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by cultivation and the provision of plant-food, the return does not rise in proportion as the applications of labour and fertiliser increase.
Experienced agriculturists, who advocate preparation for a condition of self-sufficiency during some future war, admit that this condition would be possible only with the adoption of a special war-diet. They say that we should now begin to increase the area under the plough, continuing the process till the maximum is reached, then, when necessary, adopt a special course of war-cropping-presumably slaughtering many of our animals—and thus maintain the physical sustenance of the population. The condition of self-sufficiency in regard to food supplies could be permanently maintained only by the adoption of a course of cropping to supply a practically vegetarian diet, or one including a minimum of animal products. An approach to this system may have to be adopted before the end of the present war. For two and a half years the Board of Agriculture was anxious that the head of stock in the country should be maintained. It is now more concerned to procure vegetable food for direct human consumption, and unless the area under the plough is rapidly extended this can be obtained only by a sacrifice of stock.
However, so far as the organisation of agriculture in the immediate future is concerned, there are other things to be considered before stress is laid on the principle of increasing cost, or on the possibility of obtaining a greater food value from our soil by the direct consumption of vegetable foods. There are a great number of farms in this country on which production might be increased without increasing unit cost, even with the present organisation; and on some of these such increased production might be accompanied by a diminished unit cost, if the internal management of the farms were improved.
The purely physical aspect of the Law of Diminishing Returns is clearly shown by the results of the Rothamsted experiments; but the financial aspect is open to many qualifications. The forms in which capital and labour may be applied in farm production are not fixed. A given amount of labour may be applied in the form of manual labour with a resulting financial loss; but if the same amount of cultivation can be obtained by the application of horse-power, the loss may turn to profit. Again, though it may be impossible to produce a crop of a given weight, except at a loss, by horse-power, it may be possible by the employment of steam or oil-combustion power to produce the same crop at a profit. Many problems affecting the economy and the efficiency of labour and capital employed on British farms still await solution, and, when solutions are found, gross production can be increased at a profit to the farmer.
It would not be over-estimating the possibilities to say that the total output of British agriculture could be increased to the extent of 30 per cent., with but slight increase, if any, in the unit cost of goods produced. It is even possible that the proportionate increase might rise to 50 per cent., without reaching the point at which unit cost rapidly increased, if fairly drastic changes were made in management.
The agricultural view of the Law of Diminishing Returns is well stated by Mr. John Orr :
Economists have looked to the soil instead of the market for an explanation of this phenomenon. If a farmer spends £6 in growing and marketing an acre of wheat, and receives £8 for it, he gets a profit of £2. If he spends £12, and receives £10, he loses £2. The second £6 does not produce £8 as the first did, and, regarded as a chemical and botanical operation, the result is said to be an evidence of the working of the Law of Diminishing Returns; but from the economic point of view the farmer's experience would be described as the punishment for misapplying capital and labour -a salutary arrangement for keeping enthusiastic experimental students in check. The desire to grow an unlimited quantity of wheat per acre is an impracticable ambition, and the pessimism which springs from its failure is unjustifiable: the principle which ought to determine what is best for farmers to produce is not their personal predilection. It is the relation of the cost of the thing to the price received for it. . . . If there is a Law of Diminishing Returns in the real world, it only operates in particular branches of production at a given time, while a law to the opposite effect is operating in other branches at the same time. Because economists too deeply affected by chemical enthusiasm, and farmers too firmly bound to a hard-and-fast style of farming, are losing 16 per cent. in growing wheat, more practical and fortunate people are making 150 per cent. in other lines. If the capital were properly distributed, the loss would be avoided or diminished; but even to-day over the whole field of production there is an increasing return.'
On theoretical economic grounds such a statement warrants criticism ; for Mr. Orr forgets that the market price which makes it possible for the English farmer to produce more wheat per
acre, and still maintain or increase his profits, may be the result of the operation of the principle of increasing costs in other countries such as Canada or the United States. Indeed, such has been the cause of the steady rise in price of wheat during recent years. But as the competition from still unexhausted virgin lands becomes less and less important, it will be possible for the British farmer to increase yields and yet maintain the rate of financial return. This, however, will not protect the consumer from the increasing cost. And should the State decide that farming capital shall be applied to production of specific goods, without regard to the trend of the market, unit costs must increase as the process of increasing yields continues.
Prices were rising prior to 1914; and it was felt by many agriculturists that they were reaching a level which would warrant greater application of labour, capital, and knowledge in agricultural production in this country. The point at which the financial return per unit of capital, etc., employed begins to diminish with the current costs and prices at any given time can be ascertained only by a somewhat detailed system of cost-accounting, although in extreme instances the farmer may become aware that the law is operating by a rough calculation of expenditure upon and receipts from a given crop. But even when the law begins to operate under one system of application of capital and labour, improvements in the method of application may obviate the difficulty.
There is, undoubtedly, scope for much greater application of labour, capital, and managenient ability in British agriculture. In particular, there is need for such a development of confidence in the market and the ability to organise methods of production which will return a profit as will lead to an increase in the arable area of the country. Arable land produces much more food for both man and beast than pasture on a soil of the same quality. With the guarantees now given to farmers this increase should be secured; and if, as seems probable, the upward trend of prices observable before 1914 continues after the war, the natural level of prices should be sufficient to maintain a greater area under the plough. If the level of prices is not sufficiently high to foster arable farming financial assistance may have to be continued. Under such circumstances the State should take steps to see that the area of arable is increased as compensation to the consuming and tax-paying population for the financial assistance given. The possibility of the necessity for action along this line has been foreseen, but it remains to be ascertained whether the steps taken will be effective.
Apart from the necessity for an increase in the area under the plough there is a great necessity for use of more capital, and the application of knowledge—especially the ascertained results of practical experiments—to all farming practice. The financial stimulus of guaranteed prices may be sufficient to encourage farmers to apply all their available capital, but the hereditary capital of most farmers will not be sufficient for the whole of the necessary developments. The size and system of management of the ordinary farms are such that capital from other sources is rarely attracted to the industry. With improvement in methods of accounting and of preparation of financial statements, the joint-stock banks might be induced to provide farmers with more credit ; but with the large number of farms worked on varying grades of efficiency the flow of capital from this source will be slow and unequal.
Many landlords, also, do not possess sufficient capital to provide the permanent equipment of farms necessary for a progressive system of farming. Some others possess the capital necessary, but are not anxious to see land intensively developed for agricultural purposes because of the supposed detraction from its amenity value. The whole subject of the position of the landowner in regard to the control of agricultural production requires careful consideration. Landowners naturally desire to retain their present powers, and farmers desire to obtain a greater degree of control and a larger interest in the land they occupy. Many arguments in favour of the continuance of the system of dual control are put forward by Mr. Orr and by the Sub-Committee on Agricultural Policy. But many people who are concerned with securing improvements in agricultural production are looking towards the establishment of a system of complete control by the cultivators, with the addition of public supervision, as a remedy for many of the shortcomings of the present system. All parties are agreed, however, that more capital is required in the industry. If the State can afford to pay several millions a year into the
pockets of farmers, in the form of guaranteed prices, it could certainly afford to set aside a capital sum to provide credit for farmers and landlords requiring to equip farms at the rate of interest current at the time the loan was made. The administration of such a loan fund could be carried out through a permanent board of central administrators and voluntary organisations of farmers and landowners.
But the fundamental necessity is for such an organisation of farming as can command capital from the ordinary financial sources. Under most systems of farming this requires a larger unit of land, a larger unit of original capital, and a more developed system of management than at present obtains. Bearing these considerations in mind Mr. Hall suggests the establishment of industrialised farming. This suggestion is of the greatest importance from the point of view of the possibility of improving the system of management on farms. The ordinary farmer is the sole technical and financial manager of his business. He may be a good financial or business manager, but a bad farmer, or vice versa ; but nobody with an ordinary knowledge of human capacities would expect the majority of farmers to be experts in both spheres. Yet experts in both spheres are urgently needed in the industry. Sooner or later the business expert must be employed, either by the large commercial farmer or by voluntary associations of farmers working as a co-operative society.
In many instances operations on farms have given poor financial results, merely because the system of distribution of goods has been weak and unorganised. Little is known, even by farmers, of the system and costs of transporting and marketing farm products, although complaints are made that the farmer receives only a comparatively small proportion of the price of products paid by the consumer. This condition cannot be allowed to persist if the farming industry is to make progress. For the small holder and small farmer an extension of the co-operative system is extremely desirable; but this method of organising the business of farms has proved to be extremely slow, and it is to be feared that if farmers become financially comfortable it may be even more slow than in the past.
But the expert is needed nearly as much in the sphere of technical management as in that of business and finance. The percolation of scientific knowledge, and the results of