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In some foreign lands the promoter is required to put forth his prospectus in printed form, and is then held civilly and criminally liable for all statements therein. Such a "Blue Sky Law" in this country would doubtless save the farmer from being victimized on many an occasion.

The question is still unsolved, however, of coöperation and combine, on the one hand, versus competition on the other hand.

QUESTIONS ON THE TEXT

1. Show briefly the increase in use of labor saving machinery. Cite concrete examples-the Georgia planter; M. F. Greeley's testimony.

2. Show increase in value of agricultural machinery per acre.

3. Show how this machinery lowers cost of production (figures for corn, hay, wheat).

4. Show in what sense agriculture is now "capitalistic."

5. Explain the probable effects of a greatly increased production.

6. Show the change, during the last hundred years, in the method of obtaining tillage tools. This change has brought forth what economic and social problems? State briefly different schemes used by farmers for improving the methods of obtaining tillage tools? What method or methods prevail to-day?

7. Give the history of the International Harvester Company.

8. Cite the six advantages in manufacturing and distributing farm implements claimed by this Company.

9. Cite the objections to this form of manufacturing and distributing, formulated by the Government in its suit against this Company.

10. What, in brief, is the issue involved?

11. Give the history of the Independent Harvester Company, and show what economic and social problems were involved.

QUESTIONS SUGGESTED BY THE TEXT

1. Show relation of increased production to an increase in rent; to a decrease in rent. Formulate a rule governing this relationship.

2. What would be the ideal method for farmers to obtain their tillage tools? 3. Should combines among manufacturers of tillage tools be prohibited or encouraged? Reasons for your answer.

4. State chief reasons for combines among farmers ("coöperative associations") for large-scale dealings. Do these same reasons apply to others than farmers? Reasons for your answer.

5. Should "all combinations" be prohibited? Should some combinations be prohibited? Formulate a rule in the interest of public policy.

REFERENCES

1. Report of the Industrial Commission, Vol. X, Washington, 1898-1902. 2. QUAINTANCE, H. W.: "The Influence of Farm Machinery on Production and Labor." Publications American Economic Association, 3d series, Vol. 5, No. 4, Nov., 1904.

3. Report of the Bureau of Corporations on the International Harvester Company, Washington, 1913.

4. Briefs of the International Harvester Company and of the federal attorneys, in the various suits involving this company.

CHAPTER IX

MARKETING AND THE MIDDLEMAN

Four Steps in Marketing. In recent years the discussion of marketing has taken the form of a crusade against the middleman. However, the so-called "marketing problem," when studied, is found to break up into four separate problems, namely, production, storage, transportation, and credit. In other words, when these four problems are solved, the "middleman problem" will disappear. (1) The production of a good product is the first and most important step in marketing. It is never difficult to sell products of the best grade. The daily market reports and price currents indicate brisk demand at good prices for the better grades of farm products, but, at the same time, the markets are often glutted with poorer grades. To put a high-grade product on the market, particularly if it be inspected and graded and standardized, is to take the first and biggest step in marketing. (2) Storage is a step made necessary with most farm products by reason of their production in the summer time and their consumption at other seasons. These crops accordingly must be stored some place by somebody, and the middleman accordingly usually enters at this point to begin his services. Some highly perishable products show a tremendous shrinkage in storage. Thus the southern sweet potato, needing warm dry storage in winter, shows an annual loss in storage estimated at one hundred million dollars. The white potato of the north, calling for cool, dry winter storage, also shows a heavy waste. Other farm products, such as eggs, poultry, grain, cotton, and so on, all call for particular forms of storage to bridge the gap between time of production and time of consumption. In the last analysis, considering farmers' coöperative storage warehouses, public and private storage warehouses of all kinds, and the consumers' own cellars, the retailer is doubtless the chief storer of food products. The retailer must actually own and store nearly 100 per cent of the food products which the ultimate consumer buys. Here is an important function of the retailer. One investigator has estimated that the annual waste by decay of perishable food products is 40 per cent. (3) Transportation is, next to retailing, the most expensive link in the chain of marketing. And the most expensive phase of transportation is the haul over

STATE MARKETING ACTIVITIES

131 poor country roads before the product reaches the railroad station. Lower freight rates may be brought about by using fleets of motor trucks for short haul business, provided country roads are improved. An enormous leak in railway transportation is due to the shipper himself, namely, the shipping of poorly packaged perishable freight. It is appalling to witness the loss and damage in foodstuffs arriving at big city markets, losses due to shipping in frail containers, or to improper loading of correct containers. (4) Credit is the fourth step in marketing, and is vitally important under our present system of doing business with the smallest possible use of money. We live in a credit age. Credit is a promise to pay money. Farmers' crops go to market shortly after harvest, as a rule, and are paid for in cash-with money borrowed from the banks. Hence credit must carry the crop till it is bought and paid for by the consumer, months later in many cases. It is commonly the middleman or dealer who finances the farmer by securing credit from the bank. For this service a "toll" is charged. If the farmer, in buying his supplies, uses book credit ("charge" account at the store), he is using the most expensive form of credit known.

The reformer of our present market system must successfully solve the four problems named above, if he hopes to displace our present system. Getting the farm products from the producer to the consumer-in the right quantity, of the right quality, at the right time, at the right place (usually his kitchen door) is now carried on by the middleman in a remarkably efficient manner, when you take into consideration the whims and fancies of the consumer, and the more basic fact that consumption is not rational and never can be. (De gustibus non est disputandum-"There is no disputing about tastes.") Let us now turn our attention to the concrete attacks being made on the marketing problem by the various States.

State Marketing Activities.-The year 1915 may be given as the date when the States of the Union began actual marketing activities. The high cost of living in recent years doubtless contributed to this step by the States. The long crusade against the "middleman" may be considered as a further cause for the States undertaking to deal with the marketing problem in a new and somewhat concrete way. A partial survey of the State marketing activities may be considered at this point, before examining the actual costs and services of the middleman.

Most of the States are now undertaking some marketing activity. It is a new field, and they are feeling their way, each

trying its own ideas. Only a few of the typical State systems can be given in any detail here. Among the first States to enter this new field is Idaho.

Idaho. The Idaho law creates the office of markets for the State of Idaho, in charge of a director appointed by the Governor. The law contemplates three chief activities: (1) a free State employment bureau; (2) supervision of land promotion schemes, particularly of misleading advertisements intended for homeseekers; (3) a State market department. The Director in charge of this work, W. C. Scholtz, confined his marketing activities at first largely to community and state-wide problems, working along broad and fundamental lines, leaving the individual work for later consideration. This work may be illustrated by the following two examples.

Dairy Products.-The Director found unsatisfactory conditions prevailing in the dairy industry, despite the State's natural advantages in this field. He founded a butter and cheese scoring organization, thereby leading to a standardized and higher quality of produce. Uniform accounting systems were introduced and likewise coöperative buying of supplies. Along with these activities went a vigorous campaign against the unscrupulous creamery promoter.

Potato Marketing.-The 1915 potato crop was large, in most sections of the country, and prices low. The Director found that Idaho buyers were getting the Idaho crop at from 45 to 50 cents per hundred. He circularized the growers and advised them to hold for higher prices, for 80 cents at least, assuring them that prices would soon rule higher. Within about two weeks the price actually rose to about 80 cents a hundred. It should be stated at this point that the actual forecasting of market prices is rarely undertaken by State marketing officials as part of their official duties.

California's law, passed June 10, 1915, is the one which, without doubt, has been enforced most vigorously of all of the State marketing laws. And California, like New York, has had its market bureau subjected to a torrent of very able and very continuous criticism. Nothing shows more clearly the strength, the weakness, and the limitations of California's market work than this battle of the critics. California's first law created a State Commission Market, so called, under the "management and control of a governing body of one person," known as the State Market Director, appointed by the Governor. The Governor appointed,

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as first Market Director, Harris Weinstock, a man of mature years and wide business experience. A State Senator of California began a fight against the administration of this Act, which battle of words throws much light on the question of correct State policy in engaging in marketing activities. The permanent value of this debate justifies its reproduction, in part, at this time.

"The Senator believes," says the Market Director, "that the end in view can best be achieved by State Markets, the creation of which he contends is made mandatory by this law. I contend, on the other hand, that the best results can be achieved by encouraging producers to keep on producing, by getting more people to produce, by cutting out speculation in farm products and by collective marketing. These things I hold can be best brought about by coöperative organization on the part of producers, rather than by State markets, which under the law are made discretionary on the part of the State Market Director-and not mandatory, as the Senator would have us believe." In other words, self help must not be weakened, but rather strengthened.

The Senator charged the Market Director with organizing the growers into marketing associations, and that these producers' " combines" were oppressing the consumer and increasing the cost of living.

The Market Director admitted having organized the following groups of growers: California Peach Growers; Poultry Producers of Central California; Poultry Producers of Southern California; Associated Milk Producers; Pacific Rice Growers Association; Prune and Apricot Growers; California Associated Olive Growers. The Director denied, however, that such organizations oppressed the consumer. The Director denied that these "combines" raised prices to the consumers. Collective marketing lessens the cost of distribution. The Director, in answering the Senator, claimed that products raised by unorganized farmers, such as onions, potatoes and beans, increased in retail price on the San Francisco market in the two years 1915-1917 one hundred and twenty-six per cent, but that, at the same time, products raised by the organized farmers, such as raisins and dried peaches, decreased in retail price five and one-half per cent. The market is stabilized, says the Director, by the organization of the producers. "While it is in the interest of the speculator in food products," he says "to squeeze out the highest possible price wherever this can be done, regardless of the welfare of the producer or the consumer, farmers' marketing associations are in quite a different position. The

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