The Algona Upper Des Moines from Algona, Iowa on April 11, 1957 · Page 19
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The Algona Upper Des Moines from Algona, Iowa · Page 19

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Algona, Iowa
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Thursday, April 11, 1957
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t< *'•/;• •\ ECONOMIC CHANGES IN RURAL AMERICA Text In Full of Address Made By John Kenneth Galbraith, Professor of, Economies, Harvard University, at University of Wisconsin Farm & Home Week, Madison, Wis., Feb. 5,1957, and Inserted In The Congressional Record on February 28, 1957, by Congressman W. R. Poage of Texas: /s/s/r/rs/ss/s/rsM^^ EVERY FARMER, EVERY STOCK RAISER, EVERY BANKER, EVERY BUSINESS MAN CONCERNED WITH THE FUTURE OF AMERICAN AGRICULTURE OWES IT TO HIMSELF TO READ THIS MESSAGE. Vxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx^xxxxxx/yxxxxxxxxxxxxxxxxxx.&-. v>yxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx.rxxxxxxxxxx-<xxxxxxy: "I feel myself very fortunate this morning. It has been a pleasure to be here in Madison and to see many old friends once more. Those who planned the program were also most generous to me. That topic, Economic Changes in Rural America, is one that gives me a great deal of latitude. I am in the happy position of a minister who preaches a sermon against,sin or in favor of the Ten Commandments. He has lots of room to move around; he can get by with a minimum of scriptural knowledge. I propose this morning to make full use of the latitude you have accorded me. / I feel favored in one more respect. A few days ago I met my wise arid much beloved Harvard colleague, John Gaus, and told him that I was coming out to speak to you. Professor Gaus is well known here in Madison. He was for many years a most distinguished teacher in this university. He still counts himself a member of that magic fraternity — those who say, "I am a Wisconsin man." He told me he thought the Wisconsin Farm and Home Week provided the best audience a speaker ever had. When I asked him the reason for this high praise he said, "You like to hear a man speak his mind." There are some matters on which I have been yearning to speak my mind. I welcome this occasion. The first requirement for good farm communities is an elementary one. It Is satisfactory farm income. I have heard, as have all of you, about farming as a way of life. So it is. But to say that farming is a way of •life is not enough for it can be a poor way of life and good way of life. In the last analysis, the thing that probably makes the most difference is the pay the farmer apd his family gets. I am not suggesting that happiness depends directly on income — as a people we become richer every year, but I am not so sure that our total reward from life goes up proportionately. But the income of a family does need to be reasonably certain. A sudden drop in prices for the farmer, like a sudden layoff for the city worker, is an unmistakable hardship. We also know that having reached a given standard of income and a given standard of living it is hard to go down from that levef. Rightly or wronqly, we all like the things to which we have become accustomed. The costs of living, like the costs of production, becomes adjusted to one level of price; it is very hard to move down to another. •MM*-* Farm Net Going Down Here, it seems to me, is the clue to the farm problem of recent years. It is true, that net income per farm is still far above the levels of 20 or 30 years ago. Those who have pointed this >out-are being quite honest. The hardship is in the downward trend. And the drop has been great. In comparable prices, the average net farm income was $3,314 in 1948 and $2,849 as late as 1951.. Last year it averaged only about $2,300. A reduction of this size would be hard to take under any circumstances. It can mean the difference between a good community life and a poor one and a good family life and a poor one. It can mean the difference between a son going to school and, to cite a development in so many of our farm communities, a wife having to find a job. It has meant, for many farm people, the difference between hope and frustration. But there is another aspect of this decline which seems to me even more troublesome. In recent years, not declining but increasing incomes have been normal.'Every auarter — four times a year — we have a communique from Washinaton telling us how much the gross national product — very roughly the total .of everyone's income — has gone up. Each January we have an explosion of statement telling how rich we have become. The incomes of virtually all other groups in the country have been advancina. Agricultural income, we would expect, would be rising too. But instead it has been falling. Nor are the explanations of this disparity convincing. We are told, with great regularity, that this nearly unique agricultural trend is the inevitable readjustment following "the war." (It is not always clear whether it's World War II or the Korean war.) But those who come forward with this explanation do not tell us why it is only agriculture that has to "adjust." Why has there been no downward adjustment in industry? Or in the labor market? Agriculture greatly expanded its production durina World War II, they say. But industry also expanded enormously. And so did the urban labor force. And these had no similar misfortune. The cause of agriculture's troubles obviously lies deeper. Those who explain it by talking of the inevitable readjustment are engaging not in explanation but in apoloay. I confess that I have been amazed at the gpod nature — or possibly the gullibility — with which farm people have accented this apology, let me say, in this connection, that as you will presently discover I am not engaging in any partisan criticism. Before I am finished, I hooe to distribute the blame very widely indeed — I shall even have some unkind words for our colleges of agriculture, although I take the sensible precaution of excluding the one which is our host here today. The problem of agriculture Is not one of transition or readjustment. These phrases were also used in the 1920's and the 1930's when the farmer was in trouble. The farm problem is the result of the fundamental and continuing weakness in agricultural bargaining power. Agriculture's weakness is that of the great unoraanized industry in a world of highly organized corporate Industry and a highly organized labor force. It is the problem of the one major Industry which does not have any effective control over the prices at which rt sells its products or the supply it offers. The large corporation has a built-in bargaining position based on its size and its position in the market, As a result it is able to keep its prices in reasonable relation to its costs. Thus it can minimize Its market risks. The position of the workingman was no better than that of the farmer until he changed it by organizing trade unions. These have enabled him to bargain effectively on the price of his labor. No workman in this day and aae doubts the improvement that unions have brought. Where unions are not effective the Government has stepped In to legislate minimum wages by law. Only the farmer has remained essentially unorganized. I say essentially; I do not mean he is totally unorganized. In some places and to a very limited degree the cooperative provides the farmer with some bargaining strength. In most cases, however, the co-ops are too small, too limited/and hence too weak to provide effective bargaining power. And since 1933 trw Federal Government through support prices and to a lesser extent thrauqh purchase nroqrams, has been undertaking ta reinforce the former's bargaining position. It hoc Hepped in as it has stepned into the labor market, to enforce a kind of minimum wage for the farmer. This is what we know as the form program. In spite of the great progress of the last 2Q years, the farmer's bargaining position is still far weaker than that of other groups. In rny judgment It is getting still weaker - which is one reason farm income has been falling. And unless there Is a real strengthening in agricultural leadership, I frankly see no prospect of improvement, let me analyze the situation with you for q moment. Farmer Needs Bargaining Power The first fact that strikes our eye is that while the modern large corporation and the modern labor organization are taken for granted by nearly everyone, the farm program — the farmer's source of bargaining power — is still regarded by a great many people as unwise, unsound or a politically imposed misfortune. Any farm program which amounts to anything will, directly or indirectly, have something to say about the prices at which the farmer sells his products. That is its purpose — to insure a satisfactory price and thus to help insure a satisfactory income. A farm program can no more avoid the question of prices than a collective bargaining conference can avoid the question of wage rates. Particularly, as in recent times, when demand falters or fails to keep ahead of supply it is the purpose of the farm program to keep the terms of trade from turning disastrously against the farmer. This is a hazard which, under similar circumstances, the modern corporation can avoid through its inherent control of supply and prices. Yet the agricultural programs which provide such protection that is normal with industry and labor—are still viewed with suspicion. The farmer cannot bargain by himself. He must have the help of Government. General Motors can set the price of its cars. It can keep them from going to disastrous levels. The Wisconsin farmer cannot set the price of his milk. He must have the support of Government to do what General Motors can do as a matter of course. And if he is to have a life of reasonable security he must have this help; the question is not really whether but how. The farmer cannot, in his weakness, be left to the capricious and violent treatment which he has always been accorded by the market. This seems elementary. As I say, it is the protection industry and labor have. But it it far from being agreed. The present Secretary of Agriculture, Mr. Benson, said on taking office that price supports were useful only in the event of "undue disaster." I hope I am not being unfair when I say that there is no evidence that he has changed his mind. Only last week he cautiously expressed the hope that supports might one day be abandoned. The case for the flexible supports—which in practice are really rigid supports at a little lower level—is • that they represent a step back toward the free market. The free market was never any blessing for the farmer; the ages of its rule were recurrently ones of hardship and even disaster for the man on the land. But still it remains the goal. In disagreeing with Mr. Benson, I think it is only fair to point out that he reflects a view that is influential in agricultural leadership itself. An important 'segment of agricultural leadership has accepted the view that any interference with farm markets is wrong and dangerous. Much has been made of the doctrine that if farmers allow themselves to become dependent on Government price supports they will risk the loss of their basic freedoms—they will be taking the first step toward serfdom. Our freedom does not depend on whether we support farm markets. If it had any such perilous foundation, we would have lost It long ago. Does anyone suppose farmers have less freedom today than 25 years ago? The American farmer will not become a serf because the Government helps him bargain for a fair price. There are more serious threats to liberty. For example, the man who has just come out of a sheriff's sale hasn't much freedom, and on the record of the last hundred years that remains a worse threat than Washington. American workers have repeatedly been warned in past years against surrendering their independence to their union bosses; workers have repeatedly been told that in the interests of their freedom they should defend the open shop, the right to work, and their independence from unions. Neither leaders nor rank and file have'accepted these arguments. Both have probably recognized that a union involves some surrender of individual initiative, But they have also seen that the gains in stature, dignity—and therewith in other forms of independence or freedom—that are implicit in more nearly equal bargaining power much more than paid off in the end. In agriculture, I venture to suggest, we have been less wise and tough minded. Farmers have been led into a position of at least partial opposition to the i'dea of Government intervention on behalf of the farmer's bargaining power. As a result, the farmer's case has been badly weakened, Soil Bank Weakness Farmers have also, I venture to suggest, been too willing to accept as substitutes for direct intervention on prices and supply such measures as the soil bank. The soil bank may be a useful conservation device. It may also be a legitimate form of subsidy. I don't think It at all-comes to grips with the central problem of agriculture which is that of defending the farmer's bargaining power in the markets in which he sells. The Government supports the farmer's bargaining position by helping him get a fair price—on occasion a better price than the market provides. Therefore, the man who defends price supports is on the right track. But I want to distribute my blame impartially. Not everyone on this other side of the argument has met his full responsibilities either. The man who asks a decent price must also be willing to deal with the production that price calls forth. The bargaining weakness of the agricultural Industry lies In the tendency to overproduce at any decent price. (This is one of those things that shouldn't be but is.) That over-production must be dealt with. One doesn't deal with it by proclaiming the sanctity of parity or the Tightness of 90 percent of parity. These slogans, unbacked by responsible measures, have also been damaging to the farmer. This failure of leadership goes beyond the farm organizations and the political leaders. The colleges of agriculture have also played a part. The years since the farm program was first launched in 1933 have been years of great advance in American agriculture. As everyone agrees, we have had an enormous forward movement in farm efficiency, Yet a great many economists in the colleges of agriculture are still beguiled by the notion that the free market is the only proper norm, or goal, and the one to which we should return. There is considerable reason to think that Government intervention to increase price security has greatly aided forward planning by farmers, made possible bolder Investment, and has raised all-round efficiency. Yet virtually every recommen. datlon by economists since the war has been, in th$ last analysis, to get rid of price supports, to end Government interference, and get back to the free market. Four or five years ago, an impressive grove of land-grant college economists turned,the Searchlight on Agriculture, to cite the title of their pamphlet, and reached this conclusion, last year another group, under the auspices of the Twentieth Century Funcj came to the same solemn result. In the land-grant college system there hove been almost no spokesmen for a strong and vigorous price-support program and the things that go with it. On farm matters repu* tatipns for wisdom are largely won by telling the farmer what he shouldn't hove. I am sure th.pt, in the main, these attitudes represent honest convictions. We must defend them ei such. But there may be another reaipn which I wpuldn t defend. We cannpt overlook the fact that the man who peaches the virtues ot the free market and the dangers of interfering with farm prices is also the man who avoids controversy. He is sound, and these are days of economic conservatism. Anyone who argues the need for reinforcing the farmer's bargaining power is inviting sharp debate. He may even become a controversial figure, which many people think bad these days. Well, it is not the business of the agricultural economist, or of any scholar, to avoid controversy but to speak his mind. A scholar who gets through life without being involved in an occasional row should count hiself a failure. Unless he causes the president of his university at least a few troubled nights he probably isn't doing his job. Anyhow college presidents are not paid to have a tranquil! time; they are meant by society to have a short life and a troubled one. The farmer needs the support of Goverment in defense of his bargaining power. He has had to have it in every other advanced country—in Canada, England, France, Sweden and Switzerland. Not one of these countries leaves the farmers to the mercies of the free market. For goodness sake, let us recognize facts. A few years ago it was my feeling that the farmer's effort to develop bargaining power—countervailing power—was largely won. Now I am by no means certain. He has I'ost the sympathy and support of the Federal Government. I think it is fair to say that the Government now defends the farm program with considerable reluctance. His own leadership is divided. He has lost the intellectual support of the colleges—or that part which is most vocal. Urban attitudes have also changed. Unless I am mistaken, most city people have also come to feel that the farmer is some kind of pampered profiteer who, in spite of everything, complains all the time. Perhaps here in the Middle West there is a better understanding by the city folk of the farmer's problems. What I say Is certainly true of altitudes in my part of the country. Finally, and most important of all, farmers are rapidly becoming a minor political force. About a hundred years ago Abraham Lincoln came here to Wisconsin and made a farm speech—as I recall, at a very early State fair. He said It was always a mystery to him why politicians said such nice things about farmers: he concluded it was because there were so many of them. This is true no longer. Farmers are no longer numerous. They comprise only about 13 percent of the population as compared with more than twice that production—30 percent—as late as 1920. Speech-makers still pay heed to the farrper at election time. This is partly a matter of tradition, and partly because politicians are notoriously unable to count. But the day is not far distant when farmers will have to go'to town to hear the major political candidates—unless they'happen to catch them talking on TV. The rural vote will be too small to worry about. This may seem a dreary picture that I paint. But I do not believe that I exaggerate. I have had the good fortune of being able to watch and study the problems of agriculture from a position of some detachment for quite a number of years. The picture seems to me pretty dark. It may get' better of its own accord. I think we would be wise, that farm folk would be wiser, to assume that it will only improve if it is made to improve. Program Of Action • / Let me in these last few minutes suggest the lines along w,hich improvement should proceed. What should we do? First af all, there must be agreement that a farm program—one that deals with the essentials of farm income and farm prices-is here to stay. In this organized world it is indispensable. Farmers cannot .be the only people without market power. And as long as this feeling persists that the program is wrong, that someday we will be rid of it, we won't do anything important to make it work. No farmer spends time and effort and thought fixing up a shed that he plans to tear down. We must recognize that there is no future in the political debate over flexible and 90-percent supports. For most products there is no longer very much difference between the two. Both accumulate surpluses. Neither works for perishable products. Both have other faults in common. In short, neither is good enough. , While price and income protection Is fundamental in a farm operation, a farm program that doesn't deal with prices' and income is like a wagon that doesn't carry anything; the present system of support is very poorly designed. We pile up our abundance instead of using it. We tend to keep expensive and animal products cheap. The public relations of a system that stores up large supluses is bad. The public is much more conscious of surpluses than of the cost of the farm program. I have long felt that we could correct a lot of these defects by changing the technique of support; by allowing prices to find their own level and using production payments (and, of course, where necessary, production controls) instead of direct props, Nothing, I may say In passing, would do more to restore the competitive position of butter versus margarine than this method of support. , . Production payments have been gaining support in recent years and the Eisenhower administration helped break the ice by applying them to wool,, I wish, however, that the pace of such reforms might be faster, England has worked this kind of farm program in recent years with a maximum of protection to the farmer and a minimum of administrative trouble. Where farm policy is concerned we are very slow learners in the class. Where other flaws and other faults develop we must move to correct them, Our present practice is to wait and hope that things will get better. We have learned, of late, that they can just as easily get worse. ___ Finally, we must strengthen the moral position of the farm program by making it serve better those who are the victims of major misfortune. For a great many farm families misfortune is still the way of life; I have in mind the t more than a half million farm families whose total cash income, in these opulent days, is still less than a thousand dollars. And I have in mind the men and women whose livelihood, as we now so well know, is made insecure and even perilous by drought. Compared to these unhappy people, Wisconsin farmers are fortunate indeed. But the misfortunes of farmers in one region must now be counted the. misfortunes of farmers everywhere. This is a very practical matter. I have already suggested that farmers are a diminishing political influence. If their voice is further divided by regions and by commodities, If will be negligible Indeed. Henceforth they must hang together for they have no choice. These things—acceptance of the continued need for a program, a reform of the present system of support, a will to change things when other flaws develop, a more specific succor for rural poverty and disaster—seem to m« essentials. I would also suggest that these steps will appeal to the gs©d sense and the sense of fairness of the American people. The time is coming when farm people will have to pay close attention to essentials. And they will have to pay close attention tp the effect of their pro* grams on the public at large. Henceforth farmers will not get eatily what thty want. They cannot then afford the luxury of making mistakes, ©osl« mutt h» simple and intensely practical. And they must also be *«sh as will wUl th» support of the people in town. Tfi/s Message Reprinted & Paid For By A Friend of American Agriculture Who Is Deeply Concerned

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