The Wheat Situation

VICE-PRESIDENT STAPELLS Introduced the speaker.

PROFESSOR FAY was received with loud applause, and said: Cautious economists and established grain men must, I conceive, view with some apprehension the course of events which has taken place in the grain trade in the last ten years. They are aware that the trade had built up a system which from the marketing standpoint was highly efficient, its efficiency including, in particular, three things: first of all, the grain markets, in touch with one another, provided a continuous market in all seasons; secondly, although all the crops of different countries were sold at different times, this did not result in an anarchy of delivery; the flow into the great consuming port of Liverpool was evened out over the months (I have heard that from my boyhood, being a Liverpool boy); and, thirdly, the market devised for its traders, its elevator men, its exporters, its importers, and its millers, a system of insurance by the device of hedging, which was highly steadying to the legimitate channels of trade. Those three great services the grain trade rendered in the past.

We are now confronted with the problem why this technically most efficient service has failed to give satisfaction, not only in this country but in every great graingrowing, grain-exporting country, to the producers of that commodity. What is the cause? It is not to be presumed that tens of thousands of people in different countries have been taken with some freak of insanity, and thrown away that with which they are content. What is the explanation?

I conceive that the main explanation is this: this system was devised from the standpoint of traders and consumers, but it failed to take into mind certain fundamental needs of producers. And what were they? First of all, there was the great need of the isolated farmer working out on the prairie, to know when he should sell his crop. He got on with production, and generous Nature produced ever more, but when to sell he could not know. He was not an expert marketing authority; and the machinery of .the hedge stopped short of him. Take the Canadian West. There he had the great risks of disease, pests, lack of rain. He found himself exposed to these natural ills; he was inexpert in selling, and so he and his sort followed the trend of all modern industry; they proceeded to stand together, and to transfer to broader shoulders the grave risks that inevitably attend the growing and marketing of a variable seasonal product.

Now, structures like the Wheat Pool in Canada today do not arrive in the twinkling of an eye. You may in a moment rashly institute a government authority with unlimited funds, which may do things right or do them wrong. Whatever else our Pool organization in the West is, it is not an improvised contrivance of the moment, but the ineluctable growth of thirty years of corporate effort, divided into three great stages, each of them following one upon the other.

I am only talking that which is familiar to many of you who have watched the growth of the West. But here it is. First came the great fight for equality of opportunity on the railroad, for equality of shipping privileges. Then came the great fight for entry into what to farmers at that time was the unintelligible mystery of the operation of the grain trade. That fight went on from about 1908 down to the period of the War. But the War compelled the suspension of the normal operations of the trade, and it was then seen that with one great buyer, the Allied Governments, it was necessary also to have one great seller. That seller operated with very striking success under favourable price conditions.

I came out here in the year 1921. I had already for the best part of twenty years been a keen student of the cooperative movement in Great Britain and Europe; had seen its great contribution to stability in the life of industrial England; in the life of the Continent among peasants and farmers of Denmark and Germany. One of my first tasks was to read up, here in the east, all the literature that I could find, and then I went out and spent a summer in the West, travelling around.

What did I find there in 1922? I found a country at the cross-roads. They were going through a terrible, drastic experience; plenty of individual hope; very little of corporate faith. The Government, through government intervention (as it always works), had taken them out of themselves and taught them to look above for their salvation. There was a great clamour at that time for a renewal of the compulsory Dominion Wheat Board. I think it was greatly to the strength of the Canadian West that such a solution was rejected; that they went back to their own prairie traditions and carried them forward, that they advanced their tradition of co-operation up into that third form that has taken the name of Pool-i.e., commodity marketing by the co-operative method, wheat pools, coarse grain pools, livestock pools, dairy pools, and the like.

Now, it soon became clear to an old student of co-operation that here was not only a new movement, but one that must cause trouble between the old school and the new. The old school who had done genuine co-operative work in the past-the United Grain Growers and their friends--were of the opinion that this further move towards the Pool would end in disaster. The Pool retorted, "Where are you heading? How do you stand to the farmer in essentially different relations from that of any other well-conducted line elevator company?" I do not think there was any effective answer to that. I do not think the fact that there were numerous farmer shareholders in the farmers' grain companies distinguished them essentially from well conducted line elevators. At any rate, the bulk of the farmers were not satisfied. They felt that the control of their economic life was slipping away from them; that they were losing the fruit of their economic efforts. They saw that the government was averse to coming in and doing the task for them, and therefore they went forward along the line of voluntary co-operation, to sign up their people to a contract, assuring them that their efforts must be futile unless they got a membership covering fifty per cent. of the crop.

Thus there was something approaching civil war inside the co-operative camp, and there was naturally bitter hostility from people in the grain trade-there always must be when a new structure is proposed. But they went on, and if tomorrow the Wheat Pool should close down, we could say unhesitatingly this-that the Pool, with its first five-year record, put a new corporate life into the West, as anybody could see who went there again, as I did, in 1926 and 1928.

In 1922 the talk was of moratoriums, of doing something to the banks, of getting the Government to do this or that; but when I went back in 1926 and 1928 I did not hear any such wild talk. At many a Pool meeting I have attended I have heard members say, "Well, we have done something, but there is only a bare living from farming when all is said and done." It is not from the responsible officials of the Pool, it is not from the men who are working at the problem that you hear these gigantic claims of what the Pool can do, contrary to all economic law. It is either from their ill-advised supporters or from those who pay a high tribute to them now with the hope of having a "go" at them next month.

What has been the latest development of this great organization? Where do they stand in relation to the world situation in wheat? Here I have to introduce a new idea. The question is a very fundamental one--the general trend of prices of raw materials in relation to those of manufactured products--and I freely confess that, contrary to the opinion of most academic economists, ever since I first saw the Canadian West, which was in 1909, I have been what is called a "bear" about the prices of raw materials. In England very often there has been a tendency to cry shortage and scarcity, but I cannot see it coming, and I never have seen it since that year of 1909, and for two reasons: the enormous increase of technical capacity in production, and the enormous improvement of transportation; so that the great unused, barely-touched reservoirs of the world are pouring their plenty into the world's markets at a time when the trend of population is to slow up and not to increase.

This applies to producers of raw materials the world over. Seen in its broadest aspect, there is the same kind of response everywhere. If the growers of wheat alone were trying to regulate and control their production, we might suppose that they were making some foolish local error. But apply some of the criticism that you have no doubt heard about the foolish interference with the laws of supply and demand to such things as petroleum, copper, ocean freight, etc. Do you suppose that those things are allowed to tale the course of supply and demand as they were fifty years ago? No. People realize that if they do not control production and prices there will be anarchy of production, which will react ultimately, with great injury, on the economic strength of the country as a whole. They not only do try to control the production; they must.

This new necessity of life is clearly not a thing that is going to be mastered all of a sudden. In the past we trusted to Nature in our population and in our production. One reason why we were able to do so was that our mastery over Nature had been really so very limited that we were not able to drown ourselves with Nature's abundance; but we are now not in that position.

It is almost certain that such a change, occurring among producing countries, will be offset in complementary fashion by changes occurring in consuming countries, and so the great movement of producers in all leading commodities to control their production brings with it similar action by those who use these things. Even if there were no Pool you would find the milling trade and the grain trade fundamentally altered, by the fact that there is no longer the old array of grain men and independent millers in Great Britain. There are two or three giant concerns which between them divide up the lion's share of the business. I do not call them a trust; I call them simply a part of that manifestation which is general throughout life, which we call the rationalization of industry.

That being so, the further move of the Canadian West towards bringing its own crop under its control as far as might be was not an isolated incident that we can either approve or disapprove; I do not think that is a scientific outlook; rather, I should say, it was bound to come. The only question is whether there is a better or a worse way of meeting this insistent demand that the agricultural community shall line up with the laws of economic life, in order that it may get into such a position that it may take its part in the competition of giants, which alone rules in great business today.

It is said, "All this is unnecessary fuss; you can get your wheat grown in any case; people with initiative will be always there to grow it. Look what happened from 1900 to 1914; did we need to worry then?" No, we did not need to worry, but the farmers were not making fortunes out of growing grain. Those who made money were farming for their title-deeds and getting their return in the increased value of their land. Such returns have been notably absent since 1921. Nor did we need to worry about alternative employment; we were building railways; we were living in our railway age. Just as in England in the 1840's and in America in the 1850's and 1860's there was a great railway age which dominated these countries, so there was in the 1900's in the Canadian West a railway boom which provided employment for nearly everybody who went out, as well as demand for oats, for example, and for the use of teams. But that has gone. The farmer now has either to live by the sale of his crop or to go under.

When business is depressed or when it fears depression it takes steps to defend itself, and it has one very terrible, and yet I think necessary, defence--it can put people out of their job, it can close down a plant, it can lay them off by the hundreds. The ultimate reactions of that are very profound, but I am not here to speak of industrial unemployment. I merely ask you to consider the case of the farmer. He has no such remedy; if anything, he has to work harder in a bad year, in order to get back from his own labour and that of his family what he has lost in the crop the year before. It has been calculated, and I see no reason to doubt the figures, that if you allow to the labour of the farmer and his family an unskilled rate of pay such as most industrial labour gets, you would put nine farmers out of ten into the bankruptcy court. There is not the money in it.

What sort of people are going to stand this? Here I come to what, to me, is the all-important thing; what kind of life do we envisage for the Canadian West? I will give you two pictures; choose which you will. One is a picture of a West in which all those who know which way their bread is buttered clear out of the job where there is no profit, and get into the towns. And if I were asked to go into such a West to speak at Canadian Clubs and Empire Clubs, I should speak in the towns and in the towns only; and feeding those towns with raw materials would be a great mass of farmers, not living the Canadian standard of life, but the standard of life of the gentlemen in sheepskins of whom we hear from time to time. Can you endure the thought of that? I cannot.

I have been to the summer schools of the West--the Co-operative Pool schools-and I have there seen scenes of idealism which make a man glad to be alive. I have seen young men and women banding together to learn the lessons of co-operative life. They reject the implications of a competitive system. They say, "It gets us no further; how would we ever have got on if we had not stood shoulder to shoulder, and backed each other's efforts?" People say, "Your farmer is an individualist; he will never co-operate", just as used to be said of the Anglo-Saxons, "They won't co-operate." But they have produced in Great Britain one of the most magnificent group efforts of this last century, the co-operative store, and in the last ten years co-operative effort has made history as never before in the Canadian West. Go to any co-operative school in any State of the United States, and what do you find? People coming up to you with intense pleasure to meet a Canadian. Why? Not because you come from Toronto, though Toronto is a very great city, but because you come from a country that has a Pool like that in the Canadian West, from a country that has felt through to a corporate solution of this fundamentally difficult problem, how to get a reasonable wage out of farming, and at the same time how to maintain the kind of life which we associate with Canada.

Canada is a balance; our Dominion is a compromise, on the whole a very fair compromise, and I think we have got to say this to the West: "We in the east do certain things to you which are against your interests, and we cannot help doing them. If you ask what would be one certain means of increasing the real income of the Canadian West it would be to let in, absolutely without duty, manufactured products of the country that takes the mass of our grain consumption; to have absolute free trade tomorrow with Great Britain. That would greatly increase the real demand of British consumers for the product of the Canadian West." But we cannot do that; and why? Because we have our own industries to build up, and we hope one day to be able to replace the great part of that demand which now comes from thousands of miles overseas by one that is fundamentally more stable because close at home, within our own Dominion borders. But, pro tanto, we do for the time being hurt them in that respect. Conversely, the West ought to be able to say, and will say it, whether we want them to or not--and I think we ought to welcome them saying it "You have got to stand behind us in this. We have got to live together as a Canadian Dominion. Are we to accept the run of the market when the fact, the world over, is that the run of the market leaves us without a living wage? Are we going to let this occupation of ours get down to a level at which there is only one solution, perhaps two? The one and obvious solution is to get out of it ourselves and let anybody, with any standard of life, come in and do it. The other is almost as undesirable; it is to forget that farming is not only a business, but a way of living. Then we can go at it purely as a business; we can mechanize it; we will not have a social life; we will not think of building the West with healthy Canadians; we will use the tractor and combine, and turn farming into a great company organization, getting the cheapest labour we can for the purpose. In other words, we will constitutionally perform what Mr. Stalin is trying to perform in Russia by violence." I do not want it. I do not believe it is for the stability of Canada. But rest assured that one of these solutions will come unless the farmers can go on to develop their cooperative strength on the lines of their thirty years of cooperative work.

People say, "Well, if they don't get this or that price this year the Pool will go out, and they must start again." Of course, they will start again some way, but if the Pool goes out because you do not give it all the support it deserves, the corporate life of the West will be set back for a generation.

I am not here to say that the Pool in its present marketing year has been all-wise. I take it that as we review our own relations with the stock exchange--for myself I have unfortunately no capital (Laughter)-we can say we might have been a little more wise than we were shown to be in November last. But I rather think it is poor tribute to the judgment we have, in our own handling of the currency or the stock exchange, to lay the blame upon the farmer. He is all-important in the West; he is not so important here, and whatever depression we get into, if we do-I do not say we will-we are as much responsible for our mistakes of judgment as to the price of securities, as they perhaps are if they have misjudged the price of wheat.

Another thing. You have to ask yourself, "Suppose we had not had this Pool? Suppose they had not done what they have done? What should we have had?" Well, the might-have-beens of history are always very difficult to calculate, but I rather think it would have been this-an irresistible demand for action such as the United States Federal Farm Board has taken. Now, as between the two, how do you view them? I am not a grain man, but I should not be surprised if the grain men sell the surplus grain of the West several times over to the Federal Farm Board before they are finished. (Laughter.) The Pool is not going to land us into trouble of that sort. I read recently, in an article in Saturday Night--not mine; that was the week before--a reproach that the Premiers of the West had lightly undertaken what may be a serious burden. I wonder if these critics know the class of men those Premiers are, and the sort of problems the West has? I listened once to Premier Bracken's budget speech and the tremendous insistence he laid on the taxation and economies required to put the economic situation of Manitoba in good shape. I have listened to Premier Brownlee down in the University of California, telling the American Co-operative Institution what the Pool means to Alberta. He said, "We are behind it to a man." It is no hurried conversion; rightly or wrongly the Governments of the West have decided that this new corporate life, this triumphant creation, above all other creations, of the Canadian West, this structure to which all the States of the United States look with envy, is worth backing.

No great new birth comes without its risks. I think one must allow, from a statistical standpoint, that the Pool and the trade together in this country, and the trade in America also, underestimated the possibility of price decline. I think they forgot that Europe is no longer the certain bidder that it was, that it has turned around inside itself and supplies more of its own needs on a rather simpler scale. I think they forgot, too, that there is always the possibility of alternative supplies coming along, in greater volume that at first sight looks possible. But that is no reason for giving it up. No great marketing organization is going to get through without some mistakes unless it is astonishingly lucky. What have they tried to do? They have not been trying to hold back the wheat in the West; their very organization precludes that notion. Their offence in the eyes of the trade was that they went through the exchange to the final consumer. They have been working in London, in Liverpool, in Hamburg, in Rouen, looking for real demand, like a person treading water in order to touch the bottom. They have not found the demand there, although always hoping by little dips to find signs of it. But for the Pool, with the great crop of 1928, and after that the short crop of 1929, I think we should have had a demoralizing smashing of prices, which would have made even more certain an appeal to the Government comparable to the appeal which has produced the Federal Farm Board in the U. S. A.

That, Gentlemen, is my summary of the situation, and I would like to close on an Imperial note. I am not satisfied that we are making the most of our Empire economically. I will relieve your apprehension at once. I am not a Beaver. But in the first place, we have not any body of imperial statistics. You hear the statement in the British House of Commons that England gets thirty percent of her wheat from Canada. This is calculated with reference to the last port of shipment. But, as we know, a great mass of wheat is either milled in bond in the U.S.A. or moved in bond to New York ports; and if you make the necessary corrections you find that Great Britain in normal years derives not thirty percent, but over fifty percent of her wheat from Canada. That is to say, her wheat imports to the extent of fifty percent consist of wheat harvested on the Canadian prairies. And we should know much more about that other Imperial problem so closely connected with it--immigration. The farmers of the West have been loath to pile up immigrants on themselves. I remember so well that I was preaching co-operation at a convention in the West, and they were getting very tired of me--I had been talking hog pool, or something--and finally I thought I would denounce immigration. They all waked up, seven hundred of them--(Laughter)--and jumped up and shouted themselves hoarse.

What did that mean? It meant they were just sick of this constant idea that the one thing needful is to put more people in the West--and more people, and yet more people. They believe in their West: they want it to grow, but they refuse to accept a situation in which they toil along until good times come and then have those good times spoilt by excessive immigration. New immigrants can grow wheat with very little capital, and when these distress crops come to market they disorganize it and set back the prospect of stabilizing the West as a remunerative grower of wheat. To speak in the language of economics, the marginal return from agriculture is definitely less than that from minerals or merchandising or manufacturing, and it is an extremely difficult thing for the farmer to carry on under such conditions.

So I would conclude by saying that the Governments of the Prairie Provinces are wise in viewing this problem from a very broad angle. If we lose something, either as bankers or as governments, we should regard it as nothing more than one of the inevitable costs of translating the old-fashioned industry of agriculture into the rationalized life which now dominates all industries. We are never going to get anything big by playing safe. We of the East should not try to be with the West in its profits and separate from the West in its risks and its bad times, but we should show the same spirit to the West as we feel towards North Ontario. (Applause.) That is a point on which the West feels keenly. There is no hostility towards the East as such; that has gone. What they resent is rather carping criticism of the farmer for not minding his own business. If he does not, who will? He must in his own interests try and lift his position to one in which he has control over his own economic destiny. I do not want to be offensive in the matter of colour, but I call it nothing less than a fight for a White West, the West of our dreams, the West with families like our own, finding in agriculture a reasonable living, and having their hope of advancement there, building up around themselves ancillary businesses, elevators and the like, so that there shall be something they can invest in, other than land; because if they are confined to land they just raise the price of land against themselves. We want to try and pay back to agriculture some of the losses which specialization brings, and this we can most surely do by supporting co-operative endeavour.

I have never received any money by way of fees from any organization in the West, it is needless, I hope, for me to say. I have been paid for giving lectures, as all lecturers are. I speak to you simply as a student of the co-operative movement, and I say to you that this cooperative movement is world-wide. There is no country in the world where it is not a dominant hope. Of all the contributions that have been made to the most difficult form of co-operation--integrated large-scale co-operation--there is none so great as that of the Canadian West. It has been voluntary. It has been democratic. It has not been the co-operation of a few big men; it has been your ordinary homesteader, the man that is making a life on the farm. That is the man I stand by, and I stand by him through thick and thin. (Loud and continued applause.)

The late Mr. C. A. C. Jennings voiced the thanks of the Club for the interesting and informative address.