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A market is commonly thought of as a place where commodities are bought and sold. Thus fruit and vegetables are sold wholesale at Covent Garden Market and meat is sold wholesale at Smithfield Market. But there are markets for things other than commodities, in the usual sense. There are real estate markets, foreign exchange markets, labour markets, short-term capital markets, and so on; there may be a market for anything which has a price. And there may be no particular place to which dealings are confined. Buyers and sellers may be scattered over the whole world and instead of actually meeting together in a marketplace they may deal with one another by telephone, telegram, cable or letter. Even if dealings are restricted to a particular place, the dealers may consist wholly or in part of agents acting on instructions from clients far away. Thus agents buy meat at Smithfield on behalf of retail butchers all over England; and brokers on London Stock exchange buy and sell securities on instructions from clients all over the world. We must define a market as any area over which buyers and sellers are in such close touch with one another, either directly or through dealers, that the prices obtainable in one part of the market affect the prices paid in other parts.
Modern means of communication are so rapid that a buyer can discover what price a seller is asking, and can accept it if he wishes, although he may be thousands of miles away. Thus the market for anything is, potentially, the whole world. But in fact things have, normally, only a local or national market.
This may be because nearly the whole demand is concentrated in one locality. These special demands, however, are of quite minor importance. The main reason why many things have not a world market is that they are costly or difficult to transport.
The lower the value per ton of a good, the greater is the percentage addition made to its price by a fixed charge per ton-mile for transport. Thus, if coal is £2 a ton and tin £200 a ton at the place of production, a given transport charge forms a percentage of the price of coal a hundred times greater than of the price of tin. Hence transport costs may restrict the market for goods with a low value per ton, even if, as is often the case, they are carried at relatively low rates. It may be cheaper to produce, say, coal or iron ore at A than at B, but the cost of transporting it from A to B may outweigh the difference in production costs, so that it is produced for local consumption at B, and B does not normally form part of the market output of A. For example, coal is produced much more cheaply in the United States than in Europe, but, owing to the cost of transporting coal by rail from the inland mines to the Atlantic seaboard of the United States, American coal seldom finds its way to Europe.
Sea transport, however, is very much cheaper than land transport. Hence commodities of this type produced near a port can often be sent profitably quite long distances by sea. Thus Swedish iron ore comes by sea from Narvik to the Ruhr, and British coal is exported to Canada and South America.
The markets for real estate are local. Soil has been transported from French vineyards to California, and historic mansions have been demolished in Europe to be re-erected in the United States, but as a rule land and buildings are not transported.
Some goods, like new bread and fresh cream and strawberries, must be consumed very soon after they have been produced, and this restricts their sale to local markets. Other goods do not travel well. Thus many local wines which cannot stand transport can be bought in the district more cheaply than similar wines which have a wider market. The development of refrigeration, and of other devices which enable foodstuffs to be preserved and transported, has greatly widened the market for such things as meat and fish and some kinds of fruit. But such devices often transform the articles, from the standpoint of consumers, into a different commodity. Condensed milk is not the same as fresh milk, and chilled meat or frozen butter has not the same taste as fresh.
Many workers are reluctant to move to a different country, or even to a different part of their own country, to get a higher wage. This should not be exaggerated. Before the war of 1914, over a million persons a year emigrated overseas from Europe. Following it, there were considerable movements of population within Great Britain away from the depressed areas towards the more prosperous South. Employers may take the initiative. Thus girl textile workers have been engaged in Yorkshire to work in Australia, and during the inter-war years French employers engaged groups of Poles and Italians to work in the coal-mines and steel-works of France. Nevertheless labour markets are mainly local, or at any rate national.
Transport services by rail or tram are obviously local in that passengers or goods must travel between points on the fixed track. A firm may charter, for example, a Greek ship rather than an English ship, if it is cheaper, but low railway rates in Belgium are no help to the firm which wishes to send goods across Canada. In the same way, such things as gas, water, and electricity, supplied by means of pipes or wires, cannot be sold to places not connected with the system of pipes or wires.
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