Planning for the Protection of the Consumer
Interest in the consumer as a factor in economic activity is of recent origin. Adam Smith and his followers assumed that the consumer would be the final arbiter of economic activity, for by his power to buy or withhold his patronage he could determine what was produced, how much was offered for sale, and the price at which goods were sold. No one really believed this; and virtual control over economic life gravitated into the hands of the producers. Through advertising and monopoly, producers controlled consumers' desires and prices. The consumer soon became the "forgotten man" of economics. Resentment against this condition has found an outlet in two directions: through legislation and through consumer organizations. Through the former the consumer has secured protection against the most dangerous and fraudulent practices of producers; through the latter consumers have been using their power to bargain and demand fair treatment, on the threat of withholding patronage, and establishing a consumer controlled system of production- and distribution.
Protection is after all a negative process. The government does not assist the consumer in getting the best values for his money. Although the Bureau of Standards does in fact make tests of food and drug products, it is not at liberty to publicize its findings as comparisons of various products, and much of its information is available only on specific request. Government publications dealing with topics of interest to consumers cannot name products by name. Cases brought by the government against producers of illegal products are seldom, if ever, reported in the nation's newspapers or magazines. If the consumer wants positive assistance, he must secure it through organizations initiated and supported by himself.
The most extensive of all consumers' organizations consists of the thousands of societies in the Consumers' Co-operative Movement. As we noted in a previous chapter, consumers' co-operation was a product of the pioneering genius of Robert Owen, but it got its official start in England in 1844 with the organization of the Rochdale weavers. Since then consumers' co-operatives have grown rapidly in the Scandinavian countries, less spectacularly in England, and somewhat slowly as yet in the United States. In Germany, Italy, and Russia the rather extensive co-operative movements were subordinated to the totalitarian and socialistic regimes. The goal of the consumers' co-operative is to increase the members' real income by securing commodities of high quality at reasonable prices, mainly through the direct purchase of specified products, thus eliminating the costs of advertising and the middle man's charges. The co-operative organization consists of unlimited voluntary members, each of whom has one vote regardless of the amount of money invested. Borrowed capital is paid for at no more than the legal rate of interest. Commodities and services are sold at the current retail market price; and the difference between cost price and sale price (after deduction of expenses) is returned to purchasers in proportion to their purchases. Thus the co-operative society is controlled democratically by consumers, and is run for the service of members rather than for profit. Beginning with retail outlets, the co-operative movement has developed its own wholesale distributors, and in certain instances its own productive enterprises. In America the strongest part of the co-operative movement was originally the farm population. Pressed on the one side by strongly organized buyers of farm products and on the other side by monopolistic sellers of essential farm materials, the farmer found his only salvation in organized buying groups, formed frequently in connection with the local grange. The movement has spread, however, among all consumers, especially throughout the Middle West—where one finds gas and oil co-operatives with their own distribution service and refinery, credit unions, insurance, creameries, bakeries, and grocery stores. A co-operative grocery store today is stocked largely by co-operative trade-marked articles secured through a co-operative wholesale owned by the stores which it serves. The wholesale secures products of its own specifications directly from the producer—which may be a private concern or a producers' co-operative organization such as a co-operative dairy or flour mill.
Although not nearly as strong as in Great Britain, where approximately two families out of every three belong to a cooperative society, the consumers' co-operatives in the United States are increasingly important. There are over five thousand non-farm consumer co-operative societies, and their business amounts to several hundred million dollars annually. However, this represents only about 1% to 2% of the total business of the country. Farmers do a much larger share of their buying through co-operatives than do city folks. When one considers that in a country like Sweden nearly one-fourth of the nation's retail trade is carried on through co-operative societies, it is obvious that the co-operative movement in America has not achieved anything like its potential strength.
Only the most fanatical supporters of co-operation, however, look upon it as an eventual substitute for the present economic system. More conservative persons recognize that the great value of the co-operative movement lies in offering competition and a "yard stick" for private business enterprise. Co-operative business activity will probably never be able to enter the field of large-scale industry where heavy overhead requires a type of financing not open to co-operative groups. Furthermore, the cooperative undertakings are subject to the fluctuations in business activity which undermine the stability of the economy as a whole. The consumer co-operative movement is not yet in a position to act as a stabilizing factor, albeit there are some who claim that the co-operatives were responsible for the ease with which the storm of depression was weathered in Scandinavian countries. In recent years the organized consumers speaking through their co-operative societies have been notably instrumental in forcing consideration for the consumers' problems into the forefront of government economic activity.
Just what form economic planning should take in a democracy is still a very open question. To a certain extent any individual with initiative resents all-inclusive planning. On the other hand, the steadily increasing complexity of modern life seems to make considerable planning necessary in order to provide any opportunity for individual accomplishment or individual security.
In our survey of the basic teachings of the great economists, we have considered their views on each of the major fields of economic activity. Few of them would have thought comprehensive planning possible; fewer still would have considered it desirable. But time and events change men's ideas no less than their actions. The economic ideas of the past supported laissez-faire; it seems probable that the ideas of the future will emphasize economic planning.
Interest in the consumer as a factor in economic activity is of recent origin. Adam Smith and his followers assumed that the consumer would be the final arbiter of economic activity, for by his power to buy or withhold his patronage he could determine what was produced, how much was offered for sale, and the price at which goods were sold. No one really believed this; and virtual control over economic life gravitated into the hands of the producers. Through advertising and monopoly, producers controlled consumers' desires and prices. The consumer soon became the "forgotten man" of economics. Resentment against this condition has found an outlet in two directions: through legislation and through consumer organizations. Through the former the consumer has secured protection against the most dangerous and fraudulent practices of producers; through the latter consumers have been using their power to bargain and demand fair treatment, on the threat of withholding patronage, and establishing a consumer controlled system of production- and distribution.
Protection is after all a negative process. The government does not assist the consumer in getting the best values for his money. Although the Bureau of Standards does in fact make tests of food and drug products, it is not at liberty to publicize its findings as comparisons of various products, and much of its information is available only on specific request. Government publications dealing with topics of interest to consumers cannot name products by name. Cases brought by the government against producers of illegal products are seldom, if ever, reported in the nation's newspapers or magazines. If the consumer wants positive assistance, he must secure it through organizations initiated and supported by himself.
The most extensive of all consumers' organizations consists of the thousands of societies in the Consumers' Co-operative Movement. As we noted in a previous chapter, consumers' co-operation was a product of the pioneering genius of Robert Owen, but it got its official start in England in 1844 with the organization of the Rochdale weavers. Since then consumers' co-operatives have grown rapidly in the Scandinavian countries, less spectacularly in England, and somewhat slowly as yet in the United States. In Germany, Italy, and Russia the rather extensive co-operative movements were subordinated to the totalitarian and socialistic regimes. The goal of the consumers' co-operative is to increase the members' real income by securing commodities of high quality at reasonable prices, mainly through the direct purchase of specified products, thus eliminating the costs of advertising and the middle man's charges. The co-operative organization consists of unlimited voluntary members, each of whom has one vote regardless of the amount of money invested. Borrowed capital is paid for at no more than the legal rate of interest. Commodities and services are sold at the current retail market price; and the difference between cost price and sale price (after deduction of expenses) is returned to purchasers in proportion to their purchases. Thus the co-operative society is controlled democratically by consumers, and is run for the service of members rather than for profit. Beginning with retail outlets, the co-operative movement has developed its own wholesale distributors, and in certain instances its own productive enterprises. In America the strongest part of the co-operative movement was originally the farm population. Pressed on the one side by strongly organized buyers of farm products and on the other side by monopolistic sellers of essential farm materials, the farmer found his only salvation in organized buying groups, formed frequently in connection with the local grange. The movement has spread, however, among all consumers, especially throughout the Middle West—where one finds gas and oil co-operatives with their own distribution service and refinery, credit unions, insurance, creameries, bakeries, and grocery stores. A co-operative grocery store today is stocked largely by co-operative trade-marked articles secured through a co-operative wholesale owned by the stores which it serves. The wholesale secures products of its own specifications directly from the producer—which may be a private concern or a producers' co-operative organization such as a co-operative dairy or flour mill.
Although not nearly as strong as in Great Britain, where approximately two families out of every three belong to a cooperative society, the consumers' co-operatives in the United States are increasingly important. There are over five thousand non-farm consumer co-operative societies, and their business amounts to several hundred million dollars annually. However, this represents only about 1% to 2% of the total business of the country. Farmers do a much larger share of their buying through co-operatives than do city folks. When one considers that in a country like Sweden nearly one-fourth of the nation's retail trade is carried on through co-operative societies, it is obvious that the co-operative movement in America has not achieved anything like its potential strength.
Only the most fanatical supporters of co-operation, however, look upon it as an eventual substitute for the present economic system. More conservative persons recognize that the great value of the co-operative movement lies in offering competition and a "yard stick" for private business enterprise. Co-operative business activity will probably never be able to enter the field of large-scale industry where heavy overhead requires a type of financing not open to co-operative groups. Furthermore, the cooperative undertakings are subject to the fluctuations in business activity which undermine the stability of the economy as a whole. The consumer co-operative movement is not yet in a position to act as a stabilizing factor, albeit there are some who claim that the co-operatives were responsible for the ease with which the storm of depression was weathered in Scandinavian countries. In recent years the organized consumers speaking through their co-operative societies have been notably instrumental in forcing consideration for the consumers' problems into the forefront of government economic activity.
Just what form economic planning should take in a democracy is still a very open question. To a certain extent any individual with initiative resents all-inclusive planning. On the other hand, the steadily increasing complexity of modern life seems to make considerable planning necessary in order to provide any opportunity for individual accomplishment or individual security.
In our survey of the basic teachings of the great economists, we have considered their views on each of the major fields of economic activity. Few of them would have thought comprehensive planning possible; fewer still would have considered it desirable. But time and events change men's ideas no less than their actions. The economic ideas of the past supported laissez-faire; it seems probable that the ideas of the future will emphasize economic planning.
