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Foreword
The Conference on Food and Agricultural Policy brought together people of diverse backgrounds, from various parts of the country. Most of them were agricultural economists from the universities. But also present were people from the Congress, the Department of Agriculture, the White House, the farm organizations, agribusiness, consumer groups, and from the press. Though most of the people were professional economists, some were politically oriented; both major political parties were represented. A fairly wide band of the ideological spectrum was in evidence.
The full range of farm and food policy was brought up for examination, but the sharpest focus was price and production policy for the major farm commodities. This was to be expected, since the conference was held while the executive branch of the government was shaping up its position on a new farm bill, and the agricultural committees of the Congress were already deeply involved in legislative deliberations.
I
For forty years there have been two fundamental farm policy positions. One favored a powerful role for government in the pricing and production of farm commodities. The other favored a strong role for the individual.
The major development in this conference was growing evidence that these two positions are converging. The old advocates of a strong government role in agriculture have lost some of their ardor and some of their clout. The old free market forces are now willing to accept a greater degree of government intervention than they were in former times. The old farm policy issue has been “de-escalated.” Perhaps the statute of limitations is operating. Some of the most zealous protagonists have disappeared from the scene, and their places have been taken by younger, less indoctrinated people.
Speakers at the conference, both during the daytime sessions and the evening Round Table, were chosen so as to provide a clash between opposing points of view. To the astonishment of many, these sessions produced much agreement.
Several of those in attendance pointed out that the convergence on farm policy issues was not limited to the participants in this conference, but that the farm organizations were also moving perceptibly toward one another. So are the political parties. In earlier presidential campaigns, farm policy matters had been an important issue, but such was not the case in 1976.
The respective roles of the individual and of the government in the production and pricing of farm products remain important public issues. But the degree of confrontation has perceptibly abated.
The cause of this de-escalation was considered but not agreed upon. Perhaps the generally good experience with individual decision making during 1973–1976 served to weaken the belief that free markets meant disaster. Perhaps the volatility of prices in recent years and the concern about the permanence of the newfound markets has led free-market advocates to accept some degree of federal intervention, at least as a standby provision. In any case, it appears that an opportunity has been provided to move this old issue away from the center of the stage and off toward the wings, where it can more easily be resolved.
Fortunately, the conference lifted up the fact that there is an area within which accommodation can be found. Agricultural prospects appear to be such that the protagonists can, in some measure, retreat with honor from their former rigid ideological positions. The mood of the conference was that any such move should be welcomed.
II
On a number of points there was general agreement, not as expressed by vote but rather as a “sense of the meeting.”
There was considerable discussion of the structure of agriculture as this relates to commodity legislation. It quickly appeared that the facts are at variance with the political stereotype. There was agreement with Gale Johnson’s point that “at the present time half or more of the incomes of farm people come from nonfarm jobs.” Bruce Gardner observed that “the mainstream commercial producers of farm products are no longer poor people.” This view was corroborated by George Brandow and went unchallenged. Likewise unchallenged was a set of data supplied by Luther Tweeten which showed “that there is a redistribution of income from lower-income people, in general — not just farm people, but throughout society — to high-income farmers through commodity programs.” There was general agreement on the existence of a low income problem in agriculture and on the inability of commodity programs to cope with it. Hendrik Houthakker underscored this point.
There was agreement that production control programs have limited effect on total output of farm products, though no single estimate of this effect was agreed to. Johnson said “by the early 1970s, agricultural output was not significantly different as a result of the various government programs and subsidies from what it would have been in their absence.” Tweeten estimated that diverting 15 percent of our cropland may have reduced agricultural output by 5 percent. He also commented on the poor cost effectiveness record of the feed grain program. Some studies showed, he said, that it cost a dollar to remove a dollar’s worth of production, “which is about as bad as you can get.”
There was some discussion of how we got where we are in our agricultural policies. Tweeten observed that changes in farm policy resulted more from economic crises than from changes in ideology, and that farm policy for commodities was a collection of piecemeal programs. This view was supported by several people and was challenged by none.
One speaker after another referred to difficulties caused by the wide fluctuations in price and income during recent years. The volatility of price and income, rather than a low average level thereof, was seen as the problem. There was general agreement that this volatility would be reduced by carrying larger stocks than were held during recent years. Some government role with respect to the carryover was accepted, but no program specifics won general approval.
Several people stated that loan levels should not be so high as to price us out of world markets. There was no dissent from this proposition. John Schnittker emphasized that such income transfers as were desired should be accomplished through payments rather than by setting loan rates high. This view was generally accepted.
There was agreement that agriculture’s economic condition had slipped as compared with a year ago, particularly for wheat. Cattle have been in trouble for some time. Dry weather in the west and in parts of the Great Plains were considered a problem. There was, of course, the continuing low income problem on farms too small to be efficient. But overall, commercial agriculture was not thought to be in distress.
In the evaluation of standards by which loan and target levels should be set, parity had no defenders. The cost of production fared little better. Particularly troublesome was the charge for land. Several people pointed out that inclusion of a charge for land would set the stage for a spiral of production costs and price supports. Gene Hamilton of the Farm Bureau had particular concern about this problem.
III
On a number of subjects there was disagreement, varied in degree and in the vigor with which the differences were expressed. On world food prospects, Ed Schuh discounted the Malthusian specter, at least in the next decade or so. Most other speakers declined to take positions on this subject, which was conceded to be enormously important with regard to American farm policy.
An issue that came up repeatedly was whether the rate of growth in the efficiency of agricultural production had slowed. If it had, the effect on price, production, and policy could be profound. Johnson said that agricultural efficiency continues to advance. Schuh had his doubts about this as far as the United States was concerned but was hopeful regarding increased productivity in the developing countries. World expenditures on agricultural research, he said, had tripled in real terms from 1959 to 1974, leading to the view that efficiency may increase. Jim Hildreth expressed concern whether the productivity of American agriculture was slacking off.
Foreign trade prospects, which can also be expected to have strong influence on American farm policy, were perhaps more a subject of uncertainty than of disagreement. Few firm assessments were offered. As regards further trade liberalization, there was full agreement with Clayton Yeutter’s view that the quest of liberal trade should be vigorously pursued. But there was disagreement over the prospects for success.
Several issues, frequently debated among agricultural economists, came up for discussion, without being moved toward resolution. A disagreement arose between Schuh and Trezise over the effect of flexible exchange rates on agricultural trade. Likewise, there was a disagreement whether the labor supply in agriculture was excessive; Tweeten said it was, but Johnson had doubts.
A spirited debate arose as to the boom in farm land values and the possible effect on farm policy. Yeutter expressed concern whether recent buyers with limited equity could meet the cash flow problem. This concern was shared, as was the concern that efforts to help these people with higher loans and targets might price us out of the world market. On the other hand, some of the group thought the rising tide of inflation would justify the advance of farmland prices. Howard Hjort raised a question that went unanswered: Are high farm real estate values making it too difficult for a young man to get started in farming? Do we want to have a system where ownership and operation are separated?
There was a spirited debate on the quality of the food supply. Julia Bloch of the Senate Select Committee on Nutrition was critical both of the quality of the diet and of problems in distribution. Ellen Haas of the Community Nutrition Institute supported Bloch in this view. The agricultural economists were unconvinced. The central issue, on which no agreement was reached, was the degree to which education on the one hand and government coercion on the other should be used in efforts to improve the diet.
Another dispute arose as to the role of the agribusiness in the distribution and pricing of food. Dawson Ahalt, Joel Popkin, and Ken Fedor supplied data on the performance of the food business, which generally gave the industry passing marks. But consumer-oriented members of the conference appeared unconvinced. The entire group seemed to agree that the consumer is not the adversary.
To those who work closely with farm policy, the disagreements were predictable and were less vociferous than usual. The agreements, on the other hand, were somewhat of a surprise and were closer than anticipated.
IV
The final session of the conference was intended to provide a confrontation of rival views. Hence it offered papers by Don Paarlberg, Republican, and John Schnittker, Democrat, both former officials of the Department of Agriculture. Discussants were Willard Cochrane, economic adviser to a Democratic secretary of agriculture, and Hyde Murray, Republican counsel to the House Agriculture Committee.
Surprisingly, Paarlberg and Schnittker expressed views more notable for their similarities than for their differences. Both advocated a market-oriented approach, with competitive pricing. Both were ready to accept some degree of government intervention in production and pricing if supplies became excessive. Schnittker was somewhat more ready to transfer income into agriculture, to set aside acreage, to operate a grain reserve program, and to enter into agreements of various kinds with other countries.
Cochrane observed that “there’s a hell of a big rapprochement going on here,” and associated himself with it. He said that “the market is an efficient allocator of productive resources, and should be relied upon, wherever possible, to allocate those resources; but, too, the market can produce some highly inequitable situations.”
Murray made what was undoubtedly the liveliest presentation of the conference. He stated that market orientation was dead, that it had died on November 3, 1976 — election day. He reported that members of the House Agricultural Committee were ready to vote for high loans and high targets, bringing the cost of farm programs to fantastically high levels. He said that an informal alliance had been worked out between farm and nonfarm groups, associating a generous food stamp program with high farm price supports in a log-rolling operation.
Schnittker warned that loan levels should not be linked to production costs. “They should follow a different drummer,” he said. This drummer he identified as world market prices. The group appeared to agree.
The meeting drifted into speculations as to what kind of commodity legislation would be forthcoming. Murray feared the worst, that is, costly farm programs that price commodities out of markets. The short-run attractiveness of high price supports would take precedence over the long-run adverse consequences thereof. Paarlberg was more hopeful, counting on the executive branch to hold the line. Schnittker said that those who believed in economically sound farm legislation would have to fight hard to keep the Congress from enacting a bad law. Most people offered no prognosis.
The conference accomplished at least one significant result: it defined the protagonists involved in the debate on commodity programs. It is not the Democrats versus the Republicans, as once was the case. It is not the farmers versus the consumers, as some say it now is. The real issue is between the White House, which has concern for the entire economy, and the Congress, where the special interests are strongly entrenched.
Bruce Gardner probably best summed up the situation. He commented that we economists often seek an economic rationale for farm programs. But, he observed, “the purpose of legislation is better described in political terms. And the purpose is to take from those who have less political clout and give to those who have more.” Thus has the farm policy issue evolved — or degenerated — in recent years.
Don Paarlberg
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