FABIAN SOCIETY FOOD IN WARTIME by CHARLES SMITH TRACT SERIES No 250 Published by the FABIAN SOCIETY 11 Dartmouth Street, London, S.W.I INDEPENDENT SOCIALIST RESEARCH AND INTENSIVE SOCIALIST EDUCATION are essential If democracy Is to be preserved and the war Is to be followed by a constructive peace. WE ARE DOING THIS BY RESEARCH GROUPS LECTURES on WAR AIMS and HOME PROBLEMS WE NEED YOUR SUPPORT Write for full Information to the Generil Secretary, JOHN PARKER, M P, 11 Dartmouth Street. W c·a FOOD IN WARTIME By CHARLES SMITH For the right moment you must wait . .. but )Vhen the time comes you must strike hard, as Fabius did. Fabian Tract No. I LONDON THE FABIAN SOCIETY I I Dartmouth Street SW I NOTE This pamphlet, like all publications of the Fabian Society, represents not the collective view of the Society but only the view of the individual who prepared it. The responsibility of the Fabian Society is limited to approvingthe publications which it issues as embodying facts and opinions worthy of consideration within the Labour Movement. It is the aim of the Society to encourage amongsocialists a high standard of free and i11dependent research. This tract is intended to give a general picture of the food control situation. It is hopedthat it will be of special use to consumers' representatives on local Food Control Committees, and will aid them in the important work which it is within their power to carry out in defence of the standard of living (and so the standard of health and welfare) of the working people. February, 1940. BP 1'I.SII .2-s-o) FOOD IN WARTIME Charles Smith LESSONS FROM THE LAST WAR ' The food question ultimately decided the issue,' wrote Lloyd George of the war of 1914-18. Shortage of food for the -civilian population in Germany and Austria brought about the -collapse of the Central Powers, and the food situation in Britain presented the government with some of the gravest problems which it had to face. The rise in prices caused widespread working- class discontent in 1916 and 1917 which forced control of supplies and prices upon the Government. But this did not solve the problem ; shortage of supplies led to continued discontent until rationing had to be introduced for all essential foodstuffs exceptbread. J. R. Clynes in his M emoirs recalls how when he was Under Secretary to the Ministry of Food, Lord Rhondda, the Minister, urged the necessity for this general rationing. ' It mightwell be, Clynes,' said Lord Rhondda, ' that you and I at this moment are all that stand between this country and revolution.' S tate Control State control of food supply had come gradually. At the very beginning of the war there was a shortage of sugar, for the supplies had in the past been drawn very largely from Central Europe; a Sugar Commission with executive powers was set up on 20 August 1914 and drew supplies from the East and West Indies. But so far as civilian food supplies were concerned nothing more of any substance was done for two years. During this time the State was buying large quantities of food for the Army; the Board of Trade negotiated with the South American meat companies and with other suppliers for the quantities required by the Services, and where-as in the case of New Zealand and Australia-the whole trade was carried on through the Government department, the surplus was turned over for the civilian population at home. It was October 1916 before an executive commission was set up to secure supplies of wheat, and the end of 1917 before practically all imported food was passing through the hand of the Food Controller. The food had of course to be distributed through the normal wholesalers and retail shopkeepers, but prices were controlled at each stage. The Ministry of Food had a costings department which was intended to make it possible to fix a price which would allow the trades concerned to cover their costs and earn a fair profit. The costings department and the Food Ministry however found themselves in some difficulty because of the wide differences FOOD IN WART!ME between the costs and profits of different firms in the same business whose books they examined to arrive at a margin. Cooperationbetween firms was insisted on and agreements made by the Food Ministry with trade organisations. This, Gombined with the fixing of margins which by the Ministry's figures were below the costs of some of the firms concerned, meant that the larger units in the food trades went through a period of hothouse growth and the whole trade learnt by experience the economies of combination. Private Capital This can be illustrated from the history of a number of powerful concerns in the war and post-war years. Union Cold Storage, which before 1914 was linked with a number of other companies handling South American meat, increased its capital from just over £2 millions to just over £4,750,000 in 1920 and had profits rising from £105,000 in 1913 to £248,000 in 1919.* United Dairies, founded by the amalgamation of a number of firms in 1916, expanded its capital from under £1 million to nearly £2! millions in 1919 and showed profits which rose over the same period from £66,000 to £230,000. Lever Bros developed from a combine of 40 companies with a capital of £30 millions in 1913 to a group of 140 companies with a capital of £100 millions in 1919. The large flour milling firms such as Joseph Rank Ltd and Spillers Ltd did well enough during the war to absorb rival firms and open new mills in 1920. t The Cooperative Movement The cooperative movement in Britain, on the other hand, did not show a growth between 1914 and 1919 comparable with that in other countries-in France, Germany, Belgium or the United States for example-and if allowance is made for the rise in price on the one hand and the shrinkage in the aggregate supplyof certain commodities on the other ' the volume of business shows a genuine increase in quantity in the course of five years of no more than 3% '.t The failure of the British movement to expandwas directly due to the discriminating manner in which the wartime regulations were operated. First, the basis on which the Government allocated supplies which it controlled was unfair to the coops. Each retailer of sugar was limited to one wholesaler and might only be supplied in proportion to the number of customers *The Board of Trade made one contract which ran from July 1916 to three months after the end of the war for the delivery of 50,000 tons of South American meat per month ' at prices not quite double the equivalent pre-war-rate '. (Sir William Beveridge : British Food Control, p. 11.) t Based upon F. Le Gros Clark and R. M. Titmuss, Our Food Probl•m. pp. 76, 77. :j: S. and B. Webb: The Consumers' Cooperative Movement, p. 238. FOOD IN WARTIME he had previously had. This method of rationing retailers suited most shopkeepers who had lost custom by the enlistment of men and the migration of working-class women to the industrial areas where munitions were made; and suited particularly well the existing retail grocery chains who counted as one unit and could manipulate their su~plies t? f?llow the demand; but it bore veryheavily on cooperative societies who served the working-class in the industrial areas where population was increasing and which in any case had a growing membership. Second, the Government, at any rate during the first two years of the war, put no cooperative representatives on the trade advisory committees and in 1916 appointed as the first Food Controller Lord Devonport who had made his fortune as a wholesale grocer and retained, while he held this office, an interest in the multiple shops which Government policy was held to favour. Third, and ' even more bitterlyresented', to quote Sidney and Beatrice Webb,* was the unfairness with which the movement seems almost constantly to have been treated in the allocation of supplies so that it frequentlyhappened in many towns that it seemed to be the cooperative household that obtained the least sugar, butter, margarine, coal, potatoes or whatever was in short supply. Cooperators were accordingly driven literallyby hundreds of thousands (as was subsequently proved by the statistics of butter and sugar registration) to resort to shopkeepers for the goodsthat their own societies were prevented by the Government from supplying. This was not all. Cooperative societies were harshly treated by military service tribunals and key men drafted into the army; while later the societies, which did not trade for profit in the ordinary sense, were subjected to the Excess Profits Duty. The effect of this treatment was to rouse the cooperative movement to a political consciousness which it had never shown before. Cooperative representation in the House of Commons was needed to defend the movement against the Government, and the Cooperative Party was founded at a Special National Conference in 1917. The new Party had some successes and entered into alliance with the Labour Party. The cooperative movement drew closer to the industrial working-class movement too and in 1919 a United Advisory Council of the cooperativeand trade union movements issued a pamphlet upon The Union of Forces. This emphasised that since the alliance between them had first been formed in 1916 the activities of organised capital have shown most conclusively that the closest possible union of the two organisations is essential for the protection of the interests of the workers as producers and consumers. By the making of vast profits, the 1nlmg up of hl:lg~ reserves, by amalgamation, combination and federatwn, by mampulatwn of the Press, by securina panic legislation, by direct and indirect influence over Governments, and by the exploitation of patriotic sentiment, capitalistand profit making interests have strengthened, and are daily strengthemng their resources. t *The Consumers' Cooperative Movement, p. 255. t Quoted in The Consumers' Cooperative Movement, pp. 277-8. 6 FOOD IN WARTIME POST-WAR COMBINATION Since 1918 the 'strengthening of resources' to which this passage referred has steadily continued over the whole field of industry. Amalgamation, federation and combination has gone on until in some industries, for example the chemical industry, one vast concern has secured monopoly control. Other industries, almost without exception, are dominated by a small number of gigantic capitalist groupings often operating agreements about prices or the division of markets. ' State intervention ' or ' state control' have been applied in some cases to hasten the process. These concerns from their very nature are profit-seeking. They do not always aim at plentiful supplies of the goods theyhandle; indeed restriction of production and short supply mayyield greater dividends and suit the shareholders better.* The food trades are no exception to the general rule. There the most important entity is the huge international combine which grew so fast during the last period of wartime control-Unilever and Lever Bros. This combine manufactures a very large partof the margarine and soap used in the country, controls the Mac Fisheries group (which comprises concerns operating in everyfield of the fish trade) and a number of multiple groceries (including Home and Colonial). Through its innumerable subsidiaries it controls the supply of a number of oil products from the growerperhaps in the tropics to the shopkeeper in London or Manchester. It operates in Holland as well as Britain and had close connections with German industry until the outbreak of war. Flour In other cases no single concern has got a monopoly of supply, but a group of firms working together have complete control. This is the case with flour milling. Almost all the flour used for bread making in Britain is milled in the country; just over 20% of it by the cooperative societies and practically all the rest by a small group of milling firms which are united in the Millers' Mutual Association. This Association was founded in 1929 to end the severe competition between millers which was keeping their profitsdown; its effect is to maintain profits at between 2/6 and 3/per sack of flour and to stabilise the share of the non-cooperativetrade which falls to each of the individual firms. The largest-firms, Spillers Ltd and Joseph Rank Ltd, have absorbed some of the smaller milling firms and now control between them a verylarge share of the flour used for bread making in the country. Tea Tea blending and distribution is a similar story. By 1939 the C W S handled about 25% of the supply ; while Lyons, Brooke *See National Capitalism by Ernest Davies (Gollancz). FOOD IX \VARTiillE 7 Bond, and Allied Suppliers (which buy for the Unilever retait chains) between them controlled four-fifths of the remainder of the trade and all bought through the same firm of brokers. The Tea Control Committee on which they were represented met one a month to review the trade position, and it was this committee which determined when the retail price of tea should go up or down. A comparison of prices in 1925-26 with those of 1937-38 showed that the share taken by the distributors and blenders of tea had risen (making allowance for the tax changes) from 6d per lb to over 8d. Sugar In the case of other essential foodstuffs the State has ' intervened ' with the result that the tendency towards monopoly has been encouraged. Sugar refining is a good example. All the white sugar eaten in Britain is rrfined in the country although some of the supply is derived from abroad, imported as raw sugar. Control imposed on sugar refining during the Great War was followed in 1923 by the amalgamation of the old-established firms of Henry Tate Ltd and Abram Lyle Ltd to form a combine whose name is literally a household word. When the Government began to build up a British beet sugar industry by lavish subsidy there arose difficulties with the refining firms and in 1928 the Govemment bought these firms off by giving them a monopoly of the British market. It did this by imposing so high a rate of duty on refined sugar that the import of sugar other than in the raw state practically came to an end. The refining business was elaborately shared. Fourteen-nineteenths was done by the refiners proper; and this share divided by a careful agreement which secures 86% of it for Tate and Lyle and their subsidiaries. The rest of the refining was done by the beet sugar factories ; these were amalgamated under Government auspices in 1934 into the British Sugar Corporation (in which incidentally Tate and Lyle have a considerable holding of shares). The refining margin-the gap between the price of the raw sugar and the price of the refined-on which the firms are allowed to work is agreed with the Ministry of Agriculture and the Treasury. In the past few years the Tate and Lyle combine, which has a capital of £8,600,000, has covered its costs very adequately. Between 1934 and 1938 the dividend has never fallen below 18% and there were bonus issues in 1935 and 1938 of 40% on each occaswn. Meat Meat importing provided another example of monopoly strengthened by Government intervention. .In 1938 some ?O% of British supplies of imported meat came fr?m the Argenti~e ; and the trade was practically controlled by s1x large compames. FOOD IN WARTIME Largest of all was Union Cold Storage, which was linked with Vestey Bros, and with a large number of other concerns controlling the meat from the time it was bought from the farmer in the Argentine to the time that it was sold over the butcher's <:ounter in Britain. This group and five other concerns between them handled directly 85% of the Anglo-Argentine meat trade and they combined in the South American Meat Importers' Freight Committee to reserve shipping space and to divide it up amongthemselves. Obviously this gave them control of the suppliesthat came upon the British market. Their position was buttressed by British Government policy after the Ottawa Agreement. The <:ompanies which imported meat from foreign countries were licensed and had to limit their total imports to quantities fixed by the Board of Trade. This confined the Anglo-Argentine trade to the firms that were already in it-although provision was made for a special quota of up to 15% which might be used by the Argentine Government. Two of the ix companies got between them a third of this p rcentage ; so that 90% of the meat importedfrom the Argentine comes through the hands of six companies which arc represented on the Importers' Freight Committee. Bacon But the clearest cases of Government intervention which had the effect of strengthening the large food manufacturing and food <.listributing concerns at the expense of the smaller w re the Bacon :cheme and the Milk Board. Under the Bacon cheme imports were deliberately forced down and prices rose (so that the Danish producers were sending le::.s bacon but getting more money for it). Whereas bacon cost 10d per lb in 1932, the average price of the same kind of bacon in 1938 was 1 /3~d. The home production of bacon went up ; but while r tail prices rose by more than 50% betwe n 1932 and 1938 the price that the farmer got for bacon pigs went up by no more than 30%. There have been endless difficulties about the scheme and the form finally fixed in 1938 gave the bacon curing companies a margin guaranteedby the Government. The larger the factory the cheaper it is to produce a hundredweight of bacon, so that this cheme put a good deal of Government money into the pockets of the larger curer . The largest of all these firms, Mar h and Baxters, controls with its sub idiaries ome 40% of the trade, but it is a private company, -o that figures of its profits and general po ition are not available. It is worth noting, however, that in the two year preceding the outbreak of war the number of bacon factories, which had previou ly increa d, wa reduced by ome 30°0 . * *The figure for premises licensed by the Bacon Development Board was 19 at the end of 1937 and had fallen to 582 by :\lar h 1939. Many of the premises were run by curers doing a very small business. Of tll<' "i82 there \\Ut' 241 with an average output of less than 15 cwt a week earh FOOD IN WARTIME Milk It is notorious that British milk is the most expensive in the world; what the farmer is paid is not excessive, but distributive costs are high. The price which the housewife pays is determined by the Milk Marketing Board, which enters into contracts with the distributors and names the prices which they may chargein different parts of the country. Since the Milk Marketing Board has been in existence the cost of distributing a gallon of milk has slowly but steadily risen (by about !d to just over lld). The milk which cannot be sold for liquid consumption is sold much below this liquid price (indeed below cost of production) to manufacturers of butter, cheese and margarine. The pricethey have to pay is regulated so that their products can competewith imports. The methods of the Board have all along the line favoured the big buyers of milk, whether for liquid sale or for manufacture into butter or cheese. The largest group of private firms in the milk trade is United Dairies, which has more than a score of subsidiaries, including cheese manufacturing, transport and wholesale liquid distributive firms. Not only do United Dairies directly control a large part of the milk supply of London, but one of their subsidiaries, London Wholesale Dairies, handles a good deal of the milk that is sold by small dairymen (who proudly announce themselves as ' non-combine '). Government intervention in fact is nothing new for the food trades. It has been taking place in the case of some essential foods for years; and not once has it brought prices down. That is worth remembering when studying wartime control. WARTIME FOOD POLICY After the first four months of war it is not easy to write with any sureness about Government policy or the food supplymachinery: both have undergone frequent and drastic changes. The first arrangements made bore all the marks of impermanence and within the first four months no plan which appeared to be intended for the duration was actually carried into operation. What can be discussed in the light of the various changes of planand policy are the underlying principles on which the Government's food policy is based; there is no lack of straws to show which way the prevailing wind is blowing. The Problems There are three aspects of wartime food policy. First there is the supply of food from overseas. The amount of food which is brought by ship to Britain depends partly upon strategicalconsiderations-upon the extent to which the British fleet is master of the seas-and partly on the respective importance attached 10 FOOD IN WARTIME by the controlling authority to foodstuffs and war material which has to be imported from abroad. Second there is the questionof home production. The extent to which the Government must rely upon British agriculture for food supplies bears an inverse ratio to the degree of success that the navy has in beating the U-boats. Uncertainty as to the way the war at sea would turn out explains the unwillingness of the Government in the first few months of war to commit itself to any long term policy for agriculture or to give any guarantee of 1940 prices. Third, there is the problem of getting available supplies of food into an edible form (milling the wheat, curing the bacon and so forth) and distributing them to the mass of consumers. That involves tackling the food trades in which the Government has. already intervened with results so disastrous to the consumer, and it raises the question of ensuring a fair share-and what maywell be a different thing, an adequate diet-to the working population. Since in normal times some two-thirds of Britain's food supply -including some 80% of the flour, 40% of the eggs, 90% of the butter, 60% of the meat and 75% of the sugar-is imported, the organisation of purchases from overseas is of first-rate importance in time of war. Since September import licensing has been introduced, and world shipping freight rates have been practically 100% of the normal peace time figure. Import licensing places a practical ban on the import of some foodstuffs-certain fruits regarded as luxuries for example-and imposes limitation in other cases. This form of regulation, like so many others applied in every part of the economic field in wartime, inevitably harms the large firm with considerable resources less than the small one which cannot survive any serious interruptions in its trade or even a temporary shortage of the commodity which it handles. The Government moreover is itself making big purchases-it has boughtthe whole cocoa crop of West Africa for example, and is buying sugar which it sells to the British sugar refiners. Expanded home production of food cannot be separated in the long run from the Government control of distribution, for as the National Farmer ' Union R ecord pointed out in October 1939, unremunerative price levels would inevitably kill any campaign for increased production however keen the farmers might be to play their part during the crisis. The emergency legislation has given to the Ministry of Food wide powers by order to fix retail and wholesale prices of food, but there eems to be no evidence of any real coordination with the Ministry of Agriculture. The real reason for this is that both Ministries have been watching the war at sea and playing for time before any announcement had to be made which definitely committed the Government to maintaining agricultural prices high enough to expand agricultural production. FOOD IN WARTIME Who Is In Control ? The Ministry of Food in which the control is centred grew out of the former Food (Defence Plans) Department of the Board of Trade-a shadow ministry which had been preparing againstthe eventuality of war for more than two years. As the brief reports which the Department issued before September 1939 show, the food traders showed themselves very willing to cooperate in the drawing up of schemes and placed their trade organisations at the disposal of the Department. The working of this is shown by the personnel of the Ministry at present ; in each section the executive positions are held by men who previously had prominent posts in the private firms in the trade. The only exceptions are where the controllers have come over from the marketing boards which previously handled the commodity and are now more or less absorbed into the Ministry of Food ; in this case their assistants or advisers are representatives of the big combines. The Bacon Controller is a representative of Marsh and Baxter* ; the Assistant Sugar Controller is a representative of Tate and Lylet ; the chairman of the Cereals Imports Committee is also the chairman of Ranks Ltd, the big milling concernt ; the Director of Imported Meat Supplies represents Union Cold Storage.§ But the most remarkable section of all is that dealing with Oils and Fats (presumably including margarine, which is to play so large a partin wartime diet), where there are eleven individuals performing administrative work. One (the worst paid by the way) is a civil servant ; one was formerly occupied running his own business ; and the remaining nine were previously employed in the firm of Lever Bros and Unilever Ltd or one of its subsidiaries.!! Many of the gentlemen with executive authority in the Ministry are in a most public spirited way giving their services without remuneration ; as the Economist points out : There is no need to assume any deliberate partiality ; unquestionably all the controllers are deeply anxious to serve the public interest. But they have an unavoidable bias towards seeing things through the particular spectacles of the interest from which they come. There are a large number of instances where the controller 's power has been used to enforce changes in process or in trade practice (such as terms of contract etc) which whether or not that was their purpose in the controller's mind have undoubtedly had the effect of benefiting the ~ection of the industry from which he comes at the expense of its customers. * J. F. Bodinnar, chairman of C. and T. Harris (Calne) which is linked with Marsh and Baxter. tC. N. Lyle. :j: J. V. Rank. § H. Jones, director of vV. \Veddel, part of the Union Cold Storage group. 11 Reply to a question in the House of Commons, 6 December 1939. FOOD IN WARTIME A Fishy Example The fir t adventure of the Ministry of Food in control was a fiasco. The commodity was fish, the trade in which is not highlytrustified and where, despite the existence of MacFisheries, there is no dominance of one monopolist group. On the face of it there was an obvious case for some form of control to keep prices down. For although the bulk of the fish upply is landed direct in Britain a very large proportion (much larger than in 1914) comes not from the North Sea but from more distant fishing grounds, and therefore war was likely to interrupt supplies and produce a shortage. But the organisation of the fish trade for war purposes had it seemed been carried out solely with an eye to the interests of one set of merchants-those operating at inland wholesale markets. There was no assurance of a good price for the fisherman-fish had to be ent to inland depOts for sale-with the result that much fish when it reached these markets did not fetch a price sufficient to cover costs already incurred. The fish scheme, although it quickly became the most famous, was not the only activity of the Ministry. By the end of October cereal and cereal products, feedingstuffs, tea, canned meat and fish, meat, bacon and hams, dried fruits, ugar, butter, eggs, lard, potatoes, edible oil and oil products were all subject to controls of varying degree.* Where, as in the case of margarine for example, the ' control ' was applied at the manufacturing stage, the firms -concerned were guaranteed an extremely generous margin based on the immediately preceding trade figures and pre-war profitlevel . Maximum Retail Prices Maximum retail prices were fixed for a number of foodstuffs { ggs, dried fruit, tinned salmon) ; and in ome cases wholesale prices were regulated as well. These figure were subject to revision according to season, and have in fact been revised a-the war ha progre sed. The retail margins fixed have not been exce sive, and if they are to provide a standard by which ubsequent margins are judged the mall shopk eper will find himself in some difficulty. This difficulty will be made greater by increased tran port costs and the restriction of shopping hours by the blackout (against which organi d small hopkeepers have alreadyprote ted). The ea e of meat is specially interesting, Mind rial regulation laid it down that retail prices of meat should not exceed th average of tho ruling on August 25. A. V. Alexander, speaking in th Hou of Common on Nov mb r 8, quoted a comparison of r tail pric s between Augu t and October. It show~ that for English bullocks and heifer~ the "hole,ale pncehas been up by '.6% to the butcher, for sheep and lambs 11.9% for · According to a statement of the ecretary to the :\hm~try m ·he Hou'e of Commons 26 tober 1939 FOOD IN WARTIME 13 bacon pigs 7.5%, for Argentine chilled forequarters 5.9o,{,, for Ar~entine chilled hinds 15.5%, for Australian Jamb 5.3% and for New Zealand lamb 25%. He went on to reveal that whereas the Cooperative Wholesale Society normally made a profit of 10/-in handling a beast for the retail societies recent transactions of which he had records showed average profits of £2 7 10 to £4 4 11 per animal. Allocation of Supplies But that was merely one side of the onslaught upon the consumer and the small retailer. In the first few days of war the Government assumed control of the supplies of butter, bacon and sugar and made allocation to retailers on the basis of a datum system ; retailers were entitled to a percentage-the same for all of them-of the quantities which they had handled during a previous datum period. This system of allocation did not take .account of the very considerable changes in the distribution of population which followed the outbreak of war : it was advantageous to the large retail chain which could switch supplies from place to place as demand varied, and disadvantageous to the small shopkeeper (who in the reception areas could not get extra supplies to meet the increased demand) and to the cooperative societies (who because they_ were expanding organisations would be hit by any scheme which based their quota of supplies on a period in the past). Government Profiteering That however was not all. First the Government itself did a little profiteering in butter which drew forth a gentle rebuke in the House of Commons from Sir George Schuster, the Chairman