Herbert Hoover: The Man and His Work

by Vernon L. Kellogg

Another factor in transportation bearing upon the problem of marketing is the control by food manufacturing and marketing concerns of refrigeration and other special types of cars. This special control has grown up largely because, owing to seasonal changes in regional occupation for these cars over different parts of the country, no one railway wished to provide sufficient special cars and service for use that may come its way only part of the year. The result has been to force the building up of a domination by certain concerns who

control many of the cars and stifle free competition. Much the same results have been attained by special groups in control of stock yards and, in some cases, of elevators. Where such formal or informal monopolies grow up, they are public utilities, and if the farmer is to have a free market they must be replaced by constructive public service.

A Free Market

Every impediment to free marketing in produce either gives special privileges or increases the risks which the farmer must pay for in diminished returns. We have some commodities where manufacture has grown into such units that these units exert such an influence that they consciously or unconsciously affect the price levels of the farmer's produce. When a few concerns have the duty of manufacturing and storing the seasonal reserves in a single commodity they naturally reduce prices during the heavy production season and increase them in the short season as a method of diminishing their risk and increasing profits. Moreover, their tendency is often to sell the minor portion of their product that goes for export at lower than the domestic price in order to dispose of it without depressing local prices. They do not need to conspire, for

there can be perfectly coincident action to meet the same economic currents. Such coincidence has much greater possibilities of general influence with a few concerns in the field than if there were many.

The experience gained in the Food Administration on these problems during the war led to the feeling expressed at that time, that such business should be confined to one line of activity, just as we have had to confine our railways, banks and insurance companies. This is useful to prevent reliance being placed upon the profits of alternative products when engaged in stifling of competition, through selling below cost on some other item. Even this restriction may not prove to be sufficient protection to free market by free competition. I am not a believer in nationalization as the solution to this form of domination, but I am a believer in regulation, if it should prove necessary. If experience proves we have to go to regulation, it is my belief that it should be confined to overswollen units and that the point of departure should not be the amount of capital employed but the proportion of a given commodity that is controlled. The point of departure must depend upon the special commodity and its ratio to the whole. When such a concern obtains such dimensions that it can influence

prices or dominate public affairs, either with deliberation or innocence, then it must be placed under regulation and restraint. Our people have long since realized the advantage of large business operation in improving and cheapening the costs of manufacture and distribution, but when these operations have become so enlarged that they are able to dominate the community, it becomes of social necessity that they shall be made responsible to the community. The test that should apply, therefore, is not the size of the institution or the volume of capital that it employs, but the proportion of the commodity that it controls in its operations. It is my belief that if this were made the datum point for regulation, and if regulation were made of a rigorous order, this pressure would result in such business keeping below the limit of regulation. Thus the automatic result would be the building up of a proper competition, because men in manufacturing would rather conduct a smaller business free of governmental regulation than enjoy large operations subject to governmental control. There are probably only a very few concerns in the United States that would fall into this category, and they should be glad of regulation in order to secure freedom from criticism.

Speculation and Profiteering

There are three kinds of speculation and profiteering in the food trades. The first is of the inherent speculative character of foodstuffs due to their seasonal nature. The farmer, more by habit than necessity, usually markets the bulk of his grain in the fall. By necessity he must market his animals at certain seasons for they must be bred at certain seasonal periods, they must be fed at certain seasons, and thus they come to market in waves of production larger than the immediate demand. In perishables he must market fairly promptly as he cannot himself maintain necessary special types of storage. Thus, the dealer must speculate on carrying the commodities for distribution during the period of short production while the farmer markets in time of surplus production. While full competitive conditions might reduce the charges for this hazard, there is a possibility of reducing the hazard by better organization and, consequently, the charge for the hazard that is now debited to the farmer. It is worth an exhaustive national investigation to determine whether an extension of a system of central markets would not afford great help. I do not mean the extension of our so-called exchanges dealing in local produce,