Controls and Corruption

July 23, 1962

Since 1934 this country has subjected all sugar imports to a complicated quota system under which each country is allowed to export to us no more than a fixed maximum each year. For such imports the U.S. has been paying a special premium of 2.8 cents a pound above the world price. When this program was altered drastically in 1960 by President Eisenhower’s decision to cut off purchases of Cuban sugar, which had totaled more than two-thirds of the whole U.S. import quota, increased shares were temporarily allotted to other Latin American countries.

The Sugar Act expired June 30. Early this year, President Kennedy wisely requested that the quota system be abandoned on the ground that competition among nations for quota shares often produced ill feeling toward the U.S. He could have recommended that sugar imports be treated like any other imports by converting the 2.8 cents a pound premium payment into a flat tariff for the time being, and otherwise leaving the total of sugar imports and the amount from each country to be settled by the free play of supply and demand and competition. Instead, he suggested a complicated substitute plan still entangled with foreign subsidies.

U.S. AS SUGAR DADDY

The bill that Congress actually passed retained the quota and premium systems. It provided for an increase of the sugar market for domestic producers from 55 to 60 percent, an import quota of 1,205,000 tons divided among 27 countries, plus a special treaty allocation for the Philippines, and a reduction of 10 percent annually in the premium payments. Immediately there was an outcry from the Dominican Republic that the cut in its sugar quota would lead to economic collapse and political upheaval. So the Senate tacked an amendment on to another bill giving the President discretionary power to increase the quotas of the Dominican Republic, Argentina, and Peru over the next three years.

Then a sudden protest came from senators against the practice of foreign governments in lobbying for bigger import quotas for their own countries. It was brought out that 23 countries seeking sugar quotas were represented by Washington lobbyists. All this was denounced as very wicked. But as these individual quotas are necessarily arbitrary, and set openly on a basis of political favoritism, what did Congress expect? Arbitrary quotas must breed lobbies.

PRIVILEGED ACRES

That government “planning” leads to lobbying, to favor-seeking, and finally to corruption, is even more strikingly illustrated with regard to our wholly homegrown crops. On July 2 the General Accounting Office reported to Congress that cotton brokers acting as agents for the government had made illegal profits by selling to themselves more than $400 million worth of government cotton at prices far below the prevailing market. On July 4 it was revealed that two county office managers for the Department of Agriculture had been suspended as a result of a Federal investigation into the alleged sale of Federal rice planting allotments in Texas. On July 6 two Federal farm officials from Oklahoma admitted to a Senate subcommittee that they had each accepted $820 in cash from Billie Sol Estes.

This is probably a prelude to more revelations. Bribery and corruption are an almost inevitable outcome of arbitrary government controls.

The steps are simple. The government, say, guarantees farmers higher prices for certain crops than they could get in a free competitive market. As a result it finds that it has encouraged huge surpluses. To prevent these it limits the number of acres on which each farmer is permitted to grow the subsidized crops. But these privileged acres then sell for enormously higher prices than those on which the subsidized crops are forbidden. So what happens when someone stands to win or lose millions of dollars, depending on the discretionary decision of some petty bureaucrat getting $5,070 or $7,275 a year? The result is the most inevitable consequence of substituting discretionary favoritism for the rule of law. One of the worst consequences of “government economic planning” all over the world has been the corruption of the civil service.