(C) THE CONSUMER'S RESPONSIBILITY.

50. We have stated that by exercising the right of discrimination as between retailer and retailer, consumers can appreciably assist themselves in present circumstances. So long as they refrain from doing so they must accept a measure of responsibility for high retail charges. Consumers should also realise that their ever-increasing demands for comfort, convenience and service are largely responsible for the high costs of retail distribution to-day. The retailing of food from a large number of establishments is, in any event, an extravagant method of distribution compared with, say, the system of municipal retail markets existing in many countries abroad; but it is a system which has grown up in response to the consumer's demand. Instead of purchasing a large proportion of her requirements from one centre, as is the case, for example, in Italy and France, and carrying home her purchases herself, the British housewife deals with a large number of tradesmen, each of whom has his own overhead charges, and, to meet the convenience of the consumer, has to extend deliveries of small parcels over a wide area. Notable instances of the costliness of this system have been given to us in evidence. One Consumers' Co-operative Society delivers quantities of milk as small as a quarter of a pint, twice a day, to customers in a working-class district, the roundsmen being often required to ascend several flights of stairs to deliver these small quantities to various tenements. The system of extending credit to consumers is also extravagant and costly. The entries in the suppliers' books are small, and the proportion of bad debts is large. The practice of calling for orders in other distributive trades is a further charge against the unit of commodity sold.

51. It is true that these practices were common before the war, and that they cannot, therefore, be held to account for the whole of the difference between pre-war and post-war margins. Nevertheless, consumers should realise that such conveniences as delivery and calling for orders, consisting largely, as they do, of labour and personal services, are relatively far more costly to the retailer than in pre-war days. Indeed, as we have shown, labour in the distributive trades has generally been able to win for itself in the post-war world an increased wage out of proportion to the present increase in the cost of living. The wage may or may not be more than sufficient, but it is clear that consumers who insist on extensive service must be prepared to pay increased prices accordingly.

52. It must also be borne in mind that the concentration of shopping in certain busy hours of the day and busy days of the week, necessitates the employment by retailers of larger staffs and the provision of more facilities and organisation generally than would be necessary if trade were more evenly distributed. Again, it is a known fact that many consumers feel a sense of

prestige in dealing with retailers who display their goods spaciously and with extravagant furnishings and fittings. This encourages traders to embark on much unnecessary expenditure, while the consumers concerned do not always realise that, however agreeable such an environment may be, it has to be paid for out of the price of the commodities sold.

53. In our interim reports we have shown that retailing is the most expensive stage in the distributive process and that the principal reason is the numerous and varied services which the retailer performs. It is clear, therefore, that if consumers wish to effect a reduction in the cost of retailing it rests, in the first instance, largely with themselves to reduce the nature and extent of the services they demand. Municipal retail markets, to which we have referred, would admittedly afford consumers an opportunity of buying their food more cheaply. The retail dealers who operate in such markets abroad can sell at favourable prices because they are in a position to combine for the purchase of bulk supplies at low cost, they do not normally undertake delivery, they sell for cash, they have no bad debts and their general overhead charges are low. If, therefore, a sufficiently large body of consumers in any locality in this country are prepared to return to more simple methods of purchasing their requirements and to incur the extra trouble and expense of conveying their purchases home, and if adequate support appears likely to be given to it, there would seem to be a case for the establishment of a retail market under municipal auspices. The daily delivery of supplies direct from the farms to the market, if it can be arranged, should bring about a still more considerable reduction in retail prices, while at the same time yielding improved returns to producers. The system is, in any event, essentially more suited to provincial towns than to London and other large cities We are too sceptical of the willingness of consumers generally to dispense for any length of time with the advantages of the existing distributive machinery to feel other than the gravest doubts of the practicability of introducing the system of municipal retail markets in this country at the present time. Nevertheless, it is consumers who would have to make the sacrifice of comfort and convenience which is entailed, and it is for consumers to decide whether the proposal is worth while.

VIII.-CO-OPERATION.

54. We have shown that the consumer can, if he so desires, take effective steps in the direction of reducing the costs of retail distribution. It is for consideration what action, if any, can usefully be taken by the farmer at the other end of the distributive chain in order similarly to improve his position. One expedient which farmers have for years been urged to adopt with this end in view is co-operative marketing. In our interim reports we have examined the progress that has been made in

the organisation of producers on a co-operative basis for the disposal of the particular groups of commodities with which our reports have been more immediately concerned. We have found that success has been far from uniform, that set-backs have been frequent and that progress, as a result, has been halting and slow. Nevertheless, there has been progress, and, differentiating between principle and practice, we have expressed our general opinion that the co-operative organisation of farmers on the right lines and in the right places should be encouraged.

(A) THE CASE FOR CO-OPERATION.

55. Organisation for business purposes characterises every large undertaking except agriculture, and there is a growing tendency to take advantage of modern developments of intercommunication and transport. Manufacturing firms are paying increasing attention to the evolution of methods of trading designed to reduce the number of the stages through which their goods pass from the factory to the buying public, and in many cases are combining to create their own specialist selling organisations for the purpose. In a number of other cases, the larger concerns are undertaking their own distribution. With agriculture, the conditions are fundamentally different from those obtaining in more highly organised businesses. It is true that many producers dispose of their produce direct to local consumers, but the greater part of the produce raised in this country is still handled by one or more intermediaries. Moreover, not only does small-scale production predominate, but farmers, as a whole, produce a wide variety of commodities, each having to be marketed through different agencies and handled by a different group of intermediaries. It is only when farmers specialise in the production of particular products or groups of products that they approach to a community of business interest comparable to that of the large industries. Under such conditions the producers concerned do face kindred questions of production, transportation, distribution and general trading policy. As a natural result, co-operation, both in this country and abroad, has been more extensively developed among specialist milk-producers, egg-producers, fruit-growers and stock-feeders, for example, than among producers whose interests are more diffuse.

56. The application of co-operative organisation to farming generally is, indeed, far less straightforward and simple than is popularly supposed. An added difficulty is the independence of the farmer himself, who, by tradition and environment, is accustomed to depend on his own efforts. The British farmer is intensely individualistic. He does not willingly surrender his own judgment or delegate his authority to others. He is primarily concerned with production, and, though usually a keen business man, he shows little inclination to associate with others in largescale groups to employ the skill and talent necessary to enable

him to compete effectively with imported supplies. The result is that farmers tend to compete with one another, and thus depress the price of their own produce without affecting materially the position of their overseas competitors who, in the market, combine to function more and more as a limited number of largescale trading units. The farmer stands alone at the end of a long line of distributive agencies. As an individual, his position as a seller is inherently weak. His economic relations with the community in general grow gradually more and more complex. His isolation is rapidly vanishing. He can no longer ignore the forces which surround him; he cannot dissociate himself, if he will.

57. Co-operation is a concrete expression of the associative spirit which circumstances appear to demand. By its means producers may undertake the whole or part of the distributive processes, or it may not extend beyond the first sale of their crops. In the former case, producers aim at providing services better and more complete than those rendered by the middleman. Not least of the functions of co-operation in such cases is that of suggesting to the producer the types of goods to produce, and advising him how they may best be prepared for market. At present these functions are performed only indirectly by middlemen, through the prices they are prepared to pay. At the same time by carrying co-operation into the sphere of distribution, producers hope to improve their returns by the extent of the profits of the middleman. The middleman, however, is an experienced specialist who is already in the field and not likely to surrender his living without a struggle. Farmers' organisations seeking to displace him must, therefore, be in a position to improve on the efficiency of his service. Though they may push their sales with all the energy of self-interest, they are confronted, even at the first stage, with well-organised and skilful wholesale traders who, as a general rule, perform their functions on relatively small margins. The task of such organisations, therefore, is not lightly to be assumed; on the other hand, it is not impossible of achievement.

58. Where co-operation does not extend beyond the first sale of produce the effect is to graft on to the existing distributive machinery the producer's own organisation for sale, and by thus introducing a selling agency for handling the farmer's produce, in effect adds another link to the distributive chain It should ensure for him the full advantage of bulk transportation, grading, packing and sale, and of the wide and specialist knowledge of market conditions and requirements which it is the business of such an organisation to acquire. Existing intermediaries are not necessarily displaced. The producer merely strengthens his position as a seller. There are many who hold the view that this is as far as co-operative marketing can usefully go.

59. We have not considered in detail the co-operation of farmers for the purchase of their requirements as the question is one which lies outside our terms of reference. It is, however, a phase of co-operation which is frequently undertaken by marketing societies as the natural counterpart of their selling activities. Co-operation for the purchase of supplies is primarily designed to secure for the farmer the advantages of purchase in bulk and the lower traffic rates on large consignments.

60. The case for co-operation generally has been argued many times. We do not propose to discuss it more fully here. It must be realised, however, that there is no particular quality, virtue, or magic in co-operation which will enable it to succeed without the application of the same sound business principles as are essential to the stability and success of private enterprises.

(B) THE CAUSES OF PAST FAILURES.

61. From a legal standpoint, agricultural co-operation in this country implies an organisation of producers, registered under the Industrial and Provident Societies Acts, whereby not only is the share-capital limited to a maximum holding of 2001. per member, but interest on the share-capital itself is also limited, surplus profits being divided among members in proportion to their dealings with the Society. This procedure distinguishes co-operative societies, as such, from private enterprises or companies in which business is carried on primarily for the benefit of the actual proprietors of the concern, or the shareholders as the case may be, in proportion to their capital holdings. An important advantage of registration under the Industrial and Provident Societies Acts is to secure that the future management of the undertaking shall be carried on in accordance with the principles embodied in those Acts.

62. A more detailed statement of co-operation gives the following as the essential features of a co-operative society operating under the Acts :

(1) The total amount of issued capital is not limited.

(2) As much of the capital as possible should be subscribed by those who trade through the Society.

(3) Interest on capital should be limited to a reasonable amount (say 5 per cent.).

(4) A reserve fund should be provided for.

(5) Members should have an equal voice in management. (6) The balance of profits, after meeting interest on capital, placing a certain amount to reserve, &c., should be returned to members in proportion to the business they do with the Society, thus affording an inducement to members to give the Society support.