Subsidies capital to buy productivemachinery. Small farms
Subsidies are payments, economic concessions, or privileges given by thegovernment to favor businesses or consumers. In the 1930s, subsidies were designed tofavor agriculture. John Steinbeck expressed his dislike of the farm subsidy system ofthe United States in his book, The Grapes of Wrath. In that book, the government gavemoney to farms so that they would grow and sell a certain amount of crops. As a result,Steinbeck argued, many people starved unnecessarily.
Steinbeck examined farm subsidiesfrom a personal level, showing how they hurt the common man. Subsidies have a varietyof other problems, both on the micro and macro level, that should not be ignored. Despitetheir benefits, farm subsidies are an inefficient and dysfunctional part of our economicsystem.The problems of the American farmer arose in the 1920s, and various methodswere introduced to help solve them. The United States still disagrees on how to solvethe continuing problem of agricultural overproduction. In 1916, the number of people livingon farms was at its maximum at 32,530,000. Most of these farms were relatively small(Reische 51).
Technological advances in the 1920’s brought a variety of effects. Theuse of machinery increased productivity while reducing the need for as many farm laborers.The industrial boom of the 1920s drew many workers off the farm and into the cities.Machinery, while increasing productivity, was very expensive.
Demand for food, though,stayed relatively constant (Long 85). As a result of this, food prices went down. Thesmall farmer was no longer able to compete, lacking the capital to buy productivemachinery. Small farms lost their practicality, and many farmers were forced toconsolidate to compete. Fewer, larger farms resulted (Reische 51). During theDepression, unemployment grew while income shrank.
“An extended drought hadaggravated the farm problem during the 1930s (Reische 52).” Congress, to counter this,passed price support legislation to assure a profit to the farmers. The Soil Conservationand Domestic Allotment Act of 1936 allowed the government to limit acreage use forcertain soil-depleting crops.
The Agricultural Marketing Agreement Act of 1937 allowedthe government to set the minimum price and amount sold of a good at the market. TheAgricultural Adjustment Act of 1938, farmers were given price supports for not growingcrops. These allowed farmers to mechanize, which was necessary because of the scarcityof farm labor during World War II (Reische 52).
During World War II, demand for foodincreased, and farmers enjoyed a period of general prosperity (Reische 52). In 1965, thegovernment reduced surplus by getting farmers to set aside land for soil conservation(Blanpied 121). The Agricultural Act of 1970 gave direct payments to farmers to setaside some of their land (Patterson 129). The 1973 farm bill lowered aid to farmers bylowering the target income for price supports. The 1970s were good years for farmers.Wheat and corn prices tripled, land prices doubled, and farm exports outstripped importsby twenty-four billion dollars (Long 88). Under the Carter administration, farm supportwas minimized.
Competition from foreign markets, like Argentina, lowered prices andincomes (Long 88). Ronald Reagan wanted to wean the farm community fromgovernment support. Later on in his administration, though, he started the Payments InKind policy, in which the government paid farmers not to grow major crops.Despitethese various efforts, farms continue to deal with the problems that rose in the 1920s.Farm subsidies seem to have benefits for the small farmer.
“Each year since1947, there has been a net out-migration of farm people (Reische 53).” American farmproduction has tripled since 1910 while employment has fallen eighty percent (Long 82).Small family farms have the lowest total family incomes (Long 83).
Farming is followinga trend from many small farms to a few large farms. Competition among farmers hasincreased supply faster than demand. New seed varieties, better pest control, productivemachinery, public investments in irrigation and transportation, and better managementwill increase farm output. The resulting oversupply of farm products, which creates a lowprofit margin, drives smaller farms out of business. Smaller farms lack the capital andincome to buy the machinery they need to compete with larger farms (Long 85). Manysee this tendency towards consolidation and mechanization of farms to be harmful to theUnited States in the long run, and they see subsidies as a way of achieving a socialdesire to preserve the family farm.
“If the family farm represents anything, it’s a veryintimate and fundamental relationship between people and resources (MacFadyen 138).” Fewerfarms mean fewer jobs and a higher concentration of wealth. Ten 30,000-acre farms mayproduce as much food as a hundred 3000-acre farms, but the former supports machinery;the latter, community (MacFadyen 138). Farm subsidies are designed to prevent theextinction of the small farmer.Despite the social benefits, subsidies have many problems.
The subsidy systemis often wasteful; the government finances irrigation systems in the California ImperialValley, and then pays farmers not to grow crops on it (Solkoff 27). Some benefits hurtthe small farmer. Marketing orders and tax breaks hurt small operators by giving moremoney to bigger farms. Big farms can then overproduce and undersell using advancedmachinery, driving lesser farms out of business (Fox 28).
Subsidies also allow foreignmarkets to become competitive by artificially raising market prices (Long 91). Artificiallyraising market prices create a surplus that would normally be solved by the free marketsystem. In a theoretical free market, overproduction would drive excess farms out ofbusiness, until equilibrium would establish itself for both price and quantity of farmproducts. Subsidies allow inefficient farms to continue to exist, which creates aninefficient economic system. Subsidies also increase the cost of other consumer products,while also increasing taxes to pay for them. Perhaps most importantly, subsidies do notfulfill their social role. “About 112,000 large farms– equivalent to the number of farms inMinnesota alone– produce half the nation’s food and fiber (Long 82).
” The manygovernment subsidy policies do not preserve the family farm, and the number of smallfarms has almost continuously been on the decline. Subsidies are impractical in theeconomic and the social aspects.Despite perceived benefits, farm subsidies are an inefficient and dysfunctionalpart of our economic system. Their goal, nonetheless, is noble. Writers like John Steinbeckmade people aware of the plight of the small farmer, and subsidies were the only solutionhe government could think of.
If there is some way to prevent the decline of small farmsthat does not carry the many subsidy problems, the agricultural policy would undoubtedlychange. Perhaps the same anti-trust laws that prevented the monopolizing of industrycould be used to prevent the consolidation of farms. Until some other system is developedthat can deal with the problems of the farmer, subsidies will continue to be used.Works CitedBlanpied, Nancy. Farm Policy. Congressional Quarterly: Washington D.
C., 1984.Fox, Michael. Agricide. Schoken Books: New York, 1986.Long, Robert Emmet.
The Farm Crisis. Wilson Co.: New York, 1987.MacFadyen, J. Tevere. Gaining Ground. Holt, Reinhart, and Winston: New York, 1966.
Reische, Diana. U.S. Agricultural Policy. Wilson Co.: New York, 1966.
Solkoff, Joel. The Politics of Food. Sierra Club Books: San Francisco, 1985.