The Algona Upper Des Moines from Algona, Iowa on August 20, 1959 · Page 9
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The Algona Upper Des Moines from Algona, Iowa · Page 9

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Algona, Iowa
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Thursday, August 20, 1959
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e H Word A Year And A Half Later, Thi Problem and Choices - k More True Than Ever You Are Interested In, Or Engaged In Agriculture, You Owe It To Yourself To Read This '*"<(: FARM POLICY: THE PROBLEM AND THE CHOICES \ddress by John Kenneth Galbraiih, Professor of Economics, Harvard University, before > National Farm Institute. Des Moirtes, Iowa. February 14, 1958. . In the last twenty years we have achieved something. We have come close to agreement on at least two of the underlying causes of the farm problem. We agree, first of all, that_ a remarkable technological and capital advance has remarkably increased output from given land and labor. A great many changes-improved' machinery and tjllage, more and better power, hybrids, plant foods, improved nutrition and disease ' control—have all contributed to this result. Secondly, there is agreement that this great increase in the efficiency of farm production and the resulting increase in output has occurred in" a country which has a relatively low absorptive capacity. In simple translation, this means that the expanding output of farm products does not move readily and easily into use when there is a modest reduction in prices. For »he generality of farm products only a large reduction in price will much expand consumption. Some are unresponsive to »> almost any likely movement. Needless^to say, this makes price cutting a painful way of getting expanded consumption. Such is the meaning of low price elasticity. Low income elasticity means that as the incomes of people rise-urban incomes in particular-they spend more on clothing, on transportation, on recreation, and on other things but not a great deal mbre on food. The meaning of this will be evident to everyone. While expanding prosperity and increasing purchasing power would be a cure for overproduction in other industries, they are not similarly the salvation for agriculture. : I now come to another and, in sorne respects, more vital cause of our farm difficulties. This is .also one which Is much less clearly perceived. And 'much of what I have to say later on depends on a clear perception of this point. Unljke most industry and unlike most parts of the labor market, agriculture is peculiarly incapable of dealing with the problems of expanding output and comparatively inelastic demand. This ijfi.ceipability is inherent in the organization of the industry. Agriculture is an industry of many small units. No .individual ..producervcan exercise cm appreciable influence on price or on the amount that is sold. As a result, it is not within the power of any individual producer-and since there is no effective BrgBrtizdtion to this end, it is not within the power of the agricultural industry as a whole—to keep expanding Farm output from, bringing down prices and incomes. And given the inelasticity of these markets, a large increase in pply can obviously be the cause of great hardship and even demoralization. All this, some will say, is inevitable. It is the way things should be. This is the free market. This is competition. Perhaps so. But it is a behavior that is more or less peculiar to agriculture. In the last 30 or 40 years there have been important technological improvements in the manufacture of automobiles, trucks, and tractors. The moving assembly line, special purpose machine tools of high speed and efficiency, and automation have all worked a revolution in these industries. Did it lead to a glut on the market and a demoralization of prices? Of course it did not. It did not because the individual companies, very fortunately for them and perhaps also for the economy, were able to control their prices and requlate their output. This is a built-in power: It qoes automatically with the fact that there are comparatively few firms in these industries. The power to protect its market that is enjoyed by the corporation is also enjoved in considerable measure bv the modern union. Early in this century American workers worried, and not without reason, lest the larqe influx of European migrants would break down their wage scales. They were in somewhat the same position as the farmer watching the effect of a larae increase in supply on his prices. But now the unionized worker is reasonably well orotected aqainst such competition. Even though the supply of labor may exceed the demand, he doesn't have to worrv about his waqes beinq slashed. He too has won a considerable measure of security in the market. * Thus.it has come about that the farmer belonas to about the onlv qroup which is still exoos«H to the full rianrs of the competitive market. Or this would bo so in th« absence of povernment'p''oa rarns - Government price nrotection. viewed in this liaht, U-or a ( t least e6uld be-on'v the *«uival«»nt of the price security that ihe mo^orn corporation aM the modern trade union hov« as a matter of rourse. There is »h!« irnoortant tvcul- laritv of the former's nation. Because of the corrmorativelv small *eal» of his onarot'on, hi* lc«rae numbers, nnd the *«rt that anHeiiltural reduction is *»v Us nnt'.»«»' scattered wide'*' over the face of the country, h» eon orhievo o measure of control over supolv and price ONLY with the aid nf the aovern- ment. If one wishes to pr«ss the poim\ the mirket newer of me moHern eorporo»»on-derlvinfl as it rl«f« from the stnt«- Issimd charter-on^ the market OAWAC of th* modern union both owe murh to th* «»ote. But th«ir deht is rather mor* subtle and better disauUed than thr»t of t.h* fqrrrmr to th« Aaricul- tiiml Morketlna S*rv5e«» and »he CCC. So it is overlooked or, perhrms, conveniently iqnored. The merinlnn of this argument Is also clenr.lt means that those who talk about returning the farmer to a fr*« mnrket a«» prescribing a Verv different fate for him than when th»v talk obout free entfrnrlse for General Motors or free collective baraaininq for labor. . In the free market the corporation and the um«n retain lh*!r power over mice? and output, The farmer do*»« not, What is *auee for th« corporation is sourdounh for the farmer. In |S'recent report, TOWARD A REALISTIC FARM PROGRAM, the Committee for Economic Development says that farm programs must have "the basic objective of bettering the condition of thj» commercial farmer by means consistent with FREE MARKETS and the national Well-being." This means, inevitably, the particular kind of free market which farmers have. To prescribe (he same kind of market for GM one would have to recommend splitting the company up into a hundred or a thousand auto- •nobile producing units. None of these would then have more influence than the average corn farm on price; an improvement in technology would mean expanded output and Ibwerea prices-and'a glut of autos-for all. And this recommendation applied to the labor market would mean, the dissolution of unions. The CED is a highly responsible body. It would never think of making such silly recommendations for industry or labor. Yet this is what, ,in effect, it prescribes for the farmer when it asks that he be enabled "to free himself from government subsidy and control." The special rigor with which the free market treats the Farmer has always seemed to me self-evident. I have been struck by the general unwillingness to acknowledge it. While it is not usually fruitful or even wise to reflect on the reasons for the unwisdom of others, I do think some economists have resisted the idea for reasons essentially of nostalgia. Economic theory anciently assumed a market structure similar to that of agriculture. There were many producers selling in a market which none could influence or control. This was the classical case of free competition. There has been a natural hesitation to accept the conclusion that what was once (supposedly at least) the rule for all is now the rule only or chiefly for the farmer. Also once we agree that the market operates with particular severity for the farmer we are likely to ask what should be done about it. The door is immediately opened to talk of government programs. And that talk is not of temporary expedients but of permanent measures. Those who find such ideas abhorrent realize, perhaps instinctively, that to talk of 'free markets is the best defense. I should also add that no one ever gets into trouble praising the virtues of the free market. Finally, in recent times, the beneficence of unregulated markets has acquired some of the overtones of a religious faith. It is hin.ted/even'thbughl.tis'hot quite said, that divinity is on the side of the free market. Support prices, although they may not be precisely the work of the devil, are utterly lacking in heavenly sanction. I must say I regard this whole trend of discussion not only as unfortunate but even as objectionable. I am not an expert in theology, but I doubt that Providence is much concerned with the American farm program. Certainly it seems to me a trifle presumptuous for any mortal, however great or pious, to claim or imply that God is on his side. It will be plain from the foregoing that expanding output, in the presence of inelastic demand, and in the absence of any internal capacity to temper the effect, can bring exceedingly painful and perhaps even disastrous movements in farm prices and incomes. And not only can it do so but on any reading of recent experience is almost certain to do so. And there is the further possibility that these effects may be sharpened by shrinking demand induced by depression. What should we do? Within recent times, so it seems to me at least, we have come to understand more clearly the choice that confronts us. This choice rests on an increasingly evident fact of our agriculture. It is the very great difference in the ability of different classes of farmers to survive satisfactorily under present market conditions. As I say, this is something of which we are only gradually becoming aware. Let me explain it in some detail. For purposes of this explanation we may think of three classes of farmers in the United States. The first qroup are the sub-commercial or subsistence farmers. These are the people who sell very little. Their situation is characteristic in the South- srn Appalachians, the Piedmont Plateau, northern New England hill towns, the cutover regions of the Lake states, and the Ozarks. Their income is inadequate less because prices are low than because thev have so little to bring to market. It is plain that if these families are to have a decent income ,one of two things must happen. They must be assisted in reorganizing their farm enterprises so that their output is appreciably increased or they must find a better livelihood outside of agriculture. But it seems clear that we must now recognize two separate groups within the category that we are accustomed to call commercial farmers. We must distinguish the case of the very large commercial farm which, there is increasing evidence to show, has been able to return its ooerators a satisfactory income in recent years from 1 that of the more conventional family enterprise which is in serious trouble. In the nature of things the dividing line here is not very sharp and it undoubt- sdly varies from one type of farming to another. But the growing income advantage of the large farm-the very large farm- is stronaly indicated. It is shown by the trend toward farm ronsolidation. It is strongly suggested by farm management budgeting and programming studies. And it is borne out by the statistics. Speaking of commercial farms, Koffsky and Grove of the U.S.D.A. conclude in their recent testimony on agricultural policy for the Joint Economic Committee that between 1949 and 1954-55, although the evidence is not entirely conclusive, "net income on farms with an annual value of sales of $25,000 or more was fairly well maintained, while incomes of smaller operations (although still) in the high production cateaory showed substantial declines." That the larqe farms would even come close to maintaining their income in this period was highly significant. We can conclude, I believe, that in many areas, at least, modern technology has come to favor the large farm enterprise. Agriculture has become an industry where there are substantial ALGONA UPPER DBS MOINES AtGONA, IOWA, THURSDAY, AUGUST 20, 1959 To Appear Tonight At Fair ;conomies of scale. The most successful units may, Indeed, be very large by any past standards—in some areas the investmon will be from half or three quarters of a million dollars upward This is an important point, for there is still more than a slight reluctance to admit of the size of these units and to explore the full extent of the change that is involved. We hear scholars speak of the need for a further large-scale withdrawal of the human factor from commercial agriculture. But wo hear less of the massive reorganization of the farm units which this withdrawal implies. The huge scale of the resulting units is not recognized—or this part of the conclusion is soflpedalled. Yet if many fewer people run our farm plant it can only mean that each person is operating a far larger firm. For let there be no mistake, an agriculture where the average unit has capitalization of a half million dollars or upward will be very different, both in its social and economic structure, from the agriculture to which we are accustomed. Not many can expect to start with a small or modest stake and control a half million or million dollars of capital during their lifetime. If these are the capital requirements of the successful farm, we shall have to accept as commonplace the separation of management from ownership. Owner-operatioi is H p in. shrewd enough to select well-to-do parents, will be confined, with rare exceptions, to those who were Perhaps this development will not be so bad. But we shoulc Face up to its full implications. Those who now talk about adjustments and reorganization of commercial agriculture are talking about means without facing up to results. Those who oraise the free market and the family farm in one breath are Fooling either themselves or their audience. As I have noted, it is the very large ^arm, not the traditional family enterprise, which from the evidence has much the greater capacity to survive. We should also recognize that the adjustment to high capitalization agriculture will not be painless. It will continue to be very painful. And we should spare a thought for the trail of uprooted families and spoiled and unhappy lives which such adjustment involves. I would especially warn colleges now interesting themselves in these problems, against usin£ the word adjustment as though it described a neutral and painless process. Suppose we do not wish an agriculture of large, highly capitalized units. What is the alternative? The alternative is to have a farm policy in which the smaller commercial farm- what we have previously thought of as the ordinary family- sized enterprise—can survive. Give the technological dynamic of agriculture, the nature of its demand and the nature of the market structure, we cannot expect this from the market.lt will come only as the result of government programs that are designed to enable the older family-sized enterprise to survive. It has to be a government program. Self-organization by farmers, of which some people are now talking, to regulate supply and protect their incomes is a pipe dream. Those who advocate it only advertise their innocence of history, economics, and human nature and their refusal to learn from past failure. I also confess my skepticism of individual commodity programs now so much in fashion. I very much fear that they will prove to be only a way of magnifying the tendency of farmers to disagree with each other—a tendency that is exceedingly well- Tho six performers shown above, practically all from this general HI-CM will appear Thursday nifjht, Aug. 20, in the talent show sponsored by the Kassulh County Women's Chorus at the county fail. ("uiUiin time for I ho program, which will feature 25 acts, in. ... tin- photo. It-It In right t"P row. «'' e Monnie Hanson, Livermore, who sings and plays an accordion: Judy Pedersen, Buffalo Center, who plays a vibraharp; and Le Ota Ann Voss, LuVerne, who will present a rock and roll baton act. Left lo right, bottom row, are Dolores Book, Fort Dodge, and Robert Awe, LuVerne, singers, arid Terry Voigl, Fenlon, a dancer. UDM Engraving). Resists Arrest, Man Bound To * District Court Dale Bannister, Wesley, was fined $25 and costs on a charge of intoxication in Mayor C. C Shierk's court Au#. 10. Twenty dollars of the fine was suspended, but Bannister wasjjound over lo the district court on a charge of resisting ane.st. The case originated Aug. 10 about midnight when Patrolman Duane Ilornan, Humboldl, picked Bannister up on Stale street, llo- inan had a diflicull time subjuing Bannister and got help from Policeman Eppo Bullon. Olher cases heard in mayor's court included William Wier, llum-boldt. $.') and costs, speeding; George Wright, Randalia, care- driving, $. r >; Mrs Art While, Bulan, speeding, Donald developed—and thus to insure no action of any kind. I also deplore the belief that is currently so popular that if everyone just thinks hard enough someone, someday, will come up with a brilliant new idea—for solving the farm problem and insuring everyone an adequate income. That is not going to happen either. Or, to be more precise, the choices in farm policy are not very great. Any policy must provide a floor under prices or under income. As I have said on other occasions, a farm policy that doesn't deal with these matters is like a trade union which doesn't bother about wages. There must be production or marketing controls and these must be strong enough to keep the program from being unreasonably expensive. They will also inevitably interfere somewhat with the freedom of the farmer to do as he pleases. Nothing is controlled if a man can market all that he pleases. But we should also bear in mind that life involves a choice between different kinds of restraints. Inadequate income also imposes some very comprehensive restraints on the farm family. I have long felt that there is a right way and a wrong way to support farm prices and income and that since World War II we have shown an unerring instinct for the wronq course. Production payments, either generally or specially financed, would be far more satisfactory. And since payments can be denied to overquota production, they fit in far better with a jystem of production control. But this is another story. The choice today is not the survival of American agriculture. Or even its efficiency. The great and growing productivity show that these are not in jeopardy. What is at stake is the traditional organization of this industry. We are in process of deciding between the traditional family-scale enterprise of modest capitalization and widely dispersed ownership and an agriculture composed of much larger scale, much more impersonal, and much more highly capitalized firms. This is not an absolute choice. We shall have both types of farm enterprises For a long time to come. But a strong farm program will protect the traditional structure. The present trend to the free market will put a substantial premium on the greater surv.val power of the large enterprise. , My own preference would be to temper efficency with compassion and to have a farm program that Fleets the smaller commercial farm. But my purpose is not to persuade you but to suggest the choice. Ballantine, Lehigh, passing at intersection, $5; Benita Froehlich, Algona, speeding, $5; Jerry Schichll, Eslherville, speeding, $5; Robert Schmidt, Algona, failure 1 to yield right of way, $5: Jack Gross, Algona, speeding, $5 (suspended); Alma Lauck, Whit- teinore, speeding, $5; and Ger- ildme Blair, Wcsl Bend, speed- ng, $5. Costs were assessed ulciitional to all fines. 5 From Kossuth Enter State Fair Five farmers from the Kossuth area will compete 'for a slhare of the more than $134.000 offered for prize-winning livestock at the Iowa State Fair in DCS Moines, Aug. 28 - Sept. 6. Among local ifarmers who havo filed entries in the show, and Uhe livestock they will exhibit, are: Jiirnes Erpclding, Poland China; Peter Erpelding & Sons, Poland China; «. <B. Seely and Son, Cheviols and Columbias; Kent Seely, Soulhdowns. Wm. Frilz and Sons have alsa entered 13 Columbias and^ 3 Hampshires. Eager Beavers Met The regular meeting of the Lu- Verne Eager Beavers was held Aug. 10 at the LuVerne town hall. The meeting was called, to order by vice president Jim Behnkendorf. The secretary's and treasurer's reports were given. Jerry Bristow and Jim Behnkendorf gave talks and tips were given on how to clip ! toeef and how to get curl in their hair. Lunch was served by 'Mrs iBris- low. ^^ IF IT'S NEWS. WE WANT IT for Machinery Livestock Hay & Feed UTILITY AND HOG SHELTERS Models 18 and 24 ft. wide; any length in 10 ft. 9 inch sections. Can be mounted on skids *or foundation. Heavy gauge galva- Tuz,ed steel for long life. Easy to erect-parts pre-engineered, pre-punched for fast assembly, Easily expandable. Smaller 12 ft. wide model for hogs, Has one end open, the other closed by hinged door, Has ventilation Come in and get prices and specif/cations Free~MarKet"^irWhat Some Want, '.. fBut Not fFor The Benefit of Spew***} M4 pwi !« *T t P*W *< *»*»»* »*» *»* ****** ***< Iht thwal to ftmrvtiMli* and inwroe, think th« »bo« i* 1 y^uabU cpnirit»utiont« today's thinking. BrailetBros. •»1- >"•_•,

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