Myth No. 12: “Trade middlemen are harmful”

I want to try to dispel one of the pop­u­lar social­ist myths: that trade mid­dle­men are par­a­sites on the body of soci­ety who “prof­i­teer” with a “buy and resell” scheme, create no value and only push prices up with­out justification.

The myth rests on a mis­un­der­stand­ing of the impor­tance of dis­tri­b­u­tion when stan­dard­ized goods are mass-produced. Of dis­tri­b­u­tion in general.

Before the indus­trial rev­o­lu­tion (OK, before roughly the middle of the cen­tury before last), most con­sumer goods were made by indi­vid­ual pro­duc­ers who expected to sell their goods them­selves: small crafts­men and peasants. The arrival of mass pro­duc­tion of con­sumer goods cre­ated the need to trans­port them from where they were made to local mar­kets and to sell them to the end consumer. Or rather, the devel­op­ment of trans­port made it pos­si­ble, plus a few other things.

Put simply: they started pro­duc­ing a lot in one place and ship­ping it to dis­tant areas to sell. This func­tion, the func­tion of dis­tri­b­u­tion, was taken on by the “mid­dle­men” so many people hate.

Big fac­to­ries can’t and shouldn’t do the retail sell­ing of their goods them­selves: it doesn’t pay for them. Because dis­tri­b­u­tion pays when you have lots of dif­fer­ent goods from dif­fer­ent producers.

Crudely speak­ing, this is called specialization. Everyone does what they do better than others.

Many years seem to have passed, but people are still under the influ­ence of out­dated ideas.

Apparently because it suits some­one to keep these ideas glow­ing in the heads of the masses.

So, trade mid­dle­men per­form func­tions vital to how soci­ety works: the dis­tri­b­u­tion of mass-market goods (remem­ber? deliv­ery from the fac­tory to the con­sumer in the shab­bi­est dis­trict town). That’s the first thing.

And also: find­ing out what con­sumers want and pass­ing it on to pro­duc­ers, and pro­vid­ing the ser­vices that go with a sale (pre- and after-sales ser­vice and so on).

Here’s an example. Do bananas grow in Ukraine? No. Not yet. Do you want to eat bananas? Sometimes, I think, yes. Now let’s get rid of the trade mid­dle­men who bring them here from warm coun­tries, shall we?

The poten­tial for making the noto­ri­ous profit from so-called “dumb reselling” of bananas in Ukraine “forces” importers (I put it in quotes, because nobody com­pels them) to bring fruit to this god­for­saken land.

Who’s ready to give up their services?

Never mind bananas! What about med­i­cines that can save lives?

You could go on with exam­ples forever.

And because most people can’t see what mid­dle­men are good for, they come to think the prices mid­dle­men set are unjustified. Like, since they create noth­ing, what are they charg­ing money for?

Beware of people who say that traders create no value, that we don’t need them, and that they’d better go to the fac­to­ries and pro­duce mate­r­ial goods. In today’s Ukraine, unfor­tu­nately, there are many such people. They pursue their own goals, hiding behind myths rooted in people’s minds.

And even an incred­i­ble number of grad­u­ates with eco­nom­ics degrees doesn’t save the day.