e is fixed on the horns of a dilemma. If he does not at once buy
cotton, but quotes on the assumption that price will remain steady, he
may be involved in serious loss through his estimate being mistaken. If
he determines to buy cotton at once, others who risk more, and trust
their judgment of the future, may secure the contract. On first thoughts
it would seem desirable that all spinners should buy cotton outright to
cover their contracts, but on second thoughts the social disadvantage of
their doing so becomes apparent. Much buying might take place when
stocks were scanty, with the result that prices would be needlessly
forced up; and when stocks were plentiful demand might be weak and
prices, therefore, be unduly depressed. It is evident that the buying of
cotton on the principles suggested would be calculated to cause great
unsteadiness of prices, especially as cotton is not continuously
forthcoming, but is produced periodically in harvests. Demands for yarn
cannot be expected to come always at the most favourable time socially
for the distribution of the cotton. One way out of the difficulty is
that the spinner should exercise his judgment and buy his raw material
at what seems to him the most suitable times. But to this course there
are three objections. The first is that spinners would be performing the
two functions of industrial management and cotton buying (together with
others perhaps), and that in consequence the best industrial men would
not necessarily be able to maintain their position in the trade because
as buyers of cotton they might be unfortunate. The second is that
spinners being required to give attention to two distinct classes of
problems would be less likely as a body to become complete masters of
either. The third, which is not distinct in principle from the two
preceding, is that such limited speculation in cotton buying on the part
of spinners worried with other matters would not be likely to steady the
cotton market in any high degree. It may be assumed as desirable that
the demand for cotton should be so spread as to keep its price as steady
as possible--"steadiness" will be defined more exactly later--and that
to this end it is essential that specialists should devote themselves to
the task of spreading it. Such specialists have appeared in the cotton
brokers and dealers who make their living out of bearing the risks
connected with anticipating demand and supply in relation to cotton.
To-day