The Hard Core of the Farm Problem; K. Brandt

THE THE HARD FARM CORE OF PROBLEM FOR OVER two thousand years of history, in nearly all countries except our own, the farm problem has been at different times the center of such troubles that bloody revolutions have resulted from it up to this very mo ment. This problem is today the testing ground for the irreconcilable philosophies that divide this turbulent world, namely, of freedom and respect for human dignity on one side, and atheistic materialism, the coercive economy, and political tyranny on the other. The sys tems of coercion begin invariably on the farms. Even more challenging is the fact that in our country, with its peaceful social changes, 27 years of determined legislative and administrative efforts of the federal gov ernment have put us in many ways between the horns of this same old dilemma. The overall farm problem in all countries is not a Dr. Karl Brandt, a member of President Eisenhower's Council of Economic Advisers, has studied the farm problem in several coun tries, as a farm manager, director of an agricultural cooperative, and in advisory capacity to governments and international agencies.

This article is condensed from an address at the 67th Annual Con vention of the Farm EqUipment Institute at Dallas, Texas, Septem ber 27, 1960. 351 352 KARL BRANDT cyclical or temporary affair but is almost eternal in na ture and therefore is not amenable to a real remedy or cure. It is part and parcel of the epic of man's struggle for a fuller, more meaningful life. It is composed of continually changing phases of the struggle for survival in, and gradual conquest of, a hostile and scantily yield ing nature. It is a story of blood and sweat and toil, of the adventure of defeating the horsemen of the Apoca lypse-famine, pestilence, war, and death-which are still stalking the people in many parts of this planet, atom splitting notwithstanding. In all of Christendom this has meant through the centuries a valiant struggle for gaining the material wherewithal for meaningful practice of being kind to thy neighbor, for diminishing poverty, for creating abundance where scarcity and dearth were the common destiny. The farm problem is an integral element in the eternal process economists call economic development and growth.

You may ask whether this is not pretty farfetched in this country with its recurrent problems of too much of too many things, particularly from farm production. My answer is that the emphasis on the combat against the frugality of nature and against adversity comes much closer to the essence of our farm problem than many people realize. Indeed, it is one of the truly unique achievements of the American people, that here on our farms in an ·environment of freedom and private enter prise they have won the ultimate victory for all nations on this earth in man's battle against the scarcity of food, against hunger and malnutrition, so· much so that today THE HARD CORE OF THE FARM PROBLEM 353 any nation can produce an abundance of food, provided its people understand what it takes to do it and are willing to make the proper effort. Rationale for Planning What then has happened that had such extraordinary impact on all economic processes? Quite a few people in this country have ready, plausible, yet totally errone ous, answers to this question. If I paraphrase and con dense these answers with a little malice toward some, their leitmotiv runs like this: After having taken from the Indians one of the world's richest pieces of a prolifically fertile nature, and having given away a good deal of it for nothing to the railroad magnates and other rugged individualists and ruthless exploiters of natural resources-who in their ghastly greed destroyed with ax and fire millions of acres of beautiful forests and washed into the Mexican Gulf or exported to other exploiters all the nation's heritage of natural fertility of the land-the U.S. gov ernment established the Land Grant Colleges, the Agricultural Experiment Stations, and the Extension Service. Thereby the government made farming on what was left over of the eroded and ravished land so productive that it must now proceed to ration .all means of production, and control tightly the ac tivities of all the farmers and enforce it by a tough penal code. This must be done particularly because prices are not what they ought to be despite government supports.

This is so because farmers, unlike all other people, are a different breed than all other people, and produce more and more as they progressively get less and less for their products. Measured by some formula of half a century ago, their income is low not only because they maximize their output the lower the prices get, but because all other people in the economy 354 KARL BRANDT are effectively organized as a conspiracy against the farmer with the labor unions controlling the income of U. S. labor, and the rulers of industries, transportation, and commerce con trolling the income of corporations by "administered prices" to the detriment of the farmers in their helpless state of atom istic competition. In view of this effective conspiracy, millions of innocent farm people are driven off the farm by the rascals in all other occupations. Therefore, it is high time for the U. S. government to establish a tight and total control over farm output and guarantee each farmer a just and equitable income ....

A Different InterpretationLet me give you briefly a slightly different view of what in the long run has happened in agriculture's his tory and what continues to go onin these days. We have ample proof that in Thomas Jefferson's time nine-tenths of the American people earned their livelihood in farm ing. Around 1900, only 50 per cent of the labor force worked on the farm, and today, less than 10 per cent. This is most significant and illuminating. What was the state of the U. S. economy then? This can be shown by the economy of many pre-industrial oountries which today are still where our economy was 185 years ago. In the underdeveloped economy-except for government personnel, armed forces, teachers, some general stores, and other merchants-nearly all economic activities are carried on at the farm. Food, clothing, shelter, farm and other tools, transportation, education, entertainment, and medication are all produced on the farm. Farmers build houses, barns, and bins in brick, THE HARD CORE OF THE FARM PROBLEM 355 wood, tile, mortar, thatch, and other materials; they lay pavements, dig ditches and canals, build bridges and dams; they raise draft animals, tan hides, and card, spin, and weave wool and fibers; they process and cure any sort of food and bake bread; they slaughter, preserve, smoke, salt, and pickle; they produce wheels and wagons and sleds; and with animal draft power provide trans portation on short and long distance with home-built wagons drawn by oxen or cows, horses, donkeys, or mules, camels, or buffaloes, reindeer, or llamas. Farmers provide entertainment at all festivals, nuptials, and after funerals, educate and train the young people, and treat the sick and the aging. So farmers are jacks of all trades, including the production of plants and animals, of lum ber and firewood, of peat and gravel and sand, and naval stores. Naturally, what goes to market for cash is little.

Hence, it is sheer nonsense to measure their real income in dollars, as it is done today by international agencies for underdeveloped countries. This distorts the true in come out of all proportion and serves only to stir resent ment against the industrially more advanced nations. The economy functions in that stage within a struc ture of total decentralization and with vast numbers of small vertically integrated units. As development be gins, one activity after another· is segregated from many farms at a time. Hence, not only do new occupations arise, but the skilled. workers begin to operate promptly on a much larger scale than before and at much lower costs and prices as well as much higher profits. Many specialized crafts appear: wheelwrights, carriage and 356 KARL BRANDT harness makers, blacksmiths, and more and more of all the others. Their lower prices expand the market, and their income expands the demand for farm products.

If, originally, farmers were jacks of all trades, they gradu ally became jacks of fewer and fewer trades and thereby more skilled, too. Thus, by the division of labor farm operations become more and more specialized and re fined-until ultimately only crops and animals are pro duced. Gone from the farms are the building trades, the processing of textiles and clothes, the slaughter and cur ing of meat, until finally even bread, butter, and most other foods are bought because the farm people's time is too precious. The Complications of Progress This process of economic development is little under stood. It amounts to a piecemeal disassembling and re assembling of the economy with growth of cities and the rise of industries, commerce, transportation, educa tion, research, and a multitude of more and more refined services. As more people become urban consumers, with a ris ing purchasing power, they are bidding not for more calories, but for a diet with more calories from products with a high value added such as sugar, milk, meat, ba con, butter, eggs, fruits, and vegetables, and less from starchy staples like corn, wheat, and potatoes. With a rising demand for their products in the markets the peo ple remaining on the farm increase their output, and THE HARD CORE OF THE FARM PROBLEM 357 with it their productivity and income. In order to do this, they have to equip themselves with better tools, more mechanical power, better plants and animals. In other words, 'they must increase the capital at their com mand, and must perform with ever-increasing efficiency as farm managers and workers.

All of this is pI10ceeding every day in our decentralized free enterprise economy where people are not pushed from one job to another by the government or anybody else, but where they make their own choice and choose their occupation, their place of work and living, accord ing to their own preference and the available opportu nities. In doing this the families evalute the whole pack age of working and living conditions, the opportunity of improving their composite income in cash, kind, and amenities, the security of their job and livelihood. Even in the backwoods they usually know very well what other jobs pay, and they decide to take or leave the often better pay. He who claims that in recent years several million farm people "have been driven off the farm" has to ex plain first who was responsible for the shift from 90 per cent to 10 per cent from .farm to nonfarm work in 185 years. Who drove them off? The answer is: nobody, ex cept perhaps occasionally a nagging partner in marriage.

Those who left did the sensible thing to contribute their service where it was needed most as the country devel oped and the economy started and continued to grow. In our system of free people nobody has a right to deter mine where the people live and where they work on 358 KARL BRANDT what, except they themselves. In fact, so long as they ask for no support from us, pay their taxes, and are not de linquent as parents of minor children, we have no right to force them to be efficient or to increase their income, even if they prefer to live like a hermit or to sleep like Rip van Winkle. Growth Involves Change It is axiomatic that without the movement of people from farms to towns and cities, all industrial and urban development-the entire construction of a civilization on a continent that 100 years ago was still mostly wil derness-would have been impossible. Moreover, in this long historical shift from farms to urban life and work lies the key to the secret in_ all mod ern democracies which puzzles even political scientists and which few people understand: namely, the fact that the smaller the proportion of farm people in the elec torate, the more they are assured of the good will of urban voters, legislators, and administrators and their readiness to grant farm aid. It is not the political power of a farm bloc that guarantees this, but the subconscious memory of all people in Western industrial society that all of them originally came from the farm which solidly anchors their fondness and affection for the farm peo ple. I call this the urban dwellers' image of "Paradise Lost": the farm as the forebears' origin and the happy valley where life is imagined as having been simple, safe, harmonious, and peaceful. Mixed into such nostalgia is a THE HARD CORE OF THE FARM PROBLEM 359 feeling of guilt toward those who were left behind in the heroic march of urban progress and are condemned to live in social isolation, forced to do hard physical work for long hours, being tied to tend to cows and other animals 365 days, exposed to the vicissitudes and hazards of weather and unstable international markets. Hence, the urban voters have nothing against subsidies for the poor fellows on the farm, even if it means many billions of taxpayers' money.

Irrespective of how far these thoughts are from reality, they are anchored deep in the nation's soul. Fortunately, what has actually happened on the farms is far more complex than the average citizen can realize and the situation there is quite different from such nostalgic sentiments. Our economy has grown in the long run at a very steady rate, and this growth has at all times been hinged to the rise in agricultural productivity, meaning the rate of ouput per man-hour. In recent years the rate of productivity gain on farms has not only left the popula tion growth and the growth per capita income way be hind, but also the rate of productivity gain in the rest of the economy. Agriculture is in reality the world's oldest and greatest industry of year-round transportation. In this country our presently four million farms use and operate 470 million acres of cropland, and 900 million acres of graz ing land, or a total of 1,370,000,000 acres from below sea level to high mountain plateaus. On the cropland every square foot has to be worked or passed with implements 360 KARL BRANDT and tools, or loads of materials many times every year indeed, for some crops up to 35 times-and where double or triple cropping takes place, even more often. And people and livestock and bulky commodities have to be transported from town to farm and from farm to town.

Therefore, to a large extent the saga of progress on the farm is the saga of the fabulous evolution in the tech nology of transportation. The American Indians had no domesticated animals, no ox, no donkey, no horse, and not even a cart with wheels. The Spaniards brought cattle, donkeys, mules, horses, and wagons; and other colonial powers to whom we owe our origin and early success brought more of them. From their beginning, American farmers, with the employment of ultimately over 30 million draft animals, took up to the beginning of this century some 450 million acres of cropland and some 700 million acres of grazing land into agricultural use and cleared in the process some 400 million acres of forest land with its moist soils. This cost three genera tions of gruesome toil, a piece of homework Soviet Rus sia still has to do in the future. But contrary to the ig norant indictment by politicians in the early thirties, this clearing of the woodland was one of the great achievements on which the European civilization was built also.

As the economy developed, draft animals became clearly too inefficient in use of both cropland and man power. Labor, especially, was too scarce and expensive to be wasted. In this century at long last, the internal THE HARD CORE OF THE FARM PROBLEM 361 combustion engine became the effective replacement to animal power-though first, and still predominantly, in this country. It provided individual motive power for the totally decentralized transportation industry that hap pens to be identical 1vith agriculture. Progress was slow and halting; you could replace the horse only by the com bination of three motor vehicles: the tractor, the truck, and the car, because the horse had four or more gears. As oxen, horses, and mules were replaced, mineral fuel set free over 50 million acres of cropland and additional grazing land for other livestock and crops. Mechanical Power Today we have a fleet of 15 million tractors, trucks, cars, and combines, plus many millions of electric motors on less than four million farms. A recent estimate listed the mechanical power equipment of our farms at 115.6 million horsepower, all factories at 28.2 million horse power and all railroads at 88.7 million horsepower. The result is a gigantic increase in all transportation on the farm while transportation off the farm has mostly been taken over by others. With oxen, horses, and mules practically gone, there is more speed, more power, more versatility for the manpower on farms, having set free so much of it that, for decades to come, less will be needed to feed a rapidly growing population.

The value of the equipment of our farms including machinery and motor vehicles. has increased in the last 20 years from $3 billion to over $18 billion current dol362 KARL BRANDT lars, but in terms of work capacity and actual perform ance, immeasurably more. Of course, farmers buy more new machinery, not because they are new gadgets or do more fancy stunts, but only and exclusively if, and when, all costs per unit of work leave a clear net gain over the costs replaced. Improved Production Methods Simul taneous with the vigorous mechanization, the production per plant and per acre of crops and per ani mal unit has been increased. Crop yields were boosted by better cultural practices, improved seed, more efficient protection of plants against weeds, rodents, insects, worms, bacteria, and fungi, but first and last of all, by better feeding of the plants with more nutrients. Among the nutrients, the key factor turned out to be nitrogen.

This vital element in the life-bearing proteins is mined with energy from the air by the world's biggest nitrogen producing industry in this country, where it serves as fertilizer, rocket propellant, and base for chemicals. And since plants fed with more nitrogen have rapidly in creasing moisture requirements and burn up if they run short of it, farmers applied more supplementary irriga tion to break this bottleneck. According to European ex perience, one ton of nitrogen produces 15 to 20 tons of grain equivalent. Our farm application of nitrogen has increased from next to zero in prewar years to over two million tons, while simultaneously sprinkler irrigation has spread into all states of the Union including the THE HARD CORE OF THE FARM PROBLEM 363 humid ones up to Maine. This was due to the decline in the price of aluminum pipe and motor pump units. The economic force that pushed this acceptance of better technology was again the increasing spread between the costs per unit of nutrient of water applied to the crop and the price per unit of product produced with it.

For animal husbandry the same has happened. Ani mals are only converters of feed. If one could produce cheaper feed by putting nitrogen in irrigated pastures, he could produce milk or beef at lower cost, and with more profit if the price did not drop too much. But in addition, hybridization, antibiotics, better feed mixtures, and other methods have helped to improve the input output ratios. The aggregate impact of all this increased productivity is enormous and has become the envy of the world. With their unique managerial talents, their up-to-date equip ment, and the unequaled services provided by the enter prises and institutions of the rest of the economy, the American farmers have developed their giant business to the greatest chemical industry in the world, that of converting annually 280 million tons of roughage, suc culent feed, and concentrates, plus a million acres of grazing forage, to animal products. This is capitalism at its best, with the able capitalists in overalls on the tractors, or hay-balers, or in the mechanical milking par lor. Many people do not know it, but if government payments and surplus purchases are excluded, U. S. farms earn $19 billion, or way over 60 per cent of their cash receipts, from sales of livestock products. This is done 364 KARL BRANDT with over 170 million grain-consuming animal-units and close to 100 million roughage consuming animal units, or as much "capital on the hoof" in live inventories as there is in machinery inventory, namely, $18 billion in each. This is one of the secrets of success of U. S. agri culture's productivity: it has the capital, which it can depreciate, maintain, or expand. In the Soviet orbit and many other countries of the world the rulers squeeze every penny of capital out of agriculture in order to in vest it in publicly-owned industries, to the consequence of low productivity and waste of natural resources. The greatest farm income support is rapid depreciation al lowance for farm machinery and breeding stock under the revenue code.

American vs. Russian Output Let me sum up what this huge business of agriculture amounts to in terms of output. It produces in a year with no more than 8.5 per cent of the national labor force, or 7.4 million workers, over 200 million tons of grain~ 3 million tons of sugar~ over 20 million tons of meat and eggs, over 60 mi'llion tons of milk, 35 million tons of fruit and vegetables~ or 3I5 million tons of edi ble products, plus 3.5 million tons of cotton, and nearly I million tons of tobacco. In order to measure the mag nitude of these figures I mention that after 40 years of a brutal experiment of collectivization, Soviet Russia produces with 4lh times the number of farm workers (33 million) one-third as much meat (7 million tons) as THE HARD CORE OF THE FARM PROBLEM 365 do our farmers; and even of grain, most of which they eat rather than feed to livestock, they produce only 60 per cent as much as our output. This in spite of an abundance of natural resources in Europe and Asia. One American farmer produces food for himself and 24 others. A Soviet farmer produces enough for himself and 4 others.

Interference with Markets Where then lies the hard core of our farm problem? What I have shown is that while the urban people left behind what in retrospect sometimes looks like a lost paradise, but was in reality an enormous amount of sweat and toil, of drudgery and disease, our agriculture of today is an extremely dynamic business world of its own. The government has called it into action in two world wars and then for the first war of the UN, that in Korea. In the three instances an assignment of all-out production was achieved with guaranteed high prices. But when the aftermath of World War I led to deflation and later to the great industrial depression, the Congress adopted a policy of farm income support in which fixed prices were maintained by government purchase and disposal at a loss, combined with acreage allotments and, in some cases, marketing quotas. Since the support prices were deliberately set above the equilibrium level at which demand would equal supply and since the government made an open-end com mitment to buy all that the market would not absorb, 366 KARL BRANDT the farmers responded generously to the incentive. The allotment control was defeated by intensification, i.e., by higher input. The marketing quotas were defeated as control measures by shifting the surplus to other com modities. Our farm legislation has about the same effect as if someone had jimmied the voting machine on which the consumers could vote for what farm products they wanted, and how much of them. In other words, the price signals are out of commission.

Of the four million farms, roughly two million full fledged commercial units produce some 93 per cent of the marketed product. They have some adjustment prob lems for a few commodities, particularly wheat, but are not in any financial or income calamity. In fact, their business is by any standard relatively satisfactory, espe cially if we look at the regular and substantial gain accruing in their equity. These farms are one of the greatest assets this nation has and its technology is the greatest asset of the West. But we have serious problems among certain groups of the remaining two million small, so-called low income farms, particularly in some retarded areas like the Ap palachians, the Piedmont, the Ozarks, and in the refor estation areas of the upper Lake States. In general the two million small farms need outside employment, mix ing nonfarm and farm incomes. No one suggests their abandonment as living quarters. It would be a serious mistake, however, to lump the two million heterogeneous units as suffering alike from too-small incomes. A large part of these are retirement and part-time farms which THE HARD CORE OF THE FARM PROBLEM 367 offer a most desirable form of rural existence for people who have a security insured by pensions, tax benefits, and a flow of part-time work income. The number of this type of farms will grow in the future. They con stitute no social or economic problem.

Jobs in Town There are other farms where the people must avail themselves of the nearby educational and training facili ties to find better employment for their young people. It still remains true that only the people themselves can make the decision to move, to change to other occupa tions, or to undertake better farming practices. Indeed, they are on their way. While farm operators earned $11.8 billion net income from farming last year, the total farm population earned an additional $8.5 million net income from farm work off the farm and from non agricultural sources. There is a serious legislative farm problem, definitely not an administrative one. Our farms are· by and large in fairly good health, ready to feed 200-, 250-, or 300 mil lion Americans in the future, and better than ever. The real farm problem concerns the question as to how one can liberate the Treasury from the burden of an impos sible op'en-end commitment and a continuous misinvest ment in more and more grain without doing harm to the farm community and all those who serve it. This disengagement from faulty legislation requires common sense, a warm heart, and a cool head. It requires an hon368 KARL BRANDT est businesslike approach and due respect for the basic institutions on which the American economy stands or falls and for the true stature of the farm business with its more than $200 billion productive assets.

We have out-produced the Soviets many times over and have all the benefits of our productivity, but we cannot borrow from them a compulsory production con trol system which involves the cartelization of agricul ture and all farm supply industries without ruining our prosperous farming system~ There are two ways of be coming Sovietized: by conquest or subversion is one, by voluntary assimilation of their institutions is the other. Unfortunately, we have in our midst too many self styled friends of the farmers who know exactly what is good for other people and are yearning to wield just enough power to prescribe from some office desk the recipe for the social medicine the people have to swal low and the orders as to what they have to do or not do. For my taste there is too much afHuency in telling the farmers and their suppliers what to do and telling the customers what not to .spend their money on.

If we fall for giving these people too much leeway, they will go at it and try· to take the competitiveness out of our agriculture and with it its creative dynamic quality. If I were farming right now, I would be tempted to say in these coming weeks every now and then a silent prayer: Good Lord, protect me from my friends; against my enemies I can defend myself.