XIV. Supply and Demand

CHAPTER XI~ SUPPLY AND DEMAND AT·this point in our discussion of the housing situa tion, a word of caution must be uttered on the question of figures. Any student of the housing problem will be struck by the considerable differences that are dis closed even by official figures. All the many reports available are at variance, and the most contradictory conclusions can be drawn from the figures issued by different parties and at different times. It must be remembered that we have" had three distinct official policies in connection with building-Mr. Lloyd George and Dr. Addison with the Coalition Govern ment and 'millions of housing bonds; Mr. Bonar Law, and later Mr. Baldwin, with what is strangely called a Conservative policy; and in between Mr. Ramsay MacDonald and Mr . Wheatley with a new heaven and a new earth. Each of these parties has to justify its existence by showing the other two to be wrong, and each of them produces figures in pursu ance of that amiable object. These figures, when examined, are found to differ in no essential way from the figures which issue in such impressive volume from Moscow. The great majority of them are concerned with the estimates of various com mittees and so-called authorities as to what is wanted, what should be, or what various innumer able schemes are calculated to produce. I often think that if the public would give up its interest in citizenship and sociology and turn its mind to arith metic and statistics, the world would be a very great 165 166 The Return to Laisser Faire deal more comfortable. It is not necessary to argue with the business man on the unreliability of figures and the pitfalls they represent. The Bankruptcy Courts are kept busy and thrive on the general ignor ance of these subjects.

There is another danger about official figures. Even if true they are generally misleading and. as I have remarked before, if you mention the mere word million to the average elector he is satisfied. But it often happens that the millions. figuring so largel y in official statistics are mere drops in the ocean of private and individual activity that they endeavour to dam up. During the war, for instance, there was an attempt to control paper, and Mr. Hall Caine, jnr., was given the position of Controller, I suppose ,because his father had put more ink on to more paper than any other living man. But the spectacl~ of young Hall Caine controlling paper was the mo~t ludicrous of all the absurd spectacles associated with the political mania of control. He produced the usual figures with the usual millions, but he overlooked the fact (and so did those who were engaged at that time in controlling everything) that every day of every week in thi~ little island alone there are sixty million transactions between in dividuals involving the sale and purchase of paper, and that no official machinery can ever do anything but reduce that tremendous volume of activity.

During the war it may have been desirable to reduce activity, although that remains a question of doubt, but no doubt can exist of the necessity for the opposite policy in time of peace.

Supply and Demand There is a point here in connexion with housing that is very seldom made, but that I think needs to be stressed. Almost all our other iod ustries are under a normal obligation, which they readily accept, to keep in stock a surplus of their products, which they hold at the dispos'al of the rest of us. The tailoring trade or the furniture trade does not deny its natural obligation to make its product, put it upon the shelves of the shop or into the warehouse and th~ri wait for the buyer to inspect and purchase at his leisure. Production in all the free industries is ahead of consumption, and thus it comes about that we are well supplied with all those commodities where the network of control and restriction is not so closely woven. The building trade, however, has been legis lated and organised into a position where pro duction is always behind consumption and where, if at any time there is the merest sign,of a surplus of production, something is supposed to be wrong. I fail to see why there should not always be a surplus of houses. A healthy building trade, like any other healthy trade, would always have a proportion of its products on its hands, and the consumer, or user, of houses would always have an option or a choice.

Thus, as with every other trade, the bad, the ex pensive and the inefficient would be constantly dis appearing from the market and a process of replace ment from bad to good and from good to better would.always be proceeding. There is no reason in theory why we should not rebuild England every fifty years,· and if that were done the standard of 168 The Return to Laisser Faire living. would be always improving and many times the number of builders would be always busy. Such an ideal could be realised if we would only under stand that the aim and object of industry is to deliver the goods; and if we would give up our present way of looking at these problems, which can be ex pressed in a· sentence-' , Wages without work and to hell with the consumer." ~The most superficial examination of our methods of production, of the market or of the habits of the consumer in almost any other trade, will show that we do, in fact, develop on these lines/when we have the blessings of freedom, competition and "private enterprise and when we are actuated by the common sense ideals of service.

The science of political economy or, as it is now called, economics, still talks of supply and demand, and there is very sound wisdom behind the order in which the founders of the science placed these two words. The building trade is working upon the un sound theory of demand and supply and hence there is trouble. All the national schemes for building are founded upon the idea that by ascertaining be forehand what is the demand, better arrangements can be made to supply it. That theory I believe to be unsound. Supply must precede demand in any healthy condition of things. There may be a pro spective demand, a demand which the supplier be lieves will be forthcoming when the supply is ready, but in normal, ordinary, economic business supply must come before demand. :.The truth of this is very clearly demonstrated in Supply and Demand 169 the auction room. The auctioneer produces the supply and says: " Here is a house; what will you bid for it?" One has only to put this question the other way round to see the absurdity of the position into which we have allowed ourselves to drift.

Imagine, for instance, an auctioneer saying, " If I presently produce a house, what will you bid for it? "-and then asking for bids without offering any guarantee that the house will be produced. Having secured his bids the auctioneer would go back to the builder, who would then become the supreme master of the situation and who would say that he would think it over, with the result that a few days later he would return with a demand for a higher price. That is almost exactly what is happening in the housing market to-day. The politicians are en deavouring to reverse the natural position, to make "supply and demand" read "demand and supply," and to plac.e the producer in a superior position to the consumer-a damaging and un natural operation which, as I have previously emphasised, never has worked and never will. No question of national importance has been so constantly and so prominently in the public eye dur ing recent years as this problem of housing. No question has been so woefully mismanaged and so hopelessly tangled, thanks to the intervention of the politicians in a matter which is essentially one· for the business man and private enterprise. All parties have been equally guilty of spreading the notion that houses can be built by votes, that the tens of thousands of people who want houses badly had only 170 The Return to Laisser Faire to vote for this party or the··other and houses would spring up like mushrooms, so that the wants of the masses would be satisfied.

To help to understand this housing blunder thoroughly one has only to apply the modern ideas on housing to one's own business. The housing question has become so enveloped in an almost im penetrable political fog that it is difficult to discuss it in simple terms. If one substitutes for houses some other article, say books, one sees more clearly the folly of it all. I select books because, as a pub lisher, I know something about them. My present position is that I have to go out into the market, take off my hat to my customer, inquire after his health and express the hope that he will honour me with his esteemed commands. I have to submit to his critic ism of the books which I produce and have to make my terms agreeable in every way to him. Chastened by this experience of the road, I go back to my office, where I find a small army of persons associated with the production of books-paper makers, writers, printers, binders, block makers and the rest-· and, having my customer's views fresh in my mind, am able to impress these persons with the need for economy and efficiency. In this way satisfactory books are produced and business is maintained and the book market is supplied.

Now imagine that the politicians were to raise the cry-the very sensible cry from my point of view as a publisher-that everybody must have books, that it is our right as citizens to enjoy good literature, that every Englishman should have his share of Supply and Demand 171 books and so on; and supposing we all voted for books. Instantly my frame of mind, and the frame of mind of everyone connected with the production of books, would undergo a change. Instead of hav ing to go into the market with my hat off, seeking orders and making my price satisfactory to the buyer, I should find buyers ranged up in a queue outside my office, each one furnished with the appro priate official chit entitling him to books, and the result of a Government-backed demand of this kind on the matter of supply and on the matter of price can readily be imagined. If everyone would apply this test to his own par ticular line of business there would be a clearer and sounder general view of the reasons why we are not likely to get houses by voting for them. If in regard to housing there had been, in the post-war period, the same free play for private enterprise as there has been allowed to the book market, we should not to day be suffering so acutely from housing embarrass ments and the numerous evils that are a direct con.sequence of the lamentable lack of dwellings.