Are middlemen parasites? The role of intermediaries examined

The statement

Middlemen are intermediaries, wholesalers, distributors, agents and retailers, who stand between the producer and the consumer. The statement accuses them of adding to prices without adding value, sucking the blood of both manufacturers (by taking a share of their price) and customers (by raising what they pay). I do not agree with it in general. The tasks middlemen carry out have to be done by somebody: cut them out, and the producer or the buyer ends up doing those tasks instead, usually at a higher cost. The criticism holds only where middlemen are excessive or act unfairly.

Why the criticism arises

1. Too many layers. In some trades, fruits, vegetables and other farm produce, long chains of commission agents, wholesalers and retailers each add margins, so farmers get a small share of the consumer's price.
2. Hoarding and speculation. Some traders hoard goods in shortages to raise prices.
3. High margins without service. Where middlemen merely pass goods on without storage, credit or service, their margin looks unearned.
4. Malpractices. Adulteration, short weighing and sale of fakes by some traders damage both buyers and makers.

Why middlemen are not parasites

Points 2 to 6 below rest on NCERT's account of the services wholesalers give to producers and to retailers; points 1 and 7 to 9 are our own reasoning about what distributors, dealers and retailers do:

1. Reduce the number of transactions. One distributor serving hundreds of shops saves each manufacturer from dealing with each shop, lowering total cost. Example: a biscuit maker reaches lakhs of kirana shops through a few thousand distributors.
2. Break bulk and provide assortment. They buy in large lots and sell in small ones, and bring together products of many makers, so that the consumer can buy many items in one place.
3. Storage and transport. They hold stocks near markets and move goods, creating time and place utility.
4. Finance. Distributors pay producers and give credit to retailers, easing working capital for both.
5. Risk bearing. They bear risks of price fall, damage and unsold stock.
6. Market information and promotion. They pass back information about demand and competition, and promote and display products locally.
7. After-sales service. Dealers install and repair durables, which manufacturers could not do everywhere.
8. Specialisation. Producers concentrate on production, middlemen on distribution, each doing what it does best at lower cost.
9. Retailers' service to consumers. Retailers keep goods within easy reach of where people live and at convenient hours, offer a choice of brands and sizes, explain and demonstrate products, and some give credit to regular customers.

Example: a farmer selling directly to consumers in a distant city would bear transport, storage and selling costs and risks himself, which a cooperative or wholesale market spreads over many sellers. Where technology has cut out layers, e-commerce, farmer producer organisations, it has replaced middlemen with new, more efficient intermediaries (platforms and logistics firms), not abolished their functions.

Conclusion

Middlemen are not parasites but useful links in the chain of distribution. Their margins are payments for services that would otherwise cost producers and consumers more. The real problem is inefficient or unfair middlemen, which calls for better regulation, competition and shorter, more efficient channels: not their removal.