From the collection of the

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Prelinger

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JJibrary

San Francisco, California
2006

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FOOD

FOOD

Frank A. Pearson

and '

Don Paarlberg

NEW YORK : Alfred A. Knopf

THIS BOOK HAS BEEN PRODUCED

IN FULL, COMPLIANCE

WITH ALL GOVERNMENT REGULATIONS

FOR THE CONSERVATION OF PAPER, METAL,

AND OTHER ESSENTIAL MATERIALS

Copyright 1944 by Alfred A. Knopf, Inc.

All rights reserved. No part of this book may be reproduced in any form
without permission in writing from the publisher, except by a reviewer
who may quote brief passages in a review to be printed in a magazine or
newspaper. Manufactured in the United States of America.

FIRST EDITION

Published simultaneously in Canada by The Ryerson Press

PREFACE

EVERYONE considers himself an authority on food. The farmer
knows about its production, the middleman about its distri-
bution, the housewife about its preparation, and everyone
about its consumption. The authors have no special preten-
sion as authorities other than to equate these widely diver-
gent views.

This book is an effort to present our past experiences with
food, to describe what currently appears to be its more im-
portant phases, to survey our national policy, and to present
the outlook.

In the early days of the Church a complete code of religious
doctrine was handed down to the laymen. There were some
unbelievers, who were called to account for their heresy.
These unredeemed had a spokesman whose thankless task
was to challenge the orthodox doctrine of the day. This
spokesman, since he was supposed to represent the powers
of evil, acquired the highly descriptive title of "the Devil's
Advocate."

In more modern tunes certain economic doctrines have
been handed down by the authorities of the State. Tailor-
made plans for agricultural production and food consump-
tion, new codes of economic ethics, and the fixing of prices
by decrees are a part of the new economic order. Recently,
when the food muddle thickened, ration tickets were passed

out, and a few pennies were "anted" into the subsidy "kitty."

This new doctrine of planned economy has its heretics and
unbelievers. For some time these unredeemed have had hard
going. Outnumbered for nearly a decade, they have been
termed the "rugged individualists" and the "economic royal-
ists" by the one- to fourteen-caret "liberals." Their spokes-
men have been few.

The authors, being skeptical of many of the new economic
doctrines, undertake to be the Devil's Advocates in defense
of their own heresy and that of others.

There is little in the handling of the food problem to in-
spire in the jury of 125 millions any sublime faith in the in-
fallibility of our Washington chefs.

The authors wish to acknowledge the suggestions and criti-
cisms of W. M. Curtiss, F. A. Harper, J. A. McConnell, H. B.
Meek, W. I. Myers, F. L. Platt, G. P. ScoviUe, L. N. Shaw,
E. E. Vial, and J. Warren; and the editorial work of M.
Scudder.

F. A. PEARSON
DON PAARLBERG
Written January to June 30th, 1943.

( vii )

CONTENTS

Chapter 1 WAR AND FOOD PAGE 3

Production Decreases and Waste Increases — Civilians
Get Left-overs — United States Fortunate — War Re-
duces Number of Consumers.

Chapter 2 THE FOOD SHORTAGE 8

The Nation Is Not Hungry — Who Caused the Food
Shortage? — Soldiers Did Not Cause the Shortage —
Lend-Lease a Major Cause of Shortage — OP A Unwit-
tingly Stimulated Consumption — Avoidable Waste
Negligible — The Government a Big Hoarder — Many
Mouths to Feed at Our National Barbecue — The Food
Picture Will Change:

Chapter 3 FARM LABOR AND MACHINERY 26

Farm Labor — Modern Farming Requires Many Skills
— Efficiency of Farm Labor Increasing — Family La-
bor Does Most Farm Work — Farmers Produce Surplus
Labor — In Good Times Labor Shifts to Cities — War
Depleted Farm Labor Supply — Labor Force Dwindles
in Effectiveness — Large Force Does Not Assure High
Production — Sales of Farms Do Not Threaten Pro-
duction — Labor Policy Reversed — Deferment Solves
Labor Problem — Reserve of Skilled Farm Labor —
Farmers Are Resourceful — Farm Machinery — Mod-
ern Machinery Revolutionized Farming — Farmer
Must Have Tools of His Trade — Machinery Restric-
tions Relaxed — More Tractors Needed — Truck
Transportation — Supplies of Nitrogen Short.

( viii )

Chapter 4 CROP PRODUCTION 50

What Are the Facts Regarding Crop Production? —
Agricultural Production Always Near Maximum —
Half Our Land in Farms — Non-Farm Lands Produce
Some Food — Good Farm Lands Produce Most oj the
Food — Good Lands Already in Use — Corn, Hay, and
Wheat -Our Biggest Food Crops — We Attempted to
Restrict Acreage — Curtailed Acreage Brought Back
into Cultivation — Agricultural Policy Blows Hot and
Cold — Much Depends upon the Weather — Goals and
Intentions Mean Nothing to the Weatherman — Incen-
tives Important to Production — Our National Crop
Policy - Change — Policy Changed from Restriction to
Expansion — We Have Outgrown Our Policy on Crop
Production — We Should Be Realistic about Food Pro-
duction — Outlook Is for Declining Production.

Chapter 5 LIVESTOCK PRODUCTION 70

Livestock Big Consumer of Crops — Some Foods Re-
fined by Livestock — Other Foods Condensed by Live-
stock— Number of Refiners and Condensers — Live-
stock Lags behind Crop Production — Livestock
Products per Acre and Feed Unit — First We Discour-
aged, Then We Encouraged Production — Low Ceiling
Prices Caused High-Protein-Feed Shortage — With
High Prices for Livestock, Protein Feeds Should Have
Been High — Protein Feeds Low Relative to Other
Feed Prices — Barter Economy — Low Frozen Prices
Stimulated Consumption of Feed Grains — Frozen
Prices Mean Frozen Supplies — Our Livestock Policy -
Feed 'Em and Weep — Livestock Expansion Cannot
Continue — Impending Livestock Liquidation — Ad-
ministrative Liquidation.

Chapter 6 SHOCK ABSORBERS AND EQUALIZERS IN THE

FOOD SUPPLY 97

Seasonal Stocks Adjust Short-Time Changes — Nation
Lives Largely from Hand to Mouth — Food Stored in
Form of Livestock — Livestock Serves as a Shock Ab-

sorber — Human Population Tends to Outrun Food
Supply — Foreign Trade Equalizes Food Supplies —
With Rising Population, Our Exports Decline — Fat s
for Soap, Paint, or Food — Lena-Lease a Shock Ab-.
sorber — Population Always Equals Food Supply —
The Nation Has Changed Its Policy on Food Supplies
— Rubber from Wheat — Stocks of Food Are Running
Dangerously Low.

Chapter 7 CONSUMPTION 111

Habit Plays an Important Role — Consumption Is
Stable — Range between Feasting and Fasting Is Nar-
row — Bread the Staff of Life — Do We Eat to Live or
Live to Eatf—Is There an Ill-Fed Third? —Both
Rich and Poor Fill Their Stomachs — Poor Man's Diet
Is Ample and Economical — Rich Man, too, Has a Food
Problem — What Is an Adequate Diet? — Nutrition
and Appetite Are Confused — National Policy Shifts
from Price Tag to Ticket — Food Fads Arise from Fact
and Fancy — We Have Tried to Abolish Poverty —
The Consumer Can't "Pull In His Belt" — Food a
Weapon of War and a Tool of Peace — The Nation Has
Sold Itself Short on Food — Many Guests Invited to
Our Table — Where Can We Get Additional Food? —
We Cannot Increase Production — Stocks of Grain and
Animals Soon Exhausted — We Can Feed a Few Mil-
lions on Livestock Products — We Can Feed Many
Millions on Grain — Present Policy Will Not Meet
Commitments — Civilians Must Learn to Eat Grain
and Like It.

Chapter 8 DISTRIBUTION 134

Nobody Loves the Middleman — The Marketing Prob-
lem Is a Depression Phenomenon — Little Is Known
about the Middleman and Much Is Suspected — What
Does the Middleman Dof — Middleman Matches Pro-
duction with Consumption — Consumers Demand
Service — Waste Is More Apparent than Real — Farm-
ers Waste a Minimum of Food — Distributors Waste a
Little to Save a Lot — Food Is Too Valuable to Be

Wasted — We Adopt New Slogans for an Old Policy —
Wastes and Costs of Distribution Will Rise — Little
Water Can Be Wrung Out of the Food Industry —
Efficiency of Labor Will Decline — Some "Frills" Make
the Consumer More Efficient — Progress Is Slow.

Chapter 9 PRICES 147

Price Is the Fundamental Issue — The Subject of Prices
Is Controversial — Prices Are Related to One Another

— Rising Farm Prices Are a Result of Inflation, Not
a Cause — Farm Prices Are Largely Made over Retail
Counters — Farm Prices Fluctuate More Widely —
Overproduction Was a Myth — Low Farm Prices Not
Due to Loss of Foreign Markets — Normally We Eat
More Than We Produce — General Price Level Affected
by Monetary Factors — Factors that Make Price — In
Wartime All Factors Make for Higher Prices — Price
Advances Depend on the Magnitude of the War — Food
Prices Fluctuate with Other Prices — Local Factors
Affect Food Prices — Price Affects Production, Con-
sumption, and Distribution — Price Tells the Farmer
What, Where, and How Much to Plant — Price Guides
Distribution — Consumption Wisely Guided by Price —
Importance of Rising Prices during War — Rising Food
Prices Do Not Mean Malnutrition — One Way to Lap
Up Excess Purchasing Power — We Have Experimented
with Many Panaceas — Present Policy Is a Dilemma —
All Cannot Have More if All Produce Less — Price
Level More Important to Income than Variations in
Production — Food Prices Made by Economic, Not Po-
litical Laws — Incomes Have Risen Faster than Taxes

— Price Control Is Difficult — Price Control Is Expen-
sive— Inflationary Gap vs. Statistical Gap — Rolling
Back the Cost of Living — All Signs Point to Higher
Prices.

Chapter 10 CEILING PRICES, RATIONING, AND

SUBSIDIES 187

These Are Methods of Buying Off the Public — We
Have a Two-Money System — Ceiling Prices Are In-

flexible — Price Rations Goods — Ticket Rationing a
Substitute for Price Rationing — Equality Is Not
Equity — Rationing Cannot Be Made Easy — Ticket
Rationing Means Strict Controls — Complete Ration-
ing Is Prohibitive — Subsidies Are a Stopgap — Eng-
land's Subsidized Food — Supreme Court Warning on
Subsidies.

Chapter 11 BLACK MARKETS 204

Black Markets in Currencies — Our First Dollar — Off
Bimetallism and on Gold Standard — Civil War Expe-
rience— Experiences during the Thirties — Foreign
Exchange — Black Markets in Commodities — Mod-
ern Black Markets — Causes of Evasion — Who Are
the Violators? — Large and Small Operators — Sim-
plicity of Regulations Does Not Eliminate Black Mar-
kets— Stopgaps to Black Markets — Policing the
Black Market — Occasionally Compliance Has a Bad
Effect — Black Markets Will Be with Us.

Chapter 12 ADMINISTRATION OF FOOD 220

Military vs. Civilian Logistics — Administrators Are
Untrained — New Bureaucracy Necessary — Conflict
among Bureaus and Policies — Conflict within Bureaus
and with the Public — Conflict among Czars — Job Too
Big for One Man — Public Not Trained for Regimenta-
tion — We Personalize Trouble '- — Advice to Adminis-
trators— Heat in a Frozen Economy — Administra-
tive Appeasement — Checks and Balances in a Regi-
mented Economy — Every Man for Inflation and Price
Control — Price like a Thermometer — "Squealom-
eter" Needed — Price- An Efficient Administrator.

FOOD

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CHAPTER I

WAR AND FOOD

HUNGER is playing a dominant role in human history. Con-
quest, Plague, Famine, and Death, the Four Horsemen of the
Apocalypse, are riding in this war as they rode in others.

War plays havoc with the world's food supplies. Despite
the individual and collective efforts of man, world wars re-
duce the supply of food.

Production Decreases and Waste Increases

World food production decreases during wartime because
there is less man-labor to plow, cultivate, and harvest the
crops. It is difficult, if not impossible, to take fifty million
men from the farms and factories of the world, put them into
the armed forces, and still maintain world food production.
Even Hitler has not yet been able to devise a plan whereby
men can both work and fight. Women may be pressed into
service, but efficiency is lowered. Steel is diverted from food
machinery to munitions. Fertilizers are diverted from food
production to explosives and other war purposes. The acreage
of cultivated land is reduced by camps, training fields, flying
fields, and the like, which frequently take the fertile, level,
low-lying ground. Thousands of acres of crops are trampled

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down, destroyed, or left unharvested by the invading and de-
fending armies. The net result of all these forces is a diminu-
tion in the world's production of food.

War impedes the transportation of food and therefore af-
fects its availability. This may be even more important than
decreased production. For deficit areas this is as serious as
if production itself had stopped. Food is scarce in France al-
though it is abundant in Argentina and stocks accumulate,
with grain sometimes burned as fuel. The difficulties of trans-
portation thus further diminish the world's available food
supply, already diminished by declining production. Eng-
land shuts off Germany's food supply and in turn is blockaded
by Germany. The embattled countries do everything possible
to reduce the supplies of food available to the enemy. The
Germans destroy huge amounts of food en route to England
and to our fighting forces in other theaters of war. The Eng-
lish bomb the food dumps of Germany and destroy food in
transit. In the transportation of food from Germany to the
eastern front, large quantities are lost through sabotage and
spoilage. This is an old, old game. Food is indeed a weapon
of war.

The work of both Allied and Axis army commissaries is
done under difficult conditions and, despite the best of plans,
is wasteful of food. War is the world's worst waster of food.

So far as food production and consumption are concerned,
war is more than inefficient; it is chaotic. There are no de-
grees of efficiency; there are merely relative degrees of chaos.

Civilians Get Left-overs

There is truth in the old saying that "an army moves on
its stomach." Its stomach must be filled, and filled with a
better food than is eaten by the folks on the home front. The
German army gets the best of the food that is available. It
gets sausages if there are any. It gets the French wines and

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cognac if there are any. It gets the Italian fruits if there are
any. Civilians must be grateful for whatever is left.

Since the amount of food available for the civilians de-
clines faster than that for the soldiers, the civilians must
change their food habits. The first reduction comes in the
production and consumption of the highly prized "protective
foods/' meat, milk, eggs, and fruit. The diminishing supplies
of food are too precious to be fed to animals; and to avoid
starvation, inventories of livestock are consumed. Produc-
tion of hogs and hens is usually curtailed because they are a
type of livestock that consumes food fit for direct consump-
tion by man. This occurred both in England and on the Eu-
ropean continent. In destitute countries like Greece and
Poland, the slaughter of livestock merely postponed the in-
evitable day when the amount of food available for civilian
consumption dwindled below the subsistence level. Malnu-
trition, disease, and starvation followed. The death-rate im-
mediately rose. This is the harsh method by which war ad-
justs the number of food-consumers to the amount of food
available. Starvation probably kills more people than do
Bullets.

Millions of consumers in a war- torn world are a good deal
like Lazarus at the rich man's gate. Lazarus had to be satis-
fied with the crumbs that fell from the rich man's table and,
while dying from hunger, had only the dogs to lick his sores.
Food is the essence of life.

United States Fortunate

Today the world offers illustrations of the various stages
of hunger wrought by the havoc of war. Of the warring coun-
tries, World War II has probably played the most havoc in
Greece and the least in Australia, Canada, and the United
States. The United States has a high standard of living in
the form of livestock products, and also has an additional re-

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serve, animals on the hoof. Harvests have been abundant,
and the destruction by war has been minor. The nation's
farms have not been overrun by invading and defending
armies.

At the other extreme is Greece, with a low standard of
living, poor soil, inadequate rainfall, and scant food reserves,
depending to a considerable extent upon imports. Greece has
been overrun by the invader, imports have virtually ceased,
and the conquering foe has lived off the country as much as
he was able. Starvation adjusted the Greek population to the
dwindling supplies of food. The Germans no doubt comman-
deer additional supplies of food as they become available,
and starvation continues.

The United States, like other warring nations, is also in
the process of changing the civilian consumption of food.
However, our change is not a reduction in amount. It is
merely a substitution of the less desired foods for the highly
prized ones. Up to the present time this change has not been
sufficient to cause malnutrition or disease, let alone starva-
tion. The United States is so fortunate in her capacity to
produce cereal grains that her population need not fear
starvation.

War Reduces Number of Consumers

War not only plays havoc with food supplies; it plays
havoc with the number of food-consumers. War reduces the
number of combatants during the war. War also kills civilians
because of more than normal exposure to the elements, more
than normal physical exertion, too little heat, too little cloth-
ing, too little food, and/or sudden changes in diet to which
they find it difficult to adjust themselves.

War also retards the expansion of population after the war.
Some persons are misled by the fact that with the outbreak
of war, birth-rates rise. This occurs because of "prosperity"

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and hasty marriages. If the war is of extended duration,
birth-rates will decline. After the war they will again rise.
However, like the increased birth-rate at the start of the
war, this too will be temporary. War creates a surplus of
females and a shortage of males. In the long run the effect
of war is a decrease in the birth-rate.

When the war and its aftermath are over and when man
stops wasting food and gets back to producing it, there will
be a more abundant, nutritious, and appetizing diet for
those who are left. But, as Jane Ace says, they must take the
"bitter with the better." Their cup will overrun with the
"better/' but they cannot obliterate the "bitter" — that loss
of those who were ridden down by the Four Horsemen, Con-
quest, Plague, Famine, and Death.

( 8 )

CHAPTER 2

THE FOOD SHORTAGE

LIKE Old Mother Hubbard, Uncle Sam has gone to the cup-
board and for the first time in twenty-five years has found
it bare. The public reaction was first unconcern, then un-
belief, and then alarm.

The concern is real. The food supply is not like the supply
of other critical materials. The supply of planes may be in-
creased by building new factories. The supply of soldiers may
be increased by the draft. But the production of food is al-
ways near its maximum. Increases come largely through high
prices and favorable weather, which are beyond the control
of the farmer.

The food situation will be worse before it is better. We
have been too optimistic about food production. The years
from 1937 to 1942 were all years of bumper crops. We came
to accept these good yields as normal, and erroneously
planned our food strategy on the assumption of continued
high production. Four thousand years ago in Egypt Joseph
was more realistic.

The food situation is critical not only in the matter of
supply, but in regard to requirements as well. Despite the
fact that for two decades we have been eating more food
than we produced, the nation has now embarked upon a pol-

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icy of supplying food not only to our military forces and to
our civilian population, but also to our allies and to the re-
habilitation of depressed peoples throughout the world. The
Secretary of Agriculture estimates that the requirements of
our own military forces and our allies represent one fourth
or more of the estimated food production of 1943.

Except during World War I this nation has always taken
its food supply for granted. During the thirties the idea of
overproduction of food became so firmly rooted that we be-
gan to think in terms of permanent agricultural surpluses.
The solution to the food problem took the form of the slaugh-
ter of little pigs, acreage control, and accumulating sur-
pluses.

Concern for the nation's "ill-fed third" has always been
good politics. With abundant supplies of food and low prices,
the nation decided that it was good economics as well. Sub-
sidized consumption was introduced as the solution to the
surplus-food problem.

The popular discovery of the vitamin provided a field day
for the nutritionists. To a considerable extent the nutri-
tious diet of the United States has been provided by the
condensation of cereal grains into livestock products such as
milk, meat, and eggs. The abundant supply of food in recent
years, together with its low cost, made a nutritious diet fea-
sible. Only with an abundant supply of food can a nation
afford to count its vitamins instead of its calories.

The wisdom of our peacetime food strategy at best was
controversial, but such strategy has no place in a food pro-
gram in time of war. Ten years of the psychology of surplus
had sold us on the idea that production was not a problem,
that additional requirements on our food supply could be
met without difficulty, that food prices should be kept low,
and that no nutritional sacrifices need be made.

It is from these inherited ideas that some of our present

food problems arise. With the outbreak of the war, the only
food strategy we knew was to do more of the same thing we
had been doing before. It would have been difficult to devise
a food policy less in the public interest.

The food program has been subservient to the inflation
program whereas the inflation program should be subservient
to the food program. The keynote of our food strategy has
been the maintenance of low prices for food. Low prices have
long been associated with abundance, and the nation has not
troubled itself to find which was cause and which was effect.
It was naively thought that by creating low prices abundant
food supplies could be assured. Thus armed with salt, the
government set out to catch its bird. Low ceiling prices were
established. The public has always instinctively interpreted
a low price as an encouragement to increased consumption.
The nation cleaned out the butcher shops and gorged itself
on the highly prized foods, meat, eggs, and milk. Likewise for
centuries farmers have interpreted low prices for a product
as a warning to decrease its production.

With consumption increasing and production inhibited,
further controls were resorted to. The venture in regimenta-
tion which began with the seemingly mild fixing of prices
led first to rationing, then to subsidies, and always to more
and more controls. The nation has a bear by the tail and
dares not let go so long as the administrators distrust the
individual economic judgment of its citizens.

The people of the United States are poorly trained, either
in leadership or in followership, for strict administrative
control of their habits of eating, spending, and earning. They
recall having been told and having agreed that it was for
freedom in such things that they were fighting. Administra-
tive rulings have been hastily drafted, and widely ignored.
Many are not convinced that the controls generally are
wise or that they should be obeyed. Americans traditionally

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have not followed laws and edicts blindly — unless they ap-
proved of them.

The nation has had three problems thrust upon it: win-
ning the war, fighting inflation, and inaugurating new social
reforms. Any one of these is a major undertaking. Washing-
ton is interested in all three; the 136 millions are interested
primarily in the first one — winning the war. Some think that
the anti-inflation and the reform programs slow down the
war effort.

Artificially low ceiling prices for food, short supplies, high
incomes, and general apathy regarding administrative edicts
create a perfect setting for black markets. The public in gen-
eral is more in a mood to patronize the black markets than
to persecute them.

Continued emphasis on nutrition has encouraged an over-
expansion of the livestock industry, which is a luxury in most
nations even in time of peace. The livestock population, in-
creased beyond the feed supply, will be liquidated the hard
way when the feed bins are scraped clean.

Optimism about our food potential has led us to make
commitments for Lend-Lease food exports that exceed the
possibility of fulfillment.

And, finally, our conviction that the production of food
was not a problem led us, until recently, to policies that in-
hibited rather than encouraged food production.

After having been convinced for a decade that the United
States had huge surpluses of food, the public apparently is
now headed for the other extreme and fears hunger. This is
equally in error; we need not starve or even diminish the
quantity of our food intake. All we will need to do is to
change the type of food we eat. If we were willing to eat the
type of food eaten by most of the world, we could feed ap-
proximately twice our present population.

The food situation will find its solution through the opera-

( 12 )

tion of economic laws, to which our national policy has and
will make grudging concessions. Food prices will rise, thereby
encouraging production and discouraging consumption. The
type of food which we are consuming will change and our
consumption of the more desired foods will decline. We shall
fail in our promise to feed our allies on pork loin and pow-
dered milk; if we feed them at all it will be largely on grains.
We shall see more emphasis on the production of more food,
and less emphasis on its quality or on the price we pay for it.
If food is^to win the war, it will have to be used like other
scarce war materials, not like the main dish of a Roman feast.
If food is to write the peace, it will have to write for many
people. The only way our food supply can be written for
many people is in terms of wheat, beans, and potatoes rather
than milk, eggs, and meat.

The Nation Is Not Hungry

Agitation about the food supply has been inspired by the
tongue and not the stomach. There has been no shortage
of energy food in the United States. However, if the weather-
man is a non-co-operator and the government continues to
encourage the feeding of wheat to livestock and the grinding
of wheat for synthetic rubber, and Lend-Lease exports of
wheat increase sharply, a shortage of energy foods might
develop. There is, and will continue to be, a shortage of meat,
dairy products, and other highly prized protective foods for
civilian consumption.

The consumer measures the supply of food in terms of
whether or not he can get meat, dairy, and poultry products
— the foods he most desires. Furthermore, the amount of
these foods that he would like to buy depends on his income.
He tends to gauge his shortage by the difference between the
amount of pork chops he can buy and the amount he would
like to buy, based on the purchasing power of his rising in-

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come relative to the low frozen prices of his frozen food sup-
plies. This difference is now very great. It does not measure
the shortage, but it does contribute to the "holler." Because
meat supplies for civilian consumption are less than the con-
sumer would like to buy, it does not follow that all foods are
scarce.

The consumer will submit to a gradual change in his food
habits, but resists a sudden change. During the two decades
from about 1909 to 1929 the consumption of beef fell about
30 per cent. Each year the consumer ate one pound less of
beef. The change was so gradual that he hardly knew it.

In 1943, however, the consumer is being asked to make a
sudden reduction of about 40 per cent in his consumption
of all meat. He will eat almost 60 pounds less meat than he
ate in 1942; he knows it and is telling others in no uncertain
terms.

The consumer is irritated by any change in his food habits,
loathes a drastic change, resists even a small reduction in the
consumption of his favorite food, and cries: "Starvation!"
when all these things happen at the same time. This prac-
tically sums up the food situation and the agitation concern-
ing it, but does not explain how it came about.

Who Caused the Food Shortage?

During 1942 the nation produced the greatest amount of
meat, milk, and eggs in history. Yet civilians think they are
eating the least amount that they can remember. The ques-
tion that all ask is: "What became of the food?" The con-
sumer's "food problem" is the current shortage of meats and
other highly prized foods. He wants to know why he can't
get them in the accustomed amounts.

There has been no lack of answers. The most frequent an-
swer is that the soldiers have been responsible. Lend-Lease is
frequently named as the guilty party. The consumer himself

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is charged with having created the shortage, either by feast-
ing or by hoarding. Some accuse the government of hoard-
ing, and some say food is being wasted. Others say it is the
black market. These are all partial answers, and are all par-
tially correct.

Soldiers Did Not Cause the Shortage

The most common explanation has been that the shortage
was due to our soldiers, sailors, and marines.1 From the view-
point of an official who must make an accounting that will
quiet the questioning consumer, this is an expedient if not
an accurate answer.

The army consumes a tremendous amount of food. But
the men consumed tremendous amounts of food as civilians,
and increase the country's food requirements only in so far
as they eat more than they did as civilians. A soldier eats
much more meat and about 20 to 30 per cent more total food
than he did as a civilian. The additional food requirements
of the 1942 army, which averaged about four million men,
were equivalent to about a 3-per-cent increase in the meat
requirements of the nation, and about a 1-per-cent increase
in total food requirements. This was not a very substantial
amount; in fact, it was considerably less than the increase in
food production. By themselves, the soldiers did not create
the shortage, though they did contribute to it.

As the army increases from four, to eight, to twelve million
men, the food requirements mount. A fighting force of eight
million men would increase our meat requirements by 6 per
cent; and of twelve million, by 9 per cent. The increase in
total food requirements for eight and twelve million men
would be about 2 and 2.5 per cent respectively. Such fight-
ing forces will make inroads into our food supplies.

1 Apparently the army plans to feed some civilians of invaded nations.
In that event such food should not be charged to the soldiers.

( 15 )

Lend-Lease a Major Cause of Shortage

Exports of Lend-Lease food, which are known to be large,
are named as the cause of the shortage. Officials, who do not
wish to antagonize the consumer, have sought to minimize
this argument. It has been reported that over the last two
years Lend-Lease exports of food "represented only a small
percentage of our total food supply." This is an accurate
statement, but it does not accurately describe the present or
the recent past. Beginning from zero in March 1941, Lend-
Lease shipments of food increased rapidly. An average of
such a period is not high, but the present rate of shipment
is higher than the average. It is the present rates that count.

Much of the Lend-Lease food exports have been the highly
prized nutritious animal foods. Although these foods repre-
sented less than half the 1942 tonnage, they represented
about 75 per cent of the total dollar value. The nation ex-
ported a better diet than it ate.

There can be little question that Lend-Lease has been
an important cause of the shortage. A clue to the govern-
ment's intentions regarding future Lend-Lease food exports
may be obtained from the statements of Secretary Wickard.
It would appear from his statements that Lend-Lease will
take from 15 to 20 per cent of our 1943 food production. This
would be equivalent to increasing our population by twenty
to twenty-five million people. In view of the fact that prior
to the outbreak of the war the nation ate more food than
it produced, such heavy exports would create a real food
problem.

The fall of Italy will add new demands on our already
dwindling larder. Fortunately, the Italians are great con-
sumers of wheat in the form of spaghetti. The immediate
burden will not be serious unless we attempt to up-grade
their standard of living.

( 16 )

OP A Unwittingly Stimulated Consumption

The contention is made that the consumer himself con-
tributed to the shortage by gorging himself on the highly
prized foods. Evidently the consumer felt no guilt, for it was
he who clamored loudest about the shortage.

In order to forestall inflation, OPA set low ceiling prices
on the highly prized foods. With advancing wages, full em-
ployment, low taxes, and little else to buy, increased con-
sumption of the highly prized foods — meat, milk, butter,
cheese, and eggs — was encouraged.2

Since the dawn of recorded prices food has been effectively
rationed by price. Low prices encouraged the consumption
of articles that were in abundance. Conversely, high prices
discouraged consumption and therefore rationed supplies
when they were short. Under a system of rigid ceiling prices,
this simple mechanism does not work.

The nation has been trying to prevent visible inflation by
fixing low ceiling prices, and in so doing has effectively en-
couraged consumption of the highly prized foods. Under
such a system there would be a continuous shortage. Even
with a large supply of food for civilian consumption, faulty
rationing would produce many apparent shortages.

Even the lowly potato, one of our cheapest foods, was
badly handled by the administrators. Potatoes are a rela-
tively perishable crop and cannot be carried from one crop
season to the next. The adjustment. of supplies and require-
ments is most critical in the spring at the tail-end of the old
crop and before new potatoes come on the market. At that
time stocks of old potatoes are either thrown to the hogs or
carefully doled out by high prices.

Following the establishment of ceiling prices for potatoes

2 Taxes have been raised and food prices have risen, but not in proportion
to wages and not as much as economically desirable.

( 17 )

in the fall of 1942, farm prices remained relatively stable
through February of 1943. Thereafter they rose rapidly in
spite of the ceiling prices (figure 1). These fluctuations were
in striking contrast to the relative stability of prices during
the previous crop year.

There was not much difference in the production of po-
tatoes between these two years. The United States crop for
1942 was 4 per cent greater than the previous year; and for
the thirty late states, 3 per cent greater. With the higher
prices prevailing for 1942 crops, there was less loss after

FIGURE 1. INDEX OF NEW YORK FARM PRICE OF LATE
POTATOES, 1941-2 AND 1942-3 MARKETING SEASONS

1910-14 = 100

230

190

150 -

NOVEMBER JANUARY

MARCH

During 1941-2, free prices were relatively stable. During the first part of
the 1942-3 season, prices were stable at a higher level. Thereafter, despite
ceilings, prices rose from an index of about 190 to 400.

( 18 )

harvest, better care during the winter; and less was fed to
livestock.

By January 1, 1943 there was nothing in the statistics of
merchantable stocks held by growers, local dealers, and buy-
ers to indicate that anything unusual would occur. For the
thirty late states January stocks were only 2 per cent less
than for January 1942.

During the fall, winter, and spring seasons of 1941-2 po-
tato consumption was rather stable at about a third of a
pound per person per day. This is equivalent to about a me-
dium-sized potato. During the fall of 1942 consumption rose
to almost 0.4 pound. Therefore there was only about a third
of a pound available daily per person for the 1943 spring
consumption. On a per capita basis, the 1942 fall consump-
tion was 15 per cent greater than a year earlier, whereas the
amount of old potatoes available during the spring of 1943
was 3 per cent less.

During January and February 1943 the ceiling prices con-
tinued and presumably consumption was maintained at
about the preceding high level. About the first of March
1943 the rationing of canned and dried vegetables began. It
would not be unreasonable to assume that in order to con-
serve their supplies and their coupons, folks increased their
consumption of "cheap," old-crop potatoes. On March 15
there was about a quarter of a pound per person per day for
the remainder of the spring season. The low ceiling prices
and the rationing of processed vegetables were accompanied
by high and increasing consumption of potatoes, followed by
very high black-market prices and decreasing consumption.
What happened to the consumption of potatoes after March
15, 1943 is a matter of conjecture. With the mounting prices,
potato consumption for the last sixteen days of March prob-
ably declined to about normal. This would have left about
one month's consumption for the following forty-five days.

( 19 )

Rising prices and scarcity of potatoes during April reduced
consumption even more. By May 1 there was available only
about one sixth of a pound of old potatoes per day. Consump-
tion declined primarily because of a lack of potatoes.

Although the average consumption declined during April
and May 1943, the decrease was by no means uniform. Many
ate more potatoes than usual to save their blue coupons
and/or their supplies of processed vegetables; others ate as
usual. Others must have eaten much less, and many ate none.
The hogs most certainly ate less. This was not equality of
sacrifice. Some large hospitals in potato areas of central New
York did not serve potatoes for almost a month. Many fam-
ilies were unable to buy old potatoes. A goodly proportion
of the armed forces in this country were without potatoes
for several weeks. They were fed rice, spaghetti, parsnips,
hominy grits, macaroni, and the like. It was difficult even
to get potatoes to provision outgoing boats. In New York
City late potatoes brought as much as ten dollars per hun-
dred-pound sack in black markets. This was over four times
the ceiling price at near-by shipping points.

The acute potato situation in the spring of 1943 indicated
clearly that setting low ceiling prices is not necessarily serv-
ing the best interests of the consumer. The government could
hardly have set a more favorable stage for a rapid disposal
of the 1942-3 potato crop. By the low ceiling prices, unac-
companied by the rationing of potatoes and accompanied
by the rationing of dried, dehydrated, and canned vege-
tables, the government in effect told the people to eat
the potatoes just as rapidly as possible. The 125 million peo-
ple3 did what the government, through prices, told them
to do.

The government, through too low ceiling prices, rationed
out the potatoes at too rapid a rate. Black-market operators,

8 Allowance made for 11 million men in the service.

( SO )

aided and abetted by the public, tried to reverse the govern-
ment policy. Apparently a good many of the people came
to the conclusion that if a choice had to be made, they would
rather eat in the face of black markets than starve legally.

In terms of farm production, there was no shortage of
potatoes in the spring of 1943.

In terms of the city consumer, there was a shortage.

The same was true of other foods.

The government's actions were at cross purposes. Like
Edgar Bergen and Charlie McCarthy, the government put
on a ventriloquist act with OPA as the puppet. Speaking in
its own voice, the government asked the consumer to "share
the food." Speaking through its Charlie McCarthy, the gov-
ernment said: "Help yourselves, boys; it's cheap while it
lasts." It was cheap while it lasted — but it did not last.

Since man responded to his economic motives rather than
to the patriotic appeals of his government, he was handed a
ration card and was told that he could buy only so much
meat, butter, and cheese. Many students say that this short-
age was created by the consumers. It was not due to the
consumers; it was due to the acts of their government, which
unwittingly asked them to do what it did not want them
to do.

Unless the rationing system is equitable, and unless the
unspent incomes of the low-wage groups are somehow ab-
sorbed, a part of the highly prized foods will by-pass the
regular channels and reappear in the black market. Black
markets, the inevitable accompaniment of low ceiling prices
and unspent incomes, result in waste and spoilage and con-
tribute somewhat to the shortage.

There is no question that OPA ceiling prices temporarily
hastened the disappearance of highly prized and other foods
by encouraging the consumption of the stocks in the chan-
nels of distribution and by increasing the supplies moving

( 21 )

through black markets. This added to the price administra-
tor's problems. How much it is impossible to say.

There will no doubt be many who are convinced that most
of these and the following strictures are fundamentally
sound, but doubt whether the administration could be guilty
of so high a percentage of error. The authors contend that
it is high because the administration has eliminated price as
a guide and has substituted regimentation instead. Having
made that fundamental error, all others follow from it.

The administration has accomplished certain things for
the war effort and civilians. These accomplishments have
been well presented by the administrators and the Office of
War Information and have received wide discussion by ra-
dio, the press, movies, and word of mouth. It is assumed
that the public is familiar with most of them. It is not our
intention to extoll these accomplishments, since there is no
reason for duplicating this information. Here and there we
have pointed out some wise administrative acts, but have
concentrated our attention on a few of the less publicized
administrative shortcomings. The administrators have made
mistakes and, being human, do not admit them. Since these
errors affect millions, the public is entitled to know about
them.

Avoidable Waste Negligible

i

Many persons explain the shortage of food in terms of
waste. The consumer rarely wastes much of the highly prized
foods. Regardless of whether this waste is normally a large
or a small amount, it decreases when the price of food rises.
Waste on the part of the consumer is no explanation of
tl?e present food shortage. Highly prized foods are too valu-
able to be wasted.

In time of war there is considerable waste of food on the
part of the armed forces. The Quartermaster General's data

( 22 )

presented to the Truman Senate Committee indicated that
one fifth of all the food entering the army mess halls ended
in the garbage cans. One third of the cereals, one half of the
soups, and one fifth of the meat was wasted. No doubt a part
of the situation will be corrected as experience is gained. A
part of the waste may be due to the fact that young folks
do not take to cereals and are not ravenous soup-consumers.
They detest and will not eat the kale that the nutritionists
recommend.

Large amounts of shipped food are lost in transit. Other
shipments may reach their destination, but there may not
be adequate terminal facilities to take care of all of them.
Tons of butter and thousands of cans of fruit spoiled in
Alaska because of inadequate storage facilities. With the un-
certainties of war, it is inevitable that large amounts of food
will be lost in transportation, in storage dumps, or even in
its final stages of preparation. If this loss were as much as
ten per cent of the consumption of ten million soldiers,
the losses would be equivalent to the addition of over one
million persons to our dinner table. This is not a formidable
amount, but it does add to the problem. This is one of the
inevitable wastes of war, and little can be done about it.

The Government a Big Hoarder

In time of scarcity, the government tells the consumer that
it is unpatriotic to hoard, but fixes low prices on food prod-
ucts and so encourages him to hoard. The net result is some
increase in the amount of food carried on civilian shelves.
Relative to normal household stocks, the increase is not
large. The typical consumer is not equipped to increase his
stocks of food because he has no place to store it. Whatever
changes occur, they contribute only to the apparent shortage.

In time of war the government becomes the greatest
hoarder. On April 1, 1943 the government commandeered

( 23 )

40 per cent of the inspected beef,4 45 per cent of the pork,
35 per cent of the lamb, 4 to 60 per cent of various canned
goods, and a goodly proportion of the salmon. The bulk of
these supplies are for current needs, including the army and
Lend- Lease. A part, however, are bought in anticipation of
possible future needs, which is merely another expression for
hoarding.

No one questions whether the government should main-
tain adequate stocks of the highly prized foods for its sol-
diers, sailors, and marines. Through errors in judgment or
through the enthusiasm for adequate supplies, government
hoarding occasionally is carried to extremes. Since the gov-
ernment is not normally a hoarder of food, it aggravates the
present food shortage.5

Few if any of these many drains on our present food sup-
ply in themselves could have been held responsible for the
acute food situation. Their combined effect was enormous.

The consumer asks who ate the little, pig that went to
market, and therefore who was responsible for the shortage.
Figuratively, the foreigner got the ham and most of the ba-
con. The soldier got a good share of the pork chops and a
few good roasts. The civilian got a shoulder and some sau-
sage. Part of the meat was hoarded by the government, and
part of it is at the bottom of the Atlantic.

Many Mouths to Feed at Our National Barbecue

It is impossible to estimate accurately the amount of the
highly prized foods that will be allocated to our own fighting

* Increased to 45 per cent, effective June 14, 1943.

3 The tendency of governments occasionally to hoard needlessly large
supplies of certain foods was well illustrated in World War I. England did
not dispose of her hoards of bacon and butter until the summer of 1921,
and Italy was still struggling to get rid of her hoards of high-priced sugar
until the winter of 1921. When the United States government finished dump-
ing its wool after World War I, the farm price was about fifteen cents and
the sheep industry was prostrated.

( 24 )

forces, our Allied forces in arms, the civilians of this country,
and civilians in Allied and liberated nations. All have been
promised tickets to our national barbecue. Neither is it pos-
sible to determine the losses due to poor distribution, waste,
black markets, government and private hoarding, or losses
at sea. Furthermore, it is impossible to anticipate how large
our food production will be and therefore how big a supply
there will be to divide.

Ceiling prices, Lend-Lease, losses at sea, and our fighting
forces have been the major causes of the meat famine. Losses
at sea have been greater than the unsuspecting public as-
sumes. Insurance rates to Murmansk and the western ports
of England have been high and indicate that losses at sea
bulked large.

With passing time, it will be possible to weigh more ac-
curately the factors causing our meat shortage. However, it
will be difficult to show that the shortage was due to the
scapegoats — black markets, waste, poor distribution, and
private hoarding — rather than to Lend-Lease, losses at sea,
and our fighting forces. War is the cause ; there is no disprov-
ing that fact.

The Food Picture Will Change

The first phase of the food shortage was a shortage of meat,
the most palatable of the protective foods. Eggs, which have
not been short and have been urged on the consumer as a
substitute for meat, may be scarce during the winter of
1943-4. There has been no shortage of energy foods, but one
may develop.

The future of food is a highly complex problem of supplies,
kinds, choice, free prices, ceiling prices, food distribution,
food habits, food as a weapon of war, rationing, nutrition,
subsidies, black markets, inflation, and administrative action
further befogged by charge and counter-charge by spokes-

( 25 )

men for the many interested groups. The facts concerning
food are confused by priorities, price-fixing, rationing, sup-
port prices, rollbacks, subsidies, and innumerable administra-
tive compromises — a result of political expediency. It is
difficult to separate the factual considerations from political
expediency. The facts about food are reasonably clear. Po-
litical expediency is something which is never the same for
one person in two positions, or two persons in one position,
and furthermore it is not the same from day to day. There-
fore both aspects of the problem have been treated.

It would take a master mind to array, to interpret, and
to place the facts and political expediency in their proper
perspective in the great panorama — food. By the time the
picture was painted it would be out of date. Some parts of
the picture never change, while others change so rapidly that
it is difficult to see and orient them. The scenes change, the
background shifts rapidly, the turnover of participants is
large, and the relative importance of the many factors
changes. The pictures could not be painted fast enough and
no gallery would be large enough to display them. There is
only one thing that is certain, and that is change.

Since most of us are merely amateur cameramen, all we
can do is to take a few snapshots here and there. The discus-
sions that follow are snapshots of some of the more impor-
tant phases of the food problem. Although many phases of
this problem are clear as crystal, our knowledge is not ex-
pansive enough to take into account all the conflicting factors
in the oncoming food problem.

The following chapters draw on the experience of the past,
attempt an analysis of the present, and present a few ap-
praisals with the hope of sharpening the focus of the food
picture for 125 million people.

CHAPTER 3

FARM LABOR AND
MACHINERY

THE CITY dweller knows that there is a shortage of certain
kinds of foods. He has been told that he himself was re-
sponsible. Others say the shortage of food is due to a lack of
machinery. Perhaps the majority attribute it to the shortage
of farm labor.

Farm Labor

Widespread concern regarding farm labor came with the
opening days of 1943, when there were somewhat more than
the usual number of farm sales. Much of the misunderstand-
ing of the labor situation arises from such superficial observa-
tions rather than lack of facts.

Modern Farming Requires Many Skills

The modern farm worker is neither the straw-chewing rus-
tic pictured in the funny papers nor the grasping lobbyist
described in the metropolitan press. He is an intelligent,
hard-working, resourceful individual who takes rather seri-
ously his job of feeding the world.

The days are gone when "any fool could farm." The mod-

( 27 )

ern farmer must be familiar with all the manual and me-
chanical jobs of production. He must have a knowledge of
money and management, so that he can buy and sell to ad-
vantage. He must know how, when, and where to plant and
to rotate his own labor and that of his hired man and of his
family from hour to hour, day to day, and season to season.
To train a farmer takes years of experience, gained mostly
in the school of hard knocks, aided by scientific information
obtained from research and extension work. The nation's ten
million trained farm workers are one of her greatest re-
sources.

Efficiency of Farm Labor Increasing

The American farmer is the world's most efficient producer
of food. In 1942, there were 10 million workers on farms in
the United States. They produced about 450 million tons of
crops, exclusive of pasture, and about 75 million tons of live-
stock products, or a total of approximately 525 million tons.
During the year, each farm worker produced about 45 tons
of crops, about 35 tons of which were condensed or refined
into seven or eight tons of the highly prized livestock prod-
ucts.

Over the last quarter of a century the efficiency of the
farmer has increased rapidly. From before World War I to
the twenties the output of crops per farm worker increased
25 per cent. This increase, though remarkable, was not so
spectacular as that of the much publicized assembly lines of
our Detroits. From the twenties to the forties, production
per farm worker continued to rise. By the first three years
of the forties, production of food and feed crops per man had
increased 26 per cent over the twenties, and 58 per cent over
1910-14 (table 1).

This increasing efficiency was the result of a variety of
causes. The rapid improvement of agricultural machinery

( 28 )

was perhaps most important. Better breeds of animals and
varieties of plants and improved cultural practices have had
their influence. In recent years the favorable weather has
increased yields and hence output per farm worker.

One hundred years ago the farmer produced food primarily
for himself. As his efficiency rose, he produced food for him-
self and also a surplus of food for the city consumer. The
proportion of the total population that can live in the city
is dependent upon the farmer's efficiency as a food-producer.

TABLE 1. INDEX OF PRODUCTION OF FOOD AND FEED
CROPS PER FARM WORKER, 1910 TO 1942

1926-30 = 100

Period

Production
of food and
feed crops

Total
farm
employment

Production
per farm
worker

1910-14
1920-9
1940-2

84
100
115

106
101
92

79
99
125

Family Labor Does Most Farm Work

About twenty per cent of the population of the United
States lives on farms. During 1942 about one third were
workers, of whom 2,500,000 were classified as hired hands,
and almost 8,000,000 as family workers.

At the present time as in the past most of the manpower
on farms is farm family labor, and not hired labor, as the
man on the assembly line usually assumes. Over three fourths
of the working force on farms in 1943 was "unpaid labor,"
consisting of the farmer himself, his wife, and his children.
The paid labor, more commonly known as hired labor, repre-
sented the remaining quarter.

_•• ( 29 )

Farmers Produce Surplus Labor

In addition to producing more food than he needs, the
farmer produces more human labor than he needs. There are
more children produced and reared to manhood and woman-
hood than can be effectively employed in agriculture.

In the country, children are an economic asset. They
gather the eggs, milk the cows, drive the team for the hay-
loader, and do many other tasks that would otherwise take
the time of a man. Furthermore, the country is a cheap place
to raise children. Food is abundant and relatively cheap.
Housing is less expensive than in the city, and many of the
goods and services that are required in the city can be dis-
pensed with in the country. It is not surprising that farm
families average larger than city families.

Country children are well trained for either farm or city
work. They are taught to work at an early age under the di-
rect supervision of their parents. In working with their fa-
thers on the hay wagon or in the barn, they take part in dis-
cussions of the issues of the day. Thus they learn manual
skills, resourcefulness, and the ability to think. The country
annually trains and turns over to industry about 500,000
workers. Industry finds these recruits well qualified to be-
come manual or skilled workers, and a considerable propor-
tion develop into executives.

In Good Times Labor Shifts to Cities

The rate at which this surplus labor leaves farms, and con-
sequently the supply of labor on farms, are determined pri-
marily by changes in labor efficiency, prices of farm products,
and employment opportunities in the cities. If farm prices
are low and agriculture is not prosperous, more than the nor-
mal number of these farm-reared children seek employment
in the prosperous urban industries. If employment oppor-

( 30 )

tunities in the cities are poor, the migration is slowed down
even though conditions on the farms may be unfavorable.

War Depleted Farm Labor Supply

During 1942 there was a rapid shift from farm to city. The
net movement away from farms, over 1,600,000 persons, may
be broken down as follows:

Enlistments or inductions in the armed forces, young males 737,000

Others, males and females, all ages 890,000

The net movement away from farms for 1942 1,627,000

The net movement away from farms for 1941 1,357,000

The net movement away from farms for 1940 681,000

As a result of the agricultural depression and urban expan-
sion of the twenties, the net movement away from farms
rose to as much as 1,100,000 but never reached the 1941-2
levels. The normal rate is about 500,000 per year.

The rate of movement has been more rapid in the South
and the Mountain States than in the states east of the Mis-
sissippi and north of the Ohio river.

The net movement away from farms during 1943 will be
much less than that for the last two or three years. This will
be because :

(a) The present policy is to defer men for farm work.

(b) The previous large-scale migrations to the armed forces and to
industry have depleted those age groups that normally leave farms
in the largest numbers.

(c) Former farm residents are returning to farms.

(d) The lengthening of the urban work week reduces the pressure on
farm labor.

(e) Reduction in employment in non-war industries provides war
industry with additional labor from city sources.

(f) Urban building has declined.

Labor Force Dwindles in Effectiveness

There has been a change in the composition as well as in
the number of persons reported as working on farms. With
the reduction in the number of farm workers, more farm
women, elderly men, and other farm residents who previ-
ously had not been doing farm work have replaced those who
left farms. The 1943 farm labor force will have the highest
proportion of women, children, aged, and inexperienced per-
sons in recent history. This will result in some diminution in
the effectiveness and quality of the labor force.

The depression prevented many older farmers from re-
tiring as rapidly as otherwise they would have done. Con-
sequently the average age of farm operators is the highest
in history. In 1940 there were about twice as many operators
over forty-four years of age as there were prior to World
War I (table 2) . The age distribution is not uniform through-
out the nation. Seventy per cent of New York's farmers are
over forty-four years of age. These older farmers, though long
on experience and judgment, are short on physical endurance.
The rising average age of farm operators will be an obstacle
to the maintaining of food production.

TABLE 2. CHANGING AGE OF FARM OPERATORS IN THE
UNITED STATES*

Year

Per cent
under 44 years

Per cent
over 44 years

1900

71

29

1910

72

28

1920

66

34

1930

63

37

1940

42

58

* Census of the United States: 1900, Special Reports — Occupations; 1910, 1920, 1930
Population; 1940, Agriculture Summaries by Subjects; United States Department of Commerce.

( 32 )

Women, children, and aged men constitute a part of the
normal farm labor reserve. Despite the great contribution to
the farm labor supply that has already occurred from the
tapping of this reserve, further contributions will have to
be made.

Large Force Does Not Assure High Production

The 1943 farm population is the smallest since 1910. Dur-
ing these thirty-four years the farm population has declined
about four million persons. The farm population declines a
little over 100,000 people per year. The net movement away
from farms averages about 500,000 people per year. The dif-
ference between the net movement away from farms and the
decline in farm population is due to an excess of births over
deaths, about 400,000 per year.

Changes in farm population are characterized by unusual
rather than by usual or average changes. From 1930 to 1933
the farm population increased by almost two million per-
sons, upwards of 600,000 per year. This was due to the great
depression, when surplus farm population could not move to
the cities and the unemployed in cities drifted back to farms.

During World War I the farm population declined 1.4 mil-
lion in two years. During the urban prosperity and low farm
prices of the twenties the farm population declined 900,000
in two years.

With the draft of men into the armed forces and war in-
dustries during World War II, the farm population declined
2,400,000 in three years. This is the greatest reduction since
records were available.

These unusual changes in farm population have had little
effect on food production. During the depression of the early
thirties the farm population increased and farmers produced
less food and feed crops (table 3). From 1917 to 1919 farm
population declined and food production increased. From

1940 to 1943 farm population fell almost twice as much as
during World War I, but total food production increased
three times as fast (table 3). Superficial observation would
lead to the conclusion that increasing the farm population
does not increase the food supply and that the way to get
more food is to have a war and draft the farm labor supply.
However, providence and changes in the economic incentives
play important roles in our food supplies.

TABLE 3. RELATION OF UNUSUALLY LARGE CHANGES IN

FARM POPULATION TO THE AMOUNT OF FOOD

AND FEED CROPS PRODUCED

Periods of
large change
in farm
population

Number of
persons on
farms*

Index of
production *

Per cent change in

Farm
population

Food
production

Decrease

1917

32,340,000

87.2

1919

30,930,000

93.9

-4.4

+ 7.7

Decrease

1922

31,749,000

91.8

1924

30,817,000

101.1

- 2.9

+ 10.1

Increase

1930

30,169,000

99.9

1933

32,033,000

97.8

+ 6.2

-2.1

Decroase

1940

30,269,000

100.9

1943

27,821,000

128.0

- 8.1

+ 26.9

* Farm population was based on January 1 enumeration; crop production, on reports for
the preceding year.

During the years from 1929 to 1932 the farmer had plenty
of help, no price incentive, and the weatherman was indif-
ferent. There was no change in the production per worker
(table 4). During World War I prices rose 82 per cent and
farm workers were scarce. The weatherman was helpful and
production per worker rose 15 per cent. During World War II,

up to and including the crop year 1942, farm labor was scarce,
but the acreage per worker increased. The weatherman came
through with marvelous distribution of abundant moisture,
and yields rose 19 per cent. The net result was that the
dwindling supply of labor produced one third more food per
worker.

TABLE 4. EFFECT OF WEATHER AND PRICE INCENTIVES
ON FOOD PRODUCTION

Crop years

Incentive,
per cent
change in
prices

Weatherman

Farm
workers

Yields,
per cent
increase

Production
per worker,
per cent
increase

1929-32

- 50

indifferent

abundant

2

none

World War I,
1916-18

+ 82

helpful

scarce

5

15

World War II,
1939-42

+ 45

very co-operative

very scarce

19

31

To produce large amounts of food takes labor, incentives,
and weather. With the help of weather, a decreasing farm
population can produce an increasing supply if there is plenty
of incentive.

Sales of Farms Do Not Threaten Production

During the early part of 1943 the press publicized the
sharp increase in the number of auctions and of farms sold.
The usual explanation is a shortage of labor, and it is com-
monly believed that such sales mean decreased production.

The most frequently publicized sales are those of large
farms with many hogs and cattle, employing several hired
hands. The liquidation of these large farms makes the head-
lines, but their number is small, and they play a minor role
in our agricultural production. When the operator of such
a farm decides to quit farming "because of the shortage of

( 35 )

labor," the farm does not go out of production, as is com-
monly assumed. In most cases the large farm is divided and
operated by several tenants or owners as family-sized units.
The family-sized units are not so spectacular, but together
produce about as much food as the large unit.

Less spectacular, but frequently cited, are the sales of
the typical family-sized farms. It is again erroneously con-
cluded that such sales arise mainly because of labor shortages
and will result in decreased food production.

A certain number of sales always occur because old men
retire and young men start farming. The only aspect of the
present situation that calls for explanation is the acceleration
in the number of these sales. Normally, young men went into
debt to start farming, spent most of their time paying off the
debt, and when the farms were cleared of debt, the operators
were ready to retire and move to town. The rate at which
they left farms depended on the profitableness of agriculture.
During the prosperous years from 1910 to 1920, about 22 to

24 per cent of the farmers on Illinois farms were over fifty-
four years of age. As a result of the agricultural depression,
the percentages rose to 31 and 35 respectively in 1930 and
1940. Consequently, in 1943 there were many more than the
usual number of old men operating farms. With the improve-
ment in prices and the abundant harvest, farm income has
risen sharply. This has enabled the older operators to liqui-
date their debts and retire.

The same factors control the rate at which young men
start farming. With the prosperity from 1910 to 1920, over

25 per cent of the operators were under thirty-five years of
age. In 1930 and 1940 the proportion of young men declined
to 18 and 17 per cent respectively. Consequently, at the pres-
ent time in Illinois and in most of the better agricultural
areas of the United States there is an accumulation of po-
tential farmers.

( 36 )

The increase in the number of auctions and of farms chang-
ing hands that inevitably accompanies the acceleration of
these retirements is neither an index of a shortage of labor
nor an indication of prospective food shortages. Most of these
farms will continue to be going enterprises. They will be
taken over by aggressive men and will be operated efficiently.
Since there is no shortage of men looking for good farms or
looking for more good land in our productive areas, their
urban cousins need not be disturbed by the sharp rise in the
number of farm sales that occurred in 1942 and will continue
into 1943 and 1944. The common explanation will continue to
be a "shortage of labor." A more complete explanation would
be the high average age of present operators and their rising
incomes that permit retirement.

Labor Policy Reversed

The nation's farm labor policy has changed with passing
time, as has the policy on farm production.

In the early stages of the war, the policy was to draft farm
labor indiscriminately. Ten years of surplus psychology had
sold the nation on the idea that production was not a prob-
lem, and that additional requirements on the food supply
could be met without difficulty. Local draft boards of city-
minded people had no reason to believe that they should ex-
empt farm labor when their stores were filled with signs
marked "Surplus Foods/' "Victory Specials," and the like,
all bearing some official insignia of the Federal government.

Farm labor was drafted not only by the army, but also by
industry. During the depression the normal migration from
farm to city was dammed up. With the revival of industry
and advancing city wages, there was a rapid shift from farm
to factory. Surplus workers and some of the necessary farm
workers quickly shifted to the cities.

As the food problem became acute, the national policy on

( 37 )

farm labor was reversed. Labor was frozen on farms. Farm
labor was deferred, and Selective Service encouraged ex-
perienced farm workers who had gone into industry to return
to the farms. The national farm labor policy includes the
importation of Jamaican, Bermudan, and Mexican labor and
the raising of a huge land army. The present farm labor
policy, if carried out, should provide the farmers with an
adequate supply of labor.

By the fall of 1943 some city-minded folks thought there
was an abundant supply of farm labor and they were mut-
tering that there were hundreds of thousands of young men
hiding in haylofts.

Deferment Solves Labor Problem

The farm labor problem is not a new one. In the eyes of
the farmer, there has always been a farm labor problem. The
unique feature of the present situation is that for the first
time in twenty-five years the farmer finds the rest of the
country agreeing with him. Alarm concerning the food sup-
ply has made many converts. Farmers always have enough
work to keep another man busy. They usually consider them-
selves short of help, and usually think that hired labor costs
too much. At the end of the season, the farmer brags about
the work he accomplished with so little additional help. Nor-
mally, however, most of the farmers have all the help they
can profitably afford to hire. This year was an exception. Be-
cause of the adverse weather of 1943, aging farmers with a
scarcity of labor were called on to plant the oats, corn, and
other crops and harvest the hay crop all at one time. Never
before have they worked so hard or so long, or been so dis-
couraged.

Most of the farm labor problem eventually finds its solu-
tion across the country in terms of harder work "from kin-see
to kaint-see" and not across glass-covered desks. Farmers

( 38 )

plant crops in the spring and harvest a big or little crop de-
pending primarily on the weather, regardless of the freezing
of farm labor, the fixing of farm wages, importation of labor,
the raising of a land army, and most of the other regulations
that may be promulgated from time to time. Some of these
activities will be of assistance to the farmer. The most impor-
tant is the deferment of farm labor.

The deferment of farm labor will automatically supply a
considerable amount of labor in a sense not often realized.
Deferment will again serve to dam up the flow from farm to
city. Large numbers of boys from fifteen to eighteen years
of age who would normally migrate to the cities will stay on
the farm and help solve the farm labor problem. The effec-
tiveness of deferment will be diminished in some commu-
nities by social pressures which prevent requests for defer-
ment.

The normal movement of surplus labor from farm to city
was accelerated by the disparity between farm and city in-
comes. As farm incomes and farm wages rise, the disparity
between farm and city incomes diminishes and the rate of
movement away from farms declines.

State and Federal agencies will popularize the "back-to-
the-land" movement and the land armies. City folks will be
trained for farm work. However, back-to-the-land is no solu-
tion to the farm labor problem unless the back-to-the-landers
are young men who have physical vigor and have not been
away from the farm so long that they are no longer ac-
quainted with the changing phases of agriculture.

It is relatively easy to transfer skilled farm labor to the
assembly line and make a skilled city worker in a short time.
Unfortunately, the process cannot be reversed. It may take
only two or three months to make an intelligent farm laborer
into an efficient shipbuilder. It will take two or three years to
make an intelligent shipbuilder into an efficient farm hand.

( 39 )

This is due to the fact that in industry one frequently works
day in and day out under constant supervision at one or two
operations. On a farm the jobs change from morning to night,
day in and day out, with a minimum of supervision. Many
city-minded folks think of food production as a mass produc-
tion industry. More often, it is one man working alone at ever
changing jobs. He must know how to do the job and when
to do it.

Reserve of Skilled Farm Labor

There are millions of men and women in the United States
who know how to do farm work, but who are not working
on the farms. Agriculture not only produces a surplus of food,
it produces a surplus of well- trained workers who migrate to
industry. There is no other source of such an enormous re-
serve of skilled labor.

Many of the farm-reared men in the cities have risen to
positions of responsibility and cannot be spared. Others are
ready to go back to the farm when the returns are equally
remunerative. A land army raised from this surplus of skilled
labor would be an effective one.

Another important source of farm labor is the farm women.
In this as in other wars the heaviest burden falls on women.
Normally the farm women do all the housework and a little
of the farm work. Farm women did more than the usual
amount of farm work and will be called on to do still more.

The great source of woman labor is in the city rather than
on the farms. City women raise fewer children and their
household activities are simpler; they do not preserve and
can the meat, fruits, and vegetables, or board the hired man
and do his laundry. City women can replace some of the
farm-reared men, who can then go back to farms. Although
not spectacular, this is effective. The beautiful farmerette
perched on a tractor is very picturesque but not very effec-

( 40 )

tive. She would be much more effective if she replaced an
able-bodied, farm-reared man now working in a factory and
his efforts were transferred to food production.

There is an acute shortage of young, well-trained male
help on farms. The average age of farmers is above normal.
These older farmers lack the physical endurance necessary
during the heavy work of planting, haying, and harvesting.
Normally the problem solves itself through the hiring of
extra men and the exchange of neighborhood help. With the
farmer, his wife, and children working practically at capacity,
there is an opportunity for Federal, state, and particularly
local agencies to provide small amounts of skilled, mobile
workers to assist such farmers at the time of peak labor loads.
This is not a job for farmerettes or the $26,000,000 land army
drafted from inexperienced city folks.

There are only a few ways of effectively increasing the
farm labor supply:

1. defer skilled farm workers;

2. discharge from the army skilled farm workers already inducted;

3. draft workers now in cities who have had farm experience;

4. depend more upon farm woman labor;

5. shorten the school year and release farm children for spring and fall
farm work.

There is another phase of the farm labor problem that re-
ceives scant consideration. There must be a constant succes-
sion of men taking over the farms relinquished by aging op-
erators. These men may be farmers' sons working as hired
men on their fathers' or other farms, accumulating capital.
This has been called the first rung of the agricultural ladder.
There are also many young married men with farm training
who are working in non-essential urban industries, accumu-
lating capital to start farming. Because of the high propor-
tion of old men now operating farms, great care should be
taken that Selective Service does not deplete this reserve of

( 41 )

oncoming farmers when the nation begins to draft married
men in non-essential industries.

Farmers Are Resourceful

Farming is a continuous struggle against the vicissitudes
of nature. Down the ages farmers have been forced to adjust
themselves to countless changing conditions unknown to the
man on the assembly line or to most other city folks. The
ability of the farmer to get work done under adverse weather
conditions, shortages of labor, and the like is so commonplace
that it is rarely appreciated. In the future as in the past the
consumer can depend upon the versatility and perseverance
of the farmer and his family to meet most of the emergencies
as they arise.

Under the deferment program, the labor problem on the
typical family farm, which produces most of the nation's food
supply, will not be serious except at the peak of the harvest
season. Even at that time the extra help needed is only a
small proportion of the total labor required to plant and
harvest the crop.

Farm Machinery

During the past sixty years the importance of farm ma-
chinery has mounted rapidly. In 1880 farm machinery repre-
sented 3.3 per cent of the total capital invested in our agri-
cultural plant. Since that time the importance of machinery
has increased at an increasing rate, and by 1940 farm ma-
chinery represented over 7 per cent of the capital.

Formerly crops were planted, cultivated, and harvested
largely by human labor. The only other power was one or
two teams of horses. The number of plows and the size of
the grain binder were determined by the amount of horse-
power that could be used efficiently with these tools. The
number of hours per day that the tools could be operated

( 42 )

and the rate of speed at which they moved were dependent
on the endurance and speed of the horse. The horse's upper
limit was about two and a half miles per hour for about ten
hours a day.

The farmer produced food first for himself, second for his
horses, and third for market. With the advent of the internal-
combustion engine, the farmer produced some food for him-
self, and the rest of it went to the city. The horses were dis-
posed of or, if kept, were put on reduced rations. As far
as feed is concerned, horses have become the "submerged
tenth," the animal contemporary of the downtrodden human
third.

Modern Machinery Revolutionized Farming

With the coming of the tractor, truck, and automobile,
farm work was speeded up. The number of plows and the size
of the cultivators were increased. The grain binder gave way
to the combine. The factor that limited speed and working
hours was no longer the endurance of the horse ; it was work-
ing conditions and the endurance of the farmer and his fam-
ily. Working with lights and operated in shifts, the modern
tractor pulls a gang plow at four miles per hour for twenty-
two hours a day.

By improving his equipment the farmer greatly increased
the production of food per farm worker. In fact, the machines
made the farmer so efficient and made his time so valuable
during the growing season that he produced less for himself
and began to eat out of tin cans and off the meat counters
and grocery shelves and out of the baker's ovens just like his
city cousin.

These increases in efficiency are rather different, in point
of fact, from what they appear. A common fallacy is to com-
pare the amount of wheat that a farmer can raise with a trac-
tor and combine with the amount he can raise with horses

( 43 )

and the threshing machine. Superficial observation counts
all this as increase in efficiency, but many invisible men are
working back of the tractor. Formerly the farmer raised the
horses and raised the feed for them. The horses did the work
of producing wheat and hauling it to town and raising their
own feed. With the new methods, only the farm worker is
visible, but work that he formerly did is now done by a large
number of other workers who mine the iron, roll the steel,
and make and transport the tractor. Still other workers are
producing, transporting, and refining oil. Others are produc-
ing combines and trucks. Still others print catalogues and sell
and finance the machines. Still others must repair these ma-
chines. The total time of the farmer and all these invisible
workers must be combined to determine the real increase in
efficiency in wheat production. The saving of human time is
greatly exaggerated when superficial comparisons are made.

Farmer Must Have Tools of His Trade

If the farmer is to maintain food production at a high level,
he must have the necessary equipment. He must have steel
for his combine, copper for his motors, gas for his tractor,
rubber for his truck, and service men to repair the large num-
bers of intricate machines. WPB has taken copper and steel
from agriculture for munitions and at the same time has un-
wittingly eliminated distributors of repair parts and repair
men themselves. If the farmer is unable to obtain his tools,
he must once more do all the tasks which in recent years have
been done for him by the unseen workers. The nation is ask-
ing the farmer to cope with his continual problems, the weeds
and the weather, which have always kept him busy, and in
addition to do jobs formerly done for him. Since he cannot do
all, and can do nothing about the weather, more weeds and
less food will be produced.

( 44 )

Machinery Restrictions Relaxed

Our national farm-machinery policy was to divert steel
from food production to arms production. This drastic policy
has been somewhat relaxed and some steel has been released
for farm machinery. Early in 1943 WPB permitted an in-
crease in farm-machinery production from the previous allot-
ment of 23 per cent of the 1940 level to 40 per cent, and in-
creased repair parts to 160 per cent of the 1940 and 1941
production. A long time elapses between the releasing of steel
and delivery of the machinery to the farmer. Therefore WPB
action will have little effect in 1943. The increase is large
enough to evidence admission of the difficulty, but not large
enough to correct it. The change in policy occurred after farm
organizations had expressed alarm regarding the effect of the
curtailment on food production and after the food shortage
became generally evident.

The machinery situation is more important than is gen-
erally realized. Because of the agricultural depression, farm
machinery was worn down for more than a decade. In many
parts of the United States the resulting shortage was only
partially replaced prior to the war. The number of machines
on farms in 1943 was the highest in history, but their age was
greater than in previous years. In addition, the draft of farm
labor by the military forces and by industry has made labor-
saving machinery even more important than formerly.

Shifts in crop production call for large amounts of new
equipment. Southern farmers have been encouraged to sub-
stitute peanuts for cotton. Cotton-producers do not have the
machinery necessary to harvest peanuts.

Inexperienced farm help will result in more than the nor-
mal wear and tear and breakage.

Restrictions on machinery production will have an adverse
and cumulative effect on food production. Since the farm-

( 45 )

machinery problem is a steel problem, the nation must keep
a watchful eye on the allocation of manpower and steel. If
steel is withheld from food production, increasing amounts
of manpower must be made available for food production
if it is to be maintained. The armed forces cannot have both
unless the war is of short duration.

More Tractors Needed

In view of the shortage of young, vigorous, male farm
workers and the high average age of present farm operators,
restrictions on tractor production should be relaxed.

Power is needed for farm work. Within narrow limits,
horsepower and tractor power may be substituted for one an-
other. With the drafting of manpower and the declining horse
population, tractors become more important and more neces-
sary.

During the past thirty years old dobbin has given way to
the tractor. In 1910 horses and mules furnished all the farm
drawbar power. The tractor made little headway during the
next ten years, but thereafter the expansion was rapid. The
number of horses declined and the number of tractors rose.
Tractors now furnish 44 per cent of the drawbar power. The
power furnished by the horses has declined about as fast as
that of tractors expanded. In 1920 one unit plowed, planted,
cultivated, and harvested about 85 acres of crops (table 5).
In 1943 the acreage will be about the same, 82.

If the nation pushes its crop area to 360 million acres in
1944, a total of about 4,400,000 tractor equivalents will be
needed. Work animals on farms are aging rapidly. It would
not be surprising if there should be a decline during 1943
of 300,000 or more horses and mules on farms. In that event
two million tractors will be needed. This is 100,000 more
than there were on farms on January 1, 1943. If 100,000 of
the present farm tractors are unfit for use by 1944, a min-

46 )

imum of 200,000 new tractors will be necessary for a program
based on 360 million acres. Since the food problem is so seri-
ous, experienced young male labor is so scarce, and deprecia-
tion may be high, it would be much safer to produce about
250,000 tractors.

TABLE 5. CHANGES IN TRACTOR AND HORSE DRAWBAR
POWER, 1910 TO 1943*

Drawbar power furnished by

Year

Crop acres,
millions

Tractors,
millions

Horses and
mules,
tractor
equivalent
millions f

Total power
in terms
of tractors,
millions

Acres per
tractor
equivalent J

1910

329

3.89

3.89

85

1920

360

0.25

4.48

4.73

76

1930

370

0.92

3.60

4.52

82

1940

344

1.55

2.60

4.15

83

1943

355

1.90

2.45

4.35

82

Estimate for next year:

say

then

say

then

say

1944

360

2.00

2.39

4.39

82

* Brodell, A. P., and Birkhead, J. W.: Age and Size of Principal Farm Machines. United
States Department of Agriculture, Bureau of Agricultural Economics, mimeographed report,
April 1943.

t Based on horses and mules on farms two years and older; five animals equal one tractor.

t The tractor farms no more acres now than five horses formerly did, but the tractor plows
deeper and fits the land better.

The condition of power equipment is quite similar to that
of the tractor. Many of the machines are about the same age
as the tractor and should be replaced. There is a shortage
of combines, corn pickers, and cultivators. Provision should
be made for expanding their numbers.

The farm-machinery program should be based on the like-
lihood that (a) the crop acreage will be increased, (b) the
horse population will continue to decline, (c) experienced
man-labor will be scarce, and (d) breakage will be high.

( 47 )

Truck Transportation

Trucking plays an important role in the movement of food.
Two thirds of the livestock, one half of the fruits and vege-
tables, and two fifths of the butter, cheese, and dressed poul-
try move by trucks.1

There has been a downward trend in the total tonnage and
the proportion of food moved by trucks. From 1941 to 1942
the proportion so moved declined from 60 to 55 per cent.
Conversely, the amount and the proportion moved by rail
rose.

There is little question but that the amount and the pro-
portion of food moved by trucks will continue to decline,
placing an increasing burden on the railroads. This has and
will continue to be due to the rising "death-rate" of trucks.
During 1940 about 40 to 55 per cent of the farm trucks on
Midwestern farms were more than ten years old. The prob-
lems of replacements, repair parts, tires, the quantity and
quality of gasoline, overloading, incompetent drivers, and
unskilled repair men are serious but will not be impressed
on folks until the trucks and autos break down like the "one-
hoss shay."

Transportation is so important that someone must survey
from time to time the allocation of Detroit's productive plant
to jeeps and tanks. Unless the war is of short duration, De-
troit will ultimately be producing more trucks for the trans-
portation of food and less fighting equipment for the armed
forces. Detroit cannot produce both.

Supplies of Nitrogen Short

The outlook for fertilizer is hampered by the supply of
only one element, nitrogen. Phosphorus and potash are rela-

1 Webner, W. G.: Estimated Volume of Motor Freight. Bureau of Agri-
cultural Economics, United States Department of Agriculture Mimeograph
report, July 1943.

( 48 )

lively abundant. The War Production Board has restricted
the use of nitrogen for fertilizer in favor of explosives. If the
war is of extended duration, nitrogen shortages may handi-
cap food production. The nation must reconsider from time
to time the allocation of nitrogen between food and gun-
powder.

Although grain, the backbone of the nation's food supply,
is produced in areas that require relatively little nitrogenous
fertilizers, such crops as fresh vegetables, potatoes, and cot-
tonseed oil, an important part of our food supply, are grown
on soils that require nitrogen.

The coastal area from Maine to Texas is characterized by
light soils that require constant applications of commercial
fertilizers, including nitrogen. There is practically no reserve
of nitrogen remaining from previous applications of fer-
tilizer; and on these light soils there is little natural reserve.

The next most important region requiring large amounts
of fertilizer is the fruit and vegetable area bordering on the
Great Lakes. There are many other smaller areas with light
soils. Irrigated regions on the west coast and the Mountain
States also require intensive applications. These areas pro-
duce a goodly proportion of our potatoes, fresh and canned
fruits and vegetables, and peanut and cottonseed oil. A lack
of nitrogen would handicap food production in these sections.

Fertilizer production is hampered by factors other than a
lack of supplies. Ceilings have been set on wages of workers
in fertilizer plants as well as on prices of fertilizers. These
ceilings are low relative to urban competitive wage scales
and prices of some farm products. Frozen wages below the
level paid in competing industries will prevent fertilizer com-
panies from obtaining adequate help. If this condition per-
sists, the production and distribution of fertilizer will be re-
tarded.

Low ceiling prices for fertilizer and rising farm prices

( 49 )

have encouraged heavier than normal applications. Fertilizer
prices are low relative to prices of cotton. From 1939 to Feb-
ruary 1943, prices of fertilizer materials rose 16 per cent, and
prices of cotton rose 126 per cent. From February 1942 to
1943, fertilizer prices declined 2 per cent and cotton rose 10
per cent. Cotton has risen in price relative to fertilizer over
the entire war period. This stimulates the use of fertilizer.
The amount of fertilizer applied per acre of cotton is low,
but the cotton area is enormous. A material increase in the
amount of fertilizer applied to the cotton acreage might re-
duce the supplies available for other crops.

In certain intensive crop areas .farmers have sharply in-
creased the normal applications of fertilizer. Fertilizer and
labor are two of the costs entering into crop production, and
within limits they are interchangeable. With farm wage rates
rising sharply, with low ceiling prices on fertilizer, and with
high prices of certain farm products, the tendency has been
to shift toward heavier applications. Such practices might
result in an abnormal distribution of the amount of fertilizer
available.

( 50 )

CHAPTER 4

CROP PRODUCTION

THE FOOD muddle is noteworthy for two things: a lack of
facts and a misinterpretation of the facts we have.

On one hand the consumer hears that America is a land
of milk and honey, and on the other hand he hears about an
over-all shortage of food. Empty butcher shops and over-
flowing wheat bins can be cited to support either view.

For twenty-five years the average American hasn't trou-
bled himself to do much thinking about his food supply. Food
was always available in ample quantities; the only problem
was to choose the type suited to one's taste and purse. To the
consumer, the problems of production, processing, and dis-
tribution of food were non-existent or at least unimportant,
since they solved themselves with little effort on his part.
The "farm problem," when it reached the consumer's ears,
was phrased in terms of overproduction, surpluses, and lost
foreign markets. We became concerned about the adequacy
of our food supply only when food became short.

What Are the Facts Regarding Crop Production?

For the consumer, a supply problem first really exists when
a familiar article is missing from the grocery shelves. How-
ever, the supply of food does not suddenly find itself upon

( 51 )

the grocery shelves in accordance with the demand. The
food supply is a complicated problem that involves prices,
weather, available acreage, farm labor, changing population,
foreign trade, and numerous other factors.

It is a tremendous task to provide an attractive, ample,
nutritious diet three times a day, 365 days of the year, for
136,000,000 people with different requirements, tastes, and
buying power.

To produce the crops to feed our livestock and human be-
ings requires millions of acres of land, large amounts of man-
power, adequate machinery, a huge capital investment, and
an immeasurable store of knowledge. The economic system
must provide an adequate return so that the farmers will
have an incentive to plant, and a benevolent Providence
must provide rainfall and sunshine in the proper proportions
so that the crops will grow.

Agricultural Production Always Near Maximum

Agriculture is unlike industry in several ways. Agricultural
production, limited by the weather, is always near its maxi-
mum for a given price level, while industrial production is
usually limited by the amount that can be sold. A part of our
difficulty comes about because we apply to agriculture a type
of reasoning suited to industry. We think that if we increase
our demands for food, agricultural production will automati-
cally rise to meet them. A more realistic approach would be
to recognize that food production does the bidding of the
weatherman and prices and is allergic to administrative con-
trol.

Half Our Land in Farms

The United States has about two billion acres of land, of
which one billion are in farms (table 1).

Although a little over fifty per cent of the total land area

in the United States is in farms, crops were harvested from
less than a third of that land in 1939, a good crop year. There-
fore, of the total area of land in the United States, less than
one fifth was harvested cropland.

TABLE 1. DISTRIBUTION OF LAND IN FARMS, 1939 *

Classification

Millions of

Per cent

acres

Cropland, harvested

321

30

Cropland, failure

21

2

Cropland, idle or fallow

57

6

Pastures, plowable

131

12

Woodland f

137

13

Other land J

394

37

Total

1,061

100

* : Census of the United States, 1940: Agriculture, United States Summary, United

States Department of Commerce, page 10, 1941.

t Farm wood lots or timber tracts, natural or planted, and cutover land with young growth.

t Pastureland other than plowable and woodland pasture; wasteland, house yards and
barnyards, feed lots, lanes, roads, etc.

That year the nation harvested crops from 321 million
acres. There were 78 million additional acres of cropland that
produced nothing. This area, which represents about one fifth
of the crop acreage, was idle or not harvested because of nor-
mal fallowing practices, AAA policies, wind, hail, drought,
floods, insects, disease, low prices, or lack of labor.

The plowable pastures, woodland, and other lands, which
include non-plowable pasture, wasteland, house yards and
barnyards, feed lots, lanes, and the like, represent over sixty
per cent of the land in farms, and over twice the harvested
crop area.

As far as expanding our food supply is concerned, the
amount of idle or fallow land could be somewhat reduced and
a small portion of the plowable pasture could be cultivated.

( 53 )

Non-Farm Lands Produce Some Food

Almost half the area of the United States is in desert, bare
rock, marshlands, beaches, cities, towns, roads, parks, public
grazing lands, forests, and the like. A considerable part of this
non-farm land produces some food for man. The acreage of
land in public and private range and grazing lands, classified
as non-farm land, exceeds that in crops. About one third of
the land not in farms is privately and publicly owned grazing
lands, much of which is in the western part of the United
States. The ranges produce pasture grasses adapted to arid
or semi-arid conditions. Over half of the area in forests is also
used for grazing. The carrying capacity of the woodlands
varies inversely with the density and directly with the
amount of sunlight that strikes the soil.

Since the carrying capacity of the woods and ranges is low,
the meat produced per acre is very low, but in the aggregate
it is considerable because of the huge acreage. This area is
one of the most important sources of mutton and beef.

Good Farm Lands Produce Most of the Food

Studies of good and poor farm lands indicate that there is
a wide variation in the amount of food produced. About one
third of the farm land in the United States is poor, one third
is fair, and one third is good. The poor land produces about
one thirtieth of our food supplies and the good lands, about
two thirds.

Land Land Food

classes area produced

Poor 1/3 Ko

Fair i/3 y3

Good 1/3 2/3

Judging from past records, one should not expect to get
much additional food from the poor lands during this war;

( 54 )

but it should not be assumed that some day we cannot get
additional food from these poor soils. In fact, plans may be
devised to get large amounts of food from them.

The production of food per man on most poor soils is low
and on the good soils it is high. However, some poor lands
have high productivity per man. This is the case on the Great
Plains area and in the great open spaces of the Mountain
States. In these areas farmers have adjusted their intensity
of operation and type of farming to farms with thousands
of acres.

With a shortage of food, a shortage of good land, a shortage
of labor, and a shortage of machinery, what should be the
nation's policy regarding the allocation of the scarce factors
of production?

Farmers' experience and farm-management studies indi-
cate that added applications of manpower, machinery, ferti-
lizer, and the like yield more food when applied to the better
lands than to the poor lands. Under a rationed economy there
is a tendency to treat the good and the poor land alike or even
to treat the poor better because it is poor. If the selective
draft were selective enough, it would select more boys from
the poor land for the army and leave more boys on the good
lands to produce food.

The allocation of farm machinery, fertilizer, farm supplies,
sprays, and the like tends to be on a share and share alike
basis. If maximum food production is desired, the scarce in-
struments of production should be largely concentrated on
the good to fair lands at the expense of the poor lands.

These recommendations would appear to operate to the
disadvantage of the operators of poor farms. These men
should find employment on good farms or in war industries
where labor is scarce and wages are high.

( 55 )

Good Lands Already in Use

The acreage of idle land in the United States is an index
neither of waste nor of how much our wartime food produc-
tion could be increased.

It is sometimes thought that the acreage of crops could be
expanded considerably if only we believed it necessary. How-
ever, the great bulk of our good agricultural land is already
in production. Most of the land not being tilled has been
proved by the competitive process to be unworthy of the ex-
penditures of capital and labor that would be necessary to
bring it into production. Drainage and irrigation could bring
some additional land into production. For a number of years
reclamation of new acreage has approximately equaled aban-
donment, and the acreage of farm land has been substantially
unchanged. The acreage of land that could be reclaimed is
small when compared with the acreage already under culti-
vation.

There are some marginal lands, it is true, that it might
pay to cultivate in tune of war. A large and sustained rise
in prices could bring some of these marginal lands into culti-
vation, but the increase in total production would be small.
The United States has nearly reached agricultural maturity.
Increases in the acreages of certain crops can come about
mainly through a reduction in the acreage of other crops.
Total crop production cannot be materially increased by
planting more acreage.

Corn, Hay, and Wheat — Our Biggest Food Crops

Corn, hay, and wheat, in the order named, are our biggest
crops, and represent almost two thirds of the harvested crop
area of the United States. Most of the corn, all of the hay,
and a part of the wheat are fed to beast rather than to man.

The next most important food crops — oats, cottonseed,

barley, sorghums, and soybeans — together occupy 30 per
cent of the crop area (table 2).

Four crops — peanuts, rye, potatoes, and dry beans — to-
gether represent 4 per cent of the aggregate acreage.

There are 40 other crops which, taken together, occupy
about as much acreage as the four crops just mentioned.

TABLE 2. HARVESTED ACREAGE OF 52 CROPS, 1942

Crop

Million
acres

Per
cent

Corn

89

26

Hay

73

22

Wheat

49

14

Oats

38

11

Cotton (cottonseed)

23

7

Barley

17

5

Sorghums

15

4

Soybeans

11

3

Peanuts

4

1

Rye

4

1

Potatoes

3

1

Dry beans

2

1

40 other crops

12

4

52 crops

340

100

Important grains and hay represent 96 per cent of the crop
area of the United States. Grain and hay are the backbone
of the food for beast; grain and livestock products are the
backbone of food for man.

We Attempted to Restrict Acreage

There was a widespread philosophy during the first and
second New Deals that prices could be raised by reducing
production. The method used was to restrict the acreage.
From 1932 to 1940 the acreage of cotton was reduced 33 per
cent, and corn 22 per cent. Soil-conservation practices en-

( & )

couraged the expansion of hay, soybeans, and sorghums.
Hay, the second most important crop, increased 8 per cent.

The decreases in acreage exceeded the increases. Four im-
portant crops — cotton, corn, wheat, and oats — declined 47
million acres. Three crops — hay, sorghums, and soybeans —
expanded 16 million acres. The policy of contracting some
crops and expanding others caused striking changes in indi-
vidual crops, but the total harvested acreage was reduced
only 9 per cent. Some of this decrease was due to crop aban-
donment caused by low prices and would have occurred de-
spite AAA.

The government set out to reduce production of "soil-
depleting" crops * by decreasing the number of acres planted
to them. The farmers, who are piece-workers, set out to in-
crease production on the decreased acreage. The farmers ob-
viously eliminated the poorer acreage and applied more man-
labor, power, and fertilizer to the better acres. As a result, the
acreage of soil-depleting crops fell 19 per cent, the yields rose
20 per cent, and total production declined only 3 per cent:

Government-con- Yields due to farm- Nation's production,

trolled acreage ers' efforts and the a product of gov-

fell to weather rose to ernment's efforts

times the farm-
ers' efforts, de-
clined slightly to

81 per cent 120 per cent 97 per cent

Attempted control of acreage is a poor tool for those who
would have a planned agriculture.

Curtailed Acreage Brought Back into Cultivation

Following 1940, there was some loosening of crop controls.
This and the advancing prices increased the acreage of corn

1 Soil-depleting crops such as corn, cotton, wheat, etc.; and soil-conserv-
ing crops such as alfalfa, clover, and other sod crops.

( 58 )

3 per cent from 1940 to 1942. However, the acreage of cotton
and wheat continued downward, declining 5 and 7 per cent
respectively. The total acreage increased 2 per cent. Prices,
unhampered by restrictions on production, direct or indirect,
would have increased the acreage more.

From 1932 to 1940 the acreage of four feed grains was re-
duced under the policy of shifting from soil-depleting * to
soil-conserving * crops. Since the outbreak of World War II,
with its unparalleled requests for livestock products, some
grudging concessions have been made, but these so-called
soil-depleting crops have regained only about one third of
the lost acreage. Thanks to hybrid corn and the weather,
production was good despite the efforts of the restrictionists.

With higher prices and less restrictions, farmers intended
to increase the 1943 acreage. Had the farmers carried out
their 1943 intentions, about half of the acreage taken out of
cultivation during the early years of the present administra-
tion would have been restored. Adverse weather prevented
the realization of these expectations.

It seems reasonable to assume that, with further relaxa-
tion of the restrictions and higher prices, the acreage planted
will continue to increase. It does not follow that if the acreage
is increased, food production will rise in proportion to the
increased acreage. The acres thrown out of cultivation and
therefore those that may be brought back into production
will be the poorer lands with less than average yields.

The contraction program reduced the acreage but did not
greatly reduce total production. The expansion program may
increase the acreage but may not greatly increase produc-
tion. Had the government permitted an increase in winter-
wheat production in the fall of 1942 in the Great Plains area,
the 1943 food production would have been greater. In the

1 Soil-depleting crops such as corn, cotton, wheat, etc.; and soil-conserv-
ing crops such as alfalfa, clover, and other sod crops.

( 59 )

Great Plains, where the greatest contraction in wheat acreage
occurred, weather conditions during 1943 were favorable.
However, the weather may not be favorable in 1944 after the
government belatedly permits an expansion of winter- wheat
production.

Agricultural Policy Blows Hot and Cold

From 1933 to 1942 the United States spent over five billion
dollars in an effort to reduce production, conserve the soil,
and adjust prices. During the past half-century the nation
has spent about one billion dollars for research and exten-
sion work to improve the efficiency of the farmer and increase
food production.

The two policies were obviously at cross-purposes. The
crop-reduction policy was the more expensive and the less
effective. The program of research and extension was less
expensive and of considerable effectiveness and durability.
If hybrid corn had been its only product, direct or indirect,
the expenditures would have been amply justified. Hybrid
corn increases production perhaps 15 to 20 per cent. Over the
past five years this would have totaled about two billion
more bushels of corn, or more than a year's production of
pork. The value of such a contribution in the present emer-
gency is worth more than the total cost of all research and
extension work.

The farmer's urge to improve and to increase, with nature
as his ally, usually triumphs over the forces of restriction and
curtailment.

Much Depends upon the Weather

Prices told the farmer how many acres to plant, how much
labor to hire, and how much fertilizer to apply, but did not
tell him how much he would produce. That depended upon
the weather. Improved machinery, better breeds of livestock,

( 60 )

and improved cultural practices have not decreased the farm-
er's dependence on the weather; they have probably in-
creased it. Wet weather slows the man with the hoe, but it
stops the tractor. Modern farm animals, bred for high pro-
duction, probably respond more to violent changes in feed
and weather than did their thick-skinned ancestors.

It is well understood that for one farmer, changes in the
weather can make tremendous changes in yields. It might
be thought that with six million farms scattered over forty-
eight states, these changes would offset one another and the
total food production of the nation would be relatively stable
from one year to another. Such is not the case; although
there is great variation in rainfall within small areas, this
variation does not cancel out to make a constant average.
Any particular year will have a general pattern over rather
wide areas as to temperature and rainfall. If it rains, it rains
upon the just and the unjust. In dry weather all signs of rain
fail. In any year the total food production of the nation may
vary as much as 15 to 25 per cent from the preceding years
with no change in the farmer's intentions to produce, as in-
dicated by acreage. During the drought of 1934, food pro-
duction declined 24 per cent. With the good weather of 1942,
food production increased 17 per cent.

Long-range weather forecasting has been struggling to
become a science for hundreds of years. The possibilities of
development in this field are intriguing but still embryonic.
Cycles in the weather, permanent changes in temperature,
and the like make good subjects for discussion, but as yet
are not predictable. For all practical purposes, the astron-
omer who predicts next summer's weather by the sun spots
is in the same class with the local sage who predicts a bitter
winter by the thickness of a squirrel's fur. The two have
about equal chances of success in predicting the weather of
this and the next growing season.

( 61 )

The overwhelming proportion of the total variability in
food production from year to year comes from changes in
the weather, and only a small proportion is due to changing
acreages, fluctuating supplies of labor, transportation dif-
ficulties, price changes, mistaken judgment, and the like.
We frankly acknowledge that we can do nothing about the
weather. To a limited extent, the other factors affecting crop
production are within our control. In our enthusiasm over a
small measure of success in controlling these, we sometimes
forget that by far the greatest factor affecting crop produc-
tion is completely beyond our control.

Goals and Intentions Mean Nothing to the Weatherman

There is a tremendous difference between the govern-
ment's goals, established during the winter, the farmers' in-
tentions to plant in the spring, and the final harvest the fol-
lowing fall. There is no truer saying than that hope springs
eternal in the spring. During the early spring, farmers have
high hopes. If the spring weather is favorable, the farmers
may plant as many acres as they intended. To achieve the
high hopes of the spring, however, there must be a proper
distribution of an adequate supply of rainfall during the
summer.

In the spring of 1934 the farmers intended to plant 186
million acres,2 but the weather was good and they planted
about 208 million acres. Thereafter the weatherman played
havoc with production. Crops were so poor that 22 per cent
of the crop acres2 were abandoned and the yields of the
remaining acres were 19 per cent below normal.3 As a result,
production was about 30 per cent below normal.4

In the spring of 1942 the farmers intended to plant about
217 million acres2 and planted about 219 million. The
weather was good and the farmers planted more than they

2 Based on 14 crops. B Based on 28 crops. 4 Based on 53 crops.

( 62 )

intended. The weatherman was very co-operative through-
out the year. The abandoned acreage was small and the yields
of the harvested acreage3 the highest in history. This un-
usual combination produced a crop 25 per cent above nor-
mal.4

Between spring and fall a fickle weatherman can give us
a crop 15-25 per cent below normal or a crop 15-25 per cent
above normal. This is not a theory ; it is a fact. It has hap-
pened in the United States.

In the spring of 1943 the farmers planned to plant 229
million acres,2 compared with 219 million in 1942. This was
a substantial increase. However, this optimism was short-
lived. During the spring of 1943 the weatherman was a non-
co-operator and the farmers planted only 218 million acres.2
This was eleven million acres less than they intended and
one million less than they planted the previous year.

The government dictates the acreage goals; the farmers
dictate the intentions to plant; the farmer and the weather-
man compromise on the acreage actually planted; and the
weatherman dictates the acreage that shall be harvested and
the yield per acre. The most the government can do is some
paper work. The rest is in the hands of the farmer and the
capricious, unpredictable weatherman.

Incentives Important to Production

Probably a continuation of the production of 90-95 per
cent of the nation's food is assured for the duration regard-
less of low ceiling prices relative to urban wages. However,
the other 5-10 per cent depends on alternative opportunities.
This marginal food is the most expensive part of our supply.
It is not only as important as any other part, but it is espe-
cially important in tune of war that we produce all that is
possible. It is also very important that all that is produced

2 Based on 14 crops. 3 Based on 28 crops. 4 Based on 53 crops.

( 63 )

is saved. Unharvested crops are more frequently an indica-
tion of low prices than of labor shortage. In order to main-
tain food production, incomes in agriculture must be com-
mensurate with incomes in other industries. If the incentive
— prices — is high, farmers will put forth their maximum
effort for over-all food production.

For some commodities this was recognized. Following Pearl
Harbor imports of vegetable oils declined and the govern-
ment undertook to expand the acreage of soybeans for oil.
Soybeans compete with corn. In 1940 a bushel of soybeans
was worth 1.5 bushels of corn, and the following year the
farmers planted 5.9 million acres of soybeans. The govern-
ment's support price raised prices of soybeans relative to
corn, and a bushel of soybeans was worth more than two
bushels of corn. The 1942 acreage of soybeans increased to
10.8 million acres.

Another instance of the effective use of the price incentive
was the United States Department of Agriculture's support
prices for butter to the end that production be maintained
or increased. The butter deal was one instance in which the
Department of Agriculture wisely made a reputation as an
inflationist.

The policy regarding red kidney beans was less realistic.
The government wanted more red kidney beans, but prices
were held so low for the past season or two that in the spring
of 1943 farmers in the major red-kidney-bean sections of
New York State planted about 20 per cent less than the
previous year. Of course, the number of producers of red
kidney beans is small and their aggregate contribution to
the nation's food supply is not large. With declining con-
sumer supplies of animal protein food, however, there will
be urgent need for the expansion of vegetable proteins, of
which beans are a great source. The red kidney, the pea, and
the lima bean are highly prized because of their palatability.

__ ( 64 )

Prices have been more successful in stimulating produc-
tion than have exhortations. The government appealed to
the farmers to produce more hogs and more corn. Hog prices
were more favorable than corn prices. In fact, the price situa-
tion for hogs was so favorable that the farmers' expansion
program exceeded the government's requests. The price in-
centive was so strong that in the spring of 1943, the War Food
Administrator urged the farmers not to increase the breeding
of sows and gilts more than 15 per cent. There were estimates
that some Corn Belt farmers planned a 50-per-cent expan-
sion. To the extent that the government said it wanted some-
thing and then paid a stimulating price, it chose the correct
means of accomplishing the objective.

The government kept down the price of corn, and in the
spring of 1943 the farmers planned to increase the acreage of
corn only 6 per cent.

The 1943 sugar-beet goal was the same as in 1942, but the
price of sugar has not risen in proportion to wages, and the
farmers intended to plant 30 per cent less beets than in 1942.
They actually planted 39 per cent less, the smallest acreage
since 1922. This equals about 750,000 tons of urgently needed
sugar.

The only potent incentive to increased production is the
dollar. The farmers and Congress want price to be the incen-
tive. The administration, which favors price-fixing, wants
subsidies.

Our National Crop Policy — Change

During the horse-and-buggy days the nation had no agri-
cultural production policy other than to make two blades
of grass grow where one grew before. This was a good policy.
It was the only way the farmer had to increase his wealth,
and no satisfactory substitute has yet been found.

For a decade beginning in 1932 our agricultural production

( 65 )

policy was one of scarcity, centering on the prevention or
elimination of surpluses. The nation tried to prevent sur-
pluses by restricting the acreage of wheat. Farmers were
penalized forty-nine cents per bushel for wheat produced in
excess of their quotas. We attempted to eliminate the surplus
wheat by the ever normal granary policy. This did not dis-
pose of the surplus, and the nation is now trying to get rid
of it by feeding it to livestock, a very effective but not an
advisable way.

The nation restricted the acreage of cotton and thereby re-
duced the production of cottonseed oil, an important food
product. The nation reduced the acreage of corn, and thereby
restricted pork production.

Policy Changed from Restriction to Expansion

Formerly, the policy was to pay farmers not to produce
and subsidize to raise the price. Now the policy is to pay
farmers to produce and subsidize to prevent prices from
rising.

During 1942 farmers were encouraged to plant more pea-
nuts and soybeans. The restriction policy on wheat was con-
tinued, and was not lifted until the spring of 1943. Acreage
restrictions on cotton have not yet been relaxed. After the
farmers have met their quota of war crops and complied with
soil-conservation practices, they can increase their acreage of
corn — if they have the acres.

Formerly our national policy was to control the acreage
of important crops and permit prices to fluctuate. During
1943 our policy was to let the farmers plant crops of their
own choosing, but rigidly regiment the prices. Formerly the
fluctuating prices were not permitted to guide production.
Now production is guided by a guided price.

The controlled-scarcity policy has grudgingly become a
controlled-expansion program. Those who once sponsored the

( 66 )

scarcity policy have been placed in charge of the expansion
program.

Changes were made in our policies on crop acreage, but
they were made late. Changes were made in our policy on
farm labor, but they, too, were late. Changes are being made
in our farm-machinery policy, also belatedly. We have finally
come to realize that production must be stimulated. Some
folks credit the planners with seeing the difficulties and mak-
ing the changes. Others contend that they did nothing until
shortages occurred, when the force of public opinion com-
pelled them to make changes. If the latter point of view is
correct, those in charge of our food strategy were weather-
vanes rather than administrators.

We Have Outgrown Our Policy on Crop Production

By far the most important government food program for
1943 is still that of the A A A. Some contend that the support-
price programs are more effective. However, for most prod-
ucts support prices are below the market prices.

The AAA program was originally a farm relief measure de-
signed to assist the depressed state of agriculture. The pro-
gram, with amendments, has been continued despite the in-
creased need for food and the decreased need for relief.

The AAA has used crop allocation and marketing quotas
to restrict the production of some crops. We are restricting
the cotton acreage from which cottonseed oil, an important
vegetable fat, is obtained and which is now so scarce that
it must be rationed. Paying farmers not to produce cotton-
seed oil does not assure us that more of the other vegetable
oils will be produced.

Parity payments may have some justification in time of
agricultural stress, but have little to recommend them in time
of war. In fact, the government agencies are operated at
cross-purposes. The AAA attempted to raise farm incomes

( 67 )

by parity payments, and OPA tried to hold down prices, and
thereby farm income.

As a distress measure, the nation devised a soil-conser-
vation program purportedly in the interest of future food
supplies. Despite the war, much of the old AAA policy to
conserve the soil for future generations was still in force
during the summer of 1943. It has been stated that farm-
ers can plant crops of their own choosing. It is true that
penalties for excess planting of corn have been eliminated;
but considerable indirect control still exists by classifying
certain crops as "war crops" for which AAA payments are
made. It will be difficult to eliminate the national, state, and
local interests involved in this program.

When the nation is at war and denuding itself of its man-
power and other natural resources, there is little reason to
continue a program of soil conservation at the expense of
much-needed current supplies of food. The best of our man-
power, mines, and forests are drafted for the war effort. Can
there be any objection to mining the soil for a few years when
food is so scarce?

We Should Be Realistic about Food Production

In time of war the food strategy should not be based on
a year like 1942, when the acreage planted was high, the
abandonment low, and the yields the highest in history. The
year 1942 was one of those rare ones when the pictures in
the seed catalogues came true. Only an optimist would base a
wartime food policy on the pictures in a seed catalogue. In
time of war we should be realists instead of optimists. We
should base our estimates of future crop production on the
assumption that (a) either there would not be sufficient
labor and/or machinery, and/or favorable spring weather to
plant all the acres that the goals call for or the intentions
indicate, and that (b) the weatherman would be a non-co-

( 68 )

operator during the growing season and therefore the har-
vested acreage and the yields per acre would be average or

Based on this point of view, crop production may be 10
or 15 per cent less than the bumper crops of 1942, which
apparently have been the bench mark for our Lend- Lease
food policy and our other food commitments.

Our program has been to expect a higher production than
will be realized. This is not only poor planning, but poor
psychology. It would be much better if the people were led
to expect little and be doubly thankful if they got more than
they expected. Winston Churchill5 impressed this simple
principle on 46 million Englishmen when he told them: "I
have nothing to offer but blood, toil, tears, and sweat."

Outlook Is for Declining Production

Among the many factors that affect crops, not one points
to materially higher production.

There will be little expansion in the acreage of crops in
the next several years, with the possible exception of the
Great Plains, where the lifting of wheat restrictions may put
more acreage under the plow.

There could, of course, be increases in food production
through shifts from extensive to intensive crops. For in-
stance, meadows may be plowed up and planted to beans.
Such practices would increase the production of food crops,
but increasing amounts of equipment and human labor
would be required, both of which are scarce in tune of war.
The fact that more intensive cultivation could be resorted
to is a guarantee against any over-all future shortage of food
in the United States, but it is not likely that such an intensi-
fication will occur quickly.

Farm labor, machinery, fertilizer, spray materials, gaso-

5 To the House of Commons, May 13, 1940.

( 69 )

line, rubber, and other supply problems and the price prob-
lem will irritate the farmers and alarm the country, but their
net effect will not be of sufficient magnitude to jeopardize
crop production. Crop production will be determined largely
by the weather, and there is little that can be done about
it except talk ; and of talk there will be no end.

CHAPTER 5

LIVESTOCK PRODUCTION

ON January 1, 1942 the nation had $7 billion invested in
livestock, about fifty dollars for every man, woman, and child
in the United States. There were about 145 million animal
units, or about one per capita. More simply, there was one
cow, or its equivalent in the form of hogs, sheep, and chick-
ens, for each person. Cattle were the most valuable (table 1).
These animals consumed about 130 million tons of grain
and ate, slept on, or tramped over 200 million tons of rough-
ages. There were, in addition, about 160 to 180 days of pas-

TABLB 1. NUMBERS AND VALUE OF LIVESTOCK
IN THE UNITED STATES

January 1, 1942

Type

Number

Value

Cattle
Horses and mules
Hogs
Sheep
Chickens
Turkeys

75,000,000
14,000,000
60,000,000
57,000,000
475,000,000
8,000,000

$4,140,000,000
1,051,000,000
943,000,000
488,000,000
395,000,000
23,000,000

Animal units *

145,000,000

$7,040,000,000

* One sheep equals 0.04 of one feed-grain consuming animal unit; chicken, 0.045; turkey,
0.18; other cattle, 0.51; hog, 0.87; dairy cow, 1.0; horse or mule, 1.14.

( 71 )

ture. The pastures and 330 million tons of crops together
with the water were reduced to about 80 million tons of
highly prized animal foods.

There was more moisture in the livestock products taken
out of the barn than there was in the feed hauled into the
barn. On a basis of dry matter, seven pounds of grain and
seven pounds of roughage, exclusive of pasture, were fed to
make one pound of these products.

The highly prized livestock and livestock products repre-
sent about twenty-five per cent of the dry matter consumed
by the American people.

Livestock Big Consumer of Crops

Practically all food is produced from crops, the vast ma-
jority of which must be planted, cultivated, and harvested
annually.

Agriculture produces certain crops for direct consump-
tion. Among these are beans, lettuce, and potatoes. Other
products are for direct consumption but must first be proc-
essed. Wheat as flour, oats as oatmeal, and buckwheat as
pancake flour are examples. These foods are the staff of life.

Still other crops are produced to be fed to animals and
transformed into food for man. Beasts consume all of the
roughages, all of the pasture, and about three quarters of
the cereal grains. Man eats about 3 per cent of our most im-
portant food crop, corn; hogs and other animals eat 85 per
cent. Man eats about two thirds of the second most impor-
tant grain crop, wheat; livestock probably gets about one
sixth. Beasts get about 95 per cent of our oat crop. Man
drinks about 30 per cent of the barley crop, and beasts eat
about 60 per cent (table 2).

Some Foods Refined by Livestock

Livestock may be broadly classified into two groups : those
which refine crops unfit for human consumption, and those
which condense crops that are fit for human food.

TABLE 2. DISPOSAL OF GRAIN AND HAY CROPS
Approximate proportions consumed by man and beast *

Crop

Man

Beast

Corn

3

85

Wheat

65

15

Oats

3

95

Barley

30

60

Rice

50

5

Rye

25

50

Sorghums

0

100

Buckwheat

65

20

Hay

0

100

* Seed, storage, and exports unaccounted for.

A Graphic Summary of Farm Crops. Bureau of Agricultural Economics, United States
Department of Agriculture, Miscellaneous publications Number 512, February 1943, page 12.

The farmer uses beef cattle, sheep, and dairy cows to re-
fine bulky, inedible crops into food fit for man. These an-
imals were equipped by nature with a digestive system that
enables them to handle large quantities of coarse, bulky
foods. During the summer months animals refine the inedible
pasture grasses into milk and meat. In the winter they refine
the inedible part of the crops produced the previous sum-
mer, such as timothy, alfalfa, and clover hay, cornstalks,
straw, by-products of the milling industry, and low-quality
grains. The livestock refine these inedible products into the
nutritious but expensive products: beef, mutton, lamb, milk,
butter, and cheese.

Beef cattle, sheep, and dairy cattle are not only refiners of
inedible food; to a considerable extent they are also har-

( 73 )

vesters and gleaners. During the summer months they har-
vest for themselves huge amounts of food in the form of
pasture grasses. During the fall and winter they are glean-
ers, gathering up food that would otherwise be wasted. In so
far as these animals eat crops that man himself cannot eat
and in so far as they harvest and glean crops that would
otherwise go to waste, they add to man's food supply.

Other Foods Condensed by Livestock

There is another type of livestock which serves more as
condensers of food than as refiners. Farmers use hogs and
poultry to condense crops already fit for human consump-
tion. Hogs were equipped by nature with a digestive system
much like man's ; neither the hog nor the hen can survive on
large quantities of coarse, bulky foods. Hogs and hens con-
dense the cereal grains that man does not require into nu-
tritious and highly prized but expensive pork, poultry, and
eggs.

Some of the animals are kept to serve as scavengers, to
pick a precarious living from foods that man will not eat or
has not the means of gathering. On many farms a hog and
a few chickens serve this purpose.

Since, for the greater part, these animals consume food
which could otherwise be used by man, they deduct from
man's total supply of food. Consequently, when man's food
supply is seriously threatened, these animals are quickly
liquidated.

Number of Refiners and Condensers

On January 1, 1943 the nation had 55 million units of
animals that might be classified as refiners of food unfit for
man (table 3). Sheep were the most numerous, but dairy
cattle were the most important.

The nation had almost 90 million units of animals that

might be classified as condensers of grains that man could
eat. Chickens are numerically the most important, but from
the standpoint of feed consumption and pounds of food pro-
duced, hogs are the most important.

TABLE 3. NUMBERS OF LIVESTOCK
January 1, 1943

Refiners *

Condensers *

Class

Number

Class

Number

Dairy cattle
Beef cattle
Sheep

40,000,000
38,000,000
55,000,000

Hogs
Chickens
Turkeys

74,000,000
540,000,000
7,000,000

Animal units

55,000,000

Animal units

90,000,000

* There is, of course, some overlapping. The dairy cows consume some grain. The hogs
eat some grass and grain by-products. The hens consume some ground alfalfa hay, meat scrap,
and grain by-products.

The "condensers" or heavy grain-consumers, turn out
about 80 pounds of dry matter per year for each man, woman,
and child in the United States. The cattle and the sheep, the
"refiners," produce about 150 pounds of dry matter per
capita.

Livestock Lags behind Crop Production

A severe curtailment in crop production is followed by a
decline in the current production * of all livestock. The first
effect is always on the livestock for which the least feed re-
serves exist, beef cattle on the range. Hog production, of
course, is just a reflection of the reduction of the corn crop.

1 Meat "production" as reported by the United States Department of
Agriculture includes all animals killed. To the layman, this is erroneously
assumed to be that produced for the year or its equivalent. When farmers are
liquidating their animals, this so-called production is greater than the actual
"current" production. Conversely, when farmers are holding back animals
to build up their herds, so-called production is less than the actual "current"
production.

( 75 )

The least violent declines occur in the production of dairy
products.

The drought of 1934 was one of the most severe in the
nation's history. Per capita production of food and feed
crops declined 24 per cent. Some of the effects of the drought
were felt immediately in the current production of meat;
but other effects were delayed until 1935. Based on which-
ever year was the lower, the decline in current production
of these highly prized foods was 15 per cent.

Although current production declined 15 per cent, con-
sumption declined only 5 per cent. The drastic decline in
the current production was largely offset by added supplies
from inventories. In fact, during 1934 the consumption of
meat was about normal. Following the drought of 1934, in-
ventories declined 10 per cent, somewhat less than either
crop or current livestock production. The full effect of the
drought on both current production and consumption of the
highly prized foods did not occur until 1935. The liquidation
was practically over and consumption was dependent upon
current production. Both current production and consump-
tion were 10 per cent below the 1932-3 level.

When crop conditions improve, current livestock produc-
tion increases and farmers accumulate livestock on the hoof.
Following the drought of 1936, there was a succession of
good crop years; crop production per capita increased 43 per
cent; and livestock products 28 per cent. In addition, farm-
ers stored about four months' supply of food in the form of
livestock on the hoof — their "ever normal" granary.

Regardless of whether there is a sharp curtailment in crop
production or unusually abundant haivests, current produc-
tion of all highly prized foods moves in the same direction.
Meat changes approximately in the same proportion as crop
production. The production of eggs and poultry changes

( 76 )

about two thirds as much. Milk production changes rela-
tively little.

The complete dependence of livestock production upon
crop production is thus illustrated by experience. It is im-
possible to expand livestock production beyond our feed
supply, no matter how much we may desire more milk, meat,
and eggs. Those who wish to see high livestock production
might better give their attention to the production of feed
crops than to exhorting the farmers to raise more animals.
Feed, not livestock, is basic ; the number of animals is quickly
adjusted to the feed supply. If greater livestock production
is desired, the prices of feed should be permitted to rise so
as to stimulate the production of feed grains. The numbers
of livestock will automatically rise as long as feed is avail-
able. Recent emphasis on livestock production relative to
feed production is like pulling men off the assembly line to
put them in the shipping department.

Livestock Products per Acre and Feed Unit

Formerly the farmers raised large amounts of grain and
hay to feed horses so that they could produce more grain
and hay to feed productive livestock such as hens, cows, and
hogs. Now the tractor does much of the heavy field work and
the automobile and truck do all the road work formerly done
by horses. The amount of feed fed to horses declined because
of the reduced numbers and the reduced rates of feeding to
the reduced numbers. Consequently there was more feed
available for the production of the highly prized animal prod-
ucts for man.

There has been a sharp increase in the amount of live-
stock products produced per acre of feed crops because of the
improvement in field cultural practices, the development of
better varieties of crops such as hybrid corn, and the expan-
sion in the acreage of alfalfa. Not only has the feed produced

per acre been increased but the feed is being used more ef-
ficiently by livestock. Improvement in the breeds of live-
stock, improved feeding practices, and a slight increase in the
amount of protein feeds have contributed to the rising out-
put of livestock products per unit of feed available. During
the past quarter of a century the production of livestock
products per acre of land and per unit of feed have risen 44
and 27 per cent respectively (table 4).

TABLE 4. INDEX OF PRODUCTION OF LIVESTOCK AND

LIVESTOCK PRODUCTS PER ACRE AND PER

UNIT OF FEED*

1910-14 = 100

Five-year
period

Per acre

Per unit
of feed

1910-14
1924-8
1938-42

100
118
144

100
121
127

* Feed grains and hay.

In general, these changes are gradual and occur over long
periods of time. The amount of milk produced per cow has in-
creased gradually over the past quarter-century. The change
from horsepower to tractor power was more rapid and cer-
tainly more spectacular. The expansion in the acreage of al-
falfa has been slow. The development of hybrid seed corn
was gradual, but its adoption by the Corn Belt was sudden
and spectacular. This increased the possibilities of expand-
ing livestock production. There is a limit to the amount of
feed that can be made available to other types of livestock
through a reduction in the horse population. There is a limit
below which the number of horses is not likely to decline.
Furthermore, the amount of feed fed to each horse is ap-
proaching an irreducible minimum.

( 78 )

Therefore continued increase in the amounts of highly
prized foods produced from a unit of feed awaits the genet-
icist and the commercial breeder; the nutritionist and the
commercial feeder; and the plant breeder and the commer-
cial seedsmen. Undoubtedly, over the next quarter of a cen-
tury, progress will continue to be made. But the changes will
be slow and gradual and the chances of any significant in-
creases in our food supplies from this source during the next
year or two are small.

First We Discouraged, Then We Encouraged Production

Our changing policy concerning the production of crops
has been accompanied by a changing livestock policy. In 1933
the nation slaughtered millions of pigs to keep them off the
market. During the latter part of the thirties the nation cur-
tailed the expansion of livestock by locking up grain under
the ever normal granary policy. Recently this policy has
given way to a program of all-out livestock expansion, with
particular emphasis on pork production, frowned on a dec-
ade ago. It is questionable whether the economic interests
of the nation have changed in proportion to these changes
in policy, as the impending liquidation of livestock will in-
dicate.

Not only has it been patriotic to expand livestock produc-
tion, but it has been profitable as well. High prices have been
paid for livestock products, and grain prices have been kept
at relatively low levels to encourage livestock production.
In 1942 the expansion policy of the government coincided
with the expansion policy of nature, and the government con-
gratulated itself upon its success.

Since hogs are condensers of food, the slaughter of pigs
during the early thirties piled up food at a time when it was
generally believed there was a surplus. The recent expansion
of numbers of hogs, on the other hand, has reduced food sup-

( 79 )

plies at a time when we are faced with a shortage. The ex-
pansion in the numbers of livestock, which began in 1937
and continued into 1943, was due to a succession of good
crops. Most of the abundant supplies of livestock in 1943
were a product of six years of the co-operative efforts of the
farmers, the seedsmen who developed and multiplied hybrid5
corn, and the weatherman. Their combined efforts more than
counteracted the efforts of the restrictionists.

The nation can plan for increased livestock production
based on low grain prices as long as the grain does not run
out. For continued expansion it is necessary that the expan-
sion of feed crops keep pace with the increasing numbers of
livestock. Livestock production is more than merely a prob-
lem of the number of sows that can be bred and the number
of chickens that can be hatched. Because of the limitations of
acres of farm land, farm labor, and machinery, the amount
of multiplication that is possible in the production of feed
crops is insignificant in proportion to the possibilities of in-
creasing numbers of livestock. When livestock numbers do
not expand or contract in proportion to feed supplies, there
is likely to be trouble.

Low Ceiling Prices Caused High-Protein-Feed Shortage

One phase of the livestock expansion program has been
the maintenance of low prices for the high-protein feeds in
order to make livestock production profitable. The high-
protein feeds for animals consist of tankage, meat scraps,
and oil meal. The high-protein foods for man consist of meat,
milk, and eggs. Our policy of maintaining cheap protein feeds
for livestock was similar to our policy of maintaining cheap
protein foods for man. In the early stages the same method
was followed. Low ceiling prices were maintained, and ra-
tioning was not attempted.

A shortage of high-protein feeds for livestock developed

( 80 )

in the same way as the shortage of meat, a high-protein food
for man. In fact, it developed more rapidly. The high-protein
feeds represent only about 3 per cent of the livestock ration,
while they represent about 25 per cent of the human diet.
Since the high-protein feeds are so small a part of the live-
stock ration, supplies were quickly exhausted under the
stimulation of low ceiling prices.

In the spring of 1942 OP A convinced itself and others that
the prices of meat scrap and other protein feeds were too high
and something drastic had to be done. It had been profitable
to use high-protein feeds even at the pre-ceiling prices and
OPA's action merely stimulated their consumption. Since
the nation wanted more livestock products, as indicated by
price and by government requests, why should not the farm-
ers feed more high-protein feeds? The feeds continued to be
cheap and it was both profitable and patriotic to increase
production of livestock products. Furthermore, the hog, the
dairy cow, and the hen never did have a high standard of
living.

Since the prices of high-protein feeds are so small a part
of the nation's price structure, OPA's action had little effect
on the inflation problem. The action served primarily to raise
the standard of living of the livestock for a short period of
time, at the risk of drastic reduction later. With the stimulus
of low ceiling prices, the feed hoppers were almost empty by
the fall of 1942. It was not until August 1943 that the ceilings
were raised.

With High Prices for Livestock, Protein Feeds Should Have

Been High

The high-protein-feed situation depends in part on the
incomes of livestock-producers, which in turn are dependent
upon the numbers of animals and their prices.

Normally when the supply of livestock products is high,

the price is low. Conversely, when the supply is low, the price
is high (table 5). The two factors of supply and price tend
to equalize each other so that the incomes of livestock-pro-
ducers do not vary in proportion to either prices or numbers.
During 1942 this principle did not operate. The farmers had
a large supply of livestock, which brought unusually high
prices for such a supply. Therefore 1942 incomes encouraged
farmers to produce more livestock products and to feed each
animal a more nutritive ration. This alone would have
created pressure on the supply of high-protein feeds and the
normal reaction would have been higher prices. These higher
prices would have distributed the supply throughout the sea-
son among the various classes of livestock. However, during
the latter half of 1942 and during 1943 the pressure on the
supply of protein feeds was not compensated for by firm
prices.

TABLE 5. PRODUCTION, PRICES, AND INCOMES FROM
LIVESTOCK PRODUCTS

Short supply
Large supply

Supply

Price

Income

90
110

115

85

104
94

1942

110

143

157

The relationship between the prices of hogs and prices of
high-protein feeds was also unusual. Normally, when there
were many hogs, the price of hogs was low relative to the
price of tankage. This resulted in a diminution in the amount
of tankage fed each hog, thus spreading the supply among
the large numbers. When there were few hogs and high prices,
a 250-pound hog would buy eight sacks of tankage, and when
there were many hogs and low prices, a hog would buy only
five sacks. In 1942, with many hogs, a 250-pound hog would
buy about ten sacks of tankage (if the farmer could get

( 82 )

them), compared with five sacks under normal conditions
for many hogs.

A somewhat similar situation prevailed for prices of other
livestock products and other high-protein feeds. For instance,
in 1942 a can of milk would buy about a sack of oil meal,
compared with about three fourths of a sack under normal
conditions.

Since the country's livestock receives about half as much
high-protein feed as recommended for efficient production,
and the high-protein-feed price ratios were favorable, there
was no force restricting the farmers from improving the
standard of living of their livestock except the amount of
high-protein feed available. The obvious effect of these re-
lationships was to encourage the feeding of protein feeds at
rates that could not be maintained.

Protein Feeds Low Relative to Other Feed Prices

Normally, high-protein feeds sell at much higher prices
than corn meal. For instance, from 1926 to 1930 a ton of lin-
seed meal was worth 29 per cent more than a ton of corn meal.
Early in 1943 a ton of linseed meal sold for less than a ton
of corn meal. Similarly, a ton of soybean meal sold for less
than a ton of corn meal. In the spring of 1943 a 20-per-cent-
protein ration was cheaper than the less appetizing and less
nutritious 16-per-cent ration. Such relationships would nat-
urally stimulate the rate of feeding of oil meals in the Corn
Belt, where tankage and meat scraps may be in short supply.

For safety, the feed manufacturer normally included a
margin of perhaps one half of one per cent extra protein in
a 16-per-cent ration. With the low prices of high-protein
feeds, a 16-per-cent ration might include as much as 18 to 19
per cent of protein. Assisted by OP A, which lowered the
prices, by the manufacturer, who increased the protein in
his ration, and by the feeders, who increased the ration, live-

( 83 )

— ^^^••••••••^••••^••••••^— . —

stock consumed more than the normal amount of protein
feed.

Although the government has seen fit to hold down the
prices of the high-protein feeds, it has not taken on the job
of rationing these products. The rationing of sugar, gasoline,
and coffee is child's play compared with the intricate prob-
lems that would be involved in the rationing of the many
kinds of high-protein feeds to the different kinds of livestock
of varying ages and requirements in the many sections of
the United States during the different seasons of the year.

We have rationed the high-protein foods for man on the
basis of everyone sharing and sharing alike, from the new-
born babe to the coal miner. This system, which has but one
justification, simplicity of administration, cannot be applied
to the rationing of livestock's nutritious, highly prized pro-
tein feeds. If it were, the chickens would have title to seventy
per cent of these feeds. This would be so inequitable that
practically every livestock-producer would be forced to vio-
late the letter and the intent of the ruling.

Barter Economy

When supplies become short and ceiling prices are too low,
black markets and a barter economy spring up. At the high
prices for livestock and the low prices of high-protein feeds,
there was a scarcity of high-protein feeds in the Corn Belt.
It has been proposed that the farmers exchange a part of
their soybeans for soybean meal and a part of their hogs for
tankage. This has taken place. As a result, more tankage ac-
cumulated in the hands of certain farmers and dealers than
could be used. Others visited the farmers and dealers and
bought the excess at high prices. Some of the tankage later
appeared in the Eastern poultry ration. Since the tankage
was a small proportion of the poultry ration, the high price
was absorbed.

( 84 )

Low Frozen Prices Stimulated Consumption of Feed Grains

The shortage of protein feeds, like the shortage of meat,
developed when prices were held artificially low, and con-
sumption was stimulated. A 'similar policy has been adopted
for feed grains, and it appears to be headed for the same
outcome.

The background of the feed situation is one of six good
crop years and increasing numbers of livestock. Since live-
stock depends upon feed crops, numbers of livestock move
with but lag behind changes in the supply of feed grains.

From 1937 to 1942 there was a succession of large feed
crops. The supplies of grains normally fed to livestock in-
creased from 104 to about 142 million tons.

For the six years ending January 1, 1943 the numbers of
cattle increased 20 per cent ; chickens, 39 per cent ; and hogs,
65 per cent. On January 1, 1943 the number of cattle on
farms was 78 million; hogs, 74 million; and chickens, 540
million — all the highest in history. The numbers of sheep
are the second highest in history.

During the first part of this six-year period the supply of
feed increased more rapidly than the consumption, and the
carry-over increased each year. During the second phase of
the period, supplies continued to increase, but they increased
less rapidly than consumption, and stocks of feed per animal
unit decreased twenty-five per cent. The numbers of live-
stock were catching up with feed supplies.

Normally, when there is an abundance of feed relative to
livestock, livestock products are high relative to grain prices.
Conversely, when grain is scarce, livestock prices are low rela-
tive to grain prices. Farmers adjust their production accord-
ingly; they expand or contract their production according
to these price relationships.

With livestock gaining on the feed supply, the price of corn

( 85 )

started to rise in December 1942 despite the huge crop that
had just been harvested. Based on a common-sense economy,
this was as it should have been. Livestockmen would have
taken warning and started to think about curbing the expan-
sion of their herds and flocks. However, the government had
the problem of stopping inflation and continuing its avowed
policy of encouraging livestock production. On January 12,
1943 OP A froze prices of corn, our most important feed grain,
in every future, cash, and local market throughout the coun-
try at the highest prices prevailing the preceding day. This
encouraged the further expansion of livestock. As the ceiling
prices on the high-protein feeds accelerated their disappear-
ance, the ceiling price on corn had a similar effect on feed
grains.

A shortage of feed grains will disturb poultrymen and
dairymen in deficit areas more than a shortage of high-pro-
tein feed. If feed grains are available and high-protein feed
is scarce, farmers can feed more pounds of a lower-protein
ration. If there is a shortage of feed grains, however, there
is no substitute except the dairyman's excess stocks of hay
and silage.

A shortage of feed grains for dairymen and poultrymen in
deficit areas developed at a more rapid rate than that at
which the total supply of feed grains disappeared. Grain
farmers or livestockmen in the Middle West with excess
grain were disgruntled with the $1.00% for September corn
in Chicago and placed a higher "reservation price" on their
cribs of corn. In the modern lingo, these farmers have a
high "priority," and the priority ratings of the New York
dairyman and the Pacific coast poultryman were far down
the line.

The problem of the livestockman is more likely to be get-
ting grain than the price of grain. The first reaction of most
consumers to frozen prices is favorable. All consumers like

( 86 )

low prices for the products they use. The Pacific egg-pro-
ducer, the New York dairy farmer, and the Corn Belt hog
farmer are no exceptions; but this general approval has been
shortlived. An inadequate supply of grain at a low ceiling
price is much more disturbing than an adequate supply at
a high price.

Frozen Prices Mean Frozen Supplies

The government's adventures in fixing the price of corn
were something like those of Alice in Wonderland. Effective
regulation involves more than the issuing of edicts and the
waving of wands. The experience with corn may be reviewed
as an indication of some of the difficulties that beset the
price-fixer.

Though the intention was to freeze merely the price of
corn, it was soon discovered that the corn itself had been
frozen. The normal rate of movement out of farmers' cribs
slowed down. Midwestern farmers with a watchful eye on
the exceptionally favorable government-guaranteed price of
hogs decided that they could get more for their corn by con-
verting it into pork than by selling at the ceiling price.

It soon developed that not only had the corn in the farm-
ers' cribs been frozen, but the corn in the channels of trade
went into hiding. Elevators and other handlers of grain usu-
ally "hedge" their transactions ; that is, when they buy actual
corn they sell a future contract and when they sell the actual
corn they buy back the future contract. This operation is
like betting on both sides of a prize fight ; it protects the ele-
vator against price changes and permits it to work on a fairly
dependable and rather narrow operating margin. Without
the process of hedging, a change in the price of grain would
make paupers of some grain merchants and millionaires of
others. Because of the added risk their margins would widen.

When the price of corn was frozen, the holders of contracts

( 87 )

calling for the delivery of corn at some future date refused
to sell, knowing that the freezing order was only temporary
and any price change would have to be upward. Future prices
in all markets rose to the ceilings, and trading ceased. Those
who wished to sell actual corn found themselves unable to
buy back their future contracts. If they sold the actual corn,
they practically guaranteed themselves a loss, since the tem-
porary ceilings would probably be lifted and they would
have to buy back their future contracts at a high price. The
result was that corn was frozen in the elevators.

Meanwhile the trade clamored for corn and bid prices of
the lower grades up to the ceilings, so that inferior grades
sold for the same prices as the better grades. Out on the
farms of the Corn Belt corn was sold to other farmers or to
truckers at whatever price might be agreed upon. Corn be-
gan to by-pass the regular markets, and orders were given
to limit the amount of corn involved in such trades.

The trade expected that with the expiration of the tem-
porary order, higher prices would be permitted and corn
would begin to move. But the price regulators had other
ideas. The cash prices of the inferior grades were lowered,
and the May, July, and September future prices were raised
1, 3, and 5 cents, respectively. It was hoped that this would
loosen corn and start it to move. Some corn changed hands,
but future contracts soon rose to the new ceilings, and trad-
ing again ceased. Later the May and July futures were raised
further, which loosened up some corn. Market supplies of
corn were so short that, by the middle of June 1943, corn
refinery plants were in danger of being forced to shut down.
Later the industry was requested to restrict production to 85
per cent of normal. Corn refiners produce starches, syrups,
sugars, and many other products which are used for food
purposes and for war and civilian industries. Since the corn
refiners use only about four per cent of the crop, they have

( 88 )

never experienced difficulty in obtaining the necessary sup-
plies. This is the first time in half a century that the industry
has been threatened by an over-all shortage. The latter part
of June 1943 the administration stopped future trading in
corn and commandeered a few million bushels of hedged and
unhedged corn in terminal elevators. The amount was small
and much of this corn had already been allotted to essential
industries. Therefore, early in July 1943, the War Food Ad-
ministration announced that farmers who sold corn during
the period from July to August 10 would share in any in-
creased ceiling price announced prior to October 31, 1943.
Country elevators, which became instrumentalities of the
government, were ordered to sell within twenty-four hours
after a carload, about 1,750 bushels, had been purchased. The
Congressional mail concerning corn increased from many
areas until it exceeded the communications about war.

Those in charge of fixing the price of corn were beset by
corn-producers, who clamored for a higher price ; starch fac-
tories, which needed corn ; livestockmen in deficit areas, who
wanted more feed; other administrators who were com-
mitted to rigidly fixed prices; and the trade, which prayed
for any kind of a price just so it could do business. The regu-
lators must have concluded from their hectic experience that
you can lead a man to market, but you can't make him sell.

If this pricing policy is continued, corn will probably stay
in hiding and the net effect will be to reduce that part of the
production of milk and eggs formerly produced in the East
and other deficit areas from the corn of the Middle West.
Such a policy would shift a part of the production of the
East's milk and eggs to the West, provided the Corn Belt
hogs, which were legally entitled to "patronize the black
market," didn't eat the corn first. Why should the hogs, chick-
ens, and dairy cows of the Corn Belt have been permitted to
pay black-market prices for corn, while one half the hogs and

( 89 )

over two thirds of the chickens and dairy cows, which are
outside the Corn Belt, have been excluded from patronizing
it? This was not equality for the livestock, neither was it
equality for man. In the horse-and-buggy days, the South-
erner who loved his hominy and corn grits, despite his much
publicized economic woes, at least was able to beat the hog
to the corncrib. Under price ceilings, he no longer eats at the
first table. One of them mournfully observed: "If you want
to eat corn, you'd better be a hog."

Our Livestock Policy — Feed 'Em and Weep

The administration has not been lacking in professional
advice. One of the Corn Belt's prominent agricultural econ-
omists 2 agrees with the administration's livestock expansion
policy, contending that this is the time to "scrape our feed
bins." At present price ratios, and with the likelihood that
the feed grain crops will not be so good as in 1942, there is
little question that the bottom of the bin will be scraped.

The question may be raised whether this is a propitious
time to scrape the bins. In normal times farmers carry most
of their surplus crops from one season to the next in the form
of livestock and not in the form of grain. Under the "ever
normal granary" policy, the government accumulated con-
siderable quantities of grain in corncribs, grain bins, and ele-
vators. At recent price ratios, the government attempted to
empty the bins and had little trouble in accomplishing that
end.

In time of peace a livestock-producing nation should carry
minimum stocks of grain and maximum numbers of livestock
from one year to the next, because of the economy of carrying
food in that form. In time of war this policy should be re-
versed. More than the normal amount of grain and less than

2 Schultz, T. W.: "Let's Get This Straight I" Iowa Farm Economist,
Volume IX, Number 1-2 (January-February 1943) , page 1(5,

( 90 )

the normal amount of livestock should be carried over, be-
cause the important consideration is the number of people
that can be fed. The present agricultural policy has been
the reverse: store grain in bins in time of peace and scrape
the bins in time of war.

The nation cannot continue an agricultural policy based
on one-dollar corn and fifteen-dollar hogs, when hogs are
normally worth only eleven times the price of corn. There
will be relatively little difficulty in maintaining the fifteen
dollars for hogs as long as war lasts, but it will be difficult to
prevent corn from rising above one dollar. Two of the safest
predictions that one might volunteer in these uncertain times
are:

(a) The price of corn will rise above one dollar per bushel, and

(b) Corn prices will rise relative to prices of hogs and other livestock
and livestock products.

Corn prices may be controlled on the major open markets,
thereby controlling inflation by preventing the official index
numbers of wholesale prices from rising. However, such ac-
tion will not prevent corn prices from rising relative to the
price of livestock at the crossroads in the Corn Belt.

It is certain that livestock production must be curtailed.
There simply will not be enough feed for our tremendously
expanded livestock population. Under our present policy,
this will be realized when it is found that the grain bins are
empty. The liquidation of livestock will be abrupt and dis-
orderly.

General recognition of the impracticality of further live-
stock expansion will be delayed, however, until the hog, the
hen, and the dairy cow have literally "eaten themselves out
of house and home." Even after the impossibility of con-
tinued expansion is recognized by thoughtful folks, there is
little that will be done about it until the damage has oc-
curred. The nation has been thoroughly sold on the livestock

( 91 )

program. The consumer wants all the livestock products he
can get, and the nutritionists have told him he should have
them. Livestockmen are enjoying their place in the sun and
can outvote the cash-grain farmers. OPA is for low corn
prices, unwittingly thinking that it will help prevent infla-
tion. Being popular with everybody, the livestock expansion
program is popular with the administration. The likelihood
is that the nation will keep pouring its feed reserves into
livestock until they are gone. Our livestock policy, like our
policy on farm labor, crop acreage, and machinery, will be
changed the hard way.

Livestock Expansion Cannot Continue

The combination of rising prices, advancing purchasing
power, increasing numbers, unusually good pastures, abun-
dant supplies of roughage and grains for winter feed, and the
unusually favorable feed-price ratios extending over several
years for all the important types of livestock is unparalleled
in the agricultural history of the United States. Much of this
pyramid will topple like a house of cards during 1943 or 1944
unless a benevolent Providence provides an abundant supply
of moisture properly distributed throughout the growing sea-
son for both pastures and feed crops for all the important
pasture and crop-producing areas of the United States. The
weatherman will name the date of the liquidation. The poorer
the weather, the quicker the liquidation.

Such liquidation will be accompanied by an immediate
increase in meat supplies. By many people this will be con-
sidered an increase in production and a cause for rejoicing.
The increased supplies will not be due to increased produc-
tion; they will be due to liquidation of the farmers' "ever
normal granaries," livestock on the hoof. The increasing sup-
plies will be the forerunner of decreasing production.

Our livestock policy contains the remnants of a scarcity

( 92 )

corn program and an animal expansion policy which cannot
be maintained. It looks both backward and forward, and not
very far forward.

Impending Livestock Liquidation

The corn-price problem is the administration's worst head-
ache as far as livestock is concerned. The numbers of hogs
and chickens are expanding rapidly. Reports from the Corn
Belt indicate twenty-five per cent more sows farrowed in the
spring of 1943 than the previous year. Apparently the great-
est expansion in hog production occurred on cash-grain farms
of the Corn Belt rather than on their typical hog farms.3 In
that event, market supplies of corn will be curtailed much
more than the declining stocks or increasing disappearance
would indicate. Since the cash-grain farmer was forced to sell
his corn at a low fixed price on the regular market, he kept
the corn and expanded hogs, which returned him more.

Normally the farm carry-over, which is in the hands of
cash-grain farmers rather than livestockmen, provided the
market with supplies of corn during September, October, and
November. Since many cash-grain farmers are now hog-pro-
ducers they will be loath to release their usual supplies ex-
cept at much higher prices. Deficit areas outside the Corn
Belt will suffer the most.

It has been estimated that 1943 fall farrowing will be
about 25 per cent over a year ago. The War Food Administra-
tion recommended that the increase be limited to 15 per cent,
but another arm of the government, through price, recom-
mends that farmers increase hog production just as much as
possible. Experience has shown that price is a more potent
force than exhortation. To prevent hoarding, the govern-
ment called outstanding corn loans, prevented corn-proces-

3 Since they lacked equipment, lumber yards in these districts were busy
making portable hog houses.

( 93 )

sors from having more than thirty days' supply, and raised
future prices to release hedged grain. The government is do-
ing everything possible to encourage the consumption of
grain when the policy should be to encourage farmers to
feed less and to hoard grain for future use.

As long as feed supplies increase, it is not difficult to set
prices of feed in favor of livestock expansion. As the feed
supply per animal unit decreases, normally the ratio of live-
stock prices to feed would narrow by feed prices rising and/or
by livestock prices falling. This would automatically ration,
with a reasonable degree of equity, the diminishing supplies
of feed to the various classes of livestock in the best interests
of the nation. Conditions are not normal however. Huge gov-
ernment purchases of livestock products for Lend-Lease and
the armed forces tend to prevent adjustment by a down-
ward revision of prices of livestock.

An adjustment could be brought about by a sharp rise in
feed prices. Such an advance would undoubtedly be inter-
preted as inflationary, contrary to the "stabilization" order
of the fall of 1942 and the "hold-the-line" order of the
following spring. Since the government promised our allies
huge amounts of highly prized foods and promised the
citizens stable prices, the nation was confronted with a seri-
ous dilemma. It was politically inexpedient to attempt either
to lower the prices of livestock or to raise the price of corn.
This dilemma was well recognized by thoughtful people
throughout the nation, by the United States Department of
Agriculture, by the Office of Price Administration, and by
the Office of Economic Stabilization, but everyone was loath
to do anything to correct it.

As long as no action is taken, the only course the farmer
has is to feed up all the grain just as rapidly as possible and
then liquidate livestock just as disorderly as possible. The
degree of disorder will depend on how much black-market

( 94 )

operations push market prices for corn above the ceiling
prices.

If price-fixing programs are to be tried, they should be
accompanied by rationing just as soon as shortages appear
on the horizon. One way in which the government could ra-
tion corn would be to commandeer the farm stocks and pay
the farmers $1.50 per bushel, say, and distribute it to live-
stock-producers and industry at, say, $1.00 per bushel. This
would prevent the official index numbers of prices, the usual
measure of inflation, from rising. If the rationing is not equi-
table, protest will immediately arise. Such a rationing pro-
gram would require a reduction in certain types of livestock
in certain sections of the country.

Under normal conditions a shortage of feed results in a
more rapid liquidation of heavy grain-consumers, hogs and
chickens, than of light grain-consumers. The great drought
of 1934 reduced the production of corn and oats 45 per cent.
The number of hogs declined 35 per cent; chickens, 11 per
cent; and dairy cows, 1 per cent. The liquidation was not
uniform for types of livestock or for different areas. In the
Western Corn Belt, hogs, chickens, and beef cattle declined
more than for the rest of the United States. Dairy cattle de-
clined less than any other type of livestock, but even in the
Western Corn Belt dairy cattle declined more rapidly than
in any other area.

When expansion occurred, the rates were not uniform as
to the type of livestock or the area. During recent years the
most rapid expansion occurred for heavy grain-consumers in
the Western Corn Belt states. From 1938 to 1943 hog num-
bers doubled in those states.

Administrative Liquidation

If prices were free to fluctuate, feed would be automati-
cally rationed so that the most rapid liquidation of livestock

( 95 )

would occur for hogs, followed by chickens, beef cattle, dairy
calves and heifers, and dairy cows in about that order. Fur-
thermore, liquidation would be heaviest in the Western Corn
Belt states and least in the dairy areas.

When administrative action is substituted for freely fluc-
tuating prices, the same principles should be followed. Fail-
ure to make prompt adjustment in the hog-corn ratio will
only increase the severity of the resulting disaster. The same
general principles apply to prices of some of the other live-
stock and livestock products, but the hog-corn ratio is so far
out of line and so important that it deserves first considera-
tion at this time.

Under administrative action, it is difficult to devise a
policy that would meet the tests of "equality of sacrifice/'
of "national interest," and of "political expediency."

"Equality of sacrifice" would call for a 10-, 20-, or 30-per-
cent reduction in the numbers of all classes of livestock for
all parts of the nation.

The "national interest" would call for a sharp reduction
in heavy grain-consumers in all parts of the United States.
This is exactly what happened in England. The number of
hogs and poultry was reduced. Denmark reduced the num-
ber of hogs 50 per cent, but cattle only 13 per cent. National
interest would call for a more rapid reduction of hogs in the
Western Corn Belt than in other areas. Corn Belt hogs eat
more grain than hogs of other areas, many of which are
scavengers. National interest would call for a smaller reduc-
tion in cattle, which are largely fed on pasture and roughages
unfit for human consumption. National interest would call
for a more rapid reduction in the number of beef cattle than
dairy cattle, because the dairy cow is the more efficient pro-
ducer. Therefore there should be a minimum liquidation of
livestock in predominantly dairy areas like Wisconsin, New
York, New England, and the like. If there were any differ-

( 96 )

ences in the rates of liquidation of dairy cattle, the least
liquidation should occur in those areas producing milk for
direct consumption.

Administrators of an agricultural policy cannot ignore
"political expediency." In fact, political strategy frequently
overwhelms administrative tactics. In terms of feed and la-
bor, hogs probably have been the most profitable type of
livestock. The greatest expansion has occurred in the pro-
duction of hogs in the Western Corn Belt states. If it were
proposed that these producers liquidate their hogs more than
other parts of the nation, or that their profitable hogs be
liquidated more than other types of livestock, their opposi-
tion would echo throughout the nation. Political expediency
would result in a type of liquidation that would be a com-
promise between "equality of sacrifice" and "national inter-
est." Such administrative strategy would result in a greater
liquidation of livestock in feed-deficit areas than would be
the case under a freely fluctuating price structure. Hens and
dairy cows, although very numerous, have few votes and
could not withstand the tactics of hogs and beef cattle.

Freely fluctuating prices would automatically ration the
diminishing supplies of feed and thereby reduce the different
classes of livestock in the various areas of the United States
in the best interests of the nation, with a minimum of ad-
ministrative cost and of friction between all concerned.

( 97 )

CHAPTER 6

SHOCK ABSORBERS AND

EQUALIZERS IN THE

FOOD SUPPLY

PRODUCTION varies widely within the year and between years,
whereas consumption is stable. Shock absorbers match this
variable production with the stable requirements. In time of
war the necessity for adjustment is far greater since many
factors in the food picture change. Food production declines,
requirements increase, transportation difficulties mount, and
needs cannot be accurately anticipated. Shock absorbers are
then especially needed to match erratic production with
shifting requirements.

Adjustments are of several kinds. Foods which are pro-
duced seasonally must be made available throughout the
year. Food supplies must somehow be made available in years
of poor crops. Finally, there must be sufficient flexibility in
the food supply to take care of long-time changes in popu-
lation.

It is obvious that there is considerable flexibility in the
food supply. Japan feeds 277 people per hundred tillable

( 98 )

acres; China, 216; India, 126; and the United States,1
only 30.
There are four main types of adjustment:

1. that made possible by cold storage, warehouses, commercial ele-
vators, and farm storage.

2. food in the form of livestock on the hoof.

3. equalization through imports and exports.

4. diversion of food to and from industrial uses.

Current stocks of food adjust our day-to-day and month-
to-month needs and supplies.

Livestock adjusts our food supplies over periods of a year
or two and over decades.

Imports and exports adjust food supplies from generation
to generation, from year to year, and from month to month.

Diversion of products between food and industry also ad-
justs our food supplies over long and short periods of time.

Seasonal Stocks Adjust Short-Time Changes

Normally more butter is produced in the spring and sum-
mer than is consumed. As a result the nation developed cold
storages to carry butter from these seasons of surplus to the
seasons of deficit production. This equalizes the consumer's
supply and his consumption of butter. The same general
principles hold for other foods.

Nation Lives Largely from Hand to Mouth

One who sees pictures of the large number of beef carcasses
in the meat cooler of a modern packing plant or the tremen-
dous stocks of canned goods in the warehouses of a nation-
wide food distributor might conclude that the nation could
be fed indefinitely from its accumulated stocks of food. It is
popularly believed that all the available stocks are surpluses.
These normal carry-overs are not surpluses. Because produc-

1 Mukerjee, R.: Food Planning for Four Hundred Millions (London:
Macmillan and Co.; 1938), page 6.

( 99 )

tion is seasonal, and because of inevitable fluctuations in the
weather, it is always desirable to have more food available
than is currently consumed. This is particularly needed in
wartime.

Only a small proportion of the crop is carried from one
year to another. There are two good reasons for this: food
supplies are generally perishable, and it is expensive to carry
them from one crop year to the next. The nation lives largely
from hand to mouth and depends upon current production
for the bulk of its food.

One method of measuring the size of our stocks of food
would be to compare them with our consumption. In 1939
the consumption of food in the United States aggregated 93
billion pounds of dry matter. The stocks of food exclusive
of wheat at the end of the 1939 season were less than 6 bil-
lion pounds. These stocks were only about six per cent of
the annual consumption, representing only about twenty-
two days' supply.

In 1939 the nation consumed over 4 billion pounds of fats
and oils. Stocks at the end of the year were sufficient for
about ninety days. The same year the nation consumed more
than 11 billion pounds of dry matter in the form of eggs and
dairy products. Stocks of these products were sufficient for
only six days' consumption. The stocks of fresh and cured
meats and poultry were 204 million pounds. To the layman
this sounds like an enormous amount, but it was equivalent
to only eight days' consumption. There were fifty-two days'
supply of wheat and only twenty-two days' supply of all
other foods, such as meat, sugar, dairy products, and the
like. This was the situation when the surplus idea was
rampant.

These stocks were sufficiently large to be important in
equalizing the month-to-month and season-to-season varia-
tions in production and requirements. Obviously, however,

ioo

such stocks of food represent only a small part of our Lend-
Lease exports and an even smaller part of domestic con-
sumption. Therefore the nation must look to current produc-
tion for its own food supply or for any that it expects to
give away.

Food Stored in Form of Livestock

Since the problem of unstable production cannot be met
by storing crops, it must be met in some other way. This is
done by storing food in the form of livestock on the hoof.
Livestock serves to condense, to refine, and to store large
quantities of cheap and bulky foods into small quantities of
concentrated and expensive food, to be made available six
months to two or three years later. Livestock numbers are
increased after abundant crops and are liquidated in years
of short supplies. Since time immemorial, without recogni-
tion and without subsidy, farmers have operated an "ever
normal" granary in the form of livestock on the hoof. Live-
stock is usually the only feasible way of carrying excess food.
In this form the food is immediately available in time of
need.

There is no cheap way of carrying a surplus of food from
one year to the next. Livestock on the hoof might appear to
some folks to be a cheap way of carrying food. To carry much
pork on the back of a hog after it reaches nine months of
age is an expensive process. To carry much beef on the back
of a steer after he is two years old, or to carry that type of
beef for which New York and other dairy states are famous
on the backs of old canner cows after they are eight or nine
years old, is also expensive. Carrying food supplies in the
form of livestock on the hoof beyond the period of efficient
growth is not a cheap way of equalizing the food supply. The
animals might be killed and stored in refrigerators, but there
is not sufficient cold storage. Since we do not have sufficient

storage to hold over much grain, storing excess crops in the
form of livestock is the only practical way. If it can be af-
forded, it is a pleasing way to insure against food shortages.

Livestock Serves as a Shock Absorber

During the drought of 1934 crop production in the United
States fell 24 per cent and there was not enough food for
man and beast. Man ate what he wanted and ruthlessly ad-
justed the livestock to the feed that remained.

With the good crops of 1937 to 1942, man ate what he
wanted and increased the numbers of livestock in order to
keep the remainder from going to waste.

Countries which have large numbers of livestock seldom
suffer from lack of food, for the livestock serves as a shock
absorber. If the supply of food is sharply curtailed, the live-
stock is slaughtered, adding to food supplies in two ways.
First, the livestock is used as food directly, and second, the
slaughter of the livestock releases for human consumption
food that would otherwise have been fed to the livestock.

At the present time the European livestock population has
been greatly reduced. The food strategy in occupied areas
during this and all other major wars has been to liquidate
the livestock. This is generally conceived to be a shortsighted
policy. It is believed that present stocks of food are thus
squandered at the expense of possible future supplies. In
short, we accuse the invaders of killing the goose that lays
the golden egg. On the contrary, however, the slaughter of
livestock is a conservation measure. In so far as the animals
consume grain, potatoes, and other root crops which other-
wise might be fed to human beings, the animals are a luxury
to be quickly disposed of like other luxuries in time of war.
England and Denmark reduced the numbers of hogs more
than cattle.

The high nutritive value of livestock products is not due

( 102 )

in any large degree to the nutrients which the livestock have
added ; rather it is due to the fact that in the process of build-
ing a nutritious human food, large amounts of less nutritious
food have been, in a sense, wasted. The production of crops
is a creative process so far as human food is concerned. The
production of livestock products from grain is primarily a
refining and condensing, not a creative process.

Generally speaking, poor crops mean famine for man or
beast unless sufficient food can be imported from other areas.
If a country has large amounts of livestock, it is the animals
that would starve unless they were killed before they starved.
In a country with little livestock, human starvation follows
immediately on the heels of poor crops.

Europe is a heavily populated area with large numbers of
animals. Normally a poor crop in Europe does not mean
famine, for imports and livestock serve as shock absorbers. A
part of the livestock population is slaughtered and eaten to-
gether with the grain the livestock would have eaten. China,
however, is a heavily populated area with little livestock. A
poor crop in China means starvation for many because there
is little livestock and hence little flexibility in the food sup-
ply. The problem is also complicated by inadequate trans-
portation.

One might conclude that the problem of famine could
easily be met in all countries merely by keeping large num-
bers of livestock. It is impossible, however, to maintain a
large livestock population in a country with a human popu-
lation that is large relative to its crop production. Such a
country is always near the borderline of starvation and can-
not spare the food required to maintain livestock. Of course,
a country with a small area of crops could maintain a large
livestock population if it had some other source of income,
such as diamond mines, with which to import grain for the
livestock.

( 103 )

Thanks to its high standard of living, which allows huge
amounts of grain to be fed to livestock, and to the large
numbers of livestock available, the United States is now in
a favorable position to make sizable adjustments in her food
supply.

Human Population Tends to Outrun Food Supply

That population tends to outrun the food supply is well
illustrated from our experience in this country. A rapid ex-
pansion in food production and population began when the
Middle West was opened up. From about the middle to the
end of the nineteenth century the production of food crops
for man and beast increased more rapidly than population.
From about 1900 to about 1914 population increased at
about the same rate that the food supply increased, and
since that time food production has continued to rise, but
the advance has not kept pace with our expanding numbers
of food-consumers.

Stated another way, prior to 1900 per capita food produc-
tion rose; for the first fifteen years of this century declined
slightly; and for the past quarter of a century continued to
decline, but at a more rapid rate (table 1).

During all these years the per capita consumption of food
has changed but little. Since the internal combustion engine
reduced the physical effort required of the average man, it
may have reduced per capita food consumption somewhat,
but the amount of reduction can easily be exaggerated.

Stable consumption has been adjusted to a downward
trend in per capita crop production in two ways. Our exports
of food have declined and food imports have risen. In addi-
tion, the type of food we are consuming has changed. In
earlier years, when crop production was large relative to
population, we used food lavishly by converting edible grain
into meat. As crop production declined relative to the popu-

( 104 )

lation, we ate less meat. Over long periods of time, the
amount of grain fed to livestock tends to decline as popula-
tion increases. This is one of the important equalizers in a na-
tion's food supply.

Foreign Trade Equalizes Food Supplies

Prior to 1900 food production increased and exports rose
(table 1). From about 1900 to the outbreak of World War I
the production of food increased slightly less rapidly than
population, and exports started to decline. Following World
War I, food production did not keep pace with our expanding
population and there was a drastic decline in our exports.

From 1923 to the outbreak of World War II the nation
consumed more food than it produced, and a net import
balance was necessary to equalize our food supplies (figure 1,
page 153).

TABLE 1. CHANGES IN PER CAPITA PRODUCTION OF
FOOD AND FEED CROPS AND FOOD EXPORTS,
1866 TO 1939

Period

General picture

Mathematical picture,
per cent change

Production

Exports

Production

Exports

1866 to 1897

rose

rose

+ 1.18

+ 3.54

1898 to 1914

declined
slightly

declined
rapidly

-0.26

- 6.80

1915 to 1939

declined

declined
rapidly

- 1.47

- 7.19

With Rising Population, Our Exports Decline

As the nation's population has risen, the quantity of vari-
ous foodstuffs available for export has dwindled. The propor-
tion of the cottonseed-oil production that was exported
declined from about fifty per cent in 1900 to practically noth-

( 105 )

ing during the twenties. During the past quarter of a century
the nation has produced ten to twelve pounds of cottonseed
oil per capita. With rising consumption, our per capita net
exports of cottonseed oil were converted into net imports.

During 1935, 1936, and 1937 about three fourths of the
world's exports of cottonseed oil were imported by the United
States. These imports averaged 10 per cent of our produc-
tion. In other words, our consumption was 110 per cent of
our production.

Some forty or fifty years ago, the nation produced about
80 pounds of pork per capita, and in recent years 60 to 70
pounds. With relatively stable consumption, the proportion
exported has declined. During the droughts of the thirties
both production and consumption declined, but production
declined more than consumption, and in 1937 imports ex-
ceeded exports. The per capita production and consumption
of beef have declined, but consumption has declined less
than production. Formerly we were an exporter of beef; now
we are an importer. The production of wheat has declined
from eight to six bushels per capita. Formerly we exported
almost a third of our wheat crop. In recent years exports
have been negligible.

The marvelous production of food during the past few
years has enabled the country to expand its livestock and
change from a net importer of food to a net exporter.

The nation cannot obtain large amounts of food from
current stocks or livestock. Neither can imports be substan-
tially increased. The only big reserve is of wheat and the
grain fed to livestock.

Fats for Soap, Paint, or Food

There is still another shock absorber in the food supply:
the use as food of articles frequently utilized in industry.
Wheat may be used for making industrial alcohol as well as

( 106 )

bread. Soybeans may be used for paint and plastics as well
as for cooking fat. Lard may go into the soap vat. Through
the price system we determined how much of these com-
modities would be used by industry. If food was scarce, food-
consumers bid up the prices of wheat, cottonseed oil, soy-
bean oil, or similar products, choking off the supplies for the
industrial users.

The food-consumers, urged on by hunger, outbid the man-
ufacturers.

Lend-Lease a Shock Absorber

Food has always been an economic problem. It is now
becoming a political problem as well. When economic and
political interests clash, the short-run political interests usu-
ally win. How the conflicting interests of our allies, the oc-
cupied territories, and the American voters will be equated
during the even-numbered years remains to be seen.

Population Always Equals Food Supply

The human population and the food supply will always be
in adjustment. If the supply of food is ample, the excess will
be exported or converted into concentrated livestock prod-
ucts, and all will be used. If the food supply is decreased,
livestock production will be reduced, more grain will be
eaten by man, and again all will be used. If the food supply
is decreased below the subsistence level and imports are not
possible, the harsh process of starvation will adjust popula-
tion to the food supply.

About a hundred and fifty years ago Malthus observed
that the population tends to outrun the food supply. Some
say he could not foresee the improvements in the techniques
of food production, the possibilities of shifts in the type of
food consumed, and the voluntary restrictions on the growth
of population, but the long-range soundness of his general
conclusion is inescapable.

( 107 )

The Nation Has Changed Its Policy on Food Supplies

Formerly the national policy on food supplies was to carry
stocks of grain in the warehouses, butter in the cold-storage
places, and meat in the refrigerators that would be adequate
to take care of day-to-day and month-to-month changes
in production and requirements. The farmer's ever normal
granary, livestock, was an important shock absorber in years
of large or small crops. When we had a surplus of food we
exported it, and when there was a deficit we imported.

During the Hoover regime the Farm Board accumulated
huge stocks of wheat in an effort to halt the decline in prices.
One of the first acts of the present administration was to
attack the Farm Board and liquidate its stocks of wheat. A
little later the New Deal liquidated the stocks of pigs. Still
later it accepted the principles of the Farm Board and set up
the ever normal granary. Steel bins were substituted for the
farmers' ever normal granary, livestock. This was accom-
plished by a simple process. The farmer was loaned more
for his grain than it would bring in the open market. This
program retarded exports and retarded the normal feeding
of grain to livestock.

With its "ever normal" granary the nation underwrote the
storage of grain as a solution to the problem of unstable crop
production. Until recently its books showed a net loss. It
was supposedly patterned after the experience of Joseph in
Egypt, who stored grain during the seven years of plenty
for use during the seven years of famine which followed. We
read, however, that Joseph had divine guidance. Whether
Joseph also had a blank check from Pharaoh and how, in a
warm climate, he succeeded in keeping the weevils out of
the wheat for seven years are details not recorded in Holy
Writ.

Since Hoover's Farm Board did not stem the world col-

( 108 )

lapse in wheat prices, the first act of the New Deal was to
liquidate this ever normal granary. It was an unfortunate
venture, and therefore was considered unwise. The present
administration's storage of "surplus" grain was fortunate in
that it provided large supplies of grain at the outset of the
war. Since it was fortunate, it has been considered wise. Why
was it unwise at one time and wise at another? The unpre-
dictable fortunes of war change the point of view of some.
Fundamentally, there was no difference between the two
storage policies.

During the Third New Deal the policy on food supplies
was reversed. To prevent inflation the nation set ceilings on
prices. This caused the current stocks of butter and other
products to be liquidated more rapidly than normal.

The feeding of wheat to livestock was encouraged. On
January 29, 1942 the Commodity Credit Corporation an-
nounced the terms and conditions of the feed-wheat pro-
gram, designed to release 100 million bushels of wheat for
feeding purposes. By July 1942 about 38 million bushels were
sold, when Congress and the President approved the sale of
125 million bushels of wheat at a price not less than eighty-
five per cent of the parity price for corn. This wheat was fed
by February 1943. In March 1943 Congress approved the
sale of another 100 million bushels at the parity price of
corn. In the middle of June 1943 the President authorized
the War Food Administration to make 50 million bushels of
wheat available for livestock and poultry to keep corn proc-
essing plants supplied with corn for the production of hu-
man food and munitions. The government paid relatively
high prices to accumulate the stocks of wheat which are now
being sold at relatively low prices to encourage the feeding
of livestock.

( 109 )

Rubber from Wheat

The principal raw materials used in the production of syn-
thetic rubber are alcohol and petroleum. The program calls
for the production of over two thirds of a million tons of
butadiene. About two thirds of this is to be produced from
petroleum and one third from alcohol. This would require
the equivalent of about 10 per cent of our annual production
of wheat and 0.2 per cent of the petroleum. Although both
petroleum and food are scarce, the rubber program has the
greater effect on food and particularly grain. If all the buta-
diene synthetic rubber were made from grain, it would be
equivalent to one third of the wheat, whereas if it were all
produced from petroleum, it would represent only 0.3 per
cent of the production.

The rubber-from- wheat program is another hangover from
the surplus-food era. It will change but will be changed the
hard way.2

Stocks of Food Are Running Dangerously Low

The only food supplies for which there are large stocks
are wheat and livestock on the hoof. Of the two, wheat will
feed the more people ; it will feed seven times as many people
as wheat than as the meat that might be produced from it.

The nation has been squandering its stock pile of wheat,
the one optimistic spot in the food picture.

Synthetic rubber can be produced from petroleum or from
grain alcohol. Someone should weigh the relative supplies
and requirements for oil and grain. Both are apparently in
short supply, and the requirements on both are high. It would
not be surprising if we were shorter on food than on oil.

2 It has been estimated that 150,000,000 bushels of wheat will be used
for industrial alcohol during 1943^4.

There were reports current in the spring of 1943 that the government had
halted construction on four alcohol-from-grain plants.

( no )

Our present policy is to encourage the feeding of wheat to
maintain the production of livestock. This is an expensive
and shortsighted policy. If there ever was a time in the na-
tion's history when there should be large stocks of wheat and
when such stocks should be increased, it is the present. A big
supply of wheat is excellent insurance against droughts that
are possible even though we hope that production will be
abundant. Later, rehabilitation will make heavy demands
on our stocks of all foods, and will depend particularly upon
wheat, the staff of life.

The present policy is to feed the wheat reserves in an ef-
fort to keep livestock production at high levels, a policy
doomed to failure despite our best efforts to prod it along.
The inevitable result will be first the depletion of our stocks
of wheat and then the liquidation of our livestock.

Sooner or later the nation will be forced to choose among
grain for rubber, grain for alcohol, grain for livestock, grain
for Lend-Lease, and grain for civilian consumption. There
will not be enough to go around.

( 111 )

CHAPTER 7

CONSUMPTION

FOOD consumption is a compromise between what we can af-
ford, what we like, and what we ought to have, in about that
order.

Habit Plays an Important Role

Man is a creature of habit. This applies to his eating as
well as to his other activities. Vermonters like apple pie for
breakfast. Traditionally, New Englanders want hot baked
beans for Saturday night and cold beans Sunday morning.
In other parts of the country one or two meals of beans a
month are too many. Year after year a man will eat the
same breakfast, but will keep his wife on needles and pins
to vary the main meal.

The Scandinavian eats five meals a day and never lets the
coffee pot get cold. The American office worker lives on two
lunches, one meal, and innumerable bottles of Coca-Cola.
The Irish and the French both live on potatoes, but the Irish
want them boiled and the French want them fried. Most
people demand variety in their meals, but the Eskimo is
happy with his blubber and the Arab with his dates.

Religion affects our food habits. The people of India will

( 112 )

not eat beef, and orthodox Jews retain their antipathy to
pork.

Part of what we call food habits are more than mere hab-
its; they are the evolutionary product of hundreds of years
of dietary experiment, with survival as the reward and star-
vation as the penalty for failure. By this method man has
adapted his diet to the whims of the environment in which
he lives. This is the explanation for the Scotchman's depend-
ence upon oatmeal and the Mexican's reliance upon corn-
bread, beans, and hot pepper.

For many years the consumer has been warned to substi-
tute whole-wheat bread for white bread, and unpolished
rice for polished. This may have been sound scientific ad-
vice, but man has not paid heed. Americans are not the only
ones who resist change. When Chinese students come to the
United States, they find difficulty in shifting from a vege-
tarian diet of rice, soybeans, and red-hot tea to a diet of
meat, potatoes, and ice-cold milk. The resistance to change
is so strong that it lasts not merely for generations, but for
centuries. So far as food habits are concerned, folks cannot
be pushed around much. Man is not the only animal that
resists change. The Corn Belt farmer knows that it takes
time to teach a grass-reared steer to eat corn. But someone
has pointed out that animals show greater willingness to
consume new foods presented to them than does man.

Americans are the best-fed people in the world. From this,
one might conclude that the quality of our food could be
much reduced in the war emergency. Biologically this is true,
but politically it is difficult. The food habits of the nation
have become so well established that any reduction is con-
sidered a privation. Food habits may be gradually changed
by education. They can be suddenly changed only by force
or by near starvation.

( 113 )

Consumption Is Stable

The first fact that impresses the casual observer is the
variability in food consumption. Further investigation re-
veals that food consumption is really remarkably stable.

Man requires food for body maintenance, growth, and
physical effort. The amount of food required for the main-
tenance and growth of our population is stable. The amount
required to supply energy varies somewhat with physical
effort and age. The total variation in the average amount of
food consumed by each person in our population is small.

Consumption must be on a day-to-day basis. A man must
have a relatively uniform amount of food three times a day,
365 days a year. The body can store very little food. It can
store considerable vitamin A and some vitamin D, and only
a limited amount of calories. Some excess calories may be
stored on the waistline in the form of fat. This accumulated
fat may be used for maintenance or energy, but it is a poor
and limited substitute for the current intake of food. It sup-
plies little but calories. A pound of fat will supply a man his
calories for a little over a day; and ten pounds will be a
greater source of comment than of energy.

The Indians' interpretation of the hereafter was a happy
hunting ground. The importance of a dependable supply of
food was well stated by one who had seen men in all stages
of starvation in the Yukon.1 "If a man misses his meals one
day, he will lie. If he misses his meals two days, he will steal.
If he misses his meals three days, he will kill."

Range between Feasting and Fasting Is Narrow

The lower limit of the amount of food that is required by
a human being is the least amount that will sustain life. The

1 Smith, J. R.: The World's Food Resources (New York: Henry Holt and
Co.; 1919), page 3.

( 114 )

upper limit is the amount of food that his digestive tract can
handle. The range between these two extremes is narrower
than most folks realize.

A certain amount of food is essential. If it is not supplied
in one form, it must be obtained in another or life will cease.
On the other hand, there are rather definite upper limits to
the amount of food that can be eaten. The human stomach
holds about three pints, and food moves through the ali-
mentary canal at the rate of about six inches per hour. An
effort to overload the stomach results merely in indigestion.

Bread the Staff of Life

The American picks over almost one ton of food a year.
Over half of this is water in one form or another; he eats
about 680 pounds of dry matter. Grains represent 41 per cent
of the total dry matter (table 1). Twenty- three per cent of
the dry matter of the diet is represented by the highly prized
meats and dairy and poultry products. Agitation regarding
the food shortage in the spring of 1943 was concerned mainly
with these highly prized foods.

Grain represents about 88 per cent of the Chinese diet,
whereas it represents about 40 per cent of ours. Bread is truly
the staff of life, though the American consumer leans upon
it less heavily than do the consumers of other lands. The so-
called highly prized foods, meat, eggs, and dairy products,
represent only 1 per cent of the Chinese diet, compared with
23 per cent for the American.

Do We Eat to Live or Live to Eat?

If we ate merely to live, we would figure out a scientific
diet, as a farmer does for his hogs and cattle, and stick to
it. Competition forces the farmer to see to it that his ani-
mals eat to live rather than live to eat. The preparing of at-
tractive dishes, variations in the diet, and the selection of

tasty foods are evidence that man lives to eat as well as
eats to live.

The junior author holds that in time of war one should
not indulge in unneeded pleasures, and that the nation should
plan its food strategy on the basis of eating to live rather
than living to eat. The senior author holds that since civilians
have been deprived of so many of their other pleasures, they
should get a higher proportion of their pleasure from eating.

TABLE 1. CIVILIAN CONSUMPTION OF VARIOUS FOODS
PER CAPITA, 1935-9

Pounds

Per cent

Wet

Dry

Wet

Dry

Meats

126

58

8

8

Poultry

59

19

3

3

Dairy

393

79

24

12

Fats and oils *

32

32

2

5

Fish

13

7

1

1

Fruits

206

34

12

5

Vegetables

414

74

25

11

Sugar

97

97

6

14

Grains

315

278

19

41

Total

1,655

678

100

100

* Excluding butter.

The difference is probably one of age as well as point of view.
Youth finds greatest pleasure in all forms of physical effort,
begrudging the time spent for eating and sleeping. Older peo-
ple are less able to indulge in physical activity and derive
more pleasure from the pleasant sensations of seeing, smell-
ing, and consuming delicious food. The senior author con-
fesses that his judgment may be biased because for more
than twenty-five years he has been wedded to "the best cook
west of the Hudson," who serves food so attractively that it
would raise the eyebrows of Oscar of the Waldorf. To reduce

( 116 )

the art of cooking as he knows it to the scientific maintenance
ration of a hog fills him with dismay.

Is There an Ill-Fed Third?

Some people think that the economic royalists and the
princes of privilege who live on the Park Avenues and the
Gold Coasts of New York and Chicago eat more food than
the downtrodden third. Whenever one of the downtrodden
third sees a picture, conceived in Hollywood, of the banquet
table of a Gold Coaster, this conclusion is strongly reinforced.

Furthermore, students of consumer habits have made sta-
tistical studies of the question and almost invariably report
that the wealthy eat more food than the poor, and conclude
therefore that the poor get too little. Many of these studies
are based on the volume of dollar purchases. Unquestionably
the wealthy spend more dollars for food than do the poor,
but they buy more cellophane, more delivery and other serv-
ices; and strangely enough, they frequently require more
credit. It does not follow from dollar comparisons that they
eat more actual food.

Some studies, being more realistic, concern themselves
with the volume of purchases in pounds rather than in dol-
lars. Here again it usually appears that the wealthy buy
more actual food than the poor. But still it cannot be con-
cluded that the rich eat more than the poor. Much of this
extra food is fed to the cook, the chauffeur, or the poor rela-
tives. Some is trimmed away or left on the plate. The final
answer to this controversial question awaits the ambitious
researcher who will select one hundred of the wealthy and
one hundred of the downtrodden third, weigh them before
and after each meal for a year, and add up his results. He may
well find that the rich eat less than the poor, since they are
less active.

Both Rich and Poor Fill Their Stomachs

The difference between the diet of the poor and the diet
of the wealthy is more in the type of food eaten than in the
amount. The wealthy consume large amounts of expensive,
out-of-season types of food. Choice cuts of meat, fresh fruits
out of season, and rare dishes of all kinds find their way to
the table of the wealthy. In fact, the diet of the wealthy is
more remarkable for its taste, its expensiveness, its variety,
and its attractiveness than for the nourishment and energy
it provides.

The poor, on the other hand, eat staple foods in season.
Their diet consists of hamburger instead of sirloin, apples
in season rather than strawberries out of season, bread in-
stead of an occasional cracker, eggs instead of caviar, and
potatoes rather than avocados. The downtrodden third, at
heavy work, consume more calories than the well-to-do, who
are usually engaged in sedentary occupations. Both fill their
stomachs, the poor with many calories and little water ; the
rich with few calories and much water. The so-called rich eat
their water, and the so-called poor drink it.

Poor Man's Diet Is Ample and Economical

These differences have given rise to much concern regard-
ing the adequacy of the poor man's diet. The three-M diet
of the South — meat, meal, and molasses — is frequently
charged with being inadequate. It is probably more ade-
quate, and certainly more economical, than it is interesting.
The diet of cheap meat, bread, cabbage, and potatoes con-
sumed by the industrial worker is sharply criticized by nutri-
tionists. But this group continues to supply more than its
share of the nation's football heroes, as a glance at the names
and addresses of most of the teams will show.

( 118 )

Rich Man, too, Has a Food Problem

The Main Liners of Philadelphia and the Gold Coasters
of Chicago have no politicians to sponsor their food problem.
Their problem is quite different, and in a certain sense more
serious than that of the poor. They wish that they had stom-
achs lined with zinc so they could eat hot dogs, greasy fried
potatoes, pancakes and sausages in the quantities and with
the zest of the downtrodden third.

What Is an Adequate Diet?

A farmer once defined a fair price as one which was ten
per cent higher than he could get. Similarly, an adequate
diet probably is ten per cent better than that which one now
receives.

The chief difficulty in a discussion of the adequacy of diet
is the inability to agree on some basis of comparison. Various
minimum requirements have been proposed by nutritionists
and dietitians. For some thousands of years, however, the
Chinese have been living and breeding on a food level sub-
stantially below the "nutritional minimum." The "adequacy
of diet" is a relative term. By comparison with the diet of
his employer, the diet of a city laborer is inadequate. But by
comparison with the diet of a southern European, the diet of
the American laborer is more than adequate; it is a feast fit
for a king.

The adaptability of the human body to varying diets is
amazing to those who have become accustomed to any par-
ticular diet. It is difficult for the American reared on roast
beef, pasteurized milk, orange juice, and yeast tablets to be-
lieve that man can survive on the Eskimo's raw blubber and
frozen fish, the Irishman's potato, the Scotchman's oatmeal,
the Arab's dates, or the rice of the Chinese. They live on it,

they thrive on it, down through the ages they have repro-
duced themselves on it, and they love it.

Nutrition and Appetite Are Confused

Perhaps a part of the misunderstanding comes about be-
cause we decline to divorce the science of nutrition from the
pleasures of appetite. The consumer wants tasty food, and
the body needs nutrition. This confusion has caused nutri-
tion to be sometimes a science, sometimes a crusade, and
always the source of a good argument.

A diet of blubber and frozen fish may be abhorrent to most
of us and yet be adequate. Thinking is influenced by emo-
tions as well as by facts. The nutritionists report the facts
regarding carbohydrates, proteins, fats, carotene, thiamin,
ascorbic acid, iron, riboflavin, niacin, pyridoxine, pantothe-
nic acid, amino acids, and fatty acids. We must know their
relative effects under varying combinations of temperature,
age, weight, physical effort, nervousness, metabolism, and
many other variables of life. This is an enormous problem
about which little is known. It would appear that nutrition,
like economics and medicine, deals with a wide variety of
highly complex variables, which can combine themselves in
so many ways that it is difficult to know what is the truth.
The problem is further influenced by emotions. If the facts
do not agree with one's emotions, the facts are held to be
wrong.

Even though progress has been slow, it will be more rapid
when the facts are well established. It did not take the Wis-
consin dairyman, the Iowa hog-producer, and the New York
poultryman long to eliminate the "dead hand of the past"
and recognize that there was something to the science of feed-
ing animals and act accordingly. When man gets the facts
and eliminates some of the emotions, he will recognize that

( 120 )

there is something to the science of human nutrition, and
then enormous strides will be made.

Improvement in nutrition is being made, as is witnessed
by the increasing average stature of the American people.
But with each improvement the goals are pushed further
forward, as perhaps they should be. The important thing to
be remembered is that while we may be far short of the cru-
saders' nutritional goals, we still average well above a sci-
entific minimum and are making progress.

An "adequate" diet is one slightly better than most of us
now have, and it is generally concluded that the "absolute
minimum" is a diet about like or slightly inferior to the one
we now enjoy.

National Policy Shifts from Price Tag to Ticket

For a great many years the policy was to eat what one
pleased and hope that it was good for him.

National policy on food consumption is of recent origin.
For only a few years has much attention been given to a
policy regarding the consumption of food. In those few years
the nation has run rapidly through the successive stages of
education, persuasion, coercion, and finally rationing.

Food Fads Arise from Fact and Fancy

During the past quarter of a century great scientific ad-
vances have been made in the matter of feeding beast and
man. The agricultural experiment stations have made rapid
advances in the efficient and economical feeding of livestock.
The science of human nutrition followed. Vitamin A was
discovered and milk was rediscovered. Milk was once baby
food; now a he-man can drink it and be respected. Other
vitamins were discovered, and hormones became known. The
white rat and the guinea pig moved from the pet shop to the
laboratory.

( 121 )

The public was poorly prepared to evaluate these nutri-
tional discoveries or to incorporate them into the diet. The
distance between the scientist and millions of consumers is
far greater than folks think and the food expert is willing to
admit. Consequently a whole crop of food fads arose, some of
which had a sound nutritional basis and some of which were
merely promotional schemes.

First it was "an apple a day keeps the doctor away," which
caused the wits to observe that an onion a day would keep
everybody away. Then came a period when liquid foods came
forward; orange juice, tomato juice, and grapefruit juice
were in vogue. There was a burst of interest in bulky rough-
ages such as lettuce and garden greens, and more recently a
reversion to the concentrates such as vitamin tablets. Cod-
liver oil was one of the unique fads. The question arose
whether to take it straight or with orange juice, and whether
to take it before or after meals. We counted first our calories
and then our vitamins. Scores of dietitians urged us to eat
spinach, but we resisted. PopEye the Sailor kidded millions,
including the senior author, into eating it and liking it, but
never had any effect on the junior author.

On some of these fads one might survive longer than one
would care to live.

Apparently most nutritionists detest the puns, jokes, radio
skits, and exaggerated advertisements about their work, but
such methods are much more effective in selling the results
of their work to the millions than scholarly articles in sci-
entific journals or so-called popular articles in respectable
highbrow magazines. The American public dearly loves to be
sold something. This holds true for food as well as other
things. A quarter of a century ago the public wanted to be
sold the milk program; today it is vitamins, and tomorrow
it will be something else.

Fads, like Fulton's steamboat, are good things to laugh

( 122 )

about, but they are progress. The research workers in the
field of nutrition, the processors of food, and the consumers
of food are constantly exploring new possibilities. Some are
good and some are poor. But they must be tested in the lab-
oratory of human experience. This is the hard way, but it
is the way most progress is made. Tomatoes were considered
poisonous until some daredevil ate one, or perhaps someone
attempted suicide and cured his scurvy instead. Carrots were
once horse feed, now they are food fit for man.

We Have Tried to Abolish Poverty

It is frequently felt that, by some panacea or other, all
wants could be eliminated and all could live like kings. Food
is a popular commodity for such schemes. Two chickens in
every pot is a good rallying call for any political faith.

The era of the "ill-fed" came during the middle thirties.
Food was given away. The Blue Stamp Plan was introduced
to attack underconsumption and malnutrition, the "Black
Plagues of the Twentieth Century." The plan was assumed
to kill no less than four birds with one stone. It attempted
to help (1) the farmer who sells the so-called surplus through
(2) the grocer, who thereby increases his volume of business,
to (3) the low-income families, whose health is bettered, and
finally (4) the nation, which gains all around through solv-
ing acute economic problems and lifting the standards of
health of the downtrodden third.

Subsidized improvement of the diet of the downtrodden
third is popular politically since it has the support not only
of the prospective recipients but of some food-producers as
well, who think they see the possibility of a new market. To-
gether the farmers and the underprivileged consumers make
a majority in any country.

The industrial recovery, the rapid rise in wages, the pres-
sure of Lend- Lease, and the food shortage, all contributed to

( 123 )

the demise of our Blue Stamp Plan. Some contend that it
did not die; "it merely sleeps" and is peacefully resting in a
state of coma, awaiting revival. Others contend that it is be-
ing expanded to include the world.

The Consumer Can't "Pull in His Belt"

World War II brought on the "sacrifice" and the "pull-in-
your-belt" policies, popular expressions for reducing the con-
sumption of food.

With the nation's industries and agriculture running at
capacity, men are putting forth greater physical effort than
during the latter phases of the Hoover regime and much
of the Roosevelt administration, when unemployment was
widespread. Therefore it is reasonable to assume that they
need more food. They have been asked to reduce the amount
of fuel they use. This can be accomplished only by increasing
the amount of clothes or food or both. With the restrictions
on gasoline consumption, increasing quantities of food are
required to provide the energy formerly supplied by gaso-
line. When a nation is taken off its gasoline and central-heat
standard and is asked to turn out more products, the con-
sumption of food will increase. The consumer cannot "pull
in his belt."

As the food scarcity developed, one arm of the govern-
ment urged the consumer to "share the meat," to use the
butter sparingly, to reduce the consumption of canned goods,
and the like. Another arm of the government fixed low ceil-
ing prices for these articles, which encouraged increased con-
sumption. Still another raised the sights of minimum stand-
ards for adequate nutrition.

John Q. Public was in a dilemma. He did not know that
he could not pull in his belt. He wanted to respond to the
government's patriotic appeal and reduce his consumption
of food, but he could not resist the temptation to eat increas-

( 124 )

ing amounts of the highly prized foods which the govern-
ment offered him at low prices. John Q. Public observed two
conflicting signposts : price and exhortation. He followed the
example of history and chose the former. Unwittingly, but
with governmental approval, he did his best to help create
a shortage of the highly prized foods.

Since the consumer did not react to the exhortations as
expected, the government handed him a ticket, and the gov-
ernment now determines what, when, and how much of the
highly prized foods he shall eat.

If the pull-in-your-belt policy merely means eating less
milk, meat, and poultry products and substituting the unra-
tioned cereal grains instead, this policy is the solution to the
food problem. However, -this is not John Q. Public's interpre-
tation of the tighter-belt policy; to him it means eating less
food. In this respect it is not the solution.

The rationing program will reduce our consumption of
certain types of food, but that reduction will be accompanied
by an expansion in the consumption of the unrationed foods.
It is practically impossible really to pull in the belt without
increasing the death-rate.

All sorts of unique solutions for the food problem have
been proposed. It has been suggested that the coffee shortage
be solved by substituting a glass of milk for a cup of coffee.
During 1939 the nation consumed about eighty billion cups
of coffee. The problem would be to find enough milk to sub-
stitute for the coffee. The forty billion additional pounds of
milk that would be required are equivalent to more than a
third of the nation's production of all dairy products.

Food a Weapon of War and a Tool of Peace

Military strategists contend that we should send our allies
planes, tanks, guns, and food. This idea is embodied in Lend-
Lease. It is also contended that food will write the peace, and

( 125 )

many believe that the United States will be called on to feed
large numbers of distressed peoples after the war.

That food is a weapon of war is beyond doubt. It has been
so treated by warring nations since time immemorial. Our
Lend-Lease policy is a departure from the time-honored
method of transferring food by payment at the time of pur-
chase.

The use of food as a weapon of war and as a tool for main-
taining peace on the Lend-Lease basis raises questions with
broad implications in the minds of some persons. They can-
not understand why billions of dollars' worth of food should
be transferred from one country to another without mone-
tary remuneration or a promise to pay. Consequently Lend-
Lease has been challenged as a "Lady Bountiful," "Santa
Glaus/' "Solomon" type of international philanthropy. In
one respect this is true ; we are giving away food and are not
being reimbursed. During World War I we did not deliber-
ately give food away; we loaned money to the Allies and
they purchased foods of their own choosing and paid on the
dotted line with the borrowed money. Therefore, at the time
of purchase we were reimbursed. But they did not pay back
the money they borrowed from someone else.

Some folks think that after this war the food given away
under Lend-Lease will be paid for. Whether it be World
War I or II food, the probability of reimbursement is small.

In time of peace it is difficult to invest in a productive en-
terprise and then later to collect on the interest and princi-
pal. It is practically impossible to invest in destruction and
expect to collect the interest and principal. What you collect
is what you can get; it never has been much, and is likely
to be less before it is more. Consequently the question of
final payment should not be the criterion on which the doubt-
ing Thomases challenge the Lend-Lease program.

Food is one of our effective weapons of war, just as im-

( 126 )

portant as men and munitions. No one thinks that the United
States should be reimbursed for men lost in combat. Remu-
neration cannot be measured in dollars; it is measured in
victory.

We may raise some questions as to the kinds and amounts
of food involved, and explanations offered to justify the
Lend-Lease program, but that food is a part of military
strategy there is no debate.

The Nation Has Sold Itself Short on Food

The nation has little comprehension of the number of peo-
ple that it has committed itself to feed. If the commitments
are kept, the death-rates in the United States may rise. If
they are not kept, the death-rates in Europe will rise. The
most probable result is that our death-rate will not rise, and
that the nation's food record will be strewn with broken
promises.

Many Guests Invited to Our Table

In addition to unlimited promises to feed people, we pre-
sumably plan to feed them highly prized foods. A program
to supply protective foods may appeal to the sentimentalist,
but not to the realist.

For about two decades the nation has been eating about
two to four per cent more food than it has produced. There
have been surpluses of some foods and shortages of others,
but on balance the nation has been a net importer of food.
Although this experience would seem to make it difficult to
expand food exports, the nation has now embarked upon a
policy of supplying food not only to our military forces and
our civilian population, but also to our allies and for the re-
habilitation of depressed peoples throughout the world. Ac-
cording to the press, the Secretary of Agriculture estimates
that the requirements for our own military forces and for

( 127 )

our allies represent one fourth or more of the estimated food
production of 1943. A considerable proportion of the addi-
tional food requirements represented by Secretary Wickard's
estimate will go for Lend-Lease and not to our own military
forces, and represents a net addition of fifteen to twenty per
cent. Our Lend-Lease commitments are equivalent to in-
creasing our 136 million consumers to 155 or 160 million.

Since a certain amount of food is required for body main-
tenance, growth, and physical effort, none of these new de-
mands can be met by reducing civilian consumption unless
it is assumed that in the past we have eaten too much.

The plans for such large exports of food raise many prob-
lems. How much food will be exported? For how long a pe-
riod will these shipments continue? To whom will the food
be sent? Is the objective the improvement of diets or the
prevention of starvation? What types of food can be ex-
ported? What effect will the program have on civilians?
Though these and other questions cannot be answered at
present, all indications are that large amounts of food will
be required for an extended period of time. One of the ques-
tions that can be examined at the present time is possible
sources of additional food supplies.

Where Can We Get Additional Food?

There are at least four sources of additional food for Lend-
Lease and rehabilitation :

1. increased production;

2. present stocks of grain and animals;

3. reduction in civilian consumption of livestock products with no

change in their production;

4. a curtailment in the production of livestock.

We Cannot Increase Production

There is practically no hope of feeding additional people
under Lend-Lease or rehabilitation solely from increased

( 128 )

production. The farm plant operated at a level during 1942
that is not likely to be exceeded for several years.

Stocks of Grain and Animals Soon Exhausted

On July 1, 1943 the United States had about 500 million
bushels of wheat in excess of normal stocks. This supply
would feed the equivalent of about 40 million people on
wheat alone for one year. The nearest approach to this diet
is that of the Chinese coolie, who consumes about ninety per
cent of his diet in the form of cereals.

Canada has about 500 million bushels of surplus wheat
which might be imported and reshipped. This would also
feed 40 million people for one year. The stocks of wheat in
the United States and Canada together would feed about
80 million people for one year. After these stocks had been
exhausted, there of course could be no further contribution
from this source.

There are large stocks of food in the form of cattle on
farms. If these stocks of cattle were reduced, they would add
to food supplies by that amount. However, reducing inven-
tories of cattle would be accompanied or followed by a reduc-
tion in the current production of meat and milk. Conse-
quently the liquidation of livestock would in itself make
little net contribution.

Our excess stocks of horses might feed 50,000 to 75,000
for a few years.

We Can Feed a Few Millions on Livestock Products

The United States can feed people by reducing its stand-
ard of living. This is the method currently followed. If the
American people reduce their standard of living by ten per
cent — that is, if they reduce their consumption of the highly
prized foods, meat, milk, and eggs, by ten per cent and sub-
stitute grain — the nation could feed about 3 million more

( 129 )

people each year for about fourteen years, until the shift
from livestock products to grain would deplete our stocks of
excess wheat.

With a twenty-per-cent reduction in the consumption of
highly prized foods, the nation could feed about 6 million
persons for about seven years. With a thirty-per-cent reduc-
tion, it could feed approximately 9 million for about five
years.

We Can Feed Many Millions on Grain

If livestock production were decreased ten per cent, the
nation could feed about 17 million additional mouths, and
this could be continued year after year. Reductions of
twenty and thirty per cent in our livestock production would
enable us to feed 35 and 50 million additional mouths re-
spectively for an extended period of time. Such a stretching
of the food supply would be due to the efficiency of consum-
ing cereals directly rather than indirectly in the form of live-
stock products. It takes about seven pounds of dry matter
in the form of grain, in addition to hay, forage, and pasture,
to produce a pound of dry matter in the form of livestock
products. This is a luxury which few nations can afford even
in time of peace. War is a time when luxuries are usually cur-
tailed.

A ten-, twenty-, or thirty-per-cent reduction in our pro-
duction of livestock would involve the same sacrifice on
the part of American consumers as a ten-, twenty-, and
thirty-per-cent reduction in the consumption of these highly
prized products with no change in their production. In either
case the American consumer would be called on to reduce
his standard of living. However, the number of mouths fed
under Lend-Lease or rehabilitation would be quite different.
If livestock production were continued and the excess above
our restricted consumption were shipped, there would be

( 130 )

sufficient food for 3 to 9 million people. If livestock produc-
tion were curtailed and cereal grain were shipped, there
would be enough food for 17 to 50 million people.

Another important consideration is the length of time the
two plans could operate. A twenty-per-cent reduction in the
consumption of livestock products, with no change in their
production, would enable us to feed 6 million people for
about seven years ; a twenty-per-cent reduction in livestock
production would enable us to feed 35 million people in-
definitely.

If, owing to a decrease in production, our civilian popu-
lation decreased its consumption of the highly prized foods
to the Chinese standard, the nation could feed about 170
million additional people.

These estimates were based on a continuation of 1942 pro-
duction, which is not likely. A material reduction in crop
production would not change the principle ; it would merely
reduce the numbers that could be fed.

Present Policy Will Not Meet Commitments

Although these estimates are general approximations, they
indicate clearly that reducing the standard of living — that
is, curtailing the consumption of highly prized foods with no
change in their production — fills the stomachs of only a
few million additional people. This is the current policy and
apparently that contemplated for the future. Such a policy
can be continued only as long as abundant feed is available
for livestock, and wheat is available to compensate for the
decline in the civilian consumption of livestock products.

Our agricultural policy has been to expand livestock pro-
duction and stimulate the feeding of wheat. If the nation
assumes that there is an overproduction of grain, that crop
production will continue at the high levels of 1942, that our
Lend-Lease and rehabilitation programs will not expand

( 131 )

much, and that the paramount problem is to provide an at-
tractive diet for the few rather than to fill the stomachs of
the many, a continuation of our present agricultural policy
is justified.

If the problem is to feed the many rather than the few,
the most effective way of making large amounts of food
available for export year after year is by reducing livestock
production. In that case our present policy cannot be con-
tinued.

The forecasts would indicate that there are tentative plans
to export fifteen to twenty per cent of our 1943 food produc-
tion, which is equivalent to feeding about 25 million addi-
tional persons at our dinner tables. If this is merely a tem-
porary palliative, it could be accomplished by (a) exporting
part of our surplus wheat, (b) exporting wheat imported
from Canada, or (c) exporting some combination of grain
and highly prized foods. Of course such plans would be of a
temporary nature. If the program were to be of extended
duration, it would be necessary to reduce livestock produc-
tion by about fifteen per cent.

Only by feeding its cereal grains directly to human beings
rather than to animals can the United States provide large
amounts of food to distressed peoples over an extended pe-
riod of time.

War is not the time to shift from energy foods to pro-
tective foods. Time concluded that "The U. S. decision to
upgrade the feeding habits of the world . . . will turn out
to have been one of the costliest decisions of World War II." 2

Civilians Must Learn to Eat Grain and Like It

The army understands the relationship between high mo-
rale and a well-filled stomach and does its best to supply the
soldier with an ample, attractive, nutritious diet. The ris-

2 Time, Volume XLI, Number 19 (May 10, 1943), page 21.

( 132 )

ing needs of the army, together with Lend-Lease, necessitate
shifts in the diet of the civilian population. Changes in the
purchasing power of different income groups within the ci-
vilian population cause further changes in civilian food hab-
its. Rationing makes for still further shifts.

These shifts in the diet might be diminished or postponed
for a short time if bad weather should result in a sudden
liquidation of the country's livestock. This would increase
our meat supplies, but the increase would be only tempor-
ary and would be followed by drastic reduction later. The
weather will influence the timing of our dietary changes, but
cannot prevent them.

As the amount of highly prized concentrated animal foods
has declined, a substitute must be found. People have dif-
ficulty getting enough turnip greens, lettuce, potatoes, and
other healthful, watery foods into the stomach to replace
the concentrated foods. Therefore these concentrated foods
must be replaced by another concentrated food, which in-
evitably is grain.

The sudden shift to grain will raise problems other than
dietary ones. Our cereal industry is not equipped to operate
on the scale that will be necessary if the consumer suddenly
changes his diet. In these days of scarce materials and labor,
it may be difficult for the flour mills, the breakfast-food man-
ufacturers, and the corn-products plants to expand their op-
erations sufficiently to fill the gap that will be left by dimin-
ishing supplies of highly prized foods.

Increased grain consumption need not be monotonous.
Grain can take many forms — more of the Scotchman's oat-
meal, more of the Indian's corn meal, more of the Oriental's
rice, more Pennsylvania Dutch buckwheat pancakes, or more
fortified bread from Kansas wheat. For varity there is the
possibility of more of Chinese sprouted soybeans produced in

( 133 )

Illinois, or more of New York's red kidney and Boston baked
beans.

In making the change in his diet, the American consumer
will have little experience and few signposts to guide him.
He will need to depend upon the advice of nutritionists and
food processors, whose knowledge of his problem will help
minimize the difficulties of the shift.

( 134 )

CHAPTER 8

DISTRIBUTION

Nobody Loves the Middleman

WHEN a farmer eats in a restaurant, which is seldom, he
sometimes orders a glass of milk. He is likely to receive a
small glass, for which he is charged a nickel. He may be a
dairyman and possibly may be drinking milk that he himself
produced. Elementary arithmetic tells him that he received
about one cent for producing the glass of milk that cost him
a nickel. The middleman got the other four cents.

Similarly a man in the city may hear that a friend of a
friend in the country has just sold his cabbage for 8 dollars
per ton. The city man may recently have bought some cab-
bage over the retail counter and may have paid two cents
per pound for it, which means a rate of 40 dollars per ton.
The consumer paid the grocer five times as much as the
farmer received.

Nobody loves the middleman. He is alternately accused of
robbing the farmer and gouging the consumer. The general
opinion is that he has somehow inserted himself between the
farmer and the consumer and takes toll from both.

With passing time, the middleman takes a larger share of
the consumer's dollar. It is believed that he is taking a bigger
profit, or is becoming less efficient, or both.

( 135 )

The Marketing Problem Is a Depression Phenomenon

Over a period of many years the middleman takes a bigger
share of the consumer's dollar, but within shorter periods
of time the middleman's portion rises and falls. The costs
of distribution tend to be stable, and with a given change
in the price level do not change as much as retail prices. Con-
sequently, when prices fall, the costs of distribution remain
approximately at previous levels and the middleman takes
a larger share of the consumer's dollar. The middleman there-
fore is extremely unpopular with the farmers in hard times.
The problems of marketing seem most acute in time of de-
pression.

When prices rise, the costs of distribution rise less than
retail prices, and the middleman takes a smaller share of the
consumer's dollar. In 1942 the costs of distributing food took
about half of the consumer's dollar compared with two thirds
in 1932. In time of rising prices the middleman is also un-
popular, but at such times it is the consumer's ire that is
aroused.

Little Is Known about the Middleman and Much Is
Suspected

The farmer and the consumer know little about the mid-
dleman, and, knowing little, they suspect much. The farm-
er's interest in his product ceases when he takes it to market.
He has used all his energy and ingenuity in production, and
he is glad to turn his product over to the manufacturers,
processors, and distributors. The consumer gets his food from
the last link of a long distributive chain. He usually doesn't
know where his potatoes came from or whose hands they
have gone through.

Nor do the farmer and the consumer know much about
each other. The farmer cannot see why the consumer in-

( 136 )

sists on preferring eggs in the winter, when the hens want
to lay them in the spring. The consumer fails to understand
why the farmer continues to grow poor-quality produce when
he wants good quality.

There are few things upon which farmers agree among
themselves, and still fewer upon which they agree with con-
sumers. The one thing upon which they can agree is that
they are both exploited by the middleman.

In the minds of consumers and dairymen the inefficiency
of the middleman is typified by the five milk wagons on a
street. To them this means five times the necessary cost to
deliver milk. Scientific studies indicate that the cost of de-
livering milk depends more upon the number of quarts the
driver delivers each day than upon any other factor. It is not
at all certain that he will deliver more under the "post-office
system" than when he is competing with four other drivers
all striving to increase their sales and commissions.

Mistrust of the meat packers, the grain markets, and the
milk distributors has always been an effective rallying call
for politicians. The high and rising costs of distributing food
provide a seemingly sound basis for charges of inefficiency
and profiteering. There is always one question, however, that
should be asked when an industry is charged with taking
a large share of anybody's dollar: What services does it

render?

What Does the Middleman Do?

The high and rising costs of distributing food come about
largely because increasing specialization is driving the pro-
ducer and the consumer farther apart. More services are re-
quired to span the gap between them.

A century ago the farmers in a community produced about
all the food that the community used. In fact, the producer
and the consumer frequently were the same person. Much
of the marketing that was done was done directly and costs

( 137 )

were low. Transportation, grading, processing, and packag-
ing were kept at a minimum. The problem of storage was
reduced by consuming foods in season when possible.

With industrialization, city industries became specialized.
Folks moved off the farms and away from the local commu-
nity. The city population began to rise, and the simple meth-
ods of distributing food no longer would serve.

Not only did the city man specialize, but the farmer spe-
cialized as well. The New York farmer no longer raises his
own pork, as he once did. He buys bacon produced by the
hog specialist of Iowa. Potato production has moved into
those areas with favored soils and climates. Formerly almost
every farmer had a few apple trees. Now most farmers buy
apples produced by the commercial growers of the North-
west, New York, or the Shenandoah Valley.

It is expensive and difficult to do all the tasks necessary
in order to make frequent deliveries of small quantities of
a wide variety of foods to an apartment dweller in a large
city. The rising cost of distribution is a measure of service
and quality rather than of inefficiency or excessive profits.

Middleman Matches Production with Consumption

The middleman performs many tasks. He purchases the
raw product from the farmer, assembles, grades, transports,
stores, processes, and distributes the final product to the
consumer. His livelihood depends upon doing this as cheaply
as he can, and competition forces him to take a relatively
narrow margin.

One problem that the middleman has is to provide a stable
supply throughout the year of foods that are produced sea-
sonally. Some products, like wheat, are produced but once
a year, while bread, the finished product, is consumed each
day of the year in fairly constant amounts. This calls for a
system of local grain elevators, terminal storage facilities,

( 138 )

grain markets to feed the supply to the millers as it is needed,
and a system to deliver various grades of flour to the bakers,
bread to the grocers, and finally to the consumers.

Potatoes are produced intermittently throughout the year.
The Florida, Louisiana, and Texas crops come on the market
in the early spring. They are followed by the crops from the
Carolinas, Arkansas, Oklahoma, the Eastern Shore of Vir-
ginia, New Jersey, Long Island, and Missouri. Finally, in the
fall, the Maine, Minnesota, and Idaho crops are harvested.
The same general supply situation occurs for strawberries,
peaches, melons, and other fruits and vegetables.

The handling of highly perishable food products requires
an intricate and expensive system of assembly points, trans-
portation facilities, refrigeration, and the like. There must
be an efficient pricing system to move food through a busy
market before it spoils, or to call in additional food from
the country if the supply is short.

Milk is a product that is produced continuously but not
uniformly throughout the year. Seasonally, it is not produced
in the quantities in which it is consumed. The same is true
of meats, poultry, and eggs. Storage and manufacturing,
aided by a sensitive price system, level the peaks and fill the
troughs of production.

The middleman has not only the problem of adjusting
consumption to seasonal production, but also the problem of
converting inedible products to edible form. In its natural
state buckwheat is far from appetizing, but by a process of
milling and refining it becomes buckwheat flour ready for
the cook. Some products, such as potatoes and carrots, in-
volve little processing, while others, such as ice cream, re-
quire a great deal.

Costs of distribution are high because a wide variety of
services is performed and because these services are per-
formed by the highest paid labor in the world. The food sup-

( 139 )

plies are better protected, better packaged, and delivered
with greater promptness than in any other country in the
world.

Consumers Demand Service

It is sometimes assumed that these services have been
thrust upon the American consumer. On the contrary, he
asked for them, got them, and paid for them. This was be-
cause he could afford them.

From time to time the consumer will agree with the re-
formers that the costs of distribution are too high and that
something should be done about it. But as long as his stand-
ard of living is high, he will continue to demand clean, whole-
some, attractive food products wrapped in cellophane and
delivered to his door promptly. His resistance to "economy"
was demonstrated by the furor that arose with the discontin-
uance of sliced bread.

Waste Is More Apparent than Real

Every so often there are renewed discussions of the tre-
mendous amounts of food lost through waste. Ideas of waste
originate with the poor boy looking in the rich man's window
Thanksgiving evening, with photos of the Jacksonian dinner
table at a hundred dollars a plate in Washington's Mayflower
Hotel, and with moving pictures of the medieval banquet
table showing the baron pulling a leg off a turkey, taking one
bite, and throwing the rest over his shoulder to the dogs and
common folks. It is human nature to observe and draw con-
clusions from the unusual.

Whether waste be great or small, one thing is certain:
when prices of food are high, the avoidable waste will be
less than when prices are low. Any argument contending that
there is a great waste of food is really an argument for higher
food prices.

( 140 )

Farmers Waste a Minimum of Food

Apples, peaches, and cherries sometimes go unpicked and
rot on the ground. The consumer cannot understand why
the farmer lets so much good food go to waste. It goes to
waste because nobody wants it, nobody will buy it, and no
one will even pick it. Since such products cannot be fed to
farm animals, there is no way of disposing of them except to
let them rot.

Much of this apparent waste is really insurance. Due to
the uncertainties of weather, the apple crop may be good
in one locality and poor in another, or good in all, or poor
in all. Fortunately, there are more apple trees than are nor-
mally needed. Therefore the shortage is not acute in the poor
crop years, and some apples rot in the good years.

Farmers produce much more corn than human beings can
eat. This excess corn is not allowed to rot; it is fed to hogs
and other livestock. Since it takes about seven pounds of
grain to make a pound of meat, this is, in one sense, a waste
of food. In terms of such waste, the rotten tomatoes and
vegetables, the unpicked fruit, and the frozen cabbage pale
into insignificance.

The hog is mighty good insurance. When there is an abun-
dance of corn, man eats what he wants and the hog eats
what is left. When the corn crop is short, man eats what he
wants, kills the surplus hogs, and keeps only sufficient num-
bers of hogs to eat the remaining corn.

The consumer need not worry about the waste of food
on farms. The farmer will make certain that the minimum
amount of food goes to waste on his farm.

Distributors Waste a Little to Save a Lot

In the transportation of food there is some waste. Hogs
die in transit. Tomatoes are frozen in the winter and rot in

( 141 )

the summer as they are transported from the farm to the
terminal market. Carloads of food are smashed up in rail-
road wrecks. These losses are an insignificant part of the
consumer's food supply. To try to prevent most of these
losses would be more expensive than the losses themselves.

The processing of food is accompanied by losses. A striking
case is the making of wheat flour. In the milling of flour the
outer layer of the wheat kernel, containing valuable nutri-
ents, is ground off and sold to the dairyman and poultryman
for animal feed. That this is a great waste of food there is
no question, but the American public wants white bread and
agrees with the wag who comments that the most important
use of dark bread is to make a man appreciate white bread.

Grocery stores waste food. Grocers pull the outer dirty or
wilted leaves off the heads of cabbage. They throw away the
apple or the potato with rotten spots. The average consumer,
watching this process, concludes that large amounts of food
are wasted. The consumer may rest assured that the grocery-
man wastes a minimum of food. If he didn't waste some food,
the consumer wouldn't buy his fresh fruits and vegetables,
and all would be lost. He wastes a little to save a lot.

Food Is too Valuable to Be Wasted

Some folks get agitated over the large losses of food that
accompany the process of preparing food for the table. It has
been estimated that the average housewife peels away one
fourth of the potato. This apparently wasteful process occurs
in all homes all the way from the Main Liners to the down-
trodden third. The only ways to reduce this waste are to
learn to like potatoes boiled with their jackets on, or to edu-
cate the housewives to pare the potato peelings. This would
drive them to distraction or require additional labor, when
they already have plenty to do.

One of the most knotty food problems is the age-old and

( 142 )

unsettled controversy of whether the poor apples should be
eaten first to keep the good ones from spoiling or whether the
good ones should be eaten while they are still good. The senior
author, being Scotch, eats the poor ones against his better
judgment. The junior author follows his better judgment
and eats the good ones, rationalizing that he thereby always
enjoys the best.

Someone is always pointing to the huge amounts of fat
that go "down the kitchen sink." They, too, are greatly ex-
aggerated. The housewife fries the bacon and uses the excess
fat to fry the egg sunny side up, and then re-uses it to grease
the skillet for the pancakes. After having worked this grease
over several times, the amount that is left is a very small
proportion of the original amount and is probably best fit
for the sink. Hotels and restaurants have large amounts of
grease, which are collected and sell at a low price. It is not
wise to assume that because hotels, restaurants, and the like
save their fats, the housewife should do likewise. The house-
hold quantities of such fats that are unused are so small that
they do not command attention except in time of war.

Consumers waste some food. There is, of course, uneaten
food left on the plate. The unattractive remains on most
plates consist of such items as the broken back of a chicken,
indigestible gristle, inedible bones, unsightly potato skins,
and soggy spinach. This leads some people to believe that
consumers waste huge amounts of food. Some of the "waste"
goes to the pets — and thereby saves tinned meat and biscuit
labeled "dog food."

The amount of food wasted by the farmer, the processor,
the distributor, and the consumer is an insignificant propor-
tion of the total and should be assigned to the dogs, cats, and
chickens.

( 143 )

We Adopt New Slogans for an Old Policy

A new national policy is to reduce the waste of food. This
has always been the consumer's policy.

Since time immemorial our policy has been to attack the
processing and distributing machine. The present adminis-
tration is no exception. It merely applied new slogans —
"streamlining distribution/ ' "rolling back the squeeze," and
"wringing the water out of the distributor" — to the age-old
unsolved problem of reducing the costs of distribution.

Wastes and Costs of Distribution Will Rise

Waste of food will undoubtedly increase before it de-
creases. Some food will be sunk en route to our armies over-
seas. Some will be captured by the enemy. Some will be
wasted after it reaches its destination, because of the inevi-
table difficulties of supplying armies in the field. Fighting
forces waste unusually large amounts of food. To attempt to
save the food might lose battles.

At home additional food will be wasted as transportation
grows more difficult. The difficulties of civilian logistics for
125 million consumers will result in inevitable pile-ups and
delayed administrative orders. With a perishable product
like food, delays mean waste. The civilian may attempt to
compensate for these wastes by cleaning his plate better
than he once did, but he wasted only a small amount of food
even in normal times. Food is too valuable a product to be
wasted by civilian consumers. Those who seek a solution to
the food problem by the elimination of civilian and military
wastes are doomed to disappointment.

Little Water Can Be Wrung Out of the Food Industry

The high cost of distributing food has constantly been
under criticism by the farmer and by the consumer. With the

( 144 )

advent of OP A, the government also commenced firing. Re-
tail price ceilings were imposed by the "big freeze" of 1942.
Retailers protested the difficulty of maintaining the ceilings
when wholesale prices continued to rise, thereby reducing
their margins. They aptly referred to the situation as a
squeeze and were told by OPA that their solution was to
"roll back the squeeze" by reducing their costs of doing busi-
ness. This blithe advice indicated an attitude which is quite
generally held: that the food industry takes a rather wide
margin, which it can easily reduce if it is so minded. On the
contrary, the food industry is highly competitive. It has been
forced to pay high wages, and for this reason men in the
trade have been constantly on the watch to see where they
could save a dime.

Efficiency of Labor Will Decline

We are told that the costs of distribution can be lowered
in three ways: labor can be made more efficient, wages can
be reduced, or services can be eliminated.

With many of the experienced food handlers in the Army,
with rising red tape, with increasing transportation diffi-
culties, and with rationing, efficiency is likely to go down
despite efforts to improve it.

Wages cannot be reduced in wartime ; in fact, the practice
has been to endorse wage increases.

Only through the elimination of unneeded services can
manpower be saved. The number of unneeded services is
fewer than is widely assumed. A few frills irk the food con-
trollers, but they are so small a part of the total job of dis-
tributing food that to eliminate them would save but little
manpower and would not cut down costs.

( 145 )

Some "Frills" Make the Consumer More Efficient

Many of the so-called frills are really an effective means
of saving the consumer's time. In this category is the much-
maligned delivery system. Despite some abuses, it makes the
consumer more efficient and saves his time for productive
effort on a war job. The administrators withhold rubber
from the retail distributor to cut down delivery. Another
agency of the government assigns the consumer a gallon and
a half of gas a week. Still others order him to work more
hours. If the consumer does not have enough gas to get his
food and can't have it delivered, he may work less for the
war effort. To get the highest efficiency in the war effort and
reduce the consumer's gasoline consumption, it may be nec-
essary actually to increase the costs of distribution.

Some efforts to cut distribution costs may backfire or turn
out to have raised costs rather than lowered them. The case
of sliced bread was in one or both of these categories.

Progress Is Slow

It is easy for the Washington administrator to look down
the groceryman's aisles and tell him how to clean them up.
Usually the costs are greater than the savings. This is par-
ticularly true when the recommendations are based on an
aerial reconnaissance, from an altitude of 30,000 feet, travel-
ing 300 miles per hour.

Here and there a spectacular saving may be possible.
Sometimes such savings can be made only by strong-arm
methods over the protests of organized labor. Most of the
progress that will occur will be slow and gradual.

There is much discussion of eliminating private brands
and substituting government grades. This may eliminate
some individual's lifetime efforts to give the consumer a bet-
ter product. Its elimination will not reduce costs. The same

( 146 )

kind of salmon will be caught in the same way in the same
place by the same crews, cleaned, cooked, and processed in
the same way, packed in the same kind of tin can, but
stamped with the government's "AAA brand" in red letters,
instead of "Chinook" in gold.

The hope is sometimes expressed that revolutionary effi-
ciencies in distribution will come about because of changes
forced by the urgency of war. Such a supposition assumes
a great deal of inefficiency in the present system and sees war
as the means of improvement. The shortcomings of the pres-
ent distributive system have been exaggerated, and war, in-
efficient in its very nature, has probably led more industries
into the woods than out.

Any savings which the nation can make through "stream-
lining distribution" or "wringing the water out of the dis-
tributive trade" would be savings in manpower, but not in
dollar costs or in food. Those who would solve the food prob-
lem by reducing the costs of distribution are doomed to dis-
appointment. Costs of distribution will continue to rise.

( 147 )

CHAPTER 9
PRICES

FARMERS phrase their worries in a great many terms. They
speak of the high cost of labor and equipment, overproduc-
tion of certain products, the loss of markets, and the high
cost of distributing food. What they really mean is that farm
prices are lower than they would like to see them.

Consumers similarly have adopted phrases that express
their concern. They fear declining farm production, they
mistrust the farm bloc, and they resent the gouging policies
of the food distributors. They really mean that the retail
price of food is higher than they would like to pay.

Price Is the Fundamental Issue

No matter how it is phrased, price is the real issue for both
producer and consumer. To agriculture as a whole, price vir-
tually means income, since production times price equals in-
come, and production is largely beyond control. To the con-
sumer, the price of food determines how much money will
be left for the other things besides food that are desired.

The Subject of Prices Is Controversial

Every price at which goods change hands is the result of
a controversy, either mild or violent, between buyer and

( 148 )

seller. Similarly, the whole subject of prices is controversial.
Much of the present difficulty regarding farm and retail
prices of food comes about because the farmer cannot see
the viewpoint of the consumer, who in turn cannot under-
stand the position of the farmer. Neither of them under-
stands the fundamental forces which establish food prices,
either on the farm or in the city. To this confusion is added
the political maneuverings of farmers, laborers, and many
other pressure groups, and the contradictory price policies
of numerous government agencies.

Prices Are Related to One Another

The price problem is not marked by utter confusion, as
one might think from reading the papers. The general level
of prices is an understandable sort of thing ; it is an average
of all prices, which are related to one another. Everyone has
seen a swarm of gnats hanging stationary in the air, while
the individuals within the swarm constantly change places
with respect to one another. The relationship of the posi-
tion of individual gnats to one another and to the swarm re-
sembles the relationship of individual commodity prices to
one another and to an average of all prices when the general
level of prices is unchanged.

Frequently, however, the whole swarm of gnats moves up
or down. The individuals continue to change positions rela-
tive to one another within the swarm, but in addition the
entire swarm changes its position. Such is the relationship
of commodity prices to one another and to an average of all
prices when the general level of prices itself is changed.

Rising Farm Prices Are a Result of Inflation, Not a Cause

It is generally believed that rising farm prices cause in-
flation. It would be as correct to say that a rising ther-
mometer causes a warm day. What has happened is that

( 149 )

the general level of all prices has risen, and farm prices have
risen with them in exactly the same manner that the indi-
vidual gnat rose when the whole swarm of gnats rose. Rising
farm prices have not caused inflation any more than one
gnat, by himself, caused the swarm to rise.

Inflation is an upward movement of prices in general. It is
merely another way of saying that goods and services are
now more valuable relative to dollars than formerly. In war-
time we have greater use for goods and services than we
formerly had, and it is not surprising that their prices should
rise.

Those who contend that rising farm prices cause infla-
tion note that since the outbreak of the war, farm prices of
food have risen 96 per cent, while retail prices of food
have risen only 40 per cent. It is concluded that farm prices
have somehow shot up of their own volition and have
dragged the more reluctant and patriotic retail food prices
up with them. It is not unusual that farm prices should re-
spond more violently to a general price change than do re-
tail prices. During the depression, farm prices of food fell
68 per cent, and retail prices fell only 46 per cent.

The fact that the tip of a whip cracks sharply with a slight
movement of the butt does not mean that the tip of the
whip is responsible for the motion. Similarly, the fact that
farm prices fluctuate more violently than retail prices does
not mean that they cause the changes in the retail prices.
The farmer, like the man in the back seat of a roller coaster,
gets more of a ride for his money than anyone else.

Farm Prices Are Largely Made over Retail Counters

When prices in the retail trade strengthen for whatever
reason, the retailer is willing to pay the wholesaler more in
order to get his supplies. The wholesaler is willing to pay
the commission man more, who in turn raises the price to

( 150 )

get the supplies from the farmer. The cost of handling food
between the farmer and the consumer, which consists largely
of labor and other inflexible items, does not change much
over a short period of time. The farmer is out at the tip of
the whip.

The relationship of retail and farm prices of food might
be illustrated, using potatoes as an example. Farm and re-
tail prices might be in equilibrium as follows:

Per peck

Retail price $0.75

Retailer's margin 0.15

Transportation, storage 0.25

Commission, inspection, bags, tags, etc. 0.10
Farm price 0.25

If conditions in the retail trade improve, the retailer charges
$0.80. Then the most likely price situation would be about
the following :

Per peck

Retail price $0.80

Retailer's margin 0.15

Transportation, storage 0.25

Commission, inspection, bags, tags, etc. 0.10
Farm price 0.30

In this case retail prices rose 7 per cent and farm prices
rose 20 per cent, and the price controllers would tell us that
farmers were to blame for the rising cost of living.

Farm Prices Fluctuate More Widely

With passing time, and with the addition of more and
more inflexible charges for food distribution, the fluctua-
tions in farm prices have been increasing. Farm prices are
a residual. Rising costs of distribution make the residual a
small part of the consumer's dollar. If the farm price is a

( 151 )

small part of the consumer's dollar, a given change in the
retail price results in a large percentage change in the farm
price. As the whip gets longer, the farmer feels the crack of
the whip more than he once did.

City folks who fear a ten-per-cent rise in the retail cost of
food because there has been a ten-per-cent rise in farm prices
make two errors. First, they have mistaken cause for effect,
and second, a ten-per-cent rise in farm prices was accom-
panied by only a three- or four-per-cent rise in retail prices

of food.

Overproduction Was a Myth

During the thirties farm prices of food were low and it was
generally believed that they were low because of the loss of
our foreign market and an overproduction of food. The over-
production argument ran as follows : through improved ma-
chinery, better breeds of livestock, and better farming prac-
tices, the techniques of food production had outrun our need
for food and we had entered a new era of abundance.

In a sense this was a double error. Farm prices were low,
not because of overproduction, but because of a low general
level of prices. In fact, the production of food per capita was
lower during the thirties than during the twenties. There is
no evidence to indicate that at any tune during the past
quarter of a century there has been an overproduction of
food.

The bureaucrats did a marvelous job of selling the over-
production idea to the country. It is a credit to their journal-
ism, though not to their economics. Since time immemorial,
farmers have observed that a big corn crop brought low
prices, and that a small crop brought high prices. This simple
principle has been observed throughout history and has been
demonstrated to the satisfaction of all.

Since this principle held for an individual crop like corn,
the regimenters had little difficulty in convincing the nation

( 152 )

that a general decline in the price of everything was due to
a general overproduction of everything. Here and there a few
persons raised a simple but important question: Could there
be an overproduction of everything with untold millions of
people unemployed? Their voices were not heard. The na-
tion plowed under its cotton, killed the pigs, restricted the
production of wheat, and, before Pearl Harbor, reduced the
beet-sugar acreage about twenty per cent.

The overproduction argument has been eclipsed by pres-
ent high farm and retail prices of food. The idea that all can
have more if all produce less is currently in disregard. But if
prices fall during the post-war adjustment, from whatever
cause, the overproduction argument will probably be re-
vived.

Low Farm Prices Not Due to Loss of Foreign Markets

A companion argument to the overproduction idea that
prevailed during the thirties was the concern regarding the
loss of our foreign market for food, which, it was contended,
piled up burdensome surpluses and depressed farm prices.
Foreign trade in food, tariffs, trade agreements, quotas, and
gold movements have played and always will play an impor-
tant role in our political, economic, and agricultural discus-
sions. The difference between the high-tariff policy of the
Republican Party and the high-but-not-so-high policy of
the Democratic Party has always kept these issues alive.

During the thirties there was no question but that our ex-
ports of food were declining. There was no question but that
farm prices of food were falling. The two indisputable facts
were linked as cause and effect. The public, always willing
to accept an explanation that lays the blame on the foreigner
or on the international banker, subscribed wholeheartedly.
The big question that arose was whether we should try to
stimulate our exports by some form of subsidy or whether we

( 153 )

should curtail food production and "adjust to the domestic
market." The crop controllers won and a restriction program
was inaugurated. Strangely enough, acreage restrictions
were imposed on sugar beets and other commodities for
which we have little foreign trade or which we actually im-
port.

There is considerable evidence to indicate that the low
prices of agricultural products during this tune were due, not
to a loss of our foreign market, but to the world-wide price
deflation, which practically no country escaped, whether it
imported, exported, or was self-sufficient. Furthermore, our
lost foreign market was not a depression phenomenon. It had
been going on, with interruptions, since 1900 (figure 1). "The
loss of our foreign market" was merely another way of saying

FIGURE 1. THE VALUE OF NET EXPORTS OR IMPORTS OF FOOD
IN PER CENT OF FARM INCOME, 1882 TO 1940

fQQO '390 fSOO /9fO !3aO /93O IS4&

From about 1880 to about 1900, net exports mounted relative to produc-
tion. Thereafter exports declined, then vanished, and imports became the
rule. This downward trend in exports and the rising importance of imports
have been confused by World Wars I and II, which temporarily reversed
the normal trends.

( 154 )

that, with population increasing faster than our food sup-
ply, we needed to keep an increasing proportion of our food
products at home in order to supply our own needs.

Constant emphasis on our export market for food has led
us to the popular conclusion that our foreign trade in food
shows, and always has shown, a large export balance. It is
true that we normally export considerable amounts of cer-
tain foods, including lard, fruit, and tobacco (which may be
considered a food only if it is chewed). But we also import
large amounts of non-competing foods such as coffee, cocoa,
tea, bananas, and spices. In addition, we normally import
competing foods such as beef, sugar, and vegetable oils.
Changes in the quantities of these exports and imports re-
lated to changes in our population over a period of years
indicate that foreign trade is more a result than a cause of
economic changes in this country.

Normally We Eat More Than We Produce

In general, during the past quarter of a century, the agri-
cultural production of the nation has not kept pace with its
population. From 1910 to 1914 our imports of food approxi-
mately equaled our exports. Even under the pressures of
World War I, net exports reached a maximum of only about 5
per cent of our production. When relieved of this pressure, an
excess of imports was quickly re-established. Thereafter, our
agricultural imports exceeded exports most of the time. From
before World War I to the twenties and early thirties the net
excess of food imports over exports rose from 0.2 to about 2
per cent of our production. From the more or less normal
crops of 1923-32 to the good crops of 1937-40, the net im-
ports of food rose to about 3 per cent of our production. From
the twenties to our participation in World War II, there was
a continual excess of food imports over exports. Prices rose
and fell violently. The loss of our foreign market and rising

( 155 )

imports were due to the fact that we ate more than we pro-
duced. Food prices fell and rose because of the forces of
world-wide deflation and inflation. Our dwindling exports
were no more than a scapegoat and a whipping boy.

General Price Level Affected by Monetary Factors

Changes in the general level of the farm prices of our food
come about mainly with changes in the general level of all
prices, in this country and in the world.

The general level of prices of all commodities is affected
by two groups of factors : those concerning the commodities
and those concerning the money in which the prices are ex-
pressed.

Factors that Make Price

There are five factors affecting the general price level: the
supply of and demand for commodities, the supply of and
demand for money, and the amount of precious metal in the
monetary unit. These factors are constantly fluctuating, and
rarely fluctuate by the%ame amount at the same time. At one
time the fluctuations in the five factors may be compensat-
ing, and at others non-compensating. If the fluctuations in
the factors are compensating, the price level is stable. If not,
deflation or inflation occurs.

The five factors that make price are relatively simple.
When one considers the innumerable possible combinations
of fluctuations in each of the factors, there are a myriad pos-
sible answers. For simplicity, let us assume that each of the
five factors could fluctuate by only five similar amounts. In
that case there could be 3,125 different prices.

Irving Fisher once said that if you taught a parrot to say
"Supply and Demand" he could answer any economic ques-
tion. But the parrot does not know the factors that affect
supply and demand, the amount they can vary, or the innu-

( 156 )

merable ways in which these variable factors may combine.
Even if the parrot knew, he would not have sufficient vocab-
ulary to tell us all the answers. Man may have the vocabu-
lary, but he does not know how these factors combine to
influence prices. For this reason market prognosticates and
the price-fixers are essentially erroneous forecasters.

In Wartime All Factors Make for Higher Prices

The factors affecting the price level are always fluctuat-
ing, but in time of peace they fluctuate little and the fluc-
tuations frequently compensate. There is considerable varia-
tion from year to year in the supply for one commodity, but
the supply of all commodities ordinarily is relatively un-
changed. Similarly there are changes in the demands for
various products, but the demand for all commodities nor-
mally changes little. Usually, also, the supplies and demands
for money are relatively stable and the amount of precious
metal in the monetary unit is also stable. Under such condi-
tions the general price level fluctuates much less than in time
of war.

During major wars both commodity and monetary fac-
tors affecting the price level change decidedly. World-wide
changes occur in the supply of and demand for commodities
and in the supply of and demand for money. Sometimes
warring nations get into financial difficulty. Then the ex-
change value of their currencies may fall.

An appreciation of the behavior of these five factors in
time of war will help one to understand how a major war
causes an upheaval in commodity prices.

Supplies of money in tune of war normally do not di-
minish.

War restricts the supply of commodities. It is impossible
to draft fifty million men from the world's productive ma-
chinery for military activity and maintain normal produc-

( 157 )

tion. Even the widely heralded German efficiency has not
been able to devise a plan whereby men can work and fight
at the same time. Declining production and the interruption
of transportation reduce the supply of commodities. Since
time immemorial any force that has reduced production has
been a price-raising force.

In time of war, gold, silver, paper, and credit money de-
preciate in terms of other things. This decreased demand for
money is a price-raising force.

On the other hand, there is an increase in the demand for
commodities. Normally the world's civilians individually
consume most of the goods that the world produces, and only
a small proportion of the goods is consumed by individuals
collectively — that is, by units of government. In time of
war the governments become great buyers and consumers of
goods and services. Since there is no other source, the gov-
ernments must take the goods away from the individuals.
Almost regardless of the method used, the result is a net in-
crease in the demand for commodities. This is a price-raising
force.

Some persons contend that the change is not due to de-
creased demands for money alone or increased demands for
commodities alone, but that the two demands are insepara-
ble. In time of war, individuals and nations prefer goods to
money. Goods are better adapted to the waging of war than
is money. Since people regard goods more highly and money
less highly than they formerly did, they are willing to give
more money for a given amount of goods. This is another
way of saying that prices rise.

Sometimes the world loses faith in the future of a warring
nation. Defeat or the inability to meet its debts are sus-
pected, both within and without the country. Under such
circumstances the exchange value of its currency may
fall. Since its money is worth less than formerly, it takes

( 158

more money to buy a given quantity of goods, and prices
rise.

In time of major wars decreasing supplies of and increas-
ing demands for commodities, increasing supplies of and
decreasing demands for money, and decreasing exchange
value of currencies are all price-raising factors. There is not
one factor depressing prices.

TABLE 1. CHANGES IN WORLD PRICE LEVEL DURING
MAJOR AND MINOR WARS

Major wars

Minor wars

Prices,

Conflicts,

Prices,

Other conflicts,

Prices,

Conflicts

per

United States

per

United States

per

cent

involved

cent

not involved

cent

rise

rise

rise

German-Danish

- 2

Napoleonic

64

Mexican

7t

Crimean
Austro-Prussian

9*
- 3*

World War I

138

Civil

8*

Franco-German
Chinese-Japanese

2*
0

Rnpr

ft*

World War II

?

Spanish-American

8*

.Dut/r

Russo-Japanese

\J

3

Spanish Revolution

- 6

* Generally rising prices due to causes other than wars.

t A sharp upturn in prices following the disastrous rains, the Irish famine, and the repeal
of the English Corn Laws.

Price Advances Depend on the Magnitude of the War

Major wars have always been accompanied by rising prices
and followed by falling prices. Local wars have little effect
on the world price structure (table 1). The Napoleonic Wars
and World War I, both world conflicts, swept the whole
world price structure upward and then downward. Prices
rose in ^all countries because of world- wide changes in sup-
plies of and demands for commodities and money which were
beyond the control of any one country. During World War

( 159 )

II prices are advancing for the same reasons. Our Revolu-
tionary, Civil, and Spanish Wars, and the minor conflicts
of other countries, however, had little effect on the world
price structure (table 1).

The Revolutionary and Civil Wars had a decided effect
on our prices, but our Spanish War had little effect (table 2) .

TABLE 2. CHANGES IN UNITED STATES PRICE LEVEL
DURING MAJOR AND MINOR WARS

Major wars

Minor wars

Conflicts

Prices, per cent
rise

Conflicts

Prices, per
cent rise

Revolutionary

Wild inflation

War of 1812

54

Civil War, North

145

Mexican War

- 1

South

Wild inflation

Spanish- American

0

World War I

149

World War II

?

During our Revolutionary War there was wild inflation due
to the depreciation of the Continental paper currency. The
expression "not worth a Continental" dates back to that pe-
riod. During the Civil War, prices rose in both the North and
the South — moderately in the North and wildly in the
South. These advances were not due to world- wide changes in
commodity prices. They were due to depreciation of paper
currencies in the United States. Northern greenbacks depre-
ciated until they were worth about forty cents on the dollar,
and the Southern Confederate notes until they were worth-
less.

Wars, if small, may have no effect on the prices of a nation
or the world. Larger wars may affect the prices of the war-
ring nations and not the world; or if large enough, they
affect prices of all nations.

The present war is a world-wide conflict. A certain indi-

( 160 )

vidual with heavy eyebrows, who is said to be interested in
the labor movement, apparently knows his price history and
aptly summarized the effects of the five factors on prices
during a major war :

"Inflation to some degree is a definite concomitant of any
war. It [war] . . . destroys material . . . [and] manpower
. . . creating . . . higher values of remaining manpower
and materials. To think now that a war can be fought of the
magnitude of this globular effort without resultant inflation
to some degree is to fly in the face of history and all known
economic facts." *

Food Prices Fluctuate with Other Prices

Food prices fluctuate with the general level of commodity
prices because they are affected by the same forces that af-
fect other prices. This is true in time of war and in tune of
peace. During the Civil War all prices rose 117 per cent and
food prices rose 112 per cent. During World War I all prices
rose 128 per cent and food prices rose 113 per cent.

During the deflation that followed the Civil War food
prices fell 52 per cent and all prices fell 53 per cent. When
peace was re-established at the close of the Civil War, prices
in the United States fell for two reasons: the return of the
depreciated greenbacks to their gold parity, and a general
decline in world prices.

After World War I food prices fell 55 per cent and all
prices fell 58 per cent. Since the United States was on the
gold standard following World War I, most of the decline
was due to declining world prices.

Most of the variations in prices of food products are due
to the same forces that cause the nation's whole price struc-
ture to move upward or downward. Similarly, most of the
variations in a nation's price level are usually due to the

1 New York Times, April 11, 1943, page 32.

( 161 )

same forces that cause the world price structure to move up-
ward and downward (figure 2). If a certain combination of
forces causes the whole world price structure to sweep up-
ward or move downward, these forces in turn will cause
comparable changes within a nation's price structure, and
the food prices of a country will fluctuate with the move-
ment of all prices in that country. Contrary to popular opin-
ion, the generating forces do not begin with the nation's food
prices and then proceed to a nation's price level and finally
to world prices.

FIGURE 2. INDEX NUMBERS OF THE WORLD AND UNITED

STATES PRICE LEVELS, 1870 TO 1942

1910_14 = 100

1870 1880 1830 1300 19/0 1920 /930 1940

For three quarters of a century commodity prices in the United
States have followed the world price level.

Local Factors Affect Food Prices

The price of any individual farm product may be high or
low relative to the level of farm products in a given country
or in the world. At any particular time the price of wheat
may be low relative to the general level of world food prices
because the world supply of wheat is large.

( 162 )

The price of wheat in a given country may be a little high
relative to world prices of wheat and relative to food prices in
that country because of unusual changes in local supplies.
Such a condition could exist in a country that had less than
normal supplies at a time when the world had more than
normal supplies. A drought in China might result in a trebling
of the price of rice and other foods in the interior of China
and not affect the price of food in the United States. Our
droughts of 1934 and 1936 did not affect food prices in Eu-
rope as much as in the United States.

Every Tom, Dick, and Harry knows that a big crop of corn
sells for a low price. Since few know that world forces also
affect the price of corn, they jump to the conclusion that the
only force affecting the price of corn is a big crop in their
community.

Prices are therefore affected by world-wide forces affect-
ing all prices, world-wide forces affecting food prices, and
local forces affecting the price of an individual product.

Changes in the price of an individual commodity in a par-
ticular country are a good deal like a water-skipper on the
ocean. His activities produce only a whirl on a wave on a tide.
This insect is immodestly and unduly impressed by the rip-
ples that he creates and can see. He does not realize the im-
portance of the other forces even though he is almost
drowned by a tidal wave.

Price Affects Production, Consumption, and Distribution

Prices are both a cause and a result. Food prices in the
United States are largely a result of world forces, but changes
in our food prices cause all manner of changes in the produc-
tion, distribution, and consumption of various foods in this
country.

( 163 )

Price Tells the Farmer What, Where, and How Much
to Plant

Under the capitalistic system of the horse-and-buggy days
the tremendous task of adjusting the complicated supply
problems was left to the price system and thereby to farmers
individually. Production was wisely guided by price. Whether
a farmer produced cabbage -or potatoes rested on a basis of
price. Whether a farmer sold corn or turned it into pork was
determined by price. Whether the range country produced
cattle or sheep was determined in part by price.

Public desire for more grapefruit and orange juice found
expression in public willingness to pay high prices for these
foods, or to buy more at the same price. This made it prof-
itable for the farmers to increase the acreage of citrus fruits.
Through price the nation had told the farmers that more
citrus fruits were wanted, and the farmers responded. As the
horses on farms and in the cities were replaced by tractors
and trucks, less timothy hay was needed. The nation paid
less for hay. Farmers noted the falling prices and reduced the
acreage.

With the improvement and cheapening of transportation,
the price which could be obtained for potatoes rose in areas
distant from market, and a part of the commercial produc-
tion shifted from near-by areas to Maine and Idaho.

By the price system the production of an article can be
increased, decreased, or shifted from one farm to another, or
from one area 2 to another. Since time immemorial high
prices have encouraged the production of food that was

2 A few years ago three states, Nebraska, Montana, and Wyoming, raised
about one half as many dry beans as New York. In 1943 they planted twice
as much as New York. Formerly there were price differentials based on
location. The regimenters did not approve and for the last year or so ceiling
prices were the same for all shipping points.

( 164 )

scarce, and low prices have discouraged the production of
food that was in abundance.

The way the farmer's son determined whether society
wanted him to be a farmer, a coal miner, or a doctor was on
the basis of price. In fact, price always was the major cri-
terion by which the producer could learn what society
wanted. This principle is thoroughly ingrained in all pro-
ducers.

Prices affect supplies in many ways. A twenty-five-cent
rise in the price of hogs on Tuesday increases the run of hogs
the following Thursday. A one-cent drop in the price of eggs
in Boston relative to the price in New York diverted eggs
from Boston to New York. The government's low ceiling
prices on red kidney beans discouraged New York farmers
so much that they decreased the 1943 acreage about 20 per
cent. The government's price policy regarding sugar resulted
in a 39-per-cent contraction of sugar-beet acreage. The ef-
fects of abnormally high prices for hogs may be felt two or
three years later. This is about as soon as the price telegram
can get from the consumer to the producer and the reply, in
the form of more pork chops, sent to the consumer. Changes
in the price of beef cattle have their effect seven to eight
years later.

Very few realize the myriads of different effects fixed prices
will have on production a week, a month, a year, or a decade
hence. It is gradually dawning on some of our administrators,
however, that they cannot get food in the quantities desired
at artificially low frozen prices.

Price Guides Distribution

Price has always been the primary force guiding goods
through the channels of trade. Whether milk should be con-
sumed in its natural state, churned into butter, pressed into

( 165 )

cheese, evaporated, condensed, or dried has been determined
by price. Whether the butter moves to Chicago, Pittsburgh,
or New York City has been determined by price.

Since the butter is not produced uniformly throughout the
year, periods of feast and famine would occur if butter were
eaten as soon as produced. In the periods of high production,
prices fell and the distributive trades carried over large quan-
tities of the low-priced butter to the winter months when
the price was high. This helped both the farmer and the con-
sumer. It returned to the farmer a greater income than he
would otherwise get. The large spring-summer production at
the somewhat higher price brought more income. It also
helped the consumer. In the winter months, when the pro-
duction was low and the price rose, the out-of-storage
movement of butter prevented consumer prices from rising
unduly. It reduced the violence of the fluctuations of the con-
sumer's prices, stabilized his supplies, and raised the farmer's
income.

Price very efficiently guided the flow of grain. The major-
ity of farmers sold their grain shortly after harvest, while
the consumers demanded their bread in constant supply.
Huge terminal elevators were built to store this grain. Nor-
mally, the movement of grain in and out of these elevators
was largely determined by the relationship of the cash prices
to future prices of wheat at Chicago. When the cash prices
were low relative to the future prices, the elevators were en-
couraged to store grain. When the cash prices rose above the
future prices, the elevators were encouraged to sell their
holdings. A small change in the relationship between cash
and future prices told the small country elevator and the
large terminal elevator whether society wanted grain with-
held from consumption or forced into consumption. The
Chicago Board of Trade, popularly believed to be a den of

( 166 )

iniquity, was the place where the important but little-under-
stood spread between cash and future prices automatically
regulated the flow of grain to the consumer.

Consumption Wisely Guided by Price

The housewife with the market basket on her arm chooses
foods on the basis of price. Whether one should buy ham-
burger, rump roast, or T-bone steak is largely determined by
their prices. Whether a person should buy peas, peaches, and
pineapple by the case during the autumn sales, or whether to
buy from hand to mouth is largely determined by price. If
the case-lot prices are sufficiently low, the frugal consumer
"hoards" during the fall.

Consumers decrease the consumption of high-priced ar-
ticles and increase the consumption of low-priced articles.

We should all like to eat porterhouse steaks and fresh
strawberries, ride in Cadillac cars, and live in modern ten-
room houses, but these products require so much human
effort that it is not possible to produce enough for all. High
prices eliminate from the market those buyers who want
them least or are least able to pay for them, and the scarce
supply is rationed by price to the remaining buyers.

Hens lay more eggs in the spring than at any other time.
The price falls, thereby encouraging those who would not
otherwise buy eggs to enter the market and take up the large
supply.

In years of short crops prices of wheat are high. These
high prices tend to limit consumption in the early part of the
crop year so that enough wheat will be saved to last until
the next harvest. When pork is scarce, high prices of pork
cause the consumer to shift to other types of food so that the
diminishing supplies are not exhausted before production
can be increased.

During a famine in India the government set prices of

( 167 )

grain at a low level, and most of the crop was consumed long
before new crops were available. Little or no grain was shifted
from other areas. One third of the population died. During a
later famine the government did not fix prices and in fact
encouraged speculation. Prices advanced immediately, the
pressure of the shortage was spread equally over the year,
and grain was brought from other areas.

In 1916 the world began to feel some shortage in food sup-
plies. Prices promptly rose. This decreased the purchasing
power of consumers and served to shift our consumption so
that the war effort was not hampered by malnutrition or
famine in the Allied countries. If prices had not risen and
especially if crops had been poor or had failed in the later
war years, the food supply for any one year would have been
consumed long before the following harvest.

Importance of Rising Prices during War

The price mechanism is an effective tool for changing the
nation's economy from a peacetime to a wartime basis. Dur-
ing wars it is highly essential:

(a) to stimulate food production,

(b) to shift a large part of industry from the production of civilian
goods to armament, and

(c) to reduce the standard of living of civilians.

Advancing prices were the time-honored way of obtaining
maximum food production. Price incentives were an effec-
tive way to shift industry from a peace to a war economy.
Rising prices reduced the standard of living of civilians indi-
vidually and collectively.

During World War I salaries of public school teachers rose
8 per cent while the cost of living rose 50 per cent. Therefore
the purchasing power of these incomes declined 28 per cent.
The purchasing power of salaries of university professors
declined 27 per cent; of government employees, 19 per cent;

( 168 )

of bonds and mortgages, 30 per cent; and of rents and roy-
alties, 15 per cent. If direct taxes had been included, the de-
crease in the civilian standard of living would have been even
more. But this is not all; the collective standard of living
was also reduced. The purchasing power of municipal and
state taxes declined 20 per cent ; state, municipal, and school
bond issues, about 50 per cent.

Since the purchasing power of a considerable part of the
population declined, people were forced to reduce expend-
itures. This took the form of cheaper types of food and cloth-
ing, less travel, entertainment, and education, less expendi-
ture for housing, and so on. Since the bare necessities of life,
food and clothing, can be reduced by only a limited amount,
the first and greatest reduction must come in other types of
expenditures. With decreased purchasing power, individuals
cannot afford to maintain their homes in as good condition
as formerly. They cannot afford to make improvements, let
alone to build new homes.

During World War I the depletion of capital took the form
of failure to repair dwellings, churches, hospitals, factories,
power plants, railroads, and the like. It also took the form of
the postponed construction of new homes, churches, hospi-
tals, power plants, telephone lines, sewers, streets, high-
ways, universities, schools, and the like. These sacrifices
released huge amounts of materials for tanks, guns, airplanes,
ships, and other fighting equipment.

Most people think that major wars are fought with arma-
ment created by expanding the total production of the coun-
try. The most important source of material for war, however,
is obtained by reducing the production of civilian goods, and
depleting capital. World War I cost the nation about $32
billion of which $3 to $4 billion came from increased pro-
duction; $8 to $10 billion from decreased consumption; $18
to $21 billion from depreciation of capital.

( 169 )

The existing wealth of the nation was a more important
source of fighting materials than either increases in total pro-
duction or reductions in consumption. During a war total
production may increase but little, but the production of war
materials must increase greatly. In other words, there is a
great shift in the type of goods produced. There could be
little or no shifts in the production of food and clothing,
which are normally produced and consumed on a current
basis. Contrary to popular belief, current stocks are rela-
tively unimportant. The important reduction must come in
that type of production which can be postponed because of
very large inventories. Producing war materials at the ex-
pense of reducing inventories of capital goods is equivalent
to utilizing production of the past.8

With rising food prices, each consumer reduces his pur-
chases of items other than food. War, through advancing
prices, inevitably reduces the standard of living; the real
cause of the lower standard is war and not, as is almost uni-
versally assumed, the rising prices.

During World War II many proposals have been advanced
for painlessly depriving civilians of goods and services. The
nation is using decrees, support prices, priorities, price-fix-
ing, rationing, subsidies, and the like to increase food produc-
tion, shift industrial production, and reduce the civilian
standard of living. Under this system our problem seems to
be how the most goods can be taken away from the most
people with the minimum amount of squeal — regardless of
the cost in terms of human labor.

War reduces the standard of living of civilians. Formerly
the task was accomplished by price. Now it is undertaken
by administrative action, but price is so potent that it

3 Of course, when inventories are reduced in an emergency, they must be
built up again afterward if the pre-war standard of living is to be restored or
raised.

( 170 )

rules supreme despite the efforts of the administrators to
prevent it.

Rising Food Prices Do Not Mean Malnutrition

Since prices guide the consumption of individual foods,
most persons jump to the conclusion that rising prices of
food in general curtail the consumption of all food. If this
were the case, there would be a striking relation between the
death-rate or the amount of sickness and the retail prices of
food. No one has yet presented a chart to show that in this
country they now are or ever have been associated. The ex-
planation is clear. If food prices rise faster than income, food
consumption is maintained at the expense of drastic reduc-
tions in the consumption of articles other than food. If the
prices of various foods change relative to one another, con-
sumption shifts from one food to another and total food con-
sumption changes but little. If prices of all foods rise to-
gether, total food consumption changes but little and the
consumption of many non-food items declines. This is a
necessary reduction in time of war.

A rising scale of prices of cars from the Ford to the Cadil-
lac automatically reduces the consumption of the higher-
priced cars. A rise in the price of different qualities of beef
from hamburger to T-bone steak automatically curbs the
consumption of the higher-priced cuts. This simple principle
is ingrained in the thinking of 125 million Americans. From
these observations millions of them generalize and convince
themselves that a rise in the price of food is accompanied by
a diminution in its consumption. This is an erroneous gen-
eralization. Many able public-spirited persons hold this
view, and it was an important reason for the country's efforts
to stabilize the cost of living. The rising cost of living has not
caused malnutrition. With even a greater rise, food consump-
tion would have been maintained by absorbing a larger pro-

portion of the country's buying power. This would have
eliminated some of the unspent income that comprises the
"inflationary gap" about which a few are much concerned.

One Way to Lap Up Excess Purchasing Power

The Russians apparently have one solution for the prob-
lem. They fix prices and ration food, but do not attempt to
control all prices or ration all foods or even all the supply of
one kind of food.

TABLE 3. RATIONED AND MARKET PRICES OF
FOOD IN RUSSIA*

Article

Rubles, prices per kilo t for

Dollars, prices J per pound for

Rationed
foods

Market
foods

Rationed
foods

Market
foods

Bread
Sugar
Herring
Potatoes
Cereals
Cooking fats
Butter

1
5|

10 to 20

6 to 20
20
50

140 to 150
800

0.10
0.50
0.85 to 1.75

0.50 to 1.75
1.75
4.25

12 to 13
70

60 to 70
150

1,000

5 to 6
15

85

* Kerr, W.: New York Herald Tribune, May 18, 1943, page 21.

t One kilo equals about two and one-fifth pounds.

J Based on regular exchange rate when the ruble is worth 19 cents.

Walter Kerr, the New York Herald Tribune's able corre-
spondent, presents a vivid picture of a typical Moscow work-
ing family 4 in time of war. They are paid according to the
piecework system. The family income varies from 1,330 to
1,940 rubles per month, which at the regular exchange rates
is equal in amount to about $250 to $375 per month. The
family spends about half of its income for the usual non-food
items in the cost of living. The other half of the income is

4 The father is a lathe operator; the wife, a textile weaver; the sixteen-
year-old son an apprentice in a machine shop, and the twelve-year-old daugh-
ter goes to school.

( 172 )

spent for rationed and unrationed food. Since the family can-
not get along on its food ration, it purchases the remainder
on the open market, where farmers sell their produce after
having sold a given proportion to the government at fixed
prices. This family found that its monthly rationed food
lasted from fourteen to twenty days. About one third to one
half of the food had to be purchased on the open market at
competitive market prices.

A comparison of the prices of rationed and market foods
indicates that market prices are 15 to 150 times the rationed
prices (table 3). A loaf of "rationed" bread costs about 10
cents, but "market" bread costs $12.

Joseph Stalin may not have solved all the problems, but
he has learned — possibly the hard way — that high prices
for food lap up excessive purchasing power, which is in the
public interest in time of war.

We Have Experimented with Many Panaceas

The price policy of the horse-and-buggy era was to let
prices rise and fall ; every man for himself, and the devil take
the hindmost.

Here and there attempts were made to alter the general
trends. William Jennings Bryan attempted to counteract the
deadening effects of the price decline during the eighties and
nineties by the substitution of the silver for the gold stand-
ard. McKinley proposed a tariff on food as the solution to the
problem. The Underwood Tariff Act of the Woodrow Wilson
days removed the agricultural tariffs to protect the consumer
against rising prices. The Emergency Tariff of 1921 was
passed to protect the farmers against the post-war deflation.
Tariffs cannot change the upward and downward trend of
world prices.

Mr. Hoover's Farm Board was more vigorous but equally
ineffective. The Farm Board purchased huge amounts of

( 173 )

wheat to stabilize the price of wheat in this country. The
Board did not know it, but it committed itself to stemming
a world- wide collapse in wheat prices.

The present administration put an end to the Farm Board,
but not to its basic principles, which were later revived under
the "ever normal" granary policy.

The greatest changes in our national price policies occurred
during the present administration. During its earlier years
the policy was to raise prices in this country when world
forces were holding them down, with the altruistic aim of
aiding food-producers. More recently, the policy has been to
prevent prices from rising when every economic force has
been driving them up, with the avowed purpose of protecting
the consumer. The objection to these changing policies is not
their inconsistency, but their ineffectiveness.

During 1933, food prices and incomes of both food-pro-
ducers and food-consumers were raised by the unpopular but
effective method of devaluing the dollar. This gave way to
the rather popular but very ineffective program of controlled
production. The theory was that incomes of farmers could be
raised by reducing supplies, plowing under cotton, restrict-
ing the wheat acreage, and killing the pigs. Since reducing
the supply did not raise incomes, farmers were given benefit
payments for conserving the soil, curtailing the acreage, and
the like. The ever normal granary, the parity conflict, easy
credit, the stamp plan, and other price panaceas flashed
across the horizon.

Present Policy Is a Dilemma

The present national price policy is somehow or other to
get the farmers to increase food production despite low ceil-
ing prices, protect the consumer's pocketbook with low frozen
retail food prices, and protect all of us from the wild inflation
that is universally believed to be just around the corner.

( 174 )

A policy of low ceiling prices repeals the law of supply and
demand as far as supply is concerned. It restricts future pro-
duction. It also repeals the law of supply and demand as far
as demand is concerned. Low ceiling prices speed up the rate
of consumption.

All Cannot Have More if All Produce Less

The New Deal brought to life the age-old belief that the
nation could have more by a redistribution of wealth. This
general philosophy has a strong political appeal. Most of the
improvement in the standard of living of the common man
historically has been due to a rise in the standard of living of
all people rather than through a redistribution of the exist-
ing wealth. There is only one way to raise the standard of
living permanently, and that is through increasing produc-
tion of more goods and services.

Since increasing production lowers price and decreasing
production raises price, there is a widespread belief that by
producing smaller crops, all can have more. We all know that
we are individually better off with a high price or wage. We
all know that a high price is associated with a small output.
Therefore many erroneously reason that the way to get more
is to produce less. This general philosophy may be sum-
marized as follows:

Crop Price 5 Income 6

80 140 112

100 100 100

125 70 88

There is an almost universal belief that if the production
of a crop is reduced 20 per cent, prices will rise, say, 40 per
cent,5 resulting in an income 12 per cent 6 above normal. On
the other hand, if the crop is 25 per cent above normal, the

5 Erroneous assumption. 6 Erroneous conclusion.

( 175 )

price is assumed to decline to perhaps 30 per cent 5 less than
normal, in which case the farmers' income would be 12 per
cent 6 below normal. Since time immemorial, proposals have
been made to raise both prices and incomes by reducing pro-
duction. This was the basis of our AAA program and of in-
numerable other restriction programs so widely accepted
throughout the world during the thirties.

In recent years scientific studies and practical experience
have disproved this age-old axiom. It is true that any force
which reduces production raises price, but it does not follow
that reducing production raises income. On the average, a
big crop brings agriculture just about as much income as a
little crop. The known facts may be summarized as follows:

Crop Price Income

80 125 100

100 100 100

125 80 100

A 20-per-cent reduction in the production of a crop raises
its price about 25 per cent, and a 25-per-cent increase lowers
prices 20 per cent. In each case the income is approximately
unchanged, 100. Normally, decreasing the production raises
price, but it does not raise a nation's agricultural income.7

Much of our muddled thinking is due to the fact that, al-
though reducing production raises price, it does not raise

5 Erroneous assumption. 6 Erroneous conclusion.

7 Of course, the relationships for individual crops vary somewhat from
this generalization. A 20-per-cent reduction in the supply of some crops raises
the price sufficiently to bring the farmer somewhat more dollars than a big
crop at a low price. For instance, a 20-per-cent decrease in the production
of potatoes raises prices 29 per cent and brings farmers a slightly greater
return than does the large crop at a lower price. The short crop brings farm-
ers 3 per cent more income than a normal crop and 6 per cent more than a
large crop. Similarly, a short crop of corn brings farmers a few more dollars
than a large crop. But small crops of oats, hogs, and apples bring the farmers
higher prices, but slightly less incomes than large crops.

( 176 )

price and consequently income as much as many erroneously
reason.

Since this general principle was not well known, the man
with the hoe throughout the world attended the meetings
during the depression of the thirties and approved of the na-
tional policies to raise incomes by restricting production.
During the meetings his enthusiasm for the restriction pro-
gram was unbounded; when he went home and planned his
farming operations to comply with the program, he uncon-
sciously tried to devise ways to live within the letter of the
law but produce more, because he knew it was good business
for him to do so. The records of production indicate that he
succeeded quite well. Farmer Jones knew that he, individu-
ally, could do nothing about price, and if price was controlled,
the only way he could get more income was to produce more.
His general philosophy might be summarized as follows:

Crop Price Income

80 100 80

100 100 100

120 100 120

At any price level, high or low, the only way the individual
farmer could get more income was by producing more crops.
Obviously, there was a conflict between group interest and
individual interest. The farmer unconsciously sabotaged the
program by restricting the production on the poorer land
and stepping up production on his good land.

Price Level More Important to Income than Variations in

Production

The most important factor affecting the incomes of farm-
ers is changes in the general level of prices, and not whether
farmers produce a large or a small crop.

The value per acre of large crops of wheat was about the

( 177 )

same as the value per acre of small crops. Over the sixty-six-
year period from 1873 to 1938, small crops of wheat brought
$12.47; and large crops, $12.38. The difference, $0.09, was
less than one per cent of the average value of the crop. In the
nineties, when the price level was very low, wheat was worth
about $9 an acre ; during World War I, when the price level
was very high, $23 an acre; and in the twenties, almost $15
an acre (figure 3). The difference due to the price level was
much greater than the difference due to large or small crops.
The same holds true for other crops.

Variations in the supply and the price of wheat and other
food crops for any given year tend to be compensating. Con-
sequently, the farmers' income varies less than one would
expect by looking at either price or the size of the crop alone.
The effect of the price level on the value of the farmers' crop,
and consequently their income, is not compensated. There-
fore most of the variation in the farmers' income is due to
the forces that make all prices, and not to changes in the size
of the crop.

Man is unable to observe and measure the effect of the
general price level. He is able to observe the effects of large
and small crops. Therefore it is universally but erroneously
agreed that the supply of a commodity is the overwhelming
factor affecting incomes of food-producers.

Food Prices Made by Economic, Not Political Laws

Violent changes in farm and retail prices of food have
led to demands that something be done to prevent such
changes. We have been attempting in a large way to fix farm
prices by legislation for about ten years. We have resorted
to legislation in order to control retail prices of food only
recently.

The American people have great faith in legislation as the
solution to any problem. Legislation regarding farm prices

( 178 )

centered on a legal abstraction called "parity." "Parity" is
a term which denotes an equality between an index of prices
received and an index of prices paid. During seven years of
general deflation, 1933-9, expensive and unsuccessful efforts

FIGURE 3. EFFECT OF LARGE AND SMALL CROPS AND THE

PRICE LEVEL « ON THE VALUE OF THE WHEAT

CROP PER ACRE, 1873 TO 1938

When the price level was high, the value of both large and
small wheat crops was about the same, but much larger than the
value of either large or small crops during a low-price period.

8 The solid line represents the index numbers of prices of
thirty basic commodities. The words small and large refer to
small crops and large crops.

( 179 )

were made to bring farm prices up to parity. With three
years of general inflation, parity has been reached and
passed ; the nation is now attempting to hold prices down.

Whether farm products sell above or below their parity
ratios at a given time is essentially a question of general
inflation or deflation.9

During the seven years 1933-9, when billions were spent
in an effort to restore parity, the average of all farm products
brought 77 per cent of parity. Since 1939, with a rising price
level, it has increased to 114 per cent.

Wheat is a product which has been subject to rigorous
controls. The government purchased, through loans, huge
amounts of wheat, and large payments were made to pro-
ducers to curtail production. During this seven-year period
the average purchasing power of wheat was 6 points below
the average of all farm products. At the beginning of the
period it was 3 points below; and at the end, 16 points below.
Cash payments increased the income of wheat-producers,
but the other phases of the program did not improve their
prices relative to the average of prices of other farm products.
In fact, those products which were not under control rose
relative to wheat.

The acreage of corn was also curtailed, and the govern-
ment purchased, sealed, and stored large amounts of corn
and paid producers substantial amounts to curtail produc-
tion. At the end of the period the purchasing power of corn,
like wheat, was less than at the beginning.

Butter, which was not subject to controls, averaged a little
better than all farm products.

9 Most of the change in farmer's prices expressed in terms of parity were
due to world-wide inflation and deflation, and the rates of change were
uniform. With the deflation of the twenties and thirties, a 1-per-cent fall in
prices caused 0.61- and 0.67-per-cent declines in parity. With the inflation
of World War I, the twenties, and the thirties, a 1-per-cent rise in prices was
accompanied by 0.77-. 0.85-, and 0.83-per-cent advances in parity. With
World War II inflation, the rate was 0.68 per cent.

( 180 )

During these seven years man's efforts to attain parity
were of little avail. Whether the efforts were in the form of
loans or restricted production or both, and regardless of the
efforts of the farm bloc and farm organizations, the net re-
sult was that parity was not restored.

The general inflation of the last three years has increased
prices of all farm products, and by April 1943 they had risen
to 14 per cent above parity. From August 1939 to April 1943
there was a striking increase in the purchasing power of farm
products. The percentage increases were as follows :

Potatoes 140 Barley 54

Hogs 105 Chickens 52

Corn 90 Cattle 43

Wheat 63 Butter 31

All farm products 61

Most of this improvement was due to the fact that, during
inflation, farm prices rise more than articles farmers buy.
The price whip swung in favor of the farmer, as is usual with
rising prices. Three years of moderate inflation brought
about what seven years of legislation and administrative
controls failed to accomplish.

Formerly parity was thought to mean equality. Now the
man on the street thinks parity is a method by which farmers
are attempting to get more than they deserve for their prod-
ucts. Formerly parity was the goal to which farmers hoped
that prices might rise. Later, parity was a limit beyond
which city folks hoped food prices would not rise.

Despite hopes, plans, and legislation, farm prices react in
accordance with economic laws. The efforts to hold farm
prices down during the past two years probably have been
no more effective than the previous efforts to push them up.
During the past two years farm prices have continued to rise
despite price ceilings, "stabilization," and the fortunes of
war (figure 4) .

( 181 )

FIGURE 4. INDEX NUMBERS OF UNITED STATES FARM PRICES

OF FOOD 1939 TO 1943

1910-14 = 100

INDEX

180

160

140

120

100

AUG. 1939 AUG 1940 AUG 1941 AUG. 1942 AUG. 1942

Since the spring of 1941, food prices have risen at a rather uni-
form rate of about three points per month, regardless of general
maximum price regulation, price stabilization, and the like.

During World War I the farmer was heralded as a patriotic
citizen who was encouraged to expand production and put
forth every effort to meet wartime demands for food. He was
not accused of attempting to raise prices or to profiteer. Dur-
ing World War II the government prevented the farmer
from expanding the acreage of wheat, corn, cotton, and some
other crops. Some persons accused farmers of profiteering,

( 182 )

others of attempting to raise prices unduly, and still others
blamed them for the rising costs of living. These accusations
have been propagandized so effectively that there is a large
number of intelligent people who firmly believe that farm-
ers are or will be the cause of "inevitable" inflation.

Incomes Have Risen Faster than Taxes

Heavy taxes on industry, distributors, and the moderate-
salaried groups reduced their purchasing power. The great-
est increases in income went to the low-income groups ; since
taxes were not applied in proportion to the increase in their
pay envelopes or in proportion to the decrease in consum-
able goods, they had more income than that to which they
had been accustomed. Most persons in this group spent their
incomes on a current basis and saved little. Since this was a
large group, their newly created purchasing power exceeded
the decreases in the purchasing power of the higher-income
groups, which were subject to heavy taxes. The net result
was an increase and a shift in the demand for commodities.
Higher prices have accompanied and will continue to ac-
company such programs.

Price Control Is Difficult

Under a system of freely fluctuating prices, the price of a
food in a country is determined primarily by world condi-
tions and secondarily by its internal conditions. The effect
of these world forces has been merely modified by govern-
ment regulations. Each country is attempting to operate a
more or less isolated economy which reduces to some extent
the importance of external forces on its internal price struc-
ture. This is a larger undertaking than is generally realized.
Normally the general price level responds to world rather
than to national influences. It would be as difficult for the
United States to do business at a price level differing from

( 183 )

that of the rest of the world as it would be for the corner
grocer to try to do business on a set of prices either above or
below those that generally prevailed. The difficulty of under-
standing exchange rates, the temptation to make long-run
conclusions from short-run observations, and the tendency
to become absorbed in the institutions of one's own country
have led many people to the belief that price stabilization
was possible without regard to world influences. Most of
these efforts enjoy little success. Some hobble along in a
strait-jacket of rigid government control.

These methods of price control have not been very effec-
tive in the United States ; they have been somewhat effective
in Canada, very effective in England, and seemingly faultless
in Germany. It would appear that the believed effectiveness
of controls is inversely proportional to the amount of infor-
mation available and directly proportional to the distance
between the countries in question.

Price Control Is Expensive

To police the country's distributive machinery rigidly
enough to maintain prices at fixed levels would take a huge
amount of human effort. Such an expense would be extrava-
gant in time of peace and prohibitive in time of war because
it would be a net deduction from the war effort. Since the cost
of complete control of the distributive system is prohibitive,
nations undertake varying degrees of partial control. A skele-
ton of official pronouncements is buttressed by pleas, threats,
and coercion. This method achieves some degree of success
while there are still plenty of goods on the shelves and the
bluffs are not called. The complete cost of a system of rigid
and thoroughgoing controls has not yet been realized; and
the final effectiveness of a partial system such as our present
one has not yet been measured. The nation is still in the
honeymoon days of price control.

( 184 )

The net result of the first two years of price regulation in
the United States was to retard rather than to halt the rise
in commodity prices. Some folks refer to it as a delaying ac-
tion; others, as a disorderly retreat.

Inflationary Gap vs. Statistical Gap

Recently some people have become alarmed about the ex-
istence of an "inflationary gap." This "gap" is the calculated
difference between the number of dollars in the pockets of
consumers and the amount of consumable goods multiplied
by their ceiling price. The difference between the two sup-
posedly represents idle dollars in the hands of consumers and
the threat of inflation. The "inflationary gap" is calculated
in billions of dollars, the amount depending upon the indi-
vidual who makes the calculations and the purpose for which
the calculations are made.

Others say that there is no inflationary gap; it is merely
a statistical gap, and that the official index numbers do not
measure the amount of inflation. They contend that such
index numbers contain automobiles not now made, and crude
rubber at a ceiling price instead of the cost of synthetic rub-
ber, which is above this ceiling. There is a deterioration in
the quality of clothes, meat, and many other goods and serv-
ices. Trade discounts have been eliminated, black-market
prices are not included, and the general tendency is to report
the ceiling price. A large part of the military end-products
are not under control. The index numbers do not include the
increasing importance and rising prices of second-hand goods.
All of these factors indicate that prices have risen more than
the official indexes show.

This should not be construed as a criticism of the makers
of official index numbers. They are just as well acquainted
with this problem as the critics. Furthermore, they cannot
control all the uses that are made of their index numbers.

( 185 )

In addition, there is strong pressure against changing the
measures in the middle of the game.

For these reasons it would appear reasonable to assume
that we have had more inflation than the official index num-
bers indicate, and that the inflationary gap is less than it is
generally assumed to be.

Rolling Back the Cost of Living

It is one job to roll back the official index of the cost of
living and another to roll back the real cost of the consumer's
living. There were proposals to spend $100,000,000 to roll
back the prices of seven commodities, to cut the cost of living
2.3 per cent. Stated another way, it was proposed that the
Federal government spend $100,000,000 and save about
$2,000,000,000. If the zeros are confusing the proposal may
be stated still another way. For a 5-cent expenditure the gov-
ernment proposed to save the consumer $1. Why not give
these supermen a billion dollars and let them roll back the
cost of living 20 billion dollars? The answer is simple. There
is a limit to the credulity of the American people.

All Signs Point to Higher Prices

Food prices will continue to move with the forces that in-
fluence all prices. They will respond to all the influences
making for a higher level of prices in general and, in addi-
tion, will respond to the probability of decreasing supplies
and increasing requirements. The government's bulwark
against price rises is probably weaker as regards food than
as regards other segments of its price-control policy.

Many of the activities of the Department of Agriculture
were aimed at higher prices, but some of its programs were
aimed at lower prices or stabilization at present levels. OPA
attempts to maintain rigidly fixed prices, to roll back prices,
and, if not successful, makes grudging concessions to ris-

( 186 )

ing prices. Government purchases of large and increasing
amounts of food for Lend-Lease and rehabilitation have a
strong upward influence on farm prices. Any force that de-
creases the supply of food in this country is a factor tending
to raise farm prices.10 The net effect of these various govern-
ment policies is toward higher prices.

Among the many factors affecting prices, there is not one
that points to stable or lower prices. In the United States, as
in the rest of the world, the most important forces affecting
prices are changes in supplies and demands for commodities.
The available supplies of commodities are short, and the de-
mand for these commodities, relative to the demand for dol-
lars, is high.

It would appear that the forces making for higher prices
in the world, in the nation, and in the food industry outnum-
ber and outweigh those tending to depress prices.

10 The government recognized this principle when it tried to raise farm
prices by the scarcity program under the AAA.

( 187 )

CHAPTER 10

CEILING PRICES, RATIONING,
AND SUBSIDIES

WHEN the nation committed itself to setting ceiling prices,
it unthinkingly bargained for a rationing system. Then, with
production discouraged because of low prices, subsidies were
inevitably called for. Price-fixing, rationing, and subsidies
are the three-legged stool of a regimented economy. The first,
the announcing of fixed prices, is relatively painless and cost-
less. The second, rationing, is both painful and expensive.
The third, subsidy, is an expensive intoxicant that results in
a nation-wide hangover.

These Are Methods of Buying Off the Public

The consumer always wants low prices. Through price
ceilings he got them. The downtrodden third has always
wanted equality with the princes of privilege. Through ra-
tioning the bricklayer now gets as much meat and gasoline
as the banker. Laborers have always wanted high wages for
their labor. Through hidden subsidies the country is moving
in that direction.

These crutches do not lead to economic well-being any
more than the process of taking in one another's washing.

( 188 )

When these methods are used, unspent incomes and govern-
ment debt, both of which are inflationary, rise to new and
greater heights.

Patching market prices with ceiling prices, patching that
patch with rationing, and patching that patch with subsidies
do not solve the problem. They merely postpone the day
when the tire blows out.

We Have a Two-Money System

Bimetallism was the original two-money system. It did
not always work, because it was impossible to control the
supply of and the demand for silver and the supply of and
demand for gold, or to keep the legal ceiling prices of the
two metals in equilibrium with their market prices.

The present rationing system is also a two-money system.
One must have dollars to get the property and one must have
coupons to get title to the property. There is no lack of dol-
lar money; there is a shortage of coupon money. With the
supply of dollar money greater than the supply of coupon
money, it will be hard to keep commodity prices at their
legal ceilings. The difficulties of accomplishing this objective
are enormous.

Ceiling Prices Are Inflexible

Ceiling prices, unaccompanied by the other phases of a
regimented economy, retard production, stimulate consump-
tion, and interfere with the movement of goods through the
channels of trade. These difficulties are likely to be greatest
in large cities in deficit areas. This is due in part to the in-
flexibility of ceiling prices.

Price ceilings tend to be based on differences in freight
rates. This operates to the disadvantage of large urban cen-
ters like New York City. The difference between the price
of a chicken in Missouri and New York is greater than the

( 189 )

freight rate. New York City has a great social system * to be
maintained, which means high taxes and high operating
costs for the middlemen. The difference between the cost of
a chicken in Missouri and in New York is the freight rate
plus the higher distributive costs in New York. With rising
incomes and with ceiling prices, the local consumers can out-
bid New York. Hence food shortages are greater in the large
urban centers in deficit areas. The large cities have neither
a weapon nor a magnet to attract food under relatively rigid
ceiling prices — unless through the black market.

Price Rations Goods

Many people, when they were handed War Ration Books,
assumed that this was the first time they had been rationed.
Food has always been rationed. Goods never have been and
never will be passed around indiscriminately. Under the free
economy of the horse-and-buggy days, more commonly
known as the capitalistic system, price rationed goods.

A freely fluctuating price mechanism was the pivotal and

1 New York City has a huge police force, and the Missouri farmer an
old rifle:

Service

Police

Fire department

Telephone

Water
Light

Hospitals

Parks

Swimming

Playgrounds

Labor unions

Social security

Transportation

Schools
Total

New York City

Huge

Very large

Buried in rock

Hot and cold on tap

Electricity, house and

street
Many
Many

Expensive pools
Many, supervised
Many
Much
Elevated, subway, bus,

streetcar, and taxi
Many, expensive

Very large

Western farm

Old rifles

Neighbors and buckets
Strung on poles
Cold at pump
Kerosene, house

None

None

Creek

Pasture lot

None

None

Bus — five miles away

Cheap
Not much

( 190 )

highly essential rationing device of a capitalistic economy.
Price was the dominating force influencing production, di-
recting the distribution of goods through the channels of
trade, and guiding consumption.

This system did not work perfectly, but it worked. It was
ruthless and was no discriminator of persons. Those who did
not respond to its mandates were deemed socially undesir-
able and were prevented from interfering with society's best
interests by the harsh process of bankruptcy. In one respect
the system was charitable. It punished those who did not
obey its mandates, but it did not deprive those it bankrupted
of the opportunity to make a new start in life and continue
to be productive.

The price-rationing mechanism had the advantage that it
was practically automatic and therefore very efficient. The
system had the further advantage that in one sense it was
costless. It did not require a large amount of human effort
to regulate those who produced, distributed, and consumed.

Under the price mechanism the black market did not exist.

The price-rationing mechanism did not solve the problem
of inflation and deflation, nor did it presume to do so. In fact,
the price system historically has invoked a certain amount
of inflation as a stimulus to production and a deterrent to
consumption in tune of war.

Although the price-rationing system was ruthless, it did
have definite standards of equity. The system rewarded men
in proportion to their relative performance. In general the
individual who produced the most received a higher income
and, if so disposed, could purchase more of the good things
in life. Price incentives spurred the individual to greater ef-
forts in the interest of the group. Despite its shortcomings,
this measure of equity stood the test of time. It produced
more plenty for the many than any other system.

( 191 )

Ticket Rationing a Substitute for Price Rationing

Our national rationing policy is to substitute a frozen
ceiling price and a book of tickets for the fluctuating price
mechanism. There are striking contrasts between the two
systems.

In a capitalistic system the individuals collectively tell
the individuals through prices what they want them to do.
In a collective society some individual decides and tells other
individuals what they, individually and collectively, must do.

In a regimented society price plays a minor role. Produc-
tion, consumption, and distribution are controlled by edict.
Priorities, ration cards, tickets, and stamps become the cur-
rency that dictates production, moves goods from the pro-
ducer to the consumer, and determines how they shall be
consumed.

The regimented system does not work perfectly, but pre-
sumably it can be made to work. Where it has been used, it
has proved ruthless and no discriminator of persons. Those
who did not respond to its mandates were prevented from
interfering with society's best interests by the simple process
of turning them over to the firing squad, a cheap and efficient
way of liquidating those who do not obey. In totalitarian
states, under this system, if an individual makes a mistake,
he does not have an opportunity to make a new start in life.
Those who are liquidated cease to be productive.

The ticket system is not automatic and not efficient. It
has the disadvantage that it is very expensive. Large amounts
of human labor are required in central offices and scattered
throughout a nation to supervise the production, distribu-
tion, and consumption of goods.

Rationing increases the operating costs of distribution. It
also inconveniences all consumers and decreases the effi-
ciency of many war workers.

( 192 )

The ticket-rationing system operating in conjunction with
a hobbled price mechanism inevitably tolerates black mar-
kets because it cannot help itself.

The ticket system was assumed to solve the problems of
both inflation and deflation. In fact, one of the important
sales points of the ticket sytem of rationing is the prevention
of inflation. Inflation has been used to scare people, as has
the ghost in the cemetery. Many have been effectively scared,
but it has not yet been demonstrated that this system of
rationing will prevent inflation.

In a rationed economy the state is supreme and the indi-
vidual does not count for much. The government tends to be
of the state, by the state, and for the state.

Equality Is Not Equity

The ticket-rationing system has certain tests of equity. In
its kindergarten state the test of equity is for all to share
alike from the cradle to the grave. Each person, whether an
infant, munitions worker, farmer, bank clerk, bar-tender, or
octogenarian, receives title to the same amount of meat,
sugar, and canned pineapple. Either the baby and the octo-
genarian are overfed or the war worker is underfed or both.
This measure of equity is a far cry from that established by
price rationing. This test of equity has not and will not stand
the test of time. It is already breaking down. Some unused
tickets are given to friends or sold to the neighbors without
any pangs of conscience. Such activity upsets equality as a
measure of equity and attempts to re-establish equity as it
was under a price economy. In many rural communities un-
used tickets are given to the groceryman, who is thus enabled
to sell extra food to those who want it. Rural areas eat well,
even under a rationing system. All are given equal numbers
of tickets ; since the farmers and townspeople live in part off
the land, the tickets are a supplement rather than a ration.

( 193 )

Equality for all has but one justification in a rationing
system — that of apparent simplicity. Equality as a test of
equity makes it easy to write the rules. The administrators
know that equality is not equity, but despair of attempting
the more complicated problem of distributing goods in ac-
cordance with any other measure. Consequently, the keynote
of most rationing programs is equality for all, and the pro-
gram is sold to the public on that basis. The assumption is
made that there is some particular virtue in equality.

Though equality may be the battlecry of the regimenter,
both man and nature bear testimony to its non-existence.
Variation is the basic law of nature. No two leaves are alike.
They do not receive the same amount of sunshine nor would
they make equal growth if they did. No two men contribute
exactly alike to the war effort. Equality is a fetish ; the law
of nature is that everything should vary, and that the most
productive should be encouraged.

The Russians may once have tried to supply everyone from
the cradle to the grave equally with the good things of life,
but as they accumulated experience, and especially as they
became involved in war, they discarded this early test of
equity and rewarded people in proportion to their effort,
which was the old test of equity under capitalistic price ra-
tioning. Russians at heavy work get X amount of food. Those
at less heavy work, X minus one; the next group, X minus
two, and so on. It has been reported that those that con-
tribute nothing to the war effort look out for themselves.

Sooner or later this nation must decide whether the war
worker should have, say, three pounds of meat per week,
the newborn babe none, and the octogenarian one pound.
Perhaps a war worker should have had two cups of coffee at
each meal. The farmer in western Kansas who cannot grow a
garden should have a larger allotment of canned fruits and
vegetables than a farmer hi other parts of the United States

( 194 )

where climatic conditions are more conducive to gardens and
orchards.

Equal numbers of ration tickets do not result in equal
treatment or equal sacrifice. The sooner the nation changes
from "share and share alike from the cradle to the grave" to
rewarding people in proportion to their contribution to the
war effort, the better for all.

Rationing Cannot Be Made Easy

The difficulties of rationing are not imaginary. They are
very real. Even our simplified and streamlined system of
rationing butter, meat, fats, and cheese on a share-and-share-
alike basis is beset by innumerable difficulties. The consumer
does not group butter, lard, vegetable fats, and meat into one
category, as do the rationers. Butter is an expensive product
used to grease a cheap food, bread. Cooking fats are a some-
what less expensive product used to keep a very cheap food,
potatoes, from sticking to the skillet. Meats are high-priced,
highly prized, and highly palatable food that supply pro-
teins and other nutrients to the diet.

Obviously, complications will arise because of the diffi-
culty of substituting one of the rationed products for an-
other. When the nation finally goes on the bread standard,
as appears likely, someone will go without butter under this
program.2

The products have varying degrees of perishability. Meat
spoils quickly and becomes poisonous. Butter becomes rancid

2 The first effect of rationing butter was to reduce the consumption of
bread. The one pat of butter allowed in the restaurant curtailed bread con-
sumption. The housewife, the guardian of coupons and the real rationer of
butter, contributed her bit. The husband and the children unknowingly cur-
tailed the consumption of bread because unbuttered bread is neither pleasant
to the tongue nor easy to swallow. Sooner or later the nation must increase
the consumption of grain directly, rather than indirectly by feeding it to live-
stock. The first effects of the rationing of butter were to decrease rather than
increase the consumption of wheat in the form of bread.

( 195 )

and, although not harmful, highly unpalatable. Vegetable
fats can be kept longer than lard, and lard longer than butter.

Quality is another problem not solved by the butter-meat-
fat-cheese program. Since there is little variation in the
grades of butter, lard, and vegetable fats, changes in quality
of these products are not an important problem. In the case
of meat, however, there is a wide range in quality. Some cuts
are lean and others fat. Calves' liver is 100-per-cent lean. A
standard number of tickets for a particular cut of meat, re-
gardless of quality, has caused sharp changes in the cutting
of meat. A pork chop is not what it used to be. Good old
horse-and-buggy hamburger once was about 20-per-cent
suet ; now it runs from 20- to 40-per-cent suet or even more.
T-bone steaks and rump roasts can be cut from a steer, a
heifer, a canner cow, or a bologna bull at equal points per
pound, but the quality is not the same. Some are tender,
and others are tough.

It is not possible to meet the many community prefer-
ences and keep the supply and demand for butter, meats, fat,
and cheese all in equilibrium. If there were several kinds of
tickets, it might not be so difficult to keep the supply of a
particular commodity and the number of coupons in adjust-
ment.

To complicate the problem further, the supplies of meat
coming to market vary throughout the year, while the sup-
ply of tickets is uniform. Consequently the amount of meat
available to the consumer may be at wide variance with the
uniform number of coupons, with the result that some go
without meat.

Another inequity in the rationing system is that the early
bird gets the low-point cuts and the late one is stuck with
the high-point products.

The problem of administering the program is very compli-
cated. It would be necessary to keep profit margins alike for

( 196 )

all classes of products in order to allocate supplies in propor-
tion to tickets.

It is difficult to obtain equity by rationing a part of the
meat supply and leaving the balance unrationed. Pork and
beef are rationed by the ticket system. Poultry has a price
ceiling, but is being rationed by market prices above the ceil-
ing prices. Theoretically, poultry should be rationed by the
ticket system as are other meats. Administratively, the case
for rationing poultry is not so simple.

Even by the summer of 1943, rationing had not eliminated
meat shortages in deficit areas like New York City. Under a
ticket system, a shortage is likely to be more severe in deficit
than in surplus areas.

The butter-meats-fat-cheese program may have been an
easy way out for the OPA officials, but it made rationing a
highly complex conundrum for 125 million civilians.

It remains to be seen whether a government which grants
increases in incomes has the knowledge and ingenuity to
maintain equitable ceiling prices throughout the channels of
trade, control the volume of coupons, and vary their point
values in such a way that the diminishing supplies of food
will be distributed equitably.

Much misunderstanding arises from the difficulties of dis-
tinguishing between the illusions of theories and the disillu-
sions of their administration.

Ticket Rationing Means Strict Controls

To make ticket rationing of meat work with low ceiling
prices, it would be necessary to inaugurate strict controls
from the farmer's farrowing pens to the consumer's stomach.
It would be necessary to plan in advance the correct number
of pigs that should be born. This would require considerable
foresight on the part of both the administrators and the pigs.
The gestation period for hogs, 112 days, is considerably

( 197 )

longer than the foresight of most planners. However, even
if the correct number of pigs could be determined and the
correct number of farmers could be authorized to breed the
correct number of sows, which in turn would farrow the cor-
rect number of pigs, the troubles still would only have begun.
At birth, every pig would have to be numbered and recorded
in the county recorder's hog files. In case of death, the local
veterinarian would have to certify to the pig's death, pull
the numbered ring from its ear, and return it with the proper
records to the county recorder. It would be necessary for the
administrators of this program ,to make it illegal for the
farmer to slaughter animals for his own consumption. And
this regulation would have to be enforced.

Some inspector would tell other inspectors, who in turn
would tell the farmers when the hogs were ready for market.
After the necessary papers had been filed, the farmer would
be advised to turn his hogs over to some trucker, who, at a
ceiling rate, would deliver the hogs to the market designated
by the regimenter. The hogs would be weighed by one in-
spector, graded by another; and the farmer would be reim-
bursed by still others at the price established by the govern-
ment.

The hog would be slaughtered under inspection, turned
over to the jobber who had the necessary number of ration
tickets, always under the watchful eye of a government in-
spector. The meat would move through the wholesale and
retail houses under the supervision of other inspectors, al-
ways accompanied by the correct number of coupons.

To prevent inequities, the consumer, including the farmer,
would register for a period of six months to one year at one
meat shop and be assigned a given number of beef, pork,
mutton, Iamb, veal, and poultry coupons. The same prin-
ciple would have to be applied to all other food products.

( 198 )

Complete Rationing Is Prohibitive

Under some such system, ticket rationing might be made
to work. This would be very wasteful of manpower. To ration
all the activities of 125 million people adequately would
probably require the time of, say, about four million others.
If they received, say, $3,000 in salary, transportation, heat,
light, and office rent, the net cost would approximate ten per
cent of the nation's effort. Complete rationing under such a
program would reduce the net product of the nation.

Cost-of-living studies indicate that food, clothing, and
fuel represent more than fifty per cent of the nation's busi-
ness. Despite "pull in your belt" programs, the net reduction
in the consumption of these articles is likely to be small. Any
considerable reduction would occur only at the cost of a ris-
ing death-rate. If the nation spends fifty per cent of its in-
come for these indispensable items, then the nation can
spend only fifty per cent of its income for the war effort.

The nation's program is to feed, train, and equip eleven or
twelve million fighting men; construct, man, and operate a
two-ocean navy; export billions of dollars' worth of Lend-
Lease foods and other instruments of war; and spend bil-
lions for a huge merchant marine. If it does all these things,
it will have spent half the national income.

If the nation attempted a thoroughgoing system of ticket
rationing, its cost would be a deduction from the war effort
and not from civilians. Even a nation as rich as the United
States cannot afford the luxury of an expensive new system
of ticket rationing. We could afford a rigid system of regula-
tion if we did not have a Lend-Lease program, or if ten per
cent of our food could be imported at no expense, as is the
case in England, or if it were possible to bring in a few mil-
lion slave laborers as in Germany.

( 199 )

Since the nation will not press labor into slavery, cannot
import free food and other materials, and dares not curtail
the Lend-Lease policy of supplying instruments of war to
our allies, it cannot afford the luxury of a completely regi-
mented economy.

Subsidies Are a Stopgap

Our national melodrama is now in its third act, subsidies.
In acts one and two, Price-fixing and Rationing tried and
failed to save the heroine from the inflationary villain. The
script now calls for a new hero, and Subsidy makes an en-
trance.

A subsidy for farm products is merely a device whereby
the government buys the crop at a price that will ensure high
production and sells it to the consumer at a low price. The
objective is to bolster the price-fixing policy and pacify ev-
erybody. The first cost of the system is borne by that part of
the population which pays the taxes.

The call for subsidies is an admission that low ceiling prices
have impeded production and have not protected the con-
sumer as it was assumed they would. Rising prices and short-
ages are the symptoms of an economy disrupted by war. Sub-
sidies, like price-fixing and rationing, are an effort to treat
the symptoms rather than to diagnose the malady. Subsidies
are as attractive to the imagination as the pot of gold at the
end of the rainbow, and are equally elusive.

Theoretically, a low ceiling price plus a subsidy under a
regimented economy would have about the same effect upon
food production as would rising prices under a free economy.
It might also be contended that a low ceiling price under a
subsidy would have about the same effect upon the consumer
as would rising prices if the cost of the subsidy system were
fully met by equitable taxation. However, these contentions

( 200 )

overlook the huge direct cost of administering the subsidy
program and the indirect costs due to administrative errors
in directing production, distribution, and consumption.

The problem is further complicated by the fact that the
direct costs are only partially met by taxation and that these
taxes are based upon what can be collected and not on what
should be collected. The greater part of the cost is met by
borrowing, which of course, like taxation, is inequitable. To
the extent that the government borrows and borrows inequi-
tably in order to pay subsidies and maintain low ceiling
prices, it merely deducts income from the small number who
save and adds to the incomes of the large number of spend-
ers, thereby impounding a larger inflationary lake behind the
weakening dam of fixed prices. Rising prices of food would
soak up much of the unspent incomes; low prices, insuffi-
cient and inequitable taxation, and payment of subsidies put
more money into people's pockets at a tune when goods are
scarce.

Incomes are now the highest in history. The advocating
of subsidies in order to keep the cost of food low is an admis-
sion that even with his high income and at a time when sac-
rifice is in order, the consumer lacks the moral fiber, though
not the money, to pay a competitive price for the food that
goes onto his table. Subsidies do not in the least deal with
basic causes. They are like cleaning a room by sweeping the
dirt under the kitchen sink, to appear later in a more digni-
fied form as a deficit in the United States Treasury. They
merely postpone the appearance of inflation.

It is impossible to combat inflation by keeping down
prices through subsidies while at the same time granting
increases in incomes to consumers and failing to inaugurate
a taxation policy that wipes out increased purchasing power.
Under such a subsidy policy, the government is in reality
encouraging increased consumption, which is antisocial in

( 201 )

time of war. Such a program would result in a delayed infla-
tion. The nation would then experience all the disadvantages
of inflation and none of its benefits.

Subsidies do not operate automatically and are not im-
personal as are freely fluctuating prices. They are not doled
out by a miracle man. Political abuses, errors in judgment,
and discrimination are inevitable. Subsidies are a habit-
forming narcotic that spreads and becomes a necessity. In
the words of William Pitt,8 "Necessity is the argument of
tyrants; it is the creed of slaves."

Subsidy programs to pacify the consumer and prevent in-
flation are merely one of the many blueprints of an unobtain-
able economic Utopia.

England's Subsidized Food

England has kept her official index numbers of food prices
from rising. Many contend that this has been possible be-
cause of the extensive use of subsidies, and argue that the
United States should do likewise.

During 1939 and 1940 England's food prices rose much
more rapidly than those for the United States (table 1).
During 1941-3 food prices in this country rose rapidly,

TABLE 1. PER CENT CHANGE IN RETAIL PRICES OF FOOD

FOR ENGLAND AND UNITED STATES PRIOR TO AND

DURING THE LEND-LEASE ERA

Country

Per cent change in retail food prices during:

Pre-Lend-Lease
era *

Lend-Lease era t

First half

Second half

United States
England

rose 3
rose 22

rose 21
fell 5

rose 21
rose 3

* Nineteen months, August 1939 to February 1941.
t Twenty-seven months, March 1941 to May 1943.

3 November 18, 1783.

( 202 )

whereas in England they declined slightly. Many agree with
the conclusion that "price controls have been better devised
and more firmly applied in England than they have been
here." 4

There is a general belief that England's price control, com-
bined with a £150 million subsidy, kept food prices down. An
even more effective but less widely discussed subsidy was the
free United States food shipped under our Lend-Lease pro-
gram. Had England been forced to create goods to be ex-
ported in payment for this food, her retail food prices would
probably have advanced from 1941 to 1943 and the subsidies
would not have been considered so effective.

Our food prices rose following our subsidizing Britain's
foods.

Since the United States inaugurated price controls but
did not use subsidies, it has been argued that we should emu-
late England's experience by the use of subsidies. Had the
United States inaugurated a subsidy program of billions of
dollars and had it not been necessary to ship food to our
allies and had it been possible to import large amounts of
costless food, our retail price of food would not have risen
so rapidly.

When a food-deficit country gives large amounts of food
to a second food-deficit country, subsidies are likely to ap-
pear more effective in the receiving than in the giving coun-
try.

Supreme Court Warning on Subsidies

In its early stages regimentation begins as a benevolent
welfare organization. It pays the farmers more for their prod-
ucts than they are worth ; it provides consumers with food at
less than it is worth; it provides work or insurance for the
unemployed, and pensions for the aged. It rations food, rolls

* Cleveland Trust Company Business Bulletin. Vol. 24, No. 2 (February
15, 1943).

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back prices, and subsidizes this and that group by direct pay-
ment or by hidden increases in incomes. Gradually the indi-
vidual becomes dependent upon the State from the cradle to
the grave. The extension of these State benefactions soon be-
comes synonymous with the extension of State powers.

For a time a beneficent AAA paid the farmers more for
wheat than it was worth. Ultimately, an autocratic AAA de-
vised ways of "liquidating" the non-co-operator. They fined
farmers who did not comply with the program. An Ohio
farmer, who was fined forty-nine cents a bushel for producing
too much wheat, took the case to court under what is known
as the "due process" clause. Our Constitution states that
property cannot be taken from an individual without due
process of the law. The lower courts sustained the farmer,
but the Supreme Court overruled them and rendered a deci-
sion in favor of the AAA, handing down a very significant
opinion : "It is hardly lack of due process for the Government
to regulate that which it subsidizes." 5

Different values are placed upon liberty. Some people
fight and die for it; and others sell it for a mess of pottage.

5 Italics by the authors.

Supreme Court of the United States, Number 59, October term, 1942.
Claude R. Wickard ... vs. Roscoe C. Filbura : November 9, 1942, page 14.

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CHAPTER 11

BLACK MARKETS

Black Markets in Currencies

ALTHOUGH this generation of Americans is unfamiliar with
the so-called black markets, they are as old as the centuries.
Black markets in currencies and precious metals are world-
wide and history-old. A black market exists when the market
price for a commodity is higher than the legal, fixed, ceiling

price.1

Our First Dollar

In determining the value of currencies such as the United
States dollar, the English pound, the French franc, and the
like, each country fixes by law the metallic content of its
coins. By that process it sets the legal price at which it will
buy and sell the precious metal.

Alexander Hamilton, an idol of the Republican Party, was
a bimetallist. He proposed to Congress that our currency be
called a dollar. On April 2, 1792 the dollar was fixed as fol-
lows:

Dollar Pure metal, Price per fine Ratio

grains ounce

Gold 24.75 $19.39

Silver 371.25 1.29

1 There could also be a black market by sales at prices below the fixed
price.

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The silver dollar, 371.25 grains, was 15 times as heavy as
the gold dollar, 24.75 grains. This was a bimetallic currency
at the ratio of 15 to 1. At that time the world ratio of silver
to gold was about 15 to 1 and our gold and silver dollars both
circulated.

In a few years, however, silver became abundant and it
took 15.5 ounces of silver to buy one ounce of gold. This was
the market rate. The legal rate was still 15 to 1. The result
was about as follows: One could go to the treasury with 15
ounces of silver and get an ounce of gold. One could take
the ounce of gold to the bullion market and get 15.5 ounces
of silver. On the next trip to the treasury, the 15.5 ounces of
silver would exchange for 1.033 ounces of gold. After four
trips between the treasury and the bullion market, one could
make ten per cent as follows:

Trip To treasury To bullion broker

First 15 ounces of silver ex- 1 ounce of gold exchanges

change for 1 ounce of for 15.5 ounces of silver
gold

Second 15.5 ounces of silver ex- 1.033 ounces of gold ex-
change for 1.033 ounces change for 16.0 ounces of
of gold silver

Third 16.0 ounces of silver ex- 1.067 ounces of gold ex-

change for 1.067 ounces change for 16.5 ounces of
of gold silver

Fourth 16.5 ounces of silver ex-
change for 1.100 ounces
of gold

It would make no difference whether one exchanged ounces
of silver for ounces of gold or exchanged silver dollars for
gold dollars. It was a profitable operation to draw gold out
of the banks and treasury. It was not long before gold coins

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no longer circulated and the United States was in reality on
the silver standard. The "black market" operators took the
United States off the bimetallic standard and put the nation
on the silver standard.

The black market did not exist when the legal rate, 15 to 1,
was the same as the market rate. As soon as the market rate
rose above the legal rate, a black market existed. The market
price of gold in terms of silver was higher than the legal "ceil-
ing" price the treasury paid. This was a violation of the in-
tent of the law.

Off Bimetallism and on Gold Standard

During the 1830's the situation was reversed. The mone-
tary laws were revised; the content of the gold dollar was
reduced and the silver dollar was left unchanged. During
1837 the legal ratio was fixed at 16 to 1 as follows:

Dollar Pure metal, Price per fine Ratio

grains ounce

Gold 23.22 $20.67 lfl 1

Silver 371.25 1.29

The market rate for silver was higher than the legal rate ;
therefore it paid folks to take gold to the bank or treasury,
draw out silver, and sell it on the open bullion market. It was
not long before the black-market operators took the United
States off the bimetallic standard and put the nation on the
gold standard. This again was a violation of the intent of
the law.

Down through history black-market operators thrived on
bimetallism because the market ratio of gold and silver
changed faster than kings or legislators could change the
legal ratios. During the past half-century the gold standard
was substituted for bimetallism. That step reduced the ac-
tivities of the black-market operators, but did not stop them.

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Civil War Experience

When the United States set the legal gold content of the
dollar at 23.22 grains, it fixed the legal price of gold at $20.67
per ounce.2 During our Civil War the market price of gold
rose to $30 to $40 to $50 per ounce and averaged $53.35 per
ounce during July 1864. Government officials and loyal folks
jumped to the conclusion that these advancing prices were
a "nefarious act." The operators were called "gold specu-
lators/' "Shylocks," "money-changers/7 and "disloyalists."
The first reaction was to blame the black-market operators
for bidding up the price of gold. It gradually dawned on
thinking people that the difficulty was due to the paper
money; the greenbacks were depreciating. The market price
of gold rose above the legal ceiling price because too many
greenbacks were issued.

Experiences during the Thirties

During the period between the two great wars there were
black markets in currencies in many countries. They were
due to the fact that legal prices for gold were not changed
with changing market conditions.

During our bank crisis of 1933 there were millions of black-
market operators. Some walked into their local banks and
drew out their money. Others walked into the Federal Re-
serve banks and drew out the gold; still others transferred
money and gold to London. These activities took the United
States off the gold standard. It was a violation of law to
whisper about the solvency of a bank, but it was done. Some
were afraid of the bank; some were afraid of the dollar, and
others of the nation.

Regardless of the tune or the country, when the market

2 An ounce, 480 grains, divided by 2352 grains to the dollar = 20.67
dollars per ounce.

( 208 )

price of a currency is above the legal price, a black market
in that currency will develop in that country. If it is not per-
mitted to develop in that country, it will develop outside

the country.

Foreign Exchange

One of the frequent methods of circumventing the fixed
official exchange rates is for the owner of foreign currency
to sell his private check for local currency. An Englishman
leaving England is allowed to take with him only £10. If he
is coming to the United States, he will need more. One prac-
tice is to go to an American living in England and offer
pounds for a United States dollar check. The Englishman is
willing to pay above the official price in order to get the
much needed dollars. When he arrives in New York, he
cashes the dollar check.

Others smuggle out English paper money to be sold in the
New York market. During the summer of 1943 it was re-
ported that such notes brought $2.50 per pound whereas the
official rate was $4.04. The number of ways of getting around
pegged exchange rates are no doubt legion.

Black Markets in Commodities

There have been innumerable illustrations of black mar-
kets in commodities as well as in currencies. It was the op-
eration of smugglers and free traders in black markets that
broke up the English government-granted mercantile sys-
tem typified by the East India and Hudson's Bay trading
monopolies. American clipper ships during the 1790's sailed
around the world to out-of-the-way ports of the East Indies
and bought pepper from the natives at higher than the mo-
nopoly 's "ceiling prices' ' to producers, and sold it in the
world's markets at less than the monopoly's "ceiling prices"
to consumers. These were very profitable black-market op-
erations and it was reported that the descendants of some

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New England Puritans who owned the clipper ships made
unusual profits. To those with legal monopolies, such activi-
ties were a violation of the law. Producers and consumers of
the products in question did not look at it that way. They
patronized the black-market operators and broke the mo-
nopoly.

Occasionally black-market operators have been one of the
best protections that the public had against monopolies.
Men have combined and agreed to restrict production of a
commodity in order to raise the price or to gain an advan-
tage. If such operations were not in public interest, other in-
dividuals, who were considered chiselers and black-market
operators by the vested interests, expanded production
and/or sold at lower prices. If the black-market operations
were in the public interest, sooner or later the black-market
operators broke the monopoly and were lauded as public

benefactors.

Modern Black Markets

Under our present program of widespread price-fixing,
there are two sets of prices, (1) market prices for commodi-
ties, and (2) legal or ceiling prices for these commodities.
If the supply and demand for the product, and hence the
market price, is in equilibrium with the legal price at all
points from production through distribution to final con-
sumption, no black market exists. If the supply and the de-
mand, and hence the market price, are in equilibrium at a
level below the ceiling price, a black market does not de-
velop.3 A black market is likely to exist when the supply and
demand for a commodity are brought into equilibrium at a
market price that is above the legal ceiling price. It makes
no difference whether the farm price, the wholesale price, the
jobber's price, or the retail price is above the legal ceiling.

3 The government does not consider it illegal to buy and sell below the
ceiling price.

( 210 )

In the spring of 1943 there was a black market in poultry in
New York City because the market price was above the legal
ceiling price. At that time there was no black market for
milk in New York City because the market price was below
the legal ceiling price. When this occurs, the ceiling price is
ineffectual and might as well not exist.

NRA tried to fix the price of used cars. The dealers offered
the blue-book allowance and bet the customer $50 he couldn't
spit beyond his toes.

With the present policy of fixing innumerable price ceil-
ings, black-market operators breed faster than they can be
caught. An honest soul walked into a wholesale market in
New York City and innocently asked a produce broker where
the black market might be found. The response was imme-
diate : "Look around, New York City is a black market." Our
black markets are not organized institutions that can be
easily observed. They are a good deal like "chiggers," which
the Indians call "no-see-um bugs."

Black markets take many forms. Some are large and some
are small. Some are no more than short cuts around red tape
and others are malicious. Some violations are committed un-
knowingly and others willfully. Many of the activities are
simple and some are intricate.

To most people, the black-market operator is typified by
the two-gun masked cattle rustler in the West. In reality he
is more likely to be, say, a steel worker rustling a piece of
beef in one of a dozen devious ways, so as to make his red
coupons go farther. There are many more of the latter than
of the former.

Price ceilings on used machinery are neatly circumvented
by selling two articles together. A used tractor with a price
ceiling of $500 is auctioned off together with a bale of hay
worth perhaps a dollar. The combination brings $800 and
the clerk's records show this innocent entry:

( 211 )

tractor $500.00

hay 300.00

Total $800.00

The same general method is used in avoiding ceiling prices
on potatoes. A shipment of potatoes is sold with a bunch of
horse-radish, which is then tossed back. A durable bunch of
horse-radish will serve to smooth a good number of such
transactions. In the market place it is practically certain that
somehow there will be a meeting of minds of buyer and seller,
in spite of the word of the law.

Rationing coupons are traded back and forth by house-
wives despite rules against such activities.

Accumulation of coupons becomes a problem for the re-
tailers, the jobbers, and the wholesalers. They are packaged
and transferred through the channels of trade without open-
ing the packages. Some of the packages are short of coupons,
but it is too laborious a job to count them.

Wage ceilings are nullified by the simple process of paying
men for more hours than they work. Unable to pay higher
rates and unable to hold men at present rates, employers
give their men nine hours' pay for seven hours' work.

Ceiling prices on early cabbage were established on a ham-
per basis. Formerly the hamper was filled with a "bulge"
pack. In the spring of 1943 the hamper was "flat"-packed
with lightweight small heads of cabbage. The ceiling price
per hamper was unchanged, but the price per pound rose.

Formerly lettuce was trimmed and shipped largely in
crates of five to six dozen heads. The ceiling prices were set
on a crate basis. Since supply was short, trimming at produc-
tion points was dispensed with and the crates contained four
to five dozen. With fewer heads at the same ceiling, the con-
sumer paid twenty to twenty-five per cent more per head
than before the ceiling was established.

One arm of the government establishes the conditions that

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create the black market. Another arm of the government
sets the rules to kill the black market, and a third arm of the
government finds ways to evade the law. It has been re-
ported that one unit of government paid one third more than
the ceiling price for dressed meat under "a very prudent and
intelligent purchasing plan."

Not all these people can be crooks, but the opportunities
thus set up are a happy hunting ground for the real crooks.

Causes of Evasion

People patronize black markets when they have an excess
of purchasing power and when they feel that they have been
treated inequitably. The consumer goes along with the ceil-
ing prices and the rationing as long as his groceryman's or
butcher's supplies are not too far out of line with his coupons,
his purchasing power, and his usual food habits, and as long
as he is convinced that he is being treated reasonably equi-
tably. If he feels that he has been discriminated against on
any of these counts, he is a potential customer for the black
market.

Retailers, wholesalers, and jobbers operate black markets
as a means of self-preservation. Casualty rates in the dis-
tributive trade are high. Most operators enter the field on a
shoestring, and a high percentage are forced out without
even a tip of the string. If equitable prices are not fixed for
each step in the distributive trade, black markets inevitably
will spring up. The motive is economic survival. Few black-
market operators knowingly sabotage the war effort. The
propensity to survive in business will keep men violating the
spirit of the law as long as the ceiling price is below the mar-
ket price and as long as the ingenuity of man can outwit the
law. The marketing mechanism is so complicated that it is
very difficult to write an order that does not permit evasion
— if men are forced to evade.

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Who Are the Violators?

Most people think that the black market is a "dive" op-
erated by the "scum of the earth/' "crooks," "chiselers,"
"scoundrels/' and "saboteurs." There is, of course, a cer-
tain number of such operators who have no consideration
whatever for the letter or spirit of the law. The fly-by-
nighter who tries anything he can get away with is of this
type.

However, if the black market flourishes, violation becomes
widespread. The fly-by-nighter and the professional crook
are then joined by the legitimate businessmen who enter into
black-market operations as the price of survival. If consum-
ers feel that they are not being treated equitably, a point is
reached at which respectable folks participate in the black
market.

Most farmers, most businessmen, and most consumers
are patriotic citizens who want to do their bit for the war
effort and live up to the letter and the spirit of the law. They
see others violate the law, however, and see the volume of
violations expand. Sooner or later they rationalize and be-
lieve that they should get the benefits from equal violations
and be on a par with other violators. Finally they make equal
violations of the law to obtain parity.

Large and Small Operators

Although they get little credit from the government, the
large handlers, the large processors, the big distributors, and
the chain grocers do their best to comply and carry out the
spirit and the letter of the law. There is a widespread belief
that the big, powerful corporations are the violators of the
laws, that they fight endlessly through the courts to protect
their profits. It is charged that they throw up clouds of vicious
propaganda to befog elementary issues. The big fellow goes

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along with the law as long as he can, but he will not sit tight
and go under. In the early stages experience has taught him
that the best thing to do is to squawk and hope for the best.
When he finds that squawking is ineffective and the black
market continues to eat into his business, he looks into the
letter of the law and finds ways of recapturing his share of
the trade. The medium-to-large concerns are the last to vio-
late the law. They violate its intent, but not its wording.
The escape centers in the letter of the law. There is no escape
from its intent.

The market mechanism is so complicated that it is diffi-
cult to write an order that does not somewhere have a loop-
hole that permits legal violation of the letter of the law. The
little fellow finds the loophole quickly and acts quickly. The
big fellow finds the hole just about as quickly, but he does
not act until he is forced to do so.

Simplicity of Regulations Does Not Eliminate
Black Markets

Some persons cry loudly for simplicity of regulations so
that people can understand the law and therefore comply.
Simplicity of regulation may contribute to understanding,
but it does not meet the basic black-market problem. Sim-
plicity multiplies the inequities in the channels of trade;
some prosper, others are forced to violate the law or are
forced to the wall. Simple regulations of a complicated mech-
anism merely create a healthful environment for the growth
of black markets.

Stopgaps to Black Markets

A certain percentage of a commodity can be sold through
the black market without seriously disturbing the producers,
distributors, or consumers. Let us say it is 20 per cent of the
product. When the volume rises to, say, 30 per cent, there

( 215 )

are violent protests by one or more groups and the govern-
ment must act. The usual procedure is to write an amend-
ment to the original order. This stopgap retards the black-
market operations and the volume declines to, say, 20 per
cent of the trade of the product in question. Later the same
or other fly-by-nighters expand their activities and ulti-
mately force others into the black market or into bank-
ruptcy. This results in a second stopgap, an amendment to
the amendment. As long as the ceiling price is below the
market price, the government is forced to continue this prac-
tice or wink at black markets.

These amendments are usually merely attempts to re-
strict, curb, check, or divert demand. Since no one knows
what demand is, how it operates, how to measure it, or how
to curb it, each successive amendment can be little more than
a temporary stopgap.

Policing the Black Market

It is a relatively simple process to write the orders, amend-
ments to the original orders, and amendments to the amend-
ments, but the administration of the order and its policing
are enormous undertakings. The first steps are pleas and
threats and pronouncements that price controls will be ex-
tended to every important commodity in order to roll back
prices. Such exhortations can be only a temporary expedient.
Bold words must be followed by bold action.

Since the government cannot officially countenance black
markets and must attempt to eliminate them, it attacks the
flagrant violations and ignores a certain amount of "legal
violations" of "legal intentions." A few of the first group can
be fined or put in jail. If the conditions that created the vio-
lations continue, there will be many in the second group.
It is possible to indict an individual, but you cannot indict a
nation.

( 216 )

The OPA does not have either the appropriations or the
manpower to police even a small proportion of the price and
rationing regulations that have been issued. Therefore they
appeal to the patriotism and good citizenship of labor unions
and consumers' organizations. This is not likely to be effec-
tive because people are not quite convinced that there is
anything particularly wrong in one person having a little
more of this or that food than another.

Folks react in all sorts of ways to their laws. They do not
oppose Sunday baseball. But they are unanimously opposed
to kidnapping. They not only will report it to the police, but
will go out and help catch the culprit. People are unani-
mously opposed to those who drive through a red light. Their
ire will rise and they will blow their horns, but they will not
report it to the policeman or help catch the violator.

In a land of abundance, people are not easily convinced
that they should report the man who bought meat in the
black market. That one neighbor has more meat than an-
other produces no resentment. One is much more likely to
ask: "Where did you get it?" and "What did it cost?" than
to report it to the police or to the OPA. If some get around
a food regulation, others want to do the same thing, and
feel little sense of impropriety.

To suppress black markets in food, it is necessary to have
a high percentage of the people willing to report, accom-
panied by a real police force willing to enforce. Furthermore,
there must be unanimous agreement that the practice is bad
for the community. One reasonably safe prediction which
one might offer in these uncertain times is that John Q. Pub-
lic is not likely to be a snooper reporting black-market op-
erators, nor is he likely to be a policeman helping to catch
violators. People have difficulty convincing themselves that
it is inherently wrong for some to have more meat than
others. There are many who legitimately have lockers full of

( 217 )

frozen fresh meats, cured meats hanging from the rafters,
chickens in the yard, canned meat in the cellar, and coupons
which entitle them to buy still more meat.

If the ceiling prices are to be maintained and enforced and
black markets are to be kept at a minimum, it will be neces-
sary to expand many times the OP A personnel and budget.
The War Manpower Commission has not put OPA police-
men on the deferred list. Neither has Congress exhibited an
interest in expanding OPA appropriations.

The hopeless situation was aptly summarized by Life and
by a farmer. "One difficulty is that OPA has been trying to
police its myriad price ceilings with a staff of about 2,500
agents (now being increased to 4,000). This, in P. G. Wode-
house's famous phrase, is like a one-armed blind man trying
to shove a pound of melted butter into a wildcat's left ear
with a red-hot needle." 4 The farmer compared OPA's en-
forcement task to "picking weed seeds out of a manure pile
with boxing gloves on."

Occasionally Compliance Has a Bad Effect

In some cases it may be in the public interest to violate
the law, but it may not be in the interest of a particular
butcher to be a black-market operator. There are newspaper
stories of, say, 1,500 pounds of liver wurst destroyed here and,
say, 3,000 pounds of spoiled hot dogs there because someone
lived up to the letter of the law. All will agree that the liver-
wurst and hot dogs should have been eaten instead of de-
stroyed. The amount lost is nothing, but assumes huge pro-
portions in the minds of the millions who never owned at one
time more than a pound or so of either one. Losses of food
due to compliance are magnified out of all proportion to
their importance. However, they tend to weaken the faith
of folks.

* Life, May 24, 1943, page 26,

( 218 )

Compliance resulting in the loss of time is frequently more
serious than the loss of food.

A group of lawyers drew up recommendations for the re-
pairs of a perishable food plant in the event of a fire, and at
the end included a paragraph that reads more or less as fol-
lows:

"If procedure as outlined above is followed, and steps are
taken to effect the necessary repairs ... in all probability
the work will be completed before the applications have been
acted on in Washington."

One executive commented that this was the way he op-
erated all the time. Another person added that this was the
only way an efficient executive of a company dealing in per-
ishable foods could operate.

\

. Black Markets Will Be with Us

All through history, black markets have prevailed when
the market price was above the ceiling prices, and it makes
no difference whether the declaration against them was made
by kings, emperors, fiihrers, or New Dealers. Market prices
arise from a series of complex factors which are more easy to
become conscious of than to explain. The number of vari-
ables and the innumerable ways in which they can combine
are beyond the comprehension of the businessman, the price-
analyst, and the regulators. The power of market prices is
greatly underrated. On the other hand, the power of ceiling
prices is greatly overrated.

A black market is the inevitable accompaniment of fixed
prices in a regulated economy. Since the administration can-
not change the rules as fast as the conditions change, com-
modities will be bought and sold at other than the fixed prices
and in quantities other than those prescribed by priorities
and rationing.

There are only two alternatives: (a) permit the black

( 219 )

market to exist and in effect shrug our shoulders about its
illegality, or (b) raise the ceiling price to the market price.
The latter would call for official approval of higher ceiling
prices and would cause the official index of prices — our na-
tional barometer of inflation — to rise. Since this is not
likely to happen in the near future, black markets will con-
tinue to be with us.

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CHAPTER 12

ADMINISTRATION OF FOOD

IN the horse-and-buggy days the story of food could be told
under four simple headings: Production, Consumption, Dis-
tribution, and Prices. Widely varied governmental activities
under a regimented economy do not fit nicely into this out-
line. The setting of goals on a national basis, the fixing of
quotas, the allotting of priorities, rationing, ceiling prices,
rollbacks, and the like have recently become important parts
of the food problem. Administrative control has been thrust
into the foreground and into any complete discussion of the
food problem. It makes no difference whether the control
program was deliberately chosen by the people or thrust on
them by an administration inclined toward regulation.

Military vs. Civilian Logistics

"Logistics" is a military term dealing with the problem of
obtaining supplies and of transporting them across land and
sea to munition dumps, to divisions, to regiments, and finally
to the individual soldier on the firing line. This is a complex
problem and men in the armed forces spend their lives
studying it. Although military logistics is highly compli-
cated, it can be turned over to military men with a reason-

( 221 )

able degree of confidence because they have been trained to
meet such problems.

There is the problem of logistics for civilians as well as
for soldiers. The 125 million civilians must have food, pro-
vided at the proper time and place and in the required
amounts. Although this nation trains thousands of men in
the logistics of moving military supplies for a few million
men, it has not trained the millions of men required for the
logistics of food supplies for 125 million civilians under a
system of price-fixing, priorities, rationing, and subsidies.
The nearest approach to such training was a short course in
regimentation during the early stages of the New Deal under
the direction of General Hugh Johnson, Leon Henderson,
and others of NRA.

In time of peace the logistics of civilian food supplies was
a relatively simple problem because these supplies were au-
tomatically allocated by the price system. Furthermore,
there were plenty of persons experienced in civilian logistics.
Armour and Company, General Foods, Standard Brands,
Quaker Oats, the Great Atlantic & Pacific Tea Company
down to Mr. Perugilla, who with his wife runs the corner
grocery store, all know their logistics under a price mech-
anism.

Another distinction between military and civilian logis-
tics is cost and wastage. Military logistics tends to ignore
costs and wastage because it is so important not to be short
of food anywhere any time. Military logistics is a problem
of having more food than is needed regardless of cost or wast-
age. It is a physical rather than an economic problem.

Since military logistics involves a small part of our popu-
lation, the nation can carry such costs and wastage without
"cracking up." In time of war we tolerate these high costs
and wastage because it is necessary and excusable if we are
to win the battles. On the home front it is not possible to

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ignore cost and wastage. Experience has taught us that price
was an efficient administrator of civilian logistics. Costs and
wastage were kept at a minimum. It has not been demon-
strated that a regimented economy can keep costs and wast-
age at so low a level.

The armed forces are a completely regimented economy.
If the civilian economy were completely regimented, certain
advantages would no doubt occur, but there would be many
disadvantages. Furthermore, regimented civilian logistics
runs counter to freedoms which civilians are unwilling sud-
denly to give up.

Our national policy is to substitute a controlled economy
operating under priorities, subsidies, and ticket rationing for
the price mechanism. In a modern industrialized nation like
the United States, civilian logistics is as important as mili-
tary logistics, and certainly much more expensive, inefficient,
and difficult to administer. If civilian logistics becomes dis-
rupted, military logistics is likely to be hampered.

Administrators Are Untrained

The main disadvantage of a controlled economy is that it
is not likely to be successful. Men have not been trained to
administer such a system, and it takes a long time to train
them. Some contend that the difficulty is that we are not
using the experience which individuals have accumulated
over generations. That is true, but only a part of the experi-
ence acquired under a price economy is of value under a regi-
mented economy.

American business does not place executives in charge of
its food industries until they are well trained and acquainted
with most of the details. Such experience requires the greater
part of a lifetime. It takes years to train the men who run
Swift and Company. No one would suddenly appoint an
economist or the manager of a corner grocery store, no mat-

( 223 )

ter how successful he had been, as chief administrator of the
Great Atlantic & Pacific Tea Company of America.

The wise man who does not know asks the man who does.
This explains, in part, the flood of questionnaires. The ad-
ministrators were taking a correspondence course in the
affairs of the food business, about which they knew little but
were hired to administer.

Furthermore, it is necessary for the administrators of a
controlled food economy to get current information which
was formerly available in the form of prices in the market
place. Under a price economy all distributive agencies get
such information all the time. They carry it in their heads
and act upon it at once. It is therefore not necessary for them
to use questionnaires. If they did they would soon be out
of business. The questionnaire has been unjustly abused.
It is a vital cog in the logistics of a regimented civilian econ-
omy.

The administrators who write the rules of the game are
without experience. The most difficult task an administrator
has is to attempt to teach the 125 millions what he himself
does not know.

Even if he did know, he has the impossible task of averag-
ing out the wants of people. He cannot write 125 million sets
of executive rules — one for each civilian. They usually fall
in one category; and at best only two or three. The admin-
istrator's task is very difficult because he cannot meet the
economic requirements of our freedoms and at the same time
force people into two or three economic strait- jackets.

Under the price mechanism there can be millions of pat-
terns as easily as three.

New Bureaucracy Necessary

Some persons point out the disadvantages of the multi-
plication and overlapping of Washington agencies which

( 224 )

accompany a regimented economy. However, when new pro-
grams are to be inaugurated, new agencies must be created.
The personnel must be sold on the program. Old-line de-
partments have difficulty in mothering a new idea; they have
other activities and, furthermore, they may not believe in
the new program.

The revolutionary agricultural programs of the early
phases of the present administration were not left to the
United States Department of Agriculture. A new organiza-
tion called the Agricultural Adjustment Administration
(AAA) was formed by people who believed that restriction
of production would raise farm income. The Office of Price
Administration was rightly a new and separate agency; it
should not have been in the Department of Agriculture, the
Department of Labor, or the Department of Commerce. The
War Food Administration should not be a part of the United
States Department of Agriculture nor of the Agricultural
Adjustment Administration.

The administration generally operated on the correct prin-
ciple when it made new agencies for the new programs. It
was not operating on the correct principle when it gave re-
sponsibility for a food expansion program to those who for-
merly sponsored the restriction programs.

Conflict among Buream and Policies

Some contend that the newly created agencies have not
always been given sufficient authority. Others contend the
difficulty is due to a division of authority, between an old-
line agency that is not sold on the new program and a new
agency that is.

OPA was set up to keep down prices today in the interests
of the consumer. It gradually dawned on some folks that the
consumer's interest today may conflict with his interest to-
morrow. One solution might have been to change the OPA

( 225 )

policy. It was deemed advisable, however, to continue the
old OPA policy and use the knowledge of the old-line Depart-
ment of Agriculture. It has the farmer's interest at heart,
which of course is related to the consumer's interest tomor-
row. This led to a division of authority over food and price
control between Henderson and Wickard and between Brown
and Davis. The price administrators wanted abundant sup-
plies of food today at low prices, and the war-food admin-
istrators wanted high prices for food today to assure an
abundant supply of food tomorrow.

The AAA policy was to reduce the production of wheat
to raise price. OPA wanted cheap bread. OPA favored low
prices of wheat to prevent inflation. The War Food Admin-
istration wanted higher prices to increase production. One
arm of the government wanted a stock pile to feed distressed
people in Europe ; another, to grind wheat for synthetic rub-
ber ; and still another, to feed it to livestock. Obviously such
conflict of policies was not in the best interests of the nation.

Conflict within Bureaus and with the Public

Not only is there conflict among the new agencies; there
is serious conflict within them as well. Much of this arises
from a conflict between bureaucratic policy and public opin-
ion.

Henderson was directed to keep prices down and at-
tempted to carry out that direction mainly by thumping the
table with his fist and riding roughshod over all opposition.
He was accused of bringing in the "slide-rule boys," the 19^5
name for the 19££ "braintrusters."

Since folks did not like to be pushed around and shouted
at, Brown replaced Henderson and was supposed to "hu-
manize" price-fixing. This was much easier to state than to
accomplish. Obviously, a policy of relaxing controls did not
set well with the OPA staff, nor was it correct in principle.

( 226 )

If the policy was to prevent inflation by administrative ac-
tion, there should have been more controls, and they should
have been more vigorously enforced. In a regimented food
economy it is difficult to make appeasement work.

The problem of an effective reorganization of OPA is a
difficult one. There may be a few long-haired economists, an
occasional star-gazer, and some young, inexperienced law-
yers; but most of them are able, conscientious, public-spir-
ited individuals. For this reason it would be easy to change
and regroup the personnel, but difficult to improve it. The
difficulty is not the personnel, it is the jobs they have been
assigned to do.

The leaders or the people see a new situation arising and
clamor that "something be done." In haste, "something is
done." Progress is often measured by the number and degree
of changes that are proposed and inaugurated. Occasionally
the best thing to do is to do nothing. Change is not all prog-
ress; it can be retrogression. Some of the world's most rapid
progress has been made by those who stood still while others
exploded into atoms by too rapid revolution.

Conflict among Czars

With the coming of new agencies, a food czar, a rubber
czar, an oil czar, and a price czar appeared on the horizon.
These czars are essentially in conflict with one another. Dur-
ing the rapid expansion of administrative controls, there has
not been the distinct limitation on authority that might de-
velop over a period of time. With overlapping authority,
decisions are based on conference. There is only so much
steel. The policy of each czar is never to admit that he has
enough, for if he does, his allotment is sure to be cut. This
leads to interminable conflicts over the amount of steel to be
allotted for rubber plants, for battleships, for tanks, and for
the production, processing, and distribution of food. Untold

( 227 )

numbers of items must be fished out of the pool by fishermen
whose main bait is overestimation. If the administrators do
not fish out a sufficient amount to pacify the particular group
whose interests they represent, they must blame the farmer,
the consumer, the soldier, Lend-Lease, the laborer, or else
they themselves will be blamed. In the case of food, the pe-
culiarities of weather are so widely understood that as the
food problem becomes more acute, food administrators will
probably try to shift the blame onto Providence. In that
event the weatherman will be used to whitewash adminis-
trative mistakes. The real mistake was to place confidence
in the weatherman, who is known to be unreliable.

The Baruch report made the suggestion that the synthetic-
rubber program should be "bulled through." Newspaper re-
ports indicate that the rubber czar did just that. However,
there is a limit to the number of programs that can be "bulled
through." When the number of programs becomes too large
and the conflict among them becomes too great, "bulling
them through" results in bull fights — aptly called the "Bat-
tle of Washington."

The career of the swashbuckling administrator is more
likely to be brief than brilliant. Sooner or later he offends
someone and is eased out.

Some administrators do not run their organizations. In
fact, some are run by their organizations, and there is little
that they can do about it. The administrator who is the most
likely to be "successful" is the man of inaction, who does
nothing and offends no one. For others, resignation is the
only means of escape.

Most administrators face a strange dilemma. If they suc-
ceed in carrying out a policy, someone suffers and their job
is in danger. If they fail in their charge, their original backers
turn them out of office.

( 228 )

Job Too Big for One Man

Some say the conflict among czars has a logical solution
— one-man control. That is not the practical answer, how-
ever, because the job is so big that no one individual has suf-
ficient knowledge to make all the necessary wise decisions.
Furthermore, there are not enough hours in the day to do
all the essential things. Only a superman would have the
physical stamina necessary for such a task.

One czar is no solution and only time can reduce divided
authority. The conflict of authority among the new czars in-
creases with the square of their number.

Public Not Trained for Regimentation

The problems of a regimented food economy are laid in
the lap of the administrator and it is usually assumed that
the fault is his. However, the problems are too great to be
explained away as a lack of wise leadership or the shortcom-
ings of administrators. A more complete explanation would
be that the entire nation lacks experience with a regimented
economy.

The producers, distributors, and consumers have had no
experience with and do not know how to operate under pri-
orities, rationing, ceiling prices, subsidies, and the like. They
have always followed the dictates of relative prices. When
this age-old guide is suddenly taken away, people are thrown
into confusion. Price, the equalizer between production and
consumption, is tossed away much as a mariner's compass
might be dropped into the ocean.

Maladjustments among production, consumption, and
prices make for friction. This friction produces needless pri-
vation and breeds discontent. People would rather be told
what to do by an abstract force such as price than by an
administrator.

( 229 )

We Personalize Trouble

John Q. Public always personalizes trouble. He blames the
administrators rather than the principle under which they
operate. The Henderson-to-Brown and the Wickard-to-
Davis-to-Jones administrative changes are illustrative of
such personifications. In reality, price and food administra-
tors were victims of circumstances over which they had no
control. Since John Q. Public will continue such personali-
zations, resignation is the only avenue of escape for those
who attempt to administer the impossible. Instead of heap-
ing his wrath upon the administrator, however, John Q.
Public should heap his wrath on the system under which the
administrators operate.

Advice to Administrators

Though not skilled in the art of administration, the au-
thors have made one observation that may be of value to
those in charge of a regimented economy. If the program is
controversial, the best way to sell it to the public is to put
everybody on the committee. (This is what price has his-
torically done.) The longevity of the AAA program is due in
part to the fact that large numbers of farmers serve on state,
county, and township committees, with pay. It has been fre-
quently observed that people will support almost anything
if you can get them to take a job connected with it, and that
isn't often hard.

It may be that the AAA organizers observed the method
followed by the country schoolmarm who wanted a good
attendance at the Friday night entertainment and so put all
the children on the program.

( 230 )

Heat in a Frozen Economy

Under a regimented economy, the government fixes prices,
freezes profits, and controls wages. In effect, this rations in-
come.

Income was formerly rationed by the price system, and
men were rewarded in proportion to their contribution. This
measure of equity placed responsibility for each one's eco-
nomic position upon himself; if income was low, it usually
was not necessary to look far to find the cause.

When the government assumed the task of rationing in-
come, it took upon itself the burden of establishing and
maintaining equity. Two difficulties arose : first, the govern-
ment could not ration income as equitably as could the price
system ; and second, responsibility was shifted from the indi-
vidual to the government, so that one who was at a disad-
vantage could blame the government rather than look to his
own shortcomings.

Consequently the government was blamed for two sets of
shortcomings, its own, of which there were enough, and those
of the civilians who formerly accepted the economic fate
dealt out by themselves and the price system. The result is
an orgy of pressure politics and appeasement. Laborers strike
or threaten to strike and are granted hidden increases in
wages. Farmers are appeased with support prices. Industry
and distributors are given hidden subsidies. The increases
are not equitable within the groups or among the groups,
and man is arrayed against man, and class against class.

According to a labor magazine,1 Prentiss Brown was a
"coddler of big business." Farmers thought that Mr. Brown
was a "coddler of labor." The authors do not think that
Brown was a coddler of either big business or labor ; it is their

1 Shishkin, B.: "Inflation Crisis," American Federationist, Volume 50,
Number 4 (April 1943), page 3.

( 231 )

belief that he was an able, conscientious, public servant who
was coddling an impossible task.

In a regimented economy the laborer believes that his
wages are virtually frozen and that the sky is the limit for
food prices and other incomes. The farmer believes that food
prices are virtually frozen and that the sky is the limit for
city wages and other incomes. The businessman is convinced
that his income is frozen, but that the sky is the limit for city
wages and food prices. This is an inevitable accompaniment
of a sudden change from the time-honored distribution of
income by a price economy to its distribution by a central-
ized regimented economy operating in Washington.

Labor wants food prices rolled back and wages rolled for-
ward; farmers, on the other hand, want food prices rolled
forward and wages rolled back. In time of war neither can
be rolled back and both will roll forward.

Administrative Appeasement

When a food or price administrator irritates the public
and/or fails to accomplish his task, there is such a public
clamor that changes must be made to appease the critics.
The unsuspecting and critical public thinks the wrong man
was placed in charge. Therefore the first method is to change
the names on the "big front door." This quiets folks for a
time, but if the policies are unchanged, the names are again
changed, then the name of the organization is changed, and
finally a drastic reorganization is inevitable. In that event,
the activities are taken over by another agency or are dis-
persed among two or three other agencies.

During June 1943 there were widespread suggestions that
there were too many cooks working on one broth and it was
contended that the work should be reorganized along com-
modity lines. For instance, the fixing of prices of oil, com-
munity and civilian rationing, and control of production

( 232 )

should be centralized in the Fuel Administrator's office.
tTnder this type of organization, all phases of the food pro-
gram — prices, production, distribution, rationing, subsidies,
incentive payments, and farm labor — would be put in the
hands of one administrator. Reorganization merely silences
the verbal barrage for a day, and appeasement may only
delay the demise of that which Walter Lippmann 2 aptly
called "white elephants."

There comes a day when it is generally recognized that
appeasement will not satisfy the increasing number of critics
and the administration must consider the basic cause of fail-
ure and devise ways of saving face. The Office of Price Ad-
ministration is a case in point. It is administratively impos-
sible for the many agencies to freeze prices, to roll back
prices, to ration part of the food, to subsidize this and that,
to grant hidden increases in income, to tax equitably, and
to prevent the accumulation of excess purchasing power ; all
done, presumably, to forestall inflation. One reorganization
after another is inevitable in the early stages of a regimented
economy and only the future can appraise the value of the
changes.

Checks and Balances in a Regimented Economy

The public complains that the food and price adminis-
trators have too much authority, and the administrators
complain that they have too little. Both may be partially
correct. The conflicting policies and conflicting personalities
in a regimented economy inevitably tie the hands of most
administrators. To the administrator, this presents an appal-
ling picture of chaotic administration. It seems ridiculous to
him to be appointed to do a job and then have his hands
tied so that he cannot do it.

2 Lippmann, W.: "Last Days of a White Elephant," New York Herald
Tribune, Thursday, May 27, 1943, page 21.

( 233 )

Chester Davis concluded that the administration's food
and price programs were unworkable without centralized au-
thority and were in danger of collapse. This point of view
was held by Herbert Hoover and many others, who con-
tended that "the food mess" would not be cleared up until
a single administrator was appointed with full authority
over all phases of the food problem.

Controls have been highly centralized in Washington. The
difficulty is not whether the authority is centralized in one
man's hands in Washington or in several hands in Washing-
ton, or whether it is decentralized with state or local control.
The difficulty is the insurmountable task of trying to hold
down prices in wartime and still maintain food production.

From the standpoint of the public, it may be well for in-
experienced administrators to be manacled and tethered un-
til they have matured. No farmer would hitch an unbroken
colt to a mowing machine.

Every Man for Inflation and Price Control

During the controversy over price-fixing there appeared
to be two irreconcilable groups: those who desired prices
fixed at a low level and those who wanted freely fluctuating
prices at a higher level.

There is one premise on which there was universal agree-
ment. Everyone wanted low prices for articles he bought.
This held true for farmers, laborers, school teachers, and
manufacturers, whether they were liberals or conservatives,
Republicans or Democrats. In time of war the government
became the great consumer and government officials, like
other purchasers, wanted to buy at low prices.

There was a second premise on which there could be uni-
versal agreement. Everyone wanted more income. This held
true for farmers, laborers, school teachers, and everyone else.
The time-honored way of raising one's standard of living was

( 234 )

to get more income. For more than a decade the New Deal
was much interested in raising national income and boasted
of every advance.

Was it possible for everyone to have low prices for the
articles he bought and at the same time for everyone to have
high incomes?

Income is nothing more than the product of production
times price. This holds true for individuals, for industry,
and for the nation as a whole. Farmers produce a given
amount of crops, which they sell at a given price. The total
dollars they receive are their incomes. Laborers' incomes are
the product of the number of hours they work times the
wages they get. School teachers' incomes are a product of the
number of months they work times the salary they get. Man-
ufacturers' incomes are the product of the volume of goods
they produce times their price. National income is the prod-
uct of all the goods and services produced times their prices.

Since everyone wanted more income and at the same time
wanted low prices for the things they bought, there was only
one way to have both, and that was to increase produc-
tion. In time of peace, farmers strove to produce more food.
Manufacturers, through plant expansion and increasing effi-
ciency, produced more goods. Laborers, through increasing
efficiency despite shorter hours, produced more of the good
things of life. School teachers, through more training, pro-
duced more service. Over a series of years the per capita pro-
duction of the nation gradually increased, and this resulted
in more income and a higher standard of living for all.

However, when a nation is at war and its plant is operat-
ing at capacity, it is impossible to expand production. There
are not the plants, men, or raw materials available to in-
crease industrial output. The draft transferred men from
productive occupations to the military forces. It will also be
difficult in the near future to increase agricultural produc-

( 235 )

tion above the recent abundant harvests. It does not seem
reasonable to assume that during the next year or two there
will be much, if any, increase in the total physical volume of
all goods and services produced in the United States. In fact,
it may decrease. Therefore neither the nation nor its groups
can get increased incomes by increasing production. If in-
comes are to be raised, it must be through advancing prices,
wages, salaries, and subsidies.

This simple principle is hardly worth discussing except
that it was the basis of much of the recent controversy over
price ceilings, the fixing of wages, subsidies, and other activi-
ties of our regimented economy.

Urban laborers wanted more income and low prices for
food. School teachers wanted more income and low prices for
food, clothing, and cosmetics. Manufacturers wanted more
income and low prices for their raw products. Farmers
wanted more income and low prices for corn binders. The
Federal government wanted more income and low prices for
tanks.

Laborers knew that about the only way to get more in-
come was by higher wages. Manufacturers knew that about
the only way they could get more income was through greater
volume. School teachers knew that the only way they could
get more income was through more training. Farmers knew
that most of the variations in their incomes were due to fluc-
tuating prices.

The school teacher's months of employment were fixed,
and any variation in income was due to variation in salary.
The manufacturer's production was highly variable and the
price of his product was relatively sticky. Therefore his in-
come was primarily dependent upon production. Food pro-
duction was relatively stable and prices fluctuated violently.
Therefore the farmer's income was primarily dependent on
price.

( 236 )

Like fanners, the other groups wanted higher prices for
their products, more commonly known as wages, salaries,
and the like. Since wages and salaries were not generally con-
sidered as prices, farmers were the only large group whose
income was dependent on "price" in the strict sense of the
word. For this reason farmers appeared to be the only group
that was high-price-minded. Since all others eat what the
farmer produces, they appeared to be low-price-minded.

The interests of the individuals and groups of individuals
are all in constant conflict. The idea that imperfect admin-
istrators can reconcile the conflicting interests of the 125 mil-
lion imperfect individuals when it is essential that the stand-
ard of living be reduced is fantastic.

Every man is first a seller of his product and services, and
second a buyer of the products and services of others. Every
man is therefore first an inflationist and second a price con-
troller. Since everyone is for both control and inflation, it is
probable that we shall have both.

Price like a Thermometer

Temperature registers the innumerable combinations of
the many factors affecting the condition or health of man
relative to normal. When it rises, something has happened to
the stomach, the heart, the lungs, or the liver.

Price merely registered the net effect of a myriad of com-
binations of innumerable supplies of and demands for both
commodities and money. When price rose, the normal equi-
librium was disturbed; something happened to one of the
many factors that made price.

When our temperature rises and we do not like it, we could
smash the thermometer or fix the thermometer so it would
not tell us what we should but don't want to know. Similarly,
by fixing prices we are kept from finding out what we should
but don't want to know.

( 237 )

Fixing the thermometer is a handicap to a physician when
an emergency arises. Fixed prices are a handicap to a nation
when a war is under way. The fluctuating thermometer tells
a physician whether previous acts were correct and gives him
some guide as to how he should act in the future. If the physi-
cian's thermometer were fixed so that it could not fluctuate,
he would have to depend on his own judgment and the grunts
and groans of his patient. In a regimented economy with fixed
prices, the food and price administrators, like the physician
with the fixed thermometer, must depend on their judgment
and the grunts and groans of their patients to determine the
effect of previous policies and to guide their future action.

"Squealometer" Needed

A frozen price structure and a fixed thermometer call for
the development of a machine which, for want of a better
name, might be termed a "squealometer." This machine is
merely a reversion to the horse-and-buggy days when the
wheel that squealed the most got the grease. There is only
one method of advising the administrators of their mistakes
— public protest in sufficient volume to be recorded by the
"squealometer." In a regimented economy, when decisions
are made by small numbers of men and are based on the de-
cisions of other men, the number of errors inevitably is large.
The administrator may soon learn that an error has been
made, but be loath to correct it, as few persons are willing to
admit they are wrong unless forced to do so. Even though the
administrator knew he was wrong and was sufficiently cou-
rageous to admit it, the system would probably prevent him
from making the change. The correction of one person's error
puts others in a bad light. Unfortunately, changes in policy
cannot be piecemeal. A courageous man working within an
organization might make a change in the right direction over
the protests of his co-administrators, but with basic policy

( 238 )

unchanged he would merely add to the confusion. It is only
when the squealometer shrieks loudly enough that action is
likely to be taken.

The nation is apparently on the squealometer standard.
Consumers roar and a program is inaugurated to "roll back
prices." Laborers howl and hidden increases in wages are
granted. Farmers shout, and support prices and incentive
payments are made. The squealometer is very selective —
when the distributor cries, no one pays any attention.

Price — An Efficient Administrator

Lieutenant-General Forrest of the Confederate Cavalry is
reported to have said: "The side that wins is the one that
gits thar fust with the most men."

The most important advantage of a freely operating price
economy is the quicker, more efficient results obtained. The
price system is based upon self-interest, and human beings
will act sooner in behalf of themselves than in behalf of some
administrator.

For its success, price relies on the desire of human beings
to obtain the most for their money. Since this urge is deeply
rooted in most people, the price system operates automati-
cally. It needs no injections, no campaigns, no promoter, and
no press agent. As a producer, the individual will create the
goods for which he is paid the most. As a consumer, he will
regulate his purchase of high- and low-priced goods so as to
maintain his standard of living at the highest level possible
under the existing conditions.

The combined effect of all the factors, no matter what
they are, what their size, or what their importance, is most
accurately measured by freely fluctuating prices. These
prices are the final judgment of millions of persons. When
price is the administrator, everyone is on the committee and
serves without pay. It has at least one merit : it is democratic.

( 239 )

The combined judgment of millions is a much more accu-
rate appraisal than the combined judgment of the adminis-
trators of a regimented economy. Both the judgment of the
millions and that of the administrators, although correct at
one moment, may be wrong the next. As conditions change,
the judgment of the millions changes accordingly, regardless
of previous decisions. On the other hand, it takes an adminis-
trator a long time to make up his mind that he was wrong
and still more time to admit it.

It is not contended that free prices do not frequently make
mistakes. It is contended that administrators make many
more mistakes. It is better that the public complain of a few
injustices in a freely operating price economy for which no
individual is responsible than to have it continually irritated
by mistaken judgment and faulty administration.

The simple solution is to let the price system function. In
view of the present anti-inflation policy this may seem too
inadequate and too improbable a solution to the food mud-
dle. The authors contend, however, that any other solution
is predestined to fail. To those who seek a remedy for the
food muddle within the framework of present policies, the
authors have no program to offer. Their suggestions involve
fundamental changes in policy rather than the mechanics of
administration.

There are an increasing number of persons who will agree
with the authors that price was like an unseen hand that
sometimes beckoned and sometimes suppressed the producer,
guided the distributor, and advised the consumer. It was the
baton that led the national symphony.

INDEX

AAA: cotton restrictions, 57; crop
acreage and, 52; importance in
1943, 66; liquidates non-co-opera-
tor, 203; longevity, 229; new
agency necessary, 224 ; old and new
policies, 67; raises prices by scar-
city, 186; reduces production to
raise prices, 225; restrictions
widely accepted, 175; restricts
acreage, 57; subsidies, Supreme
Court, and, 203

Administrators: advice to, 229; ap-
peasement and, 231; blamed for
shortcomings, 230; centralization
of power, 233; checks and bal-
ances, 232; conflict among czars,
226; conflicting authority, 228;
controls by-passed, 218; difficult to
average wants, 223 ; equality a bat-
tlecry, 193; errors, high, 21; free
price, mistakes, and, 239; imper-
fect, and conflicting interests, 236;
importance of questionnaires, 223;
indirect costs due to errors, 200;
job too big, 228; method of opera-
tion, 227; need squealometer, 237;
not principle, blamed, 229; policy
of action, 226 ; political expediency
and, 96; price efficient, 238; re-
versed farm labor policy, 36; rul-
ings, hastily drafted and widely
ignored, 10; run by organizations,
227; tactics, overwhelmed by po-
litical strategy, 96; time to reach
decision, 239; untrained, 222

Age, reduces efficiency of farmers, 31
Agricultural ladder, 40
Agricultural policy, see Policy
Alcohol, from wheat, 109
Animals, see Livestock
Appetite, and nutrition confused, 119
Argentina: burns grain, 4; food

abundant, 4

Australia, effect of war on food, 5
Austro-Prussian War, effect on world

prices, 158

Barley, consumption of, 71

Baruch, Bernard, rubber, 227

Beans : effect ceilings, 63 ; production
shifted by price, 164

Beef, consumption declines, 105

Big freeze (1942), 144

Bimetallism: black markets thrive
on, 206; content gold and silver
dollars, 204; two-money system,
188

Birkhead, J. W., 46

Birth-rate, effect of war, 7

Black markets : alternatives, 218 ; at-
tract food to large cities, 189; bi-
metallism, 206; break monopolies,
209; cause shortage, 14; causes of,
209; conditions necessary to sup-
press, 216; corn, 88; currencies,
204; feed, 83; foreign exchange,
208; illustrations, 211; large and
small operators, 213; location, 210;
low ceiling prices cause, 20 ; means
of self-preservation, 212; partici-

pants, 213; policing, 215; potatoes,
due to ceiling prices, 18, 19; set-
ting for, 11 ; simplicity of regula-
tions, 214; stopgaps to, 214; ticket
rationing tolerates, 192

Boer War, effect on world prices, 158

Brands, elimination of, 145

Bread, see Wheat

Brodell, A. P., 46

Brown, Prentiss : administrative
changes, 229; division of author-
ity, 225; not a coddler, 230

Bryan, W. J., silver, 172

Butter: market and rationed prices,
Russia, 171; seasonal production
and price, 165

Cabbage, black markets, 211

Canada: effect of controls, 183; ef-
fect of war on food, 5

Carry-overs, see Stocks

Cattle: liquidation, Denmark, 95,
101; prices affect production,
164

Ceiling prices: black markets and,
209 ; caused high-protein-feed
shortage, 79; compliance occasion-
ally bad, 217; disadvantageous to
large cities, 188 ; effect on consump-
tion, 10; encourage consumption,
16, 123 ; encourage use of fertilizer,
48; famine, India, 166; freeze sup-
plies, 86; gold and silver, black
markets, 206 ; inflexible, 188 ; mean
rationing, 187; methods of circum-
venting, 210; painless, 187; potato
shortage, 16, 19; power overrated,
218; prevent visible inflation, 16;
prices rise despite, 180; public un-
trained for, 228; subsidies, 199;
sugar beets, 164

Chicago Board of Trade, 165

Chickens: liquidation, England, 95;
war curtails, 5

China : drought and prices, 162 ; live-
stock and famine, 102; number
people fed, 98

Chinese-Japanese War, effect on
world prices, 158

Churchill, Winston, 68

Civil War, U. S. : effect on Northern
and Southern prices, 159; effect on
world prices, 158

Commodity Credit Corporation, 108

Consumer: causes shortage, 13; gets
left-overs, 4

Consumption: a compromise, 111; a
habit, 111; adequate diet, 118, 120;
American and Chinese compared,
114; amount per capita, 114, 115;
beef, declines, 105; coffee vs. milk,
124 ; cottonseed oil, rises, 105 ; dif-
ficult to shift, 112; effect ceiling
prices, 123; grain, 131; guided by
price, then ticket, 120; low prices
encouraged, 10; machinery re-
duces, 103; middleman adjusts
production to, 138; milk, attitude
toward, 120; nutrition and appe-
tite, 119; poor vs. rich, 116, 117;
pork, stable, 105; potatoes, low
ceilings stimulated, 16, 19 ; pull-in-
belt policy, 123; range narrow,
113; religion and, 111; shifts, cause
of, 132; spinach, 121; stable, 113,
170; subsidized, popular, 122; sub-
sidized, solution of surplus, 9 ; sud-
den and gradual changes, 13;
three-M diet of South, 117; up-
grading of diet, 131 ; various coun-
tries, 111, 112, 118

Controls, see Regimented economy

Corn: AAA restrictions, 57; con-
sumption of, 71 ; frozen prices, 85 ;
hybrid, counteracts AAA restric-
tions, 58; hybrid, result research,
59; hybrid, spectacular adoption
of, 77; largest crop, 55; refiners of,
87; restrictions on sales, 88

Corn grits, effect ceiling, 89

Corn-soybean price ratio, shifts pro-
duction, 63

Cost of distribution, see Middleman

Cost of living: accuracy questioned,
184; rollback, 185

Cotton, AAA restrictions, 57

Cottonseed oil, consumption rises,
105

Crimean War, effect on world prices,
158

Crops: allocation restricts produc-
tion, 66; harvested acreage, 52;
importance of, 56; relation size,
price, income, 174-6; restrictions,
56, 59; soil-conserving, 57, 58

Currency revaluation, 157

Curtiss, W. M., vi

Czars: conflict among, 226; job too
big for one, 228

Davis, Chester : administrative
changes, 229; centralized author-
ity, 233; divided authority, 225

Death-rate, not related to rising
prices, 170

Deflation: and parity, 178; preven-
tion of, by price and ticket ration-
ing, 190-2; world-wide, cause of
low prices, 153

Demand: if or commodities and
money, 156; registered by price,
236

Denmark, liquidation, hogs and cat-
tle, 95, 101

Devaluation of dollar, raises prices,
173

Diet, see Consumption

Distribution, see Middleman

Draft, married men and agriculture,
40

Drought (1934), effect on: crop acre-
age, 61 ; food production, 60 ; num-
bers livestock, 75, 94; yields, 61

Droughts, and food prices, 162

Economy, see Regimented economy
Efficiency : of farm worker, rises, 28 ;

of wheat farmer, 43
Egypt, 8, 107
Emergency Tariff of 1921, result of

deflation, 172

Energy food, no shortage, 12
England : blockades Germany, 4 ; ef-
fect of controls, 183 ; hoarding food
(1921), 23; insurance rate, 24;
liquidation, hogs and poultry, 95,
101; price control, 202; subsidies,
202

English Corn Laws, 158

Equality : not equity, 192 ; regiment-
ers' battlecry, 193

Ever normal granary: Farm Board
compared, 107, 173; Joseph and
weevils, 107; livestock, 100; New
Deal liquidates one, uses another,
107, 108

Exports: changes (1882-1940), 153;
cottonseed, decline, 105; decline,
153 ; equalize food supplies, 98, 103,
104; loss, not cause of low prices,
152 ; pork, decline, 105 ; wheat, de-
cline, 105

F*ads: from fact and fancy, 120;
make progress, 122

Famine, where little livestock, 102

Farm Board: accumulated wheat,
107; ineffective, 172

Farmerettes, 39, 40

Farmers : only high-price-minded
group, 236; resourceful, 41; want
more income and low prices, 235

Farm labor, see Labor

Farm land, see Land

Farm machinery, see Machinery

Farm population, see Population

Farm prices, see Prices

Fats, stocks and consumption, 99

Feed : difficult to ration, 83 ; low ceil-
ing prices stimulate consumption,
80, 84; price rations equitably, 93,
96; scraping bins, 89

Fertilizers: consumption encouraged
by ceilings, 48; diverted, food to
war, 3; nitrogen short, 47; soils
and, 48 ; vs. explosives, 48

Filburn, R. C., 49-cent wheat pen-
alty, 203

Fisher, Irving, 155

Foreign exchange, black markets, 208

Foreign trade, see Exports

Forrest, Lieutenant-General, 238

France, food scarce, 4

Franco-German War, effect on world
prices, 158

Fuel Administrator, centralized con-
trol, 232

General maximum price regulations,
and rising prices, 181

General price level, see Prices

German-Danish War, effect on world
prices, 158

Germany: commandeers food, 6; de-
stroys England's food, 4; effect of
controls, 183

Goals, and weather, 61

Government employees, war reduces
standard living, 167

Greece : effect of war on food, 5 ; low
standard living, 6; slaughter live-
stock, 5

Hamilton, Alexander, 204

Harper, F. A., vi

Hedging, advantages, 86

Henderson, Leon : administrative
changes, 229 ; division of authority,
225; NRA, 221

Highly prized foods, see Protective
foods

Hitler, A., 3

Hoarding : government, causes short-
age, 14, 22 ; private, 22

Hogs : effect price on marketing, 164 ;
liquidation, England and Den-
mark, 95, 101; pork, consumption
stable, 105; slaughter pigs (1933),
78; war curtails, 5; waste corn, in-
surance, 140

Hold-the-line : and feed prices, 93;
rising prices, 181

Hominy, effect ceiling, 89

Hoover, H.: Farm Board, attempt
halt price decline, ineffective, 107,
172; one-man control, 233; unem-
ployment, 123

Horses: decline in numbers, 45; af-
fect livestock production, 77

House of Commons, 68

Imports, see Exports

Incentives, important to production,
62

Income: all want more, 234; defined,
234; effect of size crop and price
level, 177, 178; rationed by price,

230; size or crop and price,
174-6

Index numbers, questioned, 184

India : famine and ceiling prices, 166 ;
number people fed, 98

Industry, wants more income and
low prices, 235

Inflation: cause of, 182, 232; con-
comitant of war, 160 ; defined, 149 ;
every man for, 233, 236; farm and
retail prices, 149; feed grains and,
85, 93; food programs and, 10;
parity and, 179, 180; postponed by
subsidies, 200; rising farm prices
result, not cause, 148; visible, pre-
vented by ceilings, 16; vs. price
control, 233, 236; war and, 11;
wild, U. S. Civil and Revolution-
ary Wars, 159

Inflationary gap: Russia eliminates,
171 ; vs. statistical gap, 184

Irish famine, 158

Italy : adds new demands, 15 ; hoard-
ing-food (1921), 23

Japan, number people fed, 97
Johnson, Hugh, and NRA, 221
Jones, Marvin, administrative

changes, 229
Joseph, 8, 107

Kerr, Walter, Russia price policy,
171

Labor: causes of movement to cities,
29; decline, and food production,
33 ; deferment solves problem, 37 ;
effect of social pressures, 38; effi-
ciency increased by machinery, 42 ;
efficiency index, 28; efficiency
lower on poor soil, 54; efficiency
reduced by age, 31; family fur-
nishes most, 28; farms produce
surplus, 29, 32 ; heavy burden falls
on women, 39; hiding in haylofts,
37; highly skilled, 27; import of
Jamaican, Bermudan, and Mexi-
can, 37; land army, 37, 40; large
reserve of, 39; number family

workers, 28; number hired men,
28; policy reversed, 36; Selective
Service, 37, 40; supply, effect war,
30; wants more income and low
prices, 235; ways to increase sup-
ply, 40 ; weather, and price related
to food production, 34; women,
greatest source in cities, 39;
women, high proportion, 31;
women, pressed into service, 3

Land: distribution of, 52; good, in
use, 55; most food produced on
better, 53, 54; non-farm, produces
some food, 53

Lend-Lease : additional food, sources
of, 127; beginning of price rise,
181; bench mark for, 68; causes
shifts in diet, 132; causes shortage,
13, 15; commitments, 11; defense
of, 125; food, weapon in war, 124,
126; grain, 110; increases number
consumers, 127; payment, 125;
prevents price decline, 93; prices,
England vs. U. S., 201 ; raises price,
186 ; regimentation, 198, 199 ; shock
absorber, 106; stamp plan, 122;
subsidy for England, 202

Lettuce, black markets, 211

Lewis, John L., and inflation, 160

Life, black markets, 217

Lippmann, Walter, 232

Liquidation of livestock: adds to
meat supply, 91 ; disorderly, 93 ;
England and Denmark, 95; equal-
ity of sacrifice, 95, 96; feeds more
people, 128; impending, 92; na-
tional interest, 95, 96; political ex-
pediency, 95, 96 ; price vs. adminis-
trative, 94, 96

Livestock : ever normal granary and,
75; expansion cannot continue, 91;
expansion due to good crops, 79;
famine and, 102; feed consumed,
70; feeding wheat, 110; food stored
in, 100; gleaners, 73; investment
in, 70; liquidation, see Liquida-
tion; luxury, 11, 101; number re-
finers and condensers, 74; prod-
ucts, effects of drought, 75, 94;

products per acre, per unit of feed,
76; shock absorbers, 98, 101;
slaughter inevitable in war, 5;
stocks food, 100

Logistics: costs and wastage, 221;
military vs. civilian, 220

Machinery: allocation, steel and
manpower, 45; breakage high, 44;
condition power equipment, 46;
importance increasing, 41, 44; re-
strictions, 44; revolutionizes food
production, 42; tractors needed,
45; trucks, 47

Malnutrition, not result rising prices,
170

Malthus, T. R., 106

Marketing quotas, restrict produc-
tion, 66

McConnell, J. A., vi

McKinley, W., tariff and deflation,
172

Meat: consumption, changes in, 13;
stocks, 99

Meek, H. B., vi

Mexican War, effect : on U. S. prices,
159 ; on world prices, 158

Middleman: black market, 212;
costs due to consumer demands,
139; costs due to wages and serv-
ices, 138 ; costs increased by ticket
rationing, 191; costs not equal,
189 ; costs will rise, 143, 146 ; equal-
izes production and consumption,
137; hidden subsidies, 230; labor
efficiency declines, 144; little
known about, 135; milk, reducing
costs, 136; mistrust of, 136; new
slogan for, 143 ; not trained for reg-
imentation, 228; popularly be-
lieved inefficient, 134, 136; prices
guide, 165 ; rising costs due to spe-
cialization, 136; services rendered,
136 ; shortcomings exaggerated,
146; unpopular with consumer,
farmer, 135

Milk: changing attitude toward,
120; reducing costs delivery, 136

Money, war changes value of, 157

Monopoly, broken by black markets,

209

Mukerjee, R., 98
Myers, W. I., vi

Napoleonic Wars, effect on world
prices, 158

Nitrogen, see Fertilizer

Non-foods, consumption reduced by
rising food prices, 170

NRA: black markets, 210; short
course in regimentation, 221

Nutrition: adequate, 118; confused
with appetite, 119; deals with com-
plex variables, 119; emphasis on
livestock, 11; public not prepared
to evaluate, 121

OES, 93

OPA: black market and enforce-
ment, 217 ; butter-meats-fats-
cheese rationing, 196; ceilings
stimulate consumption, 20; cheap
bread, 225; concessions to rising
prices, 185 ; freezes corn prices, 85 ;
holds down price and income, 67;
impossible task, 232; low corn
prices prevent inflation, 91 ; pro-
tein feed prices, 80, 82; recognizes
livestock dilemma, 93 ; reorganiza-
tion difficult, 226; reporting viola-
tions to, 216; rightly new agency,
224; rollback squeeze, 144; stimu-
lated consumption, 16

Overproduction, see Production

OWI, 21

Paint, shock absorber, 105

Parity: denned, 178; inflation and
deflation, 179; payments, little use
in war, 66; popular interpretation,
180 ; rates of change with inflation
and deflation, 179

Pepper, ceiling prices, black markets,
208

Perishability, and rationing, 194

Petroleum vs. wheat for rubber, 109

Pitt, William, 201

Planning, see Regimented economy

Platt, F. L., vi

Poland, slaughter livestock, 5
Policy : and political expediency, 96 ;
crops, changed late, 66; ever nor-
mal granary, 107; expansion, 65;
Farm Board, 107; farm labor, 36;
feed wheat, 129; food, reversed,
108 ; food strategy controversial, 9 ;
history, early thirties, 173; horse-
and-buggy days, 64; Joseph, ever
normal granary, 107; liquidate
livestock, conservation measure,
101; liquidate then expand ever
normal granary, 107, 108; prices,
recent, 173; prices, stemming
world-wide decline, 173; research
and controls, 59; restrictions, 65,
164; rubber from wheat, 109;
scrape the bins, 90; shifts bean
acreage, 164; two blades grass, 64
Political expediency, 25
Political strategy, overwhelms ad-
ministrative tactics, 96
Population : equals food supply, 106 ;
farm, decline, effect on food sup-
ply, 32; farms produce surplus, 29,
32; increase, and food exports,
104 ; outruns food supply, 103
Pork, consumption stable, 105
Potatoes: ceiling prices, black mar-
kets, 211 ; shortage due to low ceil-
ing prices, 16

Poverty, attempts to abolish, 122
Power equipment, see Machinery
Prices: affect consumption and pro-
duction, 12; affect marketing and
production, 164; and droughts,
162; and farm income, 176, 178;
and parity, 178; by legislation,
177; cash and future, guide wheat,
165; ceilings, see Ceiling prices;
changes due to world prices, 161,
182 ; combinations of factors, com-
plex, 155; controls difficult, 182;
controls, every man for, 233, 236;
controls expensive, 183; controls
vs. inflation, 233, 236; controver-
sial, 147; democratic administra-
tor, 238; economy, many patterns,

Vll

223; effect local factors, 161; effi-
cient administrator, 238; England,
U. S. compared, 201; falling, and
tariff, 172; farm, fluctuate most,
149, 150; five factors affecting, 155;
fixed, see Ceiling prices ; flexibility
of farm and retail, 150; food, rise
and fall with other prices, 160;
free vs. ceilings, and subsidies, 199;
free vs. fixed, famine in India, 166;
general level affected by money,
155; general level described, 148;
general level, food prices fluctuate
with, 160 ; gold, black markets dur-
ing Civil War, 207; guide con-
sumption, distribution, and pro-
duction, 163^4, 166; high, reduce
waste, 139; incentives important
to production, 62; like a ther-
mometer, 236; low, encourage con-
sumption, 10; low, mean subsidies,
187; low, not due to foreign mar-
kets, 152; low, not overproduc-
tion, 151; made over retail coun-
ters, 149; market, and rationed,
Russia, 171 ; market, arise from
complex factors, 218; market,
power underrated, 218; potatoes,
free vs. ceiling, 17; rationing, see
Rationing by price; register sup-
ply and demand, 236; rising, and
tariff, 172; rising farm, result not
cause of inflation, 148; rising, re-
duce civilian standard living, 167,
170; rising, soak up unspent in-
comes, 200; rising, stimulate and
shift production, 64, 167; size of
crop, and income, 174-6; United
States does business at world level,
182; will advance, 185, 186; world
decline, and tariff, 172; world, ef-
fect of wars, 158, 159
Production: always near maximum,
8, 51; beans, shifted by price,
163; can't have more unless pro-
duce more, 174; controls, and
wheat prices, 179; determined by
weather, 69; droughts, 60; effect
planned agriculture, 57 ; good land

produces most food, 53; industry
vs. food, 8; lags after population,
154; most variability due to
weather, 61; outlook for decline,
68; overproduction food, 9; over-
production, low prices explained,
152 ; overproduction myth, 151 ; re-
search vs. controlled, 59 ; restricted,
unconsciously sabotaged, 176; re-
striction of, 173 ; rising prices stim-
ulate, 167; unemployment myth,
152

Professors, war reduces standard liv-
ing, 167

Protective foods: OPA stimulated
consumption, 16; production, 5;
short supply, 12 ; vs. energy foods,
131

Quality, effect of rationing, 195
Questionnaires, important in regi-
mented economy, 223

Rationing: equity and, 230; expen-
sive, 187; feed, 83; in Russia, 172,
193

Rationing by price: 189; automatic
and efficient, 190; equitable, 93,
96; income, 230; invokes inflation
during war, 190 ; no black markets,
190; no discriminator, 190; re-
wards men, 190

Rationing by ticket: a conundrum,
196; complete, deduction from war
effort, 198; difficult, 194, 197; dis-
position of unused tickets, 192;
equality for all is not equity, 192,
193 ; equalizing supply of food and
tickets, 195; food not in broad
categories, 194 ; inefficient, 191 ; no
discriminator, 191; public not
trained for, 228 ; quality and, 195 ;
reduces consumption, 124; rural
areas eat well, 192 ; shifts diet, 132 ;
state is supreme, 192 ; strict control
necessary, 196; supplement, not
ration, 192; tolerates black mar-
ket, 192; two-money system, 188;
unequal sacrifice, 194; varying

( viii

point values, 196 ; vs. price ration-
ing, 191; wasteful of manpower,
198

Regimented economy : administra-
tors untrained, 222; appeasement
difficult, 226; arrays class against
class, 230 ; benefactions equal State
power, 203; checks and balances,
232; complete control impossible,
183; conflicts, policies, bureaus,
czars, and public, 224, 225, 226;
controls hobble economy, 183 ; few
patterns possible, 223 ; means more
controls, 10; new bureaus neces-
sary, 224 ; public not trained, 228 ;
results of planned agriculture, 57;
state welfare organization, 203;
training for, 221 ; vs. free economy,
239

Regulations, simplicity, black mar-
kets, 214

Rehabilitation: not met by feeding
wheat to livestock, 130; raises
prices, 186; sources of food for,
128

Revolutionary War, effect on U. S.
prices, 159

Roosevelt, F. D., unemployment, 123

Rubber: and wheat, 12, 109; petro-
leum vs. wheat, 109

Russia : inflationary gap, 171 ; ration-
ing, 193

Russo-Japanese War, effect on world
prices, 158

Sale of farms, and food production,

34
School teachers: want more income

and low prices, 235; war reduces

standard living, 167
Schultz, T. W., scrape bins, 89
Scoville, G. P., vi
Scudder, M., vi
Secretary of Agriculture, see Wick-

ard, C. R.
Shaw, L. N, vi
Shishkin, B., 230
Shock absorbers: and variable pro-

duction. 97; diversion to and from
industry, 98; imports and exports,
98, 103, 104; livestock, 98, 101;
middleman's role, 137; short and
long time, 98

Shortage, food, cause of, 13

Smith, J. R., 113

Soap, shock absorber, 106

Soil, good, in use, 55

Soil-conserving crops, 57, 58

Soldiers, cause shortage, 14

Soybean-corn ratio, shifts produc-
tion, 63

Soybeans : importance of, 56 ; uses of,
106

Spanish-American War: effect on
U. S. prices, 159; effect on world
prices, 158

Spanish Revolution, effect on world
prices, 158

Squealometer needed in regimented
economy, 237

Stabilization : and rising prices, 181 ;
in 1942, 93

Stalin, Joseph, 172

Stamp plan, 122, 123

Standard of living: decline due to
war, not price rise, 169; increased
by production, 174; not improved
by redistribution of wealth, 174;
reduced by rising food prices, 167,
170

Starvation, occurs where little live-
stock, 102

State benefactions equal State pow-
ers, 203

Steel diverted, food to munitions, 3

Stocks: amount (1939), 99; food,
running low, 109; in form of live-
stock, 100; no cheap way to carry,
100; not surpluses, 98; seasonal
shock absorbers, 98

Strategy, see Policy

Subsidies: anti-social, 200; consum-
ers, 9; encourage consumption,
200; England vs. United States,
201; expensive, 187; Lend-Lease
and England, 202; low ceilings vs.

free prices, 199; not impersonal,
201 ; patch on patch, 188 ; postpone
inflation, 200; public not trained
for, 228; result of low ceiling
prices, 199; stopgaps, 199; Su-
preme Court warning, 202; to im-
prove diet, 122

Sugar, market and rationed prices,
Russia, 171

Sugar beets, reduced production, 64

Supply: commodities and money af-
fect prices, 156; consumer's meas-
ure of, 12 ; effect declining farm la-
bor, 33; effect price, weather, and
labor, 34; registered by price, 236

Supreme Court warning, subsidies,
202

Surplus, see Production

Tariff, changes, to counteract rising
and falling prices, 172

Taxes: lag after incomes, 182; mu-
nicipal and state, war reduces pur-
chasing power, 168

Time, upgrading world food habits,
131

Tractors, more needed, 45

Trucks: "death-rate" rising, 47;
transportation important, 47

Underwood Tariff Act, 172

Unemployment, and overproduction
myth, 152

United States, number people fed,
98

United States Department of Agri-
culture, 46, 47, 63, 72, 74, 93, 185,
224

United States Department of Com-
merce, 31, 52, 224

United States Department of Labor,
224

Vial, E. E., vi

Vitamins: public not prepared to
evaluate, 121 ; stored in body, 113

Wages: hidden increases, 230; not
reduced in war, 144

War : affects food and clothing least,
169 ; affects supply and demand for
commodities, 157; crops, 67; de-
creases production, 3; depletes
capital, 168; effect on world price
level, 158; financed by deprecia-
tion of capital, 168, 169; food a
weapon of, 4; impedes transporta-
tion of food, 4; increases waste, 3;
plays havoc with food, 3; reduces
number consumers, 6; reduces
standard living, 168; wastes food,
4

War of 1812, effect on U. S. prices,
159

Warren, J., vi

Waste: amount small, 21; an insur-
ance, 140; causes food shortage,
14; consumers, small, 142; distrib-
utors, small, 140 ; exaggerated, 139 ;
farmers, small, 140; food too valu-
able to, 141 ; war increases, 143

Wealth, redistribution, does not
raise standard living, 174

Weather: causes most variability in
food, 61 ; cycles in, 60 ; determines
production, 69; effect on acreage,
58; effect on food, 8, 12, 60

Webner, W. G., 47

WFA: corn prices, 88; feed wheat,
108; hog program, 64, 92; new bu-
reau, 224; wants high prices, 225

Wheat: AAA restrictions, 57; and
livestock, 12; bread, market and
rationed prices, Russia, 172 ; bread,
staff of life, 114; consumption of,
71; effect price level and size crop,
177, 178; efficiency in production,
43; expansion, 68; for feed, 108,
110; for rubber, 109; penalty, 49-
cents, 203; prices, effect local and
world forces, 162; production per
capita declines, 105; stocks, 99,
128; supply guided by cash and
future prices, 165; whole-wheat vs.
white bread, 112

Wickard, C. R.: administrative
changes, 229; division of author-

ity, 225; Lend-Lease estimates, 9,
15, 127; Supreme Court, 203

Wilson, Woodrow, 172

WMC, 217

Wodehouse, P. G., 217

Women, see Labor

World prices, see Prices

World War I: effect on U. S. prices,
159; effect on world prices, 158

WPB: farm machinery, 43, 44; ni-
trogen, 48

THISBOOK was set on the Linotype in a face known by
the style " Modern No. 21." The " modern " part is a fam-
ily name. It indicates that Number 21 is a great-great-
grandchild of faces that were modern in 1800 — new as
compared with the eighteenth-century types that preceded
them, such as Caslon.

The book was composed, printed, and bound by The
Plimpton Press, Norwood, Massachusetts.

ORZOI