14 
Land & Water 
February 7, 191 8 
High Wages and High Prices : By Harold Cox 
THE primary cause of the food shortage from 
which we are all beginning to suflcr is the 
diversion of human energy from production to 
destruction. This has happened in most of the 
countries of the world, and throughout Europe 
it has affected in slightly varj'irg degrees all the belligerents 
and most of the neutrals. It is important to bear this, general 
fact in mind because we are all of us apt to imagine our own 
particular troubles are peculiar. 
Unfortunately the Government, while on the one hand by 
its labour policy encouraging the inflation of wages, has, on the 
other hand, by its food control policy encouraged increased 
consumption, and fo has itself helped to produce the shortage 
from which the country is now suffering. When traders 
began to realise that there might be a shortage of staple foods 
and consequently prices began to rise, the occasion arose for 
measures to prevent the poorest classes from suffering ex- 
cessively. One of the best things accomplished in the 
way of legislation since the war began was the passing 
of the Act compelling farmers to pay a minimum wage 
of 25s. a week. This Act was necessary because economic 
forces alone were not sufficient to overcome the traditions and 
the strong trade union action of farmers acting as a body. 
.Agricultural wages in a word had been kept dowTi below an 
economic level by the deliberate action of the farmers based 
largely upon a bad custom, and outside pressure was neces- 
sary to get rid of this vicious system. Following the same 
general principle, certain departments of the government 
adopted the principle of raising the wages of their less well-paid 
clerks while leaving the better paid clerks at the same standard 
as before. If these sound lines of policy had been continued 
throughout, the country would have been saved from a very 
large part of the economic troubles from which it is now 
suftering— namely, from that part which is due to the increased 
wages granted to large classes of manual workers who were 
already enjoying incomes quite sufficient to provide them fully 
with the necessaries of life. 
If thos3 who have had their wages so greatly increased had 
devoted the larger part of the increase to war savings, little 
harm would have been done, so far, at any rate, as the question 
of prices is concerned. But as a matter of fact the experience 
of the War Savings Committees shows that those districts 
where wages have risen most are the very districts where the 
weekly war savings are least. It is the people who have not 
prospered financially as the result of the war who are struggling 
out of their relatively low wages to help their country by sub- 
scribing to war loans. On the other hand, the well-to-do 
wage earner is using his increased wages to enlarge his scale 
of living. He is buying more than ever he did before, and 
every purchase he makes tends to force up prices. 
War Bonuses 
Special attention has recently been directed to this question 
of war bonuses by the extraordinary pubhc conflict between 
Mr. Barnes and Mr. Winston Churchill. Mr. Churchill may 
be responsible for the blunder of attempting to deal with a i 
highly complicated situation by means of a percentage 
bonus, but the foolishness of this proposal is readily seen. 
Take for example the case of a skilled man earning on time 
wages £3 a week as contrasted with an unskilled man earning 
on piece wages £5 a week. Obviously a I2| per cent, given to 
the skilled man— that is, an additional 7s. ed., wiU not redress 
the balance. Mr. Barnes knew this, and also knew that the 
grievance had already been largely redressed. Yet when 
.Mr. Churchill presented to the War Cabinet a scheme for giving 
a 12J per cent, bonus to a comparatively limited number of 
skilled workers, Mr. Barnes and Lord Milner, as representing 
the War Cabinet, instead of turning down the scheme in Mo, 
expanded it immensely by extending the bonus to a large 
number of other classes of time workers and thus themselves 
set up a claim for the bonus to be extended to piece workers 
also. It only remains to add that this gigantic expansion of 
an onginally foolish scheme, not only fails to solve the original 
grievance, but actually aggravates it ; for to take the illustra- 
tion above given, if the man with £3 and the man with £5 
both get a 12J per cent, bonus, the margin between them is 
actually increased instead of being diminished. This colossal 
muddle, for which the War Cabinet itself must be held 
responsible, may possibly cost the country as much as 
£100,000 000. 
The inflation of wages must in any case have made the food 
problem more serious. It has been further aggravated by the 
deliberate adoption by the Food ConfroUcr, possibly on ex- 
press orders from the War Cabinet, of a policy which the ex- 
penence of mankind has uniformly condemned, namely, the 
policy of attempting to limit prices when demand is high and 
supply is scarce. On this point it is worth while to quote from 
an extremely interesting letter written more than three and a 
half centuries ago with reference to the efforts made to fix 
prices in the reign of Edward VI. The letter was written by 
Sir John Masone, to Mr. Secretary Cecil, and is dated December 
4th, 1550. It refers to an Order of the Privy Council fixing the 
prices of cheese and butter : 
I hear here a great bruit of the discontentation of our people 
upon a late proclamation touching cheese and butter. . 
I have seen so many experiences of such ordinances ; and 
ever the end is dearth, and lack of the thing that we seek to 
make good cheap. Nature will have her course, ctiam si 
fared expcllattir ; and never shall you drive her to consent that 
a ^cMKjy-worth of new shall be sold for a fartliing. 
1 For who will keep a cow that may not sell the milk for so much 
as the merchant and he can agree upon ? 
The whole principle is contained in these few sentences- 
When normal supplies are reduced, prices — in countries un- 
troubled by Food Controllers — rise. The result is that some 
people cut down their purchases and this process continues 
until what remains is sufficient for all who continue to pay. 
It is the business of traders, both retail and wholesale, to adjust 
prices to this necessary condition. If they put prices too low 
their stocks will be quickly exhausted and their customers, 
being disappointed,' may carry their permanent custom 
elsewhere. If they put prices too high they are left with stuff 
unsold on their hands. On the other hand, where a Privy 
Council or a Food Controller intervenes and fixes a definite 
price, some entirely new method of sharing out the insufficient 
supply has to be devised. The simplest plan is the queue 
system. It has been in operation for two centuries at least 
in connection with theatre seats, where the price is always fixed 
and the supply always limited. Consequently, the theatres 
have always regulated admission on the principle of " first 
come first served ! " Exactly the same thing happens when 
prices for margarine are fixed, with this difference, that no one 
by standing in theatre queues can get two seats, whereas with 
margarine the enterprising mother of a family may send all 
her children to stand in queues ; and so one household may get 
three or four times its fair share, 
It may be answered that this argument overlooks the fact 
of unequal incomes ; but it has already been urged above that 
the income problem should have been dealt with by raising 
the wages of the less well-paid workers so that they should 
have had enough to pay for their necessaries. Had this been 
done, it is certain Viiat increased prices would have restricted 
the demand of the more prosperous wage earners, there would 
have been less greedy consumption and less sheer waste. 
But not only do high prices serve a most valuable national 
function in limiting demand when supplies are scarce, but they 
do an equal service to the nation by stimulating the production 
of fresh supplies. Alternatively, if prices are artificially 
limited by public authority, production ceases. Of this truth 
there has been abundant evidence during the past twelve 
months. When the Food Controller last spring began to 
interfere with the price of milk, farmers began to sell their 
cows, and many were slaughtered. The Food Controller 
has also fixed the price of butter so low that Dutch- 
men cannot afford to supply us, and the country is 
butterless. Another striking illustration is the fixing of the 
price of oil seeds with the plausible idea that the country 
would thus be enabled to obtain cheap margarine. The 
result has been that cargoes of oil seeds have been diverted 
from England to France. 
The Government, having landed the country in the present 
muddle, largely through its own fault, is now proposing to go 
further still and attempt to straighten out matters by a uni- 
versal system of rationing. This indeed is the only logical out- 
come of the abandonment of the world-old method of harmonis- 
ing demand and supply by means of price. And if the Govern- 
ment of the United Kingdom had only to deal with a small 
community of persons of very similar tastes, rationing would 
be feasible and just. Rationing is practised in the army 
without any very great difficulty, though even there it leads 
to a certain amount of waste ; it can be practised at a pinch 
in a beleaguered city. But when we have to deal with the 
problem of 46,000,000 people — some male and some female, 
some old and some young, some ill and some weU, some 
doing heavy outdoor work, others light indoor work, some 
dwelling in towns and some in the country, some producing 
food and some only consuming it — no system of rationing can 
possibly be devised which will get over the multiple difficulties 
created. All the evidence available shows that Germany, in 
spite of her wonderfully efficient bureavicracy,, has made a 
failure of rationing, and there is little reason to believe that 
Lord Rhondda wiU succeed where Herr Michaelis failed. 
