Syndicalism

Syndicalism, revolutionary trade unionist movement advocating control of government and industry by trade unions, to be achieved through such direct action as general strikes and sabotage. In another usage, common in France, where the term originated, syndicalism is synonymous with trade unionism, while revolutionary trade unionism is known as revolutionary syndicalism.

In common practice, trade unions are regarded simply as instruments for improving the conditions of workers within an existing social organization. Syndicalism, however, envisions a stateless society in which production, conducted not for profit but in order to satisfy the needs of the community, is administered by a federation of self-governing industrial unions and associations of non-industrial workers. Thus, it accepts the Marxist theory of class struggle culminating in collective ownership of goods and the means of production, while rejecting the Marxist concept of government by proletarian dictatorship. In this respect syndicalism accepts the anarchist concept that centralized government in any form is undesirable.

Doctrines that could be labelled syndicalist were formulated in London in the 1860s by Karl Marx and presented to the first session of the International Workingmen’s Association, or First International, in Geneva in 1866. The Russian revolutionary Mikhail Aleksandrovich Bakunin developed these doctrines and added his own anarchist theories; he was expelled from the First International in 1872. True syndicalism, however, came into being in France later in the 1870s. It was strongly influenced by the writings of the French anarchist Pierre Joseph Proudhon and those of the French social philosopher Georges Sorel, who added a demand for violent revolutionary action. In the 1890s, two French syndicalist organizations, the Confédération Générale du Travail (General Labour Confederation) and the Fédération des Bourses du Travail (Federation of Labour Exchanges), grew in importance; they merged in 1902. The movement achieved its greatest impact in the years before World War I. In England during this period a related movement, guild socialism, had some impact.

The jailing of some syndicalists as pacifists during World War I and the subsequent defection of many syndicalists to Communism through the 1920s reduced the effectiveness of the movement. Only in Spain, where the Confederación Nacional de Trabajo (National Confederation of Labour) achieved a membership of 1 million workers, did the movement grow. Spanish syndicalists supported the Loyalist cause during the Spanish Civil War and were virtually exterminated after the Fascist victory in 1939. Syndicalism then devolved into a kind of vaguely defined intellectual utopianism.

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Wages

I INTRODUCTION

Wages, in economics, the price paid for labour. Wages consist of all payments that compensate individuals for time and effort spent in the production of economic goods and services. The payments include not only wages in the ordinary, narrow sense—the earnings, computed generally on an hourly, daily, weekly, or output basis, of manual and clerical workers—but also weekly, monthly, or annual salaries of professional and supervisory personnel; bonuses added to regular earnings; premiums for night or holiday work or for work exceeding stated norms of quantity and quality; fees and retainers for professional services; and that part of the income of business owners that compensates them for time devoted to business.

Wages may be reckoned at time rates, piece rates, or incentive rates. Wage earners on time rates may be docked for days, hours, or even minutes of absence or idleness, but salaried workers usually received fixed sums for each pay period, whether or not they are continuously on the job. Workers on piece rates are remunerated uniformly for each unit output. Those receiving incentive wages are paid according to formulae relating output to earnings in ways designed to induce higher production.

A high rate of pay does not ensure large annual earnings. Building workers are paid relatively high hourly rates, but their annual income often is low because of the irregularity of their employment. In addition, nominal wages do not reflect real earnings accurately. During a period of inflation, the real value of wages may fall although nominal wages rise because the cost of living rises more rapidly than monetary earnings. Deductions from wages for income taxes, social security taxes, pension payments, trade union dues, insurance premiums, and other charges further reduce the worker’s take-home pay.

II DETERMINING INFLUENCES

The influences determining wage levels in particular countries at particular times are as follows: (1) Cost of living: even in poor societies, wages are usually at least sufficient to pay the cost of sustaining workers and their children; otherwise, the working population will not reproduce itself and will decline. (2) Standards of living: prevailing living standards influence conceptions of what constitutes a so-called living wage, thus helping to determine wage levels. Improvements in general living conditions generate moral pressures for giving labourers a share of the better life. In the presence of such pressures employers are more inclined to grant wage increases and legislators are constrained to approve minimum-wage legislation and other laws designed to ameliorate the worker’s lot. (3) The relative supply of labour: where labour is scarce relative to capital, land, and other factors of production, as in the United States in the 19th century, employers’ competitive bidding for labour tends to raise the general wage level. Where, as in present-day India, the ratio of labour to other resources is high and where accordingly the supply of labour greatly exceeds demand, competition among labourers for the relatively few available jobs tends to depress the wage level. (4) Productivity: wages tend to rise with productivity. Productivity depends partly on the energy and skill of the labour force and even more on the level of technology employed. Wage levels in developed economies are high largely because workers apply skills of a high order to the operation of an abundance of the most advanced industrial equipment. (5) Bargaining power: the organization of labour in trade unions and in political associations enhances its relative bargaining power and thus tends to win for organized labour, especially in the time of deflation, a larger share of the national income.

III GENERAL WAGE LEVEL

The general wage level is an average of widely differing individual pay rates and earnings. The various elements contributing to wage differentiation are as follows— (1) Relative value of the product: an industrious and skilled worker who produces a more valuable output than workers of lesser capabilities is worth more to an employer and usually is paid more. (2) Costs of required capabilities: employers must pay the price of special training if they are to fulfil their need for workers so trained. If engineers did not receive more compensation than building labourers, relatively few people would invest the time, money, and effort required to become engineers. (3) The relative scarcity of specific kinds of labour: common labour is paid poorly because it is common, but entertainers, such as film stars and television performers, who have qualities regarded as unique enjoy very large incomes. (4) Comparative attractiveness of occupations: difficult, disagreeable, or dangerous jobs usually bring higher rates of pay than do more inviting jobs requiring comparable skills. Thus, a lorry driver engaged in moving explosives earns more than one delivering groceries. (5) The mobility of labour: where the working population is immobile, wage differentials are wide. On the other hand, the readiness of workers to change jobs or to move long distances to better-paying positions tends to narrow wage differentials among firms, occupations, and communities. (6) Comparative bargaining strength: a union may lift the wages of its members above the scales paid to unorganized workers of equal skill. (7) Custom and legislation: many wage differentials are rooted in custom or legislation. For example, both custom and legislation are responsible for the fact that black miners in South Africa long earned only a fraction of the wages paid white miners doing equivalent work. On the other hand, governments and unions frequently act to eliminate wage differentials based on race, sex, and other irrelevancies and to promote equal pay.

IV THEORIES OF WAGES

Most wage theories reflect overemphasis on one or another of the elements determining wages. The first noteworthy wage theory, the just wage doctrine of the Italian philosopher St Thomas Aquinas, emphasized moral considerations and the role of custom. A just wage is defined as that which enables the recipient to live in a manner suited to the person’s social position. Aquinas’s theory is a view of what wages should be rather than an explanation of what they actually are.

The first modern explanation of wages, the so-called subsistence theory, emphasized the consumption needed to sustain life and maintain the working population as the chief determinant of wage levels. The theory was adumbrated by mercantilist economists, elaborated by Adam Smith, and developed fully by David Ricardo. Ricardo argued that wages are determined by the cost of barely sustaining labourers and their replacements and that wages cannot long depart from the subsistence level. If earnings should fall below that level, he contended, the labour force would not reproduce itself; if earnings should rise above it, more working-class children than the number needed to replenish the labour force would survive and wages again would be forced down to subsistence levels by the competition of labourers for the available jobs.

The assumptions of the subsistence theory were invalidated by the facts of subsequent economic history. In advanced countries, the output of food and other consumer goods increased more rapidly than population during the later 19th and 20th centuries, and wages accordingly rose well above subsistence levels.

The wage theory of Karl Marx is a variant of Ricardo’s wage theory. He argued that under capitalism labour seldom receives more than bare subsistence. According to Marx, the surplus remaining is appropriated by the capitalists as their profits. Like Ricardo’s theory, Marx’s view was nullified by later economic experience.

After the decline of the subsistence theory, attention shifted to demand for labour as a wage determinant. John Stuart Mill, among others, propounded the so-called wages-fund theory to explain how the demand for labour, as expressed in the money employers have available to pay for labour, influences wages. The theory rests on the assumption that all wages are paid out of past accumulations of capital and that the average wage rate is determined by dividing the share set aside for wages by the number of employed workers. Wage increases for some workers could mean reductions for others. Only by augmenting the wages fund or by reducing the number of labourers could the wage level be raised.

The wages-fund theorists were mistaken in assuming that wages are paid out of past capital accumulations. Wages actually are paid mainly out of current production. Wage increases, by strengthening buying power, may stimulate production and generate more wage-paying potential, especially if unemployed resources exist.

The wages-fund theory was succeeded by the marginal-productivity theory, concerned mainly with the influence exerted by the supply and demand of labour. Proponents of the theory, which was developed largely by the American economist John Bates Clark, maintained that wages tend to be set at the point at which employers find it profitable to engage the last job-seeking worker, who is called the marginal worker. Because, by the law of diminishing returns, the value of each additional worker’s contribution to production is supposed to diminish, the growth of the labour force depresses wages. If wages should rise above the level assuring full employment, part of the labour force would become unemployed; if wages should fall below that level, competitive bidding by employers for the additional workers would push wages up again.

The marginal-productivity theory is defective in assuming perfect competition and in ignoring the effect of wage increases on productivity and buying power. As John Maynard Keynes, a vigorous critic of the theory, demonstrated, wage increases may bolster an economy’s propensity to consume rather than to save; expanded consumption creates new demands for labour, in spite of the higher wages that must be paid, if higher incomes can arise out of decreased unemployment.

Most economists recognized, with Keynes, that higher wages need not cause reduced employment. A more serious danger that can result from wage increases is inflation, for employers, are inclined to raise prices to compensate for large wage outlays. This danger can be averted only if wages are not allowed to outrun productivity. Because labour’s share of the national income has been virtually constant and is likely to remain so, real wages can rise mainly to the degree that productivity rises.

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Industrial Relations

I INTRODUCTION

Industrial Relations, broadly, all dealings, transactions, and activities affecting the determination and enforcement of the terms and conditions of employment. The main parties involved typically trade unions and their employers (or collective representatives), although government also plays an important role via labour legislation.

II HISTORY

In the early 19th century, before the growth of the factory system, wages and hours of labour were usually arranged in direct dealings between employers and individual employees, replacing the traditional craft-based arrangement whereby guilds had set the terms of labour. The prevailing legal, social, and economic climate did not favour the development of workers’ organizations. Because the disparity in bargaining power between employers and employees caused many cases of abuse, however, the workers in various industries began to organize trade unions, which demanded better terms of employment. A key to their power was that as a disciplined and unified force they could use threats of mass action such as strikes, or other forms of industrial action, to press their demands. They were helped by the eventual enactment of laws governing conditions of employment, conditions in the workplace, and industrial relations practices such as collective bargaining.

The relationship between employers and employees developed differently in various parts of the world. In particular, the goals and activities of European trade unions differed considerably from those of trade unions in the United States. European trade unions were primarily national organizations traditionally espousing socialism and allied closely with political movements and parties. The typical US trade union evolved as primarily a local organization devoted to the advancement and protection of the economic interests of its members, with national and statewide affiliations but no loyalty to a particular political ideology.

The protective legislation, the earliest type of employment regulation, was enacted principally during the early 20th century. Such legislation regulated areas such as the maximum hours of work and minimum wages of women and children, and hazardous practices affecting them as employees. Under another type of protective legislation, industrial employees became entitled to benefits such as compensation for industrial accidents and income support in the event of illness, disability, or unemployment, and pensions for their old age. In more recent years, many countries have also introduced legislation in favour of equal pay for women and men, and in favour of equal opportunity in the job market by forbidding discrimination by employers on the basis of such criteria as race, gender, and in some cases age.

III MODERN PRACTICES

The larger employers of labour now usually have departments dealing with the negotiation and administration of industrial relations agreements. Such departments are responsible for day-to-day administration of matters relating to employee’s contracts and procedures governing layoffs, promotions, discipline, grievances, and arbitration. Many unions have specialists trained and assigned to deal with management specialists in negotiations and other matters. Collective bargaining can be at a variety of different levels, from an entire industry to a single plant. Recently, however, collective bargaining has become increasingly localized in some countries (such as the United Kingdom), with wages and other terms of employment such as working hours and holidays tending to reflect more closely the performance of particular companies or even plants within companies.

When the employees in a plant are not represented by a union or equivalent association, the terms and conditions of employment are usually determined by direct arrangements between plant management and employee. A union seeking to deal with an employer as the exclusive bargaining representative of its employees may try to persuade the employer to recognize it and institute a closed-shop agreement, whereby only members of that particular union may be employed by the employer, though such arrangements are now illegal in many countries.

Most countries have arrangements, sometimes statutory, for arbitration of industrial disputes by neutral conciliation bodies such as the Advisory, Conciliation and Arbitration Service (ACAS) in Britain. A popular form of arbitration in the United States is pendulum arbitration, where the arbitrator listens to both parties then decides in favour of one or the other, with no compromise allowed. Arbitrators of labour-management disputes are impartial, disinterested professionals. In some instances, arbitration is conducted by a board of arbitrators of which all members except a neutral chair with the deciding vote are interested individuals. Arbitration is conducted either by an arbitrator selected especially for a case or by an umpire, referee, or chair designated for the duration of the collective agreement. Dealings between most modern-day representatives of management and unions have been characterized by mutual respect (however grudging in some cases), the product of years of negotiation and joint administration of agreements. This attitude of mutual confidence has fostered more cooperative labour relations than formerly prevailed. Labour-management arbitration has also contributed to industrial peace because it substituted the binding award of a respected neutral for the exertion of economic force during the term of a collective agreement. Although labour and management continue to differ on various economic problems, they generally realize that neither group can reach its goals without the assistance of the other. Relations between labour and the government can be more contentious, especially with the government as the employer in the public sector or where the government is operating an incomes policy as part of an overall economic policy.

By the mid-1990s the power of organized labour had decreased markedly. Union activists are still faced with jail in China and other newly industrializing authoritarian states when they attempt to form unions outside the state apparatus. Many countries followed the example of Britain by weakening the powers of trade unions through, for example, making secondary picketing (picketing of places other than one’s workplace) illegal, prohibiting the closed shop, and making ballots on strike action compulsory. The result was a remarkable fall in the number of strikes. With more and more people employed in service occupations rather than in manufacturing, union membership declined—and so did union strength in labour negotiations. This process was exacerbated by other economic and political factors held to signal the end of Fordism, the system supposed by some economists to constitute the characteristic form of high capitalism for most of the 20th century.

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Factory System

I INTRODUCTION

Factory System, working arrangement whereby a number of people cooperate in the production of items. Today the term “factory” generally refers to a large establishment employing many people involved in mass production of industrial or consumer goods. Some form of the factory system, however, has existed since ancient times.

II EARLY HISTORY

Pottery works have been uncovered in ancient Greece and Rome. In various parts of the Roman Empire factories manufactured glassware and bronze ware and other similar articles for export as well as for domestic consumption. In the Middle Ages, large silk factories were operated in the Syrian cities of Antakya and Tyre; and in Europe, during the late medieval period, textile factories were established in several countries, notably in Italy, Flanders (now Belgium), France, and England.

During the Renaissance, the advance of science, contact with the New World, and the development of new trade routes to the Far East stimulated commercial activity and the demand for manufactured goods and thereby promoted industrialization. In Western Europe and particularly in England, during the 16th and 17th centuries, many factories were created to produce such goods as paper, firearms, gunpowder, cast iron, glass, items of clothing, beer, and soap. Although heavy machinery, operated by water-power in some places, was used in a few establishments, the industrial processes were generally carried on by means of hand labour and simple tools. In contrast to modern mechanized plants with assembly lines, the factories were merely large workshops where each labourer functioned independently. Nor were factories the most usual place of production; although some workers used their employer’s tools and worked on the premises, most manufacturing was done by workers who were supplied with raw materials, worked in their own homes, returned the finished articles, and were paid for their labour.

III DEVELOPMENT OF THE FACTORY SYSTEM

The factory system began to develop in the late 18th century when a series of inventions transformed the British textile industry and marked the beginning of the Industrial Revolution. Among the most important of these inventions were the flying shuttle patented (1733) by John Kay, the spinning jenny (1764) of James Hargreaves, the water frame for spinning (1769) of Sir Richard Arkwright, the spinning mule (1779) of Samuel Crompton, and the power loom (1785) of Edmund Cartwright. These inventions mechanized many of the hand processes involved in spinning and weaving, making it possible to produce textiles much more quickly and cheaply. Many of the new machines were too large and costly for them to be used at home, however, and it became necessary to move production into factories.

One of the major technological breakthroughs early in the Industrial Revolution was the introduction of steam engines. When textile factories first became mechanized, only water-power was available to operate the machinery; the factory owner was forced to locate the establishment near a water supply, sometimes in an isolated and inconvenient area far from a labour supply. After 1785, when a steam engine was first installed in a cotton factory, steam began to replace water as power for the new machinery. Manufacturers could build factories closer to a labour supply and to markets for the goods produced. The development of the steam locomotive and steamship in the early 19th century made it possible to ship factory-built products to distant markets more rapidly and economically, thus encouraging industrialization.

The Arkwright method of spinning was introduced into the United States in 1790 by Samuel Slater, who started a factory in Pawtucket, Rhode Island. In 1814, at a cotton mill established in Waltham, Massachusetts, all the steps of an industrial process were, for the first time, combined under one roof; here, cotton entered the factory as raw fibre and emerged as finished goods ready for sale.

IV MASS PRODUCTION

Textiles, particularly cotton goods, were the major factory-made products during the early 19th century. Meanwhile, new machinery and techniques were being invented that made it possible to extend the factory system to other industries. The American inventor Eli Whitney, who stimulated textile manufacturing in the United States by inventing the cotton gin in 1793, made an equally, if not more important, contribution to the factory system by developing the idea of using interchangeable parts in making firearms. Interchangeable parts, with which Whitney began experimenting in 1798, eventually made it possible to produce firearms by assembly-line techniques, and to repair them quickly with pre-made parts. The idea of interchangeable parts was applied to the manufacture of timepieces from about 1820 on. Then, in the 1850s, at Waltham, Massachusetts, automatic machinery was used for the first time to make watches by consecutive processes in a single factory. Thus, by the middle of the 19th century, American factories had begun to develop the outstanding feature of the modern factory system: mass production of standardized articles.

The clothing industries were revolutionized by the sewing machine and underwent a tremendous expansion during the 1860s. Spurred by the urgent demand for uniforms during the American Civil War, clothing manufacturers developed standardized sizes, a prerequisite for mass production of ready-made garments. At the same time, the military demand for shoes stimulated the creation of shoe-sewing machinery to mass-produce footwear.

V MODERN DEVELOPMENTS

As the 20th century began, the factory system of production prevailed throughout the United States and most of Western Europe. Germany, Britain, the Netherlands, and Belgium became, to a great extent, importers of food and raw materials and exporters of factory-made commodities. In 1913 Henry Ford, the pioneer motor manufacturer introduced assembly-line techniques to motor-car production in the Ford Motor plant. In time the factory system spread to Asia, where cheap labour attracted capital from the industrialized countries of the West. Japan, which had begun industrialization in the late 19th century, rapidly became the foremost industrial power in Asia and a competitor to the Western nations.

As the world economy has grown, factory operations (especially in the developed world) have sought to increase productivity and efficiency through greater use of automation and new technology. This and the closure of uncompetitive factories (often forced by competition from newly industrialized developing countries) has resulted in the phenomenon of de-industrialization in many developed national economies, where the proportion of national output and employment accounted for by industry falls. Some machines, aided by computers, semiconductors, robots, and other technological innovations, are so nearly self-regulating that an entire factory may be kept running by a few people operating sets of controls. This new Industrial Revolution has required much more sophisticated approaches to the management of factories, both in terms of strategy and of day-to-day operations. To stay ahead of the competition, great skill, imagination, and rigour must now be applied to everything from decisions on machinery and equipment purchases to quality control.

VI WORKING CONDITIONS IN FACTORIES

The introduction of the factory system had a profound effect on social relationships and living conditions. In earlier times the feudal lord and the guild master had both been expected to take some responsibility for the welfare of the serfs, apprentices, and journeymen who worked under them. By contrast, the factory owners were considered to have discharged their obligations to employees with the payment of wages; thus, many owners took an impersonal attitude towards those who worked in their factories. This was in part because no particular strength or skill was required to operate many of the new factory machines. The owners of the early factories often were more interested in hiring a worker cheaply than in any other qualification. Thus they employed many women and children, who could be hired for lower wages than men. These low-paid employees had to work for as long as 16 hours a day; they were subjected to pressure, and even physical punishment, in an effort to make them speed up production. Since neither the machines nor the methods of work were designed for safety, many fatal and maiming accidents resulted. In 1802 the exploitation of pauper children led to the first factory legislation in England. That law, which limited a child’s workday to 12 hours, and other legislation to regulate child labour that followed were not strictly enforced.

The workers in the early mill towns were not in a position to act in their own interest against the factory owners. The first cotton mills were located in small villages where all the shops and inhabitants depended on a single factory for their livelihood. Few dared to challenge the will of the person who owned such a factory and controlled the lives of the workers both on and off the job. The long hours of work and low wages kept a labourer from leaving the community or being otherwise exposed to outside influences. Later, when factories were located in larger cities, the disadvantages of the mill town gave way to such urban evils as overcrowded sweatshops and slums. In addition, the phenomenon of the business cycle began to manifest itself, subjecting industrial labourers to the periodic threat of unemployment.

VII REFORMS AND CHANGES

By the early 19th century the condition of workers under the factory system had aroused concern. One who called for reform was Robert Owen, a British self-made capitalist, and cotton-mill owner, who tried to set an example by transforming a squalid Scottish mill town called New Lanark into a model industrial community between 1815 and 1828. At New Lanark, wages were higher and hours shorter, young children were kept out of the factory and sent to school, and employee housing was superior by the standards of the day, yet the mill operated at a substantial profit. In Owen’s day, modern trade unions were beginning to develop in the British Isles, and he sought to organize them into a national movement. His aim was to improve working conditions as well as effect basic social and economic reforms. In his concern for the increasing differences between capital and labour, Owen was joined by such economic theorists as the Frenchmen Charles Fourier, Claude Henri de Saint-Simon, and Pierre Joseph Proudhon and the Germans Karl Marx and Friedrich Engels, each of whom analysed the processes of modern industrial society and proposed social and industrial reforms. Meanwhile, the factory reform acts were passed in an attempt to remedy these ills.

In time, organized protest forced owners to correct some of the worst abuses. Workers agitated for and obtained the right to vote, and they established political parties and labour unions. The unions, after a considerable struggle and frequent setbacks, won important concessions from management and government, including the right to organize workers in factories and to represent them in negotiations. Furthermore, issues and problems germane to the factory system came to figure prominently in the formulation of modern political and economic theory as the discipline of labour relations. In the Soviet Union, China, and other Communist states, the factory became a social and political, as well as an industrial, unit. Abuses of the factory system remain prevalent in many developing, and some developed countries.

One important and often overlooked consequence of the factory system was its promotion of the emancipation of women. The factory created wage-earning opportunities for women, enabling them to become economically independent. Thus, industrialization began to change the family relationship and the status of women.

VIII FACTORY INSPECTION

The inspection of factories by state agencies began in England in the early 19th century in response to the public protest against the working conditions for women and child labourers. Today, throughout the developed world regulations exist governing such matters as child labour, working hours, health and safety, and minimum wages. One important early international regulatory agency was the International Association of Factory Inspection, established in 1886 by Canada and 14 states of the United States. After 1919 the International Labour Organisation, acting in cooperation first with the League of Nations and later with the United Nations, correlated the regulation of factory conditions throughout the world, though with no guarantee of enforcement of its standards.

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Trade Union

I INTRODUCTION

The Trade Union, an association of workers established to improve their economic and social conditions. A trade union represents its members in determining wages and working conditions through the process of collective bargaining with the employer. When agreement cannot be reached, a union may conduct a strike or other industrial action against the employer. In many countries, a union is the economic arm of a broad labour movement that may include a political party and cooperative associations. In other nations where no such formal ties exist, unions themselves may engage in political activities, including lobbying for legislation and supporting political candidates favourable to labour. Many unions also provide employment services, insurance protection, and other benefits to members and their families.

Trade unions are two principal types: craft unions composed of all those performing a specific kind of work, such as electricians, carpenters, or printers; and industrial unions comprising all those in a given industry, such as car workers or steelworkers. Unions also exist among government employees and for such professional occupations as nurses, engineers, and teachers. In some countries, large general workers’ unions include all semi-skilled and unskilled workers in one organization. Unions are often affiliated with a single umbrella organization, such as the British Trade Union Congress (TUC), the French Confédération Générale du Travail (CGT), or the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO).

II HISTORY

Trade unions constitute the organized response of workers to the impact of industrialization. The first unions arose in Western Europe and the United States at the end of the 18th century and the beginning of the 19th century as a reaction to the development of capitalism. As the factory system developed, great numbers of people left their rural homes to compete for the relatively few jobs available in urban centres. This labour surplus made the working classes increasingly dependent on their employers. To offset this dependency and to help workers gain a measure of control over their economic lives, the earliest unions were formed among skilled artisans. These groups encountered great opposition from employers and government and were considered illegal associations or conspiracies in the restraint of trade. During the 19th century, many of these legal barriers to trade unionism were eliminated as a result of court decisions and favourable legislative action, but the early unions failed to survive the economic depressions of the first half of the 19th century.

In both democratic and non-democratic European countries, workers’ movements rejected the capitalist system during the 19th century and advocated various substitutes such as socialism, anarchism, syndicalism, and, after the Russian Revolution of 1917, communism. Ideologically motivated trade unions in the United States also formed in the 19th century, usually under the influence of European immigrants. These organizations, however, failed to take permanent root, largely because of the more open political system and the existence of the frontier as an alternative attraction for surplus labour. During the early 20th century, unionism extended to numerous semi-skilled and unskilled workers in coal mines, on the docks, in the transport industry, and in the factories.

For further information on the history of trade unions see Trade Union Movement in Britain.

III MODERN TRADE UNIONS

The most important function of trade unions in democratic, industrialized countries is the negotiation of collective agreements with employers. The subjects covered in contemporary agreements go far beyond the original ones of wages and hours, reflecting the increased complexity of modern society, the strength of unions, and the workers’ rising expectations. In some cases collective agreements specify wages, hours, working conditions, and benefits in great detail. In other cases unions have used their political power to win enactment of laws that provide benefits and protection—increased pensions and unemployment compensation, safety regulations, extended holidays, educational and maternity leave, housing, health insurance, and, perhaps most important, employment tribunals and other grievance procedures to protect workers against any unfair action.

In countries that today are subject to any form of authoritarian government—whether growing out of a revolution, a military or civil coup, or foreign intervention—independent trade unions are not permitted to represent workers. Trade unions in China, for example, have acted as arms of the government, helping to achieve production programmes in the planned economy; many of these unions are also charged with administering social-welfare programmes. Union members are therefore left without the traditional protection against their employer’s actions afforded by their union since both employer and union are limbs of the government.

IV INTERNATIONAL TRADE UNION ORGANIZATION

The earliest international trade union bodies were closely allied to socialist groups, and even today in many important international bodies the bulk of the affiliates are socialist-oriented. As early as 1889 various national printing unions formed the first of the international trade secretariats of workers in a specific occupation or industry. In 1901 several national trade unions established what was later called the International Federation of Trade Unions (IFTU). After World War II the IFTU was dissolved and a new organization, the World Federation of Trade Unions (WFTU), attempted to include both Communist and non-Communist unions. Trade unions from democratic nations soon found it impossible to work with the Communist-controlled bodies and left to form the International Confederation of Free Trade Unions (ICFTU). The ICFTU includes the vast majority of non-Communist unions. The membership of the WFTU now comes from the former Soviet bloc as well as Communist unions in a few democratic countries. A small international body, the World Confederation of Labour (WCL), grew out of a Christian union federation. Now secular, it has affiliates in Western Europe, Latin America, and Africa.

Although international trade unions have little actual power, they serve important purposes in encouraging cooperation and exchange of information. A few efforts have been made to influence collective bargaining among their affiliates and to coordinate affiliate policies. The International Labour Organization, part of the United Nations, also aids in the process of communication and cooperation among unions.

V INFLUENCE OF UNIONS

Those trade unions that possess the economic power to threaten continued production of goods or services, and that actually have the political right to exercise such power, have helped to raise the standard of living of both their members and others. Genuine success, however, is ultimately determined by the ability of the employer and the society to absorb the consequences of granting union demands. In democracies, for example, unions have made significant gains during periods of economic expansion; during recessions, however, unions turn to governments for programmes to ensure alternative job opportunities, income maintenance, and other forms of relief. Recently, trade union membership and influence have been declining across the developed world. In developing nations, workers’ organizations are more limited in their influence.

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Advertising

I INTRODUCTION

Advertising, the collective term for public announcements designed to promote the sale of specific commodities or services. Advertising is a form of mass selling, employed when the use of direct, person-to-person selling is impractical, impossible, or simply inefficient. It is to be distinguished from other activities intended to persuade the public, such as propaganda, publicity, and public relations. Advertising techniques range in complexity from the publishing of simple, straightforward notices in the classified advertisement columns of newspapers to the concerted use of newspapers, magazines, television, radio, the Internet, direct mail, and other communications media in the course of a single advertising campaign. From its unsophisticated beginnings in ancient times, advertising has burgeoned into a worldwide industry.

America is by far the largest user of advertising in terms of annual expenditure. In the United States alone in the late 1980s, approximately US$120 billion was spent in a single year on advertising to influence the purchase of commodities and services. By 2003 this figure had grown to a total of over US$132 billion and accounted for 41 per cent of the global spend on advertising. The United States was followed by Japan and the United Kingdom who spent over US$31 billion and over US$19 billion/£10 billion respectively on advertising that same year. As of 2006, total advertising expenditure worldwide was predicted soon to exceed US$400 billion.

Modern advertising is an integral segment of urban industrial civilization, mirroring contemporary life in its best and worst aspects. Having proven its force in the movement of economic goods and services, advertising since the early 1960s has been directed increasingly towards matters of social concern. Health awareness and anti-drink-driving campaigns are two examples of the use of the advertising industry as a means to promote public welfare.

Advertising falls into two main categories: consumer advertising, directed at the ultimate purchaser, and trade advertising, in which the appeal is made to dealers through trade journals and other media.

Both consumer and trade advertising employ many specialized types of commercial persuasion. A relatively minor, but important, form of advertising is institutional (or corporate) advertising, which is designed solely to build prestige and public respect for particular business concerns. Each year vast sums are spent on institutional advertising, which usually mentions products or services for sale only incidentally.

Another minor, but increasingly popular, form of advertising is cooperative advertising, in which the manufacturer shares the expense of local radio or newspaper advertising with the retailer who signs the advertisement. National advertisers occasionally share the same space in magazine advertising.

Advertising may be local, national, or international in scope. The rates charged for the three different levels of advertising vary sharply, particularly in newspapers; varying rates are set for differing classifications of advertising. At one end of the scale display advertisements for expensive consumer items such as cars. At the other is classified advertising, which ranges from appointments and property advertising at the top to relatively inexpensive charitable and religious advertisements at the bottom.

II HISTORY

The origins of advertising lie thousands of years in the past. One of the first known methods of advertising was the outdoor display, usually, an eye-catching sign painted on the wall of a building. Archaeologists have uncovered many such signs, notably in the ruins of ancient Rome and Pompeii. An outdoor advertisement excavated in Rome offers the property for rent, and one found painted on a wall in Pompeii calls the attention of travellers to a tavern situated in another town.

In medieval times word-of-mouth praise of products gave rise to a simple but effective form of advertising, the use of so-called town criers. The criers were citizens who read public notices aloud and were also employed by merchants to shout the praises of their wares. Although graphic forms of advertising appeared early in history, printed advertising made little headway until the invention of the printing press. The trademark, a two- or three-dimensional design symbolizing a company or industry, dates from about the 16th century when tradespeople and guild members posted characteristic symbols outside their shops. Among the best-known trademarks surviving from early modern times are the striped pole of the barber and the three-ball sign of the pawnbroker.

In terms of both volume and technique, advertising made its greatest early advances in the United States. In the early stages of American advertising, a nationwide promotion was impractical because the nation itself was underdeveloped and lacked transcontinental transport, distribution, and communications systems. Eventually, however, certain types of manufacturers conceived the idea of bypassing wholesalers and retailers and reaching the consumer through direct advertising, mainly by means of catalogues. The pioneers in this field were seed companies and book and pamphlet publishers. Mail-order houses appeared on the scene as early as the 1870s. To the present day, they have continued to expand their businesses through direct-mail catalogue and flyer advertising, although some of the biggest houses also sell through retail outlets. Nowadays, advances in advertising are international.

Patent-medicine companies loomed large in British newspaper and magazine advertising from the mid-19th century. They found a ready market because doctors and reliable chemists were scarce outside populated areas. The patent-medicine bottlers made a gross profit of between 80 and 90 percent and could therefore well afford to spend money publicizing their remedies. Railways and steamship lines were also among the early users of advertising in the United States, not only to praise the luxury and comfort of their modes of travel but also to publish their schedules and rates.

Late in the 19th century, many firms began to market packaged goods under brand names. This development initiated a new era in the history of advertising. Previously, such everyday household products as sugar, soap, rice, molasses, butter, milk, lard, beans, confectionery, candles, and pickles had been sold in local shops from bulk packages. As a result, consumers had seldom been aware of or influenced by, brand names.

In Britain and the United States, soap-makers were early advertisers of packaged and branded products. The first “household name” soap brands, which date from about 1880, include Ivory, Pears’, and Colgate. Soon afterward such brands as Royal Baking Powder, Quaker Oats, and Waterman’s Pens were nationally advertised. Shortly after the turn of the 20th century, Americans began to be aware of such brand names as Wrigley and Coca-Cola.

After World War I, advertising developed into a business so big that it became almost a trademark of the United States itself in the eyes of the world. This expansion was stimulated by many technical improvements, and the expanding American industry inspired innovations and improved techniques that benefited other facets of business in the nation.

The invention of electricity led to the illuminated outdoor poster; photoengraving and other modern printing inventions helped both the editorial and advertising departments of printed journals. Advertising was used increasingly by public-relations specialists as an important means of communication. In the United States, the advent of radio in the 1920s stimulated a whole new technique of selling by voice, but commercial radio was not to begin in Britain until the 1970s.

Commercial television advertising began in Britain in 1955. The combination of sound, movement, and colour that modern television offers can provide greater scope than most other media. It is generally regarded as the most powerful and persuasive of all media and has the capacity to build brand awareness rapidly among a high proportion of the population. However, it is also very expensive, both in terms of airtime and production. Today, the increasing number of channels now available through the development of satellite, cable, and digital television present new challenges and opportunities for media planners who have to schedule airtime in a manner that will provide the greatest number of viewers from within the target audience (coverage), as well as the greatest number of opportunities to see the commercial (frequency).

The proliferation of the Internet and digital television since the 1990s has opened up many new avenues for advertising, for a discussion of which see below III Media.

III MEDIA

Advertising messages are disseminated through numerous and varied channels or media. The major media in developed countries are newspapers and consumer magazines, television, direct mail, radio, the Internet, business publications, and outdoor and transport advertising. In addition, a significant amount of advertising is invested in miscellaneous media, such as window displays, free local newspapers and shopping news publications, calendars, and even sandwich-boards.

A wide range of advertising media has been developed from sources whose potential importance was formerly ignored. Delivery trucks, once plainly painted, now often carry institutional or product messages, as do many shipping cartons. Some packages, for example, takeaway food cartons, carry advertising for products other than those contained in them, as do telephone credit cards. Wrapping paper and shopping bags bearing advertisements are used widely by retail stores to advertise their own products and services.

In recent years, the use of ambient media has become more widespread. The term “ambient media” refers to advertising media that exploits the use of common objects or materials that the audience will encounter within their everyday environment. To a varying degree, these objects or materials become part of the advertisement themselves. Some of the very earliest examples of ambient media were found in petrol stations where advertisements were placed on the nozzles of petrol pumps. More elaborate examples have involved the use, manipulation, or utilization of buildings, architectural fixtures, furniture, animals, and even people in order to convey the advertising message. Ambient media can be particularly effective as it tends to take the audience by surprise.

The proliferation of electronic and various digital media has also had a profound impact on the channels of communication being used by organizations to promote their brands or services. Digital television and the Internet have permitted a greater level of interaction with audiences, and as more households embrace the new technology, both of these media are beginning to converge. WebTV is perhaps the ultimate manifestation of this as it combines the key functions of both the Internet and television, enabling viewers to access Web sites and order products online through their television sets. Online advertising tools include company Web sites, Web communities (Websites that provide a channel for people with similar interests to exchange information), online stores, banner ads, pop-up ads, e-mail newsletters, and unsolicited e-mails (sometimes referred to as spamming). Not all online advertising is welcomed by its recipients, and pop-up ads together with e-mail “spam” have the capacity to be intrusive and annoying. While the full potential of digital television and the Internet has yet to be reached, they are both certain to expand the scope of interactive advertising in the future.

IV DIRECT ADVERTISING

Direct advertising includes all forms of sales appeals posted, delivered, or exhibited directly to the prospective buyer of an advertised product or service, without the use of any indirect medium, such as newspapers or television. Direct advertising may be divided logically into three broad classifications, namely, direct-mail advertising, mail-order advertising, and unmailed direct advertising.

All forms of sales appeals (except mail-order appeals) that are sent through the post are considered direct-mail advertising. The chief functions of direct-mail advertising are to familiarize prospective buyers with a product, its name, its maker, and its merits, and with the product’s local distributors. The direct-mail appeal is designed also to support the sales activities of retailers by encouraging the continued patronage of both old and new customers.

When no personal selling is involved, other methods are needed to induce people to send in orders by post. In addition to newspapers, magazines, television, and radio, special devices such as single-product folders or multi-product catalogues are used in mail-order advertising. Mail-order promotions are designed to accomplish a complete selling job without salespeople. The success of direct mail rests on the quality of the database from which advertisers and their respective agencies draw up their mailing lists. Up-to-date, accurate databases enable advertisers to target the recipients of the advertising in a precise manner.

Used for the same broad purposes as direct-mail advertising, unmailed direct advertising includes all forms of indoor advertising displays and all printed sales appeals distributed from door to door, handed to customers in retail shops, included in packages and bundles of merchandise, or conveyed in some other manner directly to the recipient.

With each medium competing keenly for its share of business, advertising agencies continue to develop new techniques for displaying and selling wares and services. Among these techniques have been vastly improved printing and reproduction methods in the graphic field, adapted to magazine advertisements and to direct-mail enclosures; the use of colour in newspaper advertisements and in television; and more attractively designed and efficiently lit outdoor signboards, which are sometimes even three-dimensional. Many subtly effective improvements are suggested by advertising research.

V RESEARCH

During the 19th century, it was only possible to approximate the effectiveness of various advertising techniques. Prospective advertisers were guided almost solely by estimates of magazine and newspaper readership. In the early days of broadcasting and outdoor advertising, the industry lacked a reliable measure of the audience of these media. However, in the United States in 1914 the Audit Bureau of Circulations, an independent organization subscribed to principally by newspaper and magazine publishers, was established to meet the need for authentic circulation statistics and for a coordinated, standardized way of presenting them. Similar independent bodies have since been established in all developed countries.

Eventually, greater scientific efforts to determine relevant facts about audience and readership developed as a result of competition among the media and the demand among advertisers for an accurate means of judging the relative effectiveness of the media. The media soon found ways of ascertaining not only how many people see or hear advertising messages, but what kinds of people they are and where they are located. Newspapers and magazines, either through their own research staff or through specialized organizations employed for a fee, go to great lengths to analyse circulation to show where their readers live, their income, education, recreational habits, age, and number of children, and to provide other guides to determine their readers’ susceptibility to certain classes of products.

Radio and television broadcasters and networks similarly analyse their audiences for the guidance of advertisers. In this field, too, broadcast companies, advertising agencies, and advertisers subscribe to one or more audience-research organizations to determine how many viewers or listeners tune into regional and national programmes at any given time. Special surveys of local broadcast programmes are also arranged. In a similar but less comprehensive manner, outdoor and transport advertising companies have set up organizations to tally the numbers of people exposed to their posters.

By nature, advertising is dependent on psychological and other variables that are difficult to ascertain precisely, with the consequence that the whole field of audience research is complex and controversial. Researchers have found it necessary to refine their techniques consistently to make them increasingly reliable.

One major type of research project is the survey of test markets. Advertisers and agencies frequently conduct extensive and expensive surveys to determine the potential acceptance of products or services before they are advertised nationally at costs that may be enormous. In one common procedure, the advertising-marketing division of a company despatches surveyors to carry out door-to-door canvassing in various residential areas with different average income levels. Householders are shown various versions of the product intended for the market. If the survey convinces the manufacturer that one of the versions exhibited will attract enough purchasers, a crew then pre-tests various sales appeals by showing provisional advertisements to consumers and asking them to indicate their preference. After the one or two best-liked advertisements or basic appeals are determined, the advertiser produces a limited quantity of the new product and introduces it in a test market. On the basis of this market test, the advertiser-manufacturer can make a decision as to whether a national campaign should be launched.

The question of what motivates a consumer to buy challenges the imagination and ingenuity of the seller and presses research specialists forward into new fields of investigation. Motivational research, for example, attempts to probe the unconscious impulses that motivate buying decisions; advertising agencies then utilize these findings to influence the consumer and to attempt to break down sales resistance. Critical observers outside the advertising industry have assailed the motivational approach as unreliable and as unfair to the consumer, who should not, they feel, be subjected to such indirect sales attacks. Many researchers, however, regard motivational enquiry as merely a means of delving deeper than before into the psychological springs of behaviour. Through careful questioning and investigation, it is often possible for an advertiser to trace a sale and learn what motivated the consumer to buy a product. Workers in motivational research try to explore these influences.

VI TECHNIQUES OF PERSUASION

While experts argue about new methods of persuasion, they still rely mainly on basic appeals that have proved successful over the years. These appeals offer the hope of more money and better jobs, security against old age and illness, popularity and personal prestige, praise from others, more comfort, increased enjoyment, social advancement, improved appearance, and better health. The modern advertiser stresses not the product but the benefits that may be enjoyed by purchasers. Thus, the advertiser surveys not cosmetics but the expectation of new beauty, allure, and hope. To attract the prospective buyer of cars, the manufacturer may stress not only the mechanical attributes of the car but also the excitement, comfort, and prestige it may bring the buyer.

The most effective advertising tends to be very single-minded in the manner by which it selects the key benefit or message, and communicates this to the audience. This message is called the “advertising proposition”. It is the single, most important thing that the advertiser wants the audience to remember after seeing the advertisement.

The many techniques of persuasion are circumscribed only by the ingenuity of the creative mind, by the limits of the various channels of communications, by certain legal restrictions, and by standards self-imposed by the advertising industry. One fundamental technique, apparent in the earliest applications of advertising and still basic in the most modern procedures, is repetition. A typical national advertiser captures the attention of prospective customers by repeated appeals to buy. It is not unusual for a person to encounter advertisements for the same product in national and local newspapers, on radio, television, and online, to receive additional reminders in various consumer magazines, and to be confronted with a poster, counter card, or display on entering a shop. Repetition also helps to build a reputation. A strong brand identity can be developed through repetition of the proposition and consistency of communication.

Another basic persuader is the product name. Manufacturers have spent millions to establish their products as symbols of reliability and value. Once consumers gain confidence in it, the owner can use the product name and logo as a persuader, that is, as a device to reassure customers that all products bearing this symbol are reliable. The product name and logo are especially useful when the manufacturer introduces a new item to an existing line of goods.

Price appeal probably motivates more decisions to buy than any other appeal, and the magic words “sale” and “bargain” are directed at consumers with great frequency. Closely allied to these plain and simple discount offers are the “something for nothing” lures, such as “buy two and get a third free”, “send for free sample”, and “trial offer at half price”. Substantial cash prizes are frequent inducements, as are “buy now, pay later” offers. Special offers such as these are often referred to as “sales promotion” and can also involve the provision of free gifts as another means of encouraging individuals to purchase specific goods.

Modern advertising employs an astonishing variety of persuaders. Among these are softer-selling, often humorous and entertaining television and radio commercials (in which Britain has led the advertising world), appeals to the sense of smell by the use of perfumed ink on paper, endorsements of products by celebrities, appeals to parents to give their children a better life and future, appeals to children to ask parents to buy certain breakfast cereals, and the controversial use of “scare copy”. Playing on the principal human frailty of fear, this last-mentioned motivation is applied to the advertising of thousands of commodities, sometimes boldly, sometimes subtly. Fear of poverty, sickness, loss of social standing, and the spectre of possible disasters, great and small, sometimes moves previously unexcitable consumers to buy anything from insurance and fire extinguishers to cosmetics and vitamin tablets.

VII STRUCTURE OF THE INDUSTRY

Big-budget advertising is a relatively new industry. The developed commercial economy that supports advertising on a large scale was only established in most Western countries in the 19th century. The advertisers of that period had little need for agents. The publishers of magazines and newspapers, however, often found it difficult to sell space on their pages to advertisers and therefore began to commission brokers to go out and sell advertising space. These so-called space brokers were the first advertising agents. Present-day advertising agencies continue to act as space brokers in that they purchase space and time on behalf of the advertiser. Their commissions, however, come from the media owners. In fact, the commission represents a major portion of the income of the modern advertising agency. The feed method of agency compensation has become increasingly important and is now generally used for such non-commissionable services as research, market analysis, and public relations.

Time and space buying is only one of the principal services rendered by the modern advertising agency, although this one department has become highly specialized. The agency spends most of its time planning, creating, and producing the advertising for its clients. A typical major agency maintains advertising and marketing specialists, designers, writers, artists, economists, psychologists, researchers, media analysts, product-testers, librarians, and bookkeepers. An important group of people follows and expedites the work from start to finish until the completed advertisement is delivered to the media. The growth of television and radio broadcasting as advertising media necessitated the creation of new departments devoted to the purchase of national and local broadcast time.

In the simplest terms, the relationship between advertiser and agency may be described as follows. The advertiser tells the agent what product or service is to be sold and at what price. The agency, in consultation with the advertiser, then creates and produces the advertising and recommends the budget, the media to be used, and the scheduling of the various parts of the campaign.

The magnitude of such operations is indicated by the volume of advertising placed by market leaders. In Britain, in 2003 the top holding companies by advertising expenditure were: Unilever (through its subsidiaries), on soaps and detergents, groceries, and cosmetic products, over £206 million; Proctor & Gamble, over £195 million; and Ford Motor Company, over £154 million. These sums were all spent through media outlets such as newspapers, consumer and other magazines, network radio and television, and outdoor advertising.

Since the late 20th century, one of the most profound changes in the manner in which advertising agencies operate has been the shift towards the integration of communication media. Many agencies have now established themselves at the head of larger communication groups and networks offering a full and broader range of creative marketing and communication services. This has since manifested itself in efforts by agencies to develop strategies for using promotional tools in a more synergistic and unified way, a process termed “Integrated Marketing Communications” (IMC).

VIII ECONOMIC AND SOCIAL EFFECTS

With so many businesses using one or more forms of advertising, almost everybody hears or sees advertising every day. The high per capita cost of advertising has led many critics to attack it as a wasteful, unnecessary, unreliable, and annoying institution. Such critics usually argue that the industry adds unnecessarily to the cost of goods and services promoted by it. The proponents of advertising recognize some validity in these criticisms, but in rebuttal argue that by interesting consumers in purchasing commodities, advertising enables manufacturers and others to sell their products in larger quantities than they would otherwise; the increased volume of sales, in turn, enables companies to sell individual units at a lower cost than if they were produced in small quantities.

In the opinion of most top business executives and of many economists, modern advertising plays an integral role in the development of markets for the low-cost goods made possible by an efficient industry. At least one worldwide study of national investment in advertising, which showed a direct correlation with living standards, supported this thesis.

Advertising also supplies most of the operating funds of the principal communications media. The commercial television and radio industry depends on advertising for most of its revenue. Newspapers and magazines also derive very considerable income from advertising.

IX REGULATION

Early in the 20th century, in Britain, before the advertising industry became well organized, the sharp and unethical practices of some advertisers prompted the rise of self-regulation to avoid state controls. Self-imposed codes of ethics and procedures aim principally to curtail not only bad taste but also misrepresentation and deception in copy and illustrations, as well as derogatory and unfair representations of competitors’ products.

Advertising trade associations are concerned with maintaining high standards. The associations feel it is good public relations to do so, inasmuch as advertising that weakens public confidence damages the impact and influence of all advertising.

Individual media and media groups often establish their own codes of ethics. Some newspapers and magazines are selective about which products they will publish advertising for, refusing to promote alcoholic beverages, for example; most of them, in varying degrees, investigate the reliability of advertisers before accepting their copy. Some publishers have strict rules about the presentation of advertising to prevent the publication of false or exaggerated claims and to preserve the aesthetic tone of their publications.

Television and radio likewise cooperate closely to avoid permitting advertising that might cause unfavourable reactions.

The Tobacco Advertising and Promotions Act (2003) outlawed tobacco advertisements in newspapers, magazines, and on billboards in Britain.

Since 1961, the ASA (Advertising Standards Authority) together with the CAP (Committee of Advertising Practice) have been responsible for administering the self-regulation of non-broadcast advertising in the United Kingdom. In 2004 both of these organizations entered a co-regulatory partnership with Ofcom and are now also responsible for the regulation of TV and radio commercials.

Reviewed By:
History of Advertising Trust
Nik Mahon

Credited Images from: Youstyle

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Marketing

I INTRODUCTION

Marketing, the process of identifying, anticipating, and satisfying customer requirements for consumer goods or services. Early marketing techniques involved little more than making potential consumers aware of a product’s existence and benefits, and getting it to the market. Now, however, the marketing process starts even before decisions are taken about what products should be made.

Marketing concentrates on the buyers, or consumers, determining their needs and desires, educating them with regard to the availability of products and too important product features, developing strategies to persuade them to buy, enhancing their satisfaction with a purchase, and, finally, building trust and long-term relationships with them where appropriate. Marketing also looks to create successful brands to which customers are attracted and remain “loyal”. Strong brands are increasingly important for businesses, as long-term relationships with consumers generate greater profits.

Marketing management includes researching, planning, organizing, directing, and controlling decision-making regarding product lines, pricing, promotion, and servicing. In most of these areas, the marketing department has complete control; in others, as in product-line development, its function is primarily advisory. In addition, the marketing department of a business is responsible for the physical distribution of the products, determining the channels that will be used, and supervising the efficient flow of goods from the factory or warehouse.

II TAILORING THE PRODUCT

Merchandise generally similar in appearance, that is, in style or design, but varying in such elements as size, price, and quality is collectively known as a product line. Product lines must be planned according to consumer needs and wants.

In order to develop a line effectively, market research is conducted to study consumer behaviour. Changing attitudes and modes of living directly affect the demand for products. For example, greater awareness of the importance of eating healthily has led to a decline in demand for foods such as crisps and chocolate bars.

Also, a high-income economy triggers a demand for products very different from those selected in a declining business cycle. The availability or lack of disposable income, meaning income over and above that spent for basic necessities such as food, shelter, and clothing, affects the buying pattern for so-called luxury products. Similarly, the purchase of durable or long-lived goods, such as refrigerators, cars, and houses, may be deferred when the economy is declining and may increase rapidly in periods of prosperity. Staple products, such as food and clothing, tend not to be seriously affected by the business cycle.

The life cycles of products require careful study. Virtually all product ideas lose in time the attraction that initially drew people to buy them. Technological changes can speed up this process, as some producers of video cassette recorders and 35-mm film cameras have found. Manufacturers may also accelerate the obsolescence of a product by introducing new, more desirable products or versions of the existing product. Consumers today expect product innovations and tend to react favourably to new features. This has an important bearing on the usable life deliberately designed into a product, which in turn has a significant effect on the costs to the manufacturer and ultimately on the price to the consumer. Competition between manufacturers of similar products naturally accelerates the speed of changes made in those products.

III PRICING THE PRODUCT

The two basic components that affect product pricing are costs of manufacture and competition in selling. It is unprofitable to sell a product below the manufacturer’s production costs and unfeasible to sell it at a price higher than that at which comparable merchandise is being offered.

Other variables also affect pricing. Company pricing policy may require a minimum profit on new product lines or a specified return on investments, or discounts may be offered on purchases in quantity. Pricing is also affected by the image the company wants to create in consumers’ minds. Companies such as ASDA Wal-Mart or Primark purposefully set their prices low as they seek to attract those customers looking for a bargain or value for money. In contrast, companies at the top end of the market are more likely to deliberately charge higher prices, to emphasize their high quality or exclusivity.

Attempts to fix resale prices normally violate competition laws, which usually prohibit manufacturers from controlling the prices set by wholesalers and retailers. Such control can still be maintained, however, if the manufacturers market directly through their own outlets.

Attempts have also been made, generally at government insistence, to maintain product price competition in order to minimize the danger of injuring small businesses. Therefore, pricing decisions are reviewed by the legal department of the marketing organization.

IV PROMOTING THE PRODUCT

Advertising, personal (face-to-face) selling, sales promotion, direct marketing, and public relations are all techniques that can be used to persuade people or organizations to buy.

A Advertising

The primary objective of advertising is to raise awareness of a product or brand. Although a company may have an excellent product that meets customers’ needs and is competitively priced, if no-one knows of its existence the company will struggle to make enough sales.

Most companies consider this function so important that they allocate extensive budgets and engage specialist advertising agencies to develop their programme of advertising. By repeatedly exposing the consumer to a brand name or trademark, to the appearance or package of a product, and to special features of an item, advertisers hope to incline consumers towards their particular product or brand. Advertising is most frequently done on television, radio, the Internet, and billboards or other large displays; in newspapers, magazines, and catalogues; and through direct mail to consumers. In recent years, advertising agencies have been joining forces to become giants, making it possible for them to offer their clients a comprehensive range of worldwide promotion services.

B Personal Selling

As the costs of personal selling have risen, the role of salespeople has changed. It is relatively rare now for salespeople to need to explain in detail how a product works and why it is needed; consumers can usually find out this information themselves through the Internet. Instead, their role tends to focus on persuading consumers to buy their product rather than a competing brand, and on negotiating price and arranging terms of payment.

Personal selling remains an important means for selling between businesses. Businesses often have specific needs and concerns, which are most effectively addressed through personal selling. It also has the benefit of helping to build and strengthen relationships, helping to increase sales in the long term.

C Sales Promotion

The purpose of sales promotion is to get people or organizations to try a product or service. An incentive to buy is given, in the hope that consumers or organizations will like the product or service and buy it again and again. Sales promotions are often used in conjunction with advertising.

Often it is necessary to work closely with the dealers who handle a manufacturer’s products to make sure that satisfactory sales levels are achieved. Displays must be supplied and set up, and cooperative advertising programmes may be worked out. Shop staff should be trained so that they have knowledge of the manufacturer’s products. Often the manufacturer must provide services such as installation and maintenance for a specified time period. On the consumer level, sales promotion may involve special merchandising inducements such as discount coupons, contests, a premium (gift) with the purchase of a product, or a lower price on the purchase of a second item.

D Direct Marketing

Companies use direct marketing to communicate directly with their customers, rather than going through intermediaries such as retailers. It is an enormous growth area in marketing and includes the following activities: direct mail, telemarketing, direct response TV, and e-mail. It is an attractive communication tool as it allows a company to use a personalized approach, which is more warmly received by customers than unpersonalized messages. As technology improves, marketers are able to target their messages, products, and promotions more closely to individual customer needs and desires. It is also an effective way to build up and develop longer-term relationships with customers.

Direct marketing has become so popular that its benefits are now being diminished. The sheer volume of direct mail and emails now sent to consumers is increasingly overwhelming and unwelcome. Direct mail is commonly referred to as “junk” mail, as many consumers simply throw it away without opening it, while e-mails are referred to as “spam”. Consumers in the United kingdom can now sign up to the Mail Preference Service or Telephone Preference Service, which forbid companies from contacting them unless they have been given the consumer’s permission. Many consumers in the United Kingdom have already signed up and as a result many companies are becoming increasingly limited in who they are able to contact. Developing on-going relationships with consumers where such communications are permitted has become more and more important for companies.

E Public Relations

Public relations, or PR, is used by companies to improve their image with various publics, usually consumers, society, and investors. Public relations seeks to influence the way an organization or brand is portrayed or perceived, either to generate goodwill or positive coverage of the company and its products or to combat any negative stories appearing in the press. Public relations activity can be as simple as sending out press releases to newspapers and relevant publications, through to carefully managed and on-going awareness campaigns. It is cheaper than other communication tools such as advertising, as any coverage given is not paid for. Because the coverage appears in independent or impartial publications, rather than direct from the company, it is more likely to be trusted by consumers and can, therefore, be a highly effective and persuasive means of communication.

V DISTRIBUTING THE PRODUCT

Some products are marketed most effectively by direct sale from manufacturer to consumer. Among these are durable equipment—for example, computers, office equipment, and industrial machinery and supplies. However, many consumer goods are also sold directly to the public as well, through advertisements, telemarketing, “house parties”, and the Internet.

The Internet has had a profound effect on distribution and how companies reach consumers. Many companies are now able to sell their goods direct to people around the world via the Internet and online ordering facilities. Company websites often provide detailed product information and answers to Frequently Asked Questions (FAQs). Credit cards have made it easy for people to purchase via the Internet, mail, or telephone. Through the Internet, consumers from anywhere in the world can shop and buy goods from a company, at any time that suits them. Comparison shopping has also been made easier by websites that check product details and prices across a range of retailers, with the result that price competition among companies has intensified.

Sales via the Internet are attractive to companies as the process is often automated, meaning that orders can be processed quicker and more cheaply than was previously possible.

The Internet also offers a more dynamic and direct means of reaching customers than through traditional retail outlets. It enables a two-way dialogue between the customer and the company to take place and can help to resolve queries or problems more speedily. It therefore also helps in building and developing longer-term relationships, in a way that other outlets cannot.

Despite the phenomenal growth in direct sales via the Internet, most consumer products still move from the manufacturer through agents to wholesalers and then to retailers, before ultimately reaching the consumer. Determining how products should move through wholesale and retail organizations is a crucial marketing decision.

Wholesalers distribute goods in large quantities, usually to retailers, for resale. Some retail businesses have grown so large, however, that they have found it more profitable to bypass the wholesaler and deal directly with the manufacturers or their agents. Wholesalers first responded to this trend by adapting their operations so that they moved faster and called for a lower margin of profit. Small retailers fought back through cooperative wholesaling, the voluntary banding together of independent retailers to market a product. The result has been a trend towards a much closer, interlocking relationship between a wholesaler and independent retailer.

Retailing has undergone even more change. Intensive pre-selling by manufacturers and the development of minimum-service operations—for example, self-service in department stores—have drastically changed the retailer’s way of doing business. Supermarkets have become commonplace not only for groceries but for products as diverse as books, medicines, clothes, and electronic equipment. Warehouse retailing has become a major means of retailing higher-priced consumer goods such as furniture, appliances, and electronic equipment. The emphasis is on generating shop traffic, speeding up the transaction, and rapidly expanding the sales volume. Chain stores—groups of shops owned by the same firm—and cooperative groups have also proliferated. Special types of retailing, for example, vending machines and convenience stores, have also developed to satisfy consumers’ needs more easily and cheaply.

Transporting and warehousing merchandise are also technically within the purview of marketing. Products are often moved several times as they go from producer to consumer. Products are carried by rail, lorry, ship, aeroplane, and pipeline. Efficient traffic management determines the best method and timetable of shipment for any particular product.

VI SERVICES AND MARKETING

Services are intangible goods, which can be sold despite not being actual objects. Consumers pay for a service as they would for manufactured goods. Already more people are employed in the developed economies in the provision of services than in the manufacture of products, and the service sector shows every indication of expanding even further. Services familiar to most consumers are in the fields of maintenance and repair, transport, travel, entertainment, education, and medical care. Business-oriented services include computer applications, management consulting, banking, accounting and legal services, stock brokerage, and advertising.

Services, like products, require marketing. Those members of staff who are responsible for delivering the service are extremely important in marketing services, as they will to a large degree shape the customer’s experience of that service. Likewise, service quality, the delivery of consistently good service, is also important if a company wants customers to use its services again.

As with products, services too must be planned and developed carefully to meet consumer demand. For example, in the field of temporary personnel, a service that continues to increase in monetary value, studies are made to determine the types of employee skills needed in various geographical locations and fields of business. Because intangibles are more difficult to sell than physical products, promotional campaigns for services often have to try harder to encourage trial and take up. Through extensive promotion, temporary personnel agencies have convinced many companies that hiring on a temporary basis only in times of need is more economical than hiring permanent, full-time personnel.

VII MARKET RESEARCH

Market research involves the use of surveys, tests, and statistical studies to analyse consumer trends and to forecast the size and location of markets for specific products or services. The social sciences are increasingly utilized in customer research. Psychology and sociology, anthropology, and even neurology can provide clues as to people’s activities, circumstances, wants, desires, and general motivation. They, therefore, play a key role in understanding the various behavioural patterns of consumers.

Coupled with applications from the social sciences has been the introduction of modern measuring methods when surveys are carried out to determine the extent of markets for a particular product. These methods include the use of statistics and the utilization of computer models to determine trends in consumers’ desires for various products. Scientific analysis is being used in such areas as product development, particularly in evaluating the sales potential of new product ideas. For example, use is made of mathematical models—that is, theory-based projections of social behaviour in a particular social relationship. Sales projections become the basis for many important marketing decisions, including those relating to the type and extent of advertising, the allocation of salespeople, and the number and location of warehouses.

VIII FORCES AFFECTING MODERN MARKETING

An important influence on marketing theory is the continuous and rapid change in consumer interests and desires. Consumers today are more sophisticated than ever before. They are in education for much longer; they are exposed to the Internet, newspapers, magazines, films, radio, television, and travel; and they have much greater interaction with other people. Their demands are more exacting, and their taste is more volatile. They are safeguarded against the blandishments of indiscriminate marketing by consumer protection schemes, and they are better informed, thanks to publications dedicated to evaluating the merits and faults of different products.

Markets tend to be segmented as each group calls for products suited to its particular tastes. Positioning the product—that is, determining the exact segment of the population that is likely to buy a product, and then developing a marketing campaign to enhance the product’s image to fit that particular segment—requires great care and planning.

The number of ways marketers can reach consumers has exploded over the past few decades, with countless magazines, publications, radio stations, digital and satellite channels, and soon broadband TV, available to people. This “media fragmentation” has meant that it is harder than ever for marketers to get their messages across to a large number of consumers, as the audience for each TV channel or publication steadily drops. At the same time, as consumers have become exposed to greater and greater amounts of advertising, so they have become more and more resistant to it. Many consumers now actively seek to avoid advertising if they can, for example by changing channels during the ad break, or skipping through the breaks on recorded programmes. In response, marketing has looked to develop on-going, longer-term relationships with customers, where their communications are welcomed rather than resented.

Competition has also sharply intensified, as the number of firms engaged in producing similar products has increased. The advent of the Internet has brought global competition to even the smallest business. In response, firms have tried to differentiate their products from those of their competitors. Profit margins—the percentage of profit made by a business per unit of sales—are constantly being cut. While costs continue to rise, competition tends to keep prices down. The result is a narrowing spread between costs and selling prices, and an increase in a business’s sales volume is necessary to maintain or increase profit.

Companies have also responded to greater competition by building stronger brands to which the consumers stay loyal. Brands have become increasingly important in marketing, as they help companies to generate goodwill, develop customer loyalty, and increase profits. Although intangible, brands can now be recorded on a company’s balance sheet, and in some cases can be worth more than the physical assets of a company.

The consumer movement—that is, the insistence on reputable products and services by consumer groups—is a strong influence on marketing techniques. Both consumer groups and government agencies have intensified their scrutiny of products, challenging such diverse elements as product design, length and legitimacy of warranty, and promotional tactics. Warranty and guarantee practices, in particular, have been closely examined. New legislation has generally defined and extended the manufacturer’s responsibility for product performance.

Environmental concerns have also affected product design and marketing, especially as the expense of product modification has increased the retail cost. Such forces, which have added to the friction between producer and consumer, must be understood by the marketer and integrated into a sound marketing programme. This is often accomplished by emphasizing the “environmental friendliness” of a product or incorporating environmental considerations into initial marketing decisions prior to manufacture.

Even the way a firm handles itself in public life, that is, how it reacts to social and political issues, has become significant. Information about companies and their actions across the world is now easily accessible to consumers via the Internet, and this has led to increased calls for transparency. As a result, corporate social responsibility is becoming an increasingly important issue for many companies. No longer may a corporation cloak its internal decisions as private affairs. The public’s dissatisfaction with the actions and attitudes of a firm has sometimes led to a reduction in sales; conversely, consumer enthusiasm, generated by a firm’s intentional establishment of a good public image or public relations, has led to increased sales.

IX SPECIALIZED MARKETING DEVELOPMENTS

The success of specialized marketing developments has caused many older organizations to revise their operating methods. In recent years, for example, franchising has become an important force in retailing. Under this plan, the retailer is given the right to sell, within a certain area, without competition from another retailer dealing in the same product.

Many consumers now find it more desirable to rent products than to purchase them outright. For example, a homeowner will often find it preferable to rent an electric floor polisher when needed, rather than purchase the appliance at the list price, use it only infrequently, and then have to provide storage space within the home. Another item that consumers have sometimes found easier and less expensive to rent in certain circumstances (when abroad, for instance) is the car. The renting of equipment also figures in the large industry. Corporations are finding it to their economic advantage to rent computers and office and industrial machinery, thereby assuring themselves of product servicing and repair and allowing a changeover, without great expense, to newer equipment models as they become available.

The use of credit has had a great impact on marketing. Customers with credit cards can make purchases without the normal immediate presentation of cash, and sales are thus stimulated. Shops often further stimulate sales by the use of premium promotions whereby customers making purchases receive free goods or the opportunity to buy special merchandise at very low prices.

Businesses must strive daily to outdo competitors. The methods available to businesses for distinguishing their commodity from others in the market are subject only to their ingenuity. Such methods may include product improvement, a unique promotional campaign, a new twist in servicing, a change in distribution channels, or an enticing price adjustment.

X THE MARKETING PROFESSION

Perhaps nothing is more conducive to the success of a firm than the image that it conveys of itself to the public. The marketing activities of a company, because they act directly on the consumer, do most to shape this image and thus must be developed with great care.

In a world of shifting consumer needs and desires, it is marketing that acts as the vital interface between an organization and its customers, looking outwards from the organization to determine future customer needs and developing suitable strategies to respond to those needs.

As marketing has become increasingly complex, a need has arisen for executives trained in the social sciences who also possess statistical, mathematical, and computer backgrounds. Courses are offered at undergraduate and graduate levels in such specialized fields as advertising, administrative practices, financial management, production, human relations, retailing, and personnel administration.

In recent years, as global competition between industries has intensified, the role of marketing departments has been seen as increasingly important. As competition continues to increase and brands battle it out for supremacy, the marketing profession is likely to provide more personnel in the ranks of top management.

Reviewed By:
Chartered Institute of Marketing

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Investment Banking

I INTRODUCTION

Investment Banking, a branch of finance concerned with the underwriting, distribution, and maintenance of markets in securities issued by business firms and public agencies. Investment bankers are primarily merchants of securities; they perform three basic economic functions: (1) providing capital for corporations and local governments by underwriting and distributing new issues of securities; (2) maintaining markets in securities by trading and executing orders in secondary market transactions; (3) providing advice on the issue, purchase, and sale of securities, and on other financial matters such as mergers and acquisitions. In contrast to commercial banks, whose chief functions are to accept deposits and grant short-term loans to businesses and consumers, investment bankers engage primarily in long-term financing.

II UNDERWRITING

When a corporation needs to obtain funds by issuing stock or bonds, an investment banker may buy the entire issue and resell the securities in smaller amounts to investors, a procedure known as underwriting. Investors include individuals, insurance companies, pension funds, trust companies, investment companies, and other institutions. Sometimes a corporate issuer sells an entire issue of securities directly to one or more institutional buyers, such as insurance companies, without registering the issue for public sale. These sales are known as private placements.

The buying of a new issue may be handled by a single investment house, but large issues often are underwritten by syndicates or groups of firms. The risk-sharing thus provided has become increasingly appealing in recent decades. The originating firm conducts a thorough investigation of the issuing corporation, analysing financial, marketing, and production matters involved in the proposed transaction. It then enlists the participation of other firms in a syndicate; each syndicate member agrees to take a specified part of the issue.

The typical underwriting transaction involves a commitment by an investment house to buy a whole issue. In some cases, the firm acts only as an agent and attempts to sell the securities on a commission basis. In most cases, however, the investment house or syndicate guarantees the sale of an entire issue by buying the whole issue at a set price and assuming the risk of being able to sell the securities at a higher price.

In many countries—such as the United Kingdom—this risk is reduced by inviting other institutions to sub-underwrite an issue. Each sub-underwriter guarantees a portion of the issue and the main underwriter guarantees any remaining securities not sub-underwritten.

III OTHER SERVICES

In addition to departments handling the purchase and resale of new issues, an investment-banking house often has a trading department, a brokerage department, and a research or statistical department. The trading department buys and sells securities when profitable opportunities arise. Sometimes it may have to buy back securities it is marketing in order to prevent a decline in their market price. The brokerage department buys and sells securities, at a commission, for the accounts of other investors. The research department supplies the firm and its customers with information about securities. A significant sector of investment-banking operations is government bond dealing.

IV HISTORY OF INVESTMENT BANKING

Evidence indicates that ancient civilizations such as Greece and Rome engaged in investment-banking operations by extending long-term credits to governments and to certain industries. During the Middle Ages investment banking was concerned largely with financing governments. In the 12th and 13th centuries, for example, the Lombard banks in Italy combined trading operations with long-term loans made to various rulers.

In Britain, the earliest investment institutions of any importance were the acceptance houses or merchant banks. As far back as the 17th century, these concerns financed international trade. Later, the acceptance houses also floated foreign issues in London and accumulated funds for long-term investment abroad.

Also important in the evolution of investment banking were private banks, many of which were family enterprises, and finance companies. One of the former, the House of Rothschild, attained a dominant position in the financial centres of Europe during the 19th century and was still influential in the 20th century.

V 20TH-CENTURY INVESTMENT BANKING

In the United States during and following World War I, the investment-banking business expanded spectacularly. One aspect of this trend was the unprecedented increase in the number of individual security holders, resulting partly from the great prosperity of the 1920s. Many new and inexperienced firms entered the field. The ensuing wild competitive race for business ended during the Great Depression in a collapse of the security markets and the failure of many banking concerns. The abuses revealed during this period resulted in numerous federal reforms. Pressure for more effective legislation following the Wall Street Crash in 1929 led to the replacement of piecemeal state legislation by the Federal Securities Act of 1933. Its principal feature is “full disclosure”, the requirement that full and accurate information be made available regarding publicly offered securities through a registration statement filed with the Securities and Exchange Commission and through a prospectus (a condensed statement) given to prospective purchasers. Another reform instituted in 1933 was federal legislation compelling commercial banks to separate themselves from their securities affiliates, which had previously played a significant role in investment banking.

Currently, in Britain, channelling of capital into the domestic industry is done mainly through specialized finance or investment companies. In many European countries, however, it is customary for the same institution to carry on both commercial and investment banking. In Germany, in particular, large banks play a leading role in financing industrial development. Investment banks also play a global role. During the 1980s the Eurobond market grew tremendously. Companies and governments frequently finance their needs in the market—whether New York, Eurobond, or Tokyo—in which they can get the very best price and terms.

VI RECENT TRENDS

Investment banking has reached new high levels in many countries, despite the strong and increasing competition provided by direct borrowing by corporations from life-insurance companies and other institutional investors (including pension funds). The focus of legislation in recent years has been to increase investor protection and to increase competition in the provision of investment banking services. A leading example of the former are the insider trading laws enacted in many countries, which are designed to prevent those with privileged information from profiting from it. Examples of how competition has been fostered include the prohibition—in countries such as Britain and the United States—of fixed commissions on brokerage and underwriting arrangements.

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International Trade

I INTRODUCTION

International Trade, the exchange of goods and services between nations. “Goods” can be defined as finished products, as intermediate goods used in producing other goods, or as raw materials such as minerals, agricultural products, and other such commodities. International trade commerce enables a nation to specialize in those goods it can produce most cheaply and efficiently, and sell those that are surplus to its requirements. Trade also enables a country to consume more than it would be able to produce if it depended only on its own resources. Finally, trade encourages economic development by increasing the size of the market to which products can be sold. Trade has always been the major force behind the economic relations among nations; it is a measure of national strength.

II EMERGENCE OF MODERN INTERNATIONAL TRADE

Although international trade was an important part of ancient economies, it acquired new significance after about 1500; with the establishment of empires and colonies by European countries, trade became an arm of governmental policy. The wealth of a country was measured in terms of the goods it possessed, particularly gold and precious metals. The objective of an empire was to acquire as much wealth as possible in return for as little expense as possible. This form of international trade, called mercantilism, was commonplace in the 16th and 17th centuries.

International trade began to assume its present form with the establishment of nation states in the 17th and 18th centuries. Heads of state discovered that by promoting foreign trade they could mutually increase the wealth, and thus the power, of their nations. During this period new theories of economics, in particular of international trade, also emerged.

III ADVANTAGES OF TRADE

In 1776 the Scottish economist Adam Smith, in The Wealth of Nations, proposed that specialization in production leads to increased output. Smith believed that in order to meet a constantly growing demand for goods, a country’s scarce resources must be allocated efficiently. According to Smith’s theory, a country that trades internationally should specialize in producing only those goods in which it has an absolute advantage, that is, those goods it can produce more cheaply than can its trading partners. The country can then export a portion of those goods and, in turn, import goods that its trading partners produce more cheaply. Smith’s work is the foundation of the classical school of economic thought.

Half a century later, the English economist David Ricardo modified this theory of international trade. Ricardo’s theory, which is still accepted by most modern economists, stresses the principle of comparative advantage. Following this principle, a country can still gain from trading certain goods even though its trading partners can produce those goods more cheaply. The comparative advantage comes if the mathematics of production costs and price received work out so that each trading partner has a product that will bring a better price in another country than it will at home. If each country specializes in producing the goods in which it has a comparative advantage, more goods are produced, and the wealth of both the buying and the selling nations increases.

Besides this fundamental advantage, further economic benefits result when countries trade with one another. International trade leads to more efficient and increased world production, thus allowing countries (and individuals) to consume a larger and more diverse bundle of goods. A nation possessing limited natural resources is able to produce and consume more than it otherwise could. As noted earlier, the establishment of international trade expands the number of potential markets in which a country can sell its goods. The increased international demand for goods translates into greater production and more extensive use of raw materials and labour, which in turn leads to growth in domestic employment. Competition from international trade can also force domestic firms to become more efficient through modernization and innovation.

Within each economy, the importance of international trade varies. Some nations export chiefly to expand their domestic market or to aid economically depressed sectors within the home economy. Other nations depend on trade for a large part of their national income and to supply goods for domestic consumption. International trade is also viewed as an important means to promote growth within a nation’s economy; developing countries and international organizations have increasingly emphasized such trade.

IV GOVERNMENT RESTRICTIONS

Because international trade is such an integral part of a nation’s economy, governmental restrictions are sometimes introduced to protect what are regarded as national interests. Government action may occur in response to the trade policies of other countries, or it may be taken in order to protect specific industries. All nations seek to achieve and maintain a favourable balance of trade—that is, to export more than they import, or at least to keep the surplus of imports over exports to a minimum.

In a money economy, goods are not merely bartered for other goods; rather, products are bought and sold in the international market with national currencies. In an effort to improve its balance of payments (that is, to increase reserves of its own currency and reduce the amount held by foreigners), a country may attempt to limit imports by controlling the amount of currency that leaves the country.

A Import Quotas

One method of limiting imports is simply to close the ports of entry into a country. More commonly, maximum allowable import quantities may be set for specific products. Such quantity restrictions are known as quotas. These may also be used to limit the amount of foreign or domestic currency that is permitted to cross national borders. Quotas are imposed with the aim of stopping or even reversing a negative trend in a country’s balance of payments. They are also used as a means of protecting domestic industry from foreign competition. Modern economic thought tends to condemn both quotas and the aims they serve as economically damaging protectionism.

B Tariffs

The most common way of restricting imports today is by imposing tariffs, or taxes on imported goods. A tariff, paid by the buyer of the imported product, makes the price higher for that item in the country that imported it. The higher price reduces consumer demand and thus effectively restricts the import. The taxes collected on the imported goods also increase revenues for the nation’s government. Furthermore, tariffs serve as a subsidy to domestic producers of the items so taxed; the higher price that results when a tariff is imposed encourages the competing domestic industry to expand production.

C Non-Tariff Barriers to Trade

In recent years the use of non-tariff barriers to trade has increased. Although these barriers are not necessarily administered by a government with the intention of regulating trade, they nevertheless have that result. Such non-tariff barriers include government health and safety regulations, business codes of conduct, and domestic tax policies, or even “austerity” campaigns aimed at cutting the consumption of (frequently imported) luxury goods. Direct government support of various domestic industries is also viewed as a non-tariff barrier to free trade because such support gives the supported industry an additional advantage versus non-assisted industries in local or even international markets.

V 20TH-CENTURY TRENDS

In the first half of the 20th century, many countries levied differential tariffs (charging lower tariffs to favoured nations) and established other restrictive trading practices as weapons to fight unfriendly nations. Free trade was subordinated to geopolitical strategies. An example of such a policy was that of “Imperial Preference” for the British Empire, to promote internal trade between its member countries. “Tariff wars” also contributed to the climate of growing international tension preceding World War I. Trade policy became the source of many international economic, or even political, disputes. The Great Depression of the 1930s gave a lasting lesson in the importance of international trade policies when the failure to remove tariffs defended by entrenched economic interest groups helped to delay economic recovery from the trade slump that followed the Wall Street Crash.

A Trade Negotiations

Attempts were first made in the 1930s to coordinate international trade policy. At first, countries negotiated bilateral treaties. Later, following World War II, international organizations were established to promote trade by, for example, liberalizing tariff and non-tariff trade barriers. The General Agreement on Tariffs and Trade, or GATT, signed by 23 non-Communist nations in 1947, was the first such agreement designed to reduce barriers to international trade; growing to well over 100 signatories, and affecting about 80 percent of international commerce. From 1947 GATT sponsored a number of specially organized rounds of multilateral trade negotiations, culminating with the Uruguay Round, completed in 1994. This set the stage for its replacement as a world trade body by the World Trade Organization (WTO).

B Trading Communities and Customs Unions

Several trading communities have been established to promote trade among countries that have common economic and political interests or are located in a particular region. Within these trade groups, preferential tariffs are administered that favour member countries over non-members. One early example of a trading community is the Commonwealth of Nations; it was established under the provisions of the Ottawa Agreements of 1932, which allowed preferential tariffs to be levied among members of the Commonwealth, articulating the “Imperial Preference” policy. Non-Communist countries encouraged trade-promoting programmes to stimulate the redevelopment of economies ruined during World War II.

In the customs union known as Benelux, operative since 1948 and consisting of Belgium, the Netherlands, and Luxembourg, customs duties on trade among the three members were abolished, and uniform duties were established on imports from non-member states. In 1951 France, West Germany (now part of the united Federal Republic of Germany), and the Benelux countries joined to form the European Coal and Steel Community. In 1957 these six countries established the European Economic Community, or EEC (now the European Union), aimed at reducing trade barriers among member countries. The EEC was expanded after its creation, with other nations joining the original members. The Communist counterpart to these groups was the Council for Mutual Economic Assistance (COMECON). Established in 1949, it was dissolved in 1991 as a consequence of the political and economic changes in the Communist world.

Many economists foresee the development of three major trading blocs in the developed world—the EU, the members of the North American Free Trade Agreement (NAFTA), and a Pacific-Asian bloc. Trade within each bloc will be encouraged by the removal of trade restrictions, but difficult negotiations may be required to reduce trade barriers between the trading blocs.

VI WORLD TRADE

In 2003 the value of world trade was US$9,100 billion. This was more than double the 1994 figure, and between 1965 and 1985 world trade had increased nearly tenfold. Dramatic trade growth occurred in the oil-exporting developing countries in the 1970s and 1980s. Furthermore, world trade continued to increase in the 1980s, driven by economic recovery in the major industrial nations. After a pause in the early 1990s, caused by the recession in Europe and Japan, trade growth resumed in the mid-1990s.

By 1973 existing agreements limiting the rise of one currency’s value in relation to that of another, notably those reached at the Bretton Woods Conference in 1944, had been replaced by floating currency exchange rates. In the 1970s and early 1980s, price competition between trading partners was augmented by the resulting fluctuations in exchange rates. Attempts to manage these have rarely been successful, as shown by the mixed fortunes of the European Exchange Rate Mechanism. In the short run, the depreciation of a nation’s currency makes its exports cheaper and its imports more expensive.

In the 20th century, international trade increased tremendously as a proportion of the world’s total economic activity. It is expected that the trend towards increasing interdependence among national economies will continue into the future, albeit countered by the tendency towards regional blocs, which will make some groups of countries more interdependent than others. There has been much debate on whether the new regional trading communities, such as the Asia-Pacific Economic Cooperation grouping or the Mercosur group of Latin American countries, promote or restrict international trade overall. Evidence so far suggests that, although such groups can inhibit trade with countries outside their circle of mutually preferential arrangements, they can also serve as halfway houses towards broader free trade agreements, unless protectionist interests within the groupings force changes of policy.

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Agriculture

I INTRODUCTION

Agriculture, science, and industry of managing the growth of plants and animals for human use. In a broad sense, agriculture includes cultivation of the soil (soil management), growing and harvesting of crops (crop farming), breeding and raising of livestock (animal husbandry), dairy farming, forestry, and poultry farming.

Regional and national agriculture are covered in more detail in individual country and continent articles.

II MODERN AGRICULTURE

Modern agriculture is characterized by relatively high levels of inputs, often produced off-farm, and high levels of outputs. Standard farm management practice is to divide these inputs into those that vary directly with the output (variable inputs) and those that do not (fixed inputs). Fixed inputs include agricultural machinery, and modern agriculture is dependent on the manufacture of machinery for cultivations, harvesting, and other farm operations. Machinery is also needed for draining soils (see Drainage) and, in drier climates, irrigating crops (see Irrigation).

Mechanization has been one of the main characteristics of 20th-century agriculture, easing much of the back-breaking toil of the farmer. Developments in machinery, along with advances in plant breeding and animal breeding, have helped to increase agricultural productivity: it is now possible to produce more output per unit of inputs, fixed and variable. In Western countries, there has also been a trend towards larger, more powerful machinery at the expense of full-time labour. For this type of machinery to be economic, large fields and farms are needed and the substitution of machinery for labour is one reason why farm size has increased in Western countries. The high ratio of machinery to labour inputs in modern agriculture has two further consequences. First, it is intensive in its requirements for energy, and is, therefore, reliant on stable supplies of fuel; second, it is relatively capital intensive; thus a properly functioning financial system is also a requirement for the success of modern agriculture.

The variable inputs include seeds, fertilizers, and crop protection products (herbicides, pesticides, and fungicides), and feed and veterinary treatments for livestock production. Advances in crop and animal science have led to a much better match between crop and animal needs for variable inputs, resulting in less waste. For example, the timing and level of nitrogen fertilizer applied to crops can be closely matched to the crop’s needs; this means that the farmer can apply less fertilizer, cut his costs of production, and reduce losses of nitrogen to the environment.

Plant breeding and, more recently, genetic modification of crops such as soya and cotton, contribute substantially to farm productivity. Improved understanding of genetics has also placed livestock breeding on a more scientific basis. Despite these improvements, yields for winter wheat, one of the world’s major food crops, have increased by less than in previous decades. Over the period 1984-2004, for example, yields increased from 7.7 to 7.8 tonnes per hectare (19 to 19.3 tonnes per acre) in the United Kingdom and from 2.6 to 2.9 tonnes per hectare (6.4 to 7.2 tonnes per acre) in the United States. In Asia, yield increases have been more pronounced: wheat yields in India have caught up with the United States, increasing from 1.8 to 2.7 tonnes per hectare (4.5 to 6.7 tonnes per acre) over the same period.

Modern agriculture is usually linked to an advanced food processing and marketing sector, although the two can be quite distinct, with most of the activities that transform agricultural products into what people want to eat—the value added—taking place beyond the farm gate. Methods of processing, freezing, chilling, and preserving have changed the nature of the foods that people eat, allowing produce to be stored for long periods of time. Food processing, in developed countries, is now a large-scale industry.

Organic farming methods are becoming more widely practised in developing countries as a reaction to recent food scares generated by bovine spongiform encephalopathy (BSE) and concerns over pesticide residues and the intensive nature of modern farming. In Austria, for example, some 13 per cent of farmland is organic; in the United Kingdom, it is nearer 4 per cent.

III WORLD AGRICULTURE

Over the 10,000-year period, since agriculture was first developed, people have discovered the food value of wild plants and animals and have domesticated and bred them. The most important are cereals, such as wheat, rice, barley, corn, and rye; sugar cane and sugar beet; animals that are used for meat, such as sheep, cattle, goats, and pigs; poultry, such as chickens, ducks, and turkeys; and such products as milk, cheese, eggs, nuts, and oils. Fruits, vegetables, and olives are also major food sources for human beings. Feed grains for animals include soya beans, field corn, and sorghum. Separate articles on individual plants, including grasses and silage (fodder), and animals contain further information.

Agricultural income is also derived from non-food crops such as rubber, fibre plants, tobacco, and oilseeds used in synthetic chemical compounds, as well as from the raising of animals for their pelts.

The conditions that determine what will be raised include climate, ecology, water supply, and terrain. Problems over extensive deforestation for agriculture in developing countries have intensified in recent decades. Tropical deforestation increased rapidly after 1950, helped by the increased availability of heavy machinery. Historically, as it developed over the centuries in temperate regions, agriculture has depended upon forest removal; for example, most of England’s woodlands were deforested by 1350.

The proportion of people working in agriculture has fallen, from 52 per cent of the world’s labour force in 1990 to 43 per cent in 2004. The distribution in 2004 ranged from 55 per cent of the total labour force in Africa to about 1.8 per cent in the United Kingdom. In Asia, the figure was 54 per cent; in Latin America, 18 per cent; in Europe, 8 per cent; and in North America, 2 per cent. While agriculture has an important contribution to make to economic growth, particularly during the early stages of a country’s development, economic growth inevitably leads to a decline in the contribution of agriculture to the economy and as a source of employment.

Farm size varies widely from region to region. For example, in the early 2000s, the average for Canadian farms was about 273 hectares (675 acres) per farm, while the average size of a single landholding in Asia was somewhat less than 1 hectare (2.47 acres). The major part of production often comes from the largest farms: for example, in the United Kingdom, just over half of food production comes from the largest 10 per cent of farms.

Size also depends on the purpose of the farm. Commercial farming, or production for cash, is usually on large holdings. The latifundia of Latin America are large, privately owned estates worked by tenant labour. Single-crop plantations produce tea, rubber, and cocoa. Wheat farms are most efficient when they comprise some thousands of hectares and can be worked by teams of people and machines. Australian sheep stations and other livestock farms must be large to provide grazing for thousands of animals. The agricultural plots of Chinese communes and the cooperative farms held by Peruvian communities are other necessarily large agricultural units, as were the collective farms that were owned and operated by state employees in the former USSR.

Individual subsistence farms or small-family mixed-farm operations (see Smallholding) are decreasing in number in developed countries but are still numerous in the developing countries of Africa and Asia. Nomadic herders range over large areas in sub-Saharan Africa, Afghanistan, and Lapland; and herding is a major part of agriculture in such areas as Mongolia. A counter-trend in developed countries is the increase in part-time farming, where farmers, often on small farms, gain a substantial part of their income in other occupations.

The importance of an individual country as an exporter of agricultural products depends on many variables. Among them is the possibility that the country is inadequately developed on an industrial level to produce processed goods in sufficient quantity or technical sophistication. Such agricultural exporters include Ghana, with cocoa, and Myanmar (formerly Burma), with rice. On the other hand, an exceptionally well-developed country may produce surpluses that are not needed by its own population; this is the case with the United States, Canada, and the European Union (EU); these surpluses may be encouraged by the operation of agricultural policies, such as the EU’s Common Agricultural Policy.

Because nations depend on agriculture for food, raw materials, and its contribution to national income, trade in agriculture is a constant international concern. It is regulated by international agreements, overseen by the World Trade Organization (WTO). Trading groups such as the EU have agricultural policies that restrict trade, to the advantage of their own farmers, but to the disadvantage of agricultural exporting nations, many of which are developing countries. One of the main aims of the WTO is to liberalize trade in agricultural commodities.

IV HISTORY

The history of agriculture may be divided into four broad periods of unequal length, differing widely in date according to the region: prehistoric; historic through the Roman period; feudal, and scientific.

A Prehistoric Agriculture

Early agriculturists were, it is agreed, largely of Neolithic culture. Sites occupied by such people are located in south-western Asia, in what are now Iran, Iraq, Israel, Jordan, Syria, and Turkey; in south-eastern Asia, in what is now Thailand; in Africa, along the River Nile in Egypt; and in Europe, along the River Danube and in Macedonia, Thrace, and Thessaly. Early centres of agriculture have also been identified in the Huang (Yellow River) area of China; the Indus River valley of India and Pakistan; and the Tehuacán Valley of Mexico, north-west of the Isthmus of Tehuantepec.

The dates of domesticated plants and animals vary with the regions, but most pre-date the 6th-millennium bc, and the earliest may date from 10,000 bc. Scientists have used dating methods (carbon-14 testing) on animal and plant remains and have dated finds of domesticated sheep that existed as long ago as 9000 bc in northern Iraq; cattle (the 6th millennium bc in north-eastern Iran); goats (8000 bc in central Iran); pigs (8000 bc in Thailand and 7000 bc in Thessaly); onagers, or asses, (7000 bc in Jarmo, Iraq); and horses (4350 bc in Ukraine). The llama and alpaca were domesticated in the Andean regions of South America by the mid-3rd-millennium bc.

According to carbon dating, wheat and barley were domesticated in the Middle East in the 8th-millennium bc; millet and rice in China and south-eastern Asia by 5500 bc; and squash in Mexico by about 8000 bc. Legumes found in Thessaly and Macedonia are dated as early as 6000 bc. Flax was grown and apparently woven into textiles early in the Neolithic period.

The farmer began, most probably, by noting which wild plants were edible or otherwise useful and learned to save the seed and to replant it in cleared land. Long cultivation of the most prolific and hardiest plants yielded a stable strain. Herds of goats and sheep were perhaps assembled from captured young wild animals, and those with the most useful traits—such as small horns and high milk yield—were bred. The aurochs seems to have been the ancestors of European cattle, and an Asian wild ox of the zebu, the humped cattle of Asia. The chicken was domesticated very early. The transition from hunting and food-gathering to a dependence on food production was gradual, and in a few isolated parts of the world has not yet been accomplished. Crops and domestic meat supplies were augmented by fish and wildfowl as well as by the meat of wild animals.

The Neolithic farmers lived in simple dwellings—in caves and in small houses of sun-baked mud brick or of reed and wood. These homes were grouped into small villages or existed as single farmsteads surrounded by fields, sheltering animals and human beings in adjacent or joined buildings. In the Neolithic period, the growth of cities such as Jericho (founded c. 9000 bc) was stimulated by the production of surplus crops.

Pastoralism may have been a later development. Evidence indicates that mixed farming, combining cultivation of crops and stock raising, was the most common Neolithic pattern. Nomadic herders, however, roamed the steppes of Europe and Asia, where the horse and camel were domesticated.

The earliest tools of the farmer were made of wood and stone. They included the stone adze; the sickle or reaping knife with sharpened stone blades, used to gather grain; the digging stick, used to plant seeds, and, with later adaptations, as a spade or hoe; and a rudimentary plough, a modified tree branch used to scratch the surface of the soil and prepare it for planting. The plough was later adapted for pulling by oxen.

The hilly areas of south-western Asia and the forests of Europe had enough rain to sustain agriculture, but Egypt depended on the annual floods of the Nile to replenish soil moisture and fertility. The inhabitants of the so-called Fertile Crescent, around the Tigris and Euphrates rivers, also depended on annual floods to supply irrigation water. In China, the farmers who lived in the area near the Huang developed a system of irrigation and drainage to control the damage caused to their fields in the floodplain of the meandering river.

Although the Neolithic settlements were more permanent than the camps of hunting populations, villages had to be moved periodically in some areas, as the fields lost their fertility from continuous cropping. This was most necessary in northern Europe, where fields were produced by the slash-and-burn method of clearing. The settlements along the Nile, however, were more permanent, because the river deposited fertile silt annually. See also Archaeology.

B Historical Agriculture Through the Roman Period

With the close of the Neolithic period and the introduction of metals, the age of innovation in agriculture was largely over. The historical period—known through written and pictured materials, including the Bible, Near Eastern records and monuments, and Chinese, Greek, and Roman writings—was devoted to improvement. A few high points must serve to outline the development of worldwide agriculture in this era, roughly defined as 2500 bc to ad 500. Some plants became newly prominent. Grapes and wine were mentioned in Egyptian records about 2900 bc, and trade in olive oil and wine was widespread in the Mediterranean area in the 1st-millennium bc. Rye and oats were cultivated in northern Europe in about 1000 bc.

Many vegetables and fruits, including onions, melons, and cucumbers, were grown by the 3rd-millennium bc in Ur. Dates and figs were an important source of sugar in the Near East, and apples, pomegranates, peaches, and mulberries were grown in the Mediterranean area. Cotton was grown and spun in India about 2000 bc, and linen and silk were used extensively in 2nd-millennium China. Felt was made from the wool of sheep in central Asia and the Russian steppes.

The horse, introduced to Egypt about 1600 bc, was already known in Mesopotamia and Asia Minor. The ox-drawn four-wheeled cart for farm work and two-wheeled chariots drawn by horses were familiar in northern India in the 2nd-millennium bc.

C Tools, Storage, and Irrigation

Improvements in tools and implements were particularly important. Metal tools were longer lasting and more efficient, and cultivation was greatly improved by such aids as the ox-drawn plough fitted with an iron-tipped point, noted in the 10th-century bc in Palestine. In Mesopotamia, in the 3rd-millennium bc, a funnel-like device was attached to the plough to aid in planting seeds, and other early forms of drills were used in China. Threshing was done with animal power in Palestine and Mesopotamia, although reaping, binding, and sifting were still done by hand. Egypt retained hand seeding through this period, on individual farm plots and large estates alike.

Storage methods for oil and grain were improved. Granaries—jars, dry cisterns, silos, and bins of one sort or another containing stored grain—supported city populations. Indeed, without adequate food supplies and trade in food and non-food items, the high civilizations of Mesopotamia, northern India, Egypt, and Rome would not have been possible.

Irrigation systems in China, Egypt, and the Near East were elaborated, putting more land into cultivation. The forced labour of peasants and the bureaucracy built up to plan and supervise the work of irrigation were probably fundamental to the development of the city states of Sumer. Windmills and watermills, developed towards the end of the Roman period, increased control over the many uncertainties of weather. The introduction of fertilizer, mostly animal manures, and the rotation of fallow and crop land made agriculture more productive.

Mixed farming and stock raising were flourishing in the British Isles and on the continent of Europe as far north as Scandinavia at the beginning of the historical period, already displaying a pattern that persisted throughout the next 3,000 years. According to the region, fishing and hunting supplemented the food grown by agriculture.

C1 Beginnings of Serfdom

Shortly after the time of Julius Caesar, the Roman historian Cornelius Tacitus described the “Germans” as a tribal society of free peasant warriors, who cultivated their own lands or left them to fight. About 500 years later, a characteristic European village had a cluster of houses in the middle, surrounded by rudely cultivated fields comprising individually owned farmlands; meadows, woods, and wasteland were used by the entire community. The oxen and plough were passed from one field to another, and harvesting was a cooperative effort.

Rome appears to have started as a rural agricultural society of independent farmers. In the 1st millennium bc, after the city was established, however, agriculture started a capitalistic development that reached a peak in the Christian era. The large estates that supplied grain to the cities of the empire were owned by absentee landowners and were cultivated by slave labour under the supervision of hired overseers. As slaves, usually war captives, decreased in number, tenants replaced them. The late Roman villa of the Christian era approached the medieval manor in an organization; slaves and dependent tenants were forced to work on a fixed schedule, and tenants paid a predetermined share to the estate owner. By the 4th century ad, serfdom was well established, and the former tenant was attached to the land.

D Feudal Agriculture

The feudal period in Europe began soon after the fall of the Roman Empire, reaching its height about ad 1100. This period also saw the development of the Byzantine Empire and the power of the Saracens in the Middle East and southern Europe. Spain, Italy, and southern France, in particular, were affected by events outside continental Europe.

In the Arab period in Egypt and Spain, irrigation was extended to previously sterile or unproductive land. In Egypt, grain production was sufficient to allow the country to sell wheat on the international market. In Spain, vineyards were planted on sloping land, and irrigation water was brought from the mountains to the plains. In some Islamic areas, oranges, lemons, peaches, and apricots were cultivated.

Rice, sugar cane, cotton, and such vegetables as spinach and artichokes, as well as the characteristic Spanish flavouring saffron, were produced. The silkworm was raised, and its food, the mulberry tree, was grown.

By the 12th century, agriculture in the Middle East was static, and Mesopotamia, for example, fell back to subsistence level when its irrigation systems were destroyed by the Mongols. The Crusades increased European contact with Islamic lands and familiarized western Europe with citrus fruits and silk and cotton textiles.

The structure of agriculture was not uniform. In Scandinavia and eastern Germany, the small farms and villages of previous years remained. In mountainous areas and in the marshlands of Slavic Europe, the manorial system could not flourish. Stock raising and olive and grape culture were normally outside the system.

D1 The Manor

A manor required roughly 350 to 800 hectares (900 to 2,000 acres) of arable land and the same amount of other prescribed lands, such as wetlands, woodlots, and pasture. Typically, the manor was a self-contained community. On it was the large home of the holder of the fief—a military or Church vassal of rank, sometimes given the title lord—or of his steward. A parish church was frequently included, and the manor might make up the entire parish. One or more villages might be located on the manor, and village peasants were the actual farmers. Under the direction of an overseer, they produced the crops, raised the meat and draught animals, and paid taxes in services, either forced labour on the lord’s lands and other properties or forced military service.

A large manor had a mill for grinding grain, an oven for baking bread, fish ponds, orchards, perhaps a winepress or oil-press, and herb and vegetable gardens. Bees were kept to produce honey.

Woollen garments were produced from sheep raised on the manor. The wool was spun into yarn, woven into cloth, and then made into clothing. Linen textiles could also be produced from flax, which was grown for its oil and fibre.

The food served in a feudal castle or manor house varied—depending on the season and the lord’s hunting prowess. Hunting for meat was, indeed, the major non-military work of the lord and his military retainers. The castle residents could also eat domestic ducks, pheasants, pigeons, geese, hens, and partridges; fish, pork, beef, and mutton; and cabbages, turnips, carrots, onions, beans, and peas. Bread, cheese and butter, ale and wine, and apples and pears also appeared on the table. In the south, olives and olive oil might be used, often instead of butter.

Leather was produced from the manor’s cattle. Horses and oxen were the beasts of burden; as heavier horses were bred and a new kind of harness was developed, they became more important. The blacksmith, wheelwright, and carpenter made and maintained crude agricultural tools.

The cultivation regime was rigidly prescribed. The arable land was divided into three fields: one sown in the autumn with wheat or rye; a second sown in the spring with barley, rye, oats, beans, or peas; and the third left fallow, that is, unplanted. The fields were laid out in strips distributed over the three fields, and without hedges or fences to separate one strip from another. Each male peasant who was head of a household was allotted about 30 strips. Helped by his family and a yoke of oxen, he worked under the direction of the lord’s officials. When he worked in his own fields, if he had any, he followed village custom that was probably as rigid as the rule of an overseer.

D2 Crop Rotation

Around the 8th century, a four-year cycle of rotation of fallow land was introduced. The annual ploughing routine on 400 hectares would be 100 hectares ploughed in the autumn and 100 in the spring, and 200 hectares of fallow land ploughed in June. These three periods of ploughing, over the year, could produce two crops on 200 hectares in total, depending on the weather. Typically, ten or more oxen, no larger than modern heifers, were hitched to the tongue of the plough, often little more than a forked tree trunk. At harvest time, all the peasants, including the women and children, were expected to work in the fields. After the harvest, the community’s animals were let loose on the fields to forage.

Some manors used a strip system. Each strip, with an area of roughly 0.4 hectares (1 acre), measured about 200 m (220 yds) in length and from 1.2 to 5 m (4 to 16y ft) in width. The lord’s strips were similar to those of the peasants, distributed throughout good and bad field areas. The parish priest might have lands separate from the community fields or strips that he worked himself or that were worked by the peasants.

In all systems, the lord’s fields and needs came first, but about three days a week might be left for work on the family strips and garden plots. Wood and peat for fuel were gathered from the commonly held woodlots, and animals were pastured on village meadows. When surpluses of grain, hides, and wool were produced, they were sent to market to be sold.

D3 The Plague

Around the year 1300, a tendency to enclose the common lands and to raise sheep for their wool alone first became apparent. The rise of the textile industry made sheep-raising more profitable in England, Flanders, Champagne, Tuscany, Lombardy, and the region of Augsburg in Germany. At the same time, regions surrounding the medieval towns began to specialize in garden produce and dairy products. Independent manorialism was also affected by the wars of 14th- and 15th-century Europe and by the widespread plague outbreaks of the 14th century. Villages were wiped out, and much arable land was abandoned. The remaining peasants were discontented and attempted to improve their conditions.

With the decline in the labour force, only the best land was kept cultivated, and in southern Italy, for instance, irrigation helped to increase production on the more fertile soils. The emphasis on grain was replaced by diversification, and items requiring more care, such as wine, oil, cheese, butter, and vegetables, were produced.

E Scientific Agriculture

By the 16th century, the population was increasing in Europe, and agricultural production was again expanding.

The nature of agriculture there and in other areas was to change considerably in succeeding centuries. Several reasons can be identified. Europe was cut off from Asia and the Middle East by an extension of Turkish power. New economic theories were being put into practice, directly affecting agriculture. Also, continued wars between England and France, within each of these countries, and in German states consumed capital and human resources.

E1 Colonial Agriculture

A new period of exploration and colonization was undertaken to circumvent Turkey’s control of the spice trade, to provide homes for religious refugees, and to provide wealth for European nations convinced that only precious metals constituted wealth.

Colonial agriculture was carried out not only to feed the colonists but also to produce cash crops and to supply food for the home country. This meant cultivation of such crops as sugar, cotton, tobacco, and tea and production of animal products such as wool and hides.

From the 15th to the 19th centuries the slave trade provided the necessary labourers. Slaves from Africa worked, for instance, in the Caribbean area on sugar plantations and in North America on indigo and cotton plantations. Native Americans were virtually enslaved in Mexico, where a system known as peonage operated. Indentured slaves from Europe, and especially from the prisons of England, provided both skilled and unskilled labour in many American colonies. Ultimately, however, both slavery and serfdom were substantially wiped out in the 19th century.

When encountered by the Spanish conquistadors, the more advanced Native Americans in the New World had intensive agricultural economies but no draught or riding animals and no wheeled vehicles. Squash, beans, peas, and corn had long since been domesticated. The land was owned by clans and other kinship groups or by ruling tribes that had formed sophisticated governments, but not by individuals or individual families. Several civilizations had risen and fallen in Central and South America by the 16th century. Those met by the Spanish were the Aztec, Inca, and Maya.

E2 Breeding of Plants and Animals

The scientific revolution resulting from the Renaissance and the Age of Enlightenment in Europe encouraged experimentation in agriculture as well as in other fields. Trial-and-error efforts in plant breeding produced improved crops, and a few new strains of cattle and sheep were developed. The process of enclosure was greatly speeded up in the 18th century, and individual landowners could determine the disposition of land and of pasture, previously subject to common use. Crop rotation, involving alternation of legumes with grain, was more widely practised outside the village strip system inherited from the manorial period.

E3 Enclosures

In England, where scientific farming was most efficient, enclosure brought about a fundamental reorganization of land ownership. From 1660 onward, the owners of the largest tracts of land had begun to add to their properties, frequently at the expense of small independent farmers. By the Victorian era, the agricultural pattern was based on the relationship between the landowner, dependent on rents; the farmer, producer of crops; and the landless labourer. Drainage brought more land into cultivation, and, with the Industrial Revolution, farm machinery was introduced.

E4 Mechanical Advances

It is not possible to fix a clear decade or series of events as the start of the agricultural revolution through technology. Among the important advances were the purposeful selective breeding of livestock, begun in the early 1700s, and the spreading of limestone on farm soils in the late 1700s. Mechanical improvements of the traditional wooden plough began in the mid-1600s with small iron points fastened on to the wood with strips of leather. In 1797, Charles Newbold, a blacksmith in Burlington, New Jersey, United States, introduced the cast-iron mould-board plough. The mould-board turns the soil and breaks it up, pushing it to one side; this type of plough is still the most widely used. John Deere, another American blacksmith, further improved the plough in the 1830s and manufactured it in steel.

Other notable inventions included the seed drill of the English agriculturist Jethro Tull, developed in the early 1700s and progressively improved for more than a century; the reaper of the American Cyrus McCormick in 1831; and numerous new horse-drawn threshers, cultivators, grain and grass cutters, rakes, and corn shellers. By the late 1800s, steam power was frequently used to replace animal power in drawing ploughs and in operating threshing machinery.

The demand for food for urban workers and raw materials for industrial plants produced a realignment of world trade. Science and technology developed for industrial purposes were carried over into agriculture, eventually resulting in the agribusinesses of the mid-20th century and beyond.

E5 Pest Control

In the 17th and 18th centuries, the first systematic attempts were made to study and control pests. Before this time, hand-picking and spraying were the usual methods of pest control. In the 19th century, poisons of various types were developed for use in sprays; biological controls such as the use of predatory insects were also used. Resistant plant varieties were cultivated; this was particularly successful with the European grapevine, in which non-resistant European grape-bearing stems were grafted on to resistant American rootstocks to defeat the Phylloxera aphid after it was accidentally introduced into France.

E6 Transport

Improvements in transport affected agriculture enormously. Roads, canals, and railway lines enabled farmers to obtain necessary supplies and to market their produce over a wider area. Food could be protected in transport and shipped more economically than before as a result of rail, ship, and refrigeration developments of the late 19th and early 20th centuries. Efficient use of these developments led to increasing specialization and eventual changes in the location of agricultural suppliers. In the last quarter of the 19th century, for example, Australian and North American suppliers displaced European suppliers of grain in the European market. When grain production proved unprofitable for European farmers, or an area became more urbanized, specialization in dairying and cheesemaking became more common. Falling transport costs, and the resulting increase in trade and competition from abroad eventually led Western governments to introduce protective agricultural policies in the 20th century (see Protectionism).

F The Green Revolution

The impetus towards increased food production in the era following World War II was a result of a new population explosion. A so-called green revolution, involving selective breeding of traditional crops for high yields, new hybrids, and intensive cultivation methods adapted to the climates and cultural conditions of densely populated countries such as India, temporarily stemmed the pressure for more food. A worldwide shortage of petroleum in the mid-1970s, however, reduced the supplies of nitrogen fertilizer needed for the success of the new varieties. However, in the late 20th century, the adoption of these high-yielding varieties has, for example, led India to become a net exporter of products such as rice in some years. More recently, genetic modification of crops such as soya, maize, and cotton has allowed scientists to speed up the breeding process, allowing new crops to become available to farmers much faster. Characteristics such as herbicide resistance (in soya) and genes for producing substances toxic to insects (in maize and cotton) have been included in new varieties of crops. These have been adopted extensively by farmers in countries such as Argentina, China, and the United States. In the EU, genetically modified soya, maize, and oilseed rape can be used as food ingredients, although due to consumer fears, there is currently very little production of genetically modified crops in the EU.

Despite the ability of modern agriculture to produce high yields per hectare of land, erratic weather and natural disasters such as drought and floods continue to make world food supplies unstable. There are also increasing concerns about the sustainability of modern agriculture, as it requires high levels of energy and has substantial environmental impacts. Famine is also still widespread in many parts of the developing world, particularly in Africa. The problem is arguably not that world agriculture cannot produce enough food, but that many people do not have sufficient income to purchase the food that is already available. The challenge for the future will be to ensure sustainable food supplies and to achieve economic growth in countries such as those in Africa so that people can afford to buy the food that is produced. See Environment; Food Supply, World.

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