Farm-Bill Costs Are Tip of the Iceberg
May 21, 2008
"A major new program in the recently enacted farm bill could increase taxpayer-financed payments to farmers by billions of dollars if high commodity prices decline to more typical levels, administration and congressional budget officials said yesterday.... The final details of the new program were approved at the end of four months of House-Senate negotiations over the legislation and received almost no attention during floor debate last week." (Washington Post, Wednesday)
Oops! Did we forget to mention this?
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FEE Timely Classic (column from the 1950s)
"Free-Market Farming" by W. M. Curtiss
"...Some argue that farm “surpluses” are only a temporary thing and that with our population growing so rapidly, if we can just hold on for 10 or 20 years, our population will outrun production and surpluses will turn into scarcities. Such an argument is nonsense. The present so-called surplus production is merely an artificial situation arising because prices are arbitrarily set higher than the free market will bear. Even if the population doubled in ten years—with the present output of food—if prices were then set higher than the market, there would still be a surplus.
But farmers are not getting their “fair share” of the national income, some say, or they cannot afford to “live as they should,” and we must do something to help them. Indeed the government has demanded of all taxpayers for nearly a century that they help farmers make two blades of grass grow where only one grew before. Tax funds have been used for farm research and education. Whether in spite of or because of these subsidies, farmers have become more efficient through better varieties, better breeds, better feeding, better cultural practices, and better mechanization. Compared with 25 years ago, 34 per cent fewer farmers, working fewer hours, are now producing 54 per cent more. Truly amazing! But now it is said that they are producing too well and something must be done about it.
We should be proud of the increased efficiency of farmers, but such an accomplishment makes sense only if the market is left free to move this phenomenal production.
Suppose the framers of our Constitution had adopted the “parity” principle for farmers. Suppose they had set about to guarantee farmers their “fair share” of the national product. Had that happened, the chances are that 90 per cent of our population would still be farmers. Farm support programs tend to keep the inefficient farmers on the farm and to discourage their looking elsewhere for more useful employment.
The startling fact is that 7 per cent of our population now produces 90 per cent of our food and fiber—an accomplishment certainly not attributable to the various farm programs with which agriculture recently has been “blessed.” The industrial revolution, marked in part by increasing farm efficiency, made it possible for farmers to decrease proportionately in numbers while industrial workers increased. Can you imagine an economy in this country today with 90 per cent of the workers on farms? Who would produce the automobiles, the transportation, the educational institutions, the doctors, the theaters, the fine homes, the recreation, and the arts? One could go on and on enumerating what we consider as making up the high standard of living we now enjoy. In an economy with nearly all the workers on farms, the standard of living can consist of little more than food, clothing, and shelter; and these only in meager amounts.
The solution of the farm problem depends on a free market for farm products. True, that would speed the exodus of farmers to other occupations—but to the benefit of all concerned. The high-cost producers of farm products would find they could improve their economic status by working elsewhere. And now is the best time for that shift. Historically, the greatest movement of families from the farm has come when jobs were plentiful in the villages and cities. Only in severely depressed times, such as the 1930's, has this movement been reversed. Who knows—the time may come when only one worker in 100 will be needed on the farm. But it cannot come if we continue to subsidize inefficient farmers.
Changing one’s occupation is a highly individual problem and one which collective planning can only complicate and confuse. This is as true for farmers as for school teachers or grocery store operators. We all know persons who prefer remaining in an occupation even though they might do better economically by changing jobs. One often observes an elderly couple operating a farm years after it has ceased to be profitable. That should be their privilege if it is their individual decision and if others are not forced by governmental action to become partners with them. The rising generation of young people from such farms may find what appear to them to be better opportunities elsewhere.
A sizeable group of persons concerned with the farm problem believe that agriculture must be “protected” or subsidized because of a powerful organized labor force or because industry is “protected.” This group seems to believe that the solution to a little socialism is total socialism. They seem willing to set up a socialized agriculture just because the economy is not completely free elsewhere. As one writer stated: “It is an axiom of economic history that an unsubsidized business cannot compete with a subsidized one.” That statement demands careful inspection.
Assume, for example, that labor is organized and able to command wages higher than would prevail in a free market. Assume that this results in higher priced tractors or trucks or other needed farm equipment. Assume that some items of a farmer’s cost of production are higher than they would be otherwise because they are produced behind a tariff wall or some other trade restraint. Does this mean that farmers cannot meet these higher costs except as they receive guaranteed prices set above a free market or as they receive direct subsidies? Not at all!
If farmers’ costs of production rise, regardless of the reasons, and incomes do not rise to offset them, then this is a signal to some of them to turn to a more profitable occupation. It may be a signal to others to try to produce more efficiently—to use more machinery, or more fertilizer, or expand their acreage or otherwise meet the rising costs.
People will buy food. They will pay as much as necessary to get what they need. This demand will bring out the needed production, assuring enough farmers a satisfactory price to produce it. This is not to say that all of the farmers will be perfectly happy with the situation; but those who feel most unhappy about it will turn elsewhere.
This is in no way a defense of labor monopolies, subsidies, or special privileges of any sort for any person or group. It is merely to say that a free agriculture can exist and prosper alongside these evils. The evil effects of “protected” industry and labor monopoly will be felt throughout the economy generally, but no more by farmers than by others.
Some persons worry that, with a free market for agricultural products, only the most efficient farmers can stay in business. Actually, 40 per cent of the present farms account for about 90 per cent of total sales of farm products. The remaining 60 per cent include many farms that are too small, or the operators lack sufficient capital or experience to be efficient in the modern ways of farming. These farms produce very little for sale and the owners are often part-time farmers. Last year, work off the farm accounted for nearly 6 billion dollars of a total net income of 20 billion dollars received by persons living on farms.
With the decentralization of industry—expansion into small cities and villages in rural areas—there never was a better time for persons living on farms to find profitable employment off the farm.
Suppose we revert to a free market for agricultural commodities. Wouldn’t the change cause tremendous hardship? Of course, there would be problems for individual farmers. Some would find they could no longer remain farmers. But that process has been going on for decades and accounts for our economic progress. Admittedly, it would be difficult to correct mistakes that have been pyramiding for 30 years.
The growing efficiency of commercial farms develops in spite of recent government programs. With mechanization, family farms have increased in size by absorbing the less efficient farms around them. About one-third of all farms and tracts sold in the past year were bought for farm enlargement. This healthy trend can continue to the benefit of commercial farmers and consumers. Even the farmers who sell may benefit from finding more profitable employment elsewhere and from an improved economy generally. This is not a program to force small farmers off the land—of “plowing the farmer under.” Far from it! It would merely give farmers the opportunity to decide for themselves, free from coercion, what course to take in their own best interest..."
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