The Surplus Farmer

I

THE incoming administration at Washington is already wrestling with the critical importance of the farm problem. Its emergence to foremost national attention is not due to farm distress more acute to-day than it was in 1921, but rather is it the result of an incessant campaign on the part of the farm leaders to seek through law some change favorable to the farmer’s economic status. The flood of recent legislation started in 1920 with the Fordney emergency tariff bill. The Farm Bloc was organized in 1921. There followed a series of measures relating to coöperation, rural credit, packers and stockyard control, grain futures, commissions for agricultural inquiry, agricultural conferences, freight rates, and a host of minor acts. In 1924 the first McNary-Haugen bill was defeated by the Congress, followed by a flood of controversy that reached new high levels for agricultural interests. A revised McNary-Haugen bill was again defeated in 1925, followed by the introduction of a bewildering variety of substitute measures. The third edition of the McNary-Haugen bill was introduced in 1927, and this time was passed by both branches of Congress, but was vetoed by the President. A fourth edition, only slightly modified from that of 1927, was passed by both branches of Congress in 1928, but was again vetoed. Farm relief became the chief issue of the 1928 political campaign, and to-day has taken the centre of the stage as the most important and most urgent problem.

Prior to the war, agricultural discussion, if any, centred around the interests of the consumer. The important agricultural exports to which the country had become accustomed during the late eighties were declining sharply. From its very inception these exports had been a sort of historic appendage to the economic life of the country. After 1900 there was also some rise in the cost of living, and the fear of hunger began to haunt statesmen. The Country Life Commission was appointed in 1906. The cry, ‘Back to the farm!’ was heard in the land.

But the war had seen agricultural exports rise to new high levels. It had shown the extraordinary ability of agriculture to expand under price stimuli. It had given indubitable demonstrations that the country was far from starvation. The present agricultural discussion arises not from any fear of a food shortage, but rather from the burdens of an agricultural ‘surplus.’ As a result of war expansion the farmer is producing in quantities that cannot be consumed. He is producing something that is not wanted. Hence his rewards are low, and hence his cry of distress. The most discussed measures for farm relief, the McNaryHaugen bills, are officially labeled the ‘Surplus Control’ bills.

The farm problem grows out of a technical revolution in the practice of agriculture which is not less truly revolutionary, and which imposes scarcely less hardship on many of those it affects, than the Industrial Revolution of England, which put an end to household manufactures and workers and inaugurated the factory system.

But it is one thing to admit the existence of a great economic and social problem; it is quite another to see that problem for what it actually is, to admit the facts which constitute its reality, and to face the question of a solution with complete frankness.

In the case of the farm problem it is exceptionally difficult to practise the frankness and directness of thought which everybody recognizes as the only tolerable attitude in problems purely economic and scientific. For, besides being an economic and technical problem of the first magnitude, the farm problem also involves a great social conception. As Mr. Hoover has pointed out in his speech of acceptance, farming in this country has been considered above all else ‘a manner of living’ — the characteristic base of the American social fabric. Right or wrong, it is the conviction of political and social leaders that the farms form the head reservoirs from which the cities, industry, trade, finance, religion, and education have drawn many of their ablest leaders; and in common thought the preservation of the farm population has come to mean preservation of an essential social foundation.

Moreover, besides representing a basic American social conception, the farmers represent a great political power in national legislation. The purely agricultural states are represented in the Senate on an equal basis with the predominantly industrial states; and, with their considerable body of members in the lower house of Congress, the farm states have altogether an important balance of power. Thus political influence, tradition, and sentiment combine to urge ever new assistance to agriculture — assistance which will pacify the farmer, but which makes it extremely difficult for any man of political ambitions to act and vote with an unbiased facing of the farm problem as it actually is.

But the revolution in agriculture, like technical revolutions in other industries, has no mercy on social and economic institutions anchored to a backward state of the practical arts; and the new scientific agriculture of to-day is rapidly destroying the old foundations of farming as a manner of living, replacing them with a new order which we may for a time ignore but cannot indefinitely oppose. This new order has already made far greater advances than is generally realized. Indeed, the new farming has already established itself, and all that we can do about it now is to foresee the consequences and to lessen as far as may be the largely inevitable burden of them. This can be done by basing the agricultural relief programme, not on the emotional wish to retain the entire present farm population of six and a half million farmers, with their wasteful overproduction, but on the willingness to face the fact that this burden of the surplus can be reduced only by a reduced number of farmers. In other words, farm relief means farm migration to the city — a migration that should be developed, encouraged, and assisted.

II

The main instruments of the present agricultural revolution are as follows: —

First, scientific agriculture, thought out and in fact created by the Federal and state governments, which shall prescribe the rules by which intelligent and energetic farmers may be assured of crops much larger than the average.

Second, gas-driven farm machinery. This has enabled larger, more complicated, and heavier machinery to operate on the fields than was possible with horses; it has increased the productivity per man; it has replaced millions of horses and freed fodder acreage for human consumption. It has reduced the unit cost and has tremendously increased production.

These two agencies together have divided the country’s whole farm population into two very unequal parts. One of these parts is prosperous and contented; the other part embodies the farm problem. The prosperous part is the small minority of farmers — probably not more than one eighth of the country’s entire number of about 6,500,000; say, 800,000 — who by the practice of scientific agriculture and the use of modern machinery can raise crops at so low a cost as to leave a wide margin of profit between that cost and the average market price.

The concrete farm problem, then, is how to keep the unprosperous seveneighths majority on their farms and to bestow on them a satisfactory measure of prosperity. At least this is the way the problem presents itself to those who seek a solution that will at the same time retain the present farm population.

But the inescapable final result of the agricultural revolution is to make fully one half the present crop acreage and one half the present number of farm workers progressively superfluous, and to drive the latter away from the farms to employment in industrial centres. This elimination of the unsuccessful farmer and his family has been in progress for several years; the total migration of such defeated farm families from the farms to urban industrial centres since 1920 is estimated at about four million persons. This migration will continue, unless progress in agriculture stops. We know, however, that progress will not stop, but will, on the contrary, advance at an accelerated pace. The migration has not been fast enough to keep pace with the advancing agriculture. The danger is that it will not be rapid enough in the future to avert suffering and poverty.

‘The period of transition from domestic to factory system of industry,’ says Cheney, ‘was in England one of unrelieved misery to the great masses of those who were wedded to the old ways, who had neither the capital, the enterprise, nor the physical nor mental adaptability to attach themselves to the new. The hand-loom weavers kept up a hopeless struggle in garrets and cellars of the factory towns where their wages were sinking lower and lower, until finally the whole generation died out.’

There was no law that could have stopped or stayed the Industrial Revolution. With those who are similarly being driven from the practice of agriculture in this country, the alternative is not misery and starvation, but the difficult task of finding a place in new occupations, chiefly in the industries of the urban centres. It is a formidable problem to find employment for fifteen million additional workers in industry, but one that is not insuperable, one that if honestly faced can be solved with infinitely less disruption during the next ten years than was caused by the placing of that many workers coming from Europe to America during the period of immigration of one million a year. The movement is inevitable. The danger is not in the movement itself, but in self-deceptions, in false ‘solutions’ that will attempt to arrest it, or in the ignoring of it.

But the expansion of agriculture by scientific farmers with adequate powermachine equipment has consequences in addition to the present progressive expulsion of the unsuccessful.

As the total low cost production of scientifically managed, machinepowered farms increases, — and it is increasing rapidly, — the margin of profits will be correspondingly narrowed by increasing competition in the markets. This inevitable decrease in the profit margin will tend to limit the expansion even of the new scientific agriculture. In other words, the new agriculture will follow the course already taken by factory industry, lowering prices by the competition in reducing production costs and profit margins until the agricultural industry will become more or less stabilized in plant, output, and personnel.

It should be obvious that this competitive process — already under way — means generally declining price levels for farm products, in principle precisely similar to the declines in the prices of staple products from competing factories. The economic trend of agriculture is therefore diametrically opposed to giving the now unsuccessful farmer relief by raising the market prices of farm products.

That part of agriculture which is concerned with food production faces a peculiar limitation upon the extent of its market in the fact that the demand for food is nonelastic. The use of other goods desired by human beings can be almost indefinitely diversified and expanded, and there is almost no visible limit on the consumption of such goods. But with food the situation is entirely different. The demand for food expressed in total quantities (there is always a demand for variety) can be increased only in proportion to total population increases. The maximum limit of the domestic market for foods is that rigidly fixed by the population of the country. In point of fact this maximum limit of the food market is greater than the actual demand; for the diet of the city populations, representing the diminished intake of food suited to modern hygienic ideas and city conditions of life, has reduced total human demands considerably below per capita consumption of a few years ago. There is therefore no relief for the unsuccessful farmer in an esension of his markets.

III

The fundamental aspects of the farm problem, then, are (1) that a revolution in agricultural technique has increased production far beyond the nation’s ability to consume; (2) that in the main those ground down by the pressure of declining prices are largely in that position because of the surplus production. In the face of this situation it is rather odd to hear, as an outstanding proposal for relief, the advance of the idea that the unsuccessful seven eighths of the farm population may become prosperous in agriculture by following the example of the scientific one eighth, involving proper soil maintenance, improvement of live stock, more intelligent feeding, larger use of machinery, and better organization of farm operations. Among laymen this idea has wide prevalence. The president of a national farm school publicly delivers himself thus: ‘The potentialities for a happy and permanent rural life are a love for the soil and the ability to make it yield its best results.’ Stripped of its verbosity, the pronouncement declares that the farmer’s ills can be cured by increased production.

This exhortation to the farmer to improve his methods and thus reap the profits won by his successful neighbor has elements that make it attractive. It puts the onus of the farmer’s failure on the farmer. It does not involve government aid to private enterprise, nor the setting up of new and feared institutions of distribution. It eschews politics. It does not raise prices.

It must be granted that this method of solving the farm problem does indeed solve the problem for any one farmer. The example of the one eighth demonstrates that he who follows the scientific methods advocated by the various agricultural colleges can at present prices reap satisfactory profits. The same solution will work for any ten farmers, or for any thousand farmers, or even for any hundred thousand farmers. But when we come to apply the remedy to the six and a half million farmers involved we are obviously headed for an abyss.

We produce to-day for domestic use and for export 800,000,000 bushels of wheat annually. This is at the low average of thirteen bushels per acre. This average yield could easily be doubled on average land by skillful farming. Besides the 200,000,000 bushels of wheat normally exported we should have an additional 800,000,000 for export, or a total of one billion bushels. This amount would be twice as great as the present imports into Europe from Canada, Australia, and Argentina, the principal countries now exporting wheat to Europe, and would be equal to the total domestic production in Europe. Who would consume this increased production?

The same can be said of corn, of pork, of potatoes. Who would eat the additional quantities produced? The effective demand for the deluge of farm products would disappear.

Increased efficiency, while the salvation of any one farmer, would be the ruin of the masses. To-day the efficient farmer succeeds because his neighbors fail. His prices are good because their crops in totality are low. If the seven eighths could by some miracle be made efficient, it would precipitate an economic catastrophe beside which the overproduction catastrophe in Georgia cotton or Maine potatoes this year would seem a prosperous condition.

An important group of farm wellwishers see a solution in coöperative organizations. They see the farmer forced to sell in markets over which he has no control and behind which ‘move vested interests with sinister designs.’ One type of coöperation advocated consists of the purely marketing association, which would secure for the farmer the best prices, would assist him in warehousing and financing his crop, would reduce the cost of marketing, and would help him to develop new markets. Such marketing associations have been successful in securing as high as 10 per cent in additional prices to the farmer, a saving not to be despised. Most of the organizations have not done as well, and many have failed, presumably because of inability to compete with the efficient avenues of trade. However, even the best of these organizations fall lamentably short of the price goal desired by the farmer. He wants a price of two dollars a bushel for wheat. No coöperative has as yet been able to squeeze more than five cents additional for the local shipper from the highly competitive market which fixes the price around one dollar. The cooperative in other commodities also falls far short of the desired price to maintain the seven eighths. It gives a 10 per cent increase at most, but a 100 per cent increase is desired.

Another type of coöperative is one that would by contract corner the farmer’s product and then fix a monopoly price. Discussion of the point is academic, since all such efforts thus far have failed. The reasons for such failure are obvious and need not be gone into here. State and Federal laws cleared the way to permit such organizations, which would ordinarily come under the antitrust laws. Their failure was to be expected, since they did not attack the problem of overproduction; they were confronted with ever-increasing burdens of surpluses, which could not be sold, no matter what the type of selling organization. Added to this were the internal troubles of such an organization, built on a mixed membership, with rising external competition. Success would have been a miracle.

IV

For the past four years the most drastic relief measure before Congress has been the McNary-Haugen bill, in some one of its forms. The provisions of these bills are so familiar that they need not be discussed here. Moreover, it is entirely likely that the bill to be seriously taken up by Congress this spring will differ widely from the version that was vetoed twice. It can, however, be definitely stated that the object of the new measure will be to raise prices to the farmer at home, and in some way to dispose of the surplus abroad. The details may vary, but this is the object to be attained. We may omit at this time a discussion of the possibility of attaining these objects by any government agency. The total additional income necessary to put the seven eighths in an economic position comparable to that of steadily employed unskilled workers in factories would be six billion dollars, an increase in the cost of living of $250 per family. This item alone might give pause. Then there is the doubt whether Europe can and will take any additional farm surpluses from the United States. A strong movement on her part for national self-sufficiency, backed by tariffs, has already decreased American exports to Europe. A flood of competition from Canada, Australia, and Argentina is meeting the American exporters. Our own tariff does not make for favorable rates of exchange.

But let us overlook these factors and confine our discussion to the consequences of a successful attempt to improve the economic position of the seven eighths. Suppose the farm income was raised by six billion dollars. Suppose the average income per farmer rose from the present $700 to $1500. It could be accomplished by increased prices. Farming would be profitable. Crop production would pay. What would happen? We need not go to conjectures, but can examine actual occurrences. For some years potatoes had proved a reasonably profitable crop, selling at around one dollar a bushel to the farmer. The country ordinarily grew and consumed about 360,000,000 bushels, but this moderately good price over a period of years sent production up in 1928 by an additional hundred million bushels. The farm prices during the year fell to from thirty to fifty-five cents, prices at which the vast majority of farmers lost money.

The potential resources of the country for agricultural production were demonstrated during the war. An increase in prices to give an additional six billion dollars to the farmers’ income would precipitate a flood of production that no government agency could handle. It would increase productive capacity in a way that would make recovery impossible for years to come. These mild and merciful solutions would bankrupt agriculture. This philosophy merely deceives the farmer.

The farmer has been deceived before. During the war and for two years after, from platform, pulpit, and press he was told to produce; that his labor formed the backbone of the nation. All sources upon which he had learned to rely glibly prophesied a continuance of war prices. In June 1920, two weeks before the precipitous drop in prices, the Democratic Party in convention assembled wrote in its platform, ‘The high cost of living can only be remedied by increased production.’ Mr. Cox, the presidential nominee, agreed and said, ‘Common prudence would suggest that we increase to our utmost the area of tillable land.’ Mr. Lodge, in his keynote speech opening the Republican convention, said we must ‘keep up increased production; particularly should every effort be made to increase the productivity of the farms.’ No warning of the impending crash reached the farmer. When it came, it came suddenly; it caught him unprepared and unable to adjust himself. When these utterances were written into party platforms wheat was selling for $2.04. Within a few weeks it had dropped to ninety-two cents, and tragedy stalked on the American farms.

During the past eight years the rate of bankruptcies has multiplied by ten. The bald statement does not tell the suffering behind it. Bankers in convention assembled tell of suicides by the score; they tell of farmers who, under years of financial strain, resisted eviction with axe and gun; they tell of wholesale misery of farmers’ families during a period when the agricultural revolution was bearing heavily on the marginal farmer. In some measure this disaster to the large group of farmers who were in no position to adjust themselves must be attributed to their advisers, who either failed to foresee the consequences of the tremendous overproduction or were too timid to raise their voices. The consequence of this failure to face the realities has been eight years of misery, much of which could have been avoided. Pursuing an emotional policy has left agriculture worse off to-day than it was eight years ago, with new nostrums for the ailment.

We have too many farmers; there is too much land under cultivation; we are overproducing; we are facing decreased consumption at home, with cutthroat competition in the foreign markets. These are the facts to which the data point indubitably. Based on them an agricultural deflation programme can be built for a permanent and prosperous diminished number of farmers.