All Commentary
Friday, July 1, 1983

Farm PolicyNow What?

Dr. Peterson is the director of the Center for Economic Education and the Scott L. Probasco Jr. Professor of Free Enterprise at The University of Tennessee at Chattanooga.

President Reagan proclaims his new payments-in-kind (PIK) program to give farmers surplus grain plus cash if they cut production substantially in the next two years as “highly innovative.” Is it really? FDR had a similar program for cotton farmers, and President Kennedy had much the same scheme for feed-grain producers. Neither the Roosevelt nor Kennedy plan proved effective.

Indeed, more than a half-century of aggressive farm intervention costing hundreds of billions of dollars in subsidies spells out a record of unremitting failure and frustration, with the farmers themselves the ultimate losers.

In 1929, for example, President Hoover set up the Federal Farm Board to stabilize crop prices. By the end of his administration the Board had gone through more than $300 million of its $500 million in operating capital, with nothing to show for it but record farm foreclosures. Every time the Board had a modi-cure of success, production would shoot up, foreign markets would fade away, and heavy inventories would overhang the market like the sword of Damocles. Soon President Hoover recommended the next logical step of price intervention: production restrictions—withdrawing land from cultivation, slaughtering young animals, plowing under crops. President Roosevelt and his successors put these and other restrictions into practice.

Thus the pattern for some five decades of farm intervention was set: production incentives such as price supports and crop insurance, on the one hand, and production curbs such as acreage allotments and marketing quotas, on the other. Generally the production incentives have won, burdening the government and taxpayer with huge stockpiles of food and fiber over the years. The stockpiles, in turn, have forced the government into such welfare ventures as food stamps, school lunches, senior citizen “nutritional programs,” “Food for Peace” foreign giveaways, and so on.

The rub with modern farm policy, then, is its useless and quite irrational attempt to repeal the law of supply and demand—to reinvent the wheel. The unhampered price mechanism, in other words, ever pulls supply and demand toward equilibrium, leading to optimum efficiency and economic growth and assuring that whenever shortages or surpluses do emerge they are fleeting and short-lived.

The further rub is that the farmer to be saved wasn’t. Ultimately he was burned and he, like his forebears, quit the farm for other pursuits, causing a massive change in the composition of the American population. The 1981 Statistical Abstract of the U.S. tells the story:

        Farm       Per cent
      population       of total
      (millions)       population
1930       30.5       24.9
1940       30.5       23.2
1950       23.0       15.3
1960       15.6       8.7
1970       9.7       4.8
1980       7.2       3.3

      In a like way, American agriculture, notwithstanding the lure of subsidies, offers fewer and fewer job opportunities as farmer-entrepreneurs have automated their production. Note how the number of full-time farm jobs, including those of farm operators, their family members doing farm work, and hired hands has plummeted over a 50-year span:

        Farm       Per cent
            employment       civilian
            (millions)       labor force
1930       12.5       25.8
1940       11.0       19.8
1950       9.9       15.9
1960       7.1       10.2
1970       4.5       5.4
1980       3.7       3.5

But as the number of farms and farm employment has dropped in this period the size of farms has nearly tripled in entrepreneurial response to the economies of scale over the years:

            Farms       farm size
            (millions)       (acres)
1930       6.5       151
1940       6.3       167
1950       5.6       213
1960       4.0       297
1970       2.9       374
1980       2.4       429

Moreover, despite all manner of government controls, farm productivity has generally raced ahead of nonfarm productivity in recent decades. From the 1950- 1954 period to the 1975-1979 period, for example, the annual average yield of corn leaped from 39.4 to 95.2 bushels per acre, wheat from 17.3 to 31.4 bushels per acre, potatoes from 15,100 to 26,200 pounds per acre, milk from 5,400 to 11,000 pounds per cow, and eggs from 181 to 236 per laying chicken.

In the same periods, annual average manhours necessary to produce each 100 pounds of chicken broilers dropped from 2.4 to .1, reflecting enormous acceleration in automated broiler production and a reduction in manhour requirements by 96 per cent in a 25-year stretch. During this same period, turkey production automation was not quite so rapid. Here, 6.8 manhours were required to produce each 100 pounds of turkeys, on an annual average basis, in the 1950-1954 period, against only .5 manhours in the 1975-1979 period, thereby reflecting a 93 per cent manhour reduction in turkey production.

About the only winners I can find in America’s farm picture are the farm politician and the farm bureaucrat. The bureaucrat really farms the farmer. While the number of farms and the farm population have plummeted, the number of employees at the Agriculture Department has grown like weeds. In 1930 there were 26,050 employees, 98,694 in 1960, and 129,139 in 1980.

Clearly depopulation of the farm sector has weakened the farm bloc but only relatively. Last November all 21 Democratic members of the House Agriculture Committee seeking re- election held on to their seats while the GOP saw 5 of their 19 members defeated, including ranking member William D. Wampler of Virginia and second-ranking Paul Findley of Illinois, a key Administration supporter on farm bills. So regardless of the irrationality and colossal waste of modern farm policy, the immediate outlook is for more of the same.

But the longer-run outlook seems saner. As farms more and more come into stronger hands and grow in size, farmers will tend to demand more of a no-nonsense farm policy. Then increasingly unhampered farm entrepreneurship can play a more constructive role for the farmer, the consumer and the economy. For today’s farmer, after all, is still a private property-holding, technologically astute, business entrepreneur. And when he becomes numerically smaller still and hence no longer fair game for politicians and bureaucrats, when, in other words, he becomes just another unsubsidized businessman (if in dungarees), he will thrive.

  • William H. Peterson (1921-2012) was an economist, businessman and author who wrote extensively on Austrian Economics. He completed his PhD at New York University in 1952 under the supervision of Ludwig von Mises.