Milford chronicle., 1962-07-27
The Search For
Market Power

1T DOESN'T TAKE MUCH of an
analyst to conclude that farmers
have little voice in determining the
prices they receive for their
products. Labor goes a long way in
stipulating its wages and fringe
benefits. Neither labor nor midas
try command any more of a secret
weapon than agriculture in forcing
their product on the consumer, bat
they've been able to exercise a
greater degree of supply manage
ment than agriculture.
Market power implies a degree
of industry control over price and
1t is assumed that higher price
means higher income. Certainly
after 80 years of experience we
should know the folly of attempt
ing scarcity pricing in an atmos-
phere of abundance. True market
power lies in controlling, factors
affecting price and not in manipu-
lating price itself.
Market poweDis sought in many
ways, but chiefly is acquired by
manipulating supply and demand
through organization. Such organi-
zation may vary from government
Qreated monopolies to informal
groups of voluntary members.
The failure of agriculture to es-
tablish a reasonable degree of mar
ket power voluntarily has led to
all sorts of government programs
designed to do this for farmers.
But there is a vast difference in
the effects of market power es-
tablished by industry and by
government.
Under free enterprise control,
the principals making a decision
must bear the financial response
bility of the results, good or bad.
But under the government con-
troll, payments are made to farm
ers for services rendered to
government, not to the market,
making consumption subservient
to production.
1t is important for agriculture to
remember it can maximize income
only by producing products needed
and wanted in the market place.
No other goal can be consistent
with the philosophy on which our
economy is structured. The in
lection of government subsidy into
the picture makes it increasingly
difficult for both farmers and mar
ket agents to respond to the die
tates of the consumer.
The workings of a competitive
economy must have an equality of
bargaining power among buy yers
and sellers. When competitive ad-
vantage is gained by one group, we
see opressures on price depending
on Whether that group is buyer or
seller. cfhis results in organiza-
tional counter-measures by the
group which has lost power. Thi6I
is the position of agriculture to-
day.
At this stage it seems ap-
propriate 60 ask a question. If
organizational structures have
given buyers more market power,
why can't this same power be Off
set by sellers using this same de-
vice? We find part OF the answer
by looking at the characteristics
which give organiZational Struc-
lures their market power.
First, it is relatively difficult TO
get into and out of business. There
are many barriers to freedom of
entry. Some Tare economically
generated while others find their
origin in the political considera-
tions of trade groups or govern
ment. On the other hand, agricul-
ture has established relatively few
barriers to entry. If almost any
group in agriculture is successful
in negotiating higher prices, we
find an immediate shift of new pro-
ducers and resources into that sec
tor.
Secondly, many OF our most
powerful marketing structures ex-