Kline, Allan B.

English

Research Papers in Economics

Political  Components  in  Current
Agricultural  Policy  Formation
By Allan B. Kline
I  appreciate  the  opportunity afforded  here  of speaking  to some
of those  who carry major responsibility  for adult  education  in rural
America.
Current discussions in the newspaper  relating to the government
of the  United  States  remind  me  that  the  Adams'  say  in their Basic
History of America that the Federalist, written by John  Hay, James
Madison,  and  Alexander  Hamilton,  constitutes  one  of  the  great
treatises  on government,  and  perhaps  the only  truly great one.  The
pace of change  in  modern  government  suggests  that  there  is oppor-
tunity  today  for  equally  penetrating  thinking  with  regard  to  the
implications  of current  and  proposed  programs.
Much  of the discussion  in agriculture  is  concerned with the  eco-
nomic situation.  I shall  discuss this  first, but shall note also  that the
political  and  social  consequences  of  federal  actions  may  be  more
significant  and more  far reaching than the economic  results.
The situation economically is relatively simple. The United States
agricultural  plant  is  too  large.  It  includes  more  capital  and  more
labor than can  be efficiently  used or highly  paid.
Since  we  are producing  more  than  we  can  use  or give  away,  we
have accumulations - surpluses. Surpluses depress prices. This results
in lower  incomes.
In  this situation,  when it is  apparent  that the economic  proposi-
tions  must  be  successfully  met,  we  have  all  sorts  of  proposals  for
panaceas.  Most of them rest  on the  idea that the government  should
fix prices and, of course,  fix them at levels higher than the commodi-
ties will  move  in trade.
The  delusion  that  price  fixing  is  a  cure-all  rests  firmly  on  the
assumption  that  action  of  that  sort  has  created  the  farm  situation
since  1940.  It is  made  most clear  by comparison  of  prices  then and
prices  now. In April  of  1940,  No.  2  red winter wheat,  Chicago,  was
$1.13 a bushel;  No. 2 yellow shell corn was 63 cents a bushel; barrows
and gilts, Chicago, were  $5.48  a hundred;  and milk, wholesale,  U.  S.,
was  $1.75  per  hundred.  April  1956  prices  were  respectively:  $2.37
for wheat;  $1.50  for corn;  $15.13  for  hogs;  and  $3.84  for  milk.
30While  what  happened  can  be  illustrated  in  many  other  ways,
these  figures  are  sufficient.  Since  1940  prices  have  remained  high
primarily  because  of war  and inflation.
Setting prices  at above  market  value involves  rationing  the right
to produce.  This not  only has proved  true in current  programs,  but
is logical and inevitable.  It is  a corollary  of the  well-known proposi-
tion that government  fixing of prices  below  the level  at which  con-
sumers  would buy  involves the  more well-known  rationing  of goods
and services  available.
This course  of action depresses the prices  of storahles assurpluses
accumulate  and  spreads  to  other  commodities  as  resources  shift  to
crops  free  from price  fixing.
Another  political aspect  of  this situation  deals  with the  number
of  people  on  farms.  It  is  a delicate  proposition  because  it concerns
humanitarian  ideals  of good  people.  Actions  take many  directions:
cheap credit,  assistance  in housing, special  payments  and other farm
subsidies.
In April of  1940,  11.8  million  people were  employed  in agricul-
ture  in  this country.  In April  of  1956,  6.4  million  people  were  em-
ployed  in  agriculture.  Let  those  who  argue  that  we  must  maintain
people  in agriculture  give  us  a reasonable  estimate  of per capita  in-
come  of  farmers  if  we  had  twice  as  many  people  farming  today  as
we  had in  1940.
Fortunately,  there  are alternatives.  They involve  education,  new
industries  and  investment,  high  production  per  capita  within  and
outside  agriculture,  and  the  possibility  of  truly  thriving  and  pro-
gressive  rural  towns and  the same  sort of farm  communities  around
them.
There  is  an  intriguing  proposition  that  while we  should not  fix
prices,  we should legislate  income  by compensatory  payments.  Space
does not  permit giving  the  total argument,  but this  proposition  in-
volves  the rationing of the right to produce  exactly the same as other
forms  of  price  fixing.  Furthermore,  it  is  more  difficult  to  manage
politically  than present  programs  because  it involves  a direct  legis-
lated  payment  from  the  treasury  to every  farmer.  In  addition,  the
accumulation of surpluses promotes state trading in the international
field  with  the  circumvention  of  individual  and  private  activities
which  is  inevitable.
A government  which  does  the  things involved  in price  fixing  is
based on a theory  more given to security  than to the  protection  and
expansion  of  opportunity.  The  leveling  involved  in  rationing  the
31right to produce  will  inevitably lower the cultural  levels and educa-
tional standards  of  rural  people.  This derives  from  the  proposition
that  no  group,  over  a  long  period  of  time,  can  receive  more  than
it earns.  Price  fixing restricts the right  to earn.
The world  is  facing  a great  ideological  struggle  concerned  with
the status  of the  individual  and  the  functions  of government.  I  sus-
pect that no area of decision  is more significant  in this struggle  than
that of political action  in the farm  field in the  United  States.  It is a
real  privilege  to  start  you,  some  of  our  great  educators,  thinking
and helping  others to  think with  regard  to aspects  of  this situation
more far reaching and more permanent than the price of hogs this fall.
32

POLITICAL COMPONENTS IN CURRENT AGRICULTURAL POLICY FORMATION

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Research Papers in Economics