Every housewife appreciates the importance of buying her domestic supplies as cheaply as possible, but the matter has a wider aspect which is perhaps not appreciated by the statesman, or even by the economist.

Ever since the time of Plato the antisocial possibilities of retail trade have been recognised and denounced. What the ancient philosophers really objected to was not so much what is strictly called retail trade, but profiteering in general. By that they meant all exchange transactions which are carried on with a view to a maximum in money for the, persons engaged in them. It is because the exploitation of the needs of the people are more clearly evident in the case of retail trade proper, that their disapproval appears to be concentrated on what we call retail trade. Perhaps the word they use should more properly be translated "huckstering" with the general meaning of an anti-social exploitation of a position of economic power.

That the accumulation of the maximum possible amount of money was no part of the good of life was a common principle of ancient philosophy. That the philosopher could play this game as well as the business man, if he chose to amuse himself in that way, is illustrated by the story of Thales of Miletus.

"Thales was taunted by his fellow-men for his poverty; it showed, they said, the uselessness of philosophy. Now Thales, we are told, through his knowledge of the stars, ascertained that there would be a heavy olive crop in the next year; so, before winter was out, as he had a little money at his disposal, he paid deposits in advance for the rent of all she oil presses' in Miletus and Chios, getting them at a low rental because no one bid against him. When the olive season came many tenders reached him at once and without notice, and he let the presses out on whatever terms he liked. Thus, by making much money, he demonstrated that it is easy for a philosopher to become rich if he likes, but that this is not his aim in life. This, then, is the way in which Thales is said to have given proof of his wisdom, but, as we said, his feat, namely, the ability to procure a monopoly for one's self. is a general principle of the art of money making" (Aristotle, Politics Bk I, Laistner's Translation).

The activities of Thales of Miletus in this matter had nothing to do with the business of retail trade in the strict sense, but they are given by Aristotle as an illustration of the procedure of the "huckster" whose one object is to make money.

Production for use, and not for profit, is the slogan of the Consumers' Co-operative movement, and it would seem that there is a certain affinity between its philosophy and that of Plato and Aristotle.

While production for use - our own or other people's - is the only justifiable object of all economic activity, the ancient philosophers recognise in theory, as the Co-operative movement does in practice, that production in a developed community must, in the main, be carried on for exchange, and exchange in any elaborate degree is impossible without money. "Everything must be measured by a single standard if exchange is to take place. It is demand which unites society, and money is the conventional representative of demand. For the sake of future exchange money serves as it were as a pledge, that if we do want anything it will be forthcoming" (Aristotle, Ethics Bk V; Laistner's's Translation).

The existence of money enables us to satisfy the need we have for the services of our fellows. Hence,according to another ancient philosopher, the more money one has and thinks one cannot dispense with, the greater one's need for the services of one's fellows. In contrast with common speech the most moneyed man is the most needy man!

The object of the science of supply, says Aristotle, is to provide the members of one's household, or the members of the State, with the things needful for the good life. To provide for this object is the primary duty of the householder and the statesman. But this object is limited by its end. The things really necessary for fullness of life are not unlimited. Once the self contained household, or the self contained State, has achieved this object, it will have no inducement to further economic exertion, but will devote itself to a life of leisure - will play rather than work. Once money was invented - and money they regard as an indispensable requisite of civilisation - it made possible a second and perverted kind of the science of supply to wit "huckstering". The object of this is to produce the greatest possible financial profit. The natural science of supply is limited by its end already defined. The unnatural or perverted money making form is unlimited, for the desire for the luxuries and gratifications which it makes possible is also unlimited.

In passing, Aristotle notes a second perverted form of the science of supply, to wit, usury, "which arouses our hatred because profit arises from money itself, and not by employing money for the purpose for which it was invented. Interest is money which is the child of money, hence of methods of acquisition this one is especially unnatural".

Aristotle's analysis of the function of interest is not very profound. It is important only because it is the basis of medieval theories of interest. But we are not concerned with these to-day.

His general analysis of the function of exchange has stated a problem which still awaits solution - and to the solution of which the Co-operative movement has made a notable contribution. "Every article of property has two uses" - a direct utility for consumption and an indirect utility as a means of acquiring some other useful thing in exchange. Such exchange is natural because "men have more than they need of some articles and less of others" Barter exchange is natural and incapable of perversion since its purpose is to satisfy men's natural wants to the point of complete sufficiency. But as men come to draw their necessary supplies from a larger and larger area, as import and export trade develops, barter was no longer feasible, and the use of currency was necessarily devised. Thus money as an institution is a downright necessity, but with buying and selling for money arose profiteering and huckstering. How to get the advantage of money as a means of exchange without unchaining the devil that rides forth on it from the deeper recesses of human nature - this is the central social and economic problem.

That the profit motive should somehow be excluded from the whole field of commerce and industry would seem to he the practical conclusion of this philosophy. That it should be excluded from those departments of commerce in which it is most liable to produce anti-social activities is the practical conclusion which the Co-operative movement has reached, and theoretical considerations abundantly justify this conclusion.

In my view the profit motive is compatible with social welfare in many, if not most productive activities, but is not compatible with the maximum economy in the distribution of the necessities of life. And it is a social interest that no element of waste and no superfluity of personal services should adhere to the distribution of goods, thus enhancing their cost to the consumer, and causing some producers to waste in distributive activities the energies which would add to the real wealth of the community if employed in productive services.

The Co-operative movement by itself can never eliminate all this element of waste. There will always be some shop-keeping which is surplus to the real requirements of the community so long as the State allows free access to shop-keeping activities. It may be shown in theory that a proper system of licensing shops could be used in such a way as gradually to eliminate this element of wasteful activity, and this would add to the efficiency of the Co-operative movement, and cheapen the final cost of goods, even in areas where the Co-operative movement had not penetrated.

It is a social interest that there should be the largest possible consumption and enjoyment of the goods which agriculture and industry are becoming more and more technically efficient in producing. We have the phenomena of trade depression and unemployment which it is fashionable to attribute to monetary causes, international causes, and other causes that tax the understanding of ordinary people, and give rise to endless wrangling by experts.

Even the experts are beginning to realise what has long been plain to men and women of limited understanding - that consumption must somehow be increased if production is to be increased. Some go off at a monetary tangent and rush to the conclusion that consumption can only be increased if people generally are given more money to spend. There is an element of truth in this contention, but monetary enthusiasts are apt to overlook the serious limitation of desirable consumption that results from the wastes and frictions of the commercial circulation. The monetary remedy, if applied by itself, will maintain price levels, or, what is more important, profit margins, if not increase them, whereas the present situation really requires that primary and wholesale prices should rise and that retail prices should fall.

Bank rate policy - cheap money - is, or ought to be, a thoroughly discredited agent for bringing about the kind of price rise that is really desirable. By itself it is not enough. It probably needs to be supplemented by a suitable taxation and investment policy promoted by the State, and it certainly requires the assistance of a suitable retail price policy. The Co-operative movement - now taxed in the interests of "legitimate" trade - is not only the obvious instrument of such a policy, 'but the policy itself -- t'he policy of encouraging consumption by cutting out every unnecessary element in the cost of distribution - this policy is the core and essence of the consumers' Co-operative movement.

Unemployment is a dreadful plague, but its incidence is very unequal as between different occupations. Unemployment in the distributive trades has varied between 8.8 (1930) and 13.5 per cent (March 1933), but unemployment among cotton workers has been as high as 38.9 per cent. (1931), among coal miners 40.6 per cent. (June 1932), and among ship-builders 63.5 per cent. (1932). In my view if there was more unemployment among distributive workers there would be less among other workers.

The retail price policy of profit seeking private traders sometimes obstructs the circulation of goods, and is a direct cause of unemployment among primary producers and industrial workers. It is useless for the primary producer or manufacturer to undertake the production of more than he can count on selling to the firm which stands next to him in the long chain that leads from primary producer to ultimate consumer. Producers and manufacturers at all stages will continue gaily to fill the channels and reservoirs of the commercial circulation so long as goods are passing freely along those channels and reaching consumption. Any interest engaged in handling and passing on such goods may cause a block in the traffic, but the retail trader has it in his power, by maintaining too high a price, to cause a limitation of consumption below the level of actual production which will congest the channels of circulation from beginning to end, and cause unemployment and business depression to fall like a blight on the whole agricultural, industrial and commercial process.

Such action on the part of retail traders obstructs the circulation of money as well as of goods. All consumers' incomes may be analysed into wages, interest, rent and profits. The money which constitutes all our incomes is put in circulation as part of the process of producing goods. The cotton manufacturer who undertakes an act of production is "out of pocket" or incurs a bank debt to the extent of the expenses he has incurred and this money which is out of his pocket is into ours, and is typical of the ultimate source from which everyone everywhere derives his money income, whatever be the nature of his legal title to it. When the manufacturer sells to the wholesaler he gets his money back, but he has in fact merely passed on an expenditure or a financial liability to someone else. In due course the wholesaler unloads on the retailer, and he on the consumer.

An amount of money equivalent to what was put in circulation as consumers' income in the processes of production is returned to producers if, and only if, those actual goods are bought and paid for by consumers.

Till the consumer buys and pays the retailer incurs the expenditure, or carries the financial liability. But when the consumer buys and pays for the goods out of income the circle of exchange is completed, and the expenditure or financial liability incurred in the processes of production (the source of consumers' incomes) is reimbursed or wiped out. The man who takes the risk of an act of production casts his money on the waters in the hope that it will return to him after many days. And so it usually does, but unless the goods reach the consumer someone is left to hold the financial baby.

The real basis of credit -- the real motive of the machinery of production is not gold or paper. It is the anticipation that what a man produces will eventually be consumed, and the effect of this on the mind of the business man. Anything which obstructs the passage of goods on their way to consumption will undermine the basis of credit and the activity.of producers more effectively than any departure from the gold or any other monetary standard.

Anything which restricts consumption and obstructs the channels along which goods are trying to circulate, obstructs also the circulation of money and dries up the source from which consumers' money incomes in general originate. This principle is of first rate importance, not only in international trade, but in the internal trade of a self contained community. When tariffs are imposed by one's own country on imported goods the money incomes of the persons engaged In making those goods in foreign countries are diminished. Their purchasing power thus impaired is unable to absorb so great a quantity of other goods as before and those other goods' including the export goods of the country imposing the tariff, will experience a depressed market and a falling price level.

Not only is this the case, but the capacity to pay for the export goods of the country, imposing the tariffs is directly undermined. The persons who really pay exporters are their own fellow countrymen to the extent that they buy imported goods. Diminish the import of foreign goods and the volume of a country's exports must also diminish, unless the native taxpayer is prepared to pay the foreigner for consuming them.

. When tariffs are imposed by a foreign country the effect on the money incomes of the persons in one's own country who are engaged in making export goods is too painfully apparent.

No one will accuse any of the politicians, on either side of the channel, who started the uneconomic war, of being an economist, and if I say a word or two about its strictly economic aspects I hope no one will accuse me of being a politician.

The money income of the farming population of the Saorstat in 1926 has been estimated at 39.5 million pounds. There are about 400,000 holdings in the Saorstat and about 12 million acres of crops and pasture. The average farm is thus 30 acres in extent. If we express sheep and horses in terms of cattle, and pigs in terms of poultry, a typical farm would have 4 or 5 milch cows and 100 hens, and would sell off young cattle at about 2 years old. The average hen lays 10 dozen eggs in the year; the reduction in price in consequence of the uneconomic war averages at least 3d a dozen all the year round. The loss of income on this item is thus £12 10s.

The young cattle he might hope to sell are down by £6 a head in consequence of the tariffs, and in spite of the bounty. Let us say £25 a year on this account. The loss of income in respect of butter is masked for the time being at the taxpayers' expense. If it were borne by the farmer directly it would probably amount to another .£12 10s per annum, in the case of our typical 30 acre farm.

In any case, the farmer, as a tax-payer, is already bearing a substantial share of the loss on butter. Thus I arrive at the conclusion that the loss of money income averages, £50 per. holding. As there are 400,000 holdings the total loss of money income to the agricultural population is 20 million pounds annually; that is half their money incomes in 1926 and more than half their money incomes in the. present years of depression.

I am not worried about the ultimate outlook for the farmers so long as they can hold on to their land. All but the largest farmers can adjust themselves to nearly anything. They can and are producing more for their own subsistence and less for exchange since it no longer pays to sell agricultural produce in the same volume as before. The money which the farmers formerly made and spent was an important source of the money incomes of the commercial, industrial, and financial classes in our small community. If the farmers' incomes are down by 20 millions the classes who live by exchanging goods and services with one another and with them must anticipate a substantial reduction in their money incomes, too, and they cannot conveniently revert to a subsistence economy.

This is perhaps the best illustration that could have been given of the financial and monetary effects of obstructing the passage of goods from producer to consumer. The uneconomic war is a gigantic impediment restricting the flow of agricultural and industrial products between native producers and external consumers. The reduction in our money incomes is the measure of our economic loss to the extent that we have not been able to adjust our economy to the new situation.

The reduction in their money incomes is also the measure of the economic loss of our neighbours to the same extent. It is impossible to estimate the reduction in money incomes caused to our neighbours by the uneconomic war, but if we could add up the financial losses of British and Northern Irish industrial producers, commercial interests, dockers and transport workers, I should not be at all surprised if it exceeded 10 millions in the first year with a tendency to increase substantially from year to year.

The World Economic Conference has been a pathetic failure, but if the uneconomic war could be settled on honourable terms it would do more to put both countries back on the high road to prosperity than any success that was ever possible for that much advertised assembly.

The importance of economy in the distribution of goods has thus a monetary aspect which is generally ignored by monetary enthusiasts. Not only are consumers' real incomes reduced by the high retail prices that result from wasteful distribution, but their money incomes are reduced, or abolished, when the passage from producer to consumer is blocked.

So far as internal trade is concerned, the Consumers' Co-operative movement is the best guarantee that the right policy will eventually triumph over the stupidity of politicians and the selfishness of vested interests. It may possibly help to produce a saner international outlook if the common interest in promoting a freer passage of goods, even across national frontiers, is more intelligently appreciated. And perhaps we will yet be able to make the money economy serve only the higher purposes of humanity, and thus solve the problem which the ancient philosophers were the first to see and to set forth in its proper perspective.

Some navigational notes:

Copyright Dr Roy Johnston 1999