World Statism in Wheat

June 6, 1948

The International Wheat Agreement, now before the Senate, is briefly described by Secretary Brannan as “a multilateral four-year contract in which each of the five exporting nations [principally Canada, the United States, and Australia] agrees to sell a stated quantity of wheat at $1.80 a bushel if requested to do so by the importing countries. . . . Each of the 36 importing countries, in turn, agrees to buy a stated quantity of wheat at the floor price if requested to do so by the exporting countries. The floor begins at $1.50 and drops 10 cents a year to $1.20 the fourth year.”

The purposes of the agreement, in its own words, are “to assure supplies of wheat to importing countries and markets for wheat to exporting countries at equitable and stable prices.”

Now if world market prices throughout the four-year period never dropped below the floor or rose above the ceiling prices, then the agreement would do no harm. But in that case it would also be quite unnecessary. If the market price of wheat during the four years, however, falls below the agreement’s floor price, the taxpayers of the importing countries will be forced to take an unnecessary loss. If, on the other hand, the world market price of wheat rises substantially above $1.80 a bushel, the farmers or taxpayers of the exporting countries must take an unnecessary loss. Both sides can’t win. Either the exporting or the importing nations are deceiving themselves about the benefits of this agreement. Either the exporting or the importing nations will later regret their bargain, and some of them may try to wiggle through the escape clauses.

The specious argument that the agreement will “stabilize” wheat is precisely the same argument that was put forward in favor of the ill-fated Japanese silk and British rubber restrictions and our own cotton schemes. What the bureaucrats always overlook is that a forced stability in prices brings instability in production and discrepancies between supply and demand. It is precisely free markets and free prices that signal the existence and relative gravity of shortages and surpluses and that bring continuous self-adjustment. Abnormally high prices stimulate more production and bring economies in consumption. Abnormally low prices encourage more consumption and discourage the production of surpluses.

In this way the relative production of thousands of commodities and services is synchronized and balanced. When this free movement of prices is prevented or bypassed by government action, productive adjustments are also prevented or postponed. They must be all the more violent when they are finally and inevitably made.

To sell the wheat agreement here, a great bribe has been held out to our farmers. Listen to Secretary Brannan: “In years of ample supply the price of wheat to the U.S. farmer will largely be governed by domestic price-support policies. In years of short supply, nothing in the agreement will operate to impede the free movement of domestic prices above the price-support level.” So domestically the farmer wins both ways, heads or tails, either at the expense of the taxpayer or at the expense of the consumer.

But the wheat agreement, in addition, “will require a subsidy whenever U.S. prices for wheat are over the maximum prices.” So it doesn’t concern the farmer at all if the maximum agreement price of $1.80 turns out to be below the market. It is the American taxpayer who will be required to dig in his pocket for the difference.

The International Wheat Agreement represents just one more typical mesh in the net of spurious “internationalism” that is being woven by the bureaucrats of the world around their own nationals. What they offer is not the real internationalism of free trade and free markets. It is something ominously different. It is international controls, international statism, government-to-government bulk sales, state buying and selling—in brief, a flattering imitation of the very economic devices of the Iron Curtain countries that they profess to deplore.