Schroeder, L. Eugene

English

Research Papers in Economics

CHEAP FOOD POLICY  - IT IS NOT A COINCIDENCE
L. Eugene Schroeder
American Agricultural  Movement
Springfield, Colorado
The rules and regulations  that govern  economic  conditions in this
nation  do  not  just  happen  haphazardly.  The  policies  are  written
with  reason  and forethought.  It is in the best interest  of each farmer
and  rancher  to  study  thoroughly  the  economic  policies  that  the
agricultural  sector  operates under.  Maybe  we  can  then better under-
stand  what  these  policies  mean  and  who  they  benefit.  By  under-
standing  these  policies  we  can  better  identify  the problems  we  are
facing.  Also,  by  understanding  who  benefits,  we  can  identify  who
influences the policy making decisions.
The  cheap  food  policy  of  this  nation  is  not  a coincidence.  Like
other  policies,  the  current  1977  Farm  Bill was  written with  reason
and  forethought.  We  therefore  need  to  study  it  thoroughly  to  see
who  might  benefit  from  it. It is apparent that  farmers and  ranchers
can only lose with this bill.
In  any  discussion  of  agricultural  economics  the  term  "parity"
invariably  comes  to the front. What does it mean? Parity is a concept
that  was  born  in the 1930's  during the Great  Depression.  After the
economic  collapse,  the  government  put  together  a  committee  to
study  the  reasons  for  the  depression.  The  committee's  study made
it apparent  that the collapse  came  when  the  greatest  industry in the
U.S. went broke.  This  industry  was  the same then as now, American
agriculture.  The  committee  recommended  that  agricultural  prices
should, in the  future,  be tied on an equal basis  to other segments  of
the  economy  to  prevent  future  economic  imbalances  and  thus
prevent  future economic collapses.
The years  1910-1914  were  selected  as a based period to figure the
parity  ratio  formula.  This  period  was  one  when  all  segments  of the
economy were in balance. There was no inflation, and unemployment
was minimal.  The economy and the country were flourishing.  By tak-
ing the costs of goods and services that it took to produce agricultural
commodities,  and  at the same time taking the prices that agricultural
commodities  were  bringing  in  the  marketplace,  a  parity  ratio  for-
mula  was  developed.  Basically  stated  this parity  ratio means that we
129exchange  the  goods  we  produce  for  goods  we  need  at an  equity  of
price.  Parity  is  simply  an  equity  of  trade.  Another  way  is to  trade
goods  for  goods  at  equal  value.  When  this  is  done  all  segments  of
the  economy  will  be  in  balance  or  equilibrum  with  each  other.
Consequently,  let  us  begin  our  study  of  the  cheap  food  policy
and  observe  the  imbalances  it  creates  in  the  economic  system.
First we  must consider  where  our wealth  comes  from.  Under  our
current  system,  we consider the paper dollar as our wealth.  However,
it  is  not  our  wealth-it  is  only  our  medium  of  exchange.  Our real
wealth  is the goods and services  in the economic system.
Therefore,  let us consider the most basic type of economic  system
that  exists.  This  is  a  barter  system  where  you  exchange  goods  for
goods.  Now  ask  yourself  the  question,  where  does  new  wealth
come  from  in  this  system?  There is  no paper  money,  no banks  to
borrow  from,  and  no  printing  presses.  Where  does  the  new wealth
come from?
The  only  way  you  can  obtain  new  wealth  in  a barter  system  is
by  bringing  more  barter  material  into  the system.  This  new  mater-
ial  has  to  come  from  the  natural  resources  of  the land.  There  are
many  sources  of  new  barter  material-timber,  iron,  minerals,  fish,
water,  and  oil  are  only  a  few.  But  many  of  these  resources  are
depletable  and  are  in  danger  of  running  out.  God  gave  this  earth
one  other source  of barter  material.  The  most  basic  material  that  is
necessary  to  sustain  all  life  and  it  is not depletable,  but renewable
each  year.  It  is  agricultural  commodities,  the  source  each  year  of
new  wealth  in  this  economic  system.  We  as  farmers  and  ranchers
must  never  forget  this.  We  are  the  largest producers  of real  wealth
each  year,  producing  over  70%  of the real materials,  and the  largest
consumers,  consuming  over  30%  of  all  manufactured  goods  and
services.
With these concepts firmly in mind, let's put this into an economic
system and see what happens.
All economic  systems are composed of basic parts.
1. Government  is  the part of the system  that writes  the  rules and
regulations under which we operate.
2. Resources  are  the  source  of  real  wealth  that  comes  into  the
system,  whether it be human resources or natural resources.
3. The  industrial  structure  converts  the raw  materials  into  manu-
factured  goods to  be  used  by  the  system.  Human  resources  are used
to provide the labor to make these conversions.
4. Banks handle and control the medium of exchange.
5.  Federal  Reserve  System  regulates  the  flow  of  paper  money.
American  farmers  and  ranchers  bring their raw agricultural  com-
modities  into  the  system,  which  are  sold  in  the  marketplace.  We
130must  first  identify  this  market.  Our  grain  is  sold  primarily  to four
grain corporations  who  handle  about  90% of all grain exported from
the  U.S.,  and  completely  control  and  dominate  the  market  price.
These  four  corporations  determine  exactly  what  we  get  for  our
grain products.
Our cattle,  sugar,  and peanuts  are  sold to a few corporations  who
also  determine  the  price.  The  fact  is  our  prices  are  controlled  by
monopolistic  and  oligopolistic  multinational  conglomerate  corpora-
tions  and we  sell  our commodities  to this structure at the price they
want us to have:  the cost of production or less.
At the same time we have to have manufactured  goods with which
to  produce.  We  buy  our tractors  and  equipment,  our fuel  and  oil,
and our chemicals and  our fertilizer from a few corporations.
We  could  go  on with the  goods we  need to produce with, but the
fact  remains  that  the  prices  we  pay  for  these  goods are  set by  the
same  monopolistic  and  oligopolistic  corporate  structures.  Further-
more,  the prices we pay  for these goods is not the cost of production
or less,  but in many cases is "parity plus".
American  Agriculture  is  the  most  efficient  on  the  face  of this
earth.  We  sell  at "cost  or less". The corporate structure is one of the
most  inefficient  units  of  production  and  we  buy  from  them  at
"parity plus".
This  allows  for an  actual  flow of media or paper into the hands of
the corporates.  (But  we  always  said  it was the "middleman"  making
all  the  profit.)  What  does  this  corporate  structure  then  do with  all
these  profits?  The  profits  are  deposited  into their parent corporate
banks. It  is  said  that  1%  of  the corporate  banks  control  96%  of all
the  capital  or  wealth  in  this  nation.  This  seems  reasonable,  since
they  are  the only  ones  who  could  generate  any  capital  or make any
profits for the last 25 years.
This  now  brings  us back to our real wealth  part of the structure.
Since  the  farmers  and  ranchers  cannot  make  a profit,  they  have  to
deficit  spend,  mortgage  their  land,  and  borrow  the  money  they
lost  back  from  the  banks  they  lost  it  to.  At  the  same  time  the
farmers  and  ranchers,  because  they  made  no profits,  pay  no income
taxes.  The  government  has  now  lost  the  biggest  tax  base  it has to
work  with.  Consequently,  the  government  loses  its  income  and
also has to deficit spend.
This  year  government  spent  $60.3  billion  more  than it received,
so  government  has  to  borrow.  The  way  the government  borrows  is
simple.  Working  with  the  Treasury  Department  and  the  Federal
Reserve,  the  government  issues  treasury  bills  and  treasury  notes.
These  are  nothing  more than federal  securities  or mortgages  against
this nation just like the farmer has mortgages against his land.
These  federal  securities  are  then  sold,  and  the  only  group  that
has money  to buy them  is the  same  corporate  bands who  make  the
131profits.  The  government  now has the money it needs to operate with
and  the  American  people  have  to  pay  this interest. Inflation  goes on
and  some  day  we will also have to pay the principal.  The total public
and  private  debt  owed  to  these  banks  is  now  said  to  be  about  $4
trillion.  At  a very  conservative  6% interest rate, the interest alone on
this  debt,  paid  to  banks,  is  over  $240  billion.  This  is  a  very  large
profit  and the banks do absolutely  nothing to provide the real wealth
into the economic  system.  All  they  do  is handle and loan the paper.
All  they  were  ever  supposed  to  do  was  to store  the profits  for the
people.
We  still  have  a  basic  problem  in  this  system,  however.  Farmers
and  ranchers,  with  the  rest  of the  people,  have  not made  a profit.
We  are  working  at less  than the cost of production.  The government
solves  this  problem  by  then  giving  deficiency  payment,  diaster
payments,  subsidies, loans,  food stamps, and other forms of welfare.
We have  become dependent  upon  our own government  and our large
banks for our very existance.  This is not right. We are the people  who
produce  the real wealth.  We  also produce the most basic commodity
essential  to  life  and  are  the  most  efficient  unit  of production  that
exists on the face of this earth.
Let us now  analyze what would  happen  if  our commodities  were
priced  at  parity,  and  we  exchanged  our  goods  for  the  goods  we
consume at  equal values.  American  agriculture  is  the most efficient,
and  we  would  therefore  generate  more  profits  than  the inefficient
corporate  structure.  There  would  then  be  an  actual  flow  of paper
from  the  corporate  structure  back  to  the  people.  The  corporate
structure  would  than  have  to  borrow  some money  and that would
come  from  its parent  corporate  banks.  The  people are  now  generat-
ing  a  profit  and  a tax  base  is  established.  Huge  amounts  of  taxes
would  be  paid  into  the  government.  The  government  would  no
longer  need  the  securities  and  these  securities  could  be  burned.
This  will  stop  the  inflationary  cycle and  stop  the devaluation  of
the  dollar.  It  will  also  balance  the  trade  deficit  which  was  $4.5
billion  in  February  1978.  It  will  stop  the  growth  of  the  national
debt  and  in  time  will  pay  it  off.  In  order  for  this  economic  and
monetary  system  to  survive,  we  will  have  to  reverse  the  flow  of
paper.  The  cheap  food  policy of this nation  has  got to be  changed.
The  stranglehold  of the monopolistic corporate  structure  has got to
be  eliminated  in our marketplace  so  we  can  exchange  our goods for
their goods at an equity of price.
Above  all  we  must  realize  once  and  for  all  that  our  medium
(paper  dollars)  is  not our wealth.  It is  only  a  medium  of exchange.
The  real  wealth  in  our  system  is  our human  and natural  resources.
When  we  can  achieve  a  fair price  for our goods,  the  wealth  will  be
transferred  back into the hands  of the people  as the  Constitution  of
the  United  States  says  it  should  be.  Then,  and  only  then,  can  this
nation get back onto the road to recovery.
132American  agriculture  holds the key to this recovery  in their hands.
We are  the  greatest producer  of wealth and the greatest consumer of
manufactured  goods.  If  we  cannot  achieve  a  fair  price all  we  need
to  do is  not buy  those  manufactured  goods  at these inflated  prices,
not  sell  our products  at  less  than  equal  prices,  and, if there  are  no
buyers for  our products  at a fair  price, then reduce production  until
a fair price can be obtained.
133PART  VI
Policy Workshop Reports

CHEAP FOOD POLICY--IT IS NOT A COINCIDENCE

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Research Papers in Economics