All Commentary
Thursday, February 1, 1973

Chaff About Wheat


©National Review, Inc. ¹972. Reprinted by permission from the November 24, ¹º972 issue of National Review, of which Mr. Rickenbacker is a contributing editor. He also is editor of the Rickenbacker Report, an investment advisory service, and publisher of the Financial Book Digest.

Wheat, of all things, has been making the headlines in recent weeks as if it were married to a Greek shipping lord. There has been the announcement of general crop failures in the Communist world, an enormous sale by American exporters, accusations of “windfall” profits by those exporters, guarantees of higher than-market prices for wheat and even for the ship owners who transport it to the Soviet Paradise, the decision of the longshoremen’s union to abandon its long-established policy of refusing to work vessels under Soviet flag — and so on and so forth. Wheat, quite clearly, is a “problem.”

Now the interesting thing is that there is no reason why wheat intrinsically should be a problem, as, for example, carbon monoxide is a problem. Men of average ability can cooperate with the Lord’s creation in such a way as to produce wheat in abundance; mechanisms can match up supply and demand as they do for hundreds, nay thousands, of other commodities; transportation can be arranged at less than the presidential level for wheat as it is routinely for, say, cornflakes or narcotics. What’s so special, and what’s so especially problematical, about wheat?

I submit that the special characteristic is governmental intervention. Across the sea, in the Soviet Paradise, where the farmers in czarist days never failed to export their agricultural production to Europe and Asia, the intrusion of a crazy political ideology has converted abundance into penury, an agricultural exporter into an importer. On this side of the water, the intrusion of an equally crazy political ideology has distorted just about every aspect of wheat economics. You can’t plant wheat without a license. Trafficking in licenses is a crime. General tax revenues are used to prop up the domestic price of wheat, raising the cost of living. If a wheat exporter sells wheat at less than the domestic price, the Department of Agriculture will make up the difference. So, general tax revenues are used to depress the world price. Exporters can gamble on varying differentials in the daily quotes, and apply for subsidies calling for larger payments than needed to offset their actual losses. In the recent sale of wheat to the Soviet Paradise, this system alone cost the taxpayers $120 million. Some “sale”! The artificially swollen price for domestic wheat encourages perennial over-production and embarrassing “surpluses” that, in merely economic terms, are as surely a sign of coercive distortion as the “shortages” created by Soviet ideology in the historic breadbasket of Europe.

As for transportation, the two meddling governments, Washington and Moscow, have agreed to pay more than the market rate for shipping. General tax revenues will be used to line the pockets of the ship-owners. By political agreement, one-third of the wheat transported from the U.S. to the USSR must go in American bottoms, one-third in Soviet bottoms and one-third in “other” vessels. No matter what price the “other” vessels charge, the Soviets will pay 10 per cent more to the American ship-owners. Presumably this will help American ships to stay in business despite the ruinous results of governmental interventionism and subsidies in the shipping industry — another, but sickeningly similar, story. All of this finagling, boondoggling, price-setting and reciprocal pocket-lining would be strictly illegal if done by private citizens.

It seems clear that the effect of governmental meddling in wheat has been to unbalance the supply-demand function in the U.S. and the USSR, to raise prices in both places, to create “problems” where none had existed before (transportation of Ukrainian wheat to Europe was no “problem” when it was handled, year after year, by freely functioning agents), and to misallocate scarce resources such as human labor, farm machinery, real estate, storage bins, fertilizer and on and on. It is, in fact, impossible to show that the wheat maneuvers of Washington and Moscow have done any economic good at all; and it is easy to show that the over-all net result has been entirely negative, raising everyone’s cost of food and creating hostility where once there had been only cooperation.

Here, as always when the government intervenes in a market, the “problem” does not reside in some inanimate object named “wheat” or “natural gas,” but in false ideologies. More precisely, the problem does not lie in false ideologies but in a political system that permits some people to impose their false ideologies on others. I would gladly let the Department of Agriculture go on forever with its delusions and magical operations. But why must it have the power to force all of us to pay for its mistakes?

Wonder what would happen if the Department of Agriculture had to offer its “services” in a free market?

 

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Inventions vs. Interventions

The introduction of great inventions appears to be one of the most distinguished of human actions, and the ancients so considered it, for they assigned divine honors to the authors of inventions, but only heroic honors to those who displayed civil merit such as the founders of cities and empires, legislators, the deliverers of their country from lasting misfortunes, the quellers of tyrants, and the like. And if anyone rightly compares them he will find the judgment of antiquity to be correct; for the benefits derived from inventions may extend to mankind in general, but civil benefits to particular lands alone; the latter, moreover, last but for a time, the former forever. Civil reformation seldom is carried on without violence and confusion, while inventions are a blessing and a benefit without injuring or afflicting any.

SIR FRANCIS BACON