The Farm Problem

Orville Freeman's farm program is a monstrosity. Admittedly, few areas in modern economics present greater complexities than agriculture. And with respect to the mechanics of the federal price support system only the highly trained specialist can speak with any competence. In his public utterances since taking office Freeman has not confined himself to the safe technicalities, though. He has enunciated a definite notion of the "problem" and has specified a variety of general procedures for solving it.

Mr. Freeman maintains in a recent New York Times Magazine article that "the Kennedy Administration is already beginning to show concrete results in its effort to rid the country of the hobgoblin of farm surplus that has plagued the taxpayer and haunted the farmer, off and on, for thirty years." In short, he claims that the basic problem is the crop surplus. This view, despite its widespread acceptance, is demonstrably wrong.

Obviously, in the absence of controls there would be no surplus. The prices of some grains might drop to rather low levels, but there would always be someone to buy the commodities. For example, food processing companies, hog raisers, and whiskey manufacturers could absorb more. Indeed, in a system free from vagarious government supports private speculators would undoubtedly hoard cheap grain in years of exceptional abundance, contributing to price stability. When manufacturers are confronted with a glutted inventory of a particular product, they must either cut prices, shift to production of another product, or eventually go out of business. Clearly, but for the government, these would be the farmers' alternatives.

As the Department of Agriculture well knows, the real problem is not the farm surplus but the lot of the small farmer. Freeman points out in his article that the average American farmer today receives 81 cents an hour for his labor. Presumably, his income would be smaller if the price props were removed. It is this fact which justifies government intervention.

Recognizing the increase of farmer income as the basic objective of the federal farm policy, one might ask whether the government should continue to aid farmers. Conservative businessmen argue that the natural action of the free market would remove unnecessary workers from agriculture. Men who could not earn a living through agriculture would be compelled to take other jobs. On account of the present rate of unemployment such an approach would cause much hardship. It is not the currently accepted mode of handling other labor problems, and there is very little basis for making an exception for farmers. The apparent humane solution would be a federally sponsored retraining program to prepare inefficient farmers for jobs in industry.

Yet this plan should not be adopted too hastily, for a tragic consequence of the present farm program has been the shriveling of alternatives. Perhaps the country should retain a specified number of surplus farmers. All-out nuclear war would transform the United States into a primitive agrarian society. Thus, to insure the existence of a maximum number of self-sufficient food producers, maintenance of currently superfluous small farmers might be desirable. Moreover, it would probably be wise to establish food storage depots on the periphery of large cities. Surplus commodities stored in this manner (as emergency stockpiles) would be a national asset, not a liability. Both of these proposals should be "live options" for the defense government. Yet the present support program operates so clumsily and unpredictably that precise planning is impossible.

A program involving direct subsidies would serve as a method for restoring freedom of action and reducing costs. In the development of such a program farmers could be roughly divided into three groups: wealthy farmers, inefficient (low yield per acre) farmers with low incomes, and efficient farmers with low incomes. Wealthy farmers do not need federal assistance. Inefficient farmers with low incomes should be retrained for other jobs. It is the third group which ought to be treated in a flexible manner.

Some members of this economically "surplus" group may well be vital, either to civil defense or to the foreign aid program. Recognizing their supra-economic importance, the federal government should offer them direct subsidies, if necessary to maintain an adequate standard of living. Inessential members of this group do not belong in the agricultural labor force: they should be given federal allowances for occupational retraining.

The administrative problems of the above program would be considerable. What size subsidies would be adequate and equitable? Exactly who should be eligible for subsidies? How many poor Southern farmers are really capable of being retrained? Despite the technical difficulties, the plan comes to grip with the basic problems. Its complexities are a measure of its breadth.

For contrast consider the Freeman program. Its two main instruments are price supports and acreage restrictions. Price supports give greatest aid to big, wealthy farmers, for such farmers can generally produce at the least cost. In many cases, therefore, big farmers can afford to produce primarily for government consumption. Acreage restriction, on the other hand, gives the greatest benefits to very inefficient farmers. Since the government doles out generous grants for each acre taken out of production, farmers who previously obtained a very low yield are profiting much more than their more efficient competitors.

Thus, the Freeman program has two basic economic functions: it gives money to farmers who do not need aid, and it maintains in the farm labor force a group of workers who no longer belong there. Of course, the poor but efficient small farmer receives some indirect assistance. The tragedy is that he does not get all of it. For he is the only kind of farmer who has any right to permanent government assistance.

Besides the immediate economic waste, the Freeman program gravely undermines the freedom of the American farmer. For example, no one can plant wheat as a cash crop this year unless he has grown it in each of the last three years. And the acreage restriction plan encourages an exploitative attitude toward the government--give Orville your worst land and seed the rest more heavily. In sum, the role of the government in Freeman's paradise is that of a silly and meddlesome despot whose chief idols are underproduction, inefficiency, and waste.

At present the only major victims are the ignorant and apathetic consumer and the still reasonably vigorous economy. But one wonders how long the federal government can afford to function in such a narrow-minded, rigid, and arbitrary way.