SOME THOUGHTS ON AGRICULTURAL POLICY

128 Journal of Agricultural Economics.

SOME THOUGHTS ON AGRICULTURAL POLICY.*

By E. M. H. LLOYD, C.B., C.M.G.

Let me at the outset underline the title I have chosen. I propose to think aloud on some problems that have a bearing on agricultural policy; but I am not going to try to compete with those whose business it is to propound a long-term policy for agriculture. If I tend to emphasise the economic approach it is not that I wish to suggest that we should ignore political and social considerations. But I think that we shall most of us feel more at home in speculating upon what is economically desirable than on what is politically possible or socially expedient.

The main pegs on which I propose to hang my remarks are the following questions. First, to what extent do we need to expand food production in this country? Second, what pattern of production-in the form of particular crops and livestock products (I am not dealing with horticulture)-seems economically desirable? And third, what policies are best calculated to promote " efficient " production and marketing?

I suppose it is true of agricultural economics, as it is of physics and astronomy, that the more we discover the more we extend the bounds of our ignorance. Perhaps I can claim to have learnt enough to confess that I do not know the answers to these questions; but I have not learnt enough to avoid having opinions and seeking the opinions of those in my audience who know so much more than I do that they hesitate to express a considered judgment. If inevitably I over-simplify the issues, this must be put down to the complexity of the subject, to the need for brevity, and above all to my unfamiliarity with all the technical studies bearing on these questions by members of the Society and others. My excuse must be that your Executive Committee has challenged me to rush in where angels fear to tread-perhaps for fear of treading on someone's corns.

Under the first heading I suggest that we need to ask ourselves whether the time has not come to put into reverse the post-war drive to expand total output of food through maximum production per acre and to concentrate rather on higher net output per man even if it means fewer persons engaged in farming and a smaller gross output. Should not our aim be to reduce the labour and resources now devoted to certain types of food production and to divert' those that can be spared to more profitable uses ?

Historical Background. It has been for so many years a pre-supposition of all discussion of agricultural policy that we need to expand output almost

* Presidential Address to the Agricultural Economics Society, 1956.

Journal of Agricultural Economics. 129

regardless of cost, that some of us find it difficult to think ourselves back into the atmosphere that prevailed after the first world war. In his presidential address to the Society at Cambridge just nine years ago, Sir Francis Floud gave us a vivid picture of what he calls the " Great Betrayal." The Agriculture Act of 1920, which was designed to give guaranteed minimum prices of wheat and oats for four years ahead-the price of wheat at the time was about L20 per ton-was repealed before it came into force; all control of cultivation was withdrawn; and the Agricultural Wages Board recently set up was abolished. In a few months the price of wheat fell by half to L l O per ton and the average wage fell from 45/- to 32/-. The farmers, we are told, lost all confidence in the Government, and said they would have to lay down their land to grass, to dismiss up to 100,000 workers and to reduce wages to 25/- or less. Both tariff protection and subsidies were at the time regarded by the Coalition Government as politically impossible; but finally the situation became so serious that a subsidy of El for each arable acre was proposed, but only on condition that farmers did not reduce their arable area, or the number of workers, or the current rate of wages. Before a decision was taken, Lloyd George's government fell-but not before the great man had demanded a u 4500 million scheme for the rehabilitation of agriculture by the following Friday!

The next Prime Minister, Mr. Bonar Law, received a deputation of farmers and farm workers and heard the same story of disaster. He told them flatly that agriculture must live on an economic basis, that it could not be supported by the State, and that both subsidies and protection were out of the question. Then six months later the new Prime Minister, Mr. Baldwin, received another deputation and again ruled out tariff duties; but he promised to consider a subsidy of l 1 an acre in return for an obligation to pay a minimum wage of 30/- a week. Next, in 1924 the short-lived Labour Government rejected both duties and subsidies and declared that the industry must be conducted on an economic basis without artificial support from the public purse. Finally, the Conservative Government in 1926 produced a White Paper on Agricultural Policy, in which they again ruled out protective duties and any subsidy for corn growing. The right course they said was " to endeavour to create that confidence which is essential to progress " and to protect the industry " from the dislocation of reversals of policy and from rash proposals which would impair progress and breed insecurity."

After that came the era of marketing studies leading up to the Agricultural Marketing Acts of 1931 and 1933 (about which I shall have something to say later) and the Ottawa Agreement Act of 1932 which introduced the drastic protective weapon of quantitative restriction of imports. It is astonishing looking back to find that in the case of bacon even a moderate duty was ruled out on the ground that it would mean taxing the people's food, but at the same time restriction of imports was accepted as a substitute, even though it had the effect of raising the level of bacon prices in the U.K. market in 1936 about 50 per cent. above the free market price in Denmark. The explanation was that the Government had given a pledge to the electorate not to tax meat but had given no promise not to raise the price of meat by import restriction.

Post-War Policy, 1947. I must jump over the years of war-time control, which have been so admirably written up by Sir Keith Murray in his official history*, and come to the year 1947, when the Agriculture Act was passed, and 1949, when the Agricultural Marketing Acts were amended and brought up-to-date. Policy in these years was strongly conditioned by the circumstances of the time-world-wide shortage of food, continuation of physical

* Agriculture, H.M.S.O., 1955.


controls and rationing, programming of imports, and a fixed determination to avoid at all costs the post-war slump that so many thought inevitable and imminent. The choice was between planning and State trading on the one hand and a return to what was regarded as the “ chaotic ” instability of pre- war free markets. The dominant thought was the need for increased production of food of all kinds almost regardless of cost. Indeed, the first long-term production targets for agriculture were worked out in response to a demand from Ministers for an increase of L l O O million in five years. This led to the main emphasis being placed on those products which could be expanded most quickly and which would yield the highest money value-namely, milk, pigs and eggs. Little attention was given at that time to the real cost in terms of increased feedingstuffs, fuel, machinery and equipment, since the original objective was expressed in terms of value of gross output and not net output. It was only at a later stage that the goal of 50 per cent. increase over pre-war in physical net output gained currency; but this was not net output in the sense of value added, but gross output less imports of feed, seed and live animals-a concept which is relevant to international estimates of a country’s contribution to total world output of agriculture but does not of course measure the contribution of agriculture to the gross national product at factor cost.

Sir Francis Floud in his Paper urged that we should be clear as to the main object to which policy should be directed. He listed three alternatives which might all be desirable but not always compatible:-

1. 2. 3.

To increase production from the land. To increase the rural population. To increase the prosperity of the present occupiers of the land.

Measures calculated to increase production, he said, may not always be profitable to farmers; and measures to increase the rural population will not necessarily increase production. Moreover it may also be true that the largest possible profits may be secured by farmers by methods which will involve the employment of less labour than at present and will result in lower production-an important point to which I shall return later. Finally, he added, one of the methods of increasing production would be the replacement of some existing farmers by better men. Indeed he went so far as to say that ’( the most important livestock on the farm is the farmer himself.”

Commenting on Sir Francis Floud‘s paper, the late R. J. Thompson said that arguments about cheap food and laisscz faire had now gone by the board. I ‘ We are faced,” he said, “ with the fact that we cannot import as much as we should like, and that every ton of food produced in this country, by reducing our demand from abroad, helps us to import food and raw materials which cannot under any conditions be produced here. We have then for the first time a basis for an agricultural policy, which is clear in its main broad outline. But if the objective is clear, the means of reaching the target are by no means simple.”

That was in July, 1947, when several of those present were still engaged in administration of controls under the Labour Government. I think few of us would say that our objective is quite so clear today. Let us then take another look at what Thompson called “ the clear objective ” of 1947 and return later to the best means of reaching our goal.

First we might say that Floud‘s alternative objects are not exhaustive, and that none of them supply the answer to our questions. Merely increasing the number of farmers and farm workers in order to enlarge the rural population has few advocates; at least most people would put it well down on the list of


objectives. Then I take it no one would wish to dissent from the third object of increasing the prosperity of farmers and farm workers-though we might agree with Floud that some of the present occupiers of the land might well be replaced by more efficient farmers. The difference of opinion with which we are now faced is how far the incomes of farmers and farm workers should be determined by what they can earn in the free market and how far they should be safeguarded or raised by protection or subsidies. The answer to this will to some extent depend on how far our object is to increase production from the land.

Strategic Argument. It is still frequently assumed that on strategic grounds we ought to grow as much food as possible or at least more than purely economic considerations would dictate. This contention was examined at length in the Agricultural Dilemma by Astor and Rowntree which was mainly drafted by the late Sir Hubert Henderson. The arguments there set out seem to me as valid today as ever. First, any material reduction of food imports in peace would curtail our shipping capacity and consequently our shipbuilding industry, on which our safety in two world wars has depended. Experience has demonstrated that it is easier and quicker to increase food production in time of war than to build more ships. Growing more food a t home in time of war means more cereals and potatoes and fewer pigs and poultry which depend on imports of feed and compete with human beings for cereals. Switching from livestock to arable husbandry can be done fairly quickly. What is needed therefore on strategic grounds is, first, a policy of food storage, and secondly, measures to maintain and improve soil fertility, which is best achieved by mixed farming and livestock. These arguments are in no way weakened by the invention of the H-bomb; indeed under conditions of radio- active fall-out there might be a premium on imported tinned foods or even, as hlr. Colin Clark has suggested, on garden produce which could be covered up at night or when fall-out was expected. The strategic argument for maximum food production in peace may therefore be dismissed as invalid.

The main reasons for the post-war policy of maximum expansion have been, first, the continuance of the world food shortage for nearly ten years after the war, and second, the chronic strain on the balance of payments accentuated by inflation and unfavourable terms of trade. Let us now consider to what estent the situation has changed and is likely to change in the future.

Change an Food Sup$ly Situation. In the immediate post-war period of food shortage it was easy enough to set targets for production. They were obviously more cereals, especially wheat; more meat, with emphasis on pigmeat which could be most quickly increased; more milk and eggs to augment the supply of high-class protein; more tillage and improved pastures. Within five years of the passing of the Agriculture Act of 1947 the planned target of 50 per cent. increase in so-called net output had been reached. Milk, pigs and eggs had all gone ahead rapidly. Between 1946/47 and 1952153 milk espanded at about 4 per cent. per annum; eggs at nearly 9 per cent.; and pigmeat at the astounding rate of 1s per cent. per annum. But beef, mutton and lamb lagged behind, the tillage area contracted, and pasture improvement was not so rapid as had been hoped.

Since 1952153 the picture has radically changed. The world food situation has improved, cereals have become more plentiful, with wheat in surplus supply, and world exports of most other foods are not far from their pre-war volume. The Government has liquidated food control and bulk purchase and no longer sets production targets for specific commodities, though the overall


goal of 60 per cent. increase in net output is still spoken of as desirable. Warnings have been given against further expansion of milk, pigs and eggs- unless costs can be reduced; and the recent cut in the wheat subsidy shows that some reduction of wheat acreage and a switch to coarse grain5 and grass is thought desirable. The emphasis in recent Annual Price Reviews has been on producing more home-grown feedingstuffs and improvement of grassland in order to save imports of feed; and each year there is an urgent plea for more technical progress, better farm management and lower unit costs in order to make home production more competitive with imports and less dependent on subsidies.

World Food and Population. Before coming to the pattern of production we should aim at, I must digress for a few moments. The recent improvement in world food supplies still leaves open the question whether we can count on continued improvement, or whether, in framing our long-term policy, we should assume that in future food imports are going to be more difficult to obtain. This is my excuse for some thoughts on the relationship of world food and population. I bring this in not only because it has a bearing on our future terms of trade and consequently on our long-term agricultural policy, but also because it interests me as one of those problems on which the experts are steadily extending the bounds of our ignorance.

It has recently been argued with impressive weight by Prof. Robinson, Mr. R. hlarris and others that we are likely to be faced with a permanent, if not growing, worsening in our terms of trade. Attempts to increase exports are likely to meet with growing resistance and consequently a lowering of export prices; and imports of food and raw materials may become increasingly expensive owing to rising world population and the relative inelasticity of supply of agricultural products. I t would take too long, and I am not qualified, to discuss these problems as they deserve-particularly the elasticity of demand for exports; but a few thoughts may be permitted pointing to a different conclusion about food and population.

As to the future of world food and population it is possible to reach diametrically opposite views according to the premisses one chooses. In times of world food shortage, which tend to be associated with wars or the top of a boom, people are prone to emphasise the tendency for population to outrun food supplies. Then at the onset of a trade depression, interest shifts to the tendency for food supplies to outrun population growth. During a slump unemployment in industry is paralleled by overproduction in agriculture, since when prices fall factories close down and farms continue to produce; and the terms of trade of a country like Britain, exporting manufactured goods and importing food, swing violently in its favour. In the thirties we needed to esport only a fraction of what was formerly needed to get the same amount of food. Moreover, debtors like Australia had to send us far more wheat and wool to pay the interest they owed us on government loans. I t was sometimes held a t the time that the slump of the thirties was largely generated by over- expansion of agriculture. But I think this was a mistaken view. I t was far more a contraction of money demand than an increase of supply that led to the sharp f a l l of prices of food and raw materials. Nevertheless, I think it probable that the relative inelasticity of demand for food, particularly the staple grains, wheat and rice, may create a long-term tendency for the terms of trade to turn against food in favour of industrial products. But if this is true, how is i t to be reconciled with the tendency for population growth in all but the advanced countries to press on the means of subsistence?

I think that part of the explanation may be that quite a large part of the world's food supply-particularly the not inconsiderable amount which


tends to get left out of official statistics-is not produced for sale at all but for direct consumption by the producers and their families. There is constant striving to produce enough to feed the growing number of mouths to be fed; and this tends to produce slightly more than enough, which then finds it way onto the markets internally and internationally. Even if the aggregate surplus so created is less than 5 per cent. of total world production, it may suffice to tilt the balance in the terms of trade. Conversely, when there is a deficit somewhere owing to a poor harvest, the producers' families may have to go short, more infants will die and there will be fewer mouths to be fed in the future.

One of the most striking features of the post-war situation has been the comparative rapidity with which world production of food has recovered from the ravages of war and kept up with population growth. I t is true that during the post-war boom much of this increased supply of food has been consumed a t home and growing industrialisation has increasedthe local demand. But any setback to the present rate of investment is likely to increase the surplus of food for export. Growing population in some under-developed countries might even add to the number of those who have a surplus to sell. Indeed it may be argued that the terms of trade will not turn in favour of food producers until there is a relative decline in their numbers, whether it comes about through smaller families, by migration to the towns, or by changes involving a decrease in the number of family farms. This is unlikely so long as governments go out of their way to encourage and protect the interests of small producers. Millions of small producers, with no known cost. of production and no profit and loss account to reckon with, are in a weak position to bargain with manufacturing enterprises planning their production to meet the demands of the market. So long as manufacturing is undertaken largely to order or a t least for profit, and food production is carried on partly for subsistence and partly to pay off debts or get a little cash, the terms on which the products are exchanged will tend to favour manufacturing.

I tend to discount, therefore, the warnings so often expressed that the danger for Britain is that food, from overseas is not likely to be available at prices within our means. On the contrary, I think it more likely that Britain, in the future as in the past, will tend to be the dumping ground of other countries' surplus food; and that the danger for our own farmers is that once again the terms of trade may turn in our favour and against the food exporting countries.

The bearing of this analysis on British agricultural policy is brought out more clearly if we consider not food in general but particular foods. For example, if the world supply of wheat continues to be abundant and relatively cheap, the exchange of manufactured goods for wheat will be in our favour and there will be no case for maintaining wheat production in the United Kingdom beyond the point a t which it is competitive with imports. If, on the other hand, the world supply of some other food, like beef for example, lags behind a growing demand, our terms of trade in respect of beef will be unfavourable; and the high price of imports will keep the market price for home produced beef at a level which will stimulate expansion even without a subsidy. Adverse terms of trade for particular foods thus bring about their own corrective. If, of course, the position changes and beef along with other foods becomes cheaper in world markets, there will be strong pressure for protection or subsidies so that the home producers may enjoy an assured market at stable prices and not be exposed to competition from imports. We thus reach the conclusion that if the terms of trade for particular


foods are unfavourable, there is no need for price support; if they become more favourable, the case for price support will rest not on the difficulty of obtaining imported food but on the plea that cheap imports reduce farm incomes and compete unfairly with the home product. This is the strongest, and indeed the most plausible argument for protection or subsidies as part of a long-term policy; but it is an argument based on political and social rather than on economic considerations.

Pattern of Production. There is, of course, still a pressing need to reduce imports as well as to expand exports. But it is not so clear that any further expansion of gross output a t home can make an important contribution to filling the gap in the immediate future. But if we consider what negative contribution agriculture could make, some interesting possibilities are opened up. All of them imply some reduction in gross output but not necessarily in net output or even in the net aggregate income from farming.

The first and most obvious contribution that farmers could make is to become less dependent on imported feed now amounting to nearly 4 million tons, costing about jJ00 million. This could be done not only by increasing the supply of home-grown feed but also by reducing the amount of feed required. More and better grass, hay and silage; better grazing techniques and pasture management; and more forage crops and home-grown concentrates are the main planks in any long-term policy. But here too a warning may be needed, that the cost in labour and resources of producing more home- grown feed must not be excessive and that the farmer must be satisfied that further efforts in this direction will pay for themselves and not simply depend on increased subsidies.

Next, one is bound to ask whether some reduction may be possible in other inputs, particularly fuel and machinery. Fuel is imported at a landed cost of about L20 million; and some of the machinery dispensed with might presumably find a market abroad. The obvious way to make some economy under this head would be to reduce the tillage area, lay down more land to grass and extend the period of temporary leys. This would fit in with the objective of expanding production of beef, mutton and lamb. But it would also involve some reduction in milk, pigs and eggs.

The Minister of Agriculture stated in the House of Commons on the 30th of April that the new pattern of guaranteed prices had two objects:-first, to encourage increased production of those products which are needed, and second, to help the balance of payments. Accordingly, the guaranteed prices [or beef, mutton, barley and oats were increased; the fertiliser and calf subsidies were increased; and a new capital grant has been introduced for the provision of grass silos. He went on to explain that milk, pigs and eggs are all heavy users of imported feed, and that a t current rates imports of feed are costing over LlOO million a year.

Milk. The total subsidies for milk, pigs and eggs exceeded LlOO million for last year. Unfortunately, these are the products which are of primary interest to small farmers and that is why it is so difficult on political and social grounds to reduce the guaranteed prices. The Minister has stated that but for the special concern felt for small farmers a lower level of guaranteed prices would have been justified on three grounds:-(1) that supplies were more than sufficient; (2) that they involved a drain on the balance of payments; and (3) that they were receiving excessive subsidies. Last year the pig subsidy represented more than one-third of the market value. It would seem evident


that the quickest way to reduce unit cost in production and improve the competitive position of these products in relation to imports would be to penalise high cost production on marginal farms and face some fall in the present uneconomically high level of output. Two years ago the guaranteed price of milk was lowered by a i d . a gallon in order to check expansion and in the words of the White Paper to " reduce marginal production." But this reduction has evidently not had the result intended. Production in 1955/56 is 6 per cent. higher than it was four years ago; average costs have gone up; and the guaranteed price has been raised by id. a gallon because of the increase in costs. The logical conclusion would have been a reduction of the guarantee in order to reduce production, lower costs and encourage a marginal shift from milk to beef. But this was not politically feasible since it would have reduced the incomes of small dairy farmers.

Eggs. So too with eggs. A phenomenal expansion has taken place in the production of eggs which is now about 50 per cent. above pre-war and 80 per cent. above the 1946/47 level. Imports last year were less than a third of imports in 1938 and only represented 10 per cent. of total supplies. This is not due to a shrinkage in world exports; for, in spite of the cutting off of supplies from the Baltic and the Balkans, total exports from the principal exporting countries in 1954 were about the same as in 1938 (Commonwealth Economic Committee, Dairy Produce, 1955, page 75). Total exports from Denmark and the Netherlands were actually 25 per cent. higher in 1953 than in 1938. What has happened is that Western Germany has now become by far the largest importer of eggs. Her tariff duty is low-15 per cent. from 15th of February to 31st of August; and 5 per cent. from 1st September t o 15th of February; she has no restriction on imports from O.E.E.C. countries; and no price support or subsidy for eggs. Her home production of eggs is less than our pre-war production and less than two-thirds of our present output. This comparison supplies a striking commentary on the agricultural policies of the two countries. Before the war Germany was the home of extreme agrarian protectionism. The United Kingdom has now joined Sweden, Switzerland and France as a country that aims at being virtually self-supporting in eggs. The reason is evidently political and social rather than economic. If we are to aim a t a more economic use of resources and a smaller and more nationally profitable agriculture, a substantial but gradual reduction in the production of eggs might be viewed with equanimity. Under present conditions of world supplies and prices abolition of the egg subsidy might be expected to result in a level of egg production rather higher than before the war and, at the same time, allow larger imports than at present from O.E.E.C. and Common- wealth countries, particularly Denmark, Ireland, Netherlands, and Australia. There might even be a net saving on the balance of payments owing to the large amount of imported feed required for egg production.

Pigment. Pigmeat is another case where there has been over-expansion judged by economic criteria. Production fell by more than half during the war but then rose, under the stimulus of guaranteed prices and a subsidy equivalent at one time to about 50 per cent. of the market value, from 31 1,000 tons in 1936147 to 745,000 tons in 1954155-an increase of three and a half times in eight years. Production nearly doubled between 1951 and 1953. This was part of a deliberate policy designed to bring about a rapid increase in meat supplies and facilitate decontrol and derationing in July, 1954. In the 1955 Annual Review it was stated that the country could not afford further expansion; for the last three years there have been successive reductions in the guaranteed price subject to the feed price formula. In 1955/56 production is expected to be 13 per cent. lower than in the previous year. If,


as seems likely, beef, mutton and lamb supplies, both home produced and imported, continue their upward trend, some further reduction in pigmeat to a level approximating to the pre-war average would seem economically justified. As with eggs, this would reduce feed imports, eliminate much of the high cost marginal production, and release resources for more profitable forms of enterprise. If it were possible to substitute moderate tariff duties for the present subsidies, a saving of the order of L50 million might be made in the present subsidies for pigmeat and eggs without inflicting severe hardship on efficient producers and with net economic gain to the nation. If the resulting level of production were to be in the neighbourhood of 500,000 tons of eggs and 550,000 tons of pigmeat, we should still be getting an output 30 per cent. above pre-war.

Wheat. As regards wheat the recent White Paper has emphasised that there is no longer any reason to justify exceptional encouragement. With the higher yields that are now obtained it should be possible to get a larger output than before the war, say two million tons, from a smaller acreage of less than 1.75 million acres. Elimination of high cost production would make it possible both to abolish the subsidy and to effect some economy in manpower and machinery. In support of this view I would refer to two interesting letters to The Times written in July and August of last yea . The first was from a well-known farmer, Mr. John Cherrington, who said that owing to the subsidies he had been growing wheat and barley on " poorish hill land " in Hampshire. Without the subsidies he would lay down the land to grass, produce more beef and fat lambs, use no machinery and very few fertilisers, and probably make as good an income as he does now. He would dispense with all except two shepherds " and have nothing to do for most of the year but go fishing." This may be a bit of an exaggeration, but he adds that he thinks many other farmers would do the same. In a similar vein Mr. J. R. Warburton wrote to say that he could make a decent living by turning his farm into a cattle ranch and producing more beef; but he implied in his letter that he felt bound to grow wheat because of the 1947 Act and also because in doing so he employs more labour. How many farmers still think, ten years after the end of the war, that they are performing a public duty by spending taxpayers' money in growing wheat and thereby giving employment and checking '' the drift from the land"?

Hypothetical Pattern of Production and Net Income. The conclusion I amve at from this analysis is that if we had to set production targets based on some reduction in gross output, particularly of wheat, milk, pigs and eggs, a tentative pattern for 1960/61 would be something like the last column in Table 1.

TABLE 1.

PATTERN OF PRODUCTION

Pre-war Average

Wheat ('000 tons) ... ... ('000 acres) ... ...

oti'er grains ('000 tons) ... Milk (million gals.) ... ... Eggs ('000 tons) ... Beef and Veal ('000 tons) . . . Mutton and Lamb ('000 tons) Pigmeat ('000 tons) ... ...

1.65 1 1,856 2,791 1,563

385 578 195 435

1954155

2,783 2,457 5,278 2,151

552 777 186 745

1955156 (forecast)

2,600 1,949 6,171 2,184

574 705 186 650

1960-61 Pattern '

2,000 1,700 6,000 2,000

500 750 195 550


In Table 2 below, I have tried to illustrate the results of this more economical pattern of production by sketching a hypothetical " departmental calculation " for 1960/61. The hypothetical target figures imply a fairly drastic reduction in inputs, particularly of machinery and purchased feed, accom- panied by a moderate decline in gross output, steady increase in productivity per man, reduction of L l O O million in subsidies, and some increase in the incomes per head of farmers, farm workers and landlords. The labour force is assumed to have fallen by about 15 per cent. and average earnings per head to have risen by 10 per cent.

TABLE 2.

FARM SALES

Milk, etc. . . . . . . Fatstoclc . . . . . . Eggs and Poultry ...

Horticultural products Other . . . . . .

Farm Crops . . . . . .

HYPOTHETICAL " DEPARTMENTAL CALCULATION " FOR 1960/61 COMPARED WITH 1955/56 FORECAST.

L m

1955/56 Fore- cast

342 397 1621 2461 133) 24&

I million

Production Grants ... Valuation Change ...

1955/5e FARM EXPENSES Fore- 1 cast

1,306

65 36

Labour . . . . . . Rent and Interest ... Machinery . . . . . . Feedingstuffs ... Fertilisers . . . . . . Other . . . . . .

Totals ...

Net Income . . . . . .

290

203) 312

146

81 4

74 $

1,1074

2993

TOTAL ... I 1.407

I960/61 Hypo- thetica

270 90

180 245

70 125

980

340

1.320 I 1,107

.ion

1960/61

thetical

305 400 135 230 135 25

HYPO-

1.230

90 - 1,320

The figures for 1960/61 (which are, of course, only designed to suggest the direction we should aim at) set a target for reduction in farm expenditure which you may think is not impossible but is unlikcly to be realised. I t may also be unduly optimistic to suppose that farm sales would only fall by L76 million, if there were virtually no subsidies for wheat, milk, pigmeat and eggs. Whether the residuary figure of net income for farmers could be increased to the extent suggested would of course depend on satisfactory market prices for the reduced output, as well as on the economies that could be effected in costs of labour, machinery and feedingstuffs.

Having thrown these Tables into the arena, I must all too briefly touch on some of the other issues of long-term policy.

Reduction in Farm Labour. Every year, particularly when wages of farm workers come up for review, we hear much about the need to stop the migration of labour to the towns. This doctrine goes back a t least to 1924, when it was endorsed in the Report of the Agricultural Tribunal of Investigation and was later given special emphasis in the Report of Lloyd George's Liberal Land Committee. I t led to various schemes of land settlement and to the policy of dividing up large or medium farms in order to create small holdings. It also contributed to the decision of the Labour Government in 1924 to introduce sugar beet cultivation, which was adopted partly at least because it involved employment of a large amount of manual labour.

In the 'twenties and 'thirties it may have been better, at any rate on social grounds, for labour to be employed on farms rather than to remain unemployed in the towns. But now we are faced with scarcity of labour and


a record low level of unemployment; and there is no need for any policy of increasing the farming population by land settlement or the creation of small holdings. Economy of labour on the farms and increased productivity per man-hour are not only desirable in the national interest, but also the condition of higher earnings and higher standard of living both for farm workers and for small farmers. If anything we suffer, like most countries, from having tOQ many small farmers. Net output per head in agriculture at world prices is much less than that in industry.* Today we have the paradoxical position that demands for increased wages are based on the need to stop the drift from the land, yet the steady rise in wages and labour costs is one of the factors which contributes to the drift from the land. If we no longer need maximum production per acre but rather some reduction in marginal output, particularly of milk, pigs and eggs, it cannot make sense to subsidise farm wages in order to discourage farm workers from going into better paid occupations, where they will both earn more and contribute more to the national income.

The Problem of Marginal Small Farms. I have no time to do more than touch on this estremely difficult problem, but I must at least mention it to provoke discussion. In his speech in the House defendlng the Annual Review of Prices on April 30th, the Minister of Agriculture mentioned that last year, out of a total of about 300,000 farmers, only about 150 to 170 went bankrupt. And he then boldly added (I quote Hansard):-“An industry which has no bankruptcies at all cannot be in a healthy state. (Hon. members: ‘ Oh.’) Yes, I stick to that absolutely. I t is the price of efficiency.” By the standard of economic efficiency, that is their capacity to produce at prices a t which we can import, perhaps a third of the farmers of the country would be bankrupt but for the subsidies they receive; and by the same standard another third, who now get the lion’s share (probably about two-thirds) of the subsidies, would be well able to hold their own in competition with imports without going bankrupt, even if they received no subsidies. Even with subsidies there may be as many as 60,000 small farms which are not economically viable in the sense of providing a farm worker’s wage. And there may perhaps be as many as 100,000 (including part-time) small farmers who would be driven out of production or forced on to a bare subsistence level by a gradual decline in the profitability of milk, pigs and eggs. These figures are mere guesses and may be excessive. But there is no doubt that the problem of sub-marginal small farmers is the most difficult which the country has to face in deciding any long-term policy for agriculture. I can only briefly refer to some of the first-aid measures that might be taken to alleviate the small farmers’ lot, assuming that the object would be either to enable him to earn an economic livelihood, or to compensate him in some way for being forced out of production.

My guess would be that about two-thirds of the farmers could be expected under a long-term policy to stand on their own feet without subsidies or price support. (I leave open the possibility of moderate tariff duties like that proposed for bacon.) Then most of the remaining third should be entitled, on application and proof of need, to receive temporary economic aid from an annual appropriation not exceeding LlOO million. Some part of this would be earmarked for production grants where there was a clear prospect of making the farm economically viable. Another part would be made available for special housing grants or supplementary pensions to encourage small farmers above a certain age to retire and find alternative accommodation near the holdings which they had given up. And the balance might be devoted to

* D. T. Healey, Westminslev Bank Review. Jan., 1956.


training grants to enable small farmers willing to vacate their holdings to acquire new skills and enter better paid occupations.

This opens up a new and difficult field of administration; but compared with the pre-war problem of dealing with millions of unemployed and the special treatment of depressed areas, it should be well within the competence of the Ministries concerned to find ways and means of implementing such a policy. The rationale behind it is clear. It is the business of Government, both on social and economic grounds, to help those who fall down, often through no fault of their own, in the rough and tumble of a competitive and expanding economy. It is not the business of Government to restrict competition and subsidise inefficiency in such a way as to put a brake on economic progress.

But I must not pursue these intricate byways of administration. I need only refer to the excellent survey-complete with maps and plans-drawn up by the Land Sub-Commission for Wales, showing how Central Wales might be dealt with in such a way as to make it more self-supporting. Included among their recommendations is a suggestion that, in order to encourage amalgamation of holdings into larger units, new homes should be built for small farmers whose farms have become derelict or redundant. We need more of these regional surveys as a basis for long-term policy.

Capital Reqaiiremeiats. Much has been said but little is known about the need for more capital in farming. According to the Blue Book on Income and Expenditure 1946-1954 (p. 66), capital formation in agriculture from 1948 to 1953 has only averaged about L80 million-L50 million for plant, L20 million for buildings and L l O million for vehicles. The low figure for buildings is presumably due to the low level of rents. In a paper read to the Farmers’ Club on January loth, 1956, Mr. Freund has advocated legislation to facilitate raising of rents and suggests that part of the annual subsidies should be earmarked to serve as interest and depreciation on a Farm Capital Budget. On the other hand Mr. A. W. Tuke in his address to the Farmers’ Club on May 2nd has suggested (1) that there is no evidence of any general shortage of capital (L1,615 million in 1952/53 compared with A448 million in 1937/38) for farming along present lines; (2) that there is a shortage of landlord’s and owner’s capital for modernisation of farm buildings, roads, water supplies, etc., and (3) that some increase of tenant’s capital would be required for any increase of efficiency and productivity. If we do not have to aim at an increase of total gross output, the figure of A400 million, which is sometimes given as the extra capital needed for long-term improvements, may well be excessive. Indeed until we have more detailed surveys, and until we have a clearer idea of the extent to which farmers will be expected to compete with imports, any estimate of the amount of capital, on which an economic return could be obtained, must be largely guesswork.

Efficient Production. We are told that farmers are tired of being lectured about efficiency, and I sympathise with them. It is unfortunate that both in the Agriculture Act, 1947, and in the Agricultural Marketing Acts the legislature has used the phrase “ efficient production ” without defining what it means. I feel about efficiency what Shelley wrote in another context:-

“ One word is too often profaned

SO I will only make the obvious point that technical efficiency, in the sense of technologically advanced methods of production, may sometimes conflict with economic efficiency in the sense of what pays best in an uncertain world. We

For me to profane it.”


need greater efficiency in both senses; but not technical efficiency which involves excessive capital investment or maintenance charges.

One of the most important and difficult contributions that agricultural economists and the N.A.A.S. can make in the formulation and carrying out of a sound long-term policy is to devise yardsticks for judging when a given project of farm improvement involving considerable capital investment is likely to be economically justified.

Mr. Freund in his paper advocates specialisation (not monoculture) in farming which runs counter to the traditional emphasis on mixed farming. He argues that specialisation can help farming to give skilled workers a status, wage and leisure comparable with industry and promote higher output per man through the application of labour-saving techniques. This recalls Prof. Duckham's recent observation: " Agriculture may be over-motorized but it is under-mechanized "-in the sense of lacking labour-saving machines.

In its wider economic context economic efficiency implies ability to compete with imported products and this yardstick ought to be more often used. We need more reports like that on Pig Production in Denmark and the United Kingdom.

Efficient Marketing. The meaning of '' efficient " marketing tends to be even more elusive than efficient production. I would only put in a plea that, whatever justification there may have been for compulsory Marketing Boards in the exceptional depression of the thirties, they are out of place today when the chief problem is how to increase the national income by making the best use of scarce resources (including transport) and not to regulate sales in such a way as to maintain prices. The most significant and hopeful development in marketing since the war has been the creation by the N.F.U. of the Fatstock Marketing Corporation on a voluntary basis after their earlier plan for a statutory Meat Marketing Board had been rejected by the Government as unworkable. I hope I am not being too optimistic in predicting that all three political parties may soon come to agree that the Marketing Acts should be repealed or drastically amended; that no more statutory Producer Boards should be set up; and that every encouragement should be given to the development of producer co-operatives and voluntary Marketing Corporatioils to supplement and compete with private traders. Though most of the criticisms of inefficiency and excessive costs in distribution are exaggerated, there is always scope for improvement in marketing, and I suspect that this country compares unfavourably in costs of distribution with the United States. Some government intervention seems needed mainly in two respects: first, in the location of large markets, e.g. the problem of Covent Garden; and, secondly, in prescribing minimum standards of grading, packing and quality, so as t o prevent misdescription and facilitate bulk trading, e.g. National Mark Schemes. Progress in efficiency will best be achieved by more competition, not by restraint of competition-still less by monopolistic attempts of Marketing Boards to hold up prices.

Summary. In conclusion may I summarise the main points of my paper? 1. During the ten years since the war there has been no repetition of

the " Great Betrayal " that occurred after the First World War. On the contrary there has been an unparalleled expansion of output, first to meet the world food shortage and secondly to ease the strain on the balance of payments.

2. The time has now come to concentrate on reduction of inputs rather than on further increase of ou tpu te in particular to reduce the labour and


resources, both home produced and imported, now devoted to the production of wheat, milk, pigs and eggs.

3. The strategic argument for mLximurn food production in peace is examined and found wanting.

4. Post-war world food shortages have been replaced by growing sufficiency. In the case of wheat the problem is how to dispose of a surplus in the four main exporting countries recently amounting to nearly fouI years’ world exports.

Study of trends in world food and population suggests that there is a long-term tendency for food production to increase slightly faster than population growth. Products of peasant agriculture and family farms, much of which is sold for cash rather than for profit, tend to exchange on unfavourable terms with manufactures. The case for protection and subsidies thus rests on fear of competition of cheap imported food rather than on the likelihood of growing food shortage.

Agriculture can help to improve the balance of payments (1) by the use of less imported feed and fuel, (2) by less expenditure on goods that could be exported (e.g. machinery and fertilisers), and (3) by release of labour and resource: which could be put to more economic use in reducing imports (e.g. of coal) or in expanding exports.

Output of milk, pigs and eggs has been over-stimulated. A lower level of guaranteed prices can be justified on three grounds: (1) that supplies of all three products are more than sufficient; (2) that they involve a drain on the balance of payments through excessive imports of feed; and (3) that they involve excessive subsidies, which contribute to inflationary pressures.

Too much wheat is being grown at excessive cost on marginal land. Owing to higher yields two million tons could probably be grown economically, on a smaller acreage than pre-war, without any subsidy.

To focus discussion and illustrate the long-term objectives proposed, a tentative pattern of production for 1960/61 is given in Table 1, together with a hypothetical calculation of aggregate farm sales, expenses and net income in Table 2.

Economy of labour, involving continued migration of farm workers and small farmers into industry, is both the corollary and the condition of higher net output and incomes per head in agriculture.

If the goal of a more competitive agriculture is to be realised, economic aid to small farmers will be needed, partly to finance amalgamation and re- equipment of holdings, and partly to compensate those who are willing, or forced by economic circumstances, to vacate their farms. Statutory super- vision and dispossession under Part I1 of the Agriculture Act should be abandoned, if maximum production per acre is no longer required in the national interest. The N.A.A.S. should be expanded and given wider responsibilities in the administration of economic aid for small farmers. Pilot farms, as in Holland, should be developed. More regional surveys, like the Mid-Wales Investigation, should be set on foot.

There is no general shortage of capital for farming on present lines. Some extra capital is needed for increase of efficiency and productivity; but the amount required will not be excessive, if we are not aiming at increased gross output or maximum production per acre.

5.

7.

8.

9.

10.

11.

12.

13.


14. Technical efficiency is needed as a means to economic efficiency, which implies ability to compete with imported products.

15. Progress towards greater efficiency in marketing will be achieved by more competition and voluntary co-operation, not by more statutory Marketing Boards. The Marketing Acts should be repealed or amended.

One final word. I hope nothing I have said, or left unsaid, will lead anyone to suppose that I claim to speak with authority or special knowledge. I think we are all conscious that we lack a lot of relevant data which no one has got, and we are all a bit puzzled about what should or is likely to come next. This is what makes agricultural economics so lively and fascinating a study. In any case I am only too anxious to learn from my audience-be they farmers, economists or civil servants-what they think should be the next instalment of a long-term policy for agriculture. I am sure many of their thoughts will be very different from mine.

DISCUSSION ON MR. LLOYD’S PAPER. J . H . Kirk:

I have very great pleasure in expressing on behalf of us all our thanks to Mr. Lloyd for such an extremely interesting paper. These occasions on which the incoming president reads himself into office, reminds me of the parallel ceremony at St. Andrews each year in which the incoming captain plays himself into office by driving off the first tee. No doubt he always hopes to drive the ball straight down the middle, but I sometimes wonder if the the spectators don’t secretly hope that he will either miss it altogether or a t least drive it into the North Sea. Mr. Lloyd apparently feeling exalted by his recent exploits with other small round objects has treated us to some mighty swipes. It now falls to me and other speakers to help retrieve the ball. But if I may continue the metaphor a little longer Table 2 is I think where he hopes that he has holed out.

The form of this particular table is not altogether unfamiliar to me. Mr. Lloyd has I think, shown great courage indeed in producing it because it puts many of his ideas to the stern test of arithmetic. But does the table hold good? When Mr. Lloyd discussed it with me in draft I didn’t tumble to the fact that it was to be combined with a saving in subsidies of A100 million. I therefore felt reasonably happy about the arithmetic of the receipts side of the table because it seemed to agree with the assumed levels of output a t something not much below present prices. But if LlOO millions has to be knocked off for a start then prices and receipts from incomes must all be a good deal lower. Indeed, about a LlOO millions lower. That means I just do not think that Mr. Lloyd can reasonably expect to offer higher rewards to all the factors of production out of less output a t substantially lower prices. I do of course realise that he has provided some of the wherewithal for higher incomes by postulating economies in feeding stuffs and machinery expenses and fertilisers and various other items, and no doubt he has taken credit for 5 years increasing efficiency. But you will see that he relies mainly, though I still think in vain, on the reduction of L67 millions in feeding stuffs expenses.

About half of this would come from a lower output of milk, pigs and eggs, and that would leave about 1 million tons to be contributed mainly by a greater effective utilisation of grass, and I suppose by economy in feeding practice. No one could say that a saving of a million tons is technically impracticable; it would amount to less than 10 per cent. of present concentrate consumption and no more than about 3 per cent. of total livestock offtake. But whether we are going to get this million tons depends a great deal on the time which is to be allowed for it to happen. At the moment I am afraid I just cannot read any of the agricultural statistics in a way which would encourage me to think that the effective utilisation of grass is increasing, or that conversion efficiencies are increasing. Some gains in efficiency in pigs and eggs have I fear been fully offset by less efficiency in dairying. The immediate outlook, therefore, seems to me to be not too hopeful.

But Mr. Lloyd does allow us 5 years, and given 5 years to do the job, I think we just might succeed. I can’t say that I have any great expectation that farmers generally will be prepared to put in more effort or incur more trouble or risk to reduce their feed bills, because at the present time I would judge that preferences as between income and leisure are pretty well evenly balanced. In those circumstances silage making and strip grazing, tripoding, feed recording and so forth are not likely to make much appeal even when the

,


economist can offer an impeccable demonstration that they will save money. B u t at the same time I wonder if we have done much more than scratch the surface of devising what might perhaps be called painless methods of raising farm income. Some methods of t ha t kind would be in the field of work routines and gadgets. For example simpler and cheaper methods of handling and self feeding of bulk feeds. Others will I hope over the course of 5 years result from a gradual breakdown of the show-ring mentality and such outgrowths of i t as over emphasis on milk recording and the heavy yielding cow. Generally what are in their way genuine improvements in technology, such as the 1,200 gal. cow in place of the 800 gal. cow ought also to contribute to economic efficiency, but too many of these I feel have become disguised ways of sucking in more inputs, with only a doubtful benefit to the farmer and a downright loss t o the nation.

But as I suggested earlier, even if a A67 million saving of feeding stuffs were in the bag and all Mr. Lloyd’s other economies as well, I still feel sceptical about his offer of L40 millions to the farmers and something for the workers and landlords as well. Mr. Lloyd must, I fancy, he harbouring a few doubts of his own as well because in the later part of the paper there is no more mention of higher incomes for anybody but only a counting up of possible bankruptcies. Well I think the latter picture, the one of bankruptcies, is probably the more realistic. Unless arithmetic has led me astray I think there is going to be a substantial loss of income in the aggregate from these proposals and of course a particular impact on certain classes of farmers and in certain regions. I need hardly say tha t that is the sort of factor which must weigh, as i t has weighed, with the Government in deciding what to do. There is a great deal in Mr. Lloyd’s scheme of things which can also be found in the last annual review White Paper. Both policies-the Government’s and Mr. Lloyd’s- are moving in the same direction and are looking for much the same change of emphasis as between milk, pigs, eggs, wheat and othcr things, and feed economy is also common to both, but the scale and pace of change are clearly quite different. They are I think bound to bc until a Government comes into office, probably not in my time, which is going to solve its agricultural marketing difficulties by creating what I think any politician would regard as a still greater difficulty, of disposing of some 100,000 farmers who are said to be no longer wanted.

B u t Mr. Lloyd’s address would have been much less interesting if he had allowed himself to revert t o his former role of senior civil servant. Anyone who wants to be prudent and diplomatic might just as well read the White Paper instead. The White Paper is, I should say, the wiser document of the two, at least in the more practical sense, b u t what a treat i t has been to exchange i t for the sort of rich fare which Mr. Lloyd has offcred us. and I am sure that everyone here will feel very grateful to him indeed for giving us such an interesting morning.

H. D. Walston: I won’t bother with the golfing metaphor-it is not a game I play or watch, but much

to my surprise, and somewhat t o my disappointment, I found myself in complete agreement with Mr. Kirlc in everything that he said. So there’s no argument I can have with him. Now for Mr. Lloyd’s fascinating and stimulating paper. Point number 1 which I jotted down, but which he didn’t mention at all but just to show that I had read the paper I will mention i t , he talks of Germany and referring to egg supplies he suggests that the comparison between Germany and ourselves supplies a striking commentary on the agricultural policies of the two countries. That, I suggest, is extremely mislcading. I n Germany so far as I understand i t , they have just recently put up their price of eggs for their farmers giving them a few pence more I belicve. But they are a highly protectionist country in their agricultural policy at the present time. Wheat is not imported except with licence for the use of foreign currency which is only given to importers when they have used all their home supplies bought from their own farmers. Although they live rather closer to Denmark than we do, and therefore have somewhat lower freight charges than we would have in getting pigs from Denmark, they pay their farmers more for pig meat than we pay ours. Sugar they import virtually not at all; its an entirely prohibited import, entirely home produced; as for meat, in general i t is very difficult to get the currency for foreign exchange with which buy meat. So Germany as a whole I would say, is a far more protectionist country than we are, and incidentally produces between 75 and 80 per cent of its own food from an acreage which is virtually identical with ours and a population which is also virtually identical with ours. And i t appears from reading the financial columns of The Times that the German mark is getting stronger every day and the English pound is getting weaker. Whether there is any significance or any connection between those two facts, I do not know, but I do think that if we are going to look a t Germany there is something different we might learn than believing that i t is free-trade in its agricultural policy.

Now this whole question of world food shortage cannot be gone into in the few minutes that remain, but there is one factor that must be brought out. I agree that food production in the world is rising faster than the population. That I don’t dispute. I do not agree with


the people who assert there is less and less land available because of erosion and so on. But there is an enormously important factor we must not overlook, which is that people who, hitherto, have been living on nothing but rye or potatoes or maize meal, or something of that kind, now want better food in East Africa and West Africa, India. Whether they want i t or not they ought t o have it, and sooner or later they are going to have it. There- fore, there is going to be a greater strain on the world food resources than there have ever been before, simply because of a rising standard of feeding.

I do not disagree on family farms, another point in this world food problem which Mr. Lloyd mentioned, but there is a spread of the communist way of farming throughout a good many parts of-the world. The satellite countries today consist no longer of family farms. The far East, from what one hears, have less and less family farms, and even where family farms exist, even where there is no communism a t all, more and more are you getting state marketing organisations which strengthen the position of primary producers. I do not therefore, think that the argument of terms of trade, the small familyproducer versus the large industrial combine, carries quite the weight which Mr. Lloyd expects it to carry.

Mr. Lloyd also says that the adverse terms of trade bring about their own corrective. That to me is a laissez-faire argument: “ that being so don’t let us bother, if things are difficult we’ll produce more.” But surely he does not mean that in fact. What we should be doing now, I believe, when the situation is exactly as he tells us it is, (I have no dispute with the present assessment), when food is easier to obtain and prices are comparatively favourable to us, is not to say ‘‘ Don’t let us bother, if it gets more expensive then somehow or other we will grow more, that’s the way it works.” We should say let us try to produce more efficiently for the future.” And that must mean security and all the other things which go with that.

Let me, if I have time, give one example which I think brings outs the point. I refer to the preservation of grass. Mr. Kirk was absolutely right when he talked about silage, strip grazing and all that sort of thing-we must produce more from our grass and we must produce it in a better way. Grass drying is one way in which it can be done. In Cambridge there is a very large number of playing fields and lawns. Every week, sometimes twice a week, these playing fields and lawns are mowed. I send in a lorry and collect that grass in bags. I dry it and I make something like 100 tons a year of 300 carotin. 22 to 25 per cent. protein dried grass. I sell i t a t enormous profit, although I could sell it at a great deal less very competitively with foreign imported feeding stuffs. That could be done all over the country. We‘could make hundreds of thousands of tons off grass which today is wasted. And not only from playing fields and lawns: we could make it from our own fields if we bothered to grow the stuff properly. Some farmers did go in for grass drying; they went out of it because the price dropped. There is now a shortage, and those of us who remained in are getting unduly high prices, We can work that way. Mr. Lloyd suggests it is not the business of government to restrict competition and subsidise inefficiency in such a way as to put a brake on economic progress. I agree with that, but I would go farther and say that it is the business of government to take the brake off economic progress and to put their foot on the accelerator and to encourage economic progress. We want something more positive in this breathing space we have got and I am very sorry that I have not seen any positive signs, any positive suggestions, in this paper. It is positive forward progress now that we must be thinking about and achieving.

H. M . Conacher: Ladies and Gentlemen, I’m a ghost from the 19th century. I’m an old Gladstonian

Liberal and I welcome with gratitude Mr. Lloyd’s paper. On the whole I think it is the most masterly Presidential Address that I have ever listened to. Why do I welcome it I I welcome it because it is a return to 19th century Liberal economics, and i t was high time there was such a return. The younger generation have grown up under a regime of planning and subsidies and everything else that has gone to kill competition which, within limits, is the real spur to efficiency. I say get rid of the Etatism of the last generation with all speed. I welcome Mr. Lloyd’s laying of the ghost of strategic considerations or of world shortage considerations. As Bishop Butler said, ” Probability is the guide of life.”

I am not competent to take any part in the technical discussions as to what we should produce at the end of five years if some of the subsidies go but I am quite certain that a good deal of them have been used to force water uphill. My experience in Scotland during the war quite convinced me of that.

But more fundamentally I welcome Mr. Lloyd’s attitude because it also means the beginning of a return to a universal peace mentality. He approaches that by the doctrine of not worrying about strategic things. If there was one outstanding feature in the 19th century Liberal economy, it was that it was a peace economy. We have got to create a peace mentality and I welcome this chance of impressing that that should be the background of our general thinking.


‘‘ Probability is the guide of life.” The more we get convinced and the more we act on tlie conviction, and create a public opinion that will even force Governments to accept the utter improbability of another world war, the more that conviction will modify all our wartime and post-war set of ideas in which the younger generation have grown up.

I only want to say two more things, and that is that I had a good deal to do with the incubation of the Marketing Acts in the 1930’s and I do think they were wanted a t the time because when you came to the collapse of milk prices, in which after all there was no serious foreign competition, something had to be done. I thought it an extremely daring thing of the Labour Government of that day to do. The truth is the Convervatives simply didn’t dare to oppose it and although the House of Commons amended the Bill, it went through.

But considering everything that has been done for the farmer today I’m not sure that there are not absolutely mischevious and monopolistic tendencies liberated in the marketing board systcm and I agree with Mr. Lloyd there.

Finally, I also had something to do with a Scottish Act many years ago, the Small Landholders Act. My old chief, Lord Pentland. was absolutely enthusiastic about keeping people on the land and doing everything possible to bolster up the position of the small farmer because in the crofting counties of Scotland they were numerous. We actually made smallholdings right and left but today I’m afraid the kind of economics I have been advocating are fatal to the smallholder and therefore I’m glad to hear Mr. Lloyd proposing compensations for them.

W . J . Thomas: I would like to examine very briefly the proposition that the future course of agri-

cultural policy should be directed towards cost reduction rather than towards output expansion, and to expose the dilemma that we are in when we consider this proposition. If the purpose of farming is to maximise income there are, of course, these two processes of cost reduction or output expansion or a combination of both of them which the entre- preneur has to consider. But the opportunities of achieving economy in one way or the other are not equal on all farms and, particularly, they are not equal on farms of different sizes. On the whole, the possibilities of achieving cost reduction are greater the greater is the size of the farm. This is so because cost reduction alone depends very largely on substitution, that is, on factor or input substitution and possibly some factor product substitution. I t carries with it the necessary condition that some resources can be released, and all of us in this room know how very difficult it is to release resources on small farms, where the bulk of labour is virtually fixed and where a large amount of the capital equipment is also virtually fixed and under employed. When farms become larger what we do in effect is to shift some of these fixed resources into the variable category, and thereby increase the opportunities for releasing them and for substituting them.

But, in the present state of things, we are driven to consider the position of the small farmer, Every liaison officer in this room will tell you that i t is much easier to find ways of improving incomes on small farms by increasing output than it is by methols of cost reduction. Even when a small farm has fully exploited the possibilities of the new grassland techniques, and of replacing imported feed in this way, there are still possibilities of maxi- mising incomes by increasing the use of imported concentrates, to cows, to pigs and to poultry; precisely those products which are already in danger of being in excess supply. There is no doubt that this is one of the ways in which farmers have in fact maintained their incomes during the past few years. If you calculate a fixed weight index of agricultural costs you will find that, since 1947, it has increased by something like 60 per cent. During the same time agricultural prices, including subsidies, have gone up by about 26 per cent. Even if you discount the cost index by something like a cumulative 2 per cent., per annum. to take account of increasing efficiency in the use of resources, you still find that costs have increased faster than prices since 1947. In practice, farmers have maintained incomes very largely in this period by the expansion of output.

We reach the conclusion then, that you cannot stop output from expanding. or change the emphasis from output expansion to cost reduction, within the present framework of land tenure in this country. Therefore, I was very interested in the solution which Mr. Lloyd offers and I am with him so far as he goes in offering inducements to small farmers to retire from farming and to amalgamate their holdings. I am sorry to say that I am not as optimistic as Mr. Lloyd in thinking that the best way of doing this would be by voluntary agreement. I am not sure that you can, in fact, amalgamate farms in such a way as to lead to optimum economy by leaving it to the voluntary process, even with the incentives which Mr. Lloyd suggests. But the question of increasing the size of farms is crucial to the whole issue. and it is a subject on which we really should be doing much more thinking. What form of reorganisation do we want ? How are we best to achieve it ? Are we only going to outline the framework or are we going to take a hand in planning it and controlling it and how much capital do we need to set aside in order to achieve it ?

146 Journal of Agricultural Economics. B . R . Davidson :

There is one point in Mr. Lloyd’s very excellent paper on which I would like to join issue. And that is the point he makes that the bulk of the subsidies are going to the large farmer who could very well do without them. I’m not quite sure what he means by this. In the 1955 winter conference Professor Nash read a paper to this society in which he showed the amount by which the prices which farmers receive for various products would be reduced if all subsidies and tariffs were withdrawn. I have taken those factors and reduced the incomes of the 44 type groups of farms in England and Wales, and found out by how much their economic net output or value added would be reduced without any form of subsidy whatever. I think there’s only one group in the 44 which still has an economic net output, but the largest negative economic net outputs are among the East Xnglian groups that now have the largest positive economic net output. Just what does Mr. Lloyd mean when he says they could get along without subsidy ? I can only take it that he means that they could adjust their system of farming in such a way that they could make a profit if on large farms. I think he is right, if he assumes that. I think that your larger British farms a t world prices could make a profit. But I would like to add a word of warning from the past. In the past two depressions, if Orwin’s History of British Agriculture is correct, the farmers in those areas, particularly in East Anglia failed to make that adjustment over a fairly long period of time. They preferred to go to the wall. The price of land, according to Orwin. in those areas fell below the price of land in much less fertile areas in the west of this country. Now have we any real evidence that, if you with- drew subsidies, the farmer of the Eastern counties could be capable of making these changes. I think you want to be very careful, otherwise you might find that you’ve not only got a small farm problem but, as you had in the thirties, a large farm problem as well.

The second point I would like to make is about the small farms themselves. Until last night it would seem that we cheerily accepted that small farms not only did not give a satisfactory income but were inefficient. And Mr. Jones and Mr. Jawetz seem to have tossed a bomb into the arena by suggesting that they were just as efficient. I think another word of warning is due here, the farms Mr. Jawetz studied were dairy farms, the farms that Owen Jones dealt with were those less than 50 acres. I don’t think you can do this sort of thing unless you take the type of farming into consideration. On certain types of farms, land does not matter. Obviously on poultry farms on a battery system it does not matter. On dairy farms, to a certain extent, it also does not matter because you can replace land with feeding-stuffs. But Mr. Jawetz studied dairy farms while Nlr. Jones, in studying the small farms of England and Wales, studied mostly dairy farms with supplementary enter- $rises of pigs and poultry. I think if you started to apply the same technique to, say, wheat farms, then you would start to get efficiency with scale.

Professor E. F. Nash: It gives me very great pleasure to be able to say how glad I am that Mr. Lloyd has

become our President. He is a person whom I have had the pleasure of knowing for many years, even before I met him in person I already knew him by repute, because I remember that when I was learning economics which I had to do in a year when I was an under- graduate, my tutor mentioned to me a certain book by Mr. Lloyd which unfortunately I didn’t find time to read at that time. But i t was with very great pleasure that I later became acquainted with him and in due course became his colleague and later his sub- ordinate. More recently I have been associated with him in a certain campaign which is unfortunately not yet quite concluded. Mr. Lloyd is an unconventional sort of person. It is rather odd perhaps that you should find a person like him occupying a prominent position in the Civil Service, but I think we are fortunate in this country that we do from time to time get people like Ted Lloyd amongst the ranks of the civil servants. People with bright and coruscating minds that are always throwing off sparks in all directions such as those which produced the results that we see before us in this paper. He has produced so many sparks and so many ideas here that it is quite impossible to deal with what he said, or what has been said in comment upon it, a t all systematically.

There are several aspects of his paper on which I might if there is time say a word or two ; in particular the general position about imports and whether it is worth while to grow more food a t home in order to save imports. Mr. Lloyd began life of course as a planner. In those days he was a most advanced socialist and that is why I was recommended to read his book on Experiments in State Control. He has of course, said some things that look like Zaissez-fare. I don’t think that is really inconsistent but I think the keynote to Ted Lloyd all through is that he is a rebel against orthodoxy and he was a rebel against what was orthodoxy in his younger days, when laissez-faire was orthodoxy, and he is now a rebel against the new orthodoxy of today. But to come back to the point of growing more food and the terms of trade and the world food shortage and all that sort of thing, i t is quite impossible to say anything sensible about i t in a few moments but I think that perhaps he goes a bit far in denying any possibility that we might be able to save any foreign exchange


by growing food at home. It seems to me now accepted orthodox economics that a country can in general better itself by having a bit of protection. This is quite different from the way we were brought up but that is what they seem to be saying nowadays. And i t all depends on the elasticity of something or other which is frightfully technical and I think i t is probably impossible to evaluate anyway. So i t is very difficult. But, I think i t is impossible to deny that there is some truth in this elasticity argument, that is to say that we do gain, t o some extent, or we can in principle gain to some extent, in the terms of trade, by adopting some rational protectionist policy. However, it is a very different matter t o go on from that and conclude that any sort of protectionist policy is going to make sense, because when you start on economic planning in whatever field, the great danger is that of thinking that any plan is better than no plan at all, which I am sure is quite untrue.

It is very much easier t o adopt a bad plan than i t is to adopt a sensible one. And i t is quite easy to adopt a bad protectionist policy or to push i t too far in some direction. I think we will all agree that we are in that danger in this country now, with commodities like milk and pig meat and perhaps eggs, where it is quite probable that some of the marginal elements in the supply of those things are not in fact saving us any foreign exchange at all but may be costing u s some. The marginal gallon of milk after all cannot be worth more than about 1s. 7d. because that is what i t costs to buy the cheese which we use the milk to make. Yet we pay the farmer three and something a gallon for that milk and i t is very likely that the marginal gallon might well cost him 1s. 7d. in imported feed. I think therefore that there is much force in what Lloyd has said about the difficulty you get into even if you accept the general idea that the farmer can make some contribution to economic difficultics and so on. As soon as you come to look down the list of commodities you are faced with the fact that we seem to be getting near the limit on the number of them. That reinforces the point which he made and which the other speakers have also stressed what we can still do is to find out how to maintain our output at a smaller cost in foreign exchange by malting better use of our own resources of grass and other contributions to the feed supply. There are many other things I would like to say. I was going to talk about the Marlieting Act and I was most delighted to sce that he thinks that we ought t o repeal that. I hope also that he means that we ought to do something about the Milk Marketing Board which is so sacrosanct. When you start arguing against an egg marketing board, they always say but surely the milk scheme is all right. And I was delighted also to see that he is against Part I1 of the Agriculture Act but what about Part I and Part 111. Surely we have had enough of Part I which gives us this price review by this time.

W . E. Cave: I t is customary to say nice things to our President on these occasions about his paper

and most of you have done so. But I, personally, cannot possibly condone such heresy as he proposes. Terms of trade turn in our favour, produce less from our farms ! cut the farm subsidies ! remove some of the feathers from our beds ! Sir, this is blasphemy as well as heresy and many men have been burnt at the stake for saying much less than you’ve said today. And quite honestly, sir, as a farmer I think there’s a lot to be said for that fine old custom.

I will, however, turn to one or two particular items in your paper and comment on them, if I may. There is a paragraph about wheat. You quote two letters from The Times supporting your argument. Well you know you write for The Times, sir, and you should know something about it. Personally, I would divide the writers of letters t o The Times into three categories, broad categories they are. There may be sub-headings but in category one I would put those writers who know something about what they are writing, in category two, I would put those who know nothing about what they are writing and in the third category I would put those who write with their tongues in their cheeks. I do not quite know which catego? these letters which you quute fall into, but I am reasonably certain that they don’t fall into the first. Quite honestly Mr. Lloyd I think i t was very naughty of you to use such unreliable evidence in support of your argument, and I am going to challenge you quite seriously. Can you produce any serious evidence that farmers in this country, any farmers in this country, on a large scale, are producing beef at world prices, or any nearer world prices than the wheat producers of this country are producing their wheat at world prices ? I do not think you can produce any such evidence. And I know from my own figures which are kept fairly carefully, there’s nothing in them to suppose that I as a farmer could do any such thing. I n fact if I have got to produce a t world prices I could much better live by producing wheat than I could beef. I think that, if you are basing your argument on that, you are absolutcly wrong.

There is just one other thing which I should add. You obviously wrote your paper some time ago but here is this week’s Farmers’ Weekly, headed as you can see ‘’ Another drop in Fat Cattle Prices.” I turn over the next page to read “ Most lambs sell slightly cheaper.” Now I don’t know whether that is the writing on the wall or not, but I think that you should keep yourself up to date. On the table, which has already been challenged


by Mr. Kirk, you show a saving of, I think, L67 million on feeding-stuffs and you only show a reduction in the output of fatstock of L3 million. Well I am reasonably certain that if imported feeding-stuffs were cut to anything like that amount the volume of pigs coming forward would fall by very more than the ,43 million you mention.

On marketing you seem to have recanted your earlier views if I might say so. You do save yourself in the summary by saying that the Marketing Act should be repealed or amended. I wish you could make up your mind which you mean, because if you said amended I would agree with you but if you say repealed I would violently disagree. I do seriously consider that you dismiss marketing much too lightly in your paper. I will quote what has happened and which all you agricultural economists should know but which touches my pocket but just touches your interests. I will quote what has happened to the free market of barley in the last two years since all controls have been removed. The price, as you know, has fluctuated between about LlS or L19 a ton and L27 or L2S a ton according to the time of year when you have had your barley to sell. I am going to say as a grower of barley that is much more important today to be a good seller of barley, to market it efficiently a t the right time, than it is to grow it efficiently. I myself feel, but you may not agree with me, that i t is primarily the farmer’s job to grow the crops and he should not be completely a t the will of the market to decide whether he has a reward or not for doing that. If agricultural economists were paid on that same scale there would be considerable difference of opinion as to whether they should be paid at all I I do want to say in conclusion that I do really congratulate you on this paper and I do it because if anyone says anything worth while it usually makes someone react rather violently and you have made me react rather violently.

Dr. J. F. Dtrncan:

I am going to bc very brief because there are only two points I wish to make here. We heard a voice from the 19th century, a ghost from the 19th century. I am also of the 19th century and I am speaking to you today bccause the man who pulled me out of the 19th century was Mr. Lloyd. I found myself something over thirty years ago, a rather careless free-trader, certainly anti-protectionist, having to spend a week-end with a number of gentlemen. who had been got together to discuss an agricultural policy. I found myself undcr the tutelage of the late E. F. Wise and Mr. Lloyd, marketing experts who had had all the experience of the markcting of thc first war and who were outlining for us marketing systems for this country. I rcmcmber the thing which imprcssed me most at that time and it is a point that has never bcen referred to in Mr. Lloyd’s paper, was that the main defect under which farmers were suffering in this country was the instability of price due to the fact that this was the country on which the world’s surplus was dumped.

To meet that instability of price we had the proposal from Mr. Lloyd, which he would not support now I suppose, for import control and bulk purchasing from abroad. I fell for that then and I haven’t seen any reason to depart from it since.

The review of subsidies is long overdue, but what are we going to put in its place. Mr. Lloyd never tells us that. The case for protection and subsidies rests on fear of competition of cheap imported food. What is he going to do about that, particularly if he wants free import into this country ? I can’t see anything else suggested. If he wants free import where is the stability of marketing for the farmer or where is the confidence of the farmer to go on faiming if he is to be open to the surpluses which we had to face before.

What are we going to substitute if you take away the Marketing Act ? If you abolish the Milk Marketing Board, what would happen ? The price would be fixed by the milk distributors absolutely. The milk distributor could dictate to the farmers what the prices should be and if you had no sort of compulsory power you would just get exactly the same kind of thing as we had with the voluntary co-operatives in milk. You could find certain of your milk distributors picking off individual farmers here and there, and you do not need to pick off very many of them to wreck any co-operative agency, if you have no compulsory powers behind you.

What are the changes going to be ? These, I submit, Mr. Lloyd has not touched at all. In the very vaguest way he refers to free competition, in the vaguest way he refers to certain things which can be done for marginal small farmers, and so on, but let us have from him an indication of what his line of thought is, and if it is going to be planning then along what lines are we going to plan. Do not simply throw us back into the old position because we have found difficulties in the ones into which we have moved during all these years. It is a useful paper for stimulating thought and for bringing points before us. TO sum up, and I am doing it with all the frankness of an old friend, he is simply passing the buck.


C. H. Blagburn: My only quarrel with our President’s paper is that it is altogether too logical. I think

we can all say that he arrives a t the policy proposals he makes as a result of a very logical and well reasoned process of argument, and we must all congratulate him on that. But by so doing I think he has created the impression that agricultural policy. or any other policy for that matter, is arrived at as a result of logical processes of argument. A s an ex higher civil servant I am quite sure he knows that that is not the case. Nearly all agricultural policy in the past thirty years has been arrived a t as a result of crisis. in an atmosphere of panic. The Agricultural Marketing Acts to which he takes much exception were the result of the crisis of the 1929/30 depression. No one thinks of altering policy so long as everything is jogging along nicely, but when a crisis arrives you do something very rapidly. It used to be said, when I was in the Ministry of Agriculture, that if you had to prepare a policy memorandum for someone of Assistant Secretary level you had three months to do it in, if it was for a Permanent Secretary, you might have three weeks, but if it was for a Minister you only had three days ! That is the kind of atmosphere in which agricultural policy has been determined. After all the Agriculture Act and the price review system, guaranteed prices and so forth, arose from the crisis of the war and the LlOO million production target for agriculture to which Mr. Lloyd refers and from which we are at present suffering was equally the result of a crisis. I t was the result of the 1947 balance of payments crisis. You were kind enough Mr. Lloyd (or iinkind enough) in your remarks to say that I could shed some light on that figure. Perhaps I can. The balance of payments crisis which arose when we got through the American LlOOO million loan arose in the middle of August 1947. There may be something curious about the atmosphere of August but it is a fact that nearly all crises in Government departments appear to arise in August. And this happens to be the month when higher civil servants take their leave. This was no exception. I very well remember being in the Ministry of Food at that time and one deputy secretary and myself were about the only people left on the ground to advise the Minister as to what line he should take over agricultural policy and I have very little doubt that the same position was true of the Ministry of Agriculture a t that time. Suddenly someone thought of a number, I think it was Mr. Herbert Morrison who was Lord President a t that time, who said ‘’ we must increase agricultural output by LlOO million; we produce a programme within the next fortnight for doing that.” And that is how we got our present agricultural policy.

Mr. Lloyd was quite right in saying that milk, pigs and eggs were picked upon because they were the commodities which could be rapidly produced. They were the obvious choices. But the idea. of which one gets the impression here, that some logical process is gone through in arriving a t an agricultural policy, is I think very far from the truth. We may within the next five or ten years change our agricultural policy, if we do I am quite convinced it will be as a result of another crisis. We shall do nothing until the crisis arises. I think that what the economists who work in Government departments would do if they were wise, and I very much hope they are wise, is this. They would sit down and think very carefully what kind of crisis may be anticipated within the next 25 years. I t may be a collapse of world food prices or a sudden ending of the full employment policy or something drastic of that sort. But if they can only get their ideas clear as to what kind of crisis is most probable, then they can sit down and write out all the necessary memoranda and get together all the necessary figures in support of a policy to be introduced in that atmosphere and have it all ready to slap on the Minister’s table immediately the crisis arises. That will be the only prospect I can see that agricultural economists will have of exercising a really strong influence on the formulation of agricultural policy in the future.

G . Halletl: I want to discuss one small point of some current interest-the method of guaranteeing

prices in a free market, particularly for fatstock. If, as Mr. Lloyd suggests, the profit margin in farming is going to fall, it is more essential than ever that the farmer should have some assurance of the price he is going to receive for his stock, so that he will not be caught unawares by a sudden fall in prices.

The deficiency payments scheme for fatstock, which was intended to provide that assurance is, I suggest, failing to do so a t the moment because of the unfortunate method of implementing the guaranteed price. The details of the scheme are very complex. It has been compared, not unfairly, with the notorious 18th century problem of Schleswig- Holstein, which it was said, was not understood by six men in Europe. The fatstock deficiency payment scheme may be understood by six men in Britain, but I doubt if it is understood by six farmers, and that, I think, is a disadvantage in itself. Moreuver, it leads to arbitrary, unpredictable, and often undesirable fluctuations in the level of the subsidy throughout the year. The subsidy is based on the difference between the guaranteed price and the average market price over the previous twelve months. This is a kind of delayed action effect, so that if there is a sudden fall in prices the subsidy will not rise for some time. By the time the subsidy has arisen to a high level prices may have recovered;


so farmers who receive low prices receive low subsidies or none at all, while farmers who rcceivc high prices may also receive high subsidies.

This was pointed out last year by one or two people, including myself, when it was only a theoretical possibility. Since then this is exactly what has happened in the case of cattle. Prices fell sharply in the early months of this year, but, because of the high prices last year, no subsidy payments were made until April, and even then were very small. Since then subsidies have risen sharply whereas prices have fallen only slightly. Therefore farmers who sell fat cattle this autumn will receive very high subsidies because of the very low prices received by farmers who fattened cattle over the winter. As can be imagined, farmers have very little idea of how much in all they will get when they sell their cattle, and this makes it difficult for them to adjust their marketing to consumers’ requirements. Even a fixed subsidy would give them more idea than the present system of the prices they are likely to receive.

To meet criticisms of this kind the Ministry introduced at the,!ast pfio Review a further complication called “ stabilising adjustmcnts.” They set a floor price and a ‘’ ceiling ” price one ej:her side of the gua;r;anteed price and said that if returns to producers fell below the ‘ I floor ceiling,” they would adjust the subsidy to bring returns within this range. I suggest that this is a very bad system because it gi,yes profition only to farmers who sell in the glut period in the autumn. If you have a price which is constant throughout the year and is low enough in relation to autumn prices it will necessarily be too low to give any worthwhile support to spring prices.

So I suggest that the present system is failing and that the only sensible alternative, apart from a fixed subsidy, is to have seasonal standard prices, in much the same way as for wheat. Under this system the deficiency payment would be the difference between the standard price for each period, say a month, and the average market price in that period. Thus a farmer would know roughly what he would get in each month of the coming year. If, for example, the standard price for April were L7 per cwt. he would know that he would get something like that, perhaps a little more or less, but not disastrously less. This method would be fairly intelligible, and, without necessarily increasing the total subsidy, would give the farmer the confidence he needs but does not have a t the moment.

or rose above the

floor

K. Rasmussen:

I have only got three points. The first refers to table 2. Mr. Kirk expressed his doubts about the possibility of achieving this goal. I think if I had the same confidence as Mr. Kirk, or a t least the Ministry, in assuming A30 million of increased efficiency by farmers a year, I could accept this table by Mr. Lloyd, I think it is quite widely assumed that lower prices of livestock could cause a substantial saving in imported feeding stuffs used. It does not appear to me impossible if livestock production was reduced by L6l million, and with the assumed increase in efficiency which Mr. Kirk tells us about, to save L67 million on feeding stuffs.

I should like to direct the next remark to Dr. Duncan, who argued strongly about the great advantage in stability and security, which by the way is, I think, a dogma accepted by Mr. Lloyd. I am not certain that this security and stability always causes greater efficiency in farming. If you take European farming you would have Denmark and Holland as probably the most efficient countries in so far as they maintain a high proportion of their income a t world market prices. Well, they have not got this stability and security. Similarly, United States agriculture appeared to me to have been rather efficient when they were left to the free blast of competition but have lost a lot of their efficiency since they were protected and achieved greater stability and security.

One dogma was passed over by Dr. Duncan, the idea that this country is a dumping ground for cheap foodstuffs. You must not forget that a lot of that foodstuff comes from countries which are not supporting their agriculture add which are not dumping a single bit of their export. No substantial export of agricultural products from Denmark or from Holland are subsidised. It is simply a fact that they can produce butter and sell it to this country at prices which would leave the farmers in this country about 1s. 6d. a gallon and do it efficiently under, on average, probably poorer climatic conditions.

I should like to see a long term policy of amalgamation as one way of training ingoing farmers, etc., to achieve similar efficiency in this country so that subsidies would be un- necessary. Until that happens I cannot see that one can forego support based on social reasons. But the idea of pensioning off farmers with a specially higher pension than the old age pension seems to me to be inequitable. Why not the small shopkeepers who have only got their old age pension to go on ? Why should the farmers be preferred, not only while producing, but also while living in retirement ?

Journal of Agricultural Economics. 151 M . B. Jawelz:

If protection of agriculture is a bad thing, why should we protect our industry ? The argument of Mr. Lloyd’s about the strategic unimportance of an efficient agri-

culture does not convince me. As far as keeping up shipping capacity is concerned i t obviously takes more bulk to ship feeding stuffs into this country than to ship produce ready for human consumption. Furthermore the expansion of agricultural production in times of war involves levels of know-how and output-capacity which can only be expected i f a certain level of intensity is maintained before the necessity arises. Between the wars some farmers forgot how to plough.

There is one line of 19th century thinking which has not been mentioned at all for a long time. I mean the “ dogma ” of specialization and division of labour. If we admit foods from countries who can produce them cheaper, why do we not ever think about a division of labour within British agriculture ? Why not a programme in which the regions of the country, the farms of various size, soil and climate could use their economic advantages to a much larger extent than they do a t present ? Whatever division of labour there was, went overboard during the war. Since then the false dogma of self-sufficiency on every farm has been an impediment in the progress of specialization. Almost every farmcr. irrespective of size and capacity of farm, produces some item or other in which he is relatively in - efficient.

If we looked at the problem with an eye to the possibilities of specialization and a division of labour, we might come to entirely different conclusions from those we seem to reach now about small and large farms, hill farms, dairy farms, etc., and their various intensity levels and patterns of production.

E. M . H . Lloyd: I can only say, Mr. Chairman, that I have been let off very lightly and I am grateful

for the large number of interesting comments and suggestions. First of all I would like to thank kIr. Kirk and others for their treatment of my figures and tables. I don’t proposc at this stage to defend them but I may wish to make some modifications later.

hlr. Walston referred to my comment about Germany. I agree that in general Germany is more protectionist than this country and has a higher tariff on imports. My comment was meant to apply only to eggs for which there is only a moderate protective duty and they have now become the largest importers of eggs. I am puzzled to know why we should use a subsidy to become self-supporting in eggs. When you become self-supporting in anything there is always a tendency to produce a surplus. I think we are going to have a surplus problem for eggs.

This brings me to the most important issue on which I have been challenged. Dr. Duncan and others said that I have reverted to liberal free trade ideas. On that I would only say that I am no more inclined to be a dogmatic free trader than a dogmatic anything else. I prefaced my paper by saying how little any of us know and I applaud Mr Hirsch’s suggestion that we need to ask ourselves more questions at this stage. These problems about the right policy that government should adopt towards agriculture are not going to be solved overnight. What we need is a gradual approach to a sensible policy. I’m all in favour of sound planning but before we can work out a sound plan we must clear the ground and get rid of the old plans which have ceased to be relevant today. The thing that most impresses me in my experience is how the best plans may go awry when you get pressure groups using them for their own purposes. .

As for the demand for security and assured markets, that raises a large question mark. I am not convinced that agriculture has any special claim for more security than other industries. The motor car industry and others enjoy a protective duty and that is held to justify subsidies for farming. But does the motor car industry really require protection ? Last year, I think this country was the largest motor car exporter and had beaten Germany and the United States. That means that our car manufacturers are able to compete in other markets with German cars and Italian cars. When our farmers are able to compete in the export markets of the world a t the prices they receive at home, then there will be some analogy with the motor car industry. But as for assurance and stability, I think we have advanced since the days Dr. Duncan referred to. When in 1925 the Government decided that the right plan was to go back to the pre-war parity of the pound one was entitled as an agricultural economist t o say, “ This is going to affect farmers. We want stability of money. If you are going to change the value of money either by deflation or inflation, then you can’t get efficient agriculture.” I still believe in stability in the value of money and that is what everyone in trade or in farming requires. We have now apparently learnt how to exorcise the evil spirit of deflation, but other spirits have entered in to take its place and we are still baffled as to how to exorcise the legion of inflationary spirits. 1 fear that our policy of bolstering up farm incomes may be a contributory factor in this


constant depreciation in the value of money. That is my answer to Dr. Duncan who said that I had foresworn ideas of planning and stabilisation.

I agree with Mr. Blagburn that i t is only too difficult to expect any government to pursue a logical policy and that is one of the reasons why, however logical a socialist’s plans may be, they are apt to get tripped up and distorted when it comes to their realisation. Corvuptio optimi pessima.

I was pleased to have support from Mr. Rasmussen not only on my tentative figures but on the question of dumping. I wondered if I ought to use the phrase dumping ground; it ought to be put into inverted commas. Dumping as used in farm politics means anything imported which is cheaper than someone’s idea of what the price ought to be. We as taxpayers are subsidising the production of condensed milk which is being sold in competition with Dutch milk in our colonies. If we go on with our egg subsidy we shall I suppose be dumping our surplus eggs on the German market.

I was interested that Mr. Rasmussen challenged my suggestion that we might deal with the problem of the elderly small farmer by offering him a pension. I still think we shall have to have a special policy of this kind for sub-marginal farmers on the analogy of the assistance given to crofters in the North of Scotland.

Let us have our social welfare measures and be as generous as we like in deserving cases. But in the interests of economic efficiency my contention is that our object should be to become competitive with other countries. We are not now planning to deal with a major world slump but with an inflationary boom. Don’t let us have a long term policy evolved to deal with a slump and keep i t going all through a boom so as to be ready for the succeed- ing slump. We’ve got to be a bit quicker off the mark and adapt our policy to changing circumstances as they arise.

I am sorry that I have no time to deal with the points raised by other speakers. -411 that remains is for me to thank you most heartily for your kind attention.

Documents

SOME THOUGHTS ON AGRICULTURAL POLICY