HOW MARKETS AFFECT RURAL COMMUNITIES
We have already observed the influence of transportation and the growth
of markets in revolutionizing the self-sufficient farming of the pioneer
and the industrial self-dependency of the isolated community, but we
must give further consideration to the influence of markets on rural
community life, for the world is now facing problems of the readjustment
of its whole economic system which necessitate a better understanding by
the farmer of his dependence on markets and by urban populations of
their dependence upon the raw materials produced by the farm, if the
mechanism of our complex modern civilization is to be maintained. These
relations involve the largest questions of the interdependence of
industries and of national and international policy in relation thereto,
and we can but call attention to some of the more fundamental principles
involved. An understanding of some of the elementary principles of
agricultural economy in relation to national and international economy
by the masses of our farmers, but particularly by their local leaders,
is essential to any permanent progress not only of agriculture, but of
industry and commerce.
Before the time of railroads when rural communities were isolated from
the few cities situated on the seaboard and along the larger waterways,
there was little incentive for the inland farmer to raise more than he
needed for the use of his own family. As a result there was inefficient
farming and a low standard of living.[25] Railroad transportation made
it possible for the farmer to send his products to the existing markets
and so made it an object for him to produce a surplus, but, more
important, it also made possible the rapid growth of numerous industrial
and commercial centers and so was directly responsible for the creation
of new and growing markets. Steam power, the use of coal, and the
economies of the factory system made it possible to manufacture in large
city factories many articles previously produced in the farmer's home or
in the village centers. Thus a division of labor was effected which was
profitable to all parties; the growth of industrial populations gave the
farmer a market for his produce, and in turn he was able to purchase
from the city many goods previously unknown to the farm--fertilizers,
agricultural machinery, factory-made clothing, furniture, and other
factory products too numerous to mention. Furthermore, transportation
and reasonably stable government made possible the growth of
international commerce so that the markets of many staple farm products
became practically world-wide and a division of labor arose between
certain nations. England and Germany are dependent on other countries
for a considerable part of their food supplies and raw materials, while
certain agricultural countries depend on them for manufactured goods.
The point which must ever be borne in mind in considering the relation
of rural and urban communities is their interdependence; that the
development both of modern industrial centers and of modern agriculture
and the higher standards of living on American farms, have been due to
an exchange of commodities and services which was mutually
advantageous. Without the growth of markets our farms would still be
self-sufficing, but they would lack the many comforts and cultural
advantages which they now enjoy, and this rise in the farmer's standard
of living has stimulated further growth of industry and so made better
markets.
These considerations are particularly pertinent at the present time of
agricultural and business depression. The present position of American
agriculture, and its lack of buying power in our markets, has been
largely due to the fact that Europe has heretofore furnished an open
market for our surplus agricultural products. To-day Europe is unable to
purchase this surplus. The cause seems to be chiefly an economic
paralysis resulting from the political interference by the tariff walls
of newly-created states with the established economic relations of
agricultural areas and manufacturing centers, and an unwillingness of
the farmer to do business with a currency so debased that its value is
highly problematical. So we see the great city of Vienna,[26] once one
of the gayest and most brilliant capitals of Europe, now reduced to
destitution, and the cities not only of Russia but of Germany being
forced to revert to the ancient system of barter in order to secure
adequate food.
The ultimate dependence of all cities upon the farms and mines is to-day
exemplified in Europe with such appalling tragedy, that even the smug
isolation of the American farmer and the American business man is broken
down, not only by human sympathy but by the necessity of a better
adjustment of their own economic system to the world crisis from which
they are unable to escape.
This shift of control from the city to the country has been powerfully
portrayed by Norman Angell:
"Moreover, the problem (of feeding Great Britain) is
affected by what is perhaps the most important economic
change in the world since the industrial revolution, namely
the alteration in the ratio of the exchange value of
manufacture and food--the shift over of advantage in
exchange from the side of the industrialist and manufacturer
to the side of the producer of food."[27]
"Before the War the towns of Europe were the luxurious and
opulent centers; the rural districts were comparatively
poor. To-day it is the cities of the continent that are
half-starved or famine-stricken, while the farms are
well-fed and relatively opulent. In Russia, Poland, Hungary,
Germany, Austria; the cities perish but the peasants for the
most part have a sufficiency. The cities are finding that
with the breakdown of the old stability--of the transport
and credit systems particularly--they cannot obtain food
from the farmers. This process which we now see at work on
the continent is in fact the reverse of our historical
development."[28]
But although the farmer may have sufficient food for the time--though in
Russia millions are starving, due in considerable measure to the
economic and political chaos of the nation--yet if this reverse process
should go on, rural civilization would be reduced to that of former
generations, and its advance would be possible only when the industries
which furnish its material basis were revived and confidence in the
medium of exchange were again established. The city owes its existence
to the farm, but without the city the farm would go back to the hoe and
the sickle and the "age of homespun."
I am not seeking to justify the modern city, for its economic and social
weaknesses are ever increasingly apparent, but it is important that we
fully realize the fact that rural progress has been chiefly due to the
goods and services received in exchange from urban markets. We have
already noted the tendency toward specialization in agriculture and its
effect on the rural community, and that specialization has been chiefly
due to markets. One of the chief factors in encouraging specialization
in the growth of certain products by whole communities and sections is
the fact that a larger volume of a given product ensures better
marketing facilities and a better price to the producer as long as the
supply is not in excess of the demand. Where there is a considerable
volume of a certain product, buyers can meet their demands more easily
and are attracted to it, whereas a small lot of howsoever good a product
must seek a buyer. Freight rates are reduced, damage in transit is
reduced, and better transportation is secured in carload and trainload
than in small shipments. The middleman's charges are less if he is
assured a considerable volume of business. Thus specialization makes
possible a more effective system of marketing than is possible with
indiscriminate production.
Not only must there be sufficient volume of a given product, but it must
be so standardized with regard to varieties, grade and quantities or
packages that the reputation of the goods may be established in the
market. In order to secure uniformity it has been found necessary to
standardize varieties and to grow a few well-known varieties of a given
product which are best adapted to local conditions and to the market,
rather than a number of varieties, as might be feasible if they were all
sold directly on the local market.
Uniformity of grading and packing is also essential to establish a
reputation on the market. A concern like the California Fruit Growers'
Exchange cannot afford to spend half a million dollars a year in
advertising unless it knows that its product will be as advertised, for
advertising an unreliable product may secure temporary sales, but will
hardly be a profitable investment, for the value of advertising an
honest product is cumulative. To secure necessary uniformity of grading
and packing it has been found necessary with almost all agricultural
products to have the grading and packing done at a central establishment
rather than on the farm. For even assuming the honesty and good intent
of the farmer, the standards and skill of different farmers will vary to
such an extent that uniformity is impossible. Uniformity of grade and
package must be secured at some stage of the process of marketing before
the goods are bought by the retailer. Until recently much of this
service has been performed by the commission men at the central markets,
who have taken what was shipped to them or what their agents purchased
and graded it to meet the demands of the trade, and who, of course, had
to charge for their services. It has been found more profitable with
most products to have the grading and packing done as near to the farm
as is possible to secure a sufficient volume of business for the
enterprise. Thus we have local packing houses for fruits, potatoes,
poultry products, grain elevators, etc., usually located at the point of
primary shipment. These local plants, as well as local creameries,
canneries, and other agricultural factories and storage plants, become
community institutions as they meet the needs of the farmers within the
areas tributary to the centers where they are located. It is true, of
course, that many of these plants are located in the open country or at
mere railroad stations, and that many of them draw their patronage from
several communities; yet more commonly than otherwise they are located
at village centers and serve the areas tributary to them. With the
advent of good roads and motor trucks, the areas served by such
establishments will tend to become larger, but there are many local
circumstances which will tend to limit the process of centralization.
Whether these plants are operated by private individuals, by stock
companies, or by cooperative associations of the producers, they are
essential to an effective marketing system and may greatly strengthen
community life. If, however, there be two or three elevators in a little
village, each operated for profit by a private owner, where all the
business could be more economically handled by one concern and where the
competition creates friction and suspicion, then like the rivalry
between an excessive number of churches, they tend to divide the
community.
Students of marketing problems seem agreed that better marketing systems
will benefit the farmer through greater efficiency which will reduce the
costs of the process rather than through greater profits from higher
prices, and that in many lines the largest improvement is possible in
the grading, packing, and shipping from the local station. This being
the case, it seems obvious that the solution of the marketing problem
will increasingly depend upon community action.
Better transportation and storage facilities tend to stabilize prices
over large areas and to give the larger markets increasing advantage in
bargaining for the farmer's products. Not that there is any concerted
action upon the part of the buyers to take an undue advantage of the
farmer, for there is usually keen competition between them, but
inevitably the "centralization" of the buying power of the larger
markets makes it possible for them to very largely determine the price,
just as the large employers of labor can to a considerable extent
determine the wages they will pay if labor is unorganized; for whenever
there is a surplus the individual farmer must sell, while the buyer can,
within limits, purchase where or from whom he chooses. Thus for the same
reason that labor is forced to organize trade unions to maintain its
wages and working conditions, farmers are forced to organize to market
their products together and to bargain collectively for their price.
This is the outstanding agricultural movement of the past decade and at
the present time is so successfully challenging the established system
of marketing as to command national attention. The success of such a
movement depends primarily upon the solidarity and efficiency of the
local units, so that collective bargaining requires the organization of
the agricultural community into selling associations for its various
products. The whole process encourages the economic organization of the
rural community and heightens community consciousness through the effort
of its members to defend their common economic interests.
The method of collective selling may vary, but in practice the
cooperative selling association has proven the most satisfactory and
will be discussed in the following chapter.
When the most successful farmers on the best land in Illinois lose
twenty-five cents on every bushel of corn they raised, as was the case
in 1921, and when it is easier for isolated farmers in Kansas to burn
corn than to buy coal at the prices current, while at the same time
millions of innocent women and children are starving in Europe, it seems
evident that the complex system of marketing upon which modern industry
and civilization has depended, is pretty well out of gear and that
national and international questions must be wisely solved before it can
again function. Yet in last analysis the solution of the complex
problems of marketing rests not alone with international treaties, but
with the farmers' selling associations of the rural communities. If we
are to have a marketing system which is truly functional, which is built
on the principle of the greatest service at the lowest cost, rather than
on the principle now implicit in business of sufficient service to
secure the maximum of profit which the traffic will bear, then it must
be a cooperative system, the primary unit of which is the local
cooperative association, whose success depends upon the loyalty of its
members to the cooperative principle. So cooperation is a community
problem.
Nor can we expect marked progress in other phases of rural life as long
as the economic question is acute. It is not true that economic
prosperity in agriculture will of itself ensure the higher culture of
the countryside; but it is true that so long as the farmer is compelled
to devote all of his strength and time to making a competence for his
family, that his attention must necessarily be fixed on economic ends
and that he will have neither the means nor the time for those
satisfactions of life which are possible to one with some leisure. Says
"A.E.": "I believe the fading hold the heavens have over the world is
due to the neglect of the economic basis of spiritual life. What
profound spiritual life can there be when the social order almost forces
men to battle with each other for the means of existence?"[29] For weal
or woe the material existence of both farmer and townman throughout the
civilized world is inextricably inter-dependent. If a better economic
system is to arise it must come through the general understanding of
these relations by the education of all parties and by a willingness to
find satisfaction in the well-being of all rather than in the largest
individual profit. Unless these attitudes can be established in the
local community, how can we expect to secure harmony of interests among
larger groups? Loyalty to the common good must first be developed in the
local community among neighbors.
In subsequent chapters we shall have occasion to consider various forces
and methods for creating this spirit of community, and we shall see that
whereas the higher culture of rural life awaits a better economic
system, this spirit of loyalty which is essential for cooperative
organizations may be developed through various forms of community
activity.
FOOTNOTES:
[25] See Percy Wells Bidwell, "Rural Economy in New England at the
Beginning of the Nineteenth Century." Trans. Comm. Acad. Arts and Sci.,
Vol. 20, p. 253, 1916; and E. G. Nourse, "Agricultural Economics," p.
65.
[26] See the account of Mr. A. G. Gardiner, _Manchester Guardian_,
Weekly Edition, Feb. 6, 1920, quoted by Norman Angell in "The Fruits of
Victory," p. 27: "Suddenly all this elaborate structure of economic life
was swept away. Vienna, instead of being the vital center of fifty
millions of people, finds itself a derelict city, with a province of six
millions. It is cut off from its coal supplies, from its food supplies,
from its factories, from everything that means existence. It is
enveloped by tariff walls."
[27] "The Fruits of Victory," p. 12, New York, 1921.
[28] _Ibid._, p. 14.
[29] (George William Russell), "The National Being," p. 167.