Century of Endeavour

Report of the Tribunal on Prices 1926

(c) Roy Johnston 1999

(comments to rjtechne@iol.ie)

This Tribunal was set up by Patrick McGilligan, Minister for Industry and Commerce, in response to a public perception that consumers were being overcharged for articles of general necessary consumption. The Chair was Senator SL Brown KC and the members, apart from JJ, were Professor Busteed, RA Butler, Maire Ne Cinneide, Major Bryan Cooper TD, Senator T Farren, JF Maguire and PW Shaw TD.

The Report contained chapters on Bread, Meat, Milk, Groceries and Provisions, Porter and Stout, Vegetables and Fruit, and Fish. Each was analysed in Dublin and the main provincial centres. The Tribunal came up with recommendations relating to improving weights and measures, consumer credit, auctions of produce, and display of prices.

I reproduce here JJ's addendum, which constituted an attempt to do a theoretical adaptation to Irish conditions of the experience abroad picked up during his Rockefeller Foundation project, and to make a case for the development of a consumer co-operative movement.


Rockefeller Fellow for Economic Research, 1926-1927.


1. I agree with the other members of the Tribunal that there is need for the continuous investigation of the spread between the cost to the producer and the price paid by the consumer of articles of general consumption and that the establishment of a Prices Board is, therefore, desirable. But for reasons which I state in this memorandum I go farther than my colleagues, and am of opinion that, in order to make its work thoroughly efficient the Prices Board should operate in coordination with a National Economic Council, the Establishment of which I recommend. As the other members of the Tribunal were of opinion that the question of the establishment of such an Economic Council was strictly outside the terms of our Reference, I desire to to add this memorandum to our Report.

2. The object of national economic policy is to facilitate an increase in the consumption of wealth by all, but especially by those who now receive an inadequate amount of "this worlds goods". It is a commonplace of Economies that more cannot be consumed unless more is produced. But it is not generally recognised that in a certain limited sense more cannot be produced unless more is consumed.

3. In any given state of a country's economic activity there is a certain volume of primary goods coming into existence, entering on the various processes of transformation and distribution and finally emerging as Consumers' Goods on the shelves of the Retail Trader. If the system of distribution were perfect, Consumption would equal 100% of Production. Actually, in the case of agricultural produce, consumption is never quite at the 100% level, and sometimes falls far short of it. It is important to distinguish between production of primary goods in the physical sense (of which plentiful statistics are available) and production of these same goods in the economic sense, which refers only to that proportion of them which finally achieves consumption. The element of waste in the distribution of agricultural produce has not yet been subjected to exact statistical measurement. That it is considerable under present conditions, and that it is possible to reduce it substantially by a suitable national economic policy, have been forcibly impressed on the present writer after hearing the evidence given before this Tribunal, and studying the experience of other countries.

4. It is a waste of national effort to seek to increase production in the physical sense, unless there is some guarantee that consumption also will increase.

5. In the case of manufactured goods, which are capable of keeping indefinitely, there is no spectacular appearance of goods being produced and then going to waste, as so much of our milk supply is wasted. Even in this case the efficiency of distribution is of fundamental importance, and if the latter is unnecessarily expensive the result is likely to be inadequate use of manufacturers' plant, and unemployment. Whether the cause is in the retail trade itself, or in the antecedent processes of distribution, or in both, the effect of inefficiency of distribution is that retail prices are unnecessarily high, and the effect of this is to sterilise production. From this point of view the only difference between agriculture and industry is that in the former case a certain proportion of the physical volume of production is abortive, in the latter case, owing to inadequately used plant, goods that might have been produced fail to see the light of day.

6. The relationship between production and consumption is not governed solely by the volume of the former. To take a homely analogy, production is increased and stimulated by adequacy of consumption, as a cow will only give her maximum volume of milk if every drop is extracted by efficient milking.

7. Ever since 1921 there has been a disequilibrium between Retail Prices in these islands and Wholesale Prices. This disequilibrium is indicated, but riot exactly measured, by the respective movements of the Cost-of-Living Index Numbers and those of Wholesale Prices. As regards Great Britain, the present writer has shown elsewhere that for the years 1921-1925 the more closely the Index Number of Wholesale Prices approximated to 100% of the Index Number of the Cost of Living, the more closely did the Index of Employment approximate to 100%. This would suggest that there is a direct relationship of cause and effect between high Retail Prices and Unemployment. On general economic grounds there is no reason to doubt such a relationship, but it is not yet possible to apply a satisfactory statistical test.

8. The prices of agricultural products are in general pre-Wholesale Prices, and the disequilibrium between these and Retail Prices is also a notable phenomenon of the post-war period. Unlike manufactured goods, which are turned out in bulk, the products of the farm come to market in small quantities, and must, therefore, he collected before they can be distributed. In general they must pass along a longer channel of intermediaries before they reach the consumer. Every single intermediary is estimating supply and demand from his own limited point of view, and the possibility of mistakes, causing waste, and expense both to the producer and consumer, is greater, in proportion to the number of stages in the process of distribution. A business may be well organised and efficient, regarded as a single unit, and yet the whole process of distribution in which it plays its part may be ill-organised and wasteful from the public point of view. A test of efficiency from the latter point of view is the degree of economic friction that exists in the relations between distributors at one stage and those at a subsequent stage. When a reduction of price at one stage is rapidly and effectively passed on to those at a subsequent stage, economic friction is at a minimum. What is called the friction of retail trade, or the reluctance of the retailer to pass on a reduction of price to the consumer, has been very forcibly impressed on the Tribunal in the course of its investigations. The "stickiness of prices at the final stage is only equalled by their extreme elasticity at the primary or producers' stage, more especially in the case of farm produce.

9. From the social point of view the function of retail prices is to regulate consumption and adjust it to production - to make sure that no attempt is made to draw a larger supply from what may be called the outlet pipe of distribution than the reservoirs and antecedent channels are able to maintain. When retail prices are low consumption is stimulated, when they are high it is checked. In the absence of a rationing system, which is indefensible in ordinary times, it is the duty of retailers to raise prices when demand threatens to outrun supply - and to lower them in the converse case. Failing to understand their economic function, about which also public opinion is not well informed - retailers show a certain reluctance to make any changes in price at all, though they are more apt to raise them than to lower them.

Thus the butchers do not lower their prices as much as they should in the summer, when beef is plentiful and relatively, cheap to them. In any consideration of the process of distribution as a whole, retail prices, and the causes determining retail, price policy, are of paramount importance. No more can profitably be introduced into the upper channels of distribution than retail price policy will let out for the purposes of consumption. Yet owing to the conservative retail price policy which is generally practised there is, in the case notably of milk and meat, a seasonal, and in the case of commodities in general a cyclical banking up of the reservoirs of distribution, which overflow, occasionally causing economic waste.

This is the main cause of that disproportion between producers' post-war prices and post-war retail prices, which is so marked a feature of the present agricultural and industrial depression. As well attempt to drain the Shannon without dealing with the narrows at Killaloe as to solve the problem of increased production and better distribution without in some way securing that retail price policy will enable the whole of what has been produced to be consumed.

10. At this stage a fundamental issue of social policy may be raised. Is the State to rely on free private enterprise, and on the profit making motive, as the main method and incentive of economic activity ? It is necessary to raise this question because various methods have been suggested - price-fixing and the licensing of shops by public authority -which interfere more or less with the freedom of private enterprise. It is possible that either or both of those methods may have to be resorted to in certain cases, but in general it may be regarded as axiomatic that the State should interfere as little as possible with the management of his business by the private citizen. There remains, however, an important domain of economic policy, where, without interfering with individuals as such, the State may regulate the conditions in which businesses are carried on, and make straight the way for new business organisations of which the establishment is required in the general interest.

11. Consumers' Co-operative Societies are examples of a form of private enterprise in which the profit-making motive is eliminated. Elsewhere they have been successful in restricting the level of retail prices, and increasing the efficiency of distribution. Unfortunately this branch of the Co-operative Movement is not so large in the Saorstat as to influence the general situation. Since they depend for their success on the organised efforts of consumers, and on efficiency of management, the State, can make no positive contribution towards their establishment. The present policy of indirectly favouring their growth by granting them certain fiscal concessions and exemptions should, however, in the general interest, be maintained and developed.

12. It seems likely that the State will continue to rely on the profit-making motive as the main incentive to economic enterprise. There is nothing to be ashamed of in the making of a profit, even of a large profit, as such. It is the only way in which business men as a class can get paid for their work, and the making of a profit is the "acid test" of business success.

Any business man who says he is not trying to make the largest income he conveniently can is either a philanthropist or a somewhat untruthful person. It is important to distinguish between "profit" in the sense of rate of profit, and "profit" in the sense of business income derived from profit. High rates of profit invariably mean high prices but not necessarily high business incomes.

The economic interest of the business man is to discover what price, and therefore, what rate of profit will yield him the largest net income at the end of she year - bearing in mind that the higher the price the less he vast sell. In view of the existing redundancy of shops and the difficulty of expanding turnover, economic circumstance gives traders an overwhelming economic interest in following the high-price-high-profit-rate policy. The problem is to create conditions in which it will be to the economic interest of business men to follow a low-price-low-profit-rate policy. A first step in that direction is to bring about a gradual reduction in the number of shops.

13. In any case, unless his freedom is curtailed the business clan will try to make the largest income he conveniently can - in which respect he does not differ materially from those of us who are not business men. It is the duty of the State to harmonise as far as possible the economic interests of business men with the general interest - unless some other incentive than profit-making is to be relied on. So long as competition remains effective direct interference with prices and profits is injudicious, but many of the wastes incidental to the present system can be eliminated without impairing its essentially competitive basis.

14. The fact must, however, be recognised that some business incomes are parasitic. Public policy ought to be directed towards the elimination of these. The services rendered in return for such incomes may be necessary under present circumstances, but that necessity would disappear if the whole business process of which they form a part were organised more efficiently. The functions of "forestallers" in the Dublin Vegetable Market are necessary now because there are so many small retail shops in the fruit and vegetable trade. They would cease to be necessary if the latter were fewer and larger.

15. Other business incomes are the result of high rate of profit which is general in a particular trade, because the margin of efficiency in that trade is low. As explained in the Introduction the price and profit rate which just enables a struggling trader to survive affords a differential margin of net profit to his more fortunate fellow. If the margin of efficiency were raised by the elimination of the less fit the turnover of the survivors would he increased, and it might very well happen that the latter would find that a lower price policy than before yielded them a larger income than before.

16. There is complete unanimity amongst the members of the Prices Tribunal about the desirability of reducing the number of retail shops, but the Report does not specify in any detail the precise way in which this should he done. The reference to the licensing of shops is not accompanied by any definite recommendation. There is a general objection both to licensing and to price-fixing in that they impose the heavy hand of public authority on the freedom of individual economic action. If a system of licensing shops were to he introduced it would have to be done in an absolutely impartial manner and with intimate knowledge of local needs and circumstances. A central Department would probably exercise such a function impartially, but without the requisite local knowledge; a local or municipal authority would have the necessary knowledge but perhaps not the necessary impartiality.

17. If the principles recommended by the present writer in evidence before the Greater Dublin Commission should at a later stage be applied to other local governing authorities, it would be possible to entrust such bodies with the delicate tank of controlling the number of shops. Such powers are in fact exercised by certain German Municipalities.

18. There are two kinds of licence duty; the difference between them is the difference between a dog licence and publican's licence. Anyone who likes can keep a dog, on payment of a certain licence duty. Not so in the case of a public-house. The objections hitherto considered are objections to licensing of the public-house kind. If a tax, which may be called a licence duty, can be devised which in its incidence will tend to reduce the number of retail shops, without being passed on to the consumer, such a tax ought to be imposed, more especially if its imposition will not involve any bureaucratic restriction of the economic liberty of the individual.

19. It is estimated that not more than 10,000 out of over 42,565 retailers pay any Income Tax at all. If a tax, which in the first instance might be a nominal £5 per annum, were imposed on all retailers as such, but treated as a part payment of Income Tax in the case of those who do pay Income Tax, in no case refundable, the incidence of that tax would be on the less efficient, ie those who paid no income tax. Prices would not be affected, for Income Tax paying retailers would be paying no more tax than before. The effect of such a tax would be to encourage the exit from business of "marginal" business men, who were meditating going in any case, and to discourage the entrance of new aspirants. If a tax of £5 was not sufficiently effective it could be increased.

The gradual effect of such a tax would be to increase the turnover of surviving businesses, and create for them the economic circumstances in which a lower price policy would yield the largest net income. A tax of £5 would add nearly £200,000 to the public revenue, and the set-off in respect of the former Income Tax payers for whom the new tax was no additional burden would he made good as an indirect result of the diffusion of a wider prosperity.

20. A tax in excess of £5 imposed by the State might produce unforeseen reactions in certain parts of the country. If local administrative services were reorganised, as suggested before, it would be possible to increase the financial freedom of local governing authorities in the matter of taxation. Any variation of the tax above the £5 level should be at, the discretion of the local authority.

21. Important questions of public finance and public administration, national and local, would have to be considered in a full discussion of this matter. It might suitably occupy the attention of the National Economic Council which, in my opinion, ought to be set up.

22. The remedy here advocated for high retail prices is to improve, if possible, the efficiency of business from the public point of view without impairing the motives of business activity that affect the individual.

23. To expect business men to become philanthropists, and lose money by charging a more equitable price, is to expect a moral revolution.

24. To abolish the profit-making character of retail trade, in favour of a system imposed by public authority, would be, in its way, an economic revolution. If monopoly conditions should exist there would be a strong case for public regulation and control of prices and profits, but there does not appear to be an immediate danger of monopoly in the retail trade of the Saorstát.

25. The proposed tax on inefficiency would, I believe, have a valuable effect in raising the margin of business efficiency in retail trade as a whole. It has this additional recommendation that, so far from adding to the expenses of the State, it would by a kind of economic alchemy transform the dross of our retail trade into the gold of additional public revenue. If the question is raised as to the future fate of retail traders, who have been the victims of this fiscal Euthanasia, the answer is that the process will be a gradual one to which they can adjust themselves. Anyhow, 14,268 out of the total of 42,565 retailers appear to have some other means of livelihood. In a healthier condition of the national economy their absorption into new and more useful economic activities would take place automatically.

26. It may be pointed out in this connection that the State has already committed itself to serious and even drastic undertakings which are explicable and defensible as part of a general policy of improving the economic efficiency of the State as a whole. The Shannon Electricity Scheme the legislation affecting Dairy Produce and Eggs, and the recent purchase of Proprietary Creameries with a view to the suppression of surplus and, therefore, uneconomic creameries -- these are examples of the piecemeal application of a National Economic Policy which it would be an important function of a National Economic Council to think out, coordinate and complete. At present it wears somewhat the appearance of a jig-saw puzzle, important pieces of which are missing. The pattern of the whole is not yet clearly apparent to the general public.

27. The argument for suppressing surplus economic units is just as applicable to retail trade establishments as it is to Creameries. The only question is one of means.

28. So far as the business efficiency of individuals is concerned the State has long since accepted the responsibility of doing what it can to improve it. The educative work of the Ministry of Lands and Agriculture among the farmers has been intensified. Technical and commercial education is given in the towns, and the Universities have established Schools of Commerce in which the Higher Education is allied with a knowledge of the sciences that are necessary to business leadership.

29. In so far as they look to business character and capacity, and not merely to "real security", the Banks exercise important selective functions in deciding who shall have larger business opportunities and who shall not. A return furnished by the courtesy of the Irish Banks indicates that the total number of Retail Traders having bank accounts is 33,076. Evidently there are 9489 Retail Traders who for one reason or other do not possess a cheque book. In so far as the latter make use of credit facilities, the facilities in question are not provided directly by the Banks. The latter are the professional assessors of the Credit-worthiness of business men, and it is undesirable in the public interest that so large a proportion of Retail Traders should escape their supervision in this important matter. Here again if Retail Traders were fewer in number, and on a larger scale of business, the situation would be different.

30. Even under the British regime the State accepted the responsibility of improving economic efficiency, not merely by the education of individuals, but by large scale action directed towards the economic transformation of the nation as a whole. The traditional policy in this matter has been to establish public institutions like the Land Commission or the Congested Districts Board. Wisely enough the British policy has been in all essential respects maintained and continued, so far as the question of land purchase and land settlement are concerned. A certain reluctance to think things out, and deal with a problem in a logical and comprehensive manner, is characteristic of British mentality. Rather unwisely, in my opinion, there has been a marked tendency to deal with economic problems in a piecemeal manner, in unconscious imitation of British practice.

Since the establishment of the new regime institution after institution, public or semi-public, has been established as agents and administrators of various economic policies, but no thought appears to have been given to the inter-relation of the economic problems with which each is respectively to deal. Although we have many economic policies, we are still without a conscious and complete economic policy, because we have not yet created an institution which is capable of developing one.

31. The institutions which have been, or are about to be established, in order to give effect to our various economic policies are as follows:-

(1) The Land Commission;
(2) The Ministry of Fisheries: as successor to the Congested Districts Board;
(3) The Ministry of Lands and Agriculture;
(4) The Industrial Trust Company;
(5) The Tariff Commission;
(6) The Shannon Electricity Board (the Electricity Supply Board);
(7) The Currency Commission;
(8) The Agricultural Credit Corporation.

A Prices Board will be added to the number if the main recommendation of the Prices Tribunal is carried out.

32. Perhaps the most important dynamic force, at all events in the inception of new economic policies, is represented by the expert officials of the Ministries which are concerned with economic affairs. It may as well be recognised that modern democracy would he futile and impossible unless there were a fertile association between expert administrative capacity and political persuasiveness. Ministers themselves have been the first to acknowledge what the State already owes to the zeal, intelligence and capacity of its Civil Servants. As a member of this Tribunal, and formerly of the Agricultural Commission, I personally have had numerous opportunities of observing how helpless would be the amateur investigator if it were not for the unfailing resourcefulness and loyal co-operation of the trained official.

33. In the future as in the past the expert officials of the various Ministries must continue to play a part of vital importance in the conception and elaboration of economic policies. The proposal for the establishment of a National Economic Council is essentially a proposal for organised co-operation and team work between them and the various administrative agencies of economic policies.

34. The Prices Tribunal was established under the auspices of the Ministry of Industry and Commerce. Other Departments were requested to furnish us with every possible assistance and co-operation, and this request was complied with most willingly. As a matter of fact there was hardly a single Ministry which did not afford us valuable information. The Ministry of Defence and the Ministry of Justice do not appear to have much to do with economic affairs, but they were able to facilitate us greatly in certain important matters.

35. Yet owing to defects in the organisation of the public services, matters germane to our inquiry were not available for our consideration. Certain other matters which we considered of interest to us only came to our notice by accident.

36. About the same time as our Tribunal the Tariff Commission was set up and its investigations have been proceeding concurrently with ours. Tariff policy notoriously affects retail prices. If it had been possible for us to complete our investigations it would have been our duty to consider tariff policy in its relation to retail prices, and in the absence of arrangements for co-ordination duplication of effort would have been the result.

37. A Commission has also been inquiring recently into the economic position of the Irish fisheries, and has considered, among other matters, the problem of marketing and distributing the fish.

38. No automatic provision exists for the exchange of data between Commissions whose terms of reference overlap -- as they are bound to do at times, and in this instance the Prices Tribunal and the Fisheries Commission, following parallel lines of inquiry, have never met.

39. During the course of our inquiry the Minister of Industry and Commerce, in conjunction with the Ministry of Lands and Agriculture, helped to bring about the reconstruction of the Drogheda Meat Factory. One of the causes of high meat prices is the existing superfluity of small slaughter-houses, and the impossibility of making effective use of bye-products, which such a system entails. If a National Economic Council had existed, the question of the Drogheda Meat Factory would have been considered from the point of view of the part it might play in the better organisation of the meat trade for domestic consumption as well as for export.

40. The paramount importance of the export trade, especially in agricultural products, is unquestioned. If the expert officials of certain important Ministries have a natural tendency to think in terms of export markets and the foreign competitor, the tendency would be corrected by membership of a body with the catholic economic outlook of the proposed National Economic Council. I shall subsequently show that even the economic policy applied with notable success to the Dairy Industry (which as a member of the Agricultural Commission of 1924 the present writer took some part in framing) suffers from the same defect of lopsidedness.

41. The business of the Central Government is of necessity divided amongst a number of different and highly-specialised departments. In the nature of the case their expert officials see things through a departmental tube. In spite of the clearness of their vision, when the officials of different departments direct their gaze at the same object, they do not always see the same thing. It is the nature of a searchlight to obscure what it does not reveal. The function of a National Economic Council will be to throw a diffused light over the margins of questions which are for the time being in the full glare of departmental examination, and to co-ordinate the manipulation, so to speak, of departmental searchlights.

42. As already indicated even the special Commissions and tribunals of investigation, which are from time to time established, share to some extent the limitation of outlook of their departmental origin. The National Economic Council which it is proposed to establish will, it is hoped, render the establishment of such special investigating bodies to a large extent unnecessary, but if for any reason such a body has to be established it will be able to accomplish its purpose in the minimum of time and with the minimum of effort. Like Athene from the head of Zeus, it will spring fully equipped for its task from the parent body.

43. By a decree of the 10th January, 1925, a National Economic Council was established in France. The object was to create a school for the dispassionate study of economic questions, from the point of view of the general economic interest, and to supply an organ of "inter-ministerial" co-ordination. In conformity with this idea it is attached to the office of the President of the Executive Council - not to any Ministerial Department. It is there to be consulted by the Government, but it has also the right to give its advice unasked on any matters in which it chooses to interest itself. Its membership includes expert officials from the Ministries of Finance, Agriculture, Labour and Commerce.

It may also summon non-official experts --"techniciens", economists, and jurists to assist in its deliberations. The ordinary membership is based on a semi-representative principle ,the governing idea being that the consumers' point of view should predominate. The Government decides what organisations shall be represented, and each such organisation freely appoints its delegate to the Council.

There are 47 such delegates. Three are appointed by Consumers' Co-operative Societies, and six others represent directly various aspects of economic consumption. Eleven delegates represent managerial services in industry, agriculture etc, while fourteen represent wage-paid labour of various types.

Industrial capital is represented by three delegates, land-ownership (urban and rural), by two, while the Capital associated with banking, insurance, and the Stock Exchange has a representation of three.

44. Reports of the National Economic Council have been published in "Annexes" to the "Journal Officiel". One such report deals with hydraulic production and distribution of electric power. Another deals with co-operation and agricultural credit as means of intensifying agricultural production, another with the electrification of the countryside, another with live stock, etc etc. It would appear from recent experience that the Saorstát has need of a rational and enlightened public opinion on questions like these, and in this connection a suitably constituted National Economic Council might play a useful part.

45. It should contain in the first instance official experts from at least the economic Ministries -- Finance, Agriculture, Commerce and Fisheries. To these should be added experts from the Industrial Trust Company, the Tariff Commission, the Shannon Electricity Board, the Currency Commission, the Agricultural Credit Corporation, and the proposed Prices Board. The Chairman of the Currency Commission should be the Chairman of the Council, and the Secretariat of that Commission should act as the Secretariat of the Council. As in the case of France it should be attached directly to the office of the President of the Executive Council, and not to any Ministerial Department'.

46. Delegates from the more important professional economic organisations should belong to the Council, as in the case France, and be appointed by a similar method.

47. The representatives of Capital and Labour have been known to practise in public the form of co-operation which consists in the reciprocal removal of motes and beams from each other's eyes. It would have to be clearly understood that the National Economic Council is not a theatre for the practice of this type of opthalmic surgery. By whatever right they became members they should be persons whose eyes are, in the scriptural sense, "single", and thus the whole body of its membership would be full of light.

48. A Council of this kind, in addition to the work which it would undertake of its own initiative, would be consulted as a matter of course by the Government about various economic propositions, when they had begun to take shape in the hands of its expert advisers. If such a Council had existed when the legislation establishing the Shannon Electricity Board was in process of incubation, it could have been consulted. Assuming that it would have given its approval to the main outlines of that Bill, the Government at a later stage would only have had to confront the public with its findings in order to prevent a ridiculous stampede of public opinion.

49. The present writer agrees with the other Members of the Tribunal about the need for continuous investigation, and the desirability of establishing a Prices Board. The latter should represent especially the Consumers' point of view. As the ultimate object of economic policy is the increase of consumption, the point of view of the Consumer is of paramount importance. The influence of retail prices on Consumption - and Production - has already been emphasised. As the causes of Retail Prices are numerous and pervade the whole economic body, a Prices Board, functioning in vacuo or even in close association with one or two Departments. will accomplish little or nothing. The Prices Board should form part of a single organic whole, which is continuously engaged in the study of economic problems, while the various entities embodied in it are taking practical steps to solve the particular problems committed respectively to their administrative care.

50. The economic policy applied to the dairy industry may be said to have originated from the Agricultural Commission of 1924, though in point of fact the Ministry of Agriculture recommended to the Commission a policy which resembled very closely the one which the Commission in due course recommended to the Ministry.

That policy is concerned mainly with the export trade in butter. Recently there has been an inquiry into the milk supply of the towns -- from the point of view of public health among other things. The Prices Tribunal has also considered the milk supply of towns from the point of view of retail prices, and its recommendations are embodied in this Report.

51. If the problem of the milk supply had been considered by a body like the proposed National Economic Council it would have realised that the trade in fresh milk is only one of the many activities of the dairy industry, which also includes the manufacture of butter and indirectly the rearing of pigs and calves. At a moderate estimate the value, at retail prices, of the milk consumed by the urban population of the Saorstát is £3,000,000 per annum. The value of butter exported in 1925 was £3,649,000. This must not be taken as an exact index of the relative importance of the two outlets for milk, but it does indicate that the trade in fresh milk is of sufficient importance even from the point bf view of the agricultural interest.

52. A National Economic Council would at once realise that an economic policy for the dairy industry must envisage the industry as a whole, including the trade in fresh milk, and harmonise if possible the interests of producer and consumer in the case of the latter.

53. Milk is milk the world over, and there are certain basic economic facts, with regard to its production and consumption, which must be kept constantly in mind. The consumption of fresh milk is practically uniform throughout the year, and, if anything, diminishes in large cities at the very time when the inevitable summer surplus is near its maximum. Whatever interest can make effective use of the summer surplus, and keep it off the liquid milk market, is master of the economic situation. In England a large-scale semi-monopolist undertaking has practically achieved that enviable situation. It has its butter and cheese factories in the chief dairying districts of Southern England, and it seems almost impossible for English farmers to dispense with this organisation, or replace it by one of their own.

54. The trade in fresh milk in the Saorstát still presents that amoeba-like but chaotic condition of incomplete development which makes it still possible to organise it in the interests of the the consumer, and the public. In the alternative it will fall an easy prey to the monopolist. In many cases individual farmers deal direct with individual small-scale retailers. The quantity of milk furnished from day to day is never quite certain, and sometimes fluctuates considerably. In the summer the farmer pushes as much as he can of his surplus on the unwilling retailer, until, in the picturesque language of certain witnesses, "their shops are swimming in milk", which they cannot possibly dispose of in its entirety at an economic price. Of course the price to the farmer breaks in the summer. The wastage is sometimes as high as 10%. Both farmers and consumers suffer from the general inefficiency in the form of unsatisfactory prices.

55. About forty miles north of Paris, at Lyons-la-Fret, there is a co-operative creamery which the present writer lately had the privilege of visiting. It was established in 1900, as a result of the intelligent initiative of some thirty farmers, who were tired of economic dependence on private milk collecting firms. It now numbers about 400 members who are bound by contract to dispose of all their milk through it. In 1918, when the membership was 284, the Society handled 3,442,186 litres of milk. The value of buildings, pasteurising and cooling plant, milk cans, butter and cheese manufacturing plant, motor lorries, horse-drawn vehicles, etc, now runs to some thousands of pounds sterling. It was originally established, mainly by borrowed money, but its debts have since been repaid, and the position-is in the highest degree liquid.

The premises of the Society are adjacent to a railway station from which there is a convenient train service to Paris. A depot is maintained in that city, the manager of which is in direct telephonic, communication with his colleague at Lyons-le-Foret. It is also in close touch with the private retail milk vendors who are his customers in Paris. The latter are able to estimate very closely their requirements from day to day. They give their orders to the depot manager who, after a simple arithmetical operation, is able to telephone to the creamery manager forty miles away. telling him exactly the quantity,of fresh milk which he should send in the next consignment. The milk cans, which are of ten, fifteen and twenty litres capacity, are sealed at the station of departure, and on arrival at Paris are distributed direct to the retailers without necessarily being brought to the depot.

Nevertheless, a small cheese manufacturing plant is maintained there to deal with any surplus which the retailers might not be able to dispose of. All the milk is pasteurised at Lyons-la-Foret. Any milk not required for liquid consumption is retained there and turned into butter or cheese. Thus the substantial summer surplus is kept off the fresh milk market, and at all times of the year waste is reduced to a minimum. The suppliers are paid in proportion to their total milk deliveries -- a higher price of course in winter than in summer. In order to encourage winter milk production the refund, or dividend, payable at the end of the financial year, is paid only in respect of winter milk.

56. The Society at Lyons-la-Foret is only one among some dozens of such societies, situated at an average distance of about fifty miles from Paris. Together they contribute one-third of the total fresh milk consumed in that city. The other two thirds are in the hands of two large private firms. Some of these societies go in for the manufacture of casein in the summer. I am informed by Senator Donon, President of the Federation of the Co-operative Creameries in the Parisian region, that certain societies find the manufacture of casein so profitable that they are able to pay the same uniformly high price for milk winter and summer.

57. Twenty years ago, before the inauguration of this movement, milk was frequently sold in the country at nine centimes a litre to be re-sold at thirty in Paris. According to Senator Donon the position in the winter of 1926-1927 was as follows:-

Collection, pasteurising, cooling, transport to Paris and distribution in Paris cost in all forty-five centimes per litre. The retailers, were allowed a margin of gross profit of fifteen centimes. The consumer paid one franc fifty centimes, and this left ninety centimes a litre as the farmer's remuneration.

58. A gross profit margin of 105% over the counter on sales appears a beggarly amount in comparison with the 4d a gallon or 20% margin which is normal in Dublin and Cork, and yet it is quite possible that the Parisian Retailer makes just as large a business income on the average as his Dublin fellow. The problem of wastage and surplus is solved for him. Moreover, the organisation of the Parisian milk trade is such that the farmers' organisations can, indirectly but effectively, control the number of retail shops. The experience of organised dairy farmers in the Parisian district is that it is neither necessary nor desirable to eliminate the retail milk seller, He is an essential link in the chain which it is more convenient to leave in private hands. But by organising the milk supply up to the retail stage the farmers can in effect influence retail price policy. Any retailer who is not content with the 10% margin may have his supplies cut off, and will look in vain elsewhere for milk. The economic interest of the farmers is to sell a11 the milk they can as fresh milk. They lose on what they must turn into butter and cheese. Once the channels of distribution are cleared the farmer's interest in selling all he can is the consumer's guarantee that prices will not be excessive. Farmers may and should organise for the regulation of sale, but they can never successfully organise for the restriction of production.

59. The efficiency of this French organisation is not the result of any special virtue on the part of the French farmer. There as here there is always a minority of public-spirited and intelligent farmers who are willing to follow the rugged path of the pioneer in the inauguration of such movements. But without active encouragement and substantial support from the State it is possible that no very striking result would have been achieved. The State policy for the better organisation of agriculture in France has taken especially the form of a substantial endowment of Agricultural Credit institutions. The "Caisse Nationale de Credit Agricole", to which our Agricultural Credit Corporation bears a certain analogy, now disposes of an endowment of 700 million francs made available by the State free of interest. Ever since 1906 the Agricultural Credit Fund has been able to make long term loans to Co-operative Societies almost at a nominal rate of interest. Up till recently the rate was 2%, now it is 3%. By a law of 1920 it is empowered to lend up to six times the amount of the capital paid-up -- if the shareholders, or at least the Committee men, will make themselves jointly and severally responsible for the loan.

60. The State also provides gratis the advice and assistance of its technical experts with regard to buildings and equipment. Moreover, a free grant towards the initial expenses of organisation and establishment was payable (at all events before 1914), and this amounted sometimes to one-eighth of the whole. The Creamery at Lyons-la-Foret obtained two-thirds of its initial capital as a loan from the National Agricultural Credit Fund.

61. It would appear from French experience that, given the appropriate machinery, the State can play an effective part in the better organisation of the trade in fresh milk. If a National Economic Council were established here on the lines suggested it would contain a representative of the Agricultural Credit Corporation, as well as representatives of the Consumers' point of view, and Dairy experts from the Ministry of Agriculture. As I have shown the solution of the fresh milk problem will require the co-operation of at least these three elements -- not to speak of the farmers themselves. A National Economic Council will provide the most convenient machinery for such co-operation.

62. According to a recent paper read before the Social and Statistical Society of Ireland by its President, the economic weakness of our retailers makes them in fact the helpless agents of foreign manufacturers. It is possible that a reform of retail trade would do more for native industrial production than tariffs can ever do. The tariff medicine is likely to be applied with greater discrimination and success if the Tariff Commission is part of an organised economic 'clinique', in which specialists meet for consultation, as they would in a National Economic Council.

63. The "Caisse Nationale de Credit Agricole" plays an important part in furthering the use of electricity in the country. If our Agricultural Credit Corporation and our Shannon Electricity Board are in the habit of thinking and working together through their association on the National Economic Council, they may discover similar methods of mutual helpfulness.

64. Perhaps the interdependence of our various economic problems has been sufficiently emphasised. This memorandum is essentially an attempt to deal with the problem of high retail prices in the spirit in which it would be approached by a National Economic Council. "Nemo omnibus horis sapit". The very limitations and defects of any one person's contribution to the solution of one of many interdependent economic problems is in itself the best possible argument for the establishment of a NATIONAL ECONOMIC COUNCIL.


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