But, as in the case of most other popular beliefs, there is a 90 per cent. chance of its being partially erroneous and partially correct. It is fairly clear that prices for agricultural produce have been too low to encourage that increase in production which would probably be justified by the potential demand. Thus some upward tendency in prices was probably both inevitable and desirable. On the other hand, many of the published facts as to the methods of food distribution in this country would in themselves account for almost any rise in the price to the consumer.

The arraignment of the middle-man has been going on ever since the Linlithgow Report at the beginning of the year revealed the wide discrepancies between wholesale and retail prices, and the chaotic state of the distributive mechanism of food in this country. Since then a great number of facts and figures have been published. For instance, the Morning Post tells us that expert opinion agrees that a difference of 50 per cent. between wholesale and retail prices will, in the meat trade, more than cover the expenses of cutting up, distribution and sale. But, at the moment, it seems that from 150 per cent. to 200 per cent. is the usual profit. From these investigations the Morning Post makes the ingenious calculation that the public is paying for its food the sum of £W5,000,000 in " excess profits " each year. " Excess profits " are apparently the difference between the actual profit per cent. being made (if the wholesale price is deducted from the retail) and the profit per cent. which the Morning Post considers adequate for each type of distributor. Perhaps it is hardly to be wondered at that Sir Edmund Vestey, the head of the Union Cold Storage Company, the great combine which has 2,400 retail shops, and last year made a net profit of £446,917, became a little heated when he heard of this calculation, and told the Morning Post's representative to go and cut up a carcass for himself if he thought it so easy ! Then on Monday the Morning Post discovered the case of the English and Dutch Meat Company, Ltd., which on its first year made a profit of £289,687 on an issued capital of £602,572. Or, to take an instance in a stable commodity other than food, we may quote from The Coal Merchant and Shipper of November 15th, 1924 :- " The main cause of the quietness in the retail market is the extremely unsettled weather which is being experienced ; a long spell of cold weather will, however, greatly improve matters, but, unfortunately, that is a waiting matter. 'When, however, the volume of orders has increased to appreciable dimensions, a revision of prices to the public will come forward ; this increase is now con- siderably overdue. The first opportunity which presents itself will, however, be taken, and that will be when wintry weather is prevalent."

On November 8th the same journal remarked :— " Domestic fuel of all other descriptions is in plentiful supply at the depots. The demand for these fuels is very limited indeed. Collieries are having to curtail their output by working shoat time."

Note that the rise which we are to expect in coal prices will have nothing to do with shortage of supply, but will be " when wintry weather is prevalent " and " the first opportunity for a revision of prices to the public " will have come. We give these few examples to show that even without waiting for the Report of the Royal Com- mission we may hazard the guess that the public's sus- - . . Felons are not altogether ill-founded. Let us, then, assume for a moment that some, at any rate, of the rises in food prices may be accounted for by increased profits to middle-men. This is " the scandal." But is it a -scandal ?- Have we the "right-to grow-indignant-because middle-men and firms of distributors exact the largest possible profit for themselves ? Is not this the principle on which all industry is based ? Hai it not been laid down by the great classical economists that in so doing, in following, that is, their own personal interests, they will, in the long run, promote the interests 9f the community as a whole ? Clearly men follow their own interests ' when they combine to fix prices, or more closely to pool their resources and cut down their overhead costs. Therefore, what can be wrong and why are they attacked by, of all newspapers, the Morning Post ? Sir Edmund Vestey has indeed the right to exclaim "Et to Brute I " Yet, as a matter of fact, we all instinctively feel that the Morning Post is right when it throws the light of pub- licity on the whole business. The Post must remember, however, that its whole inquiry is based on an assumption that it might not be prepared to recognize in other spheres of industry and commerce ; and that is that the economic activity of food storage and distribution should be carried on, not in the interest of the shareholders in the distributing companies, but in the interests of the public. It may be objected that these two interests will always in the long run coincide. But can we, in modern con- ditions, when combination has so largely taken the place of competition, be sure that they will coincide ? It is useless to abuse the Trust, the Combine, and the Monopoly. They often provide much more efficient service to the public than that of a number of small competing firms. But we must readjust our economic theory to the new • conditions which they create.