BOSTON UNIVERSITY

SCHOOL OF EDUCATION

Thesis

Ward, A. A.

LIBRARY 1931

The Gift of .Alice. Applc^«n_ Ward

S-Vove d

BOSTCIT UNIVERSITY

SCHOOL 0? EDUCATION

Thesis

RSCEITT DEVELOPIIEITTS IK ?A?J.I RELIEF

Submitted "by

Alice Apple ton ..ard (B. S. in Ed., Boston University, Sch. of Ed.)

In partial fulfillment of require- ments for the Degree of Master of Education

Boston University School of Education Library

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0 U T L I I:

I . INTRODUCE OH : HISTORICAL BxlCKGROUND OF FARM RELIEF

A. Farmers [ Needs and Disadvantages

1. President Roosevelt's report of the Country life Commission

2. Agricultural Boom of 1910 — 1920

3. Report of Department of -.gri culture

4. Unemployment

5. Speculative Land Booms B. Public Indifference

II. PUBLIC RECOGNITION OF TEE PROS LEU

A. David Lubin Plan

B. MclTary-Haugen Bill

C. Research Laboratory Conducted at Public Expense

D. Establishment of Credit and the Federal Farm Banking System

E. Passing by Congress of Federal Farm Loan Act of 1916

F. Packer and Stock Yards Act and the Grain Futures Act passed by the Federal Government

G. V/arning Issued by the Farm Board

HI. RECENT DEVELOP11L.NTS IN RELIEF

A. Cities Unable to absorb a Rural Labor Surplus

B. Creation of the Federal Department of agricul-

ture to Aid the Farmer

Digitized by the Internet Archive in 2014

https://archive.org/details/recentdevelopmenOOward

III. (Continued)

C. Present demand for Economic Equality for Agricul ture

D. Veto of the McEary-Eaugen Bill

f, Free Broadcasting Service Furnished to the farmers

I, Inventory of the Activities and Services Furnished by the Department of Agriculture to Aid the Farmers

G. Pronoganda instigated in Favor of deduction of Acreage

H. Installation of Labor Saving Devices

I. Growth of Co-operative Marketing

J. Passage by Congress of the Agricultural Mar- keting Act in June 1929 which Resulted in the Establishment of the Federal Farm Board

K. Establishment of the Federal Farm Loan System in 1916

L. Development of the Tariff Situation

IV. THB OUTLOOK FOR THE FARMER

A. Experimental Eature of the Stabilization Operations in .heat Market

3. Limitation of the Federal Government in Relieving the Situation

C. Gradual Reduction of Acreage

D. Loss of Foreign Markets

E. Economic Eature of the Accomplishments of The Federal Farm Board

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IV

(Continued)

F« Delay of Putting Agriculture on an Equality with Industry

Ct. Advantages of the tariff Act

K. Difficulty in Obtaining Go-cperation of the Farmers

I. Effort of Board to Limit Production to Proh- ahle Demand

J. necessity of Agri cultural J-roups in Promoting Better Tariff Legislation

K, Because of Experimental ITature of the Loan System Benefit to the Farmers at Present Duhious

V. CONCLUSION

A. Necessity for Go-operation Between farmer and Industry

B« Necessity for Reorganization of Farm Methods to Meet "Tor Id Competition

C. necessity of Revising Tariff Legislation for the Protection of the Farmer

D. Effort of Department of agriculture to Incite Spirit of Co-operation Among Farmers

HISTORICAL BACKGROUND Or FARM RELIEF

At the present time the problem of Farm Relief is most dras- tic. Before considering the recent developments it is necessary to picture the historical "background of the situation,

"The independent farmer of today is the descendant of the pioneer of yesterday. The early history both of colonies and nation was written by the pioneer farmer. It was men and women of this breed that enabled seaboard agriculture so rapidly to escape the narrow val- leys and rocky soils on which it first got its foothold. It was they who subdued the wider, richer lands of western Hew York, Ohio, the Middle .Vest, and finally, the Far '/est. The brunt of exploring and

developing the continent fell on them, and in the remoter corners of

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the country the task of pioneering is hardly yet completed."

The pioneer farmer was selected, bred and trained for qual- ities of individualism and stubborn insistence upon living his own life in his own way. His very willingness to sacrifice himself and his women and his children in order to take a chance on the economic future of any area where they could get a farm of their own has given us not only the achievements but also some of the disasters of our agricultur- al history. For the pioneer has "the defects of his qualities", and often knows not that what was sound and laudable in early daj/s may be- come economically vicious at a more advanced stage of national develop- ment. The pioneering of submarginal lands still going on today aggra- vates the surplus problem, which is generally conceded to be the core o " present agrarian distress. The survival of pioneer habits of thought and types of action more or less generally throughout our agricultural

1. ,:Hew Republic" — April 30, 1930

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class has stood in the way of its acceptance of the social discipline of modern economic life and prevented adequate participation in the group activities demanded "by present-day economic institutions.

Probably the "hill-billy" farmer represents the most exag- gerated case of social independence linked with an extreme degree of geographic isolation. Physically 100-per cent American, with a line o ancestry running straight back; to colonial days, he is spiritually a 200-per cent American, with the virtue of indomitable independence run(j- ning to the vicious extreme of touchiness and producing a whimsical irascibility which has precluded permanent and dependable social organi- zation.

?he hill-billy farmer as we knew him in the Ozarks represenr ted the third skimming of the super-independent, who had found even the light rein of social control in the Appalachians too galling. No wonder that these farmers dynamited the dipping vats when the govern- ment tried to carry out a campaign of tick eradication. Ho wonder tha^ the county agricultural agent and the extension specialist from the college have found them impervious to scientific knowledge and better farm practices. ITo wonder that the hill-billy farmer has resisted co- operative organization, that he has breached his contract and bootleg- ged his produce to any buyer who offered an extra nickel.^"

But the pioneer who went est and enabled the country to grc up with him, and the hill-hilly who went back into the highlands and "up to the fork of the creek" where neither law nor convention would demand anything of him, do not compass the v/hole of rural "independence

1. "New Republic" — April 30, 1930

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There was also the timid soul who felt no urge to crack his whip from the seat of the covered wagon. Those who remained in the older farm- ing sections, even though this may have involved parental domination o^ the constraining influence of kinfolk and gossiping neighbors, preser- ved themselves at least against the need to change old ways to fit a new environment or altered circumstances. They have been conservative as to new methods of farming, they have been resistant toward unaccus- tomed schemes of collective bargaining, calls for information as to their "intentions to plant," or academic suggestions for the readjust- ment of their industry.

Of course we do not mean to say that all farmers fall into one or the other of the too-independent types which we have been dis- cussing. There are many fine, aggressive, socialized, co-operative farm proprietors who keep themselves effectively in touch with the edu- cational forces which constitute the experimental department of their industry and with their fellow farmers who have like interests in eithe the technical or business branches of their calling. These men, like- wise, either individually or in groups, work with little friction and much understanding at the points of contact where their industry touched the fields of finance, transportation and marketing.

But however high we may set them qualitatively, they are cfuajj. titatively but a minor factor in the whole picture of -imerican agricul- ture. There have not been nearly enough of them, as individual farm prf prietors, to establish the general level of farm management on such a blane as to effect a prosperous adjustment of the industry to the con-

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ditions "by which it has "been confronted over a period of years. There

have not been nearly enough of them to make up the membership of co-op

erative marketing organizations capable of putting the distribution cf

any considerable fraction of our farm products on a really sound and

economical basis. In only a few spots either particularly favored by

the character of the product and natural limitations upon its volume o

production or blessed with an unusually well informed and well finance*

personnel, have commodity groups been formed that are at all comparabL

in their effectiveness with those found everywhere in the ordinary run

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of non-agricultural business enterprises.

Twenty-two years ago on February 9, 1909, President Roose- velt submitted to Congress the report of The Country Life Commission. It was this Commission which first aroused the nation to an awareness of its "rural problem". President .oosevelt said, "I warm my country men that the great recent progress made in city life is net a full measure of our civilization; for our civilization rests at bottom on tlfle wholes omeness , the attractiveness and completeness, as well as the pros

perity of life in the country — But the disparity between city and

country has continued to increase. The report cf Roosevelt's Country Life Commission was .generously commended in all quarters, but the agri- cultural problem is more acute in 1930 than it was twenty years ago.

The agricultural boom of 1910 — 1920 brought such a high peak of prosperity to the farmers that the 1930 fall in prices seems very severe in contrast. High prices of farm products, "war prosperity" 1910 — 1920, caused land values to rise too fast and too far. These

1. "New Republic" — April 1930

high prices also caused a tremendous over-expansion in farming — the "bringing in of new lands to the farmers. The worst over-expansion camo in tho cne-crop areas, such as wheat and cotton. ith this cver-| expansion in land values and land utilization came a "big increase in the mortgage debt of the farmers. - igh priced land meant unusual actaJtv ity in the real estate market, many farmers buying land not to farm bi; t to sell again. Unfortunately, country banks and farm mortgage compan-| ies did not put a check on this movement when they were called in to help finance it. A very tragic situation developed, therefore, in the case of farmers who bought land at inflated prices and gave a mortgage on it.

Following the orld ar, came a period of world -.vide depres sionfrom Japan to the United States and from Canada to South America The fall in the farmers* income was great and sudden. While the farm- ers* income was falling his expenses were staying up. As v/as to be expected with this enormous increase of mortgage indebtedness, for lan bought at inflated values, came a corresponding increase in the number of farm bankruptcies, Taxes on farms increased 140> from 1914 to 1923 So also did interest increase in proportion, "he most conservative loans, those made by the federal Land Banks and the Joint Stock Land Banks are no exception to this rule.

The Department of -agriculture reported that the hired man o^l the farm was receiving ;?28.04 per month without board in 1910, and j65.05 in 1920. -hen he was "deflated" along with industrial labor. His pay fell back ,45.58 in 1921. In taxes, interest and l&bor, there|

!• "Dept. of .igriculture Year Book, U. S. D. A." 1925

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fore, the farmer: found his fixed charges still high and out of proporjj. tion to his income.

As the farmer is a large user of transportation he is vital, ly interested in freight rates. At various times during the war freight rates were advanced, and when freight rates are once established und the railroad company adjusts its scale of wages and program of betterment to this rate, it is always very difficult and usually unwise to change this rate. The farmer may therefore, look on a freight rate as a rela4 tively fixed charge. Thus we have a farmer shipping hay in 1919 paying 10.4 pounds out of each 100 pounds of hay for freight; in 1921, he paic 20.2 pounds. So with all other commodities except citrus fruits and wool the margin is too great — something is decidedly wrong.

Unemployment is generally thought of as an industrial com- plaint, a symptom of mal -adjustment in the relationship between Capita]] and >age; Labor and Farmers are supposed to be largely immune. It is often said that the farmer has one great advantage over the wage earnerlL in that he cannot be uischarged. -s a matter of fact, this is an illu- sion. Farmers can be discharged and very frequently are; and they have been discharged in exceptional numbers in recent years. Thousands are now underbidding city dwellers in a competitive struggle for an inade- quate number of jobs. Comparisons between rural and urban standards of living are difficult to make, because country and city values are not the same, it takes less cash to run a home in the country, and the fact that average cash incomes on the farm are less than average cash incomes in the city does not prove that the farmers are worse off than

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the wage earners, .-fter all, there are intangible values in farm lif«

which cannot "be measured in cash, riut security is not so substantial

an item in these intangible values ^s most people imagine. our farm

population in January 1929 was estimated at only 27,511,100 compared

with 28,980,000 in January 1925 and 32,076,960 in January 1910. This

decline in a period of rapidly growing urban population, meant that

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farmers were being discharged.

As to the cause, it is largely identical with the cause of

urban unemployment, x'echnical progress does farmers as well as wage

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earners out of their jobs. In the four years from 1925 to 1928, in- clusive, agricultural output in the united States was, according to the Department of agriculture, about 16fo greater than in the period

from 1919 to 1922, though the acreage in farms was somewhat smaller

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and the farm personnel much smaller. Fewer farmers, using less land J produced an enlarged output but substituting engine power for work animals and by raising better field crops and live-stock. This techni. cal progress benefited the consumer rather than the producer, because the market did not expand sufficiently to absorb the resulting increasjbd production. It was left to the ruthless force of competition to deter mine which farmers should be allowed to carry on and which should be required to find other work or starve. "When a farmer has to be dis- charged he gets more notice than the wage earner usually does, but thajfc is about the only important difference. Some farmers, it is true, re- fuse to be discharged, no matter how poorly the game goes against them, but these people are a class apart, not truly within our system of com -

1. 'New Republic" — May 28, 1930

2. "Year Book, U. S. D. A." — 1925

mercial farming. Many such are to be found on poor lands in the moun- tain districts of the South, and in the "marginal land areas" of New England, ./here the commercial farmers would he forced out , these mar- ginal men tighten their belts and retire into such a sort of domestic farm economy, in which they produce something for their own tables hut very little for the market. They are really not a part of our farming system, because the land they till is generally not capable of being farmed economically , and the commercial surplus they produce is practi cally negligible. It is significant, nevertheless, that nearly AS0> of the country's farm population according to the Department of Agricul- ture, live on small farms of poor and difficult land, on a very low standard of living. In considering the rural aspects of unemployment, the strictly marginal farmers must be largely ignored. It is not they but the members of a group higher in the scale, who quit when farming becomes abnormally unprofitable. This group is eased out, not by the stern command of an immediate boss, but by the slower process of dis- couragement or pressure of debt. Sometimes owners become tenants, while tenants drop to the status of hired men. Young folic leave the farm as often by compulsion as by choice.

With the same land and the same labor producing increased crop values like these, the farmers began to scramble for more land, leading to one of the greatest speculative land booms in the history oi[ America. High prices of farm products, "war prosperity," 1910 — 1920 caused land values to rise too far and too fast. These high prices

also caused a tremendous over -expansion in farming — the bringing in of new lands into farms. In these ten prosperous years, 40,000,000

acres of pasture land was plowed up and out in crops j 5,000,000 acros of forest was cleared for crops. This new land was not needed for crops and should have "been left in forest or grazing lands.

The worst over -expansion came in the one crop areas, such as wheat and cotton. Under the stimulus of high prices cotton acreage increased 17,000,000 acres in five years, and wheat acreage increased 30,000,000 acres in two years.

PUBLIC R5C0GNITI0IT OF THE PROBLEM In spite of the general indifference of the public and the banks concerning the farmers' problem, gradually Congress has be- come conscious of the needs and disadvantages of the farmer. A form of farm relief proposed by David Lubin in 1896 consisted of a bounty on agricultural exports. The plan had the support at that time of the State granges of California, Oregon, Washington, Missouri, Illinois, Virginia, and Pennsylvania. This plan is now revived under the name of the export debenture plan. Its aim and effect would be the same as the McUary-Haugen Plan, namely, raise the price of the farm surplus, and by thus raising the price stimulate the production of a greater surplus .

Following the financial panic of 1920, there were intro- duced in the Congress of the United States various bills for the re- lief of agriculture. But during the first six years of this agricul- tural depression, only one bill, out of many, succeeded in passing both Houses of Congress. This was the KcKary-Haugen. It passed Con- gress iTebruary 17, 1927, and was vetoed by President Calvin Coolidge,

1. "Few Republic" — Hay 7, 1930

February 25th, The McKary-Hau£;en Bill represents, therefore, the main plan of Farm Helief before the country during a period of six years.

Agriculture is the only great industry for which research is conducted at public expense, -he research laboratories in soil and chemistry are among the most notable laboratories of the world.

Farmers asked the government for more and cheaper credit.

Their request was liberally granted. After the close of the war the

charter of the ./ar Finance Corporation was renewed three times to aid

agriculture, and in a period of three years a sum of more than o500,000

000. was placed at the service of the farmers. 1

In the year 1914 the Federal Reserve Banking System was created as a part of our commercial banking system to aid the entire country, including agriculture. Friends of the farmer criticized the system for not having at least one farmer on the Federal Reserve Board. The Law was accordingly amended providing for a "dirt farmer" on the Board. Commercial borrowers from a Federal Heserve Bank limited to loans running 90 days or less, agricultural borrowers may borrow up to nine months. All the farmers' legitimate, short time credit needs are taken care of by this system. The Heserve Board has ruled that the pro portion which agricultural paper may form of the entire assets of a Cap ital Reserve Bank is 99;o« In other words, the Federal Fieserve Banking System grants special privileges to agriculture denied to all other classes of borrowers."^

Farmers next asked for long time rural credit. Congress passed the Federal Farm Loan -^ct of 1916, setting up twelve Federal Laijid

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1. "The Farmers' Campaign for Credit"

Banks, and priming the pump with the initial capital of .9,000,000. Thjp effect of this new credit agency was to enable the Wyoming f armors or any other farmer in any State in the Union to "borrow money on his land at a rate of interest as low as that paid by the United States Steel Corporation or any other giant industrial Corporation, "his act furn- ished the farmer an unlimited supply of long time credit, at a low rate of interest, on the installment plan of paying his mortgage, farmers asked for credit running for a period of six months up to three years, that is, intermediate credit, since this type of credit was not furn- ished either by the Federal Reserve 3ystem or the Federal Farm Loan System. Congress, in the year 1923, passed the Intermediate Credit Act setting up twelve intermediate credit banks, and providing outright the initial capital of <,?60 ,000,000. "his gives these banks a loaning power of ,;'660,000,000. In this connection let it be remembered that agricul- ture is the only industry financed by tax exempt bonds issued under off cial supervision. Congress has made this provision for the bonds issue L by the Federal Land Bank, the Joint Stock Land Banks and the Intermedial e Credit Banks. So the farmers credit needs are fully met. ..hether for short time, long time, or intermediate credit.^

Farmers asked for a form of credit that would be specifi- cally adapted to co-operative marketing. In response Congress passed the United States arehouse Act of 1916 (and amended July 24, 1919 and February 23, 1923) •

The Farmers asked for tariff protection, so when the last

tariff was passed in 1922 the farmers practically wrote their own sched-J. ales.

1. "1923 Year dook of Agriculture"

The farmers a sited for good roads. aid the Federal id to roads is now talcing hundreds of millions of dollars from the rational Treasury and putting surfaced highways in reach of every farmer in the United States. The farmers wanted "better mail service and the Aural Free Delivery of mail was established, supported by Federal taxes, it I is the only part of the post office service conducted at a financial less. The farmers asked for a curb on big business and the Federal Government passed the x'acker and Stock Yards ..ct and the Grain Futures Act, regulating for the farmer the terminal marketing of his live stock and his grain. The farmer wanted the right to combine and regulate the flow of commerce, with an exemption from the penalties of the Sherman Anti-Trust Act. They obtained this request.

In 1914, Congress passed the Clayton iLet, with its famous "Section 6" giving the farmers preferential treatment.

To give the farmer yet further protection from the Anti- trust laws, Congress in 1922 passed the Capper — Yolstead Act, entitled "An act to authorize associations of producers of agricultural products. This law permits farmers to form combines with or without capital stock,j

and for various purposes, without coming under the Law of the Sherman 1

The farmer has not been neglected by the Federal Government fcoite the opposite. Ho other class has received such favors, privileges benefits -nd services.

The Farm Board has warned that the tractor and the combine jiave brought into production vast regions that have not been used before

1. "Capper-Vol stead Act and Explanation of Act"

Public - Ete. 146 — 67th Congress

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! and tracts comprising from 400 to 4000 acros are the most economical units for wheat raising today. They are making competition by the own- ers of smaller and more expensive farms and ranches extremely difficult. These "bills will he discussed later in detail.

.rtECENT DB VSLOHZEiira S IN FARM BELIEF Congress has finally more or less successfully come to the relief of the farmers' distress by the passage of the agricultural mar- keting Act of June 1929 which resulted in the establishment of the Fed- eral Farm doard. -he unemployment problem, far from being a strictly urban phenomenon, embraces agriculture, in former times a surplus of labor in the cities of the United States was easily drawn off into the country, and became a force for national development. Today the coun- tries look to the cities to absorb a rural labor surplus, in which are numerous individuals not accustomed to thinking of themselves as a part of the nation's labor supply. For the first time in -jnerican History, our unemployed have nov/here to go* If they are in the cities, they can not flee to the land, because our farms already produce more than can bo satisfactorily sold, if they are on the farms, they cannot go to the cities unless they wish to lengthen the bread lines. Bvery-vhere the pov.^r to produce increases faster than the power to consume, and produc- tion capacity runs to waste while people starve. On all sides is raise<. the cry that production must be curtailed. This is demanded, not out o: perverseness , though it may seem perverse to suggest curtailed produc- tion in a needy world, but as a result of our inability to make consump- tion keep pace with it.

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About 40 years ago, Congress created the federal Depart- ment of Agriculture, which is now devoting much of its tine and many millions of its dollars to very direct and specific aid to farmers. To he sure, Congress has in more recent years created a Department of Commerce and a Department of Labor. But no one has ever heard of the Department of Labor sending men into the field to help organize labor unions, or of a Department of Commerce helping organize combines among the capitalists, -he field work of the Department of Agriculture in promoting co-operative organizations among farmers is now one of the major activities of the department.

In the past 100 years the United States in common with al]| commercial countries of the world, experienced five major economic de- pressions, -hese occurred in the years 1819, 1873, 1893 and 1920. Between these major crises came minor depressions. Owing to the defec- tive credit and inadequate transportation facilities, the earlier paniojs were more severe than the later ones, -he panic of 1920 was quickly weathered by our industrial and commercial interests, but not so by agri- culture, -he world wide post war depression has left American agricul- ture, or some parts of ~merican agriculture, below par when compared with the general economic life of the nation. Hence, the present demarl|i for "economic equality" for agriculture. Certain facts may new be pre- sented showing the extent and the causes of the agricultural depression. The essence of the matter may be stated very briefly in these simple words; American agriculture enjoyed a ten year boom, a period of rapid and great price inflation ending in 1920, this was followed by a rapid

md great price deflation — these are the big facts in the story. Overj-

(xpansion of activity and indebtedness under the stimulus of war time

Lrtificial prosperity have produced agricultural depression.

The i.-cHary-Haugen ^ill and several other hills during the

■>ast six years have been holding out the promise of .''arm relief, 'l'his

;tct may he cited as the "Surplus control Aet% The hill, as it passed

Congress in February 1927 is in brief surplus control, according to its

ran provisions. Yet the exact meaning of this bill is a matter of almodjb

•miversal uncertainty.1 The two earlier .xKary-Haugen bills were frankl|r

•>rice fixing measures, and were defeated in Congress largely for that

:<eason. This bill makes no direct reference to price fixing, yet it was

vetoed by the -resident largely on the grounds that it is also a price

:ixing measure. There has unfortunately followed much quibbling over

he phrase "price fixing" since the veto message, in reality, price fix

:ng is not the touch-stone by which to test this measure. Its whole pur

]Ose, effect, and operation must be examined critically and the bill

rust stand or fall by its success or failure to meet this broad test.

! herefore the following outline will designate that the provisions of this

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1 ill are all grouped under the five main heads: A, Title of the, BiUi, B. Declaration .ftfi PeMsyq C. Farm Relief ; ]. Administrative Machinery: E. Finances.

The title of this bill states three broad purposes: —

1. To establish a Federal Farm Board

2. To aid in orderly marketing

3. To aid in control and disposition of surplus

1. "Farm Relief" — James Boyle

2. "Farm Relief" — James Boyle

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Congress names six specific objects:

1. To promote orderly marketing

2. xo that end, to provide for control and dis- position of surplus

3. Ho enable producers to stabilize market prices

4. To preserve advantageous domestic markets

5. To minimize speculation

6. To encourage co-operative marketing

Three distinct and separate forms of relief are offered

"by this bill, and each an unwise governmental commercial activity,

many farmers? The hill selects six commodities and calls them "basic", the theory apparently being that these six do represent either the bulK

of our farm products or a majority of our farmers. The importance of these six commodities is very greatly exaggerated. Two of them may be

dismissed as insignificant from the national standpoint, — tobacco, occupying less than one-fifth of one per cent of our farm land; rice, less than one-tenth of one per cent. Wheats featured in every LIcNary- Haugen bill as the great American crop, has a total value of only six per cent of our annual agricultural output. Cotton, occupies an area of less than five per cent of our farm land. The corn crop derives its importance from being marketed not as corn but in the form of hogs and cattle. ..hen the relative importance of our various crops is once

grasped, it becorr.es evident that this bill does hurt more farmers than

I namely :

1.

2. 3.

Dealing with surplus Loaning money Insuring prices

Does this plan benefit a few farmers at the expense of

it helps.

There are two aspects of this problem which now claim our

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attention: "What per cent of the farm output is consumed as raw material in further agricultural operations? What is the rank of our important crops on the basis of their value?"

The corn crop is a good example of one farm product being used as raw material for further farm production. 85fo of this crop is fed to animals (40^ of it to hogs alone). Only 1.5;o is exported as corn. Therefore, elevating the price of corn by the operations of this bill would simply put an increased burden on the farmers now using 85$ of the corn as raw material. The bill would not offer "relief", but more trouble to this branch of American agriculture.1

However, it is the dairy interests and the poultry interests that would suffer most under this act.

Therefore, when our six million farmers are viewed as the consumers of 40% of our agricultural products, in part as food, in parti as clothing, and in part as raw material for further production, it is clear that they suffer in the end a net loss by having the prices eleva- ted on wheat and corn, hogs, cotton, rice, and tobacco. So this bill "to help" the farmer, does mean, in practice, help for a few farmers at the expense of the many farmers. And when it is further remembered tha ; the bill proposed to cripple and partly destroy the two basic industries; of dairy and poultry in order to lift up two other industries with only 80fo of their importance, the dangerous character of this bill is appar- ent. The majority of our farmers would be victims, not beneficiaries of this measure.

The Department of Agriculture in the 1925 Year Book speaks

lr. "Hew Republic" — April 1930

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of the growth of the free broadcast inn; service furnished to farmers: The Department made its first experiment with radio in 1920. Since then there has been a great development in the use by the farmers of this new means of communication. A survey made by the county agricultural agents in 1923 indicated there were about 145,000 radio sets on farms throughout the country. In 1924 the estimated number had jumped to 365,000 and in 1925 to 553,000. This increase of 300 per cent is evidence that the farmer appreciates the broadcasting service provided for him.

A partial and very incomplete inventory of the activities

md services and aid of the farmers are listed in the 1925 Year Book of

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jLgriculture includes the following:

1. Barberry eradication

2. Extension service

3. Foot and mouth disease eradication

4. Fighting the insect pests

5. Suppression of European fowl pests

6. Campaign against Animal Tuberculosis

7. Federal Heat inspection 8. Cattle tick eradication

9. Hog Cholera eradication

10. Fighting the Boll v/eevil

11. Discoveries in the Bureau of Chemistry

12. Plant quarantine

13. Soil surveys

14. Predatory animal control

One dominant school of thought contends that reduction of acreage is of prime importance, to wheat and cotton, the crops in a

ally vulnerable position. The necessity of such action, it is asserted is dictated by the inexorable law of supply and demand. There are farmers who believe this unwritten law is being ruthlessly employed to

1. "Year Book of Agriculture" —

— 1925 (U. S. D. A.)

ADDENDA:

Co-oporative i-arketing

America's co-operative marketing trail is long; it winds back to the middle of the last century, farmers "began "by developing cc -op- erative marketing inside small circles, sometimes handling several cro]jjs in one local association. Later they made larger circles to include many locals, often taking in all of the co-operatives handling a parti- cular commodity in a district or region. Then still larger circles were made and several regionals were federated into terminal marketing agencies* All of this was helpful hut did not go far enough to reach the main objectives. Finally, the passage of the agricultural market- ing act made it possible to draw a single or master circle big enough to take in all of a commodity handled by co-operatives, including local districts, regionals, and terminals. Eventually, this is expected to do away with competition among co-operatives handling the same commod- ity. V/ith the majority of producers inside the master commodity circle where the sales are controlled by a single national marketing organiza- tion, farmers may be able to put agriculture on a basis of economic equal ity with other industries.

Various Federal and State agricultural agencies are co-opera- ting on a national educational program designed to familiarize farmers with the new developments in co-operative marketing and to encourage more of them to become members of co-operatives. The agencies co-opera ting in this correlated educational movement include the United States Department of Agriculture, Federal and State extension groups, land-gra|.t colleges and universities, the Federal 3oard for Vocational Education, State departments of agriculture, general farm organizations and farm-

ors1 co-operatives.

The co-operative market ins agencies are financed "by the inter- mediate credit hanks, commercial hanks, and the Federal Farm Board.

Producers of more than 40 farm crops have heen definitely as- sisted in a practical way hy the agr icultural marketing act through then co-operatives. The new law, passed in June 192S has intensified the farmers' interest in co-operative marketing. Farmers are gradually con trolling a greater volume of their products as they move through market ing channels to the processor or ultimate consumer. By collective actifl; growers are extending their marketing system, strengthening their posi- tion in "bargaining on central markets, developing a credit system that r/ill make them more independent, and improving their chances of adjust- ing production to prevent troublesome surpluses.

Officially the United States is definitely committed to the principles of co-operative marketing. The policy of the Federal Govern- nent to aid with men and money in the establishment of producer -owned and producer-controlled co-operative marketing organizations is enabling farmers to take another essential step — the development of national commodity-selling agencies.

More than a million farmers have been aided by the agricultura] Marketing act. All farmers, no matter where they live in the United States, may market their crops through the local, regional, terminal, aid national co-operative organizations that are being developed in ac- jordance with the provisions of this Federal law.

Seven national agencies have been established by co-operatives

18b

with the assistance of the Federal Farm Board. Six of these are sales agencies. Five already are operating, marketing grain, cotton, live- stock, wool and mohair, and pecans.

Foundations are "being laid for the "building of other national marketing organizations wherever they are needed.

There are 12,000 farmer-owned and controlled co-operative asso- ciations in the United States, according to estimates in June 1930. Thp membership of these associations totals approximately 3,100,000 repre- senting about 2,000,000 farmers. Some producers are members of 2, 3, 4, or 5 organizations, which accounts for the difference between the membership and the number of farmers. -

16c

1. "Farmers 3uild Their Marketing machinery"

- Federal Farm Board Bulletin Ko. 3

19

reduce them to serfdom, but reliable statistics prove the contrary. the

..hatever/produce may be, the price paid for it is determined by the qanati- tity of it on the market and the public need of it. The supply of whea; in this country and in the world greatly exceeds the demand. The same is equally true of cotton. Because of the surpluses, the value has dropped to the level that the cheaper users will pay.

Study reveals that the principal reasons for the surpluses are increased acreage and the mechanization of agriculture. The area devoted to wheat raising in the United States last year was larger by 14,000,000 acres than it was before the .orld ./ar. Kansas alone put twft million more acres than it ever did before. The inevitable has happen-! ed. The carry-over totals £75,000,000 bushels or an amount equal to about one-third of the entire crop, with the price falling below the level at v:hich many farmers can pay expenses. It is highly significant that the carry-over has increased rapidly in recent years, being only 90,000,000 bushels in 1926 • Thus there has been three hundred per cent increase in this particular in three years. The situation would not be so desparate if foreign markets were open to the surplus, but the truth is that the world acreage — exclusive of -.ussia, which was once the greatest exporter of wheat — exceeds that before the war by 42,000,000 acres. This tremendous expansion of industry had built up a world accum- ulation of 489,000,000 bushels as compared with 272,000,000 bushels in 1

.926.

The expansion of agriculture has come simultaneously with bn industrial transition. Here, too, labor saving devices have been

1. "Year Book of Agriculture" ~ 1930 (U.S.D.A.)

	•

20

t.

0

installed. These devices have released human "beings from arduous eff or Diets have changed as occupations have become easier, making fat and muscle producing foods a smaller factor than ever before. The lighter diets so generally advocated by physicians have affected the staple agricultural crops adversely and at the very time of their expansion. Official figures show that, whereas the pre-war individual consumption of wheat was five "bushels annually the present consumption is 4 and 2/1 bushels. The shrinkage on such a "basis totals nearly 100,000,000 "bushels per year.

There is ample proof, however, that farmers benefit when they do resort to co-operation. The California ,/alnut Growers' Associa tion, controlling 90 per cent of the walnuts produced in this country, sold the entire 1929 crop, the second largest in history, at firm pricejs. The dairy industry, which has many co-operative organizations, has es- caped much of the depression obtaining in other agricultural enter- prises. A third example is provided by the California citrus industry, seventy-five per cent of which is controlled "by the California Fruit Growers' Exchange, Through organization, co-operation has permitted ttafe handling of nearly a normal volume at gocd prices.

Early last year there appeared in the Hew Republic an ar til- de in which Mr. Robert Stewart discussed the possibility of agricultural- al relief through tariff legislation. "The Farmer", he concluded, "wil jreceive little real help from tariff legislation proposed "by Congress." Some persons have criticized this conclusion for being based on insuffi- cient evidence. ISr* Stewart, they say, took only commodities that were

2. "New Republic" Hay 1950

3/ "New Republic" June 1930

4. "New Republic" March 1930

particularly favorable to his case — though they, to be sure, provide 44 per cent of the farmers' cash income — wheat, cotton, corn, hogs, tobacco and rice.

In contrast to Stawart, another article discussed these four commodities — dairy products, eggs, wool and flax — which are cited by tariff advocates as the best examples of effective protection. Together these commodities provide 21 per cent of The farmers' cash, in- come, Consequently, this article presents the best that can truthfully be said for agricultural tariffs. If, after this supplementary study, the indications are that farmers will not be materially aided by the tariff legislation about to be passed by Congress there can be no ex- cuse for saying that only one side of the argument has been presented."

Butter production in the United States amounts to over two billion pounds a year, with a total farm value of ^800,000,000. or eight times as much as the cash income from rice, three times as much as from tobacco, twice as much as from corn and as much as the cash income frcmi vheat . The present tariff on butter is 12 cents a pound. Under this tariff, butter producers received approximately 5.7 cents a pound above bhe London or world market price in 1929. Kence, the tariff of 12 cents 7as not then fully effective, but was nearly 50 per cent so. The month when New York prices were the highest above London prices was Larch, frith 10 cents,: the lowest month was November, with 1.5 cents above London. The total annual benefit from the butter tariff amounted in 192)9 o approximately ^90,000,000. Since 80 per cent of cur farmers keep cows, this tariff benefit helps 4,988,000 farmers, in proportion to the number

1. "New Republic" I .arch 1930

of cows they keep and the amount of their products marketed. Assuming this .'90, 000, 000. to be divided equally among them, each producing farmer received ^18. benefit in 1929.^"

Under present conditions the twelve cent tariff is practi-i cally prohibitive, less than 3,000,000 pounds (about 0.1 per cent of the comestic production) being imported in 1929. During the same period nearly 4,000,000 pounds of butter were exported, leaving an actual net export of 1,000,000 pounds.

In 1928, dairymen received a benefit of about $125,000,000. as compared with the ^90, 000, 000. benefit in 1929. This 28;2 decrease in 1929 was primarily due to our increased production, which depressed domes- tic prices. At the -present time (March 1950) domestic prices are actually below prices of Danish butter in London.

These data indicate that because cf the present tendency tjo increase domestic production (creamery butter production in 1922 was 1,153,515,000 pounds; in 1929 it was 1,513,580,300 pounds), the proposed tariff increase will be of no benefit to dairymen, and furthermore, they

indicate that farmers will experience even more than 28^ decline in tari-

1

iff benefits in 1930.

The House bill increases the duty of £.5 cents per gallon on milk to five cents per gallon, and increases the present duty of twenty cents per gallon on cream to 48 cents per gallon. These increased rates will particularly prohibit milk and cream imports from Canada, since they offset the price differential which ITew York now holds over Montreal, vhe importation of cream from Canada into the Boston market

1. "New Republic"

- March 1930

23

amounted to 15;^ of the total boston supply in 1926.

Shutting out Canadian ir.ports will result in a shifting of the source of 15fo of boston's cream supply from Canada to the middle west, i'he price of cream will have to increase enough tc compel boston consumers to pay the freight rates of 14 cents a gallon from Chicago to Boston. New England dairymen will benefit directly "by this increased price, and I.Iidwest farmers will "benefit indirectly by probable better butter prices brought about through the removal of between three and four million gallons of creams, or the equivalent of between 14 and 16 1 million pounds of butter, from the butter market to be used for sweet cream consumption in the -.ast. Thus, the proposed tariff legislation increasing the duties on milk and cream will undoubtedly prove benefi- cial to united States dairymen generally. (It is interesting to note that President Hoover raised the milk and cream duties the full fifty per cent allowed by presidental proclamation on Iaayl4, 1929, to be

effective on June 14, 1929. This makes the present duty on milk 3.75

1

cent per gallon and the cre.-m duty 50 cents per gallon.

The House bill makes all cheese dutiable at "seven cents per pound, net less than 37.5 per cent ad valorem". This increases the duty on bmerican and other cheeses except Swiss, since they now carry a duty of five cents per pound, but not less than 25 per cent ad valorem. She duty on the only kind of cheese on which an increase could materially help producers, namely, Swiss, was actualljr decreased, for Swiss cheese already carries a duty of "seventy -five cents per pound, not less than 37.5% ad valorem", -he increased duty on all cheese except

1. "New republic" ...ay 1929

24

Swiss vail probably be useless to producers, because imports of Jvmerican cheese, the only competitive type of which we produce appreciable amounlts (are now now a price determining factor, had the duty on Swiss cheese been increased, it would have increased the price now received by domes- tic producers of Swiss cheese by about 70 per cent of the amount of the! increased duty. Since Wisconsin produces ninety per cent of the Swiss cheese of the United States, the benefits would have gone primarily to this ofae state. As the bill now stands, cheese producers will receive practically no benefit from the proposed tariff legislation."^"

The United States produced 1,900,000,000 dozens of eggs in 1924, which had a farm value of approximately |547,000,000. Sggs pro- I vide about 3-§ per cent of the farmers' cash income and are produced in i varying amounts by 90% of our farmers, "he House bill increases the duty on eggs in the shell from 6 cents per dozen to 10 cents per dozen,

and on eggs, egg yolk, and egg albumen, frozen or otherwise prepared or

2

preserved from 6 cents per pound to eight cents per pound. The bill does not change the duty on dried egg products, the principal competing *roup. In 1929 imports of dried eggs, dried albumen, dried yolks and eggs imported in any other form, converted to their equivalent of eggs in the shell, totaled 49,000,000 dozen plus the albumen from 17,5000,000 dozen* Exports of eggs from the United States for 1929 totaled 12,000,000 dozen; leaving a net import of 37,000,000 dozen and the albumen equivalent of 17,500,000 more. At the present time, 80,000,000 dozen eggs are broken 3ut annually in the United States and either frozen or sold in liquid form. If the imports of dried, frozen and other eggs are prohibited,

1. "New Republic" March 1930

2. "New Rerublic" Llarch 1930

25

the domestic market for breaking will be increased by about twenty per cent

This withdrawal of approximately 37,000,000 dozen eggs yearly will supply a market for about twenty per cent of our present production of "dirties", "cracks" and undersized eggs, which are not now broken because the Chinese egg products undersell us and take away our market. The removal of this number of poor grade eggs might possi- bly cause an increase of as much as one or two cents per dozen in the price of our better grade eggs, .-hile the annual benefit on the total production would be an appreciable amount, ^8,000,000. the average benefit to producers (except for a few large commercial poultrymen) would be very small, since poultry is kept by most farmers as a side line for getting pocket money with which to buy groceries. Assuming that the benefits were distributed equally among the 5,505,617 farmers keep- ing chickens, the benefit per producing farmer would be approximately seventy cents annually. This item may be a factor indeed. ^

The United States produced an average of 139,000,000 pounds Of scoured wool per year for the period 1923 - 1928. .Tool provides about I per cent of the farmers* income. The present duty of thirty-one cents per scoured pound gives the wool growers in Texas, Montana, yoming, |lt ah, California, Ohio and other states an annual average benefit of ^45, 000, 000. Vhere are about 430,700 farmers or seven per cent of all our farmers keeping sheep. This benefit of .,343,000, 000, from the wool uty is not divided equally among them, but goes primarily to a few large

a

ranchers. The House bill proposes to increase the rate to thirty-four cents

1. "New Republic"

March 1930

per pound. Under this rate, the benefits will probably total about ^47,000,000.!

In general, the tariff on wool is three-fourths to fully- effective, varying somewhat with different grades of wool, "he proposed three per cent increase provided in the House bill will benefit wool producers between two and three cents per pound, The chief criticisms of the wool duty are that only seven per cent of our farmers keep sheep, and that the benefits go principally to a few large ranchers.

The flax crop of the United States in 1927 was 26,583,000 bushesl, having a farm value of $49 ,373,000. or 0.6fo of the farmers' total cash income. Approximately 104,000 farmers produce flaxseed in North Dakota, South Dakota, Minnesota and l.ontana, where on many farms jwheat has been partly given up for this more profitable crop. The pre- sent duty of forty cents per bushel on flaxseed yields producers an an- nual benefit of .#5,600,000. or $5« per farm. The House bill increases the duty to 56 cents per bushel. Under this rate, the probable annual benefit will be ..^8,250,000. or ^78. per producing farm. 3etter prices for flaxseed will induce some shifting among farmers of these four wheat states from wheat to flax, thereby decreasing to some extent the present United States wheat surplus. That this shifting will account for but a small amount of the total wheat surplus is obvious. The ap- pearance of flax wilt when flax seed follows flax seed necessitates a jcrop rotation in which flaxseed crops on the same land are four or five years apart. This had a very positive control over actual and potential Ijflaxseed acreage. Nevertheless, a tariff on flax is very beneficial to

1. "New Republic" I.Iarch 1930

the 104,000 flax growers and, to a very limited extent, indirectly ben-J

1

eficial to wheat growers.

The facts here presented indicate that even in those cases where the tariff if considered to he most effective on agricultural pro- ducts, increases now proposed "by Congress will not materially influence the farm situation. Dairy interests will "benefit from the increased egg tariff, "but the production of eggs for market is such a small side I line on most farms that the "benefits occurring to each producing farmer! will he a small amount, 'i'he wool producers will probably benefit by between three-fourths and the full amount of the increase in the wool duty, but a few ranchers will get most of it, -he increase in the flaxj duty will materially help fjax grov/ers but they comprise but 1.6 % of the! American farmers.

June, 1929, the Congress passed a law in benefit of American agriculture named the "Agricultural Marketing Act", with the intent as defined in the preamble, "to establish a Federal Farm Board to promote the effective merchandising of agricultural commodities in interstate and foreign commerce and to place agriculture on a basis of economic equality with other industries. The necessity was political. All the premises were experimental.

At the first meeting of the Federal Farm Board members, which consisted of eight men with the Secretary of Agriculture, President Koover said to them: "I invest you with responsibility, authority and resources such as never before have been conferred by our Government inl assistance to any industry." That was very strong notice yet it passed

1. "Hew Republic" — March 1950

as a statement of relative fact. Its signif icance was lost in a sensi of relief. One more board had "been created to absorb a national dis- traction — namely, in this case, the farm problem.

V<'e had long been used to the spectacle of Congress, itself at an impasse, delegating original powers of government to boards and commissions. Somehow, it had worked. If, in this instance, the powers were greater than had ever been delegated to a board before, that was, perhaps, necessary from the magnitude and complexity of the situation to be acted upon. She farm problem was not solved. 3ut the problem of how to solve it — that was solved. A board with a mandate to find the solution and ^500, 000, 000. free in its hand, .-hat more could agricul- ture reasonably expect; especially since it had no perfect or unanimous solution of its own? A scientific approach at last. Pact finding, re- search, modern business principles to be laid upon agriculture. These were innocent reactions. But even among those who &ne% the extreme posj- sibilities of the law and were fearful of them, there was, perhaps, not one who could have imagined that ten months later such paragraphs would be appearing in the daily grain-market reports as the following from

the Hew York Times of April 15th. 1

"Chicago — The wheat market showed relative steadiness earlj- today, only to break three cents from the top later, because of selling,

attributed to local professionals and Eastern longs On today's

break, the buying of Hay wheat by houses that usually act for the GoverjA- nent gave the trade the impression that the federal Tarm Board was taking pack the grain it sold on the recent bulge. The Government with 50, 000 J-

1. "New York Times" — April 15, 1930

29

000 bushels of wheat on its hands.'

Is the Chicago wheat pit hexing itself with wild inven- tions? Not at all. In the company of professional speculators, the Government is buying and selling futures in the wheat pit. The Govern-) ment's speculative position in the market, bow much money it will bet out of the United states treasury against all comers on the future price of v/heat and what it will do with a cash-grain corpse when the wheat itself is delivered to it on future contracts, are suddenly as natural matters with which wheat-pit speculators are obliged to con- cern themselves by rumor, gossip and deduction,'''

Surprise, if any, is from not knowing what the law is. The Agricultural Marketing -^ct of benign physiognomy authorizes the federal rarm ^oard to speculate in wheat. ?or this purpose it sets up a dummy corporation to be its creature. This dummy has no mind, no re-j sponsibility , no capital — nothing whatever to lose. iThen the federal Farm 3oard says for it to do so, it borrows money from the Government and casts it into the wheat pit. it buys not the wheat but the options or futures — meaning the contract to receive wheat at a future date. This it does, of course, tc support the price of wheat in the pit. If the price rises, it may sell out in the pit at a loss or actually re- ceive the grain and have that on its hands to sell. The la? provides that if the dummy loses the S overnment ! s money it need not repay the loan. That is to say, the loss is charged to the United States Treas- ury and there is the end of it. if, by luck, there is a profit, the

dummy may keep it. ^11 the Government can get back in that case is the the loan at a low rate of Interest.

1. ,! Vorld's /ork" February 1931

To all this activity the federal Farm 3oard denies the

name of speculation, -he dummy is called a stabilization corporation.

therefore, its operations in the wheat pit are stabilizing operations,

tending to stabilize the price. Jut that is what professional speculaJ

tors have always said of their own operations — that they tend to sta-j

bilize the price and that such is the true function of speculation.

2he government is neither miller nor wareheus eman . it has

no use for actual crain. .hen the federal Fajm Board, through its dummy,

enters the wheat pit against professional speculators and begins dealing

in futures, it is speculating in the price, with intent to influence it|»

Otherwise what it does is without meaning or point; and otherwise the

law would not, as it does, discuss the consequences of profit and loss.

To stand much on a change of name, calling it stabilization

instead of speculation, is puerile apology for the federal Farm Board,

for its acts, for the law itself, it is better to take the fact in its

bald character and look then to the theory and intent of the amazing

1

transactions now taking place in the name of farm relief.

■heat is only the most vivid episode. i'he Federal .'arm 3oard is equally authorized to speculate in other agricultural commodi- ties and tc employ government money in ways direct and indirect to af- ect prices. Almost unawares, we have entered a road of original epi- sodes. IT© one knows the way of it or the end of it. 2he undertaking is| |o improve the relative economic status of agriculture by government in- tervention, --ark the word "relative", in relation to what is the eco- nomic status of the agricultural part of the population to be improved?

1. "Federal Farm Board Circular, i,o. I" Ilarch 1930

31

.hy, in relation to the economic status of the urban and industrial part, on the ground that the disparity between tthem has become chronic The law begins with a declaration of policy, which is "to place agricul- ture on a basis of economic equality with other industries". By act cf legislation.

Radical departures do often take place in dimness and hastjle . The most adventurous piece of economic legislation in our history was enacted at a time when the public mind was inert from sheer weariness, -he controversy over farm relief has reduced it to a state of complai- sance. Everybody was willing that something should be tried. Only the extremists in Congress were alert. 'j-hey seized the opportunity to load the law with strange and extraordinary powers, partly, no doubt, in a spirit of sabotage, if the law was rejected for that reason, so much the better, for then the agitation could gc on; if, on the other hand, the law was accepted in spite of what they had done to it, they would have their hands on the Treasury door knob.

Those who deeply disliked the extreme features of the act were, nevertheless, persuaded that they had either to reject it as a whole, or witness the shipwreck of a plan for farm relief, otherwise sound, for which the country had been anxiously waiting. This or noth- ing, after all that had been promised, would be a political disaster. Joreovor, they said the federal rarm Board was invested with powers of discretion. A sound federal >'arm Board would work only that part of thtt taw that was sound and necessary to move the benign intention; the un- | sound part it need not work at all, or, if ever, then only to meet an

unforeseen emergency.

The total result was a law in conflict with itself — a law with two heads facing opposite ways, each with its own intention. One was the intention to assist agriculture to help itself. That may be called the Hoover idea. The other was the intention to crash the United States Treasury for the farmer. This may be called the radical farm-bloc idea.

Then what did astonishingly proceed from the law and the reasons in case thereof can be set forth in a fair light. It is, first of all, necessary to understand this conflict and see it in the law.

Under the Hoover idea — which is very simple — agriculture needs first of all, to rationalize production instead of letting it rurj wild, and then to market its products in an orderly systematic manner To these ends, three means — namely, organization, capital and farmer- owner physical facilities. Organization is the first term. There is no way to rationalize production or to bring order and system into mar- keting without organization on a very large scale. For many reasons, agriculture had never been able to organize itself. The time had come for the Federal Government to take it by the hand and patiently lead it through association to a state of self-government.

Thus President Hoover, in his first words to the Federal Farm Board: "Your fundamental purpose must be to determine the fact and to find solution to a multitude of agricultural problems; among them to more nearly adjust production to need; to create permanent busiiiess in- stitutions for marketing, which owned and controlled by the farmers,

shall be so wisely devised and soundly founded and well managed that

they, by effecting economies and giving such stability, will grow in

strength over the years to come, 'through these efforts we may establish

;o the farmer an equal opportunity in our economic system with other in- 1

jlustry."

He was thinking of agriculture as it might lie entirely onder a system of co-operative associations, like the trade associations )f industry, only with more legal rights and privileges, including the right to limit production by agreement, immunity from the anti-trust ict, and the privilege to borrow money direct from the government at a Low rate of interest; each association to own its physical facilities, such as terminals, clearing houses, storage plants and selling agencies, ind to be free of government interference when, in time, it could take jontrol of its own affairs and go alone. All as it was contemplated in the act, down to the details of a vast pyramidial structure like this: First, at the top of the pyramid, the Federal Farm Board vith a revolving fund of half a billion dollars tc be loaned and reloan-| ad downward to the base.

Next, below the Federal Farm Board, a system of executive 30-operatives representing agriculture by regions or commodities — one for wheat, one for cotton, one for tobacco, one for livestock, one for iairy products, and so on»

Beneath each one of these executive national associations any necessary number of local or unit co-operative associations, drawing aid and benefit to the soil from the Federal Farm Board at the ton.

1. "Time Magazine"

— April 1930

Loans "by the Federal Farm Board frcm the ,500,000,000. re- volving fund run not to individual farmers direct out, in the first in- stance, to the executive or national associations and through these to the local co-operatives; and these loans — all repayable — may "be for sucjh purposes as to "buy, lease and build physical facilities for handling, at© ring or processing agricultural commodities; to promote co-operative organization, to assist effective merchandising in any way, and to en- able co-operatives to lend to their members more money din their crops than they can "borrow at a hank.

This scheme undoubtedly would work, provided the farmer embraced it. Otherwise not. Unless a very large majority of farmers were willing, as individuals, to impose upon themselves the restraints and discipline of co-operative effort, the Federal Farm Board, under al||L this part of the law, would still be jjowerless to change the economic status of agriculture. And that was what the extreme protagonists of farm relief were thinking.

Now comes the radical farm-block idea. It is Section 9, under the heading, Stabilization Corporations.'1' rJhose who are extreme-j minded about farm relief have a cold eye for co-operation or for any- thing that tends to limit the farmer's historic freedom of action, whicfln includes the right to produce as he sees fit. From their point of viev the demerit of the lav; up to this point was that Federal aid was con- fined to co-operative associations of a certain character — namely, such as would undertake to do more business with non-members than with mem- bers, .ell , then, suppose a majority of farmers v;ere unwilling to bind

1. Farm Board "Questions and ^s\vers,!

35

their individual freedom in responsibilities of association. How was government aid to reach such as these?

So they wrote into the act that wonderful dummy device named the "stabilization corporation," Paragraph B of Section 9, reads: "Any stabilization corporation for the purpose of controlling any sur- plus in the commodity. .. .may prepare, purchase, handle, store, process and merchandise, otherwise than for the account of its stock-holders or members, any quantity of the agricultural commodity or its food product; Note the phrase: "Otherwise than for the account of its stockholders o| members." This aid shall not be confined to co-operative associations. It is wide open to agriculture, co-operative or non-co-operative. All limitations are off. Under Section 9, the Federal Farm Board, through a stabilization corporation, may buy any quantity of an agricultural commodity. It may engage in the packing business, or the milling busi- ness, run a canning factory, or manufacture jellies. It may make a corf tier in an agricultural commodity, with government money. Literally so.

As if they had foreseen the possibility of a corner, with thd jovernment torn between farmers on one hand, and food buyers on the othflr, the authors of Section 9 wrote into it this aspiration of restraint: "Any stabilization corporation receiving loans under this subdivision fiflr surplus -control operations shall exert every effort to avoid losses and to secure profits, but shall not withhold any commodity from the domes- tic market if the prices have become unduly enhanced, resulting in dis- tress to domestic consumers."

But no way is suggested, no authority is set up, to determine

L. The Farm Board "Questions and Answers" Circular ITo. 1,

March 1930

36

what \;ould be undue enhancement or what would constitute consumer dis- tress. T.or is there anything in the law about what should be done in the event, not impossible, that after having not the money from the Government to make a corner in an agricultural commodity, and having made it, the dummy stabilization corporation came alive with a farmer mind of its own and defied the federal Farm Board's ideas of what woulRl be undue enhancement or what would constitute consumer distress.

And for all these Section 9 purposes — specifically, to buy and withhold agricultural commodities until the price is enhanced to a point just this side of consumer distress — the Government directly provides the money.

The Federal Farm Board's official interpretation of oectioi 9 is set forth in Circular ITumber I, entitled, "Questions and -jiswers",] Questions 30 asks for the board's thoughts on stabilizat ion,^" The an» swer is that the .tfoard thinks of stabilization in two terms:

First, there is normal stabilization, and everything the Board does should tend in a cumulative manner to produce stability in agriculture.

The Second term is different. TbM Board says, "The second form of stabilization might be termed extraordinary or emergency oper- ations, whereby, because of a large surplus of any commodity, the opers tion would consist of buying and taking off in the market some consid- erable part of the tonnage, so as to relieve the pressure in the hope there would be a more favorable opportunity of aisposin;: of it. This second, or emergency class of operation would, of course, be car-

1. The Federal Farm Board "Questions and -nswers" Circular Ko. I

March 1930

ried out strictly under the provisions of the --i.gr i cultural F-arketing Act, with money advanced by the 3oard, end if the final result of such operation shows a loss or deficit, such loss will "be borne by the revolv- ing fund." By the Government, that is to say.

^Surplus is the millstone, the price breaker, the evil measurt Agriculture has never been£>le to control the surplus, for the simple reason that is has never been able to rationalize production. ell, neither is the law able to touch production, The Federal Farm Board with all its powers cannot act upon production, that is to say, upon surplus at the source, save by exhortation. One of its duties is to exhort farmers to cease from producing excessively. Theoretically it may withhold loans and other benefits from those who do in a wilful manner produce an excess of any commodity, actually, nevertheless, a surplus in being is a fact in itself and creates an emergency on which the Federal Farm Board is obliged to act. If the Board should say to the farmers, "Since iaiowingly you have again produced a surplus, you must yourselves bear the loss of it," the farmers would say, "But for this problem of surplus we should not need a Federal Farm Board. The law tells you what to do about a surplus. That is what the lav was foi

Moreover, the law defines what a surplus is. It defines it not as a quantity that has been unavoidably produced. How or why it has been produced apparently does not matter. Flatly, the law says: There shall be considered as a surplus for the purposes of this .let any seasonal or year's total surplus, produced in the United States and either local or national in extent, that is in excess of the

1. "Farm P.elief" James 3. Boyle

requirements for the orderly distribution of the agricultural commodity or is in excess of the domestic requirements for such commodity.

Clearly, under the law it is the function of the stabiliza- tion corporation, and the duty of the federal Farm Board acting througlj the stabilization corporation, to do away with the surplus at any cost and charge the loss to the Government. So at last the wicked surplus, which, hitherto, -American agriculture has had to dump on foreign mar- kets at the world price will be dumped on the Government, The theory of dumping it on the Government is that when the Government has removec the surplus quantity from the market, so that what remains of an agri- cultural commodity will be «iust sufficient to satisfy the domestic demand, then the domestic price will be the world -price plus the tarifJj In the case of wheat, that is the world price plus forty-two cents a bushel .

Thus the law. How to see what has proceeded from it. The Agricultural IJarketing Act was passed on June 15, 1929. The federal i^arm Board took being thirty days later, beginning in June and continuing through tiuly and August, there was tremendous excitement in the wheat pit. The price advanced some times as much as six or eight cents a day, and the total rise in these few weeks was fifty cents a bushel — on rumors and expectations of what the Government to do under the head of stabilization. The effect was what you would expect. In- stead of selling their wheat on this rise, the farmers thought only of holding it for a higher price.

The Department of -agriculture was of the same mind and urged

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farmers to hold their grain. In July, in fact, it launched what was called a hold-your-^vheat campaign. All the government's price experts said wheat at ,;1.50 a "bushel was too low. They could prove it with reason and statistics, and did prove it with certainty to the satisfac tion of the federal Farm 3oard, whereupon the Chairman announced that the Board was in sympathy with the movement to withhold grain."*"

-hey were all wrong, -hey underestir.aated the amount of whea^ in the world, overestimated the world demand, and, of course, had no pre-vision of the financial crash then imminent in .Vail Street, This was "bound to have repercussions even in commodity markets.

As it turned out — as it will always turn out — the Govern]. mentTs opinion on the future of prices is no better than a private opi] .- ion; there is this difference, however, when the Government gives fortlj. an opinion and farmers have acted upon it, a moral responsibility is created.

In October came the typhoon in ./all Street. The natural sequel of a panic in the world of industry was heroically avoided, neverthe- less, demand in all directions was retarded, there was an onset of un- employment, commodity prices suffered, naturally, the price of wheat would hove fallen s omewhat , but it fell violently, not only because of the general economic disturbance but for the reason, also, that every- body suddenly discovered the position of wheat itself to be much weaken than had been represented by the Government. The Canadian wheat pools were in trouble, with a large carry-over from the preceding crop, and required help from their government, -here was "trouble also in Austral:

1. "Saturday evening x^ost" «;une 1930

and ..rgentina. ..ith these three countries pressing wheat for sale in the world market and with unsold -.merican wheat at the same time pilind up at all the export terminals until the railroads were obliged to s top receiving it on their tracks, the situation "became serious.

'./hat did the farmer say? He said: "'.Then wheat was $1.50, thdl Government told us to hold it. l!ow it is jl.25 and what is the Govern^ ment going to do about it?'"

There was the federal Farm .board, with half a billion dollars) to support agricultural prices. What was it doing? Fact-finding, re- searching, taking thought. But here was an emergency. Having said, irj August, "The Board is in sympathy with the movement among farmers' or- ganizations to withhold their wheat from market," had it no October re- sponsibility at all?

Both the pressure and the logic were irresistible. On Octo- ber 28, the Federal Farm Board said flatly that the price of wheat was too low. The decline, it said, was owing partly to the rush of new wheat to a glutted market and partly to the economic disturbance producelji by the ".'/all Street disaster. "Wheat producers," it said, "should not bp forced to sell on a market affected by these conditions."

Therefore, the Federal Farm Board acting through co-operative associations of wheat growers would lend government money on wheat up t its full market value, the basis to be ^1.25 a bushel for Ho. I Norther i wheat at Minneapolis. There was then no reason why a farmer should se .1 his wheat. He could borrow the full market value of it. Suppose the

price went down, well then the Government might have the wheat and welcome to it. But suppose the price went up, then the farmer could sell

41

pay back the Government, and keep the profit.

In announcing its policy the Board made this vast statement: "The Board places no limit on the amount of government money to be so loaned. ITearly ;100,000,000« is available for the purpose and, if ne- cessary, the Board will ask Congress to appropriate more." Maybe you would think, as many people did think, even, apparently, the federal Farm Board that when the Government has undertaken to leny any amount of money on wheat at a certain price a further decline is impossible. How could wheat go below the price? well, it did. It went very much lower, for two reasons: One was that the loans were limited to co-opeij ative associations of wheat growers; the other was that not even the Government can determine the selling price of wheat. The whole world does that.

As the price continued to fall, for reasons over which the

Federal Farm Board had no control, it was necessary to take another

step. The Board loaned liovermnent money to co-operative associations

for the purpose of actually buying wheat from member farmers at the

loan value of vl.25 a bushel, and to buy it at the same time in the opa^n

market at the market value. Loans for these two purposes were made by

the Federal Farm Board principally to and through the Farmers' national

Grain Corporation. This was the first national commodity, co-operative

sales association to be set up under the lav. .hen it was organized, ip.

October, the Federal Farm Board said: "This corporation provides a

medium through which the Federal Farm Board may make loans to cc-opera-|

tive grain marketing associations both for current marketing purposes and fnr the acquirement of physical facilities.^"

1. "Farmers Build Their Marketing Machinery" — Bulletin No. 3,

December 1930

42

The corporation proceeded to support the price of wheat with "buying orders. An Associated Press News dispatch from St. Paul, rebru- ary 6, read: "The farmers' National Grain Corporation has become the heaviest single buyer of grain in the country through its purchases in North /estern markets to "(bolster faing wheat prices." In the same weels the grain report in the Financial Chronicle said: "Wheat declined 5 to 6^ cents owing to the dullness of the export trade and the largeness of the surplus stock in this country. The co-operatives keep busy buying car lots of wheat in Minneapolis and Kansas City, but it looks like a futile gesture for the time being.""1'

Here is a singular spectacle. Co-operative selling associati jns buying the commodity they have to sell. Their problem is how to dispose of a surplus. But because the price is too low, they will buy the sur-| plus. As a producer, the farmer is, naturally, a seller. But since he is unwilling to sell at the current price, he himself turns buyer. ..hat they were thinking, of course, was that as buyers they could advance th i price and sell out. That is what professional speculators are supposed to do. ..hy shouldn't farmers be able to do it? Besides, it was the Government's money, and if it all went wrong, the Government would hold the bag.

But for all of this, the market price of wheat went on fallin| Only the market price. There were now two prices. One was the market price and the other ..as the government price, and the spread between thttm firas some times as much as eighteen cents. The Government was still lend- ing money on wheat on the basis of yl.25 at Minneapolis and lending

1. "Associated Press News" February 6, 1930

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money also to co-operative associations for the purpose of actually

buying wheat at that price, whereas anybody could buy wheat in the ope:

market for, say, fifteen cents less.

,/icked speculators were doing it. They bought wheat in the

terminal markets at the market price, then shipped it back into the

country and sold it to co-operatives at the government price, clearing

thereby very handsome profits. The position of the federal Farm Board

at this time was painful and ridiculous. Professional grain traders

were getting its money. The last step had then to be taken. That

meant to invoke the powers of Section 9. On February 11, the Board an|

nounced the existence of the Grain Stabilization Corporation and that

it had been provided with vlO ,000,000. of government money "to carry oij

1

its initial operations". ITature of initial operations not specified. II This Grain Stabilization Corporation appeared at once in the wheat pit at Chicago, buying Llay futures with government money. There was no ground for surprise. It was all legal. The law was clear, and even though .Section 9 was not mandatory, still the sequel was inevitable. 'There is there an instance of a Board or a commission exercising less than its whole power? Nevertheless, the bald sight of the Government standing in the pit and dealing in wheat futures along with profession; speculators was too strong, and the Federal Farm Board began to hear itself criticized. On March 6, it issued what was clearly a challenge to the grain trade particularly and to all detractors in general. It was this:

The Grain Stabilization Corporation will continue buying whes b

1. "Farmers Build Their r.arketing Machinery" Bulletin, Lo. 3,

December 1930

at the market and remove from the market whatever additional quantity that may he necessary to relieve the pressure and prevent any consider ahle decline in wheat prices. The Federal Farm Board is prepared to advance to this Farmers' organization whatever funds are necessary for that purpose. The Stabilization Corporation is being accused of specu-j lating in the grain market. There is no foundation in fact for such a statement. The Stabilization Corporation is prepared and expects to take delivery of all grain purchased on future contracts and merchan- dise it as the market conditions will permit.

Kote, first, there is no limit. Any quantity of wheat neces sary to he removed from the market will "be removed. Any amount of monety- needful to this enterprise will he forthcoming.

lThe Federal Farm Board refers to the Grain Stabilization Coi poration as "This farmers' organization". That it is a farmers' organi zation is true only in a technical sense; all otherwise it is a limp friction. '.Tho is it says what the Stabilization Corporation willdo? It is the Federal Farm Board. There was the Grain Stabilization Corpor ation created? On the desk of the Federal Farm Board. 'There did the decision lie to buy Eay futures to whatever extent was necessary? In the mind of the Grain Stabilization Corporation? No, in the mind of th Federal Farm Board. The Grain Stabilization Corporation says nothing. It has not even the voice to defend itself against the charge fhat what it is doing is nothing else than speculation. It is the Federal Farm Board that says to buy futures is not speculation if you expect to take

the actual grain in the hope of being abifce sometime to sell it at a profit.

1. "The Farmboard Circular Fo. 3"

45

At that interval the situation in wheat was as follows:

1, Enormous suns of Government money outstanding as loans on wheat at prices away above its market value, and all such wheat likely to pass into the hands of the Government by default of the borrov/ers.

2. Co-operative associations holding at a loss great quantities of wheat bought with government money to support the price, much of this wheat also likely to pass into the hands of the Government.

5. -he Federal Farm Board itself, through the Grain Stabiliza- tion Corporation likely to find itself at the end of the old crop year in possession of maybe 100,000,000 bushels of wheat, from its buying o futures in the Chicago wheat pit.

4. And nowhere any control of new production, no way of touching it save by exhortation.

To this vital weakness of its position the Federal Farm Board was obliged to give its increasing anxiety. Five days after hav|n announced that any amount of wheat necessary to event a further de- cline in price would be removed from the market by the Grain Stabili- zation Corporation, the chairman of the Federal Farm 3oard, in a tele- gram to the governor of Forth Dakota said, "There is no possible solu- tion of their problem unless we get the co-operation of the growers themselves. Fo other industry in the world blindly produces without any attention to the potential market possibilities. Your growers vail ask how they are going to get along with a less production, but if theg can get more money and we believe they can, by raising four bushels where they now are raising five, why should they destroy the market by

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• 1	raising the extra bushel? The present operations of the Stabilization Corporation will undoubtedly result in their having upward of 100,000, 000 bushels of wheat on hand at the close of this present season, and if farmers are going ahead trying to produce an additional surplus on the basis that some way will be found tc take care of it on a fair price level, they are going zo be mistaken." The federal Farm Board had already borrowed Dr. John L. Coulter from the Tariff Commission and sent him on a missionary errand to the Forth ./est where he is well-known as an agricultural economist. The errand was in the name of the Government to beg farmers to curtail their wheat acreage. So the Federal Farm Board with already one hundred bushels of surplus wheat in a government basket, exhorting farmers to produce less I And the member of the radical farm bloc in Congress at the same time saying that the only way you could get farmers to produce less would be to shoot all the excess farmers. '.Veil, there is the story of the first season of wheat, wheat alone, under the agricultural market act, as far as it goes, it will finish itself, '^he sequel will be what it will be. How to be set forth is the theory under which the federal Farm jDoard acted to the extreme of its powers. Continuously in its mind was the thought that a ilational crisis existed, -here was first what happened in all Street in October, in consequence of what rresi- dent Foover had called a vast contagion; then the reaction to that

47

event of reckoning upon economic conditions in general.

To avoid a serious depression in the country, finance and industry, under the active guidance of the Government , pooled their resources of Will, capital and imagination in a manner and to a degree never before attempted, For the first tine a »7all Street disaster of the first magnitude was not followed by senseless disorder in the eco- nomic structure as a whole.

But, whereas the w el fare of industry, the continuity of its works, wages, and profits, were the first concern of finance, there was no such thing as an organization of private finance and powerful trade associations to come to the aid of agriculture cr to save it from the evils of necessitous and wasteful liquidation, vo do for agriculture vrtiat was doing for industry became, thereforo, the ^ob of the Federal Farm Board. It had the power, the means to organization, and the mono™

•	Specifically, and only in view of the national emergency then existing, the federal Farm Board undertook to prevent a panic in agri- cultural commodity prices, Such was the theory on which it acted under Section 9, to the limit of its powers. And all this was apart from wha else it was doing, and intending to do, gradually to improve the econom ic status of agriculture by sound means. Its decision to set up the Grain Stabilization Corporation and enter the wheat pit as an unlimited buyer of future contracts was formed at what it considered to be a critical moment. ..-heat prices were very weak, around y1.00 per bushel, ~rade experts sat with the Federal Farm ooard saying the price would go to 80 or 75 cents, trimly
	1. "Farmers Build -heir Marketing i-achinery" — Bulletin ..o. 3« December 1930

it might have "been wise to let the price go. heat at seventy-five cents would have solved at least three of the federal Farm Board's pro-f hi ems automatically;

First ; It would have "brought many more fanners intc the co-operative associations in order to oh tain Federal aid.

Second; At seventy-five cents the -jnerican surplus might have "been sold in the world market and got out of the way.

Third; 'x'here would he nothing like the spectacle of seventy -five cent wheat to make farmers curtail wheat acreage.

Keanwhile with the Government willing to lend :;1.25 a "bushel to farmers,

so that each might individually hold hack his share of the surplus, th€

farmers need not have "been hurt "by a temporary drop in the market price

to seventy-five cents, provided that all joined co-operatives.

Yet in the opinion of the Federal Farm board, a decline in the price of v/heat to seventy-five cents would have "been a first class economic disaster; moreover, it would have "been grievous for farmers outside the co-operatives, and therefore, "beyond the aid of the Govern-j ment. The Board went further in wheat than in any other commodity, and for that reason the narrative of wheat receives more attention thaij it would perhaps intrinsically require. It illustrates luminously the working of the whole law and perfectly represents, hesides, the ideals that move the Board.

In cotton, it stopped short of setting up a stabilization coifl- poration actually to "buy and remove the surplus from the market. But, as in wheat, so also in cotton it undertook to lend an unlimited amount of government money through the co-operatives up to a "base of sixteen cents which v/as at that time its full market value. As with the price

of wheat, so with the price of cotton it went much lower, and the Government found itself lending up to sixteen cents on cotton when any-| one could "buy it in the open market for fifteen cents, ^s in wheat, sc in cotton, the 3oard loaned the co-operative associations government money to "buy the commodity for the purpose of withholding it from the market. And the idea in both cases was the same, as shown in the fol- lowing statement from the Chairman of the Federal Farm Board on Febru- ary 25,: "Sorr.e objection has developed in the grain trade against the action of the Farm Board in financing farm co-operatives in the purchas of wheat and cotton in the present situation. The activities will con- tinue in the interests of agriculture and business, as an emergency measure in the present situation. I have no fear that co-operatives will not be able to eventually market these purchases satisfactorily. The Board is endeavoring through financing the farmers' own organiza- tions, to help to restore stability and expedite recovery from a crisis which the farmer did not create and for which he is not responsible.

"Critics of the Agricultural Marketing Act have objected that the remedy is to be applied to the distributive system, whereas the ill of agriculture are due to defects in the productive organization of the industry. However, any really intelligent and searching diagnosis of unsatisfactory prices is likely to emphasize the existence of acute or chronic surpluses and thus lead to critical and constructive proposals for the conduct of agriculture's producing department. Indeed, the act itself explicitly states that one of the Board's four lines of proced- ure shall be to aid "in preventing and controlling surpluses in any

50

agricultural commodity, through orderly production and distribution, s as to maintain advantageous domestic markets and prevent such surpluse from causing undue and excessive fluctuations or depressions in prices for the commodity.""''

The problem being one of better economic organization in agr culture, ameliorative measures are to start at a point where existing organization is greatest, or, if you please, disorganization least projf mounced. It appeared that the distinctive form of modern business or- ganization appropriate to agriculture is the co-operative association and co-operation has been predominantly concerned with marketing activjj- ities.

But even accepting this as good strategy for the attack, two questions are still to be faced; how heavy are the odds, and how brigh are the prospects of victory? .Vhoever attempts to answer these questions must either be blessed with omniscience or buoyed up by the valor of ignorance, -''or ourselves, we ^hall be content merely to set forth what we consider the essential issues raised by the creation of a Fed- eral Farm Board within the structure of our government.

Agriculture is to be aided in saving itself throug?i the agency of large-scale joint action similar to that found in other indus- tries. To propose this is openly to throw down the gauntlet to the farmer, challenging him on the ground of his most deepl;/ rooted prepos. session. Sv^gfiy^here and always he has cherished the idea of himself as "the independent farmer". But the Federal Farm Board has not been anointed this god; it smites hip and thigh the idol of farmer "indepen-l

		= ■« 1 1 -

dence." The hand of iconoclasm is tearin g at the foundations of one of our most ancient tribal gods. Before he topples, or "before the iconoclasts retire in discomfiture, let us take a closer look at his lineaments and the virtues which tradition ascribes to him.

A grave problem confronts the federal Farm Board. You can- not have co-operation without co-operators, and the rank and file of American farmers still live by the creed of individualism in which thejfr were reared. 'The Farm Board may be called upon to aid sor^e of the es- tablished and successful co-operatives. But after all, these have shown a considerable ability to take care of themselves, and facilitating their future efforts would be but a small and not very brilliant star in the Farm Board's crown on the last great day. The real purpose for which the Board was brought into being is to do something significant about the low net prices of our great staple products — prices that have been disastrous for millions cf farmers scattered from one end of the country to the other, and that have produced a decade of agricul- tural depression.

Grain, livestock, cotton and tobacco are four sprawling giants whose unco-ordinated movements and perverse conduct have caused national humiliation, if not alarm. They are badly in need of some tutorial or disciplinary agency that can set them squarely on their feet, tidy their appearance, steady their movements, give them the snajji and smartness that distinguish the other members of our industrial family.^"

It would take a sizable volume to analyze the present state

or organization and. tne past nistory oi' organizational effort in any 1. "Farm Reli&f™ James E. Boyle

52

one of these "branches of our agricultural industry. ~iven in this brieff" article, however, we may perhaps "bo able to present a thumbnail sketch which will illustrate by a single instance the case of farmer "indepen - dence" versus the Farm Board. For this purpose we shall take the grai: l- growing industry, to whose grooming the Farm Board has already laid itft hand.

The first farmers* grain elevator of which we have record had its origin in the late fifties. "hrough the ups and downs of Grange and Farm Alliance history, the movement retained a tenacious foot- hold, but it showed little expansion until near the end of the century Then it found itself, and for a few years fought a brilliant battle in which it vanquished the hosts of line elevator monopoly and broke through local shipping points to put its grain directly in the great terminal market centers. Overlapping this movement was another which aimed to establish co-operative terminal selling agencies, and which has, over the years, produced a handful of such concerns capable of maintaining their own existence but exerting negligible effect on the grain market Just after the .'orld Var the craze for "commodity pools" swept rapidly from the Pacific Northwest over into the I.-ississippi Valley until it included more than a dozen of the principal wheat-producing states. After barely a decade, less than half of these wheat pools were still in existence. The survivors seemed unwilling to die, "but were unable to move forward to accomplish any of the significant results which v/er expected of them. Each one of those groups has been directed by men who. were close to the soil — "farmer -minded" — and thus thoroughly

	■	r c

indoctrinated with the traditional code of farmer "independence." No one of the three would work with any of the others, Their idea of co- operation was that others work with than. They preferred rusty obso- lescence to the pain and humiliation of "being melted down and recase i 1 a new form "better designed to fit the farmers' needs.

No douht each of these three factions hoped and sought to "be the recipient of the Farm Board's funds and favor, which would enable it to expand into a mighty agency of salvation for the grain farmer. But the hard-boiled Board took little account of their separate sover- eignties, their stubborn sense of independence. Behind closed doors it gave them a brisk injunction to forget the past and get together in a single co-ordinated enterprise, a system of producer grain marketing which would include "both country shipping and terminal selling, and which would pool the interests of all their producer members in the common cause of more economical handling and the most skillful distri- bution possible.

Apparently the leaders who received this well reasoned mes- sage from an outside agency occupying a position so well calculated to command respectful attention have set seriously about the business of designing a co-ordinated grain-marketing systeir. which would provide an integrated agency of contact between grain producers and the Federal Farm Board, But however skillful their draftsmanship, however well designed the marketing machinery which they propose to set in action yet another question remains to be answered: Will the farmers sun-port

But if it is to accomplish its appointed purpose the farmer must turn over his grain to it and must supply a reasonable part of th^ capital with which it is to do business. She Farm Board stipulated two conditions to the conference of fifty representatives of present co-operative grain-marketing agencies:

First; The several factions must throw in their lot with a single

co-ordinated system of grain marketing, so that there may be one representative or authoritative agency with which to dea!

Second: This organization must be on a sound commercial basis adequate to its needs; must have an initial capital of at least ten rrillion dollars.

i-ven this would be sufficient only for an organization that could serve as a nucleus for the comprehensive producer-owned marketing system whicfi is contemplated as the ultimate objective «^

Here, then, is a blunt challenge to the "independent" grain farmers. ill enough of them and of their small and local business unilts curtail their cherished sovereignty and delegate to a central governing organization enough power to make it a significant competitive factor in business organized upon the large scale which prevails in the busi- ness world in which they aspire to play a brilliant part? To anyone who knows the stingy contribution of capital and the fickle patronage which even the surviving farmer grain -marketing agencies have been vouchsafed by their nominal members, it must be a matter of grave doubt whether the farmers who have clamored for relief to the grain -growing industry are redely to pay the "quid pro quo" in terms of loyal and in- telligent support.

'./ithout such support as this among existing grain co-operativfes

1. Federal Farm 3oard, Circular ITo. I

no r'arm Board that could be recruited anywhere could build a grain- marketing agency which would get efficient merchandising of even that part of the total grain supply which this most nearly co-operative fraction of the grain industry controls. As for doing anything througtj such an agency toward the stabilization of any but the most local dis- parities of price, that is utterly out of the question. Before much could be done toward real price stabilization, even intra-seasonally , there would have to be allegiance and a working scheme of government covering the dominant portion of the industry — the several million farmers scattered over most of our states, the in-an-outers as well as established producers, '-'he aim certainly will not be accomplished within the present pattern of farmer "independence".

Only three alternatives seem to be embraced within the logic of our agricultural situation. - irst T our farmers may remain "indepen-l dent", disorganized, discouraged; accepting such economic adjustment as the blind, relentless working of economic laws may eventually bring. Mature in the long run strikes its own equilibrium. Second, there is the "noble experiment" upon which the Agricultural Marketing Act of 1929 has embarked us. -his looks to voluntary co-operation of broad scope under government auspices as a means toward the rationalization of the several branches of our agricultural industry. 32 he purpose is to effect a quicker and more socially satisfactory equilibrium through purposeful public and private action. It can be accomplished only if the farmer puts off his ancient garment of ragged individualism and

accepts the modern mode of expertly designed group action, -he third alternative is some for;:: of compulsory co-operation.

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Public opinion in these safe and sane United States has al- ready arrayed itself so stoutly against i^cNary-IIaugenism that v;e may safely dismiss the third alternative for the present ut least. V/e shall not set our feet in the path of comprehensive group action under govern- ment compulsion, even though some rather decent hordics in neighboring countries and overseas are experimenting with this sort of economic mechanism. Kor is it our present intention to fall hack on laissez- faire. As at no previous time in our history, it has been explicitly declared to be the public policy of this country to solve the agricul- tural problem, or at least to ameliorate the condition of those who depend on agriculture for their livelihood, by economic engineering of an ambitious sort.

V.hether this engineering project succeeds will depend upon the soundness of the design and the correctness of the principles upon which that design was made, but not less upon the quality of the mater -j ials with which the structure is tc be built. Even if the engineers did not have a trustworthy handbook from which the strength of these materials could be ascertained, they may have made a happy guess in accordance with which their calculations will eventually prove them- selves sound and workable. Or it may be that they will be able to de- vise some clever schemes for treating even unsatisfactory materials in such a way as to give the necessary strength or workability . We must all of us stand by in interested and sympathetic contemplation of theii efforts.

Can they infuse into the discrete individualism of agricul-

57

ture as we have known it such a sense of solidarity, such a willingness to accept even s elf-imposed discipline, that we shall really have agri- culture economically organized on a "basis comparable with that of other industries and commensurate with modem economic needs? vie have set out to solve the agrarian problem in terms of organized agriculture. But unless the nine gentlemen who constitute the federal Farm Board can effect this shift from farmer "independence" to a reasonable measure of industrial solidarity and internal control, "organized agriculture" will still be known only in the gorgeously Bickwickian sense in which the term has been used thus far."'''

President Hoover, it is said, has won a great victory over the Senate by the defeat of its debenture amendment to the farm-relief bill. That statement overlooks the future and an important part of thti past. The debenture will appear as an amendment to the tariff bill. That has been the plan of the Senators supporting it, all along, and a logical plan too since the debenture is a device for making the tariff effective on farm products. The Senate's insistence on inserting it in the conference bill for agricultural relief was mainly for the pur- pose of forcing the House to take a vote on it.

After all, the fundamental issue is not the result of a quarl rel between two branches of our government, but what sort of relief th| farmers are to get.

Three major agencies, or typos of agency, are contemplated ii the successful measure. At the top is a Federal Farm Board, to be com posed of twelve members, one from each Federal Reserve District. Under

1. "New Republic" April 30, 1930

58

this may be found advisory committees for separate commodities, and third, there may be created stabilization corporations for the several commoditios, co-operatively owned, and empowered to deal in those com- modities for the benefit of the co-operative owners.

The Federal Farm Board is to carry on research, educate the farmers in the advantages and uses of co-operation, encourage the organ- ization of co-operative societies, foresee and try to prevent overpro- duction, and attempt to work out new uses for agricultural products.

The advisory committee will help in these activities. The chief func-r tion of these committees appears to be, however, to suggest the forma- tion of stabilization corporations whenever the need appears. The theory is that such corporations should not be formed unless the cc-op-jf eratives concerned want them. Their main purpose would be to buy sea- sonal or temporary surpluses which threatened to break the market, and hold them for better prices. They would operate under the strict supe vision of the Farm Board.

To enable this sort of thing to be done, a revolving fund, limited to .500, 000, 000 • is provided, of which Congress has appropriated ■J150 ,000,000. Loans from the fund can be made to the stabilization corporations, at low interest notes. They are to pay back when they sell their accumulations of crops and are also to create reserves of their own out of their possible profits, after they have paid a divi- dend limited to eight per cent to their owners.

Other purposes for which the fund may be used are:

		59
>	First: To assist the orderly marketing of crops, and to reduce specu- lation and distributive waste, by the creation of facilities such as warehouses and terminals. Second: To finance the insurance of co-oioeratives against reduction in the prices of crops which they buy These broad outlines of the plan permit a good deal of lati- tude to administration. The most obvious comment is, that under able and meticulously honest administration there is a chance of success, but that the plan offers tremendous opportunity for political pressure, profit or mere blundering. The tendency of any agency which offers to private interests governmental "loans" is to pour out as much as possi- ble, in the way of benefit to the interests concerned and allow the loans to remain unpaid, except by the tax-payers. A straight-out sub- sidy would often be preferable. The plan, moreover, offers nothing in the way of emergency relief to those agricultural staples which have been persistently over- producing or whose prices are set by foreign markets. It would clearly he absurd to form a state stabilization corporation and finance it to hold off the market a crop like wheat, which suffers from low prices /ear after year because of large world production. Or at least to hold Dff enough to materially affect the price over an average period of >rears. If that were attempted, the loans would not be repaid, the "re- volving fund" would not revolve, and a continuance of overproduction vould be encouraged until the corporation could stabilize us no longer md the price collapsed. Much better, if that is the purpose, a sub- sidy like the debenture, or an export agency like that proposed in the IclTary-Haupien Bill, with the loss met out of equilization fees.

	>	•

		60
	The only price aid to be s oundly offered under the plan woul< he that which might he extended for one season only, or at most two, t( a crop whose yield happened to he temporarily and unusually large on account of weather or other accidental conditions. There would have to he a moral certainty that the temporary surplus would in an average period of years, he succeeded by an equivalent shortage. If Mr. Hoover's desires are followed, this feature of the fell will probably be used only in rare emergencies. He undoubtedly lays more stress on its provisions for eliminating waste in the distribution of food products. That such waste exists there can be little doubt. That it is of a nature which can be remedied by any federal ?arm Agency acting alone may, however, be douhted. To eliminate it will require a long process of adjustment of railroad, terminal, trucking, and other practices, not merely the substitution of new agencies for the much- abused middleman. If the new agencies used the same methods and facil- ities that middlemen do, the cost of distribution would scarcely be af- fected merely by the elimination of the private distributor's profit. 3ut to make the necessary adjustments will require much time. It does not fall under the head of "farm relief" so much as building for the long future. .hen it is all done, the consumer rather than the farmer lri.ll derive the benefit, as long as the farmers tend to produce more of Bvery crop than the consumers want to buy. Limitation of production is the essential basis of any endur- ing relief to the farmer, whether the immediate instrument of relief be stabilization corporation, debenture, crop insurance, clearing channels	L of

distribution, cr seme thing else. It is difficult to see how this can "be achieved except through the formation of sufficiently strong co-op- erative farmers' societies, resting upon deeply ingrained co-operative habits, loyalty, and understanding. .American experience abundantly proves that farr.ers will not remain loyal enough to a co-cperative as- sociation even to market through in bad times so long as they regard it as a distant business agency in which they have no part other than t profit by higher prices. That co-operativos of this sort could induce farmers to limit production is difficult to believe. 'The super-agen- cies contemplated by the bill might fit well on top of a co-operative structure which had grown solidly up from the ground; but if we had such a co-operative structure it could probably command its own researcjji, planning and credit. Few successful co-operatives see much benefit in the present bill. The most dubious feature of the Hoover plan is whether it will succeed in building effective co-operation frcm the top down. If it does not, there will be a real danger of financing artificial and paper organization, and providing places for self-seekers, thus tending to corrupt the whole movement and making the pathway more difficult for the genuine co-operatives.

.e have before us the example of the Federal Land Banks, whic' .r:ere supposed to be co-operative, but which have been run by political appointees ever since their foundations, and have been sadly abused by patronage and other unsotmd practices of administration.

One feels it is almost certain that the farmers will Hk© dis- appointed if they expect any immediate aid from it. It will take skil

62

and foresight to make it work well enough In the long run so that the farmers v/ill not lie sorry that it was passed.

The Federal Farm Loan system is a colossal centralized credit community of ours, it is now ah cut fourteen years old, it "boasts nine- teen millions of assets, and the achievement of having lowered farm moiflt- gage interest rates hy ahout two per cent.

Economists point out that, even at rates lowered two per cent farmers are paying too much for necessary financing. Our rates are higher than those available in twenty other leading countries. Our far industry earns only about four per cent on its investment. It cannot afford to pay five to six per cent for mortgage loans, nor for market- ing loans, to say nothing of the customary ten per cent for financing crop production where such credit is obtainable. .hy, the farm organi- zations demand, is the world's largest rural credit system offering tax:, exempt bonds denominated as government instrumentalities, asking farmer: of the United States to pay more for funds than the farmers in other Lands £e» pay for loans from smaller systems."'"

That administration of our rural credit has not resulted in 1*7 anough interest rates is merely a first point made by critics, -hey con plain that major social powers, carefully prepared for in drawing the "arm Loan Act have been abused or prevented. One of these powers looks ;o the prevention of unnecessary deflation of the farmers' permanent Investment, his land. That section of out1 three-part system for farm .oan relief, the Federal Land Banks, controls about ten per cent of the ;otal farm mortgage business of the country. Fne twelve regional Feder-

1. "Few Republic" February 1929

		•

63

al Land Panics are under government control. ITat ion-wide in their ac- tivities tjiey possess regulatory pavers v/hich extend to the authority to sustain farm land values to an important degree.

The acid test of whether this credit -community has a mind involves this point, encouraged hy high prices and the "boom-methods of farm realtors, some but hy no means all, of our farmers bought too much acreage at inflated post-war prices, »7ith the failure of farm income, deflation occurred, followed by a land crisis. Bankruptcies and foreclosures were widespread and inevitable and the tragic proces- sion of defeated farm families began to move to the city, seeking live- lihood in other occupations than those to which they had been trained. By 1924 it was a migration, then a route. Joday we know that we suf- fered a net loss in farm population of four millions, and still land panic is with us. Farms are still being foreclosed in numbers by mort- gagees and land prices are strikingly subnormal. Jhe question is, did the Farm Loan System display the disposition and the intelligence to use its wide powers to sustain land values as much as possible?

Concrete acts allow ground for belief that the system exerted its powers, perhaps blindly, to the positive detriment of agriculture, for -whose relief it was designed. -or, somewhat casually, when defla- tion of farm prices was well under way, the federal Farm Loan Board ini- tiated a drastic policy, the significance of v/hich — since nominally it had to do an accounting — remained obscure for several years, -res - idents of the rederal Farm Land Banks were advised that "acquired real estate" — foreclosed farms — must be completely charged off the books

immediately after talcing. Since Land 3anks have no assets save lands, this ruling was conducive to inflicting a rate of one hundred per cent depreciation upon the business, -hereafter, for more than five years, all farms foreclosed were not listed in any value whatever as assets. The true asset value of these farms v;as thus concealed, -he effect of this ruling was calamitous."*"

Like all other agencies lending on land, the .ederal Banks had to carry an overburden of real estate, although they were not, in most instances, so badly off as state or certain national banks, or many insurance and mortgage concerns.

Axl identical problem faced all alike: How to carry the land until it could be profitably sold. "HOLD" was the v;atch-word» Experts advised a private insurance company on heavy mortgage investments that to sell 5,000 acres in parcels scattered throughout lowa at forced sale would depress farm land prices throughout the State twenty-five dollars per acre.

Commercial banks, having demand obligations, were soon com- pelled to sell, Land banks, however, were in a favored position. Ae- cepting no deposits, free fro: demand obligations, they were also forti - fied by a provision in the /arm Loan -ct designed to meet just such a crisis, and to allow for the cycle of industrial ups and downs, the Land Banks are empowered to hold land five years if necessary and no fixed rate of depreciation is set. o-enerally speaking, the federal Land ^anks were in a good position to hold, since appraisals for the most part have been conservative. Testimony given in Congressional

1. "New republic" February 1929

hec-rings states that in Iowa, for example, .100. per acre was arbitrar ily fixed as the top value that would ever "be accepted as a lending basis, ihe federal Land Bank loaned closer to thirty-five per cent than the legal fifty per cent of the accepted valuaticn.

'±'he policy of complete, immediate depreciation of all assets however, changed the complexion of the situation, since it deeply af- fected the "balance sheets of many of the federal Land Banks. 3?e make a reasonably good showing, the Land Banks of various districts had to sell, ihere were few "buyers at any price. As tight-pressed commercial oaiilcs attempted to liquify assets nearly all at once, an abundancy of land accumulated, ..Tien, regardless of market conditions, certain land Banks joined the stampede and dumped land — sometimes wholesale — on a market which was already bad, priced dropped likewise.

"The St. Paul federal Land Lank sent to the auction block, ir a single batch, parcels of land worth one million, the cash price re- ceived was i375,000. i'he transaction brought a large direct loss to the banks, but its indirect losses were worse. Ly depression values the security behind every good loan was reduced, not only for this bank but for all mortgage agencies. And in human loss 2 warmers in no visi- ble way related to the federal Land .bank saw their equities in their farms diminish, and in some cases vanish, ouch a process inevitably increased the emigration which it was the obvious duty of the System tc exert itself to check."1

"In the freat Spokane Land Bank a serious situation was reachjfed by 1924. federal Land Banks have interlocking liability, all are respc ti-

1. "Hew Republic" — June 1929

66

sible for the losses in any. Spokane's overburden of foreclosed lands (unpaid taxes) alarmed the Federal Board and the other eleven banks. The condition set up by law for receivership of any bank is default of interest on its bonds. This was not reached at Spokane, nevertheless, a f eceivership, camouflaged under, the name of the Spokane Commission, was set up. Today Spokane stockholders complain that their bank never actually required any such treatment; that, had they been allowed to count their real assets at book values (farms appraised at ten millions which the bank had foreclosed) they would have worked out their problerr They complain that a large land-sales department, employing forty peopl^ and extra officials, exerts a costly and dual control over the bank's affairs which Spokane is required to stand because the other eleven banks furnished up to 1928 some 2,800,000 to help Spokane out."1

v/e lack sufficient "information to test the justice of these contentions. A cloudy atmosphere has been maintained for some years over the actual contract between the Spokane bank and the other eleven banks, about the amount of land sold, whether wholesale or retail, as well as about the prices received and the names of the purchasers. The apparent secrecy has its' excuse in the probable effect on the bond mar- ket. If the farmers of other districts had known that three millions o funds otherwise available for dividends to themselves v/ere diverted to the Northwest necessarily or unnecessarily, stockholders as well as bon<j. holders might have exerted themselves in an effort to find out whether the situation was caused and prolonged by stupidity or by design.

For the financial aid given Spokane taxed the resources of

1. "New Republic" — June 1929

67

other banks, and the continuance of the charge-off policy even more so Today the Columbia, S. C. Bank is said to face a more serious situatioi than any other. Six out of twelve of the Federals, "by 1927, showed their embarrassment by cutting their dividends, four reduced, two paid more however, .by these facts were omitted from the 1927 Annual reporl of the Farm Loan Board to Congress is a question of interest. Fcr two years those annual reports of the Farm Loan Board have been oddly de- layed. The 1926 report was withheld until Congress had adjourned. Finally submitted Lay 1927 it was not printed for general distribution until the very last of that year. The 1927 report, due in the first quarter of 1928, was held up until the Senate finally passed a special resolution demanding it.

The farmers have long complained that the tariff is a one- sided affair, which protects manufacturing more than it protects agri- culture. The economists of the agrarian movement which has been active in recent years have never tired of pointing out, the inequality of farmers and manufacturers under the tariff was not the result of simply an inequality in the duties levied on farm and factory products respec- tively. It really arose because the most important farm duties were ineffective in giving the protection to domestic prices which they were ostensibly designed to furnish. As long as we are mainly a wheat-ex- porting rather than a wheat-importing nation, we cannot raise the price of most of the wheat grown in this country merely by putting a protec- tive duty on imports, whether that duty be one of five or five hundred per cent. If the wheat farmers had monopolistic power and could re-

strict production "behind a tariff barrier, they could he protected, if they could control prices sufficiently so that they could sell in this country at a higher price than they can sell abroad, they could be pro - tected. But wheat farmers have none of these powers. That is what makes the tariff on wheat less effective than the tariff on steel rail;* Likewise the tariff on other grains, on cotton, and indeed on most of the important agricultural products, is nearly useless, either because these things could not be imported to any extent in any case or becaus i their production cannot be successfully restricted.

No more severely logical action has been taken by the Senate for years than the amendment which is the export debenture in the tar- iff bill. If it kills the tariff bill, that will be only because the tariff bill ought to be killed. The debenture belongs in the tariff bill.

The HcITary-Eaugen plan in its various forms, was devised to remedy this defect in the -American protective system, riut the llcllary Haugen plan was rejected, and now the debenture, simpler and more easily workable, has taken its place. Its whole purpose is to enable wheat and other farmers to do what the steel companies can do as a result of protection, namely, sell their products in this country at a higher price than those products can be sold abroad, in the face of foreign competition. If anything short of a high degree of concentra- tion of ownership in agriculture, such as prevails in steel, can accom- plish this result, the debenture can accomplish it. If a protective system which raises the price of manufactured products is good for the

69

country, a protective system which raises the prices of agricultural products is good for the country. If it is unsound economically to grant a subsidy to farmers, by means of the debenture, to be paid out (jjf consumerTs pockets and out of governmental revenues, it is equally un- sound to grant a subsidy to manufacturer's tc be paid out of consumer^ pockets, and by means of a restriction of governmental revenues. Pro- tection does restrict governmental revenues, because it rakes the re- ceipts fror import duties less than if these duties were low enough to admit more imports. If the debenture cannot achieve its avowed pur- pose of making protection effective for the majority of farmers, then that purpose cannot be achieved, and protection for manufacturers is one-sided and unjust.

"To any student of the tariff, it is obvious that so far as solving the farm problem is concerned, the new tariff bill is a very minor factor. /ithout doubt, agriculture as a whole would have been much better off had the tariff not been changed at all, because the in-J crease in rates on manufactured and other non-agricultural products pre v: ded in the present bill will burden farmers as a whole more than the increases on agricultural products will benefit farmers as a vhole. Agricultural groups should, therefore, exert their influence in secur- ing legislation to aid in establishing and developing better marketing machinery, better tax policies and better credit facilities, which will in the long run, produce a greater benefit and help a larger proportior of our farmers than will any possible tariff legislation.^-

1. flffew Republic"

- June IS 29

THL OUTLOOK JCH TKI1 ffAECIIK The Board frankly admitted that its stabilization operations in the wheat market have "been a costly and experimental venture with the outcome very much in doubt. vhile insisting that the operations have contributed materially to support farm prices of wheat, the Board! made it clear that the results had not been all that had been hoped f o^ . It averred further that stabilization, at best, is only temporary and that in the last analysis the hope of the wheat grower rests upon his own willingness to curtail production. There is a field of stabiliza-f tion measures — just how large a field the Board is not in .a. position to determine — but experience described indicates to sore extent the difficulty and hazards that are involved. _he reduction cf acreage is the obvious and economic remedy for the overproduction if wheat. The i'arm Board's record is one of sincere and persistent striving and of a degree of success already attained, a.nd it presents the prospect that achievement of the ultimate goal of the government's policy will be accomplished, and thus agriculture will be made as stable and secure as other American industries are. The Farm Board's statement of its plans with respect to the 1931 wheat crop combines strai ght thinking and plain speaking.

Today the two most powerful arguments are ranged squarely on the side of non-stabilization. They are first, the facu that a policy of wheat buying by the Government would physically swamp the alroady overflowing storage facilities cf the country, and second, that the

71

Board hasnrt the funds to see it through another season of -price sta- bilization.

The Federal Government is helpless other than to make financ- ing easier and to assist in the establishment of sound co-operative or- ganizations. Such legislative enactment as the equalization fee and the export debenture, for dealing with present day exportable surpluses, are little more than quack remedies. They would result only in taking

farmers to the mountain tops showing them the world, and casting them 1

down again. Such proposals contemplate subsidizing the exportaticns of excess sujjplies. Most importing countries have embargoes of counter vailing duties that would defeat the very purpose of the proposals, 'oreover, dumping of surpluses on foreign markets, if permitted, would depress world prices to perhaps the extent of the subsidy, thereby ben- efitting no one. American producers can help themselves most by restrict- ing themselves to the domestic market, thus caning within the clearance circle of protection that this government of itself can give, whatever, the world situation may be.

Aith reduction in acreage offering the way out, .J?thur B. Hyd the Secretary of Agriculture, and Alexander Legge, Chairman of the Aede^ al Farm Board made a "Paul Aevere Hide" through the Plain States last

summer, sounding the warning before audiences that over-production pre-

2

sents tne greatest dangers. Although many of their listeners were hostile, their trip accomplished some of the results they desired. Sta- tistics compiled by the Department of Agriculture show that the winter wheat acreage this year will be smaller by 4-g- per cent than it was last

1. "New Republic" lay 21, 1930

2. "Time Magazine" June 2, 1930

72

year.

The reduction is not large enough, but it is a beginning. Time may come when wheat farming will be limited to those sections of the country where the grain can be raised most cheaply and in the larg- est quantities per acre. But any such transition will be slow. It is an extremely difficult task to turn farmers from one of the easiest crops to grow, but the change :.;ust come if disaster is to be averted. For neither the yield nor the cost of production is uniform. A ruin- ous price for some farmers permits a fair return to others, irofit is made on some cheap land brought under cultivation by the tractor and the combine, even if the grain grown on it brings only seventy-five cents per bushel. In recent months the price paid at the farm had broken below this ridiculously small figure. Continuation of such re- turns cannot but drive tens of thousands of farmers intc bankruptcy. High priced land cannot be made to pay at such figures. The income de- rived is hardly encugh to meet the cost of seed, ploughing, planting and harvesting, no account being taken of interest on the mortgage; the balance left for profit is practically all.

However strong the arguments may be that wheat must be plante L as a rotating crop to benefit the soil; market conditions make it plain that much of the land now used for ..heat will have to be turned to othei"

purposes.

Objections tc the diversified farming tiras indirectly suggested

may explain in part the demand for such cure alls as the equalization fee and the export debenture, "'"-he prime purpose of these proposals is

(

73

to permit the farner to go on expanding his acreage and increasing his production, selling as much of it as he can at a high price in the horn r.arket and dumping the surplus ahroad. But "because of the world sur- plus, the foreign markets cannot absorb our over-supply, even if they were willing to do so. -1 favorite argument heretofore has "been that however great the surplus might be, aty one organization "buying and holding 25,000,000 bushels of wheat could peg any price it desired. Il , an effort to check the slump in prices last spring, the -ederal Farm Board "bought 50,000,000 bushels of the 192 S crop. It did check the decline temporarily, out prices have since fallen to a lower level thai at any time in more than a decade."'" The very fact that the board was holding that tremendous quantity of grain and would have to put it on the market some time has had a depressing effect on the market. For the government to buy whatever surplus the farmers raise is out of the question, There seems to be no satisfactory alternative to the program] the -dmini strati on is sponsoring for reduced acreage.

The agricultural difficulties have "been accentuated "by the worst drought in history. The absence of rain in some of our great agri- cultural regions throughout much of last summer and fall caused a loss of approximately 700,000,000 bushels of corn, reduced the hay crop "by

12,000,000 tons, destroyed thousands of truck gardens and burned pas- 2

tures and ranges. Immediate action was taken. National, State, and county committees were appointed, disastrous as the drought has been, it may help to solve the problem presented by~"the wheat surplus. The great bulk of the corn crop is used ordinarily to fatten hogs, cattle

1. '-.Ycrld's "./ork" February 1931

2. "Federal Farm Board questions and Answers" Circular Ho. 1

Larch 1930

r

r

dairy stock, horses and poultry, Although wheat is worth uoro than corn normally, corn has "been sell in.; recent 1. i'or more than wheats due to the shortage in the one instance and the over supply in the other. Under the circumstances , soj;;e farmers hasve suhstituted wheat for corn as feed, cracking and crushing it and using it in combination with hay Such use will reduce "the wheat surplus somewhat, off-setting in part th ) loss of foreign markets, -he farming feeding wheat worth seventy cents a "bushel in the market gets better than one dollar for it at the presen Torices paid for live stock.

Agriculturists emphasize that the loss of foreign markets is real with respect not only to wheat but to cotton and other products, xhe total volume of agricultural exports from this country for the fis- cal year ended c;une 50th last was the smallest for apy year since 1910, iue to lower prices and increased competition as well as the inability jf Europeans to buy because of the world wide depression. An extremely Important factor, too, is that governments of countries which have been Large importers of our staple products are encouraging ho. e production t tieet horr.e demand. The distress of farmers whether caused by boycotting ibroad, by the drought or by overproduction, is so acute that reopening )f the whole agricultural controversy in Congress is forecast. It may iccoraplish something, but the chances are it will result in nothing but leated words. President Hoover and his agricultural advisers hold that ;he Government cannot accept any of the plans advanced for the handling >f exportable surpluses. The advocates of relief legislation it would >e vetoed; and it could not be passed over the veto.

75

In the last analysis the solution is economic not political. That much discussed governmental agency, the Federal Farm Board though it has made mistakes, has jqpplied itself whole-heartedly to the econom- ics of the situation. The Board has "been condemned by outstanding pro- ponents of the debenture proposal and it has been a disappointment to many of the farmers themselves. Evidently it was expected to wave scumej sort of magic wand that would rehabilitate agriculture, at the very moment that the nation was experiencing a wave of industrial depression

The Administration believes, however, that the organization has accomplished all that could have been expected of it, existing cir- cumstances being taken into consideration. The changes in personnel necessitated by the prospective retirement of Chairman Legge, C. C. Trague, and Sam McKelvie do not foreshadow changes in policy, eatcept as regards any effort to stabilize the prices of outstanding commodities. The futility of the action seems to be indicated by the experience of the Board last year. Its purchases of wheat and cotton, on the basis of the market at this time, representa a loss to the Grovernment of ap- proximately 60,000,000.

Turning to conditions which preceded this latest of development tit may be said that the recession of business, necessarily limiting the purchasing power of the people, has had an adverse affect on the activ- ities of the Board but this does not explain the delay in putting agri- 3ulture on an equality with industry. The explanation is that the Boart , aeeds ever so much more time to bring about the readjustment than has passed since its creation. There may be honest differences of opinion

whether the 3oard is on the right track, hut study in '.Vashington and in the fields indicates it should have ample opportunity to demonstrat the soundness of its program. Figures show surpluses in the too "basic crops, "■hy, then, should our farmers, a consi derahle proportion of whom are college graduates and many of whori en«joy all modern conveniei strive to compete in world markets with the peasants of other lands? ./hy, indeed, should they attempt to raise more foodstuffs than they car. possibly sell advantageously, world conditions heing as they are, where hy producing smaller quantities, the return for their efforts would he as large if not larger than it is today.

If the answer is more than the farmers have the land and ought to cultivate it then the observation is in order that the industrial plants of this country he idle whenever the manufactured products escee L the demand* '.That, for example, would have happened if as many automo- biles had been manufactured in 1930 as in 1929?

Another observation, still more pertinent, is that some if not all the land released from grain and cotton production can be turned ad- srantageously to other purposes, The tariff act, the most beneficial to agriculture in all the history of tariff making, offers opportunity to produce crops that could not be grown and sold heretofore in competition Tith the world.

Diver sif ication is important, but revolutionizing the practices if the farmers is vital also. The Board believes its prime task is to lelp the farmers organize so they can control not only their production >ut their marketing.

77

_= _ J

If the task should be completed satisfactorily, operators and speculators Bould be quite generally eliminated, it is only natui - al that they can see no good at all in the plan. Someone always suf- fers when a new program is inaugurated, operators and speculators hap- pen to be "IT" in this instance. In justice, of course, it should not be done. The prime consideration is whether the change will be suffi- ciently beneficial to the great body of people to justify the change

?he i>oard is concerned, not with the consumer but the farmer. It believes it can help him immeasurably by revolutionizing organiza- tion and distribution. So far as organization is concerned, it is en- countering difficulties, The farmer is nothing if not an individualist , and the lesson of co-operation is difficult for him to learn,

Presi the administration point of view, co-operation offers the only solution of the problem confronting the imerican farmers. Therefore, it is pushing the movement. It has helped bring into being the Farmers' National urain Corporation with a capital of 010,000,000. the American Cotton Co-operation Associut ion with a capital of $50,000 ©00. and the national Wool Marketing Corporation which has a million dollar sales agency. Another million dollar organization is the Nation- al Livestock Marketing Association, All told, advances of 280,000,000. have been made by the 3oard since it began functioning. Of this sum, about Al 80, 000, 000, has been repaid.

The Farm -oard would set up great light-house institutions fo: the farmers, f armer -owned, farmer -controlled, and farmer-financed whic i should serve agriculture as the Federal Aeserve System serves finance,

1. "Farmers Build Their Marketing Machinery" Bulletin No* 3,

December 1930

78

as Standard Oil serves as pacemaker for the oil industry, and as the United States Steel serves for steel, it would, as soon as those insti|J- tutions are paid for by the farmers, turning them over to the farmers themselves to be a& independent of the ^arm Board or the Government as any other corporation in the land, Thus the Board expects to give the farmer some control over his own products after they leave his line fences and enter the markets of the world, Thus we expect to give the farmer an organization which can bring to bear upon his problems the collective thought of his industry, survey his probably markets, and on a nationwide basis, limit production to the probable demand.

There may be many questions and problems of purely sectional nature but many years of experience prove that agriculture is not one oi them, farmers throughout the Southern ^ier of States contribute to the rolume of the cotton crops and thus fix the price for all. -.aimers in practically every state add their volume to the surplus of wheat, r'arm- )rs in Aroostook County, ...aine pit their potato production against the potatoes of Virginia and the Carolinas and against the potatoes of Idaho tad Minnesota and Colorado. So interwoven are thoir interests, so inex- ricably mixed their problems, that no answer vail be found for farm pro

ems of one that is not also an answer to the problem as to that commodi 1

'or all sections.

llor is the farm problem local from any angle. If there is dis-| ;ress among the cotton and grain farmers in Texas, that fact is speedily •eflected in past due notes and unpaid accounts in the hands of the bank ■ >rs and merchants who serve the area. The fountains of credit are quick Ly

:-

. "New Republic" June 1S29

79

dried up, the means of the merchant to buy more .^oods is frozen, and the outlet of the merchant to sell more goods disappears, -he salesmar fror. St. Louis reports to the wholesaler that he made no collection of accounts due and no sales of new goods, ihe wholesaler must renew his notes at the "batik:, the factories located in Detroit or Philadelphia sodjp. found that there is no market demand. The industry in turn must lay off its men or find si mar Ice t elsewhere.

Thus the distress in Texas finds its reaction in the counting houses of merchants, hankers and factories everywhere, do section of tjhi United States lives to itself alone. He is a wise industrialist who recognizes his interdependence and a foolish manager if he shuts his eyes to distress anywhere.

The farmer is in distress* There is divergence of opinion as to what should he done to aid him. Perhaps he can aid himself "better than anyone can help him. If co-operative effort is a solution, he should apply himself to the principle. If marketing of his own products will he "beneficial he should attempt it.

The benefits here listed include the chief agricultural pro- ducts on which the tariff is most effective. let one cannot fail to he impressed with the smallness of these benefits, even though they com- prise the main portion of all those derived from agricultural tariffs.

To any student of the tariff, it is obvious that, so far as solving the farm problem is concerned, the new tariff bill is a very minor factor. ithout doubt, agriculture as a whole would have been better off had the tariff not been changed at all, because the increase

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in rates on manufactured and. other non-agricultural products provided in the present bill will burden farmers as a whole more than the increases on agricultural groups should, therefore, exert their influence in secur- ing legislation to aid in establishing and developing better marketing machinery, better tax policies, and better credit facilities, which wil in the long run, produce a greater benefit and help a larger proportion of our farmers than will any possible tariff legislation.

./nether the co-operatives will be able to sell out successfully is a matter of opinion, jut whether the government's money is lost or not is much less important than the principle involved when the Govern- ment undertakes to establish, influence or support prices — to say at a given time they are too low and that at a future time they will be ligher. "he valuation of wheat at vl.25 for loan purposes was arbitrary so was the valuation of cotton at sixteen cents for the same purpose, 3oth commodities were then too low, in the opinion of the Federal Farm 5oard; both went much lower, That is to say, the Government was wrong loreover, it would be quite impossible to say how much of the decline ir trices, both before and after the Federal Farm 3oard have fixed these ealuea , was Owing to a national crisis and how much to normal facts.

The activities of the Federal Farm Board have touched, besides rheat and cotton, such a variety of agricultural commodities as rye, lorn, oats, barley, beans, flax, honey, buckwheat, rice, livestock, wool nohair, tobacco, poultry, eggs, grapes, raisins, seeds, potatoes and airy products. Generally two ideas were acting, and with no very clear distinction between them. One was the idea to build up agriculture on g

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pyramidal co-operative basis, slowly, and the other was to prevent a panic in agricultural commodities, on the ground that a national crisi required it.

If, as the Federal Farm Board may complain, workings of the first idea have been less noticed than those of the second, this is because co-operation in agriculture for all purposes is a familiar prir - ciple, whereas the use of government money to influenee prices by direct intention is a new and startling thing.

Take it in butter, The Federal Farm Board, in January, made a] large loan to the "land O'Lakes Creameries, Inc." of Minneapolis, which is one of the successful old co-operative associations in the country Now, as to this loan one is bound to ask certain questions. If the Fedfl- eral Farm Board is in the business of assisting distressed agriculture, certainly it could have found many farmer organizations more in need of aid than the "Land O'Lakes Creameries, Inc., " for as a solvent associa|- tion, with a long record of profit and sound management, it could get any reasonable accomodation of credit at the bank.

The answer is that, of course, it could borrow on reasonable terms at the bank for all normal commercial purposes. But it could not borrow money at the bank for the purpose of protecting the market price of butter. That was the trouble. The price of butter was falling. It iad fallen below thirty cents a pound and nobody knew where it might stdjp .hat the Land O'Lakes Creameries needed was a large sum of money not on]y for the purpose of holding its own butter off the market but also to bus and store the butter of other associations, because they were all press-

ing it for sale on a falling market. The only source of money for that purpose was the federal Farm Board. It loaned the money, the "Land O'Lakes Creameries" bought up surplus butter and put it away, and with what result? The price of butter advanced to thirty -six cents a pound which was a fair price, and then everything was all right again.

One must ask, for v*iom was everything all right again? Is it not very strange that the Government should lend money to butter makers for the immediate purpose of advancing the price six cents a pound, whe i there are 4,000,000 butter eaters unemployed? How is such use of gover 1- ment money to be justified?

The answer is that if there had been a panic in agricultural commodity prices the number of unemployed might have become 6,000,000. And is butter an agricultural commodity? There again is a matter of opinion. If the opinion is sound you may say the end justified the meais, and pass it on; though not without wonder still that it lies in the wia- dom of a Soard at V/ashington to say what price people shall pay for DUtter in order that unemployment shall not increase; nor without wonded at the seeming contradiction that, as it lends money to the "Land O'Lakes Dreameries, Inc.," to buy and remove surplus butter from the national (narket , the Federal rami Board at the same time issues a warning againsll the overproduction of butter, exhorts farmers to eat more of it and sel] Less, and then with the other hand, lends money to the Lower Columbia Dairy Association for the purpose of increasing its plant.

Hear at this point the voice of the farmer saying, "Industry sorrows money on its commodities at a private bank in order to postpone

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the sale of them and thus protect the price. .hy shouldn't agriculture borrow money from the Government for the same purpose?"

The difference is almost too obvious to require statement. It is true that private hanks lend money on surplus commodities to save th 3m from being pressed for sale on a weak market, and that certainly is to protect the price, but in swch private transactions the risk is shared between lender and borrower, .hen agricultural producers borrow money from the Government, they take no risk at all. Only the Government can lose. If that is not a legal fact, it is a moral fact. The Government could no more proceed against its agricultural debtors in the manner of a private bank than it can eject settlers from federal irrigation pro- jects for non-payment of their dues and water rents. Simply, it cannot be done. 'Veil, then, you have the difference between borrov/ing with risk and borrowing without risk, and this, human nature being what it i$ becomes the difference between sound and unsound.

The intent of the above is wholly expositive, that is, to show that the Agricultural Marketing Act is, how it came to be what it is, whiflt aas proceeded from it, and what was acting in the mind of the Federal arm Board. Therefore, all discussion of the farm problem itself has )een avoided.

There is a farm problem, both real aid unreal; both economic ai )Olitical. The agricultural Marketing Act as a whole is the strongest ipproach so far made to a rational solution of it. ITo fair conclusions ire yet possible. It is too soon to pass judgment on an economic experil- i lent of such magnitude. It may turn out to be a mistakan experiment in

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principle, in which case we shall be lucky to have made it while we could afford it and to have put it behind us. On the other hand, it m^y turn out that farmers will learn to support it intelligently and make it work; in which case the initial errors and losses will be soon for- gotten. The immediate misfortune is that all effects are in dispute, even on their own merits. This is so far two reasons.

In the first place, the law has been administered with two ideas in confusion, one permanent and one meant to be temporary. The permanent idea was slowly to impose business principles upon agriculturb and to improve its status through the co-operation of farmers, "he ide meant to be temporary was that of preventing at any cost a panic in agri- cultural commodities at a time of national crisis.

In the second place, the total rood of the Federal Farm Board* operations under the emergency theory is by no means clear and perhaps never will be. Very probably it is true that but for its enormous bid- ing and lending operations in support of prices agricultural commoditie would have gone much lower. Yet even this will be disputed, and much more will it be disputed, whatever happens, that the work of the Feder- al Farm Board under Section 9 was helpful toward future prices. There is still a surplus to be disposed of. A slaughtered surplus is a loss but an impounded surplus is a liability. If prices improve and the sur plus now accumulating in the bands of the Government is worked off suc- cessfully, some will say the Federal Farm Board made matters worse and others that, but for its operations, everything would be very much wors|. And nothing can be proved. Farmers themselves are at this

juncture divided. Agitation for further, even more direct relief is very active, talcing the form of a demand that the Government shall pa-/ a direct "bounty on agricultural sports, thereby subsidizing the sur- plus, -hat is the debenture plan.

Ileaavhile the one most significant fact is in the character oT a precedent. Government money on a very large scale has "been actively employed in agricultural commodity markets to uphold prices for the farmer. That is what the radical farm "bloc wanted; that is what Sec- tion 9 was for. But that was not the Hoover idea of farm relief.

This use of government money, if it continues is bound to in- crease by extension for such is the natural law of political benefit. If it increases with no positive control of production there is disas- ter in sight for the United States Treasure. On the other hand, posi- tive control of production by the Government entails such interference in his affairs as no farmer would tolerate. That enigma lies in any scheme of subsidy, bonus, guaranty or price production whereby a sur- plus producing industry will be made more profitable than it already is. The more profitable you make it the greater the temptation will b| to produce a surplus. That is what the Federal Farm Board is facing without power.

COITCLUSIOIT

Following is a brief summary of the outlook for the farmer. Now is the time for real co-operation between the farmer and the businessman and between the Federal Farm Board and the Grain trade.

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One represents the farmer and the other the buyer, Ilecent development have led the farmer to think that "business is unfriendly to his interests. This is not so. businessmen are friendly to agriculture, a merger of interests is suggested. The Farm Board needs the facilities of the grain trade and the grain trade needs the farmers* grain. Such co-op- eration would eliminate the duplication of grain handling machinery terminals, country elevators and selling organizations. 7e would all gain thereby.

Farming costs in the United States in order to meet world com- petition must he reduced to the same extent that costs have been reduced in all other industries. Farms must be large enough to comprise eco- nomical units. Lodern machinery must be used, tractors and other equi] - ment must operate day and night. Skilled far:; operators of machinery will receive as much pay as skilled workmen in the cities. J.1 foreigr countries are encouraging the product icn of grain within their own boundaries. Tariff walls are&aing erected everywhere. V/e are face to face with the problem of world competition and we must expect lower prices than we have had during the last five years in the world markets).

Give the farmer the same protection through our tariff as other industries enjoy and the advantages, which labor has through re- stricted immigration. One feels that it would be a serious mistake to reduce our tariff on manufactured goods or to lessen the restrictions on immigration, but it is only fair that our flexible tariff be adjusted to give him similar advantages on his products.

Through outlook work of the united States Department of --gri-

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culture, co-operating with the -octension service in the states, and or- ganized effort among farmers, the message is being carried to the farm- ers, backed with reliable statistical information so that acreage re- adjustment and improved plans .of farm management will accomplish for agriculture the adjustment of production to normal demand that has bee brought about in most other branches of industry.

The major task of the federal -'arm Board is to assist farmers in acting collectively, it is hopeless to expect that six and a half million producing units can individually maintain a profitable level of operation in a society where organization is the rule. Co-operative marketing is the central feature of the Agricultural Marketing Act. -his is a long-time program that contemplates the establishment of agri culture on a sound economic basis and should not be confused with emer- gency measures such as stabilization activities in wheat and cotton. The latter is not regarded by the Board as the solution of the farmers' economic problem.

.hile it is not to be expected that prices for farm commoditie will return to wartime or other inflated levels, it is reasonable to assume that the bottom has been reached and a basis somewhat higher thaii the present will prevail, -he foundation of better return for the farm er will be established, first, through more efficient and economical production somewhat in keeping with what has been achieved in the fac- tories, and second, through lower cost of distribution. The latter means that the farmer must have a more important place in the marketing of his products thereby eliminating waste and unnecessary costs, and

exercising a greater control over the w ages or income of those who are nov; handling farm products, xhis means, of course, that some of the thousands now engaged in distributing farm commodities must charge less for their services or get into some other line of "business, it is un- thinkable that the farmer should "be called upon to adjust himself to a lower price level without others doing the same.

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BIBLIOGRAPHY

Boyle, James E« ******************************Fam Belief

Elliot, Clara ***************************** *T"h.e Farmer's Campaigr

for Credit

Farmer's Bulletin ***************************ji44 "Co-operative Mar

keting"

Lippincott, Iafa«*****************************Wfcat the Farmer needs

Mew Republic *****************************pg-jjpyjjj,y 1929

" 20,1929

i w 27,1929

March 1, 1929

11 April 24, 1929

" June 12, 1929

June 26, 1929

" September 4, 1929

" January 1, 1930

15, 1930

? February 19, 1930

" March 5, 1930

" April 30, 1930

May 14, 1930

" December 25, 1930

New Republic *****************************?e-bruary

Saturday Evening Post ************************june 2, 1930 '.'/orld's V/ork *****************************pe-bruary ^.SZl