Interrelation Between Industry and Agriculture
THE EFFECT ON ENGLAND'S FOREIGN TRADE
By R. S. HUDSON, British Minister of Agriculture
Delivered at London Rotary Club, London, England, November 1, 1944
Vital Speeches of the Day, Vol. XI, pp. 283-286.
ONE of the difficulties facing agriculture today is the existence of many people, unfortunately many influential people, to whom it seems that there is an antithesis between our export industries and home food production. Such people argue that our export trade is vital to our livelihood as a nation, and that if we wish to export we must be prepared in exchange to import all the food and raw materials that other countries wish to send us in payment. In the past there may have been some truth in such an argument. But today I would like to try and show you why I personally believe that, far from there being any conflict between the export industries and home agriculture, it is vital to the future prosperity of our country that the two should march forward hand in hand.
How Britain Became a Food Importer
We are, today, primarily an industrial and manufacturing nation. As a result we sometimes tend to forget that about 150 years ago we were primarily an agricultural country, growing most of the food which our people needed. Of course, in those days our population was nothing like its present size. In 1801 it was only 10 1/2 millions. As soon as it began to expand rapidly during the nineteenth century, rising as it did to 37 millions in 1901, we could not hope to go on supporting ourselves entirely by our own home food production efforts.
At the same time as this rapid industrialization and increase in population was happening over here, the great virgin lands of the American continent, of New Zealand and Australia, were being brought rapidly into production and the means of transport were being rapidly expanded and quickened. And with their wide open spaces and their untapped reserves of soil fertility, they could produce many food items cheaper than was possible in the older agricultural systems of Europe.
It was not, therefore, surprising that we began to import more and more of our food requirements. In the 1850's the aggregate value of our food imports was about £68 millions. In 1901 it had risen to about £216 millions. We were also, of course, importing large quantities of raw materials which we urgently needed for our manufacturing industries.
This method of relying on imports for a large part of the everyday necessities of life was possible and profitable in those days because we held an unchallenged place in the international industrial market. We had a long start which could not easily be overhauled by other nations. The idea that Great Britain was and would remain the leading manufacturing and commercial country of the world, and at the same time the largest world market for food and raw materials, took firm root. Exports and "cheap food" from abroad was the policy of the day. And certainly in those conditions it paid us well. We prospered and grew wealthy. The standard of living rose in spite of the rapidly increasing population.
How Food Imports Were Paid For
Such a policy was not unwelcome to the Dominions and to the foreign countries with whom we traded. For ourtrade was so large that we were able to invest considerable sums in capital developments overseas, from which they reaped large benefits. At the outbreak of the last war our overseas investments were of the order of £3-£4 thousand millions. The interest on these investments provided us with additional supplies of food and raw materials without the necessity of making direct payment in exports, and also enabled us to increase still further our investments abroad.
During the present century the position has gradually been changed. Other countries had been building up their industrial economies and challenging our former supremacy in the field of international trade. Even countries still predominantly agricultural began to build up their own secondary industries. For instance, the share of world industrial production contributed by non-European agricultural countries rose from 11 per cent in 1928 to 24 per cent in 1934, and has increased still further since then. We began to lose, and to lose fairly rapidly, the long lead which we had established in the nineteenth century. We began to find that, in spite of all our efforts, the quantity of our exports was shrinking.
Counterbalances to Shrinking Exports
But the effects of this were not for a number of reasons readily apparent. Firstly, we still had very large and profitable investments in overseas countries. These continued to provide us with a large proportion of our import needs in the way of food and raw materials, without making any call on our export capacity. Secondly, the terms of trade were turning more and more in our favor. World prices of food and raw materials were falling rapidly. For instance, the price of wheat fell from 11s. 6d. per cwt. in 1923-6 to 5s. 8d. per cwt. in 1933-6, while the price of rubber fell from 22d. per lb. in 1923-6 to 2d. per lb. in 1932.
On the short view, this seemed to be to our advantage. In fact, however, primary producers throughout the world were left without the means to buy the tools of their trade and the clothes, fuel, and other necessities of life, which the industrial workers were only too anxious to sell them. At the same time, farmers and other primary producers, unable to help themselves, were trying to produce and sell more, so as to make up for the low prices they were getting for what they did produce.
The Vicious Circle
So the vicious circle spun round and round, with the result that we all know and can remember. In nearly every industrial country there was a high rate of unemployment. Millions were eking out a miserable existence, many of them badly undernourished and many indeed hardly above the starvation line. Not because there was not enough food in the world to feed them—wheat was being burnt, coffee was being dumped in the sea, crops were being left to rot in the ground, and fruit was being left unpicked. And in those days there was no machinery to stop the rot from spreading. The laissez-faire system of free competition in international trade had broken down.
We in this country felt the effects pretty badly. But to some extent they were cloaked, mainly by two factors that I have already mentioned—namely, the interests we were receiving on our overseas investments and the favorable terms of trade. The real truth was that, though many of us did not realize it, we were living to a large extent on our past rather than on our current achievements, on the wealth created by our fathers and grandfathers, rather than by ourselves.
I have ventured to recall this past history to your minds, as I think that it provides the key to the conflict of ideas which exist today about agriculture and its relation to our commercial policy. I believe that those who argue that a prosperous, healthy and reasonably large home agriculture is inconsistent with our position as one of the most important industrial and commercial nations of the world do so because they are still living in the world of the nineteenth century. The conditions of the nineteenth century have changed but the ideas and policies of the nineteenth century still linger in the minds of many. "Free Trade" and "Cheap Food" are cries which have become so engrained in the thoughts of a large body of people that any doctrine which is, or even appears to be, opposed to them is regarded as heresy. They have forgotten the conditions under which, and the means by which, those policies brought us our wealth. Or, if they have not forgotten, they argue that our policy should aim at returning as far as possible to those conditions and reviving those means. To them I would say, "No man and no nation can put back the clock; we are living in the twentieth century and under twentieth century conditions, and the means which we adopt must be twentieth century means." Let us look realistically at the situation in which we shall be placed after the war. No one, I think, would deny that it will be very different from that which obtained before the war and still more from that which obtained in the nineteenth century.
A Debtor Nation
The first and most important change will be that from a creditor nation we shall have become a debtor nation. No longer shall we be able to rely on the accumulated wealth which our ancestors had built up overseas. That will almost all have gone. For nearly every ton of food and raw materials which we want to import we shall have to export goods in payment. As the Chancellor of the Exchequer told us a few weeks ago we shall not only have to maintain the value of our exports, but increase it by at least 50 per cent if we are going to maintain the standard of living of our people, It was no easy task trying to increase, or even maintain, our exports even before the war, as I can tell you from my own personal experience at the Department of Overseas Trade. After the war we are likely to have to face and overcome difficulties quite as great, if not a good deal greater. I need not remind you that the industrial and manufacturing capacity of most of the free countries in the world has been vastly increased during the war. This capacity is at present largely devoted to weapons of war and to munitions. But when peace returns, that capacity will have to be shifted to the production of peaceful goods. No, conditions will be very different from the days of the nineteenth century when we were one of the few sellers and the world was full of buyers clamoring for our wares.
Changing Terms of Trade
That is one change. But another, almost equally important is what is going to happen to the terms of trade. Are they likely to be as favorable to us after the war as they used to be? Are we still likely to be able to get food and raw materials at the same cheap, cut-throat prices? Personally, I think that in the long run this is unlikely. No doubt a good many of you have read the report and resolutions of the Conference on Food and Agriculture at Hot Springs. Two of the resolutions passed there unanimously by 44 of the free nations of the world seem to me to be of fundamental importance in connection with our trade position after the war. First, it was agreed that while inherent natural and economic advantages in any area should determine farming systems adopted and commodities produced, the agricultures of the different countries should aim at three things: First, at maintaining soil fertility at levels which will sustain yieldsand ensure adequate returns for labor; second, at protecting crops and livestock from major pests and diseases; third, at favoring steady employment throughout the year. The aim in fact must be, not only to produce food and raw materials as cheaply and efficiently as possible for the consumers of the world, but also to give economic and biological security to all primary producers. And it was agreed by all the technical experts from 44 different countries that the best way of doing this was by balanced mixed rotational farming and the avoidance of single-crop production or monoculture. This indeed is a revolution.
Most people, whether they are interested in agriculture or not, have heard of the Dustbowl conditions in America. Those are one result of monoculture, and they have certainly cost our American allies dear. But it is not generally realized that this is but one instance of the ravages of man on the fertility of the land. In many other countries, all over the world, similar spoliation was taking place. Everywhere the same results have inevitably followed from a policy of mining the capital fertility of the soil. There is no need for me to point out to you as businessmen that to deplete the soil, which is the capital of agriculture, must in the long run be unsound. One of the elementary principles of any business enterprise is the provision of adequate allowances for depreciation. This is important enough when you are dealing with buildings or machinery, which can be replaced when they are worn out. How much more important when you are dealing with land, which once lost cannot be replaced. Obviously it is not only sound business practice, but plain common sense, to take steps to maintain the health and fertility of the soil. Even before the war the newer agricultural countries were beginning to realize this, and to think more in terms of mixed rotational farming instead of specialization. They were beginning, in fact, to appreciate that the farming methods of the older agricultural systems of the world, methods which had been, practised for hundreds of years and in some cases for thousands, were not just the outcome of tradition and antiquated knowledge but were founded on sound fundamental principles.
Probable Rise in World Food Prices
This movement away from specialization and towards mixed farming is, in my view, likely to go and spread after the war. It is true that farming systems which exploit the soil are laying up great trouble and expense for the future, but in the short run their costs are cheaper than those of farming systems which aim at putting back into the land what is taken from it, of farming to preserve the soil, not to cash in on its fertility. Thus, the adoption of mixed farming systems is bound to mean some rise in the costs of production, as well as a change in emphasis as regards the commodities produced and as regards those available for export.
This movement is likely to be reinforced by the second resolution at Hot Springs to which I referred. This was a unanimous decision that, after the war, each country must do its best to raise as rapidly as possible the nutritional standard of its people. That means that more livestock and livestock products will be required, and that there will be a concentration on the production of things required at home rather than on products for export.
Both these factors will take time to have effect. But I think that in the long run they are likely to lead to a rise in costs, and so in prices, of food sold on the world market. I think, therefore, that in the twentieth century the terms of trade, far from being more favorable to us than in prewar days, are likely if anything to turn against us. As against this, we must remember that, if primary producers get more for their products, they will have more money available with which to buy industrial goods. Thus the market for industrial goods may in this way be increased.
You will not be surprised, after what I have said, if I tell you that in my view we are likely to be faced after the war with great difficulties and that it will need all our energies, the energies of each one of us, to overcome these difficulties, and to make sure that our standard of living is not only maintained at its pre-war level but goes on rising. That we can do so I have no doubt. But only, as I believe, on certain conditions. The first is that we make use to the greatest possible extent of our own natural resources here at home. These natural resources are the land, what we can get from under the land which is mainly coal, together with the skill and industry of our workers. Secondly, that we concentrate especially on trading with those countries that are particularly ready to trade with us. We should certainly make a start with our Dominions and Colonies.
A Means to an End
I hope that, from what I have said, it is by now clear to you why I told you earlier that I believed there was no antagonism between agriculture and the export industries. Export we must and will, after the war. But exports are not, as some people tend to think, an aim in themselves. They are a means to an end—that is to enable us to import the things which we need. To say, as some people do, that we must import certain things whether we need them or not, in order that we may export, is nonsense. To say that we must export to get the essentials we require is sound common sense. For a time, at any rate, the resources put at our command by our exports are unlikely to cover everything we require. For a time, therefore, we shall be compelled to cut down on things other than necessities. We want both food and raw materials. But many of the raw materials we most require we cannot produce here at home, whereas the farmers and farm workers in this country have shown that much of the food we need can be grown here. If, therefore, we must economize, it seems only sensible to do so on imports of food rather than on imports of raw materials.
I should perhaps make it clear that by this I do not mean that we shall not still require substantial quantities of food from abroad. The area of our land is* limited and we can never hope, nor do we desire, to be self-sufficient as regards food. Our soil is not suited to the production of all we need of certain commodities. For example, we do not wish to maintain any longer than we need the terrific acreages of wheat and potatoes that we are at present growing. We are, after all, primarily suited to the production of livestock and livestock products, and the emphasis must be gradually changed over to these from crops for direct human consumption. The point that I am making is that for some time our overseas income will be limited, and will not enable us to import all that we should like to. So long as it is limited, we must concentrate on importing those essentials which we cannot produce here at home. Agriculture can make an important contribution, by enabling us to economize for the time being on food imports and bring in more raw materials for our industries. In due course, as our overseas financial resources are increased and as our standard of living rises, I believe that we shall be able to absorb not only the food which countries overseas wish to send us, but also the food which a healthy and well-balanced agriculture in this country should produce—and produce, too, at prices that will compare not unfavorably with average world prices.
You can well understand, therefore, how glad I am to see a growing realization among businessmen of the close inter-relationship there should be between agriculture and industry and of the extent to which each must rely on the other. Onlythe other day, for instance, the London Chamber of Commerce in their report on the Government's White Paper on Employment Policy reaffirmed their belief that the prosperity of home agriculture was essential to the future welfare of the country.
I believe that in the postwar era industry and agriculture will each have their part to play, and that in playing it each will be of the greatest help to the other. Together they can I think, ensure that our nation will continue to prosper and rank as one of the great economic powers of the world. In opposition, they will in my view spell out a dismal and precarious future for our country.