PROCEEDINGS
OF THE
.,.
FOURTH INTERNATIONAL CONFERENCE
OF
AGRICULTURAL ECONOMISTS
HELD AT
ST. ANDREWS
SCOTLAND
30 AUGUST TO 6 SEPTEMBER 1936
LONDON
OXFORD UNIVERSITY PRESS
HUMPHREY MILFORD
1 937
I
FARM ORGANIZATION WITH SPECIAL REFERENCE
TO THE NEEDS OF TECHNICAL, INDUSTRIAL, AND
ECONOMIC DEVELOPMENT OF AGRICULTURE
FIRST OPENING PAPER
A. BRIDGES
Agric11/t11ra! E.conomics Research Institute, Oxford
T
HE subject implied in the main title of to-day's proceedings is
one which opens up a vast field for discussion. I would like to
make it clear at the outset that I have read into the title a distinction
between the organization of farming and the organization of the
farm. The latter is properly concerned with the problems connected
with the organization of any individual farm to the best advantage
of the farm. The former, which I understand to be the subject for
to-clay, has a much wider implication, namely the organization, not
of a single farm, but of the industry as a whole. Also by the term
'organization' is meant the structure of the industry, how it is built
up in its units of land, labour, and capital, and the principles on
which these factors of production are regulated.
In our agricultural literature we are apt to associate particular
types of farm organization with certain countries. Thus we associate
the peasant organ,ization of farming with Denmark and Switzerland. We think of farm organization in North America partly
in terms of family farms and partly, in former times, with what
were called 'bonanza' farms. At present we associate Russia with
large-scale State farming. With conceptions of these kinds in our
minds we might be inclined to think of to-day's subject as a conflict
of nations, each defending the farm organization associated with it,
but, while this may be difficult to avoid, we should be in error if this
aspect is taken too literally. In most countries all the main types of
farm organization exist in a greater or less degree. In this country,
for example, there is the hereditary peasant system, part-time farming
and family farming; there are medium-sized farms employing some
wage-earners and large farms employing a considerable number of
workers; there is also a little corporative farming, and, while State
farming does not exist in a large sense, some farming is carried on by
public and semi-public bodies. My assumption is that, in different
degrees, this position is true of many other countries besi9.es this
country, and, if this is so, the problem of farm organization is not
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205
one on which we are in opposition, but one which, in principle, we
all have in common, namely the economic strength and weakness
of all the various ways in which the industry is organized.
One thing which is impressive is that, in nearly all the developed
countries, farms are generally small. If we accept our own official
statistics on this point, then nearly 70 per cent. of all farms over one
acre in Great Britain are under 50 acres. In most European countries
the proportion of such farms is higher than that. Even in this country, which is not regarded as a country of small farms, the figure is
impressive on behalf of small-scale farming. It is a figure also which
appears to make farming on a large scale seem negligible. But the
corrective can be applied by the statistics which show that some
70 per cent. of the land of Great Britain is farmed in farms larger
than 5o acres. Thus 70 per cent. of the farmers farm only 3o per cent.
of the land. This reverse side of the picture would not be the same
for other European countries, but it is bound to be true that the land
under the control of small farmers is a much smaller proportion to
the total agricultural area than their numbers are to the total numbers of farms.
I recognize that the point of 50 acres which we take in this country
as the dividing line between small and large holdings is an arbitrary
one, and that in many European countries a holding of 50 acres
would be considered a large farm, while in the newer overseas
countries 100 acres would rank as being about the dividing line.
Taking only this coup.try then, it may be said that in point of numbers the small farms, i.e. under 50 acres, are the most important, but
from the point of view of the agricultural area involved they are
considerably less important. In fact it is interesting to note that all
the land in holdings under 5o acres is not as great as the land in
holdings over 3oo acres, the largest group recorded in the statistics,
which in point of numbers of farmers only accounts for 3 per cent.
of the total.
When we consider the various issues which are raised regarding
size of farms, it seems to me that a useful analysis might be made
between those factors which cause farms to be small and those
which arise because farms are small. The failure to make this distinction leads to a good deal of confusion. For example, one of the
most complex issues in the discussion is concerned with the intensity
of production. It is said that small farms are suitable for the production of intensive crops, whereas what is really meant is that because
farms are small the energies of the farmers must be directed to the
production of intensive crops. If we were clear about the causes and
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A. Bridges
results of small holdings we would not therefore find ourselves in the
untenable position of claiming that small farms were any more
suitable for intensive production than large farms.
There are other distinctions to be made on this subject. For
example, in the first group of factors, which cause farms to be small,
there is the distinction between those which are inherent in the
nature of farming and those which are survivals of bygone days or
are the result of haphazard development, and which could be
removed if the necessary effort were made. In the second group,
which arise because farms are small, there is the problem of effecting
a compromise by trying to overcome the difficulties while retaining
the small-scale farming system. In this connexion we find co-operative societies for the marketing of small outputs, a problem which
would certainly be simpler if there were no small outputs. We also
have co-operative use of machinery or engineering developments for
making small, cheap, general-purpose machinery, problems which
would not arise if there were no small farms.
When we think about farm organization it is common to make
certain distinctions along the lines of size of farm or the size of
business, both of which are necessary measures for certain purposes,
but are not really the fundamental characteristics which differentiate
types of farm organization. Peasant farms are generally small in
area and size of business, and we think of them as such, but it is the
fact that the organization has special characteristics of an economic
and social kind, which distinguish peasant farms from other kinds of
farm organization. In the same way family farms are similar to peasant
farms in terms of size, but we also think of them as having features
which shade them off from the organization of the peasant farms.
With corporation farms and State farms it is natural to assume that
they are always large farms, or highly specialized farms, but there is
no particular reason why they should be so because they are operated
by corporations or States. The basic differentiation in regard to
their organization is that they are run by a corporation or the State
as the case may be, and have special characteristics in the provision
of land, labour, and capital.
It is important to emphasize this difference between size and
method of organization. The basis of the peasant and family type is
that the land and capital are owned by one man, who is also manager
and employs little or no labour. Yet it is well to recognize that this
would mean a large farm if the peasant owned sufficient capital and
if his family and relatives were numerous enough. This is an exceptional case, which perhaps involves a difference in standard of living
Farm Organization
and outlook from that of the traditional peasant, but there is no essential difference in the organization of the three factors of land, labour,
and capital. Similarly, when dealing with corporation or State farming it is true that the farms are usually large, but the organization
could be used for a small area or in small-scale farming, and there
may, in fact, be instances where it is. Emphasis on this difference
is very important, because in the past there has been a long conflicting controversy about size of farms in which the technical efficiency
of various sizes has been the main issue. It is true that it is one problem connected with farm organization, but there seems to me to be
the more important one of the type of organization of land, labour,
and capital.
I will deal briefly with the question of technical efficiency of
various sizes of farms, using that term in the sense of producing
goods at a low cost while paying normal return on capital and
labour. It is generally considered in this country, at least, that there
are many farms which do not permit of a full modern standard of
efficiency. They are the small farms which involve a high capital
charge for permanent equipment, e.g. buildings, roads, fences, and
the like, and limit or prevent the use of many kinds of modern implements and machines. Also by having small fields they require more
time for cultivating and harvesting on each unit of land, and by
having a variety of live-stock enterprises each on a small scale more
time is required per head, while the farmer becomes a 'Jack of all
trades and master of none'. In the general accusation of the uneconomic conditions of production on small farms there is also the fact
that farmers must buy their requisites in small quantities, and their
output of each product is very small. These conditions make for
high costs in buying and low prices in selling. This weak trading
position has in some countries been overcome by the formation of
co-operative societies, yet the cost of the service they provide still
remains an additional expense which must be met by the farmers.
In the comparison of small and large farms certain contentions are
usually made which suggest that the disadvantages of small-scale
production are overcome by other factors. I mention two which
seem important. Firstly, as to small farms, it is claimed that they give
the opportunity of close personal management by the farmer, which
is all the more effective because he owns the land and his savings are
at stake. Since the most of the small farmer's time is taken up in
labour and not in management, the latter being negligible in his case,
the claim means that when the work is done by the farmer himself it
is better done than if performed by an employee, or that the larger
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A. Bridges
farmer and his men are less skilled and less reliable than the small
farmer. I think it may be difficult to support this contention, for,
apart from the fact of the possibilities of employed workers being
more specialized on the larger farms, there are numbers of examples
where farm workers are known to be first class men and where their
pride of craftsmanship is as strong and sometimes stronger than that
of the farmer himself. Further, the increased attention which can be
given to management on large farms may counterbalance the lack of
it on small farms. Even though we admit the validity of the contention, we have still to be sure that the extent of the advantage
arising from the close personal contact and financial motives on small
farms is equal to, or greater than, that which large farms possess by
virtue of the large-scale operations.
Secondly, there is the other main point connected with the small
farm, namely, that it results in a large output per acre of land. Most
of the figures show, though this is not universally so, that the small
farms obtain a higher output per acre. This arises from the concentration of their energies on intensive crops, or by carrying a
greater head of live stock than the large farms, and it may be, though
this is less clearly established, that the yields per acre of the individual
crops or the yields, say, of milk per cow are also larger.
It does not follow, however, that the larger farms could not shift
the character of the crops grown, increase the stock, or force a greater
output per unit, if it were necessary and the means were available
to do so. Small farms do not appear to be better placed for producing
a high output because they are small farms, and it seems that the
necessity of having to earn a livelihood is the main reason for the
phenomenon of their greater output per acre.
If it is admitted that larger farms have advantages in technical
efficiency, the main issue is how far it is necessary to go before
the optimum size is reached. The answer is not easy, as the size
will vary with the types of production for which the land in any
area is suitable. But if we think of the factors involved-that is, of
specialized labour, of the full use of modern machinery for cultivating the land and harvesting the crops or in live stock production,
of flocks and herds sufficiently large to pursue an adequate policy of
live-stock improvement, and of adequate output to secure economy
in buying and selling-and calculate the area which is necessary to
meet all these demands, even on a widely diversified system of
farming, we should find that we were far short of the tens of thousands of acres and extremes of that kind, which are often spoken
of as the unit of large-scale farming.
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209
The extension of farming organization beyond the moderate
sizes of 1,000 to z,ooo acres at once introduces problems of another
kind, and in this connexion I might mention that of management.
The moderate size of holding enables close supervision to be made
of all the day-to-day operations on the farm. When, however, farms
are made much larger, then we are faced either with extending the
services of managementin order to preserve this close supervision, or
alternatively with sacrificing its efficiency. If the former is followed
we have not gained anything. On the contrary the relationships and
checks which are necessary between sub-managers and the manager
create a new set of overheads, which do not occur in the moderatesized unit.
On grounds of technical efficiency we see on the one hand the
great disadvantages of the small farm, and on the other the dangers
of a different kind which may arise with the very large farm in an
industry like agriculture. Stress is usually laid on the personal factor
as the corner stone of farm organization for the purpose of securing
efficiency in production. Opinions may differ on this question, but
I think too great an emphasis is given to its advantages and not
sufficient to the conditions of production which may arise where
the personal factor is combined with small-scale organization. At the
same time we have to recognize that, to accomplish an increase in the
size of holdings necessary to give scope for modern ideas of production, it would involve a revolution in organization of farming. In
England and Wales, for example, if we" take only 500 acres as a size
to secure efficiency in production, the number of holdings would
have to be reduced from 384,000 to some 50,000.
I turn now to those questions of the structure of the organization
of farming, which seem to me to override questions of technical
efficiency, but which, nevertheless, are to some extent also linked
up with them. As I indicated earlier, the real distinguishing feature
of farm organization is not the size of the farm, or of the business,
but the way in which it is organized for the use of land, labour, and
capital. The peasant farm means a sub-division of the ownership of
land; it requires no paid labour, and the capital is provided out of the
savings of the farmer and is controlled by him. The corporation or
State farm, taking the other extreme, is distinguished from the peasant
farm by the nature of the supply of its capital and its dependency on
paid labour and salaried management. Between these extremes we
get types of organization in which there is a shift in emphasis on
some, though not all, of the factors of production. Thus the problems with which we are concerned are how the land is to be
p
2.10
A. Bridges
controlled and divided, how the capital is to be owned and controlled,
and of the place of management and of the type and organization of
labour in farming.
I do not propose to deal with the question of land and its tenure, as
this subject has already been discussed at length during the proceedings on Land Tenure. But I realize its fundamental importance in the
subject, since the majority of the prevailing systems of farm organization owe their existence, in some measure, to political and social ideals
concerning the ownership of land and the place of agriculture in
national life, which in tum have tended to create and to preserve a
certain amount of rigidity in sizes of farms and in the supply of
capital and labour in the industry.
The first topic which I will discuss is that of capital. With a few
exceptions the industry is capitalized on an individual basis, that is
to say, the farmer provides and controls the capital used on his
farm. Also, this capital arises almost entirely from the savings
made in the industry. There are not many primary industries in
which the capital and control is through the individual, and even
in the distributive trades the proportion of the capital provided
in this way is nothing like so high as in agriculture.
The provision of capital by the individual and the limited scope
which exists for its accumulation create to some extent the wide
diversity of size of farms and businesses found in the industry, since
the amount of capital at one person's 8.isposal will determine the
size of farm which he can operate, or the type of farming which he
can pursue. It is common knowledge to those who work in the field
of farm management that the amount of capital which is employed
by individuals on farms of similar size and character varies widely.
These variations arise from the degrees of intensity with which the
land is stocked and cropped, which in turn appear to be due to the
personal character of the provision of capital.
When we remember that the industry relies for its capital on the
personal savings made by the individuals engaged in it, we find that
these variations arise from certain circumstances which affect the
accumulation of capital: (1) the varying ability of the farmer, (2) the
standard of living, (3) the effect of testamentary disposition on the
death of the farmer.
I need not dwell on the first of these points. In every industry
there are certain to be variations in the ability of those responsible
for its direction, which will affect the financial results obtained in it.
When, however, we think of the great number of farmers and the
lack in many cases of sufficient financial resources to obtain a good
Farm Organization
211
education and adequate technical training, we are bound to confess
that the standard of managerial ability may not be so high as in
other industries which are capitalized in a different way.
As regards the second point, agriculture is peculiar in the sense
that it is comparatively easy to adopt a standard of living which makes
few calls on cash requirements, the farmer and his family getting
most of their necessities from within the farm itself. It is for this
reason that it is possible to start farming with a moderate amount of
capital, and, by pursuing extensive methods at the beginning, to build
up capital and eventually to take more land or to carry on a more
intensive kind of farming.
The third point about the method of individual provision of
capital is that on a farmer's death the capital may be dispersed by
division among members of the family, while part of it will accrue
to the State in death duties. The effect of this is that such members
of the family who are trained to follow an agricultural calling may
have to go through the same process of starting in a small way and
building up.
The point which I wish to emphasize in regard to these features
is that farming is not an industry which is capitalized on the basis
of what it requires, but on the capital ability of the individual at any
given moment. It may be that, in this way, farming is kept efficient
as far as its managerial personnel is concerned, but the periodic setbacks in capitalization, which occur because of the personal character
of its supply, keeps farm organization and development essentially
conservative in outlook and may also affect its profitability.
Contrast this method of capitalization with the joint-stock principle. Here an enterprise is floated with the capital necessary for
running it, and fresh capital for its development may be raised when
occasion demands. It does not suffer break-up on the death of any
of its share-holders or lose through the payment of death duties.
For these reasons the capital structure can be maintained. Further,
the joint-stock principle enables an industry to get any temporary
credit it requires through the normal banking channels, based on
its earning capacity. At present agriculture offers few real standards
by which to gauge the earning capacity of individual farmers. It has
been necessary in some countries to set up special credit institutions
to overcome some of the difficulties associated with small-scale
farming. In countries like this, however, while a small proportion
of farmers may receive short-time credit through existing credit institutions, the majority have to fall back on the more costly and less
desirable form of merchant credit.
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A. Bridges
Two further points in regard to capital may be emphasized.
Firstly, if the industry is made up of units which make it difficult
for farmers to get any more than a bare living, or if it is manned
by individuals whose motives are other than economic, that part of
the industry must remain in a more or less static condition. This
may account for the survival of much small-scale farming. Secondly,
farming has established for itself a reputation as an industry which
does not yield profits as high as those earned elsewhere, and for
being one in which it is only possible to be reasonably successful if
one is born and bred to it. On this account competition for farms
becomes restricted to those brought up in the industry. This view
has generally prevailed, and agriculture has therefore become something in the nature of a closed profession. This in all probability
has deterred the entry of capital to the industry on a joint-stock plan.
It must be admitted, however, that this form of organization has
not been outstandingly successful in agriculture, but the difficulties
of getting access to land have prejudiced the chances of success. It
is clear that if the joint-stock principle is to take a more active part
in farming organization, access to compact areas of land is necessary
for economy in equipment, in production, and in marketing, as well
as being essential for supervision and administration.
The absence of that satisfactory management which is of fundamental importance in the joint-stock plan may also have been prejudicial to success. The employment of paid management has never been
large in agriculture for reasons which are obvious. On some large farms
the control of the day-to-day operations may be left in the hands of a
foreman, the general policy of the farm, however, remaining with the
farmer. On certain kinds of farm the latter function may be exercised
by a bailiff, but generally speaking there is no managerial class having
the high technical qualifications or business training of those in
industry. Even in cases where there is a considerable capital at stake it
is common to employ a farmer, or person of the bailiff class, as manager.
In so doing the owners may put into his hands an amount of capital
much in excess of that which he has been accustomed to handle,
while the kind of organization envisaged by the owners, or necessary
because of the division of the ownership of capital from that of
management, is not one of which he has had any experience. There
has been little or no call for the type of manager with organizing
ability and business knowledge, but this aspect is one which any
change to the joint-stock plan would certainly have to face. At the
same time, as I have previously indicated, the area which could be
managed successfully may not be extremely large and, therefore, it
Farm Organization
21
3
might be unnecessary to offer very large reward for management.
But the point which I wish to leave with you is that the unit of
management need not be the unit for capital purposes. This fact
opens up opportunities for a new kind of management in the industry and provides possibilities for economy in the use of capital,
which cannot be obtained in the present structure.
The third and last aspect of farm organization with which I will
deal is that of labour. We get in agriculture a great many forms of
labour organization. We can compare the small peasant farm or the
family farm where the work is wholly done by the farmer, his wife,
and his children with the larger business where paid workers accomplish the whole of the work of the farm. The comparison leads us to
a number of economic and social issues. On the small general farm
the peasant or family farmer has a great variety of jobs to perform.
He is a general man, tender of all kinds of stock, cultivator of the
soil, and harvester of the crops. In this way he gets experience,
valuable in giving variety to his occupation and making for adaptability. But while recognizing this, it says little for the skill and craftsmanship required in agriculture, if he can do all these jobs efficiently.
It is this aspect of the labour question which makes part of the case
for specialization of farming. This point of standards of efficiency
is not, however, the one I wish to stress. In the peasant or family
organization there are undoubted weaknesses in technical efficiency
when judged by modern standards, and to overcome them the holder
must either work very long hours and use the labour of his wife and
children, or alternatively sacrifice some portion of his or their labour
worth. He and his family are known to work very long hours, and it
is claimed that there are times when they are prepared to carry on for
a poor labour reward. The implications of this are seen in contrast
with the obligations of the farm organization employing paid labour.
In this organization the number of hours and rates of remuneration
are set for the farmer under statute. In this country the wage is
based on providing a reasonable standard of living for the worker,
who naturally tends to compare his hours and wages not with those
of the small farmer, but with those prevailing in an entirely different
set of circumstances, namely, with those of workers in other
industries.
The better standard of wages and hours of work elsewhere tend
to make more enterprising and efficient workers leave agriculture,
while the setting of standards of hours and remuneration, which are
not observed elsewhere in the industry, may result in a sacrifice of
paid workers in times of stress and, what is also important, in some
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A. Bridges
sacrifice of the efficiency standards in farming, as well as in some
change in the character of farming itself. The peasant and family
farmer maintain their independence and, as far as possible, endeavour
to preserve their capital. They can, however, adapt their hours of
labour or sacrifice their labour remuneration and standard of living
if necessary. It is true that the two forms of organization exist
together in the farming structure, but the presence of the peasant
type seems to be incompatible with a high reward for capital and
labour in that part of the industry where capital and paid labour are
relatively important.
One further point may be noted. While agriculture is naturally
different from other industries in regard to its hours of work, the
claims of farm workers, apart from the question of wages, are for
shorter working hours, freedom from some of the Sunday work, and
opportunities for holidays, so that their conditions may correspond
more closely to those of town workers. It is difficult to see how
these demands can be met when a great many of the farms employ
only one or at most two men. Under these conditions there appears
to be little possibility of paid workers getting freedom of any kind
from the daily toil. On larger capitalist farms where more workers
are employed greater flexibility in hours of work and conditions of
employment is possible, and the requirements of workers may,
therefore, be obtained by an extension of this form of organization.
It is clear, of course, that all the difficulties connected with paid
labour can be abolished by adopting the peasant type of organization
for all farms, but we must realize that by doing so we commit the
industry to conditions of work which permit of little alteration and
which are bound to become increasingly at variance with those in
other walks of life.
I conclude by raising the issue which seems to emerge from all
the questions which I have touched upon. It is this. Is agriculture
to be organized on the basis which makes for the highest efficiency
in the use of land, labour, and capital? If so, then we must ask ourselves is it so organized at present; if not, is it to be achieved by the
further sub-division of farms and the settling of more people on
the land, regardless of whether there is need for them there,
regardless of their standards of living, and regardless of the interests
of the consumers of food; or is to be achieved through medium- or
large-scale organization by means of joint-stock or similar forms of
capitalization, and an economy corresponding to that prevailing in
modem industry?
There is no denying that agriculture in most civilized countries
Farm Organization
215
has made great progress in technique in recent years. In crops,
better seeds and more and better fertilizers have been used, and better
methods of cultivation are being practised. In the breeding, feeding,
and management of stock, there is a record of continual improvement.
Concurrently with these improvements power machinery has been
introduced where it has been economical to do so. These increases
in technical efficiency should have led to more economical production, and few will deny that much of the agriculture to-day is reasonably efficient within the limitations of its present organization.
When, however, we consider the structure of the organization,
can we say that any progress has been made? Is it not true, because
of the too great division of holdings, by the method of individual
capital and control, and by the difficulties associated with labour
organization, that the capital costs and maintenance of the permanent
and temporary equipment in agriculture are too high, that man-power
is wasted, that the primary marketing of farm products is too costly,
and that the industry generally is not as efficient as it might be?
While it may be claimed that there is some scope for further
improvement in the art of farming, is it not the type of organization which bars the way to advances which would result in
appreciable reduction in the cost of production? It may be then
that the next big step forward would be to remove these limitations
of structure with which the industry is hedged round.
Finally, we must ask ourselves too: If agriculture were organized
on a joint-stock basis with larger units, would this be inconsistent
with those national requirements of health and defence which are
always considered so important in discussions of agricultural policy?
It may be that this method of organization would mean fewer people
on the land, but it does not necessarily involve lower production
from it. It may, in fact, increase production since greater profitability in the industry would attract more capital and this in turn might
mean a greater intensity of farming, and perhaps, in the long run,
a rise in the use of man-power.
In many countries the industry is obtaining subsidies and preferential treatment, and most of the money necessary for this purpose
has to be met by the taxpayer or consumer of food. If these props
are to continue the taxpayer and consumer are bound to ask,
sooner or later : Is the industry organized for efficient production?