Farm Fiasco – Introduction Chapter (1989)

When I was doing the blog entries with the first chapters of my books a few months ago, I apparently left out the intro from my first book, Farm Fiasco (ICS Press, 1989).

So, better late than never, here’s my bouquet for Iowa et al.

FARM FIASCO  by James Bovard

INTRODUCTION CHAPTER

Federal farm policy is trampling individual rights, sacrificing the poor to the rich, and giving congressmen and bureaucrats vast arbitrary power over American citizens. For sixty years, the U.S. government has devotedly repeated the same agricultural policy mistakes. Unfortunately, the federal safety net is slowly strangling American agriculture. Farm policy is the perfect example of politicians’ inability to rationally plan and control economic development.

Farm subsidies-roughly $25 billion a year in federal handouts and $10 billion more in higher food prices-are the equivalent of giving every full-time subsidized farmer two new Mercedes Benz automobiles each year. Annual subsidies for each dairy cow in the United States exceed the per capita income for half the population of the world. With the $260 billion that government and consumers have <M%-2>spent on farm subsidies since 1980, Uncle Sam could have bought every<D%0> farm, barn, and tractor in thirty-three states. The average American head of household worked almost one week a year in 1986 and 1987 simply to pay for welfare for fewer than a million farmers.

In 1930, the <MI>New York Times<D>, surveying the wreckage of agricultural markets after the federal government tried to drive up wheat prices, concluded, “It is perhaps fortunate for the country that its fingers were so badly burned at the very first trial of the scheme.”1  Despite an unbroken string of failures, the federal government has continued disrupting agriculture ever since. The trouble with farm programs is not that they are malfunctioning in the late 1980s, but that they have never worked well and Congress has never fixed them. Almost all the mistakes of the past are still being repeated: only the names of the secretaries of agriculture and of the farm-state congressmen have changed.
 
“Prosperity through organized scarcity” is the goal of many U.S. Department of Agriculture (USDA) farm programs. The USDA rewarded farmers for not planting on 78 million acres of farmland in 1988-equivalent to the entire states of Indiana and Ohio and much of Illinois. Government shut down some of the best American farmland in an effort to drive up world wheat and corn prices. Supply controls-paying farmers to plant less-are introduced only after politicians and bureaucrats have mismanaged price controls. The federal government pays farmers not to grow seven of the four hundred crops produced in America largely because Congress insists on paying farmers more than those seven crops are worth. Government first artificially raises the price of the crop and then attempts to artificially reduce crop production.

Each year, the USDA’s marketing orders force farmers to abandon or squander roughly 500 million lemons, 1 billion oranges, 100 million pounds of raisins, 70 million pounds of almonds, and millions of plums and nectarines. The USDA endows major fruit and nut cooperatives with the power to effectively outlaw competition and to force farmers to let much of their crop rot or be fed to animals. To preserve federal control of the lemon business, the USDA effectively bans new technology that would boost fruit sales and benefit both growers and consumers. The USDA assumes that farmers gain more from higher prices than they lose from being forced to abandon much of their harvest.

“Handouts in lieu of exports” is the core of farm policy. For sixty years politicians have driven American farmers out of world markets and onto the government dole. The federal government decided in the 1930s that American farmers could not compete with foreign farmers and proceeded to close the borders to imports, undermine exports, and drive up domestic farm prices. The leading export sector of the U.S. economy was effectively confined to a government hospital because politicians said it could not survive on its own. But each time Congress has driven American crop prices above world prices, Congress drove American farmers out of the world market. Taxpayers have paid out more than $400 billion since 1930 in part to compensate farmers for politicians wrecking farm export markets.

Federal farm programs are the biggest source of unfair competition in rural America. The USDA has bankrupted cattlemen in order to enrich dairymen, bushwhacked dry bean growers in order to reward wheat growers, and clobbered soybean growers in order to benefit corn growers. USDA bureaucrats have forced Arizona farmers to abandon three-quarters of their lemon crop in order to enrich California lemon growers, and the USDA sanctions the crushing of independent dairymen in order to make huge dairy cooperatives all-powerful. Congressmen talk of the sanctity of the family farmer, and then routinely sacrifice weak farm groups to other farm groups with more political clout.
 
Farm programs are government out of control: Programs perennially have no concept either of waste or of failure. The USDA is paying eleven-year-old children $50,000 a year not to plant corn. The Farmers Home Administration made almost a billion dollars in loans to farmers who were already technically bankrupt in 1985 just to keep them on their tractors one more year. Since 1980, the federal sugar policy has cost the equivalent of over $2 million for each sugar grower, and the USDA has spent over $1 million for each full-time rice grower since 1985. Yet no matter how much money government wastes, politicians ask only one question: “Is government being generous enough to farmers?”
 
Thanks to political mismanagement, one of America’s leading industries is becoming a ball-and-chain on the American economy. Every year between 1983 and 1987, the total cost to consumers and taxpayers of welfare for farmers equaled or exceeded total farm income-even though many farmers and most farm products received no subsidy. Federal subsidies for wool, cotton, rice, and honey are so lavish that they routinely exceed the value of the entire subsidized crop. In 1987 the entire corn harvest was worth only $12.1 billion, yet the USDA spent $12.0 billion on corn subsidies-the same amount government spent on food stamps for 20 million Americans. Though American farmers may potentially be the world’s most efficient wheat producers, annual subsidies for wheat production are double or triple the amount of the 1980 Chrysler bailout.

Farm policy is a classic example of the debilitating effects of providing welfare for businessmen. The more welfare American farmers have received, the less competitive they have become. Every farm handout program has reduced efficiency, raised costs of production, or increased federal control over farmers. Many farmers have gone bankrupt because they received too many subsidized government loans. Farm policies have helped caused boom-and-bust cycles in farmland values, shattering many farmers’ livelihoods in the process. Handouts have encouraged farmers to spend their time “farming Washington” rather than maximizing their own productivity. According to Larry Johnson of the National Corn Growers Association, farmers now spend more time standing in line at local USDA offices than it would take them to plant crops on all the acres the USDA pays them to keep idle.2

 Farm policy discussions have focused largely on the beneficiaries of federal intervention, with little consideration of the victims. The USDA estimated that the 1987 farm program, by paying farmers to leave more than 70 million acres unplanted, destroyed more than a quarter million jobs for farmworkers and others in related industries. By driving American dairy prices to triple world price levels, the USDA contributes to calcium deficiencies among the poor and osteoporosis in the elderly. The squandering of capital and labor resources in agriculture decreases American manufacturing and service exports by $10 billion a year, according to a study by a former USDA chief economist.3

Federal agricultural policy is based on the superiority of government central planning over private decision-making. There are many similarities in how Congress and the USDA manage American agriculture and how Eastern European governments manage their industries. In Poland and in California, government policy is designed almost solely for the benefit of the producer, with open contempt for consumers. In Hungary and in Mississippi, prosperity often depends more on political connections than on economic achievement. In Bulgaria and in Montana, government programs reward producers for neglecting quality and maximizing the quantity of their output. In Czechoslovakia and in Illinois, the government pays not according to whether a product is sold, but whether it is produced. In Eastern Europe there are stockpiles of unused, often worthless manufactured goods; in the United States, we have our mountains of surplus cheese, butter, and increasingly infested wheat and corn. In East Berlin and in Washington, planners routinely set prices for domestic products with an open contempt for the rest of the world. In Rumania and on Capitol Hill, economic planners scorn the future and attempt to prohibit innovations that would disrupt government control.

Eastern European economies have their five-year plans and Congress has its five-year farm bills. Both Eastern European and American government agricultural plans are usually out of date by the time the plans are finally printed up-but politicians stick to the plans and ignore reality. Federal agricultural planners in the 1980s may not be socialists, but they share with Eastern European planners a faith that government coercion is superior to voluntary agreement-that the plan is more important than individual rights-and that the more power government has, the better off society will be. Rexford Tugwell, USDA assistant secretary, declared in 1934, “Russia has shown that planning is practical. . . . The success and enthusiasm of Sovietism almost guarantees an unlimited rise in Soviet standards of living.”4 Though farm policy-makers have abandoned the 1930s rhetoric, they have retained the 1930s programs.

Farm Programs and the Nature of the Modern State
Farm policy is the best American example of industrial policy in action. Agriculture is our most controlled, regulated, and subsidized industry. Agricultural policy is perhaps most valuable for what it reveals about how politicians manage the economy. The same rationales for intervention, the same caliber of analyses, and the same failures that characterize farm policy-making are repeated in federal intervention in many other sectors of the economy.

Farm policy is a study of a political system unable to correct its economic mistakes. Political and bureaucratic inertia are the dominant forces in American agricultural policy. While congressmen ceremoniously label every second or third farm bill an “agriculture adjustment act,” politicians and bureaucrats themselves refuse to adjust to the new realities of world agriculture. The federal government paid farmers not to work in 1988 primarily because it paid farmers not to work in the 1930s; the government is effectively destroying much of the orange and lemon crop this year mainly because the USDA also condemned citrus harvests in the 1940s. The most important test of farm policy has become not whether it succeeds or fails, but whether the same thing was done last year.
 
The history of federal agricultural policy is largely the history of a Sisyphean struggle against the gradual, inevitable decline of crop prices. Wheat, corn, oat, and cotton prices have been gradually declining in real terms for more than 150 years, and have nose-dived in comparison to units of labor required to purchase them. Prices have declined because the cost of production has declined, thanks to the invention of tractors, new seed varieties, better fertilizers, and other innovations. Politicians have perennially misunderstood this economic trend and cited the decline in crop prices as proof of market failure and proof of the need for political intervention. They proclaim that because wheat prices are lower now than they were ten, twenty, or thirty years ago, society is treating farmers unfairly and farmers deserve recompense. Farm policy is a case history of politicians attempting to control what they could not understand.

When the federal government took control of agriculture in the 1930s, many people believed that agriculture should be managed by politicians for the public good rather than by private individuals for their own selfish gain. But buying votes is the only farm policy most congressmen understand. For politicians, votes and campaign contributions have always been more important than supply and demand. The federal farm-welfare system has always been more concerned with re-electing politicians than with benefiting farmers.
 
Farm programs have survived only because the farm lobby and many congressmen have successfully perpetrated an image of farmers as hardship cases. Yet the average farm family income has exceeded the median American family income every year since 1964. The average full-time farmer earned more than $152,000 in 1987. The net worth of the average full-time farmer is more than ten times higher than that of the average American family. The average full-time farmer is a millionaire, yet farmers as a class pay no income taxes. The essence of agricultural policy is hollering about poor farmers and giving money to rich farmers.

The Choice America Faces
Federal farm programs have become far more expensive and more self-defeating in the 1980s. President Reagan preached about the “miracle of the marketplace,” and then bragged that his administration had given more money to farmers than had any administration in history. The federal government took over de facto daily control of major crop prices, and the USDA devastated self-reliant farmers with covert schemes to drive crop prices up or down. The U.S. government now holds or guarantees half of all farm debt. Though the 1985 farm bill has been saluted as a “historic turning point in agricultural policy,” farm policy is still based on maximum political manipulation-on allowing politicians vast arbitrary power over farmers in order to attempt to boost “farm income.” 

We have a choice, in agriculture and elsewhere in American society, between more control and more freedom. There is a farm revolution occurring around the world. Crop yields are soaring on every continent, costs of production are falling rapidly, and comparative advantages among nations are shifting. From China to Tanzania to Argentina, politicians are admitting their failures and reducing government controls over farmers. Yet Congress and the USDA remain devoted to trying to perpetuate the agricultural production patterns of the 1930s and the agricultural prices of 1910.

The main effect of farm programs is to force farmers to do inefficiently what they would have done efficiently without subsidies, to force Americans to pay more for food, to drive up the price of farmland (thereby decimating American farmers’ competitiveness), and to squander pointlessly tens of billions of dollars a year. Every subsidized crop will still be grown in America even if the USDA never hands out another bushel of greenbacks. The issue is not whether the United States will have ample food in the future, but whether politicians will continue controlling American agriculture.

Farm programs raise moral questions that go to the heart of the welfare state. Do politicians and bureaucrats have a right to coerce people in an attempt to benefit them? Is the government entitled to sacrifice one individual’s rights to boost another individual’s profits? Are politicians morally justified in using taxpayers’ dollars for programs that are guaranteed to make society poorer?

Agricultural policy epitomizes the mindless paternalism of modern times. The USDA is a bureaucratic Leviathan that, because it was created to benefit farmers, continues grinding away regardless of how many farmers it harms. After almost sixty years of Keystone Kops economic planning, politicians continue their stranglehold on American farming -like a feeble monarch that refuses to relinquish power regardless of how badly he mismanages his domain. The government’s “enlightened despotism” over farmers is increasingly absurd, increasingly wasteful, and increasingly costly both to farmers and to the American economy.