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POST-WAR ECONOMIC POLICY AND PLANNING
HEARINGS
BEFORE THE
U SC SUBCOMMITTEE ON AGfRICULTUEE AND MINING
"^SPEcTaL COMMITTEE ON POST-WAR ECONOMIC
POLICY AND PLANNING
HOUSE OF KEPEESENTATIVES
SEVENTY-EIGHTH CONGKESS
SECOND SESSION
AND
SEVENTY-NINTH CONGRESS
FIRST SESSION
PURSUANT TO
H. Res. 408 and H. Res. 60
A RESOLUTION CREATING A SPECIAL COMMITTEE ON
POST-WAR ECONOMIC POLICY AND PLANNING
PART 5
AUGUST 23, 27; DECEMBER 15 TO 18, 1944; APRIL 25, 26;
MAY 24, 1945
POST-WAR AGRICULTURAL POLICY
Printed for the use of the Special Committee on Post-War
Economic Policy and Planning
--kf^^-
3 L r c
POST-WAR ECONOMIC POLICY AND PLANNING
HEARINGS
BEFORE THE
SUBCOMMITTEE ON AGRICULTUEE AND MINING
SPECIAL COMMITTEE ON POST-WAK ECONOMIC
POLICY AND PLANNING
HOUSE OF BEPPSENTATIVES
SEVENTY-EIGHTH CONGRESS
SECOND SESSION
AND
SEVENTY-NINiH CONGRESS
FIRST SESSION
PURSUANT TO
H. Res. 408 and H. Res. 60
A RESOLUTION CREATING- A SPECIAL COMMITTEE ON
POST-WAR ECONOMIC POLICY AND PLANNING
PART 5
AUGUST 23, 27; DECEMBER 15 TO 18, 1944; APRIL 25, 26;
MAY 24, 1945
POST-WAR AGRICULTURAL POLICY
Printed for the use of the Special Committee on Post- War
Economic Policy and Planning
99579
UNITED STATES
GOVERNMENT PRINTING OFFICE
WASHINGTON : 1945
0
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'"S. SUPERIWTENDE^T OF duGU*i£N7
S£F 14 1945
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SPECIAL COMMITTEE ON POST-WAR ECONOMIC POLICY AND
PLANNING
WILLIAM M
JERE COOPER, Tennessee
FRANCIS WALTER, Pennsylvania
ORVILLE ZIMMERMAN, Missouri
JERRY VOORHIS, California
JDHN R. MURDOCK, Arizona
WALTER A. LYNCH, New York
THOMAS J. O'BRIEN, Illinois
JOHN E. FOGARTY, Rhode Island
EUGENE WORLEY, Texas
COLMER, Mississippi, Chairman
HAMILTON FISH, New York i
CHARLES L. GIFFORD, Massachusetts
B. CARROLL REECE, Tennessee
RICHARD J. WELCH, California
CHARLES A. WOLVERTON, New Jersey
CLIFFORD R. HOPE, Kansas
JESSE P. WOLCOTT, Michigan
CHARLES S. DEWEY, Illinois 2
Subcommittee on Agriculture
ORVILLE ZIMMERMAN, Missouri, Chairman
JERRY VOORHIS, California HAMILTON FISH, New York 2
JOHN R. MURDOCK, Arizona CLIFFORD R. HOPE, Kansas
Marion B. Folsom, Director of Staff
Henry B. Arthur, Consultant Theodore W. Schultz, Consultant
« R3r>lacod in Seventy-ninth Congreps by Jay LeFevre, New York.
* Replaced in Seventy-ninth Congress by Sid Simpson, Illinois.
FOREWORD
The fourth report of the House Special Committee on Postwar
Economic PoUcy and Planning, issued September 8, 1944, contained
a brief discussion of the principal problems of agriculture in the post-
war reconversion period.
Shortly after the publication of that report the Subcommittee on
Agriculture and Mining undertook a series of hearings to investigate
further the problems discussed in the fourth report. As a first step
the subcommittee felt it was important to inquire into the longer range
goals toward which our agriculture should seek to reconvert. With-
out a clarification of our objectives in this field it seemed clear-that
no constructive national policy could be developed other than one of
temporizing with immediate problems and complaints.
The subcommittee's inquiry was begun on August "23, 1944, with
testimony from Secretary of Agriculture Claude R. Wickard and War
Food Administrator Marvin Jones. After receiving statements from
these two administrative officials, it was felt that a canvass should be
made of the views of the leading nongovernmental students of agri-
cultural problems.
The bulk of these hearings therefore record the views of some of
the people who have been associated with programs for agriculture
and have made exhaustive studies of its problems. In inviting its
witnesses to appear at the hearings, the subcommittee asked for sugges-
tions upon four basic questions:
1 . Basic long-run policies to lessen instability of income result-
ing from variations in production and in demand;
2. Basic policies to place agriculture on a satisfactory self-
sustaining basis in long run ;
3. Policies to promote higher levels of consumption and nutri-
tion; and
4. Relationship between our foreign trade policj^ and domestic
agriculture policies.
Oil the basis of this testimony the subcommittee plans to reexamine
the major goals to be sought in framing agricultural legislation to the
end that specific laws may be coordinated and directed toward more
definitely understood goals. One of the assignments of the House
Special Committee on Postwar Economic Policy and Planning has been
that of studying and reporting to the Congress upon the basic com-
ponents of a coordinated postwar economic policy for the Nation. It
is the plan of this Subcommittee on Agriculture and Mining to examine
the problems of agriculture from the points of view both of the farmers
themselves and also of the national well-being and the attainhient of
our goal of a stable and prosperous economy, one which preserves,
protects, and promotes freedom, enterprise, and high attainment.
The views expressed in this report of hearings contain valuable
contributions to this end.
(Signed) Orville Zimmerman,
Chairman, Subcommittee on Agriculture and Mining.
Ill
CONTENTS
Page
Foreword iit
Testimony of —
Hon. Claude R. Wickard, Secretary of Agriculture (accompanied by
Howard R. ToUey and Bushrod Allin, of the Bureau of Agricultural
Economics) 1227
Sherman E. Johnson, Bureau of Agricultural Economics 1268
Hon. Marvin Jones, War Food Administrator
Theodore W. Schultz, professor of agricultural economics, University
of Chicago -,- \ 1340
L. J. Norton, professor of agricultural economics. University of lilinois- 1361
John Brandt, president. Land O'Lakes Creameries, Minneapolis,
Minn - 1381
Karl Brandt, Food Research Institute, Stanford University, Califor-
nia 1406
Allen B. Kline, president, Iowa Farm Bureau Federation 1429
Oscar Heline, president. Farmer Grain Dealers Association 1430
Noble Clark, chairman, Committee on Post- War Agricultural Policy,
Association of Land-Grant Colleges and Universities . . 1451
John Black, professor of economics. Harvard University 1478
Edward A. 0'Neal,'president of the American Farm Bureau Federa-
tion 1509
Mrs. Charles W. Sewell, director, Associated Women of the American
Farm Bureau Federation 1540
Russell Smith, legislative secretary. National Farmers Union 1546
G. N. Winder, president. National Wool Growers Association 1547
J. B. Wilson, chairman, legislative committee. National Wool Growers
Association 1563
Congressman Adolph J. Sabath, Chicago, 111 1572
Fowler McCormick, president of the International Harvester Co.,
Chicago, 111 1579
Arnold P. Yerkes, supervisor of Farm Practice Research, International
Harve.ster Co 1593
I. H. Hull, manager of the Injdiana Farm Bureau Cooperative Asso-
ciation 1599
Horace B. Davis, United Farm Equipment and Metal Workers of
America. Congress of Industrial Organizations 1607
J. K. Galbraith, New York City, N. Y 1617
Paul Darrow, Chicago. Ill- i 1624"
Theodore W. Schultz fcontinued) 1627
Joseph S. Davis, director, Food Research Institute, Stanford Univer-
versity, California 1643
Edwin G. Nourse, vice president, Brookings Institution, Washington,
D. C , 1667
SCHEDULE OF TABLES AND CHARTS
Table No. 1. Total United States cotton exports, by crop seasons 1216
Table No. 2. Farm and nonfarm income, 1910-43 1255
Table No. 3. Cyclical movements in per capita farm and nonfarm income. 1351
Table No. 4. Calories and proteins from an average acre of land and dav
of man labor in the United States used in the produci^ion
of different foods 14S9
Table No. 5. Cash income of various products and relative importance in
13 Western States for 1943 1567
Table No. 6. World produci^ion of wool ]5'"»S
Table No. 7. Relationship of prices during 1909-14 1 570
Chart No. 1. World imports and United States imports, value and quan-
tity, 1929-38 1253
Chgirt No. 2. LTnited States national income, industrial production, imports
and exports, 1919-38__i 1254
Chart No. 3. Cyclical movements in farm and nonfarm income 1344
Chart No. 4. Wholesale prices of all commodities. United States, 1801 to
date. . 1363
Chart No. 5. National income, farm marketings, and percent that market-
ings were of national income, 1910-44 , 1364
V
. EXHIBITS
Introduced Appears
No. at p. on p.
1. Report of the New York State Emergency Food Commission,
October 16, 1944, submitted by William I. IMyers, dean,
College of Agriculture, Cornell University 1688 1689
2. Statement by Donald R. Murphy, editor, Wallace's Farmer
and Iowa Homestead 1688 1692
3. A Plan for Price, Surplus, and Production Control for Farm
Products, submitted by John Brandt 1386 1694
4. Supplementary statement by Paul Darrow 1625 1699
5. Supplementary statement by Joseph S. Davis 1656
VI
1703
POST-WAK ECONOMIC POLICY AND PLANNING
WEDNESDAY, AUGUST 23, 1944
House of Representatives,
Subcommittee on Agriculture and Mining
OF THE Special Committee on Post-War
Economic Policy and Planning,
Washington, D. C.
The subcommittee met, pursuant to call, at 10 a. m., in room 1304,
New House Office Building, Hon. Orville Zimmerman presiding.
Present: Representatives Zimmerman (presiding), Voorhis, Mur-
dock, Colmer (chairman of the special committee), Worley, Reece,
Hope, O'Brien, Wolcott, and Wolyerton.
Also present: Marion B. Folsom, director of staff, and G. C. Gamble,
economic adviser.
Mr. Zimmerman. The subcommittee will come to order.
This is the first meeting of the subcommittee on Agriculture and
Mining of the Post-War Economic Policy and Planning Committee.
Due to the importance of agriculture in our national economy now and
in years to come, we felt that we should consider the problem of agri-
culture before we took up a program for the future of mining.
The committee, at an informal meeting a few days ago, decided that
it would be proper to open this study with representatives from the
Department of Agriculture, and we have invited the Secretary of
Agriculture and members of his staff to come here and talk with us
about the future problems of agriculture and the part that agriculture
must play in our economy of tomorrow if we are to have a healthy
economy in our Nation.
I see the Secretary present, and if there is no objection, we will
open the hearing today by hearing from Secretary Wickard, of the
Department of Agriculture.
STATEMENT OF HON. CLAUDE R. WICKARD, SECRETARY OF
AGRICULTURE (ACCOMPANIED BY HOWARD R. TOLLEY AND
BUSHROD ALLIN, OF THE BUREAU OF AGRICULTURAL ECO-
NOMICS
Secretary Wickard. Mr. Chairman, and members of the committee:
I am glad to have an opportunity to appear before tliis group. It
is most encouraging to know that your committee, which is interested
in all phases of the Nation's post-war problems, is so deeply concerned
with agriculture. I am especially glad to be able to present some of
agriculture's problems to a group with such broad interests, for the
essential condition of a sound post-war agriculture in this country
lies outside the field of agriculture proper. It is full employment in
1227
1228 POST-WAR ECONOMIC POLICY AND PLANNING
this country which, in turn, is partially dependent on expanded world
trade and full employment in other countries.
Until recently American farmers have been concentrating their
energies on converting agriculture to a full wartime basis, and today
full production for victory remains their chief concern. They have
produced bountifully for war, under heavy handicaps. Now they are
beginning to ask what the future will hold lor them in the years after
the war. Not only in justice to farmers, but in the interests of our
whole population, this Nation must have an adequate and sound
post-war program for agriculture. We cannot afford to stand by
and allow farmers to fall into the same pit they fell into after the last
war.
People in the Department of Agriculture already have done con-
siderable thinking about the place of American farmers in the post-
war world. We have, I believe, singled out the main problems, even
though we don't even pretend to have all of the answers.
Most of the post-war work to which I refer has centered in the
Department's Interbureau Committee on Post-War Programs estab-
lished in 1941, a few months before we got into the war, and in the
allied efforts of specialists in the Department's Bureau of Agricultural
Economics. Regional committees made up of field representatives
of the Department and of representatives of the Land Grant Colleges,
have worked closel}^ with this committee. The Interbureau Com-
mittee already has made good progress in assembling a supply of
information on probable post-war situations as they will affect agri-
culture. Also it has given much thought to measures which might be
used to cope with some of the situations which may arise.
Naturally, most of my remarks will deal with economic phases of
the question. I want to make it clear, however, that our basic con-
cern in planning for agriculture in the years after the war must be
with people, not trade balances or price levels. A sound post-war
pattern for agriculture must mean abundant food and fiber for con-
sumers and security and a good way of life for farm families. Eco-
nomic methods for reaching those objectives are of great importance,
but only as a means to an end.
The problems which will confront our post-war agriculture are
many and varied. Most of them are difficult; they will require careful
consideration. But when peace comes one central problem, over-
shadowing and affecting all of the others, will confront American
farmers and indeed the whole Nation. That problem is how to make
good use of the tremendous productive capacity of our farms.
This year the Nation's farmers, with a smaller labor force than
before the war, are achieving a production level about one-third higher
than that of the peacetime period. Their post-war capacity to pro-
duce will be even larger, as more materials become available for new
farm machinery, equipment, and fertilizer; and as hundreds of thou-
sands of strong and skilled farm operators and workers return from
the armed forces or war industries.
If we are able to find use for all of that huge productive capacity,
the remainder of our farm problem, serious as some of its aspects are,
will be manageable. If, on the other hand we fall very far short of
putting to use all that our farmers are able to turn out, the prospects
for our agriculture and indeed for our whole national economy, are
dark.
POST-WAR ECONOMIC POLICY AND PLANNING 1229
Our agriculture will enter the post-war period geared to a high
domestic demand growing out of wartime full employment and the
great needs of our armed forces, and a high foreign demand based at
present largely on lend-lease operations. From the experience of
the past few years, we know what large production, fully matched by
effective demand, can mean to American farming and farm people.
Prices for nearly all farm products are good. The present average is
about 15 percent above parity, and 80 percent above the average for
the 5 years ending with 1939. Farm income is the highest in our
history.
There is no question as to our continued — or even increased — -
ability to produce. Nor is there any serious doubt that in the years
after the war the people of this and other countries will need, for their
well-being, all of the farm products we can turn out. The real ques-
tion is whether we can maintain effective demand for our full agri-
cultural production— ^in other words, not whether all our farm pro-
duction will be needed, but whether it will find a good market.
In general, the pattern of our wartime farm production is in line
with probable post-war needs. Most of the production increases we
have made during the war have been in the right direction — milk,
eggs, vegetables, and other protective foods that people need in
larger quantities. There will be some products, of course, notably
the vegetable-oil crops, in which we shall need to make downward
adjustments when they again are available from the parts of the
world which produced them so heavily before the war.
As I see it, three conditions must be met to assure a demand for all
of our farm production on a sound, permanent basis. First, and
most important, is full employment in this country at fair wages and
salaries, so that people will have the money in their pockets to buy
the farm products they want and need. That, incidentally, is the
reason why agriculture is so deeply interested in the nonagricultural
problems your committee is considering. Full domestic employment
w^ould provide a market for most of the things our farmer will be
able to produce.
But it would not provide a market for all of them. Tentative
estimates indicate that even full employment in this country would
require the output of fewer acres than are under cultivation this
year. Those estimates, I wish to point out, assume that the efficiency
of our farm production methods will continue to improve. American
farmers never have stood still with production techniques and I see
no reason why they would or should start now.
The second condition to be met is assistance to low-income families
in obtaining more food and textile products from our farms. Under
present income patterns, even full employment would fail to give
millions of families the buying power to purchase enough of these "
commodities. Government programs to increase food and clothing
consumption — along the lines of the food-stamp and school-lunch
programs — will be of great assistance in keeping our farm plants
running at top capacity, as well as making it possible to have all our
citizens properly nourished and well clad.
Such programs would help a lot, but probably even they would not
close the gap between our agricultural capacity to produce and
demand for our farm products. So the third of the conditions that
must be met is a reasonable level of farm exports. Such a level can
1230 POST-WAR ECONOMIC POLICY AND PLANNING
be achieved, provided a pattern for healthy world trade is worked
out for the post-war years.
That is an aim much easier to talk about than to accomplish. The
outlines of the problem, however, are fairly clear when we examine
the main points of world trade in relation to agriculture.
By now, I believe, it is widely recognized that this or any other
nation can hope to maintain a profitable and steady flow of exports
only to the extent that it takes a corresponding volume of imports.
It is ako recognized that to shut off imports results not only in a dam-
ming up of exports, but also in a slackening of domestic employment
and purchasing power.
We shall need to export a certain volume of farm products that
people of other nations want and are in a position to buy. To achieve
such exports will require a vigorous and well-conceived national policy
for both imports and exports. In the case of imports, for example,
we must plan carefully the type of products we want and need and
not reluctantly accept what may be thrust upon us.
Indiscriminate dumping of large amounts of agricultural products
on foreign markets would soon lead to retaliation and new and more
restrictive trade barriers. Ibe most promising long-term solution of
the export problem for farm products lies, it seems to me, in coopera-
tion with otber exporting and consuming nations to -increase world
consumption and assure each exporting nation of its fair share of world
markets. An example of this type of action is the international wheat
agreement, to which this country is a party. Such agreements, of
course, should fit into a general framework for increasing world trade.
Without full domestic employment, supplementary steps to increase
consumption in this country and expandmg world trade, the best farm
policies and programs that could be devised would be more pain killers
than cures. Even price support, necessary and effective as it often
can be, is by no means in itself a permanent cure-all.
Our discussions in the Department of Agriculture, of course, have
included the probable effects of failure to reach the desired levels of
domestic and foreign consumption of our farm products, or for delays
in attainmg them. However, we have approached possible long-term
programs on the assumption that we must come at least close to full
employment. We have reached the conclusion that, should we fall
far short, the only possible answer would be, not only a forcible and
drastic reduction in the living standards of farm people, but a great
reduction in the living standards of the whole Nation. Plans doubt-
less could be made to soften the effect of such a disaster, should it
occur, but defeatist and banlvi'upt ideas of that nature are not the
kind of post-war plans we should concern ourselves with now.
We have been dealing thus far with the conditions that must serve
'as the basis for any construction and lasting set of post-war programs
for agriculture. Most of these have concerned national, rather than
strictly agricultural, policies.
Now, I want to outline briefly what I believe should be the dominant
aims of our policy for agriculture itself.
1. Full production at maximum efficiency: Full and efficient
production must be the basis of our farm policy; to curtail over-all
production or fail to use the most efficient methods would be to admit
defeat. If the nutritional and clothing needs of the people in this
country and our logical customers abroad are completely met, all of
POST-WAR ECONOMIC POLICY AND PLANNING 1231
our present farm plant and the utilization of the most efficient pro-
duction methods would be required. There would, however, have
to be sortie shifting among crops and livestock products, with greater
emphasis on some and less on others. The ever-normal granary idea
should be expanded, both as a means of storing part of the yields of
years of plenty against years of low^er production, and as a means of
stabilizing the income of fanners.
2. Equal living standards for farm and city families: By this I
mean that a farm family should enjoy a way of living comparable to
that of a family of equal capacity and industry which derived its
income from business or industry. Parity prices for farm products
should be only one possible index of whether this aim were achieved.
Parity incom.e would be ' another yardstick. The objective also
includes parity of public services an.d of facilities for rural people, such
as housing, health services and hospitals, schools, and rural electrifica-
tion. An adequate social security program for farm workers, including
self-employed farm operators, also should be developed.
3. Equal protection for all types of farmers: No sound farm policy
can fail to recognize that the needs of farmers vary greatly according
to the size and nature of their operations. Price and income support-
ing programs should be part of national farm policy, for there may be
delays in reaching effective demand for all farm products, and almost
certainly there would be times wdien demand for some products would
temporarily fall off. Just as farmers have an obligation to produce
all that consumers need, the Nation has an obligation. to protect farm
incomes in times of depressed prices. But price protection, although
of the greatest value to commercial farmers, would mean little or
nothing to farmers who marketed only small amounts. Some of these
small farmers need technical advice as w^ell as other assistance.
Others need special assistance in moving up the agricultural ladder
from tenancy to ownership. Families on small unproductive farms
need assistance either in obtaining part-time jobs off the farm or in
acquiring sufficient land to support them decently. Nearly all
farmers need adequate credit facilities, but widely different types of
credit are required.
4. Soil conservation and improvement: These are basic needs, in
spite of all the worry over what to do with our large production.
After all, we not only need scil conservation to insure efficient and
continuing production, but also to encourage stable rural communities
and allow the development of adequate facilities for rural living.
Agriculture cannot bo stabilized until the soil is stabilized. To
insure continued efficiency of production, as well as to guard against
future scarcity, we must do far more than we are now to defend
soil against erosion; to preserve and improve the facility of our
present high yielding soils; and to see that low-yielding and sub-
marginal Idnds are used wisely.
5. Conservation and improvement of forest resources: The Nation's
forests, on both public and private land, constitute a great national,
source of industrial materials, rural employment, and recreational
facilities. These resources are being depleted under present practices
on much private land, but they could and should be replenished under
proper practices. These include proper harvesting, adequate plan-
ning, cultural and other methods, and improved protection against
fires, disease, and insects. Also they should include development of
1232 POST-WAR ECONOMIC POLICY AND PLANNING
uses and marketing methods that will encourage farmers to grow
forest products on land which is best adapted to such use.
6. Encouragement of the famih'- sized farm: This aim is not
included as a pious hope, based on sentimental grounds. It is based
on a belief that the Nation needs' the social stability of millions of farm
families on their own land, and a belief that the family sized farm
results in better rural living without any sacrifice of efficiency and
production. The family sized farm is especially well adapted to the
efficient production of many farm products, especially when the
operators work together through cooperatives. It should be part of
national policy to strengthen the family sized farm through adequate
credit programs and other means.
7. Retirement of submarginal land and reclamation and cultivation
of potentially good farm land: The fact that in the immediate future
there seems to be no need to substantially enlarge our farm plant does
not lessen the urgency for retiring land too poor to yield a decent living
to other uses, and for opening part or all of the estimated 30,000,000
to 40,000,000 acres of productive farm land which can be made
available through irrigation, drainage, or clearing.
8. Improvement in the marketing of farm products: Necessary
improvements in this field cover a wide range, and would benefit both
farmers and consumers. Some of those improvements should be
expansion of farmer-operated marketing cooperatives, elimination of
waste in marketing, further elimination of interstate trade barriers,
additional storage and marketing facilities, and construction of more
farm-to-market roads.
Fortunately the means by which some of the agricultural objectives
already mentioned can be reached tie-in closely with the attainment
of full national employment. Improved m.edical care, for example,
is among the services most urgently needed if rural living is to be
brought on a par with urban living. Development along that line, to
be anywhere near adequate, would require the services of thousands
of doctors and nurses, and the construction of hundreds of rural hos-
pitals and dispensaries. There is a great need for better rural housing.
On less than a million of the Nation's 6,000,000 farms are the houses
up even to a minimum adequacy measured by urban standards.
More than a million rural homes are really beyond repair, and many
other types of farm buildings need repairs or replacement. The
possibilities of an expanded program of rural electrification are almost
limitless. Electricity is needed both as a home convenience and as
an aid to farm production. Despite all of the gains of the past 10
yeal-s, only 4 out of every 10 of the Nation's farms yet have electricity.
The remaining need opens a great field for development.
Some of the heavy operations of soil, water, and forest conserva-
tion, such as building terraces and dams and improving forests could
and should require much labor and equipment. It has been estimated
tlifi.t even the minimum amount of work now required in our forests
would require the services of half a million men woi'king a year each.
These and similar badly needed improvements comprise a sort of shelf
of rural works projects. Some of them can be accomplished by pri-
vate enteiprise if domestic employment continues high. If it should
show r-igns of slackening, such projects could become the basis of a
sound rural public-works program.
POST-WAR ECONOMIC POLICY AND PLANNING 1233
■ In conclusion, I want to sound a warning against any belief that
there can be any sizable back-to-the-land movement after this war
i am afraid that a good many people have the idea that there will be
places m agriculture for millions of returning veterans and persons who
leave war plants. There have been such m.ovements in almost every
country after almost every war. In this country, after this war ao-ri-
culture will offer no large-scale possibilities along that line. A sub-
stantial number of our men now in unifoim came from farms Th?t
number will be about sufficient to fill the gap left when women r^iil-
dren, and older farmers drop out of farm work after the war There
IS every reason to believe that a somewhat smaller, rather than laro-er
farm labor force will be needed to turn out full farm production * '
As we have seen, even under the most favorable conditions it will
be no easy matter to maintain and improve the living standards of
family already on the land. We cannot afford again to think of ao-ri-
culture as a refuge or national poorhouse in tim^es of economic dtffi-
culty.
Mr. Chairman that concludes my prepared statement. The mem-
bers of the Interbureau Committee on Post- War Programs for Ao-ri-
culture have prepared statements, which elaborate upon the many
points that I have covered in my prepared statement. I don't know
whether this committee will have time to get into all of those today
but 1 think they will be needed for future reference and study by the
committee or othei-s who may be interested in the post-war problems
of agriculture, and I would like to suggest that they might be inserted
m the record so that they will be available for study.
Mr. Zimmerman. Have you those statements available, Mr. Secre-
Secretary WiCKARD Yes; we have. We have those statements
available. Mr. Smith, who is chairman of the Interbureau Com-
mittee will make^them available to the clerk, if you so desire
Mr. VooRHis. The only thing is, Mr. Chairman, we might like to
hear some of the people who prepared those
Secretary WiCKARD Yes; I meant to say— I did say, I believe—
tnat i don t know whether you will have time to hear all of them
today or not There are about 12 or 13 of them. Some of the men
who prepared them are here.
I thought, in the questions you might ask, we might have some of
these people respond by giving you part or all of the statements, de-
P^??"^|,^PO^^ ^he interest and wishes of the committee
Mr. Hope. I assume that those statements elaborate on and amplify
and make more specific the general suggestions and recommendations
you have made, sir, m your statement.
Secretary Wickard. That is right, sir.
Mr. Hope And I presume, if we should ask you some questions
which would require more specific detailed discussion of what you
have said here that some of the men you have who prepared these
statements, will be prepared to answer those questions
Secretary Wickard. Yes; that is right. I will be glad to turn to
tnem on any matter on which you require more detail than I mav
have m my own mind.
^HoY'f CoLMER. Mr. Chairman, if I may suggest, it might be a good
Idea to have suggestions from the committee as to which particular
1234 POST-WAR ECONOMIC POLICY AND PLANNING
phase of this matter they want to go into, and then the Secretary
could designate
Secretary Wickard. I could read you a list of the various papers or
topics, rather, which have been prepared. I beheve they are up
there before you.
Mr. Zimmerman. Have you another list available?
Mr. VooRHis. Mr. Chairman, I would like to make a suggestion
for the consideration of the committee.
I would like to suggest that we take a reasonable length of time in
order to give us an opportunity to ask questions of the Secretary right
now, and then that we include the statements in the record and try
to inform ourselves as to what the various statements cover — we
can have lists of them— ^and then that we might decide to call different
people on different ones of these subjects to testify, not necessarily to
read their whole statement, but to have a little discussion on that
subject.
Secretary Wickard. May I say that these statements have been
condensed from studies which have been made by the members of the
Interbureau Committee or the committees which have been working
on the particular subjects. They are brief and will not take very
long if you want to hear them.
I didn't want to come up here and insist on all of them being read
this morning, because I didn't know how much time you might have.
I want to say to you, Mr. Chairman, that we in the Department
of Agriculture are most happy to have this opportunit}^ of presenting
oui views on the subject of this committee and would be most happy
to stay here as long as you care to question or hear us.
Mr. MuRDOCK. Mr. Chairman, I notice that one of these, the
second on the list, appears to answer directly the first thing I want to
put to the Secretary, perhaps more than answers it. I wanted to ask
the Secretary regarding the prospects of further farm mechanization,
especially for the small farms.
Mr. Zimmerman. We will go into that gladly, but I think we
should first determine whether we want to place in the record at this
point the 12 statements which have been condensed from studies
which the Secretary has proposed to put in the record at this point.
Mr. Hope. Mr. Chairman, wouldn't it be better, perhaps, as Mr.
Voorhis has suggested, to go ahead and interrogate the Secretary
on some of the things he has brought out, and that will bring out
some of the matters covered in these discussions, I think, and then
after that we can perhaps determine whether we want to include
these discussions just as they are or some of them, or perhaps as to
some of them the subject may be brought out on the discussion.
Mr. Zimmerman. I think that is a very fine suggestion and we will
defer that suggestion until you have had the opportunity to answer
questions of the different members of the committee.
Do you gentlemen have any questions you would like to ask the
Secretaiy?
Mr. Hope. I have some questions that I do want to ask at this
time. I hardly know just where to start. I have not numbered the
questions.
You mentioned the matter of export markets, and, of course, you
mentioned the very obvious statement that if we export we have
got to import also.
POST-WAR ECONOMIC POLICY AND PLANNING 1235
I just wondered if anyone in the Department had made a study
of possible export outlets for farm products during the next few
years and had included in that study also what we might be expected
to have to accept in return for those exports.
Secretary Wickard. Yes; we have made that study, and that study
is included in one of the papers here which has to do with agricultural
full employment.
I thmk that we, perhaps have talked more about the amount that
we might expect to export rather than the amounts of particular
commodities which we might export or import; that is, we have talked
in terms of dollars or percentages of our total exports. I think the
Department has even gone into some studies of the particular com-
modities, but we did not include it in this paper because that is
pretty much in detail.
Mr. Allin is here and he might give you some information along
that line if you wish to hear it.
Mr. Hope. I would like very much to have some summary of
what the Department considers to be our possibilities as to customers,
not only as to
Secretary Wickard (interposing). Do you want it in dollars or per-
centages, or by commodities?
Mr. Hope. I want types of products, amounts, and destinations,
particularly.
Secretary Wickard. Do you have with you this morning that
much detail on types of nroducts, amounts, and destinations?
Mr. Allin. What we have done is to study the relationship between
our past customers and changes in national income. That was the
basis on which we made our estimates; and on one assumption; on
the assumption that we maintain full employment, maintain price
levels at about what they were in 1943. We might expect national
income in a year after the transition of about $150,000,000,000 which
is about what we had in 1943.
Now, if we have that kind of national income, and if- we have full
employment, on the basis of relationships that existed in the past,
we might expect to export about a billion dollars worth of agricultural
products.
Now, how do we arrive at that? Normally — I say normally, for
many years in the past — our exports of agricultural products — I will
put it this way: From about 1925 to 1929, our exports of agricultural
products have represented about 37 percent of our total exports.
From 1935 to 1939 they represented about 25 percent of our total
exports.
Now, looking ahead to a true post-war year, which we would say
arbitrarily 1950, we estimate that that percentage of our total exports
will probably decline to about one-sixth and the reason the percentage
of our total exports would decline is that that is in line with a long-
term trend which has existed since, oh, way back, 1850. We have some
data on that from the statistical abstract which might be useful to you.
So we say that if our agricultural exports in 1950 are one-sixth of
our total exports and we export $6,000,000,000 worth of goods, which
is about the volume we would export at that level of national income
on the basis of past relationships between-^xports and national income,
if we export about a billion dollars worth, that would probably be
distributed between the various commodities — well, it is awfully
1236
POST-WAR ECONOMIC POLICY AND PLANNING
difficult to say how much each commodity would represent of that
total, but we think perhaps about 8)2 million bales of cotton and about
75,000,000 bushels of wheat, but it is very difficult to build up a billion
dollars worth of agricultural exports by looking at the prospects for
each commodity.
Take cotton, for example. In the case of cotton, we have got the
competition of synthetic fibers coming in, and competition of other
countries going into cotton production, the willingness of other coun-
tries to sell at lower prices than we are willing to sell "at. You can raise
that figure anywhere from three and one-half to seven million bales,
depending on what you think our policies might be, but if you were
going to export a billion dollars worth of products in 1950, about
Z]i million bales of cotton is about all we can get in that total,
and we don't see how, if the situation in the future follows past
relationships at all, our total exports would be much more than a
billion dollars.
Mr. Zimmerman. May I interrupt you at that point?
Mr. Allin. Yes.
Mr. Zimmerman. Would you supply a total there of our cotton
exports over a period of years, at that point in the record?
Mr. Allen. Yes, sir.
Mr. Zimmerman. A long period?
Mr. Allin. Yes, sir; we have them.
Mr. Zimmerman. So that the trends may be shown, as a supplement
to your statement as to what we might hope to export?
Mr. Allin. Yes, sir; that would be shown.
(The matter referred to is as follows:)
Table 1.— -Total United States cotton exports, by crop seasons
[Bales: 500 pounds gross weight]
Season
Bales
Season
Bales
Season
Baies
1850-51 to 1859-60 i.
2, 360, 000
138, 000
2, 846, 000
4, 258, 000
6, 105, 000
6, 800, 000
8, 027, 000
5, 973, 000
6, 348, 000
5, 007, 000
1923-24. .
5,815,000
8, 240. 000
8, 267, 000
11,299,000
7, 857, 000
8, 419, 000
7, 035, 000
7, 133, 000
9, 193, 000
1932-33
8, 895, 000
1860-61 to 1864-65 2...
1924-25...
1933-34
7, 964, 000
1870-71 to 1879-80'...
1925-26
1926-27 .-..
1927-28
1934-35 .
5, 036, 000
1880-81 to 1889-90'-.-
1935-36... . -
6, 267. 000
1890-91 to 1899-1900 '.
1936-37 .
5, 689, 000
1900-01
1910-11
1920-21
1921-22..
1928-29
1929-30
1930-31
1931-32
1937-38
1938-39
1939-40 .
1940-41
5, 976, 000
3, 512, 000
6, 505, 000
1, 174, 000
1922-23... ' - ..
' 10-year average.
2 5-year average.
Source: Division of Statistical and Historical Research, Bureau of Agricultural Economics.
A billion dollars worth of exports would represent about one-
seventeenth of the gross farm income that might be expected under
under those conditions. In other words, we might expect about a
$17,000,000,000 gross farm income, one billion of which- — well, it would
be less than a billion — something less than a billion would be repre-
sented by exports. Most of it would be production for home con-
simnption, and that seventeen billion would compare with about
twenty billion gross income in 194.3.
Now, that is under the assumption of full employment and the 1943
price level and a $150,000,000,000 income.
POST-WAR ECONOMIC POLICY AND PLANNING 1237
Mr. Zimmerman. Mr. Colmer, do yoii have a question?
Mr. Colmer. I think the gentleman answered mv question
You said based on a $150,000,000,000 nationaf income "Did we
get up to one hundred and fifty bilKon in 1 943?
Mr. Allin. About one hundred and forty-eight bilHon, just about
Mr. Colmer. Well have we any grounds or justification for hoping
that we will have one hundred and fifty billion income in the next few '
years — be able to mamtain anything like that?
Mr. Allin. Well, sir, as a-^^ —
Mr. Colmer (interposing). I may be taking you too far out of your
particular field, birt it seems to me that in making your assumptions,
they are just a httle broad. ^ '
Mr. Allin. All right; let me contrast that statement and the con-
sequences to agnculture m that assumption with another assumption
which we have also made. ^
We are not forecasting in this analysis; we are trying to see what the
situation of agriculture would be under different assumptions Let us
say, as you have, that that is a very optimistic assumption', iust for
the sake of discussion. t , j ^ xv^i
Now, let us assume that we have 7,000,000 unemployed instead of
ull emp oyment, which would represent about the same proportion of
tlie total labor force unemployed as it was in 1940. Now if that is
the situation that prevails in 1950, prices would not then remain as
high as they were in 1943. They would probably decHne
Now, assuming they fall to an average of what they were between
1938 and 1942, if we have 7,000,000 unemployed, then the nationd
income would not be $150,000,000,000; it would be $110,000 000 000
And, with $ 10,000,000,000 national income and 7,000,000 mWploy-
ed— i forgot to say a moment ago that under this assumption of
full employment, farm prices would stand at about parity on the
average-under the assumption of 7,000,000 unemployed, farm
prices would fall to less than 90 percent of parity, but gross farm
ncome would fa 1 to about $12 000,000,000, which is about one-tS
less than what it would be under full employment, and the net farm
mc^me would fall to half of what it would be^mder full emproyment
Toonnon'^'' can go on with another assumption, and instead of
7,000,000 unemp oyed we have 15,000,000 unemployed, and if we
have something like that, our national income might eLily fall to
sixty or sixty-five billion, and farm prices might fall to 55 pJrce^t of
parity, and the gross farm mcome might fall to five or six billion
which would be a very bad situation. unuon,
Now, I lay these out and you can draw your line that you expect
TJe^tst' "^ '"'' '^''' '''' '^ assumptions, if you wanrto
Now, coming back to your question, "What have we done to show
how much we might export," the net result of our study is thl
That because of the fact that agricultural products, our agricultural
products, do not enjoy the same technical superiority over the products
automobiir^p't'"'! '''T''' ^? ^^^ T^ manufacture"^! product? such a
f^^Zlil\ ''*''^' ^^' J^' ^^'^ ^'^.^ P^"^^P^^^ "^ foreign trade lies not
m any great expansion of our agricultural exports, but in a great
Mr. VooRHis. May I interrupt you at that pomt?
99579— 45— pt. 5 2 •
1238 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Allin. Yes, sir.
Mr. VooRHis. Is there any possibility of such an expansion ot our
total exports unless there takes place, in view of the great importance
of the American market relative to other markets m the world, a cor-
respondmg increase ui the volume of our imports?
Mr. Allin. No, su-. ■ ,. ■ • -i
Mr. VooRHis. And can there be a correspondmg nicrease m tiie
volume of our imports without causing domestic unemployment unless
we have a policy of high national income and full employment, such as
you and the Secretary have been envisaging.
Mr. Allin. That is right. ' . ,, ,
Mr. VooRHis. In other words, the possibility ot agricultural ex-
ports depends directly upon our pursuing a policy of full employment
at home.
Mr. Allin. That is right, sir.
Secretary WiCKARD. That is right, sir.
Mr. WoRLEY. Does the gentleman have any suggestions as to how
we may procure that full employment at home?
Mr. Allin. That is a broad question. • o tvi- t i
Mr VooRHis. May I ask one question on that point? May i ask
you this- Would you say that, for the sake of agriculture, it would be
necessary or sound policy for us to say that to the extent unemploy-
ment could not be avoided by other and better methods— and 1 think
there are better methods— wc should provide for public works em-
ployment to the extent necessary?
"\/f y. A T T TT^ "x PS Sir.
Mr! CoLMER. May I ask a question right there, Mr. Chau-man?
Mr. Zimmerman. Yes, sir. ,
Mr CoLMER. That raises a rather broad question, doesn t it: the
ability of the country to finance a long, large, voluminous public
works program?
Mr. Allin. Are you asking .
Mr CoLMER (interposing). I am asking you if there isn t a limit to
which the Federal Government can go in the expenditure of pubhc
funds, consistent with maintaining the faith and credit of the Govern-
Mr Allin Well, su-, I should say there undoubtedly is a hmit;
but I should also say that there are ways by which we can do, as a
country, as a nation, what needs to be done to maintain full employ-
"^ In other words, you are taking me just a little bit out of my field here
into the whole problem of Federal financing, but I believe there are
better wavs. I think one of the first thmgs that should be done is to
do evervthino- possible to stimulate private employment. ' It after
that has been^done, there is still unemployment and private enterprise
cannot fill in the gap, then there are techniques of Federal nnancmg
by which it can be done by public funds.
Mr. MuRDOCK. May I ask a question at that point?
Mr. Allin. Yes, sir. ^i +
Mr MuRDOCK. Doesn't it depend pretty largely upon the nature
of tliose public works . Son ; e public works are made work ; leal-rakmg,
gravel scratching, and that sort of thing which merely keeps people
from starving. I hope that we never have to resort to that again.
Other public^works are in the nature of mvestment. borne ot them
POST-WAR ECONOMIC POLICY AND PLANNING 1239
indii-ectly return v,aliie paid out, as in public roads and that sort of
thing. Still other public works arc revenue producing from the
start, and wealth-producing, and form the basis of new wealth. Such
public works are not limited as Chau-man Colmer has indicated, to
such an extent as are the made works.
Mr. Allin. Yes, sir.
Secretary Wickard. May I add one other point to what you have
just said?
Mr. MuRDOCK. Yes, Air. Secretary.
Secretary Wickard. There are some which are self -financing or self-
liquidating, like the rural electrification program, which means that
not only will the fund be paid back, but a tremendous increase made in
the manufacture of goods or the production of farm products.
Mr. VooRHis. May I ask a question at that point?
Is there any reason why the sovereign nation should be required to
sell securities to provide for the money which the banks create to
finance a Boulder Dam which will pay back its entire cost over a period
of years, with interest? Is there any reason we could not finance a
Boulder Dam on a noninterest basis in the first place?
Mr. Allin. The main thing is that isn't our custom.
Mr. VooRHis. Is our present custom a sound custom?
You need not answer my question. Every time we begin talking
about full employment tliis question is always coming up. But to the
extent that any amount of money which might be put in cii-culation
can be matched by corresponding production, thus avoiding any in-
crease in the price level, there is no reason why the interest-bearing
public debt should be increased to put that money in cu'culation,
regardless of the purpose for which it is done.
Mr. Colmer. Mr. Chahman, I just want to apologize for getting
the gentleman so far out of his own fit^d, but I did want to again sound
a note of warning and to be on record that, in mj^ opinion at least, the
answer to all of this post-war condition is not public-works programs.
Of course, there is a place for'a public-works program, and this com-
mittee has spent a lot of time making recommendations along that
line. So many people, Mr. Chairman, approach the subject with the
idea that we are going to solve all of the post-war problems by putting
on a gigantic W. P. A.
I don't think that is the answer to it, and I again apologize for
having gone so far afield.
Mr.,VooRHis. Mr. Chairman, may I say that I don't thmk that is
the answer either. I think it is only the last resort, and there are
other things which may be done first and should be done first.
Mr. Worley. I don't apologize, if I started that line of questions,
because I think it is very germane and pertinent to the subject.
As I understand, your suggestion is that public works would be a
portion, not the total, of the economic panacea we are trying to find.
You take the position that it is just a part?
Mr. Allin. May I make a brief statement on that?
I think, from the standpoint of public policy, if you look back to
what we have been doing since 1933 when we came into the depression,
w^e had no plans for public works to relieve unemployment. It has
been customary in this country — using the term "customary" again —
for public works, in the sense of State and local public works, to decline
1240 POST-WAR ECONOMIC POLICY AND PLANNING
at exactly the same time that private income and private employment
decline. r i i
Well, the Federal Government was the only agency powertul enough
financially to come in and fill in the breach when we had large-scale
miemploymcnt. The cities and counties were not in position to do it.
Now, looknig ahead, if not only the Federal Government, but the
States and the localities will plan their useful public works— not leaf-
raking — so as to time them with fluctuations in the business cycle, a
real contribution to stabilization and the maintenance of employment
will be made. But it is not the whole story at all, as Congressman
Voorhis has said. There are a lot of things that are fundamental and
come before that, but it is one of the answers.
Mr. WoRLEY. Do you believe that the prosperity we are now enjoy-
ing is a healthy prosperity?
Mr. Allin. a healthy prosperity?
Mr. WoRLEY. Am I getting you out of your field?
I will elaborate on that. We are going on the three assumptions
you make, one of which is 7,000,000 unemployed in, say, the next few
years. It seems to me that is the m.ost logical and practical assump-
tion, because we had it prior to our entry into the war and I think
we will revert to it. We will be facing, assuming that is true, the same
conditions that prevailed in 1939 and 1940. Did we have seven or
nine miUion unemployed?
Mr. Allin. We had about that number in 1939.
Mr. WoRLEY. If the war had not come along, don't you think we
would still have the same number of unemployed?
Mr. Allin. If the war had not come along, we would certainly have
had a larger number of unemployed, yes.
Mr. WoRLEY. At least that many?
Mr. Allin. Probably. "
Mr. WoRLEY. Do you recommend we take the same steps to guard
against such an unemplovment figure as we were taking when that
condition actually existed? What steps did we take to reheve that
unemployment? ^ -^ ,•
Mr. Allin. Well, what really relieved that unemployment situation
was the advent of the war. . .
Now, that prosperity is unhealthy m the sense it is a wartime
prosperity: but I wouldn't go so far as to say that, as a nation, we
couldn't do other tilings than have a war to maintain full emploj^ment.
Mr. WoRLEY. Say that again? . .■ ■ .
Mr. Allin. I wouldn't say we could not, as a nation, eliminate
that large-scale unemployment which we had before the war without
going to war. ^ • . ^ j
Mr. WoRLEY. Of course, that is the answer we are trying to hnd,
how to do it without a war.
Mr. Allin. Well, there are just lots of things. If you want me to
talk on that subject, I will give you my ideas on it.
Mr WoRLEY. I don't want to burden the committee.
Mr Allin. I think there are a lot of things. I think our tax
policies, for example, should be improved from the standpoint ot
providing the proper incentives to private enterprise. I think that
the Government could do something to give incentives to small
business and control the expansion of monopoly. I thmk that an
POST-WAR ECONOMIC POLICY AND PLANNING 1241
expansion of the Social Security System would make a contribution
toward the maintenance of employment.
Mr. WoRLEY. Were those steps taken in 1939 and 1940 when we
had that unemployment?
Mr. Allin. Were they taken? Not adequately, no, but that is
getting us really out beyond. I am just giving you my opinion. I
think, as a nation we could, by following sound pohcies, promote
private enterprise by other means at our disposal and reduce unemploy-
ment much below what it was just before this war broke out.
Mr. Zimmerman. May I suggest at' this point that we have another
subcommittee on pubhc works; maybe we had better leave the ques-
tion of public works for that subcommittee'^
Secretary Wickard. May I add, Mr. Congressman, in further reply,
that I think one of the things we are going to have to do is to have
freer international trade than we have had in the past.
To answer your question of what we could do: AH of the restric-
tions against international trade were not of our own making, you
understand, but I do hope that, out of the peace settlement, we can
have an exchange of goods and services between nations which wih
help all nations. I think, as I said in my talk, that our prosperity
is related somewhat to world prosperity, and, vice versa, world pros-
perity is related somewhat to our prosperity.
I hope we can improve that condition compared to what it was
before war broke out. At that time some countries were trying to
get on a self-sufficiency basis to prepare for war. If we can have
the right kind of peace, surely we can do a lot. Other nations make
thmgs we don't make but which we need. If we could have that
kind of exchange, it would help a lot.
Sometimes it doesn't seem to me to take too much of a chunk to
keep the wheels from rolling, but does take a large chunk to make
them roll. We have to look on the Government in that way; not
something which furnishes the big means to keep the wheels rolling,
but something to keep the chunk out.
Mr. Worley. Then you don't think we can have prosperity here
at home without freer and more foreign trade?
Secretary Wickard. No, sir; not the kind of prosperity I am talk-
ing about.
Mr. Worley. A healthy prosperity.
Mr. Zimmerman. Mr. Hope, I am sorry your line of questioning
was interrupted. Have you further questions?
Mr. Hope. I do want to ask Mr. Ahin some further questions.
Eight at this time I would like to ask the Secretary what he thinks
the prospects are for a freer international trade in the future.
The thing that disturbs me is that apparently many nations are
going to operate on some system of government control of trade. We
know Kussia operates that way, unless they change their system, and
everything we hear now indicates that Great Britain will operate on
a basis of government control of exports.
The condition of many of the countries in Europe which have been
in the war is going to be such that they will probably have to control
foreign exchange in order to maintain their own financial systems ;
that would mean that there would have to be control over exports
and imports.
I am wondering if you agree with that, and, if so, whether you still
think that there is an opportunity for freer international trade. I am
1242 POST-WAR ECONOMIC POLICY AND PLANNING
in perfect agreement with your thought that we ought to have it, but
I wondered what you think about the possibihties for securing it.
Secretary Wickard. I agree with you when you say that there is a
tendency by some nations, at least, to go to what we call a policy of
state trade. I think it might be called state control of trade.
It is difficult for farmers to meet that sort of international trade
situation. Perhaps there will have to be some help from Government
to private exporters and enterprisers to cope with other nations
which are dealing on a state basis. I think that is one of those things
that perhaps will have to be covered in international discussions at
one time or the other. J
You spoke about other nations being burdened by war debts and
so on. Of course, you must remember that other nations are going
to have, great destruction and great depletion of a lot of their resources.
As I said in my paper, I believe we can come to an understanding
about some of the things we need from other nations and enter into a
policy of exchange.
For insta.nce, it occurs to me that we might well buy much of our
potash abroad in large quantities. We are going to need potash, in
my opinion, in increasing quantities in this country to keep up pro-
duction. We ought to keep our own deposits and import largely
from Europe. Germany and Alsace-Lorraine have large deposits,
I don't see why we shouldn't say: We need your potash; you need
some of our commodities. Why shouldn't we work out an exchange
that will be helpful to both?
I think that does perhaps require some of what I might call state
planning, not state operation. I think none of us want to see
private enterprise eliminated because it is to all of our interests to
see that private enterprise be given every opportunity. I think there
does have to be some international planning on that line, and that is
why I 'was hopeful, to answer your question, that we might expand
our international trade despite some of the difficulties in the picture
if we recognize them and try to meet them.
Mr. ZiMMEEMAN. May I interpose there, Mr. Hope?
Mr. Hope. Yes, sir.
Mr. Zimmerman. You gave the example of importing potash' from
foreign countries. How does that fit in with the suggestion that we
must have full production at home? When we talk of full production
we are not only talking about agricultural production but about all
other phases of production. What is going to happen to our pit
owners and producers here at home?
Those are the things we have to face. In one breath you say we
must have full production. It seems that everybody is agreed on
that. We don't want to extend this doctrine of scarcity. Yet if we
hold down production of, say, that commodity at home and import
that commodity from another country in order to give a sale for some
products that they need from our country, it looks as if we are doing
violence to the very thing we have been trying to perform.
Secretary Wickard. My point there is, using potash as an illustra-
tion, that the quantities oi potash in this country, so far as we know,
are not unlimited ; that is, we may at some future time run out of
potash if we use ah of the potash we see available now. Also, I think
if we used ah the potash we have, we would find that it would be at a
hisrher cost than it could be obtained from other countries.
POST-WAR ECONOMIC POLICY AND PLANNING 1243
Therefore, I say why not save the potash for times of emergency
and obtain potash from other countries that have it in large quantities
and can produce it cheaper than we? We can say to other countries,
"There are some things we can produce cheaper than you, automobiles,
for example." If we could work out a policy of exchange it would bo
to the profit of those countries. Some countries can "produce some
articles more cheaply and have a better product than other countries.
We ought to work out an exchange that would not decrease the total
economy in one country but would enlarge it.
Mr. Hope. Of course, in the past we have done a good deal of that,
unconsciousl}^, through our tariff laws.
We have accepted the fact tlmt other countries can produce certain
thmgs more easily or cheaply than we can or that we cannot produce
some things at all. We have governed our foreign trade under that
sort of a program, and that has been the policy right up until now.
As far as this country is concerned, we have not just decided that
we wanted to import certain quantities of certain materials, except
war materials. Before that time, we sort of ran the thing rather
loosely, without any conscious effort to control imports or exports.
But, if other countries are going to follow that method, how far
do you think we have to go, then, ui accommodating ourselves to the
methods they use?
That is the' whole history of the country as far as foreign trade is
concerned.
Secretary Wickard. Well, of course, if all countries go nationalistic,
we will have to go nationalistic, too. However, I am- hoping other
countries won't go nationalistic if we exert the right kind of leadership.
Mr. Hope. I am, too, but we will have to accommodate ourselves
to what the rest of the world does if we trade with them.
Secretary Wickard. Yes; but we ought also to be in a pretty strong
position of leadership.
I am hoping some of those restrictions you are speaking about can
be removed. I hope there are no new ones erected, as I said in my
statement, because I think, if we are not careful, there might be that
tendency, especially if we start to dump a lot of our products abroad
and other nations start doing the same thing, we will get in some of
the same trouble we were in. We were putting up trade barriers and
relyuig on bilateral agreements and the operations of cartels.
Mr. MuRDocK. Will the gentleman yield for a question?
Mr. Hope. Yes, sir.
Mr. MuRDOCK. We accept it as a truism, then, that exports must
balance with imports or imports balance with exports. Your assist-
ant mentioned cotton and wheat as exports. Possibly he had others
m mind, but he didn't name them.
You have mentioned potash.
I find myself in agreement with you. I wonder if you or the assist-
ant would like to mention any other possible imports?
Secretary Wickard. Well, there are, of course, tropical fruits in the
field of agriculture, which can be produced in other countries and can-
not be produced here; or some of them in better quality.
Then I think we ought to consider perhaps some of our mineral
resources as something we ought to keep here pretty well in reserve
and think about some importations. It is not only oil that I have in
1244 POST-WAR ECONOMIC POLICY AND PLANNING
mind. I am not too avoII versed in some of these things, but I under-
stand there are other minerals whieh we are going to need in great
quantities which other nations can produce and have been producing.
We have been using some of them during the war.
I don't know of anything else right now.
Mr. Allin. Tliat is about it, as to agricultural imports, of course,
do not compete-^most of our agricukural imports do not compete
with our own production ; coffee, rubber, bananas. Now sugar does.
Mr. MuRDOCK. And rubber will.
Mr. Allin. All right; and silk, and so on.
Now, during the war, we have been depleting, as the Secretary says,
a lot of our mineral resources, and we might look to increasing im-
portation of some of those products. I think that the point that we
haven't brought out clearly yet is that this term "full employment"
that we have been talking about, as such, does not depend on any
particular level of international trade. What- we want is full employ-
ment at an expanding level of living.
Let me illustrate what I mean. Take bananas and coffee. The
most extreme nationalistic viewpoint would not say that we should
quit importing bananas and coffee; that we should grow them in our
own country. Weff, we could grow bananas and coffee in greenhouses
and it would cost a lot and give employment to a lot of people growing
coffee and bananas. . Obviously we wouldn't do that.
To shift to a choice between making more automobiles to sell to
foreigners and producing more cotton, if you are up against a situation
in which your outlook in the cotton industry is not bright, might it not
be better'as a national policy to take some of the people who are grow-
ing cotton and put them to growing things others do want and will buy
from us rather than to continue growing cotton at a level at which we
could sell previously, but at which we cannot sell any longer?
In other w^ords, what we want is full employment at an expanding
level of living.
Mr. Zimmerman. I think we have had before our fuH committee a
great number of economists and experts in business, and they all tell
us that we must, if we are to maintain a healthy economy in our
country after this war is over, in order to carry on paying the interest
on ou/national debt and take care of the veterans' needs under legis-
lation that has already been passed by Congress, and to provide for
the necessary, operation of the Federal Goverimient and to reduce
the national' debt slowly, we are going to have to have a national
income of approximately 150 billions of doffars; we have been told
that that is a "must."
In other words, we have got to meet that requirement unless
disaster stalks in our way as we^o along. That is what they tell us.
Now, I want to ask this question, because I tliink it has a bearing
on agriculture:
We must have full production, we say, fidl employment at a wage
that people can live on according to certain standards. We must
have those things.
Now, taking in the field of agriculture, how much of our over-all
production can we consume at home? All of it?
Mr. Allin. Well, these estimates I just gave you as to what we
would consume at the prices assumed were that we would be export-
ing only about 10 percent — no, only about — well, the products of
POST-WAR ECONOMIC POLICY AND PLANNING 1245
16,000,000 acres out of the total of 326,000,000 acres; about 5 percent-
95 percent of it we would be consuming at home. '
Mr. Zimmerman. How much agricultural products would we be
importing, then?
Mr. Allin. We would be importing in dollars and cents about
twice as much as we would be exporting, but most of that is noncom-
peting production.
Mr. Zimmerman. But American consumption would be more than
total American agricultural production?
Mr. Allin. That is right.
Mr. Zimmerman. That 5 percent of cotton, wheat, or butter that
we export, that plays a very important part though in our economic
structure, doesn't it?
Mr. Allin. And particularly in the economy of the people who
produce those particular products. That is where the shoe pinches,
the cotton grower, the wheat grower, who is on that export market.
Mr. Zimmerman. Now, we can't have that full production at home
you say we must have unless we, by some means, establish trade
relations with our neighboring nations whereby we can get rid of
■that 5 percent you are talking about, and, of course, get from them
a corresponding amount, which you say will be more than we send
them, of imports.
Now, that is one of the problems we have got to solve if we keep
up maximum production and full employment at adequate wages,
and prices which will keep the national income up to that 150 billion
which we have been told is absolutely necessary if we carry on success-
lully.
Mr. Allin. And the Bretton Woods conference was directly related
to that problem. That, of course, takes you out down another
alley.
Mr. Zimmerman. Yes; that is true.
Studying this agricultural problem then, do you think you would
put our export problems with other countries as the major problem
we have to solve, or one of the major problems?
Mr. Allin. Oh, I would say it is one of the major problems. I
wouldn^t say it is the major problem.
Mr. Zimmerman. If we do not solve it, we are going to
Mr. Allin (interposing). You can say, "if we don't solve it," but
you can turn around and say if you don't solve other problems you
are going to be in awful shape, too.
Mr. Zimmerman. We are deahng with agriculture. This committee
IS trying to find out what to do to promote a healthy agriculture in this
country.
Mr. Allin. At any given time— and I don't know whether today is
that time— that problem of the right trade relations with foreign
countries may be the limiting factor in achieving this whole goal, but
vf ^^v ^^^ ^^^^' ^^ ^^'^ ^^^'^ ^° °^^^^^ things, we might still fall down.
Mr. Zimmerman. There is an old saying that first things must come
first. Is that right?
Mr. Allin. That is right.
_ Mr. Zimmerman. If that is one of the first things we must tackle
m the interest of a healthy agriculture in this country, that is the thing
we ought to direct our energies and thoughts to.
1246 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. VooRHis. I think this is pertinent to what Mr. Zimmerman
has just been asking. Isn't this true: that if we fail to maintain a
full home market, then we are going to be up against the necessity of
trying to get rid of more than 5 percent of our agricultural production?
Mr. Allin. That is right.
Mr. VooRHis. And, as a corollary to that, isn't this true: that if
America maintains a high level of national income and national pur-
chasing power, that even if other nations do go nationalistic, as we
said a while ago, assuming that the American home market is at a high
level, isn't it true that, in all probability, it will be possible to conclude
mutually advantageous trade agreements with other nations to take
care largely of this problem of the necessity of disposing of this surplus
of 5 percent of our agricultural production?
Mr. Allin. Another way of saying that is that the American econ-
omy, in the total world economy after this war — — ■
Mr. VooRHis (interposing). Is so important ■
Mr. Allin (continuing). Is so important that what we do at home
to stabilize conditions at a high level will contribute more to expanding
this trade we have been talking about than any other single thing.
Mr. VooRHis. Ngt only that, but if America has a high level of
economy at home so that we are not afraid of imports — our markets
being that important — we will offer such advantages to other nations
that we should certainly be able to conclude agreements with them
which will take care of the problem Mr. Zimmerman was bringing up
before.
Mr. Worley. May I ask one question?
Mr. Zimmerman. Yes, sir,
Mr. Worley. In your plans for exports and imports, I suppose it
would be necessary for the Government to determine the production
of these given agricultural commodities.
Mr. Allin. No. This' analysis I just presented was based on a
no-support basis, no-support program, no-Government direction of it.
Now, the necessity for these things comes in just to the extent the
situation does not turn out the way we have indicated. What I am
trying to say is that when I said the volume of exports we might
expect in agriculture would be about a billion dollars, that was based
on the relationship between national income and exports in the past,
which goes clear back to the 20 years between 1920 and 1940 when we
did not have any Government programs of any kind, but there are
problems that have been created by this war, as the Secretary
mentioned, products we have deliberately expanded, such as peanuts
and flax, and one thing and another.
Kegardless of whether the thing works out the way I have indi-
cated, we are going to have some adjustment problems in these
particular commodities. You would have to have that much
Government assistance and direction.
Mr. Worley. But your idea is no Government regulation at all;
let the cotton farmer produce all he call produce, all he wants to
produce; the wheat farmer produce all he wants to produce?
Mr. Allin. All I am saying is that under those assumptions there
would be a market abroad for about Sji million bales of cotton.
Whether the cotton farmers, through their Representatives^ in
Congress, are going to say, "We want to export more than that," or
''We want to produce more than 13,000,000 bales," which is all we
POST-WAR ECONOMIC POLICY AND PLANNING 1247
could produce if that was all the market we would have, that is
something else.
It may produce a demand for a program which would support the
price above what it would sell for at the prices I have assumed, or
which would store cotton and make use of it in various ways other
than through the normal export market. Wliether you will have those
or not is another question. All I was indicating is what you might
expect under those general assumptions with those programs.
Mr. Zimmerman. You say the farmer should be permitted to
produce all the cotton he wants to in this full production period?
Mr. Allin. I said that, if we had a national income of
$150,000,000,000 and full employment, cotton prices that would clear
the market would be about 13 cents a pound and that we would be
willmg to export about 3}^ million bales, and the total demand would
be for about 13K milhon bales. Now, whether that is going to be
satisfactory to cotton growers or not, we have no way of knowing.
Mr. Zimmerman. Suppose, when this war is over, they adjust
their spmdles in foreign countries, a great number of spindles in foreign
countries, to the manufacture of other products like rayon and oth1;r
synthetics instead of to the weaving of cotton
Mr. Allin (interposing). We have taken that into account as far
as we can.
Mr. Zimmerman (continuing). And suppose further that under this
expanded program of manufacturing farm machinery and even financ-
ing foreign countries to go into the cotton-producmg business, they
raise a lot of cotton and they are going to enter that world market
and want some manufacture4 products which they need for cotton-
won 't they do that?
Mr. Allin. Yes; if you have full employment conditions and if
cotton prices are at about what I indicated, the tendency would be
for surplus cotton growers to seek nonfarm employment. 'You would
have a comparatively tight labor situation under the full employment
assumption rather than a heavy surplus labor situation which you
would have under conditions of large-scale unemployment.
All I can say is that we have framed these assumptions and taken
into account the relationship of opportunities in industry for our sur-
plus farm labor, and we have taken into account, as nearlv as we can,
what we think is going to happen in the rayon and substitute textile
developments in making those estimates. Thev may /be wrong.
They are tentative, and as we make other analyses, they will be re-
vised, of course. ,
Mr. Zimmerman. Are there any further questions?
Mr. MURDOCK. Mr. Chairman, I have any number of questions.
ihey come flocking.
The Secretary said something about the sub]e(;t of the ever-normal
granary, that it should be extended or developed.
May I ask for a clear statement of what that concept is of the ever-
normal granary, either from the Secretary or Mr. Allin?
Secretary Wickard. Well, I think of the concept of the ever-normal
granary as being very similar to the one we had before the war and
which has been so useful to us during our war production of agricul-
tural commodities, the wheat and the corn and the cotton and all
those staples which cannot be stored. This^ it seems to me, ought to
constitute our ever-normal granary.
1248 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. MuRDOCK. It does not really imply an economy of scarcity?
Secretary \Yickard. Oh, no, sir. The ever-normal granary implies
a stabilized supply of pro(kicts for consumers at all times, and it does
get away from rapid fluctuations in supplies and prices.
Mr. AIuRDOCK. It may mean, however, that some producers are
restricted, leading to what some persons have said is regimentation
of farmers?
Secretary Wickard. Not necessarily. I think that, as you know,
during the war we have had no restrictions on production. The only
governing of production has come about through price, and I think
in the future much w ill depend on the price as to what farmers want
to produce as to kinds and amounts. I don't think the ever-normal
granary necessarily involves any restriction on production at all.
Mr. MuRDOCK. I didn't know whether I understood it or not, but
I thought I did. If it is what I think it is — and you are confirming
the opinion — I favor it, but I have heard so much criticism of the
thing or policy, or something that it is held up as being, that I am
just wondering about it.
The American farmer is an individualist; he doesn't want to be
restricted. We are talking here about full production: turn them
loose and let them produce. Well, that is what I favor, but wdiat is
the danger of a crushing surplus as soon as the starved w^orld gets
filled wnth food and fiber? Are- we in danger of running into trouble
W'ith some surpluses again?
Secretary Wickard. That danger involves, I think, first, what we
produce wdiich goes back to the incentive to produce; and, second,
wdiat we can consume in this country and what we can export abroad.
The danger of surpluses arises, it seems to me, out of those two factors,
our ability to match demand with our capacity to produce.
Mr. MuRDOCK. In other words, we haven't really had overproduc-
tion in food and fiber?
Secretary Wickard. Not from the standpoint of need; no, sir.
Mr. MuRDOCK. I think you are exactly right about that, but if
technology goes on at a rapid rate and we produce more and more
relativel5^ is there any danger of a possible overproduction?
Secretary Wickard. Yes, sir; there is that danger. Again it
comes back, as I said, to wdiether or not we have an effective demand
or not. If we have an effective demand, and people's needs are met,
I think that danger is remote, but if we don't have an effective demand
here and we don't have exports that we should have, then there is a
possibility of producing more than the effective demand will take;
not more, I want to say again, than people need,
Mr. MuRDOCK. I should like to know the best thought of your
department on this matter of new crops and new uses for old crops.
I think possibly that may be brought out in No. 2 on the list you have.
Secretary Wickard. Yes, sir; there is one of the papers that covers
that at least in part.
Mr. Murdock. What are the prospects of chemurgy, for instance?
That is one of the big ciuestions.
Secretary Wickard. I will only answer generally, and maybe one
of the other men might w^ant to go more in detail.
There are always, of course, new uses for our farm products. For
instance, one of the most startling developmeiits to me is the new
uses for wood products, which, of course, in a way is part of our
POST-WAR ECONOMIC POLICY AND PLANNING 1249
agricultural production. We are now rapidly discovering new uses
for wood as a source of construction material, new chemicals, and
things like that.
No one, can, of course, fully perceive what all the new commercial
developments might be. On the other hand, no one can conceive
how much synthetics will take the place of other materials which will
increase the demand for agricultural products. One might offset the
other. That is anybody's guess.
Looking at it purely from the standpoint of what the commercial
developments might be, I don't think we should be too optimistic
about finding a lot of new outlets for agricultural products, especially
when we see how substitutes may replace some of our agricultural
products.
Mr. MuRDOCK. Do you think synthetic fibers might seriously
compete with cotton?
Secretary Wickard. It depends on price relationships, I suspect,
and if our prices on cotton are too high, it is always easy to find a
substitute when prices are high on any product.
I think there is grave danger that synthetics will play a more
important part in our fabric production than they have in the past.
Mr. MuRDOCK. Mr. Chairman, I had jotted down here as the first
question the matter of mechanization on the farm, that is, the small
farm.
Now, the Secretary has indicated that agriculture cannot take very
many of the returning veterans, or has no place for a back-to-the-farm
movement. I can see that; and yet it is in the air. A lot of veterans
will want to go on the land, and we are taking some steps toward
making it possible for them to do so.
If the small farm is mechanized, and the production is correspond-
ingly increased, it will make it necessary, will it not, that we find other
uses for farm products?
Secretary VVickard. Yes. One of the papers which we have goes
quite into detail. It might be of interest sometime, at least to this
committee, to have that paper given. Some other members of the
committee asked questions about it.
First, as to veterans, I meant to make the statement in my paper
that agriculture will offer an opportunity for a great number of
veterans, perhaps as many as have gone into the armed forces, for
replacement of older people and women and children. I didn't mean
to say that there will be no opportunity. There will be a great
demand for those boys to go back to the home farm and home com-
munity.
A great many of them want to go. Some of them may not want to
go and that may let war workers who want to return have an oppor-
tunity to live on the land.
What I was trying to say, though, is that tliere is r.o possibility, as
I see it, for .us to put a large additional number of workers on the land
as compared with what we have now, or had before the war started,
without lowering standards of living, because, after all. we are going
to have about the same amount of agricultural inccn.e r.r.d, by putting
more people there, the share for each will be less.
Mr. Zimmerman. Right at that point, I read with interest, a
statement that among the wives and women who are working in the
war plants today 6 out of 10 of them want to remain in those jobs.
1250 POST-WAR ECONOMIC POLICY AND PLANNING
Now, when these boys get back, should they remain in those jobs,
where are those veterans going to go? Are they going back to the
land?
Secretary Wickard. I said that if we absorb a large additional
number of workers on farms, we can expect to lower the standard of
livmg on the farms, because the income from work on the farms will
be necessarily less.
Mr. Zimmerman. That is the very thing you inveigh against?
Secretary Wickard. Yes, sir.
Mr. Zimmerman. You want to elevate the standard of living on
farms?
Secretary Wickard. Yes, sir; I do. I want to say here before I
lose the opportunity, that farm income, including value of things
farmers consume, has only been about half of what urban income has
been per capita. I don't think we want to further increase that dis-
parity.
There was one further thing you referred to, the use of tractors.
I don't think there is any question, Mr. Congressman, but what there
IS going to be an increase in the number of tractors on farms. It is-
going to increase farm efficiency, take some of the drudgery out of
farm life, and that is well. However, we must recognize that if we
increase the number of tractors, we decrease the number of horses and
mules which live directly on farm products, which decreases agri-
cultural production again. That is one of the things we have to
recognize.
Mr. MuRDOCK. That increases the amount of food for human
consumption?
Secretary Wickard. That is right, sir.
Mr. MuRDOCK. And increases the need for turning the production
to something else that can be used industrially, either as fuel or fiber
or something of that sort?
Mr. Secretary, this is a splendid paper, and I want to congratulate
you upon the bi-oad viewpoint expressed therein. You are thinking
of an improved agricultural society which, of course, depends upon an
improved agricultural economy.
There are any number of Other questions that come flocking to my
mind: Your stress upon health conditions, housing, and that sort of
thing. Of course, that means better medical facilities.
Not many months ago a young woman, the wife of a farmer in one
of the best agricultural districts of this country, died because they
didn't get her to a hospital in time. There is a fife sacrificed because
of lack, not of goods roads, because in this case there were paved
roads, but the distance to an operating room. And it was not a
poor family.
Now, that example can be multiplied many, many times.
Secretary Wickard. May I say there, in line with some of the dis-
cussions had here this morning, that I think the providing of better
facilities, as you discussed, and better homes, and all those sorts of
things, is an investment, an investment in health and happiness and
efficiency of our people. To some people it may appear to be only an
expenditure, but to me it is an investment — I mean an expenditure
with no return.
I hope that most of this may be done by private enterprise, or
private investment, but, as I said, whoever does it I think makes an
investment without spending money needlessly.
POST-WAR ECONOMIC POLICY AND PLANNING 1251
Mr. MuRDOCK. I am glad to see you went to the point in this
paper of stressing school lunches. We have had that problem before
us recently. It might seem strange to some that in an agricultural
community, an old and established farming community, school
lunches should be furnished.
I grew up in such a community, and I know in the past — and it is
blot on American agriculture, or economy, rather — I know that
undernourishment does exist in some of the best farming communities
of America.
Secretary Wickard. I went to a one-room schoolhouse too, and
I agree with you.
To bear out your statement, Mr. Congressman, when we look at the
selective service record we find the percentage of rejects higher in.
rural areas than in urban areas. I have said that there was more
need for better nutrition and better medical care in rural areas than
in some of the slums we hear so much about. Not that there isn't
need there, but I think we do have slums out in rural areas, although
we do have fresh air and sunshine. When we come down to the
selective service records, we have to recognize that it is not all as it
should have been.
Mr. Zimmerman. Your idea is, Mr. Secretary, that in order to
have this full production and full consumption, we have got to do
something along the line of free school lunches and planning to absorb
in certain areas this full production that we hope for; in other words,
we have got to do some things to insure the consumption of this
production, this 95 percent we are going to consume here at home,
and you consider that a major problem?
Secretary Wickard. Yes, sir. I do.
Mr. Zimmerman. And that is a program that we can work out here
at home?
Secretary Wickard. Yes, sir.
Mr. Zimmerman. In other words, we may have difficulty in work-
ing out proper trade relations with foreign countries and great
difficulties equalizing our exports and imports because international
questions are involved there. But as to the program at home en-
abling us to dispose of this full production in order to have full con-
sumption, that is a matter that we here at home can work out and
must work out, if we are to attain the objectives you pointed out in
this very illuminating and able paper?
Secretary Wickard. May I amplify just a little? It seems to me
that the American people do not want, and would not permit a policy
in this country, if they recognize it as having people and land remain
idle while other people needed food and fiber for their well-being,
despite the fact that the income of some people might not permit them
to get it. I think we have to take some. means through local, State,
or national programs, to insure that as long as our people need it
and we have the capacity to produce, both from the standpoint of
the people on the farms and the land on the farms, we should see
that that is made available through the most practical means.
I don't know whether school lunches or food stamps or all of the
things we thought about in the past are the full answer or best answer,
but let's attain such state of full utilization of our resources as long;
as our people need it.
1252 POST-WAR ECONOMIC POLICY AND PLANNING
We only expect at the best, perhaps, to export the products from 5
percent of our acres, but the important thing there is that we will
have to export more than that, or let go unproduced more than that
in the long run if we don't have the high national income that will
keep a good market for the 95 percent of our products. And that is
where the most important part of our international trade comes in,
keeping up the national economy and making it possible for people in
this country to have the income to purchase at proper prices the
things farmers want to produce.
Mr. Zimmerman. We had during the depression years restricted
production and great poverty, great need, and low prices, and it did
not solve the problem. We had greater needs then than ever before.
Now, the point is to get the earning capacity in this country and
then maintain that, so that they can purchase and then produce.
It is about 12 o'clock. I don't know what the pleasure of the
committee is — ■ — •
Mr. MuRDOCK. Air. Chairman, we have indicated here about a
dozen splendid papers that go right to the heart of the problem.
I, at least, would like to see those papers, and I think they ought to
be included in the record.
Mr. Zimmerman. A few members have had to go to theu- offices
for a few minutes, but I wonder if we can't come back here this
afternoon at 2 o'clock and resume this very interesting hearing and
continue these discussions?
I think we had better adjourn the meeting at this time and come
back at 2, Is that satisfactory with you and your associates, Mr.
Secretary?
Secretary Wickard. Yes, sir.
Mr. Zimmerman. If that is the case, we will do that, and then
we will take up this afternoon.
(Whereupon, at 12 noon, a recess was taken until 2 p. m., of the
same day.)
AFTERNOON SESSION
(The committee reconvened at 2 p. m., upon the expiration of the
recess.)
Mr. Zimmerman. Come to order.
Mr. Secretary, without objection, we will resume your hearing.
At this point I would like to ask a question. Have you available the
farm income over a period of years that you could*^ furnish for the
record?
Secretary Wickard. I think we can make that available for the
record. I don't know that we have the table right now. How many
years would you have in mind?
Mr. Zimmerman. Well, for as long back as you could get available
data for the earlier years, in 10-year periods.
Secretary Wickard. We can supply it from 1910 to date.
Mr. Zimmerman. That will be all right.
Secretary Wickard. I have a paper here before me that Mr.
Wells just gave me, which I believe has that on a cash income from
marketing, gross farm income, realized net income, net income from
farming to all persons on farms, income of the nonfarm population,
also per capita income.
Mr. VooRHis. What does gross farm income mean? Including the
use of the farm home, places of the farm?
POST-WAR ECONOMIC POLICY AND PLANNING
1253
(
1929= IOC
)
VALUE OF IMPORTS
N^
-
^^^WORLD
,<^
N""
-
X
C.
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-
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-
Secretary Wickard. Yes. It includes cash income from market-
ing, Government payments, value of home consumption, and rental
value of dwellings.
Mr. Zimmerman. Would you mind putting on that some statement
that would indicate what these terms mean, so it would be easily
analyzed, with a footnote.
Secretary Wickard. This table does have the footnotes on it.
Mr. Zimmerman. That will be inserted in the record at this point.
(The matter referred to is as follows:)
Chart 1
WORLD IMPORTS AND UNITED STATES IMPORTS.
VALUE AND QUANTITY. 1929-38
80
60
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ao
100
80
60
40
20
Moex
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100
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QUANTITY OF IMPORTS
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VALUE AND QUANTITY. 1929-38
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VALUE OF EXPORTS
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-
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-
1929 IG30 193! 1932
9&079 — 45 — pt. 5 3
1933 1934 1935 1936 1937 1938
us Tariff Commission ~ Sept. 19*^ (23e^i)
1254
POST-WAR ECONOMIC POLICY AND PLANNING
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POST-WAR ECONOMIC POLICY AND PLANNING
Table 2. — Farm and nonfarm income, 1910-43
1255
Cash farm
income
from
marketings
Gross farm
income '
Realized
net
income 2
Net in-
come from
farming to
all persons
on farms 3
Income
of the
nonfarm
population
Per capita income
Year
Farm
from
farming
Nonfarm
from all
sources
1910
Millions
$5, 793
5, 596
6,017
6,248
6,050
6,403
7,750
10, 746
13, 461
14, 602
12, 608
8,150
8,594
9,563
10, 221
10, 995
10, 564
10, 756
11,072
11,296
9,021
6,371
4,743
5,314
6,334
7,086
8,367
8,850
7,686
7,877
8,340
11,157
15, 374
19, 252
Millions
$7, 352
7,081
7, 561
7,821
7, 638
7,968
9,532
13, 147
16, 232
17,710
15, 908
10, 478
10, 883
11, 967
12, 623
13, 567
13, 204
13, 251
13, 550
13, 824
11,388
8,378
6,406
7,055
8, 486
9,595
10, 643
11, 265
10, 071
10, 547
10, 962
13, 799
18, 474
22, 738
Millions
$3, 753
3,435
3,671
3, 786
3,518
3,745
4,687
• 7,011
8,674
9,249
6,778
3,603
4,057
4,842
5,128
6,103
5,699
5,706
5,695
6,044
4,329
2,744
1,832
2,681
3,759
4,484
5,062
5,139
4,327
4,459
4,617
6,395
9,254
12, 046
Millions
$4, 450
3,915
4, 335
4,387
4,516
4.395
5,055
8,329
9,660
9, 877
8,368
3, 795
4,850
5,608
5, 500
6.866
6,617
6. 314
6,687
6,741
5,114
3,482
2,285
2. 993
3,531
5,052
5,361
6,093
5,041
5, 262
5,409
7,542
11, 224
13, 665
Millions
$28. 614
28, 575
30, 121
33, 375
31,851
33, 859
39, 858
45, 031
48, 461
56, 259
65, 025
54, 538
55, 667
65, 067
65, 074
68, 321
73, 779
72, 188
74, 357
79, 213
70, 250
56, 371
41, 320
39,013
45, 917
51,346
60, 346
65, 463
61,371
66, 253
73, 066
87, 291
108, 964
134, 068
$139
122
135
136
140
135
155
258
304
319
265
119
153
180
180
223
216
209
222
223
170
114
74
93
111
159
171
197
165
173
179
252
386
491
$482
1911
468
1912
483
1913
521
1914
484
1915
502
1916
580
1917
640
1918 . .
671
1919
762
1920
878
1921
720
1922
718
1923
815
1924 _
792
1925
812
1926
858
1927
820
1928
830
1929 .
871
1930
761
1931..
1932
1933
605
442
419
1934
488
1935
540
1936 . . .
626
1937
671
1938.-
1939
622
663
1940 .
722
1941
1942-_
850
1,039
1943
1 243
1 Includes cash income from marketings, Government payments, value of home consumption, and rental
value of dwellings.
2 Gross farm income minus total expenses of agricultural production.
3 Realized net income of farm operators plus adjustments for inventory changes and wages to hired laborers
living on farms.
Source' Bureau of Agricultural Economics.
Mr. MuRDOCK. Air. Chairman?
Mr. Zimmerman. Do you have any further questions?
Mr. MuRDOCK. 1 want to ask if someone connected with the
Department of Agriculture can tell me about the correlation between
national income and the farm income and just the significance of that
correlation, if it has any. You have inquired about the national
income for the past 30 years, which is available. I am told that the
farm income runs pretty consistently, good years, boom times, and
depressions, about one-seventh of the amount of the national income.
1 am just wondering if there is a casual relationship, and, if so, which is
the hen and which the egg in that relationship. That has mtrigued
me a lot, that correlation between farm income and national income,
whether we can predict anything from it, or whether we can say the
one, being so and so, the other wUl invariably be?
Secretary Wickard. There is a correlation, I think, that you spoke
about. It has always been argued which is the hen and which is the
egg. Perhaps that cannot be settled definitely. I suppose one state-
ment might be made that since the national income is seven times the
farm income^ that it might be rather a predominant factor; whether,
1256 POST-WAR ECONOMIC POLICY AND PLANNING
say, one can be separated from the other entirely or not, I think would
not be a truthful .statem.ent.
Howard Tolley, would you like to amplify any statement or make
any further reply to the question?
Mr. Tolley. I agree with the implication of the Congressman's
question. I thmk there is a very close correlation between the two.
It isn't always one-seventh, year by year. But we know for sure
that when the national income is low, farm income is low. When
national income is good, farm incom.e is good, because the consumers
of the farmers' products then have the money with which to buy the
farmers' products-.
On the other side, our farm population of from twenty-five to
twenty-seven million out of a total population of 130 million people
are the customers, to that extent, of the manufacturers and makers
of other things. When they have money, a good income, they buy
from the other man. So to keep the income stream rolling, and keep
the economy going at full tilt, we can say that we can't have a pros-
perous agriculture without a prosperous nation. By the same token,
we can say that we can't have a prosperous nation without prosperous
agriculture.
Mr. VooRHis. May I ask a question in connection with that? I
would like to ask whether the Department of Agriculture, Mr. Secre-
tary, Dr. Tolley, or anybody else, doesn't think it has been generally
true that the percentage of national income which has gone to agricul-
ture has been less, on the average, than in equity it should have'been?
And secondarily, whether one reason for that has not been the fact
that in the determination of prices for industrial goods — -not only
goods, but services upon which the farmer depends, -such as trans-
portation, power, other thiilgs like that — that those costs have been
largely determined or at least in many mstances determined by m.onop-
olistic control. Whereas the am.ounts received by the farmer for his
crops, generally speaking, have been the prices determined not even
in a free market, a market most times controlled by the buyer.
Secretary Wickard. I will say a word first. Perhaps Howard will
also want to make a reply to your question. I think I said today our
long-time per capita income for farmers was less than one-half of that
for urban dwellers, which seems to answer in the affirmative the first
part of your question.
Now I will say this: In agriculture there has been no monopoly.
Everything has been more or less on a free competitive basis. I don't
think we could say there has been a free competitive basis in hardly
any other segment of our economy. There has been in agricultm-e.
There has always been one development — they are not allowed to get
together, whether capital, labor, business management, whatever may
have been the set, established returns. Usually they are established
on what might be reasonable returns. That has not always been true
in agriculture.
There is one other factor I rather touched upon this morning, that
1 would like to call to your attention; that is, it always seemed to me
that agriculture was a sort of shock absorber for the Nation whenever
it came to a business depression or unemployment: that is, when people
could not find opportunity for employ 'nent, where somebody said
"go back to the land" the people naturally went back to the land.
There was no other place to go. Also when business depression, of
POST-WAR ECONOMIC POLICY AND PLANNING 1257
one kind or another — there were these artificial means for maintaining
prices for everything, and nothing available for agriculture. Agricul-
tural prices went down. People got cheap food. There was no way
of holding it up. The farmers went ahead and produced just the same
during the years of depression. Our agricultural production went
down very, very little. That again shows that, through good products
and good prices, agriculture absorbed part of the shock of these
depressions in which some of the factors seem to bear out your state-
ment that agriculture has not had exactly a fair sliare.
Mr. VooRHis. From 1929 to 193-3 farm products declined only 6
percent, but farm prices declined 54 percent, and as to farm imple-
ments, which is a rather highly monopolized industry, products de-
clined 88 percent and declined in price only 12. I just happen to
carry those in my head. They illustrate what you just said.
Secretary Wickard. Do you want to say something, Howard?
Mr. ToLLEY. I have nothing to add. This is simply to amplify.
There is another reason for this low average per capita income of
farm people. That is the make-up of our farms and ourvfarm popula-
tion. You see of these 6 million farms that the census enumerates,
only a little over 3 million of them are what we call commercial farms.
That includes all of the big farms, the plantations of the South, the
corporation farms of our West, and all of the family farms down the
ladder as far as those which in 1940 had a gross income of $600. That
just takes 3 million and a little more of our farms. The other 2]'i
million or so are enumerated as farms, but they are small. They
are pai't-time farms. Part-time farmers aren't so bad in times like
this. They have jobs elsewhere. A great many of them — what, for
want of a better term, we call subsistence farms — have little acreage,
poor land, consume all they produce or nearly all that they do.
Mr. VooRHis. Dr. Tolley, when you say these 3 million farmers
include all that have $600 income in 1940, is that gross income includ-
ing the value of the use of the farm home?
Mr. Tolley. No. That is the value of the sales; cash income from
farming.
Mr. VooRHis. IMay I ask one other question?
Mr. MuRDOCK. Yes.
Mr. VooRHis. I want to ask somebody, the Secretary, I guess,
whether he would agree that the formation of farm cooperatives, as
you have stated in your statement, is one of the most constructive
methods of trying to resolve this problem of the disparity between
farming income and other income?
Secretary Wickard. Yes; I think it is. And I am in agreement
with the policy which has been stated by Congress that we should
foster the farm cooperatives.
Mr. VooRHTS. How do you think we should foster it?
Secretary Wickard. I think the methods we have used in extending
credit is perhaps the first thing that is most important. Second, at
every opportunity we should give the sort of education to farmers that
they have to have to know what the objectives of a true cooperative
are and how they may best be operated and controlled.
Mr. VooRHis. You don't mean the Government should actually
form the co-ops and participate in them?
Secretary Wickard. No.
Mr. VooRHis. I don't either.
1258 POST-WAR ECONOMIC POLICY AND PLANNING
Secretary Wickard. We couldn't do that. It has got to be farm
operated and controlled or they will lose their effect.
One other thing: I think I testified this morning that cooperatives
enable farmers who operate family-size farms to have more efficient
methods of production, such as larger types of machinery, better sires,
maybe warehouses, things of that kind, so they can have for them-
selves through group action as efficient production as they would have
if they were a lai^ger unit themselves.
Mr. Zimmerman. One question, Mr. Secretary. I want to get j^our
view on the contention that is made by a great many people that a lot
of our cooperative effort— such as grain elevator, or maybe a flour mill
or a cotton gin, or some other cooperative enterprise engaged in by
farms; that is, a large group of farmers get together and conduct this
business — do you think that they should be required to pay taxes to
local. State, and Federal Governments as private enterprise that is
engaged in the same business and with which the cooperative is com-
peting? That has been advocated by a great many people. I want
to get your view on it.
Secretary Wickard. They do pay property taxes the same as any
other enterprise. There has been, as you know, some discussion of
whether they will not be subject to corporation taxes growing out of
the refund they make to their members.
Mr. Zimmerman. Yes.
Secretary Wickard. I cannot share that view, because, after all,
they are operating a business, and they are sharing in the operations
of that, and that goes back to each individual farmer. That is not,
as I see it, the typical corporation tjT^ of operation.
Mr. Zimmerman. I see.
Secretary Wickard. I think there is quite a little argument about
that at the present time. I am glad you asked the question. I don't
think we would want to put them in the same class as corporations as
far as taxes are concerned. I think you would automatically stop all
of the cooperatives in the country. That would be very unfortunate.
Mr. Zimmerman. There is some considerable agitation on the part
of certain groups that they should be taxed as an ordinary business
enterprise. I wanted to get your view as our Secretary, and as one
who has sponsored these cooperatives, as to the soundness of that
contention.
Mr. VooRHis. May I ask a question at that point?
Mr. Zimmerman. Yes.
Mr. VoGRHis. I carried on something of a debate by correspond-
ence with Mr. McCabe, who is the shining light of the National
Tax Equality Association. In reply to my last letter he simply said
he thought he had already said all he had to say. But the essential
thing in this question, it seems to me, is the attempt on the part of
these people who, in my judgment, are seeking to destroy farm co-
operatives, to try to make a case that money which is only held in
trust by the cooperatives to be paid out to its members should be
taxed like ordinary corporate income. If you don't tax that money,
then the farm cooperative has hardly any mone}^ at all.
Secretary Wickard. That is right.
Mr. VooRHis. And if they taxed that money held in trust for mem-
bers, they would destroy it throughout the country and do something
unconstitutional as well.
POST-WAR ECONOMIC POLICY AND PLANNING 1259
Secretary Wickard. I agree with you.
Mr. Reece. Are you through? May I ask a question?
Mr. Zimmerman. Yes.
Mr. Reece. It was brought to my attention this morning. This
is somewhat foreign to the study which this committee is making.
Possibly this is not within the purview of the Department of Agri-
culture. But since the subject of taxes has been brought up, it called
to my attention the matter of the tax replacements by the Tennessee
Valley Authority to the counties and other strata of government
within the T. V. A. area. A bill, as you probably know, was passed
by Congress a few years ago authorizing the T. V. A. to make certain
payments by way of substitution for taxes which private property
acquired. The T. V. A. paid. It w^as placing a very great financial
burden upon the counties.
The information which came to me indicates that when a power line
or rather a facility w^hich was acquired by a private company has been
replaced by a new line or new facility, then the tax replacement pay-
ments by the T. V. A. to the counties are reduced; that is, when new
lines or facilities are instituted for the old ones which were held by the
private company, no replacements, no tax replacements, are made.
This is very greatly reducing these tax replacement payments to the
counties and will eventually do away with them altogether. It has
become a matter of very great importance to some of the counties
this year, particularly the farmers. That is why it came into my
mind at this time. In view of the drought in that whole east or
middle Tennessee area, many farmers will have no income, no net
income, and will be in the red very much as result of this year's oper-
ations. The taxes are going to be increased in order to make up the
reduction of T. V. A. tax replacement measures. I have taken the
matter up with the Tennessee Valley Authority since they proposed
the original tax replacements and was only able to get tliem^made
after considerable effort. I don't have very much hope of getting
any cooperation from the T. V. A. on this matter. I don't know
whether some appropriate agency in the Department of Agriculture
gave some attention to it by way of being of some assistance to the
rural counties in this respect, it would help. I am not really asking
a question. I am simply calling the matter to your attention. I
hope the Department has found some way of furnisliing feed for the
dairies and other livestock down there. I am inclined to think that
maybe the seriousness of the situation in that particular area has not
been fully impressed upon the Department, because it is really very,
very bad. Many of the farmers won't make their seed, much less
their fertilizer, this year.
Secretary Wickard. I think the War Food Administration has
been discussing and considering that problem. And when Judge
Jones appears before you, he may be able to answer your question in
that regard in more detail than I could.
Mr. Reece. At the risk of taking too much time, I would Uke to
make one -other observation. This does have to do with this gen-
eral subject of inquuy. That is with reference to the system of
marketing tobacco. The markets are established in the various
cities. Warehouses are constructed, and the tobacco cannot be sold,
until the companies send buyers. Then, of course, the Department
of Agriculture enters into it. Until the Department sends gradei^, a
1260 - POST-WAR ECONOMIC POLICY AND PLANNING
market can't be built up, and without the company sending buyers
down. The companies can, therefore, elect to send buyers to one
market and not to another market. They can send one set of buyers
to one market and send two sets of buyers to a market nearby. That
means one market is got up at the expense of the other. Heretofore
the Department of Agriculture has not seen fit, officially, at least, to
use its influence in the question of the number of sets of buyers that
are furnished markets. That means that the farmers in one area are
forced to take their tobacco to another market to sell it. One market
will be congested. The tobacco will be waiting to be lined up, so it
will require probably 4 or 5 days to get it on the floor. Another mar-
ket will dry up the same day, due to the fact they haven't got buying
facilities for that market. This means that the companies can dis-
criminate, if they wish, between the cities where the State line is close
between the States, in recognition of certain considerations that they
might have received, or by reason of political influence that might be
brought to bear. This is of very great importance to the tobacco
growers. I have talked many times with the appropriate official in
the Department of Agriculture, because there are certain conditions
down in the hurley area which are particularly aggravating and a
source of great disturbance to the growers.
Likewise the warehousemen — ^it very vitally affects the whole
tobacco products operation. The companies stand in the position of
a kind of quasi public service in connection with these tobacco buyers.
I feel that is something the Department can very well afford to give
more attention to. When the Department has graders standing in
the same position, you have in your hand the reason whether you with-
hold or send graders to a market to build up or destroy a tobacco
market. And likewise, you have the power to determine what market
the grower shall be forced to sell his tobacco upon. That becomes a
very ^reat responsibility, both on the Department of Agriculture and
likewise, I think, on the part of tobacco companies, by reason of the
system of selling tobaccos. I am not going into any particular cases.
I do have some in mind. I expect to discuss it with Mr. Kitchen and
others concerned at some other time. I might even want to trespass
upon your time some in connection with the matter.
Secretary Wickard. All right, sir.
Mr. Zimmerman. Mr. Wickard, there is one question I would like
to ask you. I think we all agree that we must have full production
on the part of agriculture, as we must have full production on the part
of industry. I note that the National Cotton Council of America
has established a department for the purpose of discovering new uses
for cotton and for cotton products. I don't think there is any doubt
but what that organization is making a valuable contribution to the
cotton industry and will help enable the cotton farmer to produce
more cotton.
What is being done, if jou know, in regard to other agricultural
commodities, such as wheat, corn, the other major crops?
Secretary Wickard. As you know, Congress authorized the erection
and establishment of four laboratories. Those laboratories are located
in California, one in Peoria, 111., one in Philadelphia, one in New
Orleans. The one at New Orleans, of course, deals largely with cotton.
Now those laboratories are following every suggestion that they
think is worth while in trying to find new uses, because they were
POST-WAR ECONOMIC POLICY AND PLANNING 1261
established for that purpose. I want to say that to a great extent,
however, during the past 2 or 3 years, the hiboratories have helped
out in the war effort. We have talked to various Members of Con-
gress, the Appropriations Committee in particular, about how we were
requested by the Army or by the Navy to develop new techniques
for production of war materials and Congress has seen fit to have us
do that. But I look forward when we can go back on a peacetime
basis of seeing a number of things developed by the different labora-
tories. I just wish that a member of this committee could visit these
laboratories, because they could see what able scientists we have there
and what things have already been accomplished, which will be of
great assistance in finding uses for agricultural products.
Mr. MuRDOCK. In what lines do they specialize? You speak of
cotton in New Orleans.
Secretary Wickard. The western laboratory is concerned with
fruits. The one at Peoria is concerned with corn and soybean prod-
ucts. The one in Philadelphia has to do with, I believe, some poultry
products and tobacco and perhaps some fruit work. For instance,
among the things they have developed at Philadelphia laboratory has
been the use of apple juices, apple products as a substitute for glycerin,
which became very scarce, but which was used in the making of cigar-
ettes. The one at New Orleans, as I said, has been largely confined to
cotton.
Mr. Zimmerman. In the program of all our production, don't you
think consideration should be given as a possible war program to ex-
panding this program — in other words, these laboratories — and try
to make it possible for them to make further contribution to the pro-
duction of agricultural commodities?
Secretary Wickard. Yes, I think so. I am very anxious to see
those laboratories and other experimental work and research work
continued because I think in those developments lies a great hope for
agriculture, both from the standpoint of utilization and development of
of agricultural products.
Mr. Reece. Pardon me. I read in the paper only today or yester-
day that a Senate committee would make a study of the rayon indus-
tiy. And I judge from the report that it would be made with a view
of determining to what extent it encroaches upon certain phases of
agricultural products. I think I have rather an unprejudiced point of
view on that, coming from the part of the country that I do. It would
seem to me — I want to get your reaction on this — that the opportunity
for agriculture lies in exploring and developing new uses and not re-
tarding the development of other industry. I rather regret to see a
contest develop between the rayon industry, using it as one of the
synthetic products, and- agriculture. I don't feel that there is any
contest or at least should be between the two.
Some of the rayon processes are utilizing agricultural products in the
production. So, after all, the income finds its way back to agriculture,
but I recognize as the chairman has indicated, tha' there is a wide
field for the development of use for agricultural products in these new
fields. I haven't seen anything to indicate that the Department of
Agriculture was taking any position in this contest between rayon, for
instance, and cotton. I think it is right unfortunate that some of
the representatives of the cotton industry in the South should not
enter into the rayon industry. The rayon industry has a place in our
1262 POST-WAR ECONOMIC POLICY AND PLANNING
economic life. It has come to stay, I presume, until some different
industry arises which is competitive and is of equal use.
Secretary Wickard. I want to say I agree with you that the De-
partment of Agriculture should find facts, produce facts in an unbiased
manner; in keeping with what you are saying we have been making
some studies to compare the desirability of using rayon and cotton in
automobile tires. I think that has been taking place at the New
Orleans laboratory. You may rest assured we will give the facts as
we see them on a strict comparison. The public, the consumers of
the country will have to make decisions as to which one they are going
to buy. I don't think we can be in position to come out and say you
ought to use an agricultural product simply because we want to keep
up the consumption, when some other product might be cheaper and
more satisfactory. I think the public has to decide those things. It
is all right with me for Congress to make an investigation. I will
give all the information we have on any particular subject. I say we
try (o furnish facts that are not sentiments. In some of these things,
sometimes it is a little hard for us to be entirely divorced from the
fact that we are an Agriculture Department. But I think we are a
little more than that. We represent both consumers and producers in
the Department of Agriculture and to do that we have got to give the
facts as we see them.
Mr. MuRDOCK. Mr. Chairman, I would like to make an observation
and ask a question. Not only are we confronted in the future with a
conflict between agricultural products, in the natural products and
synthetic products as in the case of these fibers, but there is a compe-
tition in the natural fibers, is there not?
Secretary Wickard. Yes.
Mr. MuRDOCK. For instance, to what extent is china grass, or what-
ever it is called — what name it is called by, I am not quite sure.
But there are various fibers that might possibly be introduced into
this country. Will somebody supply me with the name of china
grass?
Dr. ToLLEY. Ramie.
Mr. MuRDOCK. Ramie might become a serious competitor of
cotton, might it not, if mechanical processes were invented comparable
to the cotton gin, and so on, this old fiber that is new to us could be
developed?
Secretary Wickard. Yes; I think that is true. Yet it would be an
agricultural product, because it can be grown in the southern part of
the country, I understand.
Mr. MuRDOCK. This is the question I want to ask, to what extent
may we expect soybean milk to compete with cow's milk, for instance?
Secretary Wickard. I am glad you kept on milk rather than some
other dairy product. But I will have to admit that I have tasted or
drank some soybean milk that tasted quite a little bit like cow's milk.
Maybe if I hadn't been informed as to the name of the product, or the
origin of the product, I might have been deceived. I tell j'^ou where I
drank that product, at Henry Ford's round table out in Dearborn, not
very long ago. But I am not too worried about that. I think it is
going to be awfully hard to find any substitute for cow's milk, either
from the standpoint of nutrition or the standpoint of taste. However,
as I said, if the consumers of this country say we want this, it is a
more desirable product than some other agricultural product, I don't
think we can stand back and say no, you shouldn't make the sliift.
POST-WAR ECONOMIC POLICY AND PLANNING 1263
Mr. VooRHis. Mr. Chairman, the Secretary in his statement,
which, incidentally I thought was a most excellent statement, has
set forth eight points here, beginning on page 4, running up on
page 5, which I understand are intended as a general over-all program
for agriculture. Now do I understand in the statement that has been
prepared, this list of statements, those tilings are elaborated on?
Secretary Wickard. Yes, sir,
Mr. VooRHis. I wonder if I could ask a few questions right now
about some of those points? Would that be all right?
Secretary Wickard. Yes. I was referrmg to the measures Congress
has already adopted.
Mr. VooRHis. I would like you to be very free as to whether you
think that loan period is the best way to do it, what you think should
be done after that loan period runs out, what about the future of
agricultural price measures? -
Secretary Wickard. What I said in my statement, as you referred
to the price-support program, in my estimation that should be
retamed by Congress, even after the period in which the present
measures might expu-e. The reason for that is that it seems to me
it is not only the fair thing to do, from the standpoint of rewarding
the farmers "for full production, it is necessary to protect consumers
because in the long run, if you have to establish prices to farmers, you
ought to have established prices to consumers. There will be less
chance for fluctuations in markets which are harmful, both to pro-
ducers and consumers.
Mr. VooRHis. What machinery do you think should be used?
Secretary Wickard. I think it depends enthely on the product.
If the staples, I think, can be handled by loan programs, such as
have been handled in the past; the cotton and the wheat, corn,
perishable products may have to be handled quite a little differently,
either by direct purchase, making available for low-income families or
for exports or in some other manner disposing of perishable products;
I don't think they lend themselves to the loan type of program.
Mr. VooRHis. If you are going to do that for perishables, you must
have worth-while outlets for them. Absolutely. Projects like this
lunch program, locally sponsored, is important m that connection.
Secretary Wickard. Yes. I agree with you. Those programs
should have been locally sponsored as far as possible, because the
local people are entering mto these programs, can see theh worth,
and can use them to benefit most people. They can make a great
contribution through one organization or another, providing facilities
and help bring these products to the people.
Mr.. VooRHis. Farm co-ops can be of considerable help in this
regard.
Secretary Wickard. Yes.
Mr. VooRHis. You don't recommend an approach that was included
in a bill that was before the House several sessions, which would
provide in effect for prices on farm commodities. What is your
opinion of that?
Secretary W^ickard. What?
Mr. VooRHis. Floor prices, I should say. There would be a certain
minimum below which there wouldn't be trading in a certain farm
product. Like a minimum wage law, if you will.
. 1264 POST-WAR ECONOMIC POLICY AND PLANNING
Secretary Wickard. I don't know whether I would want to
advocate such a measure as that or not. I hadn't thought of price
supports involving that sort of thing.
Mr. VooRHis. Give us an idea, roughly.
Secretary Wickard. By fixing prices by fiat?
Mr. VooRHis. You don't fix them. You put a floor on them.
Secretary Wickard. Yes. I rather tend toward supporting various
prices by purchasing and taking ofi* the market, if necessary, certain
products. We have been using that during the war, as you know.
We have been using that procedure to maintain the prices because we
have had products like eggs, for instance, during the last winter and
even more recently which have gone down in price to a place where
the Government had to enter in and take those products off the
market.
Mr. VooRHis. Yes, I know. In connection with that, and the ever-
normal granary, to take them together, is it your conception there
has to be any attempt to channel production into certain lines and
out of other lines to some degree in connection with a price-support
program? Do you see what I mean?
Secretary Wickard. Yes; I think we can't overlook the fact if we
maintain artificial, high levels, the prices of certain products, we may
get overproduction of those, when other products are more needed
by the consumers. As I said in my paper, we may have to provide
one means or another, certain shifts between production of certain
crops or between certain animal products.
Mr. VooRHis. Then I would like to ask, if I may, a very brief
question, going back to the co-ops. Your position would be that the
bank of cooperatives ought to be continuing?
Secretary Wickard. Yes.
Mr. VooRHis. You mentioned here equal living standards for farm
and city famahes. I wdil only ask one question about that. I know
it covers almost everything. "V\ hat about health? YHiat is the De-
partment's idea about trying to improve health standards and health
services for the rural people, farm labor, for instance, as well as
farmers?
Secretary Wickard. I think that thc*i"e was a little discussion this
morning on that particular subject. I appreciate the opportunity of
giving my view, even though it is somewhat repetitious.
Mr. VooRHis. I am sorry. Maybe I didn't hear^hat.
Secretary Wickard. That is all right. I will rejAj briefly. I think
the selective service records indicate that people on the farm, despite
the fact they are out in the sunshine and livmg out in the country,
have not had or enjoj^ed the health the people in the cities have en-
joyed. That is due to two or thi'ee factors, perhaps. One is they
have not had the knowledge or the opportunity to get the right kind
of food. Also, there has not been opportunity to examine children
in the schools to make certain corrections, take certain corrective
measures so they will have sound bodies.
Now I think that if we, either as 1 said this morning as local. State
or Federal program, imdei'take the improvement of health of rural
people, we are going to make an investment in this countrj'^ because
we will not only save doctors' bills, but we will make people more
productive. We will get away from sick leaves, all the sort of thing
that goes with poor health.
POST-WAR ECONOMIC POLICY AND PLANNING 1265
Mr. VooRHis. Do you have in mind any legislation toward that
end? How do you think we should approach it?
Secretary Wickard. As far as the health is concerned, of course,
that is a matter I would like to say the United States Public Health
Service perhaps ought to make the plan. I had hoped there could be
some of the surplus medical materials, drugs, and bandaging facilities
of one kind and another available after the war. I had hoped that
those could be made available for rural communities under one sort
of organization or another. Because then, I think, we can attract
doctors and nurses into rural communities. It is pretty hard to get
doctors and nurses into rural communities if there are no facilities.
You can hardly expect the individual doctor and nurse to provide
those.
Mr. VooEHis. Yes. Hasn't the program for medical service for
farm workers, migratory workers — I know in California the State
medical association cooperated with that and supported it quite
heartily — hasn't that been reasonably successful?
Secretary Wickard. Yes. I think our records tend to indicate that
those programs have proven to be a real economy.
Mr. VooRHis. I just have two more questions, I hope.
You mentioned soil conservation which, to my mind, is pretty close
to the heart of the matter. Would you propose any change in the
present soil-conservation program or would you propose it be con-
tinued as it is?
Secretary Wickard. I propose it be continued somewhat as it is,
but expanded.
Mr. VooRHis. How do you mean expanded?
Secretary Wickard. I would expand the aid which is going to the
sod-conservation districts, technical aid, and perhaps making avail-
able to them larger equipment, which is necessary for reforestation,
building of dams, things of that kind. And I would also foster the
organization of more soil-conservation districts.
Mr. VooRHis. You would simply try to carry on the present
program?
Secretary Wickard. Yes. Of course, a lot of things have to do
with conservation. I think a reforestation program is one of the
most practical means of soil and water conservation.
Mr. VooRHis. Let me ask this. Do you think at this very mo-
ment— no, it wouldn't be fan to take this moment, but just before
the war, let's put the period just before we got into the war — do you
thinlv we are holding our ground with regard to . soil conservation?
In other words, was our program preventing any further deterioration
of our soil resources?
Secretary Wickard. As a whole?
Mr. VooRHis. As a whole. Were we replacing it as fast as we were
losing it in other places?
Secretary Wickard. I have a question that they were. I don't
think our program had gone far enough to say we are gaining on
erosion and soil depletion.
Mr. VooRHis. We must be gaining.
Secretary Wickard. Yes; we must gain or we are going to lose
eventually.
Mr. VooRHis. In the country, as a whole, it is possible to do it
certainly. The whole future depends on it.
1266 POST-WAR ECONOMIC POLICY AXD PLANNING
Mr. MuRDOCK. You spoke of reforestation, revegetation, too, I
suppose, Mr. Secretary. I come from the West. A large part of it
is not tillable. We must depend upon it for grazing. Fifty years ago
much of that region which is now barren, the grass being eaten off into
the roots, was covered with green grass up to the stirrups of the horse-
back rider. The whole picture has changed. They say it has been
brought about by overgrazing. "WTiat are the chances of restoring the
ranges?
Take one Indian reservation , the Navajo Indian Reservation , mostly
in the State of Arizona. It's as large as the entire State of West
Virginia; 52,000 Indians live upon it. They are nomadic people,
move over large distances with their flocks. They can't get any more
land. They are increasing in number. One natural resource, the
pasture land, is going, gone. Is there any chance of restoration?
Of course, I am thinking of those Indians, I am thinking of the
cattle people, the sheep,* the livestock.
Secretary Wickard. I don't know. I think we all recognize that
we have on the ranges today more cattle than the ranges could be
expected to support over a period of time.
Now, as you know, pasture and ranges have been very good during
the last 2 or 3 years because of abundant rainfall. So, one of the
things I think has to be done is sometime, in some manner, make an
adjustment in the range cattle numbers which will be more in line with
the long-time carrying capacity of our ranges.
Mr. MuRDOCK. The forestry people have done that and other
agencies have done it, too. Indian people have cut down on these
Indian reservations. But if you keep on continually cutting down,
you get to a point where they couldn't support themselves.
Secretary Wickard. I think this is a Department of Interior prob-
lem I have just had brought to me. Nevertheless, it is involved in the
entire matter of range conservation. I hadn't thought of the Indian
angle until you mentioned it.
Mr. Zimmerman. Do you yield?
Mr. MuRDOcK. Yes.
Mr. Zimmerman. I think we have at this point been overgrazing
public land. I thought Congress sometime back passed the Taylor
Grazing Act which gave the Department of Interior control over the
grazing of our public domain with the view of preserving these ranges
so as to keep the grass and accommodate a certain number of cattle.
I thought that was our program. Of course, if that is true, the very
fact that the Indians increase and need more cattle, I don't know how
we are going to deal with that problem. You just can't keep them
from increasing in population very well.
Mr. VooRHis. Mr, Secretary, I have a couple more questions I
think are important. I want to go now to j^our point about a family-
size farm, something that concerns us in the West considerably. I
am going to ask this $64 question first.
How big do you think that a farm tenant purchasing program could
be made within the following two limitations: First, find worth-while
people, worth-while tenants, who would make good on the land that
they bought, and, second, have the program pay for itself as it is now
doing?
POST-WAR ECONOMIC POLICY AND PLANNING 1267
Secretary Wickard. I would say in my estimation that we could
find the people who would make the tenants and who would be happy
to be given the opportunity. And I think that they can pay out if the
land is purchased at proper prices and they are given proper aid.
Now, I think the question is more where are you going to find the
land, and how are you going to be able to get that? I think that is a
limiting factor, rather than the number of people or the ability of the
people to pay out.
Mr. VooRHis. You may find the land people are willing to sell.
There have been times when it is not true.
Secretary Wickard. There have been times when nobody wanted
agricultural land. If we have the right kind of prices, income, I think
it is going to be difficult to find the land the people ought to have.
Mr. VooRHTs. To get some of that, wouldn't the logical place be
some of the surplus land the Government is going to have after the
war?
Secretary Wickard. Yes; I so testified before the national com-
mittee recentW.
Mr. VooRHis. You don't have to answer this question. Wouldn't
it be logical to have the Department of Agriculture, instead of the
R. F. C, dispose of that land, as a part of your farm program?
Secretary Wickard. I think I would be biased in that. But I
think it would be advisable to let people who have had a lot of experi-
ence in the purchase of land, tenant purchases, tenants who wish to
make purchases, do the same thing for the disposal of this land.
Mr. Zimmerman. Do you yield?
Mr. VooRHis. Yes.
Mr. Zimmerman. Along that line, I think that you all know that
after this war is over there is going to be a tendency to mechanize
farming. Is that generally believed to be the situation we are going
to confront?
Secretary W^ickard. Yes.
Mr. Zimmerman. Now, what will that mean? Does that mean the
units will be increased in size or can we have mechanized farming from
family-size farms as profitably as on the large holdings?
Secretary Wickard. I think under a proper scheme and proper
management, you can have the small tractor doing for the small farmer
what the big tractor has done for the larger unit. I have especially
in mind some other technical developments coming along.
I would like to suggest at this time that Mr. Johnson read his paper
upon technological developments. I think it will bring out a lot of
things of great interest and be helpful to you people, if you don't mind.
Mr. Zimmerman. We will be very glad to hear Mr. Johnson at this
point. I had him in mind. That is the reason I asked those ques-
tions.
Secretary Wickard. Dr. Johnson, of the Bureau of Agricultural
Economics, has been making a special study. I am sure he has some-
thing interesting.
Mr. Zimmerman. Tell the reporter who you are.
Mr. Johnson. Sherman E. Johnson, Bureau of Agricultural
Economics, Department of Agriculture.
1268 POST-WAR ECONOMIC POLICY AND PLANNING
STATEMENT OF SHERMAN E. JOHNSON, BUREAU OF AGRICUL-
TURAL ECONOMICS
Mr. Johnson. Improvements in farm technoloijy and their effects
. on farm output, wartime increases in production: The output of
farm products for sale and for use in the farm home was 29 percent
higher in 1943 than in the years 1935-39. If July and August crop
prospects materialize the total output in 1944 will be even higher.
These tremendous increases over pre-war years were made pos'sible
partly by favorable weather and by high feed reserves accumulated
before 1943. On the other hand, the 1943 output was produced with
6 percent fewer workers than in the pre-war period; also a less experi-
enced labor force, and with shortages of new farm machinery, building
materials, containers, and some other supplies.
The record production in 1943 and the prospect of continuing this
high level m 1944 are an indication of the tremendous production
capacity m agriculture that could be drawn upon if need arises and
if farmers are given sufficient time to mobilize resources for all-out
production. Fortunately, farmers had purchased a large volume of
farm machinery in the years 1934-41 and therefore were fairly well
equipped m most regions, despite the small amount of new machinery
made available in 1943. The large increase in tame hay and plow-
able pasture which took place during the 1930's created a reserve of
land and fertility that could be drawn upon in wartime. Although
we have been depleting those reserves to a certain extent there are
no indications that wartime charges in farming have caused large-
scale permanent injury to soil resources.
Favorable weather often is mentioned as being responsible for a
large part of the increase in wartime output. If average yields for
the years 1923-32 are taken as 100 percent, all the years since 1936
are above that level. However, recent studies of weather conditions
in relation to crop yields indicate that with average weather condi-
tions we can expect as much as 20 percent higher crop yields than those
experienced in the 10-year period 1923-32. If this higher yield expect-
ancy is borne out over a period of years it represents a remarkable
change within a relatively short period.
We are beginning to reap the results of many improvements in
farm practices that have come to the forefront in recent years.
Adoption of hybrid seed corn in the Corn Belt has increased yields
per acre in that region by about 20 percent. New corn hybrids
adapted to areas outside the Corn Belt will make possible further
increases in yields per acre for the country as a whole.
There has been a remarkable increase in per acre viekls of cotton
in recent years. The acreage in cultivation on July 1^ 1944, adjusted
for average abandonment is less than 50 percent of the cotton acreage
harvested in the years 1923-32. However, the indicated yield per
harvested acre is 155 percent of the 1923-32 average with the result
that estimated production is 78.5 percent of the a\erage output in
those years. Cotton yields have increased most in the Delta areas
where the average yield in the years 1938-42 was 178 percent of the
1923-32 average. In addition to favorable weather, some of the rea-
sons for the increased yields of cotton are: (1) increased use of fertilizer
(a larger proportion of the acreage fertilized and application of about
a third more fertilizer per acre); (2) more winter cover crops; (3)
POST-WAR ECONOMIC POLICY AND PLANNING 1269
improved varieties; (4) more effective boll-weevil control; and (5)
selection of more productive land for the smaller acreage of cotton.
Post-war effects of better farnung: Further adoption of known
improvements in farming will tend to increase farm output in the post-
war years. Increased use of fertilizer and lime offer the greatest
potentialities. For example, on a group of West Virginia farms a ton
of ground limestone and ISO pounds of triple superphosphate per acre
increased forage production 57 percent and the protein content of the
forage more than 40 percent. The use of commercial fertilizer has
more than doubled in the period from 1934 to 1943. After the war
production capacity will be available for a greatly increased nitrogen
output. If increased use of nitrogen is balanced with comparable
increases in phosphates and potash, and with application of lime where
needed, large increases in jaeld per acre could be expected on both crop
and pasture lands. Other land-management practices such as im-
proved rotations, contour tillage, and strip cropping also will make
important contributions to increased yields.
Use of improved varieties is one of the easiest, cheapest, and surest
ways of getting higher crop yields. New soybean varieties are being
developed that promise increases similar to those experienced with
hybrid seed corn. New strains of wheat, oats, barley, and flax also
will increase yields per acre of these crops as soon as the new varieties
become more fully adopted.
Substitution of high quality hay and pasture (alfalfa, lespedeza,
kudzu, Ladino clover, and improved grasses) for the lower yielding
types could mcrease roughage production 25 to 30 percent and in that
way provide an increased feed supply for livestock. The greatest
increases in livestock production are likely to come through use of a
larger feed supply and better care rather than through breeding
improvement. However, cross breeding, artificial insemination, and
more eft'ective disease control also will mcrease livestock production
in the next few years.
Purchases of farm machmery are likely to become greatly acceler-
ated as soon as more machmes are manufactured. Small machines
are likely to be developed to sell at prices that will attract purchases
by operators of small farms. As tractors and trucks are substituted
for draft animals the land which formerly produced feed for workstock
will produce commodities for sale. The shift to tractor power since
1920 has made available over 60,000,000 acres of crop and pasture
land for the production of products for the market. If the annual
decrease in horse and mule numbers that is now under way continues
until 1950 that has been a newly continuous trend, there will be nearly
2,000,000 fewer horses and mules on farms at that time. This shift
would make available another eight to ten million acres of crop and
pasture land on which to produce farm products for sale.
There would also be about 460,000 additional tractors on farms in
1950. Each additional tractor would save about 800 hours of man
labor per acre if it is used with appropriate tillage and harvesting
equipment.
Alany new machines are likely to have considerable adoption in the
next few years. Among these are the mechanical cotton picker, the
improved cotton stripper, rice combines, flame cultivators, hay driers,
and manure leaders.
99597 — 45 — pt. 5 4
1270 POST-WAR ECONOMIC POLICY AND PLANNING
Production per worker for sale and for use in the farm home nearly
doubled from 1910 to 1944 as a result of farm mechanization and other
improvements m farm practices. Rapid mechanization and further
adoption of other known improvements could result in even greater
output per worker by 1950.
Accelerated adoption of improved practices is likely to exert con-
sidexable pressure for increased output when labor, machinery and
fertilizer become more freely avaUable. A considerable amount of
new land development is also getting under way. The marketable
output of farm products could be increased in the post-war period in
four different ways: (1) expanding the area of cultivated land- (2)
shifting to more intensive crops and livestock; (3) increasing crop
yields and output per head of livestock by use of improved practices;
and (4) shifting to mechanical power. To what extent the physical
potentialities for mcreased production will be realized depends on
market outlets, and on the kinds of programs of education, assistance
and encouragement that are developed. It is recognized that there
also are some factors tending to offset the pressure to increase produc-
tion. One of these is the possibility of less intensive use of land to
maintain soil resources; another is the tendency not to work as long
hours m peacetime as in wartime. But the pressures tending toward
production increases seem much more powerful than those which
would retard production, unless they are restrained by shrinkmg
market outlets and lower prices for farm products.
Implications of increased efficiency: It often has been assumed that
increased efficiency in operating individual farms will benefit all
farmers and also society as a whole. Cost reductions that increase
output per farm result in increased income to the operator, unless
other farmers also increase output. Then if demand for the product
is not increased sufficiently to offset the increase in output the price
of the product may go down even to the point where the farmer
receives less for a larger volume of products than he previously did
for a smaller quantity. This would mean that more than the net
gam from increased efficiency would be shifted to other groups and
the farmer's mcome would be lowered. In addition to the effects on
the farm operator we need to consider the workers that are displaced
by improvements in farmmg. The Nation as a whole must give due
consideration to employment for the displaced workers as well as for
the income of those remaining in agriculture.
Improvements in farm technology will bring a net gain for the
Nation only if there are other employment opportunities readily
available for the displaced workers, and if we have a continued high
demand for farm products. If consumer-purchasing power is not
maintained there will be constant pressure of unemployed people on
the land. This situation would delay adoption of some of the im-
proved practices that have been described, and would therefore tend
to slow down the increase in output. However, experience in past
depression periods has shown that output would not be reduced enough
to prevent chronic surpluses of many products.
Increased efficiency in farming means that less effort is required to
produce farm products, and that therefore more labor and more time
is available for the production of other worth-while goods and services,
and for increased leisure. But A\^ays need to be found to keep market
channels open for the volume of farm products that are needed in a
POST-WAR ECONOMIC POLICY AND PLANNING 1271
balanced national economy, and to make other employment oppor-
tunities available for workers that are no longer needed in agriculture.
Mr. Zimmerman. Unless certain conditions are met, the paper
doesn't present a very rosy picture for agriculture, does it?
Mr. Johnson. That is correct.
Mr. Zimmerman. Unless we can furnish employment to these dis-
placed people at a living wage so they can buy this increased produc-
tion, then your prediction is that farm prices will go down and we
will be confronted with surpluses, and agriculture will be in the same
boat it was a few years ago when this depression
Mr. VooRHis. Another element, too.
Mr. Zimmerman. I just want to get that answer.
Mr. Johnson. That is correct.
Mr. Zimmerman. That is something we may look forward to?
Mr. Johnson. Which means the market channels will have to be
kept open for farm products, also other farm opportunities m other
sections of the economy. ' , i •
Mr. Zimmerman. Then, as the Secretary pointed out this morning,
we have got to keep these people employed in industry at a wage so
that they can buy these surplus farm commodities, and we have got
to maintain our international relations so we may hope to export that
5 percent that spells the difference between success and failure.
So those are the big problems that the Nation faces as a whole.
And the fate of agriculture is bound up then in the fate of industry
and labor, and what to do to keep that national income up to the
point where we can keep our economy in a healthy condition; is that
right? , . .,
Mr Johnson. That is correct, and of tremendous importance, Mr.
Chairman. We often don't think about it, but when consumer in-
comes are high, thev tend to buy higher-quality farm products. In
other words, when purchasing power is low, we get food enough of
some kind, but not the high-quality farm products that bring the
incomes of the farms up to higher levels. In other words, we all
would like to buy more beefsteak and more strawberries and cream.
Some of those things we will buy if the purchasing power is there.
Air. Johnson. That is correct. The tremendous importance, Mr.
Chairman, in a way we often don't think about it, that is, when con-
sumer incomes are high; they tend to buy higher-quality farm prod-
ucts. In other words, we get food enough, even though the purchas-
ing power is low, of some kind, not the high-quality farm products
that bring the value of the market up, but from the farms up to higher
levels. In other words, we all would like to buy more beefsteak and
more strawberries and cream. Some of those things we will buy if
the purchasing power is there. , ■ i • i ^
Air. Zimmerman. You mentioned something else which is novel to
me. I wish you would expand on that a little bit. You spoke of
flame cultivators. I wish you would tell us what you mean by flame
cultivators. That is something new.
Mr. Johnson. They are just coming in, Mr. Chairman. 1 must
confess I haven't seen one myself, although some of our folks have.
There are just a few of .them used in the South, in cotton and sugar-
cane especially. They appear to be very successful, not only for
keeping the weeds out, but also for blocking the cotton instead of
chopping by hand.
1272 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Zimmerman. You mean to say if they develop that flame
cultivator, we won't have the need for the horde of people in the South
who chop cotton?
Mr. Johnson. If the mechanical cotton picker comes along, it's
being manufactured commercially now, we won't have any need of
them for picldng.
Mr. Zimmerman. My friend Mr. Murdock won't have to send dowm
to Mexico to get a bunch of Mexicans to come up and pick the cotton
in that section; is that right?
Mr. Johnson. That is correct.
Mr. Zimmerman. That is going to affect considerably the economy
of these sections; is it not?
Mr. Johnson. It undoubtedly will eventually and if those develop-
ments should come rapidly in a period of depression obviously it would
worsen the situation. If they come in a period of rising emploj^ment
opportunities— in other words, if they were introduced under conditions
such as today, the repercussions wouldn't be nearly as serious if there
were other employment opportunities for the displaced people.
There is one modification, one saving grace perhaps on the intro-
duction of those machines. Our experience in the adoption of the
gram combine, or for that matter in the adoption of the tractor, corn
picker, and some other machines, indicates it takes about 20 to 25 '
years from the time machines are first manufactured commercially
until there is general adoption. That is especially true of som^e of the
more complicated machines.
Mr. Zimmerman. That gives us hope we won't have to send our
cotton choppers up to Mr. Wolcott's district
Mr. Johnson. You would have to send them but not for as lono- a
time. '^
Mr. WoLCOTT. You send your choppers up there at least to eat our
beefsteak.
Mr. Voorhis. Why haven't they been introduced in this very
period? "^
Mr. Johnson. One reason is there have not been materials to manu-
facture farm machinery. And allotm.ents have been made for the
manufacture of these new developments only on an experimental
basis. I would say the mechanical cotton picker has been perfected
to the point now where there is no question about it.
Mr. Johnson. Apparently there is no question about the picking of
cotton. There is still a question about whether you can get as high
a grade and quality of cotton as you can with hand picking.
Mr. Murdock. Mr. Chairman
Mr. Johnson. It requires some ginning changes as well, to get
good quality cotton.
Mr. Murdock. I wonder if I might interject a matter here, not my
own thought at all, but merely to get the w^itness's reaction. Is there
not a view held by men in high economic stations that we must
inevitably face lower agricultural prices because of the fact that you
are mechanizing the small farms and the large farms, and that will
mean lower cost of living and will react upon wages and low^er the
whole cost of production for all goods and services? Do you know of
any such theories advocated? If so, how do you feel toward them?
Mr. Johnson. I have a reaction to one phase of it. As far as the
general price theory is concerned, the question of general level of either
POST-WAR ECONOMIC POLICY AND PLANNING 1273
farm prices or other prices, there are others here who can answer that
better than I can. But from the standpoint of improvements in
technology, if we liave cost reductions, and those cost reductions, of
course, can take place either with or without increasing output, most
of them result in increased output. Prices of farm products can go
down and still leave the farmer as large a net income. That is, they
can go down to a certain point and still leave the farmer as large a
net income as he had before. Now then, if the market dem.and doesn't
keep pace with this increased output, as I said in the paper, prices
might go down to the point where the farmer gets less for a larger
output than he did before with a smaller output before the cost reduc-
tions took place. That would mean that all of the benefit of the
improvement would be shifted to other groups in society and that
farmers would be worse off than they were before.
Mr. MuRDOCK.. I want to see that avoided. I have been puzzling
a long time to try to find out who is an agricultural producer and just
what proportion should go to the man who has his feet in the soil, the
primary producer. He is the man I am most interested in, by the
way. But I am able to see there are others who are economic pro-
ducers. I am not sure wiiat part they shoidd get. I do know there is
too wide a spread between the farmer who grows the potato and what
I pay when I get a baked potato on my plate. Too wide a differ-
ence there. I am wondering what happened between. But it is this
I had in mind this morning, Mr. Chau-man, about the mechanization
of small farms. If we are to mechanize the small farm, do away
with horses and mules, thus produce more for human consumption
which the animals formerly consumed, are we likely to get that farm
machinery down cheap enough in cost so it will be economically feas-
ible? Or are our great manufacturing concerns tied up with patents
so we will pay three times the prices for the light weight, small tractor
and its attachments than we needed to pay with proper cornpetition?
Mr. WoLcoTT. What do you mean by "proper competition"?
Mr. MuRDOcK. Effective competition.
Mr. Johnson. As to the question of price policy, the phase of
that question relating to mechanization shift from horses and mules
to tractors, I would say that it would be possible to manufacture and
sell associated equipment that goes with the tractor to produce farm
products more economically perhaps even on the smaller farms, than
we do with horse and mule power. Now, obviously, if a farm gets too
small, the- tractor becomes a very large investment. So also is the
acreage that is required to raise horse and mule feed as far as that is
concerned.' In other words, if the farm gets too small in size, there
just isn't very much income in it for the farm operator whether he
uses horses and mules or tractor power.
Mr. VooRHis. Isn't this true, Mr. Jolmson, in connection with lots
of types of farm machinery it is altogether possible to have cooperative
ownership among a half dozen farmers, three or four, maybe even one
farmer to make a sort of venture in investment in one of those pieces
of equipment and rent it to his neighbors? It doesn't necessarily
mean, does it, that you have to give up the hope of preserving the
family-size farm.
Mr. Johnson. That possibility of course is even greater with
mechanical power than horse or mule powder. There is also this factor
involved: As we shift horse power to mechanical power, we increase the
1274 POST-WAR ECONOMIC POLICY AND PLANNING
acreage and output that one person can handle. In other words, since
1910 we have just about doubled the output per worker for sale that
goes to market. That has been a fairly steady increase with some ups
and downs. I thmk we can speak with the accelerated mechanization
we will have after the war, it will at least continue and probably in-
crease. That does mean a worker or farm familv with the operators
and family laborer can handle larger acreage and"^ produce more prod-
ucts than they could before mechanization.
Mr. Zimmerman. In my section we have a great number of acres of
soybeans the last few years. I mean by combines, that is, who have
smaller farms and they go out and harvest other crops for men In
other words, hire this equipment out. That is true I think of the corn
picker. I just mention that to supplement what Mr. Voorhis said
about the ability to utilize this mechanized equipment. *
Mr. Johnson. A family can operate more land and under proper
conditions would have the possibility of getting a larger income for
their efforts.
Mr. MuRDOCK. May I ask one more question there in regard to the
light tractor— this doesn't apply to my own district personally
because I live in a community where we have heavy soil. We have
to use "cats." But if we use small tractors, light, I personally know
of several cases, I think I could mention three where men have been
killed by light tractors raring up, tiping over on them. I understand
that whole thing has been ehminated. Is there more than one
manufacturing concern that has a new-type connection where lio-ht-
weight tractors would pull heavy loads without that danger? "^
Mr. Johnson. I am not an agricultural engineer, but my engineering
friends assure me that none of the newer-type tractors do that under
heavy loads.
Mr. Zimmerman. Any other questions? Mr. Wolverton?
Mr. Wolverton. I think Mr. Wolcott has one.
Mr. Wolcott. What has been done m the field of agronomical
chemurgy to remedy this situation? We appropriated 8 or 10
million dollars a few years ago for the study of uses to which agricul-
tural products could be put in industry. The soybean industry, of
course, was sponsored by Mr. Ford as part of that farm-chemurgy
program. Out Independence way private individuals have been
experimenting with the use of industrial alcohol made from all kinds
of vegetables, mostly corn, and when we have the gasoline shortage
we are going to have in a few years, so we are told, I had hoped we
might develop other uses for agricultural products in industry.
Secret3.ry Wickard. Awhile ago the chairman asked nie about
what we were domg to develop the use of farm products. I referred
to the four laboratories which Congress had created or authorized to
be created. At that time I said that the work in discovering new
outlets for farm products had been delayed somewhat because these
laboratories in several instances had taken the scientists off the work
which they were originally intending to put them on— and putting
them on war work. For instance, the Peoria Laboratory has been
doing a lot of work on fermentation which enters into this product of
alcohol. It got into experimental work for producing alcohol for
synthetic rubber. It did discover some new techniques in that field.
I had a pilot plant at Peoria for work in that field. As quickly as the .
opportunity presents itself we want to get back in the work on experi-
ments, research; trying to find new uses for agricultural products.
POST-WAR ECONOMIC POLICY AND PLANNING 1275
Mr. WoLCOTT. Our chemists have been over to Germany before the
war; they have been to Russia. They gave the Russians and especially
the Germans the benefit of our knowledge of the use of agricultural
products in the manufacture of synthetics and particularly elastics.
We were told that the Germans have utilized that knowledge to the
fullest extent. And a great portion of the manufactured products in
Germany is synthetic, comes from the ground, crops. I wonder if
we are not being a little superficial in trying to develop a post-war
program without giving more consideration to expanding the use of
agricultural products in industry? Here is my point, if I may tell
you why I am bringing this up. The world is becoming mdustrialized
whether we in America like it or not. I just had an interesting
experience up at Bretton Woods, I know that every Iraqian and
Iranian visualizes smokestacks all over their deserts in the post-war
period. We have got to compete in the new industrial world following
the war. It seems to me that we have got to catch up on the processes
which will materially decrease the cost of products, otherwise we will
not be in a position to compete in the world industrial markets. We
have all been doing quite a lot of figuring about this farm chemurgy
program in that respect.
Secretary Wickard. Getting back to the subject of plastics at the
Peoria laboratory, we have done a lot of work developing and making
the plastics from various farm products. A lot of those products are
in use today; some are being used in the war effort. Some I wouldn't
want to discuss here. They are really startling so far as their develop-
ment and utilization are concerned. May I say in connection, at
the Forest Products Laboratory we have carried on research which
has enabled us to find ways of using forest products and trees which
will not be useful for saw logs in making a lot of products, including
alcohol. You know recently the War Production Board authorized
the Eugene, Greg., plant for producing alcohol from wood, from saw-
dust. So I think we are making a lot of progress in finding new uses
for agricultural products; and I believe our research has taken on new
impetus since w^e completed this new laboratory. Of course they
were not more than completed when we were in the war effort. As I
said, we had to stop. So the primary research we had intended to
carry on, we will continue as soon as our people will be released from
the various war projects on which they were working.
Mr. WoLCOTT. I think we have been somewhat amiss in not de-
veloping that. If you notice on the desks all through this House
Office Building they have a plastic border, a bakelite border, to lay a
cigarette down on the border of any of these tables, it burns right at
the end, take your stump off and you can't see where the cigarette
has been. In my travels around the United States I had never seen
that. Here, in the New House Office Building, that has been in use
10 years.
Secretary Wickard. That is wood material?
Mr. WoLcoTT. No, that is bakelite.
Secretary Wickard. Going back to that, we are using forest prod-
ucts in building airplanes. We did a lot of work in developing the
use of wood to replace aluminum. And of course we do have ash
trays and all kinds of containers which are fireproof and which are
very durable.
1276 POST-WAR ECONOMIC POLICY AXD PLAXXIXG
Mr. WoLCOTT. There seems to be such a field for that. We are
told in our study of post-war construction, especially home construc-
tion that perhaps 10 years from now about the only lumber which
will be used in home construction is that used for hardwood floors
provided you want the beauty of hardwood floors. All vour door
casings will be of plastic. WaUs will be of plastics. They will be
verminproof fireproof, much more desirable than at the present time
becretary ^\ ickard. I don't know why you made the exception of
hardwood floors. You can get plastic-impregnated wood, plywoods
Ihey are going to be harder and just as satisfactory and beautiful as
hardwood.
Mr. WoLcoTT. That is the only lumber they tell us wfll be used in
construction following the war. If that is true, it seems to me there
wiU be a tremendous field for the use of agricultural products in in-
dustry m respect to home construction alone.
Secretary \Yickard. I agree with you. As I said this morning I
wish the members of the committee had opportunity to see one of the
laboratories the Forest Products Laboratory; the new things that
can be developed from agricultural products are very intrio-uincr and
very exciting. As I said this morning there are one or twolhiii^s we
might consider as being more or less offsetting. The first is synthetics
constantly being developed from use of nonagricultural products coal
tar, lor instance. There is the other thing— when you develop the
use from one kmd of agricultural product, a new use for it you may
be depriving an outlet for another agricultural product. These thin4
have a way of ofl'setting or balancing each other. I hope you don'^t
thmk I am not m favor of carrying on all the research be'cause the
better products we can make, the cheaper we can make them, the
more advantage it is to both producer and consumer. I don't know
as far as our total outlet is concerned whether there is a great hope for
mcreased outlet for farm products going out of one kind or another
Mr. W OLCOTT. Are you acquainted with Dr. Hale's activity?
Secretary Wickard. No, I am not.
Mr. WoLcoTT. He has written several books. They are a little
tno deep. I don't remember enough of my college chemistry to un-
derstand one of the books. The other two are very understandable
and list the uses to which agricultural products might be put in
industry, especially along the lines of plastics. As I understand Dr
Hale went to Germany before the war, and Russia, and they made
lull use of his knowledge. He tells me he had been trymg to get the
Crovernment, before the war, of course, to consider it. I know of
some of his activities. He had been trying to get the Government to
expand their research program along that line for a good many years.
Secretary Wickard. You know we are making hats now from
skimmed mflk instead of wool or felt, and dresses from skimmed milk
instead of cotton. I think the consumers are going to have to decide
what kind of dresses they like. Nevertheless, those articles you have
mentioned are all m the agricultural field. Personally, I "^ prefer a
good felt hat to the skimmed milk variety that I have had. I think
the Germans would, too, if they were available to them.
Mr. WoLcoTT. There is a psychological factor.
Mr. WoLVERTON. Off the record.
(A remark followed off the record.)
POST-WAR ECONOMIC POLICY AND PLANNING 1277
Mr. WoLVERTON. Mr. Chaii-man, I had one or two questions I
would like to ask. I think either witness would be able to answer
them. I am sorry I did not hear the Secretary for his entire testi-
mony. I have a very high regard for our Secretary of Agriculture.
When a man has theories who has had practical experience, I think it
is worth a great deal to us. I feel that is what we have in our present
Secretary of Agriculture, a man who has had practical experience on
which to base whatever theories he expresses.
The point I would like to make is a point lightly touched upon
by Mr. Murdock a few moments ago. He spoke of a price that is
received by the farmer for his products. I assume he asked the
question from the standpoint of the farmer, because his district is
largely a farming district. I am in the position of having a district
that might be described as being 50-50, as it has both large industry
and the farming industry as well.
What I have noticed is that there is a great difference in price be-
tween what the farmer receives for his product and what the consumer
pays for it. What is the reason of that? It is a practical question.
It is an everyday question. I am in a position where I live to know
what the farmer gets, and I know what we pay when we go to the
market.
Secretary Wickard. Well, Mr. Chau-man, one of our papers con-
cerns this problem of marketing. I don't know whether you want
me to try to attempt to answer the question which has been asked,
because it is not a simple question. I think perhaps sometimes we
are led to believe that there are much larger gaps between what the
farmer gets and what the consumer pays than are necessary. Perhaps
there are when large speculative efforts are involved in the handling
of the farmer's products.
I think that all of us want to see that gap narrowed as rapidly as
possible, and as is feasible.
Now, there have been certain changes made during the war looking
forward to more efficient handling of agricultural products. I would
be happy, if you want to go into it further, Mr. Chairman, to have
Mr. Thompson present his paper on marketing. It might give you
more in detail some of the answers to your question.
Mr. WoLVERTON. Mr. Secretary, it seems to me the question of
marketing, if that is where the answer lies, is certainly worth con-
sideration. Because the spread, while it has always been noticeable,
yet in the last few years it has become distressingly noticeable. I
have heard of all kinds of prices a farmer would get for picking his
huckleberries and what we pay for them on the market. I know
something about watermelons.- I know what the farmer would get.
I know what we have had to pay at times for them.
That isn't a criticism of O. P. A. It isn't the result of any thought
upon my part that it's ineffective even though it may be. That isn't
the answer, for the spread always existed. It existed before the
war. It has existed for years. It seems to me, if we want to do
something for the farmer, if it is necessary for the consumer to pay
the prices he does, there ought to be some means by which the farmer
would get a better part of that price which the consumer would pay.
Mr. Zimmerman. Will you yield?
Mr. WoLVERTON. Yes.
1278 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Zimmerman. As a member of the Committee on Agriculture
want to say, about a year ago, less than a year ago, the House
authorized the Committee on Agriculture to make a study of that
question and appropriated, the committee was appropriated quite a
sizable sum of money to make that investigation. Now, I under-
stand they have organized and started to work on that very important
matter. ^
Mr. WoLVERTON. I think we will all agree it is an important matter
and one the committee may devote its attention to with a o-reat deal
of profit to farmers as well as the consumer. '^
Now, the other question I had in mind was based upon the state-
ment that was contained in the testimony of the Secretary, in which
he spoke of a better parity as between the income of the farmer and
the industrial worker.
At the present time, we are very much interested in providing a
source of income for the unemployed worker in the post-war period
If It becomes necessary to do so, what can we do of a comparable
nature that would prove beneficial to the farmer the same as we are
seeking to do for the worker in industry?
Secretary Wickard. Now, are you "^ talking about our giving the
farmer a better income or better prices, or are you talking about the
unemployed farmer, the farmer who cannot get a job in the city
which is satisfactory, cannot get enough income from his little amount
of land which he operates, which is satisfactory?
Mr. WoLVERTON. The thought came to me as a result of your state-
ment, "Parity income would be another yardstick," when you were
discussing under point 2, "Equal living standards for farmland citv
families,'' then under point 3, "Equal protection for all tvpes of
farmers," you said, "Just as farmers have an obligation to produce all
that consumers need, the Nation has an' obligation to protect farm
incomes in times of depressed prices."
Now, when you consider that in its general character, it would
meet with approval. What I am interested in, as a legislator for the
time being, would be what could be done to work that principle into a
real living practical thing?
_ Secretary Wickard. I think I referred, first, to the fact that there
is a need in my estimation for continuation of the present price sup-
port policies for farmers. I think you know about the support prices
being m effect for 2 years after the war. I think those should be
continued. However, as I pointed out in mv statement, they are
not an answer in themselves. After all, it is one thing to name a jprice,
another thing is the possibihty of getting people to buy it at that
price. A granary program helps to take it off the market when prices
are depressed, making it available later when production has fallen off.
Mr. WoLVERTON. Even, after you have done all those things, Mr.
Secretary, it seems to me the farm income is very low, considering the
amount of work it requnes.
Secretary Wickard. I agree with you. It is low in comparison
with urban income on a per capita basis. I had hoped all the things
I suggested this morning, eight points, would all make a contribution
toward narrowing that disparity between urban and rural people.
Mr. WoLVERTON. The other question I had in mind to ask of Mr.
Johnson was his statement that "The use of commercial fertilizer has
more than doubled in the period from 1934 to 1943." And you advo-
POST-WAR ECONOMIC POLICY AND PLANNING 1279
cated a greater use o fertilize" in the future and pointed out the ad-
vantages ah-eady gained and that can be gained by the use of an in-
creased amount of fertilizer.
Mr. Johnson. That is correct.
Mr. WoLVERTON. Is there any thought in your mind that the pri-
vate fertilizer industry would not be suificient to meet the demand?
Mr. Johnson. No, there is no implication in my statement to that
effect at all.
Mr. Wolverton. I realize you have got the answer to a good many
questions. I am asking you that question for this reason, judging by
some of the letters that I have received from fertilizer concerns of long
standing, there is a fear expressed of an intention of the Government
to go into the production of fertilizer. Do you know of any reason
for that?
Mr. Johnson. I do not. I do not know of any reason.
Mr. Wolverton. I asked the Secretary that same question when
you were before the expenditure committee.
Secretary Wickard. Yes.
Mr. Wolverton. You very frankly stated you did not see the
necessity of it. I remarked that was one more point we were in agree-
ment and one which I was glad to have you express yourself on.
Secretary Wickard. I do not see it will be necessary for the Gov-
ernment to enter mto the production of fertilizer, that is, to own and
manage a plant, because I think private enterprise will do it. There
may be instances in which we might want to keep some of the nitrogen
plants in a standby condition so they could be used for munitions.
Mr. Wolverton. You have in mind maybe for experimental pur-
poses?
Secretary Wickard. Munitions. I would hate to see these plants
torn down because sometime we may have to put them up again.
These nitrogen plants could be leased some for private operation. That
is the extent to which I think the Government has any place in the
fertilizer business.
Mr. Wolverton. That is all.
Air. Zimmerman. The evening is slipping by. Mr. Murdoch.
Mr. MuRDOCK. Congressman Wolcott brought out most what I had
in mind this morning when I asked about new uses for old crops and
the mtroduction of chemurgy. I might say to my friend from Michi-
gan, in the spring of 1942, Dr. Hale appeared before the subcommittee
of the Mines ancf Mming Committee of the House and made a splendid
statement bearing right on the matter you have in mind.
I feel in agriculture we are building great forces which require a
safety valve. I notice on all steam plants that the generation of
steam, although needed, is taken care of, when it is overproduced, by
a safety valve. I believe with Air. Wolcott that this chemical use of a
possible surplus on the farm constitutes just exactly that sort of
safety valve.
Now, we are going to make our land more fertile. We are going
to produce more abundantly and we are going to mechanize. For a
few years, I know the world is hungry for food and fiber. But it is
going to be satisfied, I hope, in a shorter time than we anticipate.
Secretary Wickard. I am almost afraid it is going to be satisfied
in a shorter time than we anticipate.
1280 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. MuRDOCK. The question is, What is our safety valve when
there IS what we used to call overproduction. I believe the uses
stated by the gentleman from Michigan is the answer
Mr. WoLcoTT. I don't want it to appear by our silence that we
acquiese whole heartedly m all sections of the statement. The
statement says, "By now, it is widely recognized that this or any
other nation can hope to maintain a profitable and steadv flow of
exports only to the extent that it takes a corresponding volume of
SSll * ^^""^'^ '''^^^ *^ contribute to that whole
Secretary Wickard. That is my statement.
Mr. Zimmerman. I think we had better conclude
Mr. VooRHis. There are a couple of items of business I would like
to suggest. One is that I don't think we ever determined definitely
whether we were going to include in the record these 12 papers I
would like to have that done myself. t^ i •
Mr. Zimmerman. I would like to suggest, Mr. Secretary, that you
make these papers a part of your statement
Secretary Wickard. Should I make the list to the clerk, and they
will be supplied to him? "^
Mr. Zimmerman. Yes; they will be parts of the record
Mr. VooRHis. I would like to make another request which either
you or the Secretary can veto very readily if you want to. These
papers, it they are as good as A/[r. Johnson's, would be very valuable
Ihere is something else I would like to get besides the papers, that is!
m briefer form than this. I would like to get a very brief summary
01 what the proposals of the Department would be for the carrying
out ol those difterent items under those eight points which you made
not so much a discussion, not background discussion, but just how are
thrt?^^'""^ ^^ '^' "^^ ^^"^ suppose you could do something like
Secretary Wickard. Yes.
Mr VooRHis. You answered a number of questions along the
line that i am saying now.
Secretary WickARo. Would you want our proposals or would you
want alternatives? I don't know whether we in the Department
liave specific remedies or proposals or methods for achieving some of
the ends. ^
Ali\ VooRHis. You said something about the improvement of rural
health. That would be one of the tough ones. Your answer was
you thought the public health departments would be responsible for
working that out. Maybe that is all you want to say.
Secretary Wickard. No; we have a paper, two or three pages long,
it almost has to be that long to answer your question.
Mr. WoLVERTON. I think your suggestion is very good. As I
pointed out^m that one instance we believe the general principle enun-
ciated, but from a legislative standpoint the difficulty comes in trans-
lating It into actual legislation. So any concrete suggestion the
becretary wou d have to make to carry out those eight points would
be very helpful to us.
Mr. VooRHis. That is what I had in mind exactly
Mr. Zimmerman. May I make this suggestion? That the Secretary
sunimarize these recommendations and statement of things he thinks
could be done and attach that to his statement following or iust be-
fore they put in these exhibits.
POST-WAR ECONOMIC POLICY AND PLANNING 1281
Mr. VooRHis. I want him not only to summarize but to spe-
cifically
Mr. Zimmerman. You want him to specify wherem
Secretary Wickard. He wants the answer to all the $64 questions,
and I don't think I have them all.
Mr. Zimmerman. Will you try to write that summary for him?
Secretary Wickard. You will have to give us a little time to think
about them. We will do the best we can.
Mr. Zimmerman. We would like to have them. I thmk, m fair-
ness to the Secretary and his staff, you have been very patient. I
want to say we appreciate your presence here today more than I can
express, ^'our statements have been very frank and informative.
We appreciate the information you have given us today.
Mr. VooRHis. I want to say that I do agree with your statement
about imports and exports.
Mr. Zimmerman. Unless there is objection, the committee will
stand adjourned to meet again on Friday at 10 o'clock.
(Thereupon, at the hour of 4:25 p. m., a recess was taken untd 10
a. m., Friday, Ausrust 25, 1944.) . * . ,
(The following statements from the Department of Agriculture
Interbureau Committee on Post-War Programs were submitted to the
House Special Committee on Post-War Economic Policy and Planning,
August 23, 1944:)
Agriculture and Full Employment
(Prepared by Bushrod W. AUin)
In recent months the Bureau of Agricultural Economics has been analyzing
past relationships between naitional income, employment, farm prices, and foreign
trade in order to provide a statistical guide for post-war agricultural policy.
This has been possible onlv because the Bureau over a period of years has accumu-
lated in its files vast quantities of data on these subjects. The purpose of the
analysis has been not to forecast what will happen to agriculture after the war,
but to estimate what would be most likely on the basis of alternative assumptions
with respect to national income and employment. It was felt that this would at
least be helpful in indicating the nature and magnitude of the problem of main-
taining agricultural prosperity or of avoiding acute agricultural depression. The
estimates presented here, of course, are subject to revision- based on further
analvsis. , .... , ,,
One assumption made was that after the transition from war to peace the
national economy would be so managed as to mtain full employment— a goal
generallv supported by most people concerned with post-war problems. A view
of what" agriculture might look like under this more or less optimistic assumption
was considered to be useful as a point of departure in thinking about programs
that might be required under less optimistic assumptions.
Arbitrarily assuming that the year 1950 will be a true post-war year m the sense
that reconversion will have been completed, it was estimated that the population
of the United States at that time would be 144 millions, 59 millions of whom would
be able and wanting to work. This means that in order to have full employment
there must be at least 57 million jobs availeble, the remaining 2 million workers
being accounted for as people on vacation, changing jobs, or otherwise tenrporanly
out of work on their own volition. Assuming that 8H millions of these 57 million
jobs would be in agriculture, and 4:8% millions would be in nonagricultural occu-
pations and assummg further that average wholesale prices would be maintained
at the same level as in 1943, these 57 million workers would produce a national
income of about $150,000,000,000, which is only slightly larger than the national
income was in 1943. . ,j , u i,- u
Under peacetime conditions, however, average farm prices would not be as high
in relation to nonfarm prices as during the war year of 1943, when they stood at
about 188 percent of the 1910-14 average. On the basis of past peacetime rela-
tionships and without anv Government programs to support farm prices, it was
• estimated that under conditions of full employment with a national mcome of
1282 , POST-WAR ECONOMIC POLICY AND PLANNING
leo'^S'^fttYorolH at?t^^ ^-"1^ «^-d at about
abo^ parity as clrllZi\:Sh't&%e7ol'5 u'^r:!^S^:^l^^^f'!^^ 1
would yield a sross cash farm inoonip tn si' ,r,i ii„„ ""70 pantj n 1943, and
of about $17,000,000,000 ariompared «?th the 1^« ^r"«'"'' ?"f ^^"^ '™»'<=<^
8.8 million worlscrs of $20 000 000 000 ^ ' '^'"■" '""<'"<' '°
,mporK'ei"p^o;i', s zri'ic'^rJuor^rfh'r ':i ■"!^'"= P"-"'- °f
imports would represent onlvibmW 4n ^L-T' l^ ! . , • "- ^^^^ agricultural
^^§^»S>iiHSS?SS"^i-^^^
a7;S£--.i^:-r=F— ^^^^^^^
se|/ISfTSL;l.'^^rrfnVfh1t'?oJ?ht?L^.|1^^^^^^^^^^^^
had dropped to 25 percent. If this downward trend isrSumed ffter the Sr I™
hke y tha agricultural export, by 1950 will not LceedSSw.lTof total evnortf
wo fd La/ onlT'iT'oM MO 000""tWs '° ««r''''"'°-"'"'' "^'^ '"-' -Ports
1.9 billion., for ihe vears 'mS bu ft ff^^e compares with an average of
1935-39 and i, doUleThe amount fm- 1940 *" "" '^" ""' ""'"■"^'^ '"'^
mo 'S -SP'°--'=;'>r .*o T'.'inal Ltyel°aV"onsidUhMo'" rttLts''?50° Om''
?a°s.Todu''c{sSS;infpLr;;;tfs,^r/eS;cf'toS?r'°"iV^
s.b e to arrive at total donLtic coLumptfof r?o,TrenS "J°"
of?^oi??i?,ss,s"oo^o' '"" «"p'°"-"' -"'" .View .i7^rc^if:^^t.Zi .
„ ^ ui oniy dz/,uuu,UUU acres of cropland. This comnares \ ith ^'^o aan nnn
acres actually harvesfpH in ^QA^ t^v,, ^ ^ho e-umpdrts \ irn do^,uuu,UUU
cfSdCi-iSrSiS?'"^^^^^^^^^^^^^^
iar^'tx'rfof£Xi:iie'<;;r,';:Td»""it''resti?n":^^^^^^
tr;uV.s,r"''Sr'o?/sfS9 '"'^^^^
:5£a-|K^^
Jv--rr--?i'ine-;&s^^^^^^^
POST-WAR ECONOMIC POLICY AND PLANNING 1283
1950 about 7,000,000 of the 59,000,000 workers should be unable to find jobs
rv> hich would represent about the same proportion of the total labor force as was
unemployed in 1940), it is reasonable to assume also that the general price level
V ould fall below the 1943 level w hich was assumed for full employment. With
this number of unemployed and with the price level about the same as the average
for the vears 1938-42, the national income would stand at about $110,000,000,000,
or $40 000,000,000 less than under full employment. Farm prices would stand
at only a little less than 90 percent of parity, but gross cash farm income would
fall from $17,000,000,000 to about $12,000,000,000, or almost a third ^et cash
farm income would fall to about one-half of what it would be under full employ-
ment. Domestic consumption would fall about 5 percent, thus making it a prob-
lem of what to do with the product of 34,000,000 acres instead of the 17,000,000
acres not needed under full employment conditions. .^. ^, r u+
But this would be a condition of relative prosperity compared with the plight
in which as^rioulture would find itself in the event of a severe post-war depression.
If about 15,000,000 workers should be unemployed, the price level would undoubt-
edly fall still further, and the national income might well decline to sixty or sixty-
five bLlion dollars. With these conditions, agricultural prices could easily drop
to 50 or 55 percent of parity, and gross cash agricultural income could tali to
five or six billion dollars.
If the estimates made on the basis of these alternative assumptions are even
approximately correct, the farmer's stake in full employment can hardly be
overemphasized.
Improvements in Farm Technology and Their Effects on Farm Output
(Prepared by Sherman E. Johnson)
wartime increases in production
The output of farm products for sale and for use in the farm home was 29 per
cent higher in 1943 than in the years 1935-39. If July and August crop prospects
materialize the total output in 1944 will be even higher. These tremendoas in-
creases over pre-war years were iiiade possible partly by favorable weather and
bv high feed reserves accumulated before 1943. On the other hand, the 194d
output was produced with 6 percent fewer workers than in the pre-war period;
also a less experienced labor force, and with shortages of new farm machinery,
building materials, containers, and some other supplies. ,, . , • i, , , •
The record production in 1943 and the prospect of continuing this high level m
1944 are an indication of the tremendous production capacity in agriculture that
covld be drawn upon if need arises and if farmers are given sufficient time to
mobilize resources for all-out production. Fortunately, farmers had purchased
a large volume of farm machinery in the years 1937-41 and therefore were fairly
well equipped in most regions despite the small amount of new machinery made
available in 1943. The large increase in tame hay. and plowable pasture which
took place during the 1930's created a reserve of land and fertility that could be
drawn upon in wartime. Although v^e have been depleting those reserves to a
certain extent there are no indications that wartime changes in farming have
caused large scale permanent injury to soil resources. .^, , , , ^f
Favorable weather oftei is mentioned as being responsible for a large part ot
the i icrease in wartime output. If average yields for the years 1923-32 are taken
as 100 percent, all the years since 1936 are above that level. However, recent
studies of weather conditions in relation to crop yields indicate that with average
weather conditions we can expect as much as 20 percent higher crop yields than
those experienced in the 10-year period 1923-32. If this higher yield expectancy
is borne out over a period of years it represents a remarkable change within a
relatively short period. . ^ • r „+;«„^
We are beginning to reap the results of many improvements m farm practices-
that have come to the forefront in recent years. Adoption of hybrid seed corn
in the Cora Belt has increased yields per acre in that region by about 20 percent.
Nfew corn hybrids adapted to areas outside the Corn Belt will make possible
further increases in yields per acre for the country as a whole. _
There has been a remarkable increase in per acre yields of cotton m recent
vears. The acreage in cultivation on July 1, 1944, adjusted for average abandon-
ment is less than 50 percent of the cotton acreage harvested in the years ly^^--^^-
However, the indicated yield per harvested acre is 155 percent of the 1926-^^
1284 POST-WAR ECONOMIC POLICY AND PLANNING
' where the average yield in the years IQ^S 49 l^'l^^™"'^ ^" ^^^ ^^Ita arels
average. In addition to favorable weather so-pS fV^ P"'"""*. ^^ *^^ ^923-32
yields of cotton are (1) increa2d fisrof ft/nf ^ V'^'"' """^^'""^ ^^^ ^^^ increased
age fertilized and apVlicat?on ofalS^af a tS^^ «f ^h^ acre-
winter cover crops; (3) improved vrriettsf?) TZiT^l-'"' ^f,^"'"^' ^2) more
and (5) selection of ..ore Produ?tivT£'fir'\hTsmX\^^^^^^^
POST-WAR EFFECTS OS" BETTER FARMING
onfp^SX'Sr/yeTrr rSIsTil^^fSiri^ ^'"1,^-^"^ \° ^"^ ^--
potentialities. For example, on a group of West ViSn1« f«™' ^^'f ^^^g^^^test
hmestone and 180 pounds of triple sunerDWnb./^ ™'^-'' ^''^ "^ 8^°""^
production 57 percent and the protein coKt of f h! f ^^"^ ^''''^ increased forage
The use of commercial fertilizer has n?nl+^ of the forage more than 40 percent,
to 1943. After the war p^oductJon ?amc W w^ hf "^ "•, '^^ P/^^°^ ^^°"^ 1^34
creased nitrogen output. If increased uJeoKitr. \vailable for a greatly in-
i-creases in phospl ates and potSf an?u4h .S'^''^^^'f'f■^ ^vith comparable
strains of wheat, oats, barley and flax aTsn wfnin ^^""^^ '''^^ ^«™- New
crops as soon as the ,^w va^etS'b^LtmoVe'f iTaX,^^^^^^^ ^^^ ^^^^ °^ ^^-«
clo'vt and^:S;? Xr^^^fh^^^^^^^^^ ''^P%-- k-dzu, Ladino
production 25 to 30 pfrc^nfLd in thlfT.' -V^^'P"^' ''""^^ increase roughage
livestock. The greSS increases in livSn^T''^'^'' T !""^a^ed feed suppTv for
effective disease control kls^^ -^iS^ISS^-lir^UXS^S^^
as motSShfnS^reTat^^cfured '^'slnairn'^rr^ ^^^^^/-T --^-ated as soon
to sell at prices that^TatSLrnurc ats h.? .""' ^^ ^ developed
tractors and trucks arrsUsSuted^f^r SSt aniE^lf' ,°^ f'^^i' {^''^'- ^s
produced feed for work stock will nrnH,,^! ^'"'''^^If. ^hf land which formerly
tractor power since^^So'l^atm^de^a^'a able^Slo S^^^^^ ^'^ ^'^'* 4
pasture land for the nrodiiotinn of r.y-r.1t,\r.+ f A, ','^^^ ^cres of crop and
crease in horse and ^de num e?s fhat s now' ^^' "'^'^'*- ^^ ^^'' ^""^'^1 de-
there will be nearlv 2 000 OoS fewer horses n^d"^ I" ""^^ f ^tinues until 1950
This shift would makekvaSe anothei 8 to fSml^ ' '''' ^^7"^ ^* ^^^^ ^™^-
land on which to produce farm products Lr sife ^"'^' °^ ''°P ^^^ P^^^^'^^
adS- "aUra'tor ^o^dl^Va^^r^^^^^^^^^^^ ^^^^^f l^ '^'^' - ^^50. Each
with appropriate tillage al'J'h^rvistifg'eq^d^^^^^^^^^ '''''' ^'^ ^^'^ '' '' - "-d
y^^r!:'\^Znr^:::iTn'^%^^^^^ in the next few
stripper, rice combines flame cX^^Sorsh.?'' P'^^^-, ^^e improved cotton
Production per worker for sale am fo; ^f J -'''^f '% ^"^ "^^'^"^^ 'orders.
pressSe for TncSroutpu X'nl ^' '^'^^'•^ ^ ^^'^^ considerable
freely available. A considerable amo^^^^^^ 1"^ /"'"^'^^ become more
under wav. The mSr^toblf nnttnf f f ""^ ^T"^ development is also getting
post-M^ar period in ??,rSS^ient™ products could be increased in thi
(2) shifting to more intonsh-rcrops'a^ ^'"^'^^ cultivated land:
output per heed of livesVoH bv ?f=.^f i'^^^^^ck; (3) mcreasmg crop yields and
POST-WAR ECONOMIC POLICY AND PLANNING 1285
that there also are some factors tending to offset the pressure to increase produc-
tion. One of these is the possibility of less intensive use of land to maintain soil
resources: another is the tendency not to work as long hours in peacetime as in
wartime. But the pressures tending toward production increases seem much
more powerful than those which would retard production, unless they are re-
strained by shrinking market outlets and lower prices for farm products.
IMPLICATIONS OF INCREASED EFFICIENCY
It often has been assumed that increased efficiency in operating individual
farms will benefit all farmers and also society as a whole. Cost reductions that
increase output per farm result in increased income to the operator, unless other
farmers also increase output. Then if demand for the product is not increased
sufficiently to offset the increase in output the price of the product may go down
even to the point where the farmer receives less for a larger volume of products
than he previously did for a smaller quantity. This would mean that more than
the net gain from increased efficiency would be shifted to other groups and the
farmer's income would be lowered. In addition to the effects on the farm operator
we need to consider the workers that are displaced by improvements in farming.
The Nation as a whole must give due consideration to employment for the dis-
placed workers as well as for the income of those remaining in agriculture.
Improvements in farm technology will bring a net gain for the Nation only if
there are other employment opportunities readily available for the displaced work-
ers and if we have a continued high demand for farm products. If consumer pur-
chasing power is not maintained, there will be constant pressure of unemployed
people on the land. This situation would delay adoption of some of the improved
practices that have been described and would therefore tend to slow down the
increase in output. However, experience in past depression periods has shown
that output would not be reduced enough to prevent chronic surpluses of many
products. '
Increased efficiency in farming means that less effort is required to produce
farm products and that therefore more labor and more time is available for the
production of other worth-while goods and services, and for increased leisure.
But ways need to be found to keep market channels open for the volume of farm
products that are needed in a balanced national economy and to make other
employment opportunities available for workers that are no longer needed in
agriculture.
Marketing Farm Products
(Prepared by F. L. Thomsen)
In the reconversion from war to peace, agricultural marketing problems will be
even more important and difficult than those which arose in mobilization for war.
Many of these problems will be a resumption in accentuated form of those which
prevailed before the war. Surpluses of foods, in the face of widespread mal-
nutrition", have long constituted one of the most exasperating anomalies of civiliza-
tion, and a glaring weekness of our distribution system. The problem which they
present will be intensified after the war because of the difficulty of readjusting
agricultural production to peacetime needs. The primary post-war marketing
problem, therefore, will be to find satisfactory market outlets for the "surplus"
products of our farms.
Other post-war marketing problems arise out of the changes in food marketing
conditions which have been brought about by the war and which will again be dras-
tically altered by the ending of hostilities. These problems of readjustment will
be complicated by marked technological changes in processing and transportation
methods which already are under way and which promise to virtually revolutionize
the production and marketing of many perishables.
disposition op wartime controls
One of the first problems in dealing with post-war conditions in marketing will
be to dispose of the many wartimfe regulations and controls affecting the marketing
of farm products.
"Disposition" does not necessarily mean elimination. Some of these regula-
tions, such as those designed to reduce the number of deliveries of milk and to
stop the sale of bread on consignment to retailers, may be found to have such
99579— 45— pt. 5 5
1286 POST-WAR ECONOMIC POLICY AXD PLANNING
desirable results that we will want to continue them even in peacetime. Other
regulations may be found to be necessary or desirable only for a year or two after
the war.
Most controls should be discontinued at the earliest practicable date after the
cessation of hostilities. It is not as simple a proposition, however, as many people
seem to think. Producers, consumers, and marketing agencies have adjusted
their buying and selling operations to these regulations. It would be highly
unsatisfactory to eliminate wartime controls merely by issuing a general blanket
order. Discrimination and judicious timing are required.
REENTERING COMMERCIAL INTERNATIONAL TRADE IN FARM PRODUCTS
During the war exports of farm products for use by the armed forces and our
allies greatly increased, but commercial exports dwindled to very small propor-
tions. After the war we will be faced with the task of getting back, and if possible
expanding, our commercial export outlets. One way of doing this is to support
general policies favoring the exchange of our products for those of other nations.
Foreign trade is not a one-way proposition. We cannot hope to permanently
increase our exports unless we stand ready to accept increased imports of those
commodities which other countries are better able to produce.
The advantages of an expanded international trade are not theoretical but
represent practical benefits which can mark the difference between a prosperous
and a depressed agriculture. Farmers seem increasingly aware of this, and we
believe that after the war they will stand ready to support, even more than in
the past, those public policies which will contribute'to a healthy recovery of foreign
trade.
It is important, also that all possible specific methods of expanding foreign
markets for our agricultural'products be examined carefully and open-mindedly.
Some of these possibilities will be old devices revamped to meet post-war needs.
But we may also require some totally new approach, such as an "international
commodity exchange" which among other things could buy from surplus-
producing nations the commodities which cannot be moved into commercial
domestic and export trade channels at satisfactory prices. Such surpluses might
then be disposed of to deficit countries having large numbers of people with very
low incomes and hence unable to buy these products in the open market. Such
entirely new approaches to the expansion of international trade in farm products,
although new and subject to various possible disadvantages, at least are worthy
of consideration.
EXPANDING DOMESTIC CONSUMPTION
Vigorous efforts also should be made to increase domestic consumption of food
after the war. The additional market is there, if we can but reach it. Studies
have shown that even in the United States vast numbers of people are underfed
and underclothed. To meet adequate nutritional standards for all our people
would require the consumption of large additional quantities of animal products
and of fruits and vegetables unless our food consumption habits were materially
changed.
When all is said and done, of course, the best way to obtain increased domestic
consumption of farm products would be to maintain consumers' incomes suffi-
ciently high to permit adequate diets for all. The potential effect of this on
demand is indicated by the appearance of food shortages during the war, despite
the fact that per capita civilian consumption was above that of many pre-war
years.
But even if national income remains at a high level there will be a considerable
number of people unable to afford an adequate diet. To the extent that full
employment is not achieved, the number of such people will be increased. It
seems apparent, therefore, that much could be done to expand the domestic market
by encouraging greater food consumption by the low-income groups, through
programs such as 5-cent-milk distribution, free school lunches, and "the stamp
plan." Such programs not only result in giving the poorer consumer groups better
diets but also in the disposal of additional quantities of food which otherwise would
compete directly with food sold in regular commercial channels of trade. The
alternative is to see that every family has enough income to permit adequate
food consumption.
INCREASING MARKETING EFFICIENCY
The reduction of the spread between farmers and consumers would be one of
the most lasting and beneficial ways of making cheap food available to the masses
of consumers, thereby increasing domestic consumption without reducing returns
POST-WAR ECONOMIC POLICY AND PLANNING 1287
to producers. It is worthy of our close attention in making post-war plans for
marketing.
Farmers and consumers alike long have protested against the high cost of dis-
tribution. Careful research has shown that, contrary to popular impression, the
price spread between the farmer and consumer usually is not in any large degree
attributable to high profits, speculation, or unethical business practices, but to a
multitude of conditions which contribute to inefficient distribution.
There is no doubt that much could be done to improve efficiency and reduce
the costs of marketing. But this would require real effort and a spirit of team-
work which producers, consumers, and middlemen have not frequently demon-
strated.
One of the factors responsible for inefficiency in marketing, for example, is the
long list of internal trade barriers which have been erected by the States and
municipalities to further local interests. Until it is realized that such actions in
the end are harmful rather than helpful, we cannot expect to make much progress
in increasing marketing efficiency. For in every present inefficiency somebody
has a vested interest. We cannot expect others to forego these benefits unless
we are willing to reciprocate.
READJUSTMENTS IN PROCESSING AND MARKETING FACILITIES AND METHODS
The war has greatly accelerated technological progress in relation to food proc-
essing and marketing. Some of the technological developments in food utiliza-
tion which have been introduced during the war to meet special requirements of
the armed forces and lend-lease no doubt will be abandoned after the war. But
there are so many new developments in prospect that it is safe to predict that, in
the several decades following the peace, marked changes in the marketing of
perishable agricultural commodities will occur.
Important among these newer technological processes are dehydration, the freez-
ing preservation of food, and air transport. New industrial uses for farm prod-
ucts also are in the offing, although their favorable effects on market outlets for
farm products will be at least partly offset by the development of competitive
synthetic textiles and other products made from nonagricultural raw materials.^
" Among the many post-war problems which will be presented after the war as"
a result of these developments are the following: (1) How can food dehydration
facilities be converted to peacetime uses? (2) How can air transport equipment
and personnel released by the armed forces be used in transporting farm products
and opening up new export outlets? (3) Will dried milk seriously affect the
established fluid-milk markets and specialized dairy production areas, and how
can we make this new product an aid to dairy producers in seeking new markets
rather than merely a different form of competition? (4) How can we promote
the orderly development of the frozen-food industry to prevent gluts and other
difficulties which may arise from too hasty conversion and the present lack of
distribution facilities and home storage equipment? (5) What are our post-war
needs for assembly and processing facilities to meet new technological develop-
ments in production, such as extractor, cleaning, and conditioning equipment of
cotton gins to care for mechanically harvested cotton?
Farm leaders and agricultural businessmen seem unusually well aware of the
imminence of these post-war marketing problems, and the desirability of taking
steps to meet them before they arise. Concern has been expressed lest we plunge
into peace no better prepared to deal with the resulting problems than we were
to cope with war. Another test is coming in agricultural marketing, as severe
as that which immediately preceded and followed Pearl Harbor. Let us hope we
will be prepared to meet it.
Agricultural Price Policies -in the Post- War Period
(Prepared by Oris V. Wells) *
Since farm prices were stabilized in the spring of 1943, farmers have chiefly
worried over production and the factors immediately affecting it — labor, farm
machinery, fertilizer, feed, and always, of course, the weather. Questions are
now beginning to be raised, however, as to agricultural prices during the years
ahead.
As a background for the discussion of questions which should be considered
and the alternative policies which might be followed, there are two sets of facts
which need to be kept in mind.
1288 POST-WAR ECOXOMIC POLICY AND PLANNING
First. Agricultural production for sale or use by farm families was over one-
fourth greater in 1943 and will be almost' one-third greater in 1944 than the
average for 1935-39. A new record has been established each year since 1939
and this gain in production can be maintained or further increased in the ytars
following the slowing down of the war effort.
Second. Farmers have already received assurance of substantial aid in sup-
porting prices under the so-called Steagall amendment and the Agricultural
Adjustment Act of 1938, as amended by the act approved October 2, 1942.
That is, the Congress has directed the Secretary of Agriculture or the War
Food Administrator to support prices for the basic agricultural commodities —
corn, cotton, wheat, rice, tobacco, and peanuts (for nuts) — and for commodities
for which substantial increases in production have been formally requested.
Such increases have so far been requested for soybeans, flaxseed, and peanuts for
oil, potatoes and sweetpotatoes (when properly cured), American-Egyptian cot-
ton, hogs, eggs, chickens (excluding chickens weighing less than 3 pounds and
all broilers) , turkeys, and milk and butterfat. Prices are to be supported at not
less than 90 percent of parity (or, in case of the feed crops, 85 percent, and cotton,
92.5 percent) for 2 jears from the January 1 following the date on which the
President or the Congress shall have proclaimed hostilities to have ended.
This is a far more difficult assignment than anything contemplated in the
Agricultural Marketing Act of 1929 or the Agricultural Adjustment Act of 1933.
But the commodities covered only account for about 65 percent of the cash farm
income since fruits, vegetables, beef cattle and veal calves, sheep and lambs, and
wool are not covered. Questions will, of course, be raised relative to these and
other commodities, and the Congress has also directed that so far as possible
such commodities shall also be supported at a fair parity relationship.
Perhaps the domestic demand will continue at a high level, and this, together
with the foreign shipment of food and other commodities for relief will be sufficient
to clear the market during the conversion or transition period. Perhaps not.
As a result, careful consideration should be given to the question as to whether
enough funds are available to support prices in case of a slackening in demand
and as to whether adequate authorities exist for satisfactorily disposing of the
. commodities which might be turned over to the Government.
Another question which should be considered has to do with the removal of
wartime orders, allocations, rationing and price control. Although it is desirable
to remove such controls as fast as conditions will permit, it is also desirable that
such controls should be retained as long as they are actually needed. The
decision as to when such controls are to be removed should depend upon the
extent to which supplies are available to meet the effective demand. The
control record so far is on the whole good and restrictions should not be removed
at a time or in a manner which will encourage inflation and speculation, including
speculation in farm land. Prices for farm land have already shown a considerable
increase and a speculative boom should be guarded against. Farmers are reduc-
ing their farm mortgage load and if this continues thej^ will be in a much stronger
economic position than was the case following World War I.
As we turn to the post-war period 'itself, one of the first questions in the price
field centers around the generall goal for agricultural prices or the share of the
national income to which farmers are entitled.
So far as satisfactory prices are concerned^ the discussion centers around the
parity standard. As an average, parity prices as now calculated appear to be a
reasonable goal given full employment and an active foreign trade. But some
revisions in the parity prices for specific commodities are needed if the parity
standard is to be continued, and there are, of course, those who feel that some
better standard should be devised or that the entire parity approach should be
dispensed with.
Some are sure that the goal should be parity income ratlier than parity prices
as such. Actually, the real goal is to give farm and nonfarm families an equal
standard of living and it is doubtful if this can be measured by any single statistical
device or standard. But prices serve as a convenient administrative standard
and much of the curi'ent argument turns around finding some more satisfactory
manner of calculating parity or forward prices than is now used.
This also leads to a second set of questions relating to the means of assuring
satisfactory' prices for farm commodities or maintaining farm incomes at a desir-
able level. The current price support program suggests one ajjproach. But
certain conditions must be met if a successful and continuing support program is
to be developed. Prices must be set at a level which will assure reasonable returns
to farmers, guide production toward those crops and classes of livestock which are
POST-WAR ECONOMIC POLICY AND PLANNING 1289
most needed and not result in food costs out of line with what consumers can
afford. At the same time, adequate funds and authorities for administering such a
program must be available and on the average the entire production must be
consumed. Sizeable stocks of some commodities can be used to offset year-to-
year changes in production and 'to some extent demand, but stocks of even these
commodities cannot be continually increased.
Since there are circumstances under which these conditions might be difficult to
meet, there are some who feel that the general price support program should not
be continued. Rather, their suggestion would be that agricultural prices should
be allowed to seek their own level in order to encourage the maximum use of
agricultural commodities both at home and abroad and that supplemental pay-
ments should be used to maintain farm income, provided such assistance is
required. Such a suggestion also offers difficulties as well as raises the question
as to whether such payments wo«ld be accepted as a general substitute for satis-
factory prices in the market.
Such suggestions as these do indicate two conditions which should be met in
case a general support program is continued. First, ways of assisting families
with low incomes to obtain adequate food and clothing should be devised; and
second, the support-price program should be so arranged as- to encourage foreign
trade. Some are afraid that support prices will be so administered as to force
American commodities out of the foreign market. Such a result could perhaps be
avoided through either the use of some form of a two-price sj'stem or of supple-
mental payments to assure returns to producers while at the same time allowing
the commodit}' to move forward at a relatively low cost. Something more is also
needed and the suggestion that the several nations might work together to
increase consumption and assure each of the exporting nations its fair share of the
world market should be considered. Such a solution would involve the use of
agreepients or other commoditj^ arrangements which should, of course, fit into
such a general framework for encouraging world trade as might be developed.
Forest Conservation and Development
(Prepared by Raymond E. Marsh)
Forests, occupying one-third of our land area, are one of the Nation's greatest
and most essential resources.
This Department regards it of the utmost urgency that the Nation's post-war
plans include comprehensive measures to stop unnecessary destructive exploita-
tion, and to restore and keep in reasonable productivity the great acreages of
whollj' idle or seriously deteriorated forest land.
A few highlights of the forest situation will provide a necessary setting for the
action recommended:
Only about 20 percent of the 462,000,000 acres of commercial forest land remains
in old-growth timber. Much of that is economically unavailable. Of the remain-
ing 80 percent, a very large part is now only partly productive. Heavy cutting
and the inroads of fire, insects, and disease leave much land poorly stocked and
often occupied by inferior species and cull trees. Some 77,000,000 acres are so
severely cut over and burned as to preclude early reestablishment of commercial
stands without planting — an area three times the size of Virginia.
Nationally, saw-timber drain before the war exceeded annual growth by 50
percent. In the 30 years prior to 1938 the total stand of saw timber declined
almost 40 percent.
The impact of the war has been to worsen an already unsatisfactory forest
situation. Lumber and pulp are among the most critical war materials. The
most essential demands have been met only by drawing lumber stocks down to
less than 50 percent of normal and by drastically curtailing important civilian
consumption.
Our forest capital or growing stock has l^een further impaired. Saw-timber
drain has increased about 25 percent to almost double growth. In many localities
the situation is acute, with dependent industries having to cease for lack of timber.
High prices, pressure to increase- output, and scarcity of accessible old-growth
timber have combined to stimulate the premature cutting of young second growth
throughout the East and South, and in some western localities. Such cutting
involves a sacrifice of growing stock that will adversel}^ affect usable forest crops
for decades. It often leaves the land entirelj^ nonproductive. With some excep-
tions the level of woods practices in old growth has been lowered. The liquidation
1290 POST-WAR ECONOMIC POLICY AND PLANNING
of privately owned old growth in forests of the West, where present and prospective
supplies are insufficient to support existing mills for long, is being hastened.
These comments are not to criticize sacrificing our forest resources to the extent
necessary to win the war. The result, however, is to accentuate the importance
of forest rehabilitation.
The urgency of remedial action is further emphasized by the likelihood that our
forest-product requirements will continue at present high levels after the war.
There are huge accumulated civilian requirements for housing and many other
purposes. There are fascinating possibilities for the development of new uses of
wood through chemical conversion and other new treatments. The trend of
paper and paper-products consumption is still definitely up. Large potential
demands upon our forests for reconstruction in Europe and the Orient are depend-
ent upon international trade policies and exchange.
Such an outlook for forest requirements, despite the foi;est problem it imposes,
should be welcomed. It broadens the potential economic and social utihty of
the great area of land suitable only for forest use.
Forest productivit^y and services are an essential feature of our whole national
economy. They have a particularly close relation to the farmer. Nearly one-
third of our forest land is on farms. This in itself affords a fine opportunity,
as a rule only partially realized, for enhancing the farm income. The farmer
himself is one of the greatest consumers of wood products. Forest and forest-
industry work affords needed pa.rt-time employment in rural areas. Forest
watersheds are the main source of irrigation water.
Against this background this Department advocates dynamic, comprehensive
action, to be effectuated as soon as practicable, including:
1. A program of forest works for forest rehabilitation and development. This
includes among other things forest planting; weeding, thinning, pruning, and
other cultural work; fire-hazard reduction; and the construction and recondition-
ing of necessary physical improvements such as fire-lookout towers, forest roads
and trails, landing fields, and telephone lines; control of injurious insects and
disease; range reseeding; the expansion of facilities needed for recreation, water-
shed protection, and other forest uses; and for administration and research.
This work is eminently sound on its own account. Moreover, It is ideally
suited to the relief of unemployment. Most of it can be undertaken at short
notice, and the value of work accomplished is not lost when the program of
employment is curtailed. Such work does not compete with private industry.
For the most part it requires relatively little skilled labor or special equipment.
Much of the equipment required, such as dump trucks, bulldozers, compressors,
and small tools, should be made available by transfer from military surplus.
Such work is well adapted to a system of work camps — perhaps somewhat on
the order of the Civilian Conservation Corps. And it is suited also to the em-
ployment of local residents.
On public forests this work is well suited for handling as public works. Pre-
liminary estimates for the national forests alone — by all odds the largest public
forestry enterprise — indicate a program of over $1,300,000,000.
Unsatisfactory conditions on private forest lands justify a large program of
work on them also with particular emphasis on protection against fire, insects,
and disease.
This Department, through the Forest Service, is giving all possible attention
to the preparation of a works program. But for maximum economy and effi-
ciency a great amount of detailed planning in the nature of blueprint preparation is
needed which is impossible to do with available facilities.
2. Public acquisition of a large acreage of forest land now in private ownership.
This includes lands that have been reduced to nonproductive condition by erosion,
destructive forest practices, fire, and misuse; other lands plainly submarginal
for permanent private ownership; and lands essential for watershed or other
public purposes. Public acquisition should be an important part of a public-
works program. High priority should be given to some 35,000,000 acres within
the boundaries of existing national forests. To .-emove certain local inequities
incident to Federal ownership, tlje present method of financial contributions to
local government on accoiuit of national-forest lands should be improved.
Related to this is the disposal of surplus forest lands now held for military use.
The 3,000,000 acres of national-forest land now occupied by the Army and Navy
will, of course, be returned to their former status at the close of the war. In
addition nearly 1,000,000 out of the 7,000,000 acres purchased froni private
owners for military use are primarily suited for public forest purposes in peace-
time. These should be added to the national or State forests rather than opened
for entry or offered for sale.
POST-WAR ECONOMIC POLICY AND PLANNING 1291
3. Effective public regulation of cutting and other forest practices on private
forest land to stop destructive cutting and keep forest lands reasonably productive.
This Department has advocated a plan which would provide for Federal leadership,
and for actual participation in those States which fail to enact and administer
regulation consistent with standards fixed by the Federal Government.
Some 90 percent of our timber cut comes from private lands. Even after the
public acquisition advocated, private lands will always remain the main source
of timber supply. Despite excellent forestry by many private owners, the great
bulk of the private cutting is done without conscious regard for keeping the lands
reasonably productive. It is fully as important to stop destructive cutting as it
is to prevent destruction by fire, insects, and disease.
4. Strengthening of all phases of forest research. Emphasis should be given to
forest-products research, and to pilot plants for commercial demonstration of new-
processes and products, as a basis for new outlets for nonmerchan table species and
trees, and for the great volume of material which now goes to waste in woods and
mill operations. There are great potentialities along these lines.
5. Strengthening of pubhc aids to farmers and other private owners in the
protection and management of their forests. Progress may be expected from recent
enactment of Public Law 296, increasing from 2V2 to 9 million dollars the author-
ization for Federal assistance in forest-fire protection, and of Public Law 273,
authorizing integrated sustained-yield management of national-forest and inter-
spersed or adjacent private lands. Additional authority is needed to expand
technical assistance to private owners, to provide pubUc credit especially adapted
to needs of sustained-yield forest management, to facilitate forest cooperative
associations, and to provide more adequately for protection against forest insects
and disease.
In conclusion: Despite the establishment of the national-forest enterprise and
numerous other forward-looking Federal, State, and private forestry undertakings,
this country has never adopted an adequate forest conservation policy. Broadly
speaking, we have continued to dissipate our forest resources — to live on the prin-
cipal, instead of on the yield. In the judgment of this Department, a comprehen-
sive program of the character recommended is greatly needed.
Soil and Water Conservation
(Prepared by Melville H. Cohee)
The intensive crop production required by the war has unavoidably set the
national soil and moisture conservation program back. It now is essential that
we plan carefully to catch up with the problem and make plans for technical per-
sonnel and equipment to enable the carrying out of these plans.
It is true that there has been no widespread plow-up of lands unsuitable for
cultivation as there was during the last months of World War I and the period
following, because the farmers of America — particularly in the wind erosion areas
where a great deal of this damage occurred — ^are well aware of the hazards involved
since their experiences of the early thirties. However, work on the land to control
erosion, rebuild damaged lands, and establish a pattern of correct land-use for
our farm lands has been slowed up. There has been, as is well known a great
demand on the part of the military establishments for heavy equipment of the
types required in carrying out the various practices which are part of the soil-
conservation program. This demand in the early stages of the war rightly had
first priority. Also, a great deal of the technical personnel of Federal and State
agencies was called into the service of the Army or Navy. The very training and
experience which made them valuable in conservation work made them valuable
likewise to the armed forces who again had first priority. Furthermore, because of
the necessity for greater increased production, certain technical groups had to
devote practically their whole time to supervising the application of specific
measures designed first of all to increase crop yields rather than work on the more
permanent basic soil conservation measures.
The result has been that available technical personnel has had to spread itself
very thinly over the whole job, in spite of a steadily increasing demand for such
work. Because of these facts, we have lagged behind somewhat. Before the
United States got into the war, we were approaching the point where we could say
that we were at least holding our own against erosion — today we are not. The
job now is to obtain personnel, equipment, and material, not only to catch up with
■erosion, but to forge ahead and conquer it as swiftly as we can.
A recapitulation of soil damage in the United States shows that 300,000,000
acres or more of United States farm lands have been and are being damaged by
1292 POST-WAR ECONOMIC POLICY AND PLANNING
erosion. This total breaks down approximately thus: Fifty million acres of former
cultivated land have been forced out of production by excessive erosion, and
another 50,000,000 acres have been so severely damaged that they invite abandon-
ment; a second 100,000,000 acres have been eroded by wind and water until half
the topsoil is gone; and on a third 100,000,000 acres erosion is taking the topsoil
inch by inch.
This presents a rather grim picture of our situation as of today. We can add
another 100,000,000 acres to our cropland capital, if necessary, by taking some
from farm woodland, some from pasture, and carrying out clearing, drainage,
irrigation, and other water-conservation measures, and erosion control and soil-
building measures to make it productive and stable. This will add not only to
our potential cropland resources, however, but likewise to the magnitude of the
job yet to be done, a job which needs technical personnel and, especially in such
work as the above, heavy dirt-moving machinery.
The Soil Conservation Service has made a Nation-wide inventory of the needs
of the Nation's farm lands, which will serve as a measure of the size of the task and
as a guidepost to its accomplishment. Some of the figures indicating the land's
needs in terms of specific soil and moisture conservation farming practices are
impressive :
Forty million acres of land unsuited for cultivation should be shifted to grazing
or woqdland.
One hundred million acres should be taped down by terraces to prevent erosion
and promote water conservation.
Forty miUion acres of good farm land is in need of improved or new drainage.
One hundred and sixty-five million acres need the protection of contour cultiva-
tion annually to prevent erosion and promote water conservation.
Eleven million acres need field and gully plantings.
Ninety million acres should be planted to strip crops to prevent erosion and
promote water conservation.
One hundred million acres of farm woodland need improvement.
Ten million acres need repair or improvement of farm irrigation systems.
Seven million acres should be put in permanent water courses and outlets.
Five hundred and sixty thousand stock-water* ponds must be built.
One hundred and thirty million acres of pasture and range need reseeding,
fertilizing, liming. Much of this latid also needs measures to increase water
absorption.
Four hundred million acres of grazing land should have improved management,
including proper stocking , (numbers of livestock in accordance with carrying
capacity) and on 267,000,000 acre of this land deferred grazing should be prac-
ticed. Nearly 1,000,000 acres of stream banks should be stabilized to help
prevent silting damage to down-stream areas and reservoirs, and erosion of fields.
This work, together with border strips and other needed measures on 3,000,000
additional acres, will greatly aid in the enhancement of this country's wildlife
resources, including fish, fur-bearing animals and game birds.
The various practices likewise will make an important contribution to flood
control. Soil and water conservation is a watershed problem and must be solved
on a watershed basis. The measures that keep soil in place and control the run-off
of water on watersheds help minimize floods below. The inventory indicated
that only 71,800,000 of our 1,060,000,000 acres of farm land do not need such
practices.
These are the major needs and the major practices, Conservation farming may
require half a hundred other practices, depending upon the land and its use.
Some measure of the job may be determined from the fact that the Soil Conserva-
tion Service has estimated that approximately 2,000,000 man-years of labor, from
all sources — farmer and outside assistance — will be necessary to do the job.
Of this amount of labor it is calculated that 470,000 man-years of labor could be
used during the first 4 years of the post-war period.
While the actual accomplishment of this task must be considered as a post-war
undertaking, it is by no means a problem arising from the war. It would have had
to be done even though there had been no war. It is a problem of peace, and a
primary one among those that must be successfully solved if we want peace to
continue on a sound and equable basis.
Two things are essential to the carrying out of this vital task:
1. We must have adequate technical personnel to supervise the application of
all this work to our valuable farm lands.
2. We must have heavy equipment of many types to do that part of the essential
work that cannot be done by the light equipment owned and operated by most
POST-WAR ECONOMIC POLICY AND PLANNING 1293
farmers. T'he program could conceivably be delayed years if such equipment were
not available.
Research in the techniques of soil and moisture conservation should be con-
tinued since it is resulting in improvement of methods. Typical of conservation
research is recent study in raindrop erosion carried out at the Coshocton, Ohio,
Experiment Station. Using devices which can produce almost any kind of
weather, from a gentle drizzle to a drenching downpour, and tilting plots of soils of
various types, scientists have found that the impact of individual raindrops dis-
lodges more soil than does water rushing over the surface of the ground. This
discovery provides a basis for planning cropping systems, and in particular
emphasizes the importance of cover crops, removing them from the "advisable"
column to the "essential."
Likewise of great importance is the educational phase of the conservation
program. As in any program of accomplishment, education of the public to the
need is essential.
Ail over the country, the farmers themselves have direct supervision over the
application of soil and water conservation methods to theiand. Some of this
control is through soil-conservation districts, 1,148 of which have been organized
in 45 States, embracing more than half the farms of the country and more than
half of the farm lands.
Farmer control of the application of conservation work to the farms of America
likewise is effected through the agricultural conservation program administered
by committees of farmers in practically every agricultural county in the Nation.
It is important that every possible assistance be given these groups, particu-
larly soil-conservation districts whose boards of supervisors now are developing
detailed plans for carrying on the work within district boundaries during the
post-war period.
It should be clearly understood that conservation is not a job to be tackled
entirely by the Government at the Federal, State, and local levels. There are
certain responsibilities which the farmers of America must shoulder themselves
and there is no question that the farmers understand this, for already they are
shouldering these responsibilities all over the country. On the State level appro-
priations are being made from State funds to assist soil-conservation districts in
carrying out their plans. Approximately two-thirds of the States which have
soil-conservation districts have made modest appropriations to date, and it is
anticipated that most of the others will do so. Similarly, the Federal Government
must assume a sizable portion of the job, particularly in connection with dam
construction, major drainage operations, and similar heavy construction work of
a community benefit nature. Since soil- and water-conservation work is a na-
tional problem, and Federal participation is essential to the success of the com-
plete program, we feel that the Government will wish to provide necessary funds
and every facility possible to its agencies created by law to carry out the program.
Rural Electrification
(Prepared by James Salisbur}-, Jr.)
This statement is intended to furnish information on the status of rural electri-
fication and to suggest a program of action which includes a substantial segment
of the total job that remains to be done before all farms of America have this
essential service.
Interpretation of informations presented herewith are based on the pioneering
experience of the 869 Rural Electrification Administration-financed electric co-
operatives and power districts, the Rural Electrification Administration of the
Department of Agriculture, and other groups responsible for the development of
rural electrification since 1935 — a development which has resulted in an unprece-
dented increase in the number of farms electrified in the relatively short period
of 9 3'ears.
Farm electrification advanced very slowly during the 53-year period from 1882
to 1935. While a few farmers were connected to central-station power prior to
World War I, it was not until the early twenties that the progress made in elec-
trical engineering was reflected by a small increase in the number of farms served.
Slightly more than 10 percent of American farms had electric service* in 1934, as
compared with ahnost universal electrification in many foreign countries. This
had increased to 42 percent by June 3(1, 1944— a growth of 245 percent in the
number of farms receiving service.
1294 POST-WAR ECONOMIC POLICY AND PLANNING
STATUS OF RURAL ELECTRIFICATION
• The United States census of 1940 reported that 1,853,249 of the 6,096,799 farms
m the United States were receiving central-station electricity. Since 1940 it is
estimated that approximately 704,000 farms have been connected to rural lines
bringing the total number of electrified farms to about 2,500,000 as of January l'
1944. On the basis of this estimate some 3,540,000 farms are without high-line
service.
Of the 15,707,320 American rural homes, which includes rural farm and nonfarm
dwelhngs, the census reports 7,151,188 were without electric service. About
829,000 farm and rural homes have been connected to rural power lines since the
1940 census was taken. Some 6,322,000 rural homes are still without electric
service.
OBJECTIVES OF A PROGRAM OF NATION-WIDE RURAL ELECTRIFICATION
(1) Electric service to all rural -people.— The extension of central station electric
service at low-cost nondiscriminatory rates to all farms and rural communities
should be the ultimate goal of a national rural electrification program.
(2) Optimum application of electricity to farm production and farm family
Uving.--Th.is objective will become increasingly important as more and more farms
receive service. We have not scratched the surface, so far as utilization of elec-
tricity in agricultural production is concerned. It ofiFers an opportunity to bring
about a more efficient and more diversified tvpe of agriculture which is going to
be needed in the post-war period. There is still another aspect of rural electrifica-
tion which involves better Uving on the farms. Electricitv not only makes farm
life more enjoyable through the ehmination of drudgery and through the bringing
of modern conveniences to farms; it also offers an opportunity for better health
through refrigeration and sanitation equipment.
(3) Optimum use of electricity in rural communities.— To the extent that social
and economic progress of rural communities lags behind progress of urban centers
there will be a retardation in the welfare of the Nation as a whole. Extension of
high-hne service to rural communities measurably contributes to their progress.
(4) Development of rural industries.— New rural industries and the possibility
of industrial decentrahzation offering both full and part-time employment hold
forth the promise of important public benefits. Widespread utihzation of power
resources in rural areas will facilitate such development, as Tennessee Valley
Authority has demonstrated in peacetime as well as in wartime.
The early American farmer and his community aimed at maximum self-
sufficiency as a matter of necessity. The dangers of the predominantly one-crop
agricultural economy of the late twenties were revealed bv a Nation-wide de-
pression which found miUions of farm families unprepared to make effective use
of their potential resources. However, a complete rural self-sufficiency in this
day and age is incompatible with modern standards of living. A national rural-
electrification program should therefore include the extension of power resources
to rural industries to the end that the resources of these rural communities may be
employed in building a better, more stable rural life.
POST-WAR ELECTRIFICATION REQUIREMENTS OF FARM AND NONFARM RURAL
ESTABLISHMENTS
Recent estimates of Rural Electrification Administration indicate that about
6,400,000 farm and other nonfarm rural establishments now without central
station service are potential consumers to be served by rural power systems after
the war. These estimates are based on census data, on supplementary informa-
tion provided by the annual Rural Electrification Administration survevs, on an
analysis of 650 county-wide unelectrified farm surveys conducted by Rural
Electrification Administration financed systems scattered throughout the country,
and related data from cooperatives' operating reports and experience records of
Rural Electrification Administration. This estimate of potential rural consumers
includes rural establishments such as schools, churches, rural nonfarm commercial
and noncommercial units as well as farm and nonfarm homes (table I).
POST-WAR ECONOMIC POLICY AND PLANNING 1295
Table I. — Summary of rural electrification program for construction of new
distribution lines by rural power systems in the United States, Jan. 1, 1944
[[Based on Rural Electrification Administration prewar construction costs]
Total program: ^
Number of consumers ^ 5, 392, 000
Total expenditure $1, 600, 161, 000
Man-years of labor ^l 800, 000
Immediate post-war program, 5 years: *
Number of consumers 3, 655, 000
Total expenditure $1,042,052,000
Man-years labor 3 621,000
Long time post-war program:
Number of consumers 1, 737, 000
Total expenditure $558, 109, 000
Man-years labor s . 279, 000
• The total program to be accomplished from Jan. 1, 1944, will be reduced by the number of rural con-
sumers electrified during the period of restricted wartime activity. It is estimated that an average of 11,530
rural consumers will be served each month by all rural power systems for the duration of the estimated
program. This estimate is based on a careful analysis of consumers coimected since the Rural Electrification
Administration program's inception.
2 Includes an estimate of rural establishments without electric service as of Jan. 1, 1944, which must be
served by rural utility systems as distinguished from approximately 1,000,000 nonfarm rural establishments
located on the fringe of urban developments which may best be served by urban utilities.
* Direct and indirect labor involved in line construction assuming average annual wage of $2,000.
' The 5-year period after materials and manpower become available in quantities sufficient to permit
general resumption of primary line construction.
AREA COVERAGE RURAL ELECTRIFICATION A BASIC FACTOR
■ Area coverage service contemplates the making available of electric service
to all farms and rural establishments in a given area. This approach to rural
electrification inaugurated by the Rural Electrification Administration in 1935
is one of the primary reasons for the outstanding success of this program as
measured by the extent of service to the American farmer and his neighbors and
by sound financial records of Rural Electrification Administration-financed
systems. Comprehensive coverage of the entire area allows construction and
distribution cost to be spread between large and small consumers^ and thinly
and densely populated rural areas. Because the entire area is to have high-line
service designed to reach all potential consumers, it becomes possible to employ
highly efficient mass-production methods in the development, construction, and
operation of these rural systems. The net result is lowered costs and availability
of electric service to all potential users. Isolated unserved areas or pockets of
unserved consumers resulting from selective service only to those farms situated
in the more densely populated areas or promising relatively large immediate
loads, a practice which in the past has been referred to as "cream skimming," are
eliminated.
The experience of the Rural Electrification Administration in this respect gives
assurance that area coverage electrification makes electric service possible to
substantially every farm and rural establishment, on a self-liquidating basis.
At the same time, the cost of this electric service is one which the farmer can
afford to pay.
A SUGGESTED RURAL ELECTRIFICATION PROGRAM
The first phase of the job to be done in rural electrification can be done rapidly
if immediately planned. The Rural Electrification Administration estimates
that electric service by rural power systems, both Rural Electrification Adminis-
tration-financed and private, can be made available to .3,655,000 farms and
nonfarm rural establishments in a 5-year post-war program. This program
would require expenditure of approximately $1,050,000,000 based on prices which
prevailed before the war and on the basis of Rural Electrification Administration
experienoe, would require 521,000 man-years of labor (table I).
It is of interest to note that Rural Electrification Administration, given the
green light, can proceed to make a most substantial contribution toward expedit-
ing this program" to its completion. Rural Electrification Administration financed
systems now have a backlog of construction work amounting to approximately
$110,000,000 which can be undertaken as soon as materials and manpower are
released from war requirements. In addition, Rural Electrification Administrs-
1296
POST-WAR ECONOMIC POLICY AND PLANNING
tion has on hand or in process of preparation, applications for financial assistance
totaling more than $100,000,000.
The second phase of the program would achieve the long-time objective of
making electricit}- available to remaining unserved farms and rural homes. This
would involve service to 1,737,000 farms and nonfarm rural establishments and
would require expenditure of approximately $558,000,000 and would require
280,000 man-years of labor (table I).
The carrying out of such a program of rural electrification would affect pro-
foundly a verv wide segment of our economic life. In addition to the labor and
materials required for execution of the construction program, there will be an
enormous demand for house-wiring materials and services, farm-productive
equipment and other electrical appliances stimulated by the program, thus fur-
nishing markets for tremendous masses of labor and materials. Rural electrifica-
tion expansion may be expected to provide jobs for returning veterans and
released war workers. The jobs would not be temporarv in many instances be-
cause once the power network to our farms has been substantially completed, it
will automatically start a market for replacemen,t equipment and for the many
new devices to be developed and invented in the future.
Rural Housing
(Prepared by John M. Brewster)
There is an acute need for the improvement of rural housing. Preliminary esti-
mates indicate that nearly a third of the farm houses are practically beyond repair,
another third are in need of repairs or additions, while only approximately one-
third are in good condition. Almost half of those in good condition fall short of
modern standards for facilities and conveniences.
While we believe that there should be no let-up in the improvement of urban
housing, it should be kept in mind, as indicated by table 1, that housing conditions
upon farms are worse than in cities.
Table 1. — Comparative data on farm and nonfarm houses in 1940
Median
value of owner-
occupied
units
Average
number of per-
sons in dwell-
ing imit
Percent
With running
water
Needing major
repairs
United States
$2, 377
1,028
2,938
3.78
4.25
3.66
69,9
17.8
83.3
18.3
33.1
14.2
Rural farms
All others
While the rural-housing problem does not stem directly out of the war, it having
been with us for decades, limited repairs and replacements during the war have
intensified the problem. Just as houses have been neglected during the war, so
have other farm buildings. There will be need for a Targe program of recondi-
tioning and replacement of barns and other farm-service buildings, as well as of
houses, at the end of the war.
The following points should be taken into account in considering the means of
bringing about improvements in rural housing:
1. A farm house functionally is the center of many farm activities in addition
to hving, thus necessitating differences in design and construction from urban
houses.
2. The value of the house, regardless of cost, cannot be disassociated from the
value of the farm as a going business concern. Thus a house costing, say, $5,000
has little credit or sales value if on a farm too poor to yield a living, unless it
happens to te located in relation to off-farm employment opportunities in such a
way as to serve as a residence for persons working full or part-time off the farm.
Putting this another way, a farmer's employment opportunity, either on or off
his farm, determines the amount he can afford to spend for housing. With no
off-farm employment available, the income from a particular farm limits the
amount which can be used to support housing on that farm.
■= 3. Approximately half the Nation's farms are so limited in resources that they
do not furnish sufficient employment to their operators to enable them to have
farm incomes large enough to support adequate dwellings.
POST-WAR ECONOMIC POLICY AND PLANNING
1297
4. From the standpoint of financing improved houses, farmers may be divided
roughly into three classes, as follows:
(a) Those who have adequate cash on hand to repair, remodel, or build better
houses. For this group, which makes up a small proportion of all farmers, the
improvement of housing is not a serious problem,
(b) Those who have a basis for credit for repair, remodeling, or replacement of
farm houses. Adequate credit on suitable terms is often not available.
(c) Those who have neither cash nor a basis for credit for the improvement or
replacement of their houses. This group presents a tough housing problem.
In table. 2 preliminary estimates are presented which indicate housing require-
ments of farm families in relation to their employment opportunities.
Table 2. — Preliminary estimates of housing requirements of farm families according
to adequacy of employment opportunities in 191^0
Number of
farms
Houses on farms classified by conditio!
of houses
Class of farms by employment
opportunities
Houses not requiring
repairs
Houses
needing
repair
and/or
additions
Houses
With
minimum
facilities
AVithout
minimum
facilities
beyond
repair
Total all classes...
6, 000, 000
900, 000
1, 100, 000
1, 900, 000
2, 100, 000
1. Full-time adequate farms
2. Part-time farms with ade-
quate ofl-farm supplemental
employment
3. Retirement farms.-. _.
1, 800, 000
700, 000
400, 000
3, 100, 000
400, 000
300, 000
75, 000
125, 000
500, 000
150, 000
75, 000
375, 000
600, 000
150, 000
150, 000
1, 000, 000
300, 000
100, 000
100, 000
1, 600, 000
4. Other inadequate farms
The following recommendations are suggested for consideration:
1. For farms with adequate employment opportunities, 1. e., units where farm
resources alone are sufficient to yield incomes that will support adequate dwellings,
or where farm plus off -farm employment will do so.
(a) For the benefit of farmers who have adequate cash on hand to finance im-
proved housing, continue research and education to provide information on
building materials, construction methods, and up-to-date house and farm building
plans to farmers, local building supply dealers, contractors, and manufacturers
of building materials. The groups mentioned below also will need such informa-
tion.
(6) Provide credit facilities as follows for farmers without ready cash but who
would have a basis for credit if adequate credit of the proper types were available:
(1) Amend the Federal Farm Loan Act, if necessary, to authorize land banks
or the Land Bank Commissioner to encourage better rural housing for owner-
operators, tenants, sharecroppers, and hired workers, including migratory workers,
through lending 75 percent of the value of land and houses and necessary farm
service buildings, including the buildings to be constructed, provided the loan
does not exceed 75 percent of the long-time earning capacity value of the farm.
(2) Federal insurance of 90 percent of the amount of private loans on land and
buildings to provide better housing and necessary farm-service buildings, pro-
vided the loan, together with prior loans, if any, does not exceed 90 percent of the
long-time earning capacity value of the farm, and, in the case of part-time farmers,
of such farm earnings plus estimated oflF-farm income. This would give farmers
the same treatment as now accorded to urban dwellers through the Federal
Housing Administration.
(3) Expand and modify the tenant-purchase program by amendment of the
Bankhead- Jones Act to provide for:
(a) Continuation of making loans up to 100 percent of the long-time earn-
ing capacity value of the farm for the purchase of adequate family-type farms
and the provision of adequate housing and necessary farm service buildings.
(fo) Making loans to the present owner-operators of family-t3'pe farms, for
the improvement or replacement of houses and necessary farm service build-
ings, and the provision of needed new buildings, provided that the loan, after
1298 POST-WAR ECONOMIC POLICY AND PLANNING '"'
refinancing prior mortgages, if any, does not exceed 100 percent of the long-
time earning capacity value of the farm, and provided the farm contains
sufficient land to be an economic unit.
(c) Making similar loans to landlords, who own adequate familv-type farms
for the improvement or replacement of houses and other necessary farm
buildings or the construction of needed additional buildings, in order to
encourage better housing for tenants on such farms.
(4) Continue the inclusion of funds for minor housing repairs in rehabilitation
loans under the Bankhead-Jones Act.
2. For farms with inadequate employment opportunities, i. e., units where
neither farm resources by themselves, nor farm income plus off-farm earnings are
sufficient to support adequate dwellings. Such farms as these constitute approxi-
mately half of all farms. This problem is far more than a housing problem as
such. The trouble stems mainly from the fact that the farms are so limited in
resources — too little or too poor land, livestock, poultry, machinery and equip-
ment, and too little knowledge of scientific farming — that the operators do not
have a sufficient employment opportunity on their land to earn enough income,
even when prices are high, to support a good living including adequate housing!
Where adequate off-farm employment has not been available, these families have
had no means of providing themselves with better housing.
(a) Amend the Bankhead-Jones Act, if necessary, to enable modification of the
present tenant-purchase program to provide for farm-enlargement loans to owner-
operators of inadequate units for enlargement of their farms to economic family-
type units and to improve, replace, or provide for the construction of new houses
and necessary farm service buildings, under the same terms as in the present
tenant-purchase program.
(5) Where inadequate units cannot feasibly be enlarged, or where they are
absorbed into large units through farm enlargement loans to their neighbors,
families on such units should be aided as follows:
(1) Through making tenant-purchase loans to them for the purchase of ade-
quate family-type farms in other areas, under which arrangement they can obtain
better housing.
(2 1 Through encouragement of the development of rural industries which will
provide them with off-farm work, thus providing them with incomes large enough
to support better housing.
(3) Through special attention from the Federal and State employment services
in finding for them new employment opportunities as hired workers on other farms
or in off -farm jobs, combined "with public purchase under the Bankhead-Jones
Act of their submarginal farms.
(4) Where the occupants of inadequate units are aged persons with incomes too
low to support adequate housing, and none of the three measures indicated im-
mediately above is appropriate to improve their situation, the submarginal farms
should be purchased and paid for by the Government under title III of the
Bankhead-Jones Act, and the owner-occupants given lifetime estates; and where
the proceeds from the sale of such farms, combined with income from the farm
or from off -farm work or pensions does not permit such minor repairs as repair of
roofs, screening openings, sanitary disposal of sewage, and protecting the water
supply, grants should be made for these purposes under the rehabilitation loan
and grant title of the Bankhead-Jones Act.
(5) Where the occupants of such inadequate units are younger persons, par-
ticularly where children are involved and a considerable period of time might
elapse before the more fundamental and preferable adjustments proposed above
could be brought about, temporary subsidized housing should be provided during
this interval to avoid the rearing of any children in our democracy under rural
slum conditions.
RuKAL Health
(Prepared by F. D. Mott, M. D.)
The Department of Agriculture is naturally deeply concerned about the health
of farm people insofar as sound health is a necessary component of sound farm
economy. Not only is a sick or physically unfit farmer unable to do a good job
of farm production, but the farmer whose pocketbook has been invaded by the
cost of serious or recurrent illness is unable to meet the financial needs of proper
farm management.
POST-WAR ECONOMIC POLICY AND PLANNING 1299
The importance of health as a feature of sound.farm management was recognized
many years ago by one of the constituent agencies of the Department of Agri-
culture, the Extension Service, in its health educational efforts among farm youth.
The Farm Security Administration and its predecessors have recognized since
1936 the importance of protecting Government loans through the provision of
medical care to its borrowers and have developed, in cooperation with the organ-
ized medical and dental professions, an extensive program of group health plans.
Studies by the Bureau of Agricultural Economics on medical care and the Bureau
of Human Nutrition and Home Economics on nutrition have for several years
shown the relationship between these fundamental needs and farm welfare. The
War Food Administration's farm labor program includes extensive provision for
services to domestic interstate, foreign, and certain other migratory farm laborers,
as a measure necessary to insure maximum productivity of agricultural manpower.
It is evident, therefore, that health measures for farm people have long been
provided in answer to felt needs in the programs of several agencies in the Depart-
ment of Agriculture. No post-war plan for American agriculture would be com-
plete without proper recognition of the need for action to meet the vast problems
of rural health and sanitation. In this connection, the Department's Infer-
bureau Committee on Post- War Programs has brought to light abundant ma-
terial, prepared by agricultural committees in the States. Everywhere the need
of rural people in terms of a high burden of illness and preventable death, high
selective service rejection rates, great shortages of physicians and dentists, lack
of hospital beds for general disease, mental disease, and tuberculosis, meagerness
of public health facilities, inadequacy of environmental sanitation, poor nutrition,
and generally low levels for all medical services received was emphasized. A wide
range of recommendations was made, however, to cope with the problems.
On the basis of these contributions by the States and guided by the experience
of the Department of Agriculture in the administration of certain rural health
services, the following recommendations are submitted for the consideration of
this committee:
1. If the Congress decides to include the provision of health services under an
extended social security program in the post-war period, it is recommended that
the farm population be fully encompassed under such a program. It is certainly
possible to overcome the administrative difficulties usually associated with the
application of social insurance to farm people, so that they may be assured a
parity of modern medical services.
2. As part of any public-works program in the post-war period, it is recom-
mended that high consideration be given to the construction of hospitals, health
centers, and sanitation facilities in rural areas. The grant-in-aid mechanism, in
which the proportion of Federal subsidy should be greatest to States of greatest
need, would probably represent the soundest policy. Special steps should also be
taken to distribute to rural communities surplus military properties useful in
equipping rural health facilities, such as hospital and clinic furnishings, surgical
instruments, diagnostic equipment, and X-ray machines. Mobile medical and
dental units, developed by the armed services, are particularly adaptable to rural
needs.
3. Special steps should be taken by the Federal and the State Governments to
effect a more reasonable distribution of physicians, dentists, and related personnel
to answer rural needs. Licensure barriers between the State should be relaxed,
rural medical fellowships should be established, special incentives to rural settle-
ment should be provided, and other voluntary manpower measures should be
undertaken to assure adequate health personnel for the rural population.
4. It is recommended that special appropriations be made by the Federal and
State Governments, utilizing perhaps the grant-in-aid mechanism, to insure that
every rural county in the United States is provided with the preventive and ad-
ministrative services of a full-time and well-trained department of public health.
The functions of this agency should involve not only the traditional matters of
communicable-disease control and sanitation, but al^o nutrition and accident
prevention. It may be advisable for the States to arrange for groupings of rural
counties into multicounty districts, in order to develop efficient units of local
health administration.
5. The need for organized research to extend our knowledge of diseases afflict-
ing rural and urban people alike must be part of any rural health program. It
is time that government took a heightened interest in the organization and exten-
sion of such research on which the public welfare depends. Rural practitioners
should receive the benefit of periodic post-graduate education, furthermore, to
keep them fully acquainted with the most recent developments in medical science.
1300 POST-WAR ECONOMIC POLICY AND PLANNING
Special recognition should be given to the probable need for an extensive pro-
gram of health services for the nriigratory farm labor population in the post-war
period. The experience of the Office of Labor of the \\'ar Food Administration
has amply proved the value of adequate health services in terms of reduced ab-
senteeism, more effective working ability, and protection of farm communities
against disease which might be imported by migrants. Because of the special
problem of needy migrant workers not enjoying State residence in the areas of their
employment, yet economically essential to the farm economy, it is particularly
necessary that the Federal Government insure the provision' of essential health
services, with the cooperation of the States. As shown not long ago by the Senate
Committee on Interstate Migration, we must reasonably anticipate"^ the strong
possibility of a continuing problem of migratory farm labor. We must, therefore,
make proper provision for the health care greatly needed by this group.
Finally, from the experience of the Department of Agriculture's Committee on
Post- War Programs, it is felt that rural health constitutes a special national
problem requiring a special program for its solution. As we have noted, several
of the constituent agencies in the Department of Agriculture have already been
forced to face health needs as a phase of agricultural programs for specific groups,
such as low-income farmers or migratory farm workers, or in special fields such as
human nutrition or general health education.. What we must plan in the post-
war period, however, is a program which will face squarely the health needs of
the entire rural population.
Because of the special conditions of rural life — the wide dispersion of the popu-
lation, the large percentage of people in low-income groups, the relatively lower
educational opportunities, and the special disease problems — it is necessary that
a special program be developed, adjusted to these circumstances. Any such
program must and should, of course, be coordinated intimately with any national
health program which may be developed by any agencies so authorized by the
Congress. Only with special administrative attention, however, can we expect
farm people to be assured of that parity of health services necessary to insure the
production of the food and fiber which will be required in the post-war economy.
Extension of Social Security Programs to Farm People
(Prepared by Carl C. Taylor)
The social-security program is a national program from which farm people
are, by and large, excluded. They will continue to be excluded until the program
is expanded to include the self-employed and all wage workers — those in agricul-
ture as well as in other industries. It will fail to render the most needed services
to farm people until it is expanded to include medical and health services. Farm
people themselves do not know a great deal about the social-securitv program
because very few of them participate in it and because many of them believe it is
only a program of assistance to hired men and paupers. Few of them know what
proposals have been made to expand the social-security program to include them
in the present old-age and survivors' insurance and to include them in medical,
haspital, and maternity benefits.
The social-security program is a national program to which all Federal tax-
payers make contributions, farmers among others. Farmers also unconsciously
make contributions to the social-security fund because the prices for things they
buy are often increased by social-security contributions made by industries and
wage workers, which, in the complexities of price equations, influence the cost
of production'of things which farmers buy. Notwithstanding these facts, farmers
continue to furnish their own welfare programs through local units of government
to which they pay taxes, instead of escaping some of these burdens by having the
services furnished to the needy by social-security programs. Many farmers are
not conscious of these things, in fact do not know that there are social-security
benefits from which they are excluded.
The Social Security System has two broad programs: Insurance programs and
public-assistance programs. Citizens make payments to and receive benefits
from the insurance programs as a matter of rights because they as individuals
have paid contributions into the insurance fund. They make no direct payments
to the public-assistance programs and receive benefits from these programs only
on the basis of proven need. Farmers with all other citizens are eligible for the
pubHc-assistance benefits, if they are needy blind, aged, or dependent children.
They are not now eligible for old-age and survivors' or unemployment insurance
benefits.
POST-WAR ECONOMIC POLICY AND PLANNING 1301
If a farmer or farm laborer spends as much as 10 years working in covered
industries, all of which are outside of agriculture, he becomes "fully insured"
in the Social Security System. This is to say he must not have been a full-time
farmer during all his working life. There were in 1939 only 816,000 part-time
farmers, whereas there were 3,750,000 large- and small-scale family-sized farmers.
In the face of these facts farm families have in them more than their share of the
Nation's children and old people; accident rates among farmers are higher than in
industry as a whole; and medical and welfare facilities in rural districts are not
equal to those in urban areas.
Thus only the needy aged, the blind, dependent children, a few part-time farmers
and few farm laborers can receive any of the benefits of the social-security program.
Even farm laborers are excluded during the periods of employment on farms and
cannot qualify except by working for a considerable time in covered industries.
In looking to the post-war period it must be recognized that hundreds of thou-
sands of farm people have been working in defense and war industries in recent years
and making contributions to the social-security fund during that employment.
If and when they return to work in agriculture many of them will lose their rights
to social-securitv benefits for which they have made partial payments. Unless
the social-security program is expanded to include agriculture these people will
have made their payments only to benefit others rather than themselves. Should
the men and women in service" be given credit for social-security payments during
the periods of their service, they will constitute another group many of whom will
lose their benefits if they return to full-time employment in agriculture. This will
continue to be true until the program is expanded to include self-employed and
wage workers on farms.
Farming Opportunities for Veterans and War Workers
(Prepared by H. H. Wooten)
Usually following wars and during major depressions a great deal of sentiment
developsfor a back-to-the-land movement. And during such periods in the past
we have experienced a considerable migration to farms. It appears that after the
present war there will be a great demand for farms on the part of veterans and
workers in war industries. The question arises as to just what opportunities
there will be for additional productive workers in agriculture after the war.
Among the points which should be taken into account in considering this prob-
lem are the following:
1. At no time in the past have we had a smaller proportion of farm to non-
farm workers in this country than now; at no time have we reached higher peaks
in agricultural production.
2. Agricultural production per worker for the country as a whole averaged
25 percent greater in 1940-43 than in 1935-39 and 67 percent greater than in
1910-14. Prospective technological improvements in agriculture indicate that
labor will become increasingly productive in the future and possibly at an even
more rapid rate.
3. There are no indications that in the near future total requirements for agri-
cultural production will be much higher than at the peak of wartime production
levels. It will probably be possible to maintain such levels of agricultural pro-
duction after the war with a smaller rather than a larger agricultural labor force.
4. The farm families of the Nation have always produced more children than
couid find economic opportunities in agriculture. About half of the rural youth
have customarily sought employment off the farm. During every year since
1920, with the exception of the depression year of 1932, the net population move-
ment has been from farms to towns and cities.
5. During the past 4 years there has occurred the largest movement of people
from American farms ever recorded in so short a period of time. Some 1,500,000
have gone into the armed forces, and there has been an additional net migration
of around 4,500,000 civihans, including workers and others, such as children and
housewives, into cities and other nonfarm areas. Not all of the civilian migra-
tion can be attributed to the influence of wartime industrial activity. If migra-
tion from farms had continued at the same rate as during the last 5 pre-war years,
nearly 2,000,000 persons would have left the farms in the normal course of events
during the 4-year period. It can, therefore, be assumed that the excess net migra-
tion from farms during the last 4 years roughly has been 4,000,000, including non-
workers as well as civilian workers, and also including those who entered the
armed forces.
99579 — 45— pt. 5 6
1302 POST-WAR ECONOMIC POLICY AND PLANNING
6 Not more than half of the approximately 6,000,000 farms reported in the
1940 census were sending significant contributions of agricultural commodities to
the market place m 1939. The top 2,000,000 farms marketed 84 pe"ent of aS
?MoSoo S'nlH nn^l^' ^^'^ middle 2 000,000 about 13 percent, while\he bot om
2,000,000 sold only 3 percent of the Nation's total marketings of agricultural
commodities While tliese figures will have changed somewhat by theind of the
war, It is safe to say that at that time nearly half of the existing farm operators
i:!i^!^ Tolve weTl' «PP-^-^^- ^- -^--Iture to appl/their laEor^o!
uJ\M^u^u^^'^f.u''^ relatively high, and present trends indicate that they will
.^. hIp /^k^'h^'^^^u"'?^ °/ -^^^ ^^.'u, " °^^ P^y^ <^°o high a price for a farm it
is likely to be difficult if not impossible to make a satisfactory living from farm ng
and at the same time be able to maintain the soil and buildings and make interest
and principal payments on indebtedness. s '^ ^ "^'I'^t. mteresi;
8. There will probably be gradual withdrawals from the agricultural work force
of women, school children, old men, and some nonfarm residents temporarily
working in agriculture m numbers sufficient to require one million workers for
replacement after the end of the war. wuie^eib iui
990 nnnlM"^^? f "^°''^ ^^\ expected withdrawals there will be approximately
220,000 elderly farm operators who may be expected graduallv to turn their farms
over to younger men at the end of the war. About half of these farms, however
would be farms which had a total value of production of less than $600 in 1939'
99n nnn therefore would provide opportunities for considerably fewer than
220,000 new replacenients if new operators were looking for opportunities to em-
ploy their labor profitably and to have satisfactory living conditions These
opportunities no doubt will be shared by the large number of farm youth as thev
mature and become farm operators. '
_ 10. It appears reasonable to expect that during the next few vears some land
H^i^fo? °.^ farms suitable for clearing, draining, or irrigating could be further
developed and offered for sale, thus providing 100,000 or more additional farm
operators with ]obs and fair incomes.
11. Another source of farm-operator opportunities after the war will be the
gradual and orderly development of part or all of the 30,000,000 to 40 000 000
acres of undeveloped land not in farms which is believed suitable and 'feasible
to develop through drainage, clearing and irrigation. About one-third of this
land or 10,000,000 to 12,000,000 acres, enough for about 125,000 farms of 80 to
100 acres, is in areas where development work is planned, authorized, or under
construction The number of new farms which should be developed through
these methods will depend upon the demand for agricultural products and upon
the number of submargmal farms which are retired from cultivation It will also
depend upon the changing technologies in agriculture which influence the acreage
required for a given amount of production, and upon the amount of conservation
care given to land m existing farms.
12. It is expected that agricultural land now used for militarv purposes will be
declared surplus at the end of the war. If this is made available in family-tvpe
units, It will provide farms for from 8,000 to 10,000 former owners, veterans, and
others who are seeking farms.
13. In addition to opportunities for new farm operators, it has been estimated
tliat there will be job openings for approximately three-fourths of a million
workers, including persons who will work on the home farm as unpaid familv
workers partly to work in present farm-labor shortage areas and partly to enable
tarmers to reduce their overtime hours contributed to wartime productaon
In view of the above information, the following recommendations are suggested:
1. iliat in order to facilitate the transfer of approximately 220,000 farms from
retiring to new operators under such conditions and terms as will assure economic
units to the purchasers, and enable them to have an adequate living and pay for
the farms, the Government should supplement private initiative by making
adequate credit and supervision available.
2 That surplus military land suitable to farming be sold in family tvpe units
to former owners veterans, and others, thus providing farming opportunities to
approximately 8,000 to 10,000 new operators.
3. That the Government furnish guidance and assistance in placing veterans
and war workers in available jobs on farms, and also in placing underemployed
farm persons in farm and nonfarm jobs. ^ ». f j
4. That geared properly to the requirements for agricultural production new
tamily-type farms be developed through drainage, clearing, and irrigation of
suitable new land and land already in farms, thus making opportunities for up to
POST-WAR ECONOMIC POLICY AND PLANl^ING 1303
approximately a quarter-ittillion new operators. The rate of development of new-
farms would depend upon the rate of retirement of submarginal land, much of
which should be converted to uses such as forestry and grazing, as well as upon
the domestic and foreign outlets for agricultural products. Individuals who
desire to farm new land should investigate the suitability of a proposed site for
farming before committing themselves to purchase.
5. Prospective farmers should be warned against paying inflated prices for
farms and should be guided away from lands, both in established farming areas
and in undeveloped areas, which are not suited to agricultural use. The estab-
lishment of a public farm appraisal service should be helpful in this regard,
6. That there be no public sponsorship pf migration to farms beyond the
limits of manpower requirements to produce needed food, fiber, and forest
products which can be consumed at home and abroad. Our goal must be full
production and full employment in agriculture and in the total economy. There
is no place for the defeatist policy of usmg agriculture, or any other segment of
the economy, as a dumping ground for unemployed persons.
DiFFEKENT TyPES OP FARMERS REQUIRE DIFFERENT TyPES OF' PROGRAMS
(Prepared by F. F. EUiott)
It requires only a cursory examination of the information relating to farms and
farmers in the United States to be convinced of their wide diversity in interests,
problems, and needs. The last Census of Agriculture, for example, indicated
there were approximately 6,100,000 farms in tne United States in 1940. But
this does not mean that there were this many family commercial farms, the kind
of farms which most of us think of as real farms. There were, in fact, thousands
of farm famihes who sent very little to market, and many of them consumed at
home most of what they produced. There w^re also thousands of farmers who
had retired to small acreages; many suburban estates and part-time farms; as
well as hundreds of thousands of Negro and white croppers, who, in most respects,
were only wage laborers paid in kind. .
With so much diversity in the type of units now designated as farms, obvi-
ously, such items as average income per farm and per farmer have very little, if
any, significance. Yet people contmue to write and talk about "the farm
problem" and ways and means of meeting it as though these six million-odd
units were alike in their conditions, outlook, and the problems confronting them.
We can begin to get some notion of the diversity in economic interests and
social conditions prevailing on these different farms if we first divide them into
two main categories — those which are commercial in character and those w^hich
are noncommercial. The first of these groups, of course, will include those
farms which are bona fide business units— the centers of our commercial agri-
culture. The noncommercial group of farms, on the other hand, is in the business
of farming in a different way since they have but little to sell. Their cash incomes
are low and they consume most of what they produce. -nr- v.-
But these two broad groups of farms are by no means uniform. Within each
of them there are a number of quite distinct classes:
Among the commercial farm group in 1940 there were, for example, some 55,000
to 60,000 large-scale farms that had a value of products in terms of 1939 prices of
$10,000 or more and that emploved 750 days or more of hired labor; there were
some 20,000 to 25,000 plantations in the South which had at least 5 croppers,
standing, share, or cash tenants, or at least 1 cropper or tenant and sufficient wage
hands to make a total equivalent to 5 croppers or tenants, working under the direct
supervision of the plantation owner or manager; and there were from 3,000,000 to
3 250,000 familv commercial farms that had a value of products in terms of 1939
prices ranging from $600 to $10,000. These 3 classes of commercial farms thus
comprised'in round numbers from 3,100,000 to 3,300,000 independent proprietor-
ship units. They included, in addition, some 575,000 to 650,000 cropper and
tenant units that worked under the direct supervision of the plantation owners or
other commercial farmers and are not here considered as independent units.
Although representing only about 60 percent of the total number of farms of the
country, these 3 classes of "commercial farms accounted in 1939 for approximately
90 percent of the total value of products.
Among the noncommercial farm group, all the farms which had a value of
products in terms of 1939 prices of less than $600, were found some 600,000 to
650,000 part-time farms whose operators worked 100 days or more off the farm;
1304 POST-WAR ECONOMIC POLICY AND PLANNING
there were 550,000 to 600,000 residential farms with operators 65 years or over and
working less thqn 100 days off the farm; and there were 950,000 lo 1,225,000 sub-
sistence farms with operators less than 65 years of age and also working less than
100 days off the farm. Thus all told there were something like 2,100,000 to
2,500,000 independent noncommercial farms in 1940. Although these farms repre-
sented approximately 40 percent of the total number of farms in the United States
in that year, they produced only 10 percent of the total value of products.
In developing post-war agricultural programs, it is of supreme importance
to recognize this wide diversity in problems and needs of the different kinds of
farmers in the United States. If we are to be even reasonably successful in our
efforts to "meet these problems we nuist not develop just one over-all program and
assume it will meet all situations. We rather shall need to examine the needs of
the different groups and develop, if necessary, separate programs for each of
them. Obviously, as we move from war conditions to those of the post-war, the
interests and needs of these various classes of farms will differ markedly.
To the operators of the 'three classes of farms making up the commercial group,
commodity loans, price support programs, adjustments in production and market-
ing, and similar measures will be of great interest and importance. These classes
of farms also will be greatly interested in measures affecting national income and
business activity since these things will determine the demand for agricultural
products and the prices and income received. They also will be interested in
legislation on fiscal and commercial policy and in labor legislation having a bearing
upon the hours and conditions of employment, minimum wages, etc. Large-scale
farms particularly will be directly interested and affected by legislation of the
latter type since both they and their laborers are continuously confronted with
special problems in recruitment, wage determination, housing and other related
matters not common to the family commercial farms.
The type of programs of interest and concern to the noncommercial group,
on the other hand, are- likely to be quite different. Since these farms have but
little to sell they will not be greatly affected by changes in prices of agricultural
products. Commodity loans, price supports, and related measures, consequently,
will be of little concern to them. They will be more particularly' interested in
programs of social securitj^, in old-age and survivors insurance, in health, hospitali-
zation, and medical care and in programs looking toward the improvement of
rural education, recreation, etc.
But the problems and needs of the three classes of farmers in the noncommercial
group will not be the same. The interests of the part-time farmers, for example,
are different and broader than those of the other small farmers in the noncom-
mercial group. In general, they probably have a higher economic status and
enjoy a better standard of living. This is a group that likely will grow in im-
portance after peace is restored. They are interested only incidentally in changes
in agricultural prices since they depend upon nonfarm employment for most of
their cash income. They are vitally interested in programs affecting national
income, employment, and business activity, and, of course, in unemployment
benefits, in old-age and survivors insurance and in rural education, health, and
medical care and the like.
The residential farmers likewise are little concerned with fluctuating prices
and income, since many of them do not have any large interest in farming as an
economic enterprise. They simply are people past the prime of life who are at
or beyond retirement age. They are found scattered throughout the United
States but tend to concentrate around urbah centers. Their interests are not as
broad as those of the part-time farmers. They are interested primarily in pro-
grams relating to health and recreation and in old-age and survivors' insurance
and related matters.
The subsistence farmers are in still a different category. Substantially all of
their working time is spent at farming. They have not reached retirement age.
Their scale of living is probably lower than that of any other group of farm oper-
ators. They are located primarily in poor land areas, where the area in cultivation
is too small, or where the productivity of the land is too low to j-ield a decent
living. This is a class of farmers which we should not perpetuate in their present
situation. If they remain in agriculture they should be assisted in better farming
methods, in improving their physical resource base, in getting onto larger units,
or in becoming part-time farmers. In the event these steps are not feasible^
they should be encouraged to get out of agriculture altogether. Obviously, ai>y
measures that will maintain full employment, high business activitj^, and national
income will be of great assistance in this direction.
POST-WAR ECONOMIC POLICY AND PLANNING 1305
Still another agricultural group, not yet mientioned but which certainly has a
legitimate claim for assistance, is the farm-labor group. This group as a whole
undoubtedly has been lower in the scale of living than even the subsistence
farmers. Their primary interest, of course, is to improve their level of wages and
income and to improve the conditions under which they live. They are interested
in anything that will maintain full employment, high. level of business activity,
and national income, since this means job opportunities for them. They also
are interested in minimum-wage and housing legislation if they give promise of
direct assistance to them and, of course, in social security, unemployment benefits,
old-age and survivors' insurance and related programs.
It should be clear from what has been said that the problems and needs of
these different groups in agriculture are by no means uniform. It also should be
clear that if we are to meet these problems and needs realistically we shall be
obliged to develop not one but several agricultural programs. The sooner we
appreciate this fact and "move in this direction, the sooner our efforts will be
crowned. with success.
POST-WAE ECONOMIC POLICY AND PLANNING
FRIDAY, AUGUST 25, 1944
House of Representatives,
Subcommittee on Agriculture and Mining
OF THE Special Committee on Post-War
Economic Policy and Planning,
Washington, D. C.
The subcommittee met pursuant to call, at 10 a. m. in room 1304,
New House Office Building. Hon . Orville Zimmerman presiding.
Present: Representatives Zimmerman (presiding), Voorhis, Cooper,
Walter, Murdock, Lynch, O'Brien, Reece, Wolverton, Hope, and
Dewey.
Also present: Marion B. Folsom, director of staff, and G. C.
Gamble, economic adviser.
Mr. Zimmerman. The subcommittee will come to order.
We have with us today War Food Administrator, Judge Marvin
Jones, who has consented to come before us and give us his views
concerning some of the things our Nation should do in this post-war
planning program on behalf of agriculture. I want to say, on behalf
of members of the Agriculture Committee, that we appreciate the
presence of Judge Jones for the reason that for many years he was
chairman of the House Agriculture Committee. During that long
period of service, he rendered this Nation an outstanding service in
behalf of agriculture.
I don't thmk any man in recent times has rendered the constructive,
efficient service on the part of agriculture that Judge Jones rendered
while he was chairman of that committee. Naturally we expected
him to be appointed to this very important position of War Food
Administrator. With the backgroimd he possesses, we are honored
today in having him come before this committee to give us his views
of what can be done after the war.
We are glad to hear you.
Mr. Jones. Thank you, Mr. Chairman. I want to assure you that
I appreciate your generous comment. I believe I have had the privi-
lege of serving with nearly every one of the subcommittee present. I
regard the work which the committee is doing as being very important
and am glad to have the opportmiity of appearing before you.
For the record, I have done the usual thing of preparing a written
statement and would like to have the privilege of reading it. I think
that it pretty well covers what I have in mind.
Mr. Zimmerman. Would you prefer not to have interruptions until
you conclude your statement?
Mr. Jones. I don't know that it makes any difference. It is only
about 10 pages; then I will be glad to answer any questions I can.
Mr. Zimmerman. Very well.
1307
1308 POST-WAR ECONOMIC POLICY AND PLANNING
STATEMENT OF HON. MARVIN JONES, WAR FOOD
ADMINISTRATOR
Mr. Jones. It is impossible to separate the problem of production
storage, and disposition of food from the problem of the land ori
which it is produced and the prices and income which farmers receive,
or from the machinery, tools, and labor with which it is produced,'
or from the processing, storing, and handling as well as transportation,
ihe basic problems of soil, price, and income will remain in peace as
well as in wartime.
The War Food Administration, while an independent agency report-
mg directly to the President, utilizes and has control of the action
agencies of the Department of Agriculture as well as its own personal
staff. In this way it is far less expensive than if it operated altogether
with a complete new personnel of its own. In addition, it has the
advantage of the experience of those who have heretofore been engaged
in the same line of work.
We are therefore directly interested not only in guiding production
and supporting prices, but also in the disposal of food as such, and in
disposition and handling of the land now owned by the Government,
m rebuilding and maintaining the soil, in the use of water, in the
disposition of equipment, machinery, and supplies owned by the
Government that may be useful in connection with farming or with
the soil, and with other questions that are intimately linked with the
future of the farm and ranch.
The American farmers and ranchmen have done a magnificent pro-
duction job since the beginning of the war. In spite of wartime
handicaps they have produced more food than any nation in history
ever produced in the same time. They have not only made it possible
for us to have the best-fed Army and Navy in the world, but have
supplied all essential civilian needs and, at the same time, have made
it possible for us to ship vast quantities of food to our fighting allies.
The War Food Administration for the last year has purchased an
average of more than $8,000,000 worth of food per day for shipment
abroad for these purposes. Every pound of this food has brought
results. It has made it possible for our fighting allies to continue
their all-out war effort. The Allied Nations owe the American farmer
a debt of gratitude. They have so expressed themselves.
This production is what we want. There is no place in America
for a philosophy of scarcity. Ours is the heritage of abundance.
It is our goal today and will continue to be our goal when the war
is over. Out of the great resources with which nature has endowed
our land, we have built a great nation. Abundance is the soundest
of national policies. It is plain common sense to produce all that
we can consume and export without injury to 6ur soil and natural
resources and at a reasonable profit to the producers.
This production can be continued only if we have all-out industrial
production as well. There cannot be curtailment of industrial pro-
duction and, at the same time, abundant agricultural production.
The two furnish a market for each other and assure employment to
labor. This abundant agricultural production was made possible by
the support prices which Congress wisely provided. You are aware,
of course, that to carry out this support program in accordance with
POST-WAR ECONOMIC POLICY AND PLANNING 1309
the commitment, necessary funds and authority will have to be sup-
lied by the Congress.
This problem involves disposition of Government-owned stocks of
agricultural products which must be held in reserve for war needs.
We will have surplus stocks of food just as we will have surplus air-
planes, guns, and tanks. The only way to have assurance against
a shortage of these essential needs of our armed forces is to have some
reserve supplies. Some of these supplies will, of course, be needed -
for temporary relief abroad, but we will also need authority to dis-
pose of surplus agricultural commodities and the products abroad at
competitive world prices.
One of the most interesting movies I have seen recently portrayed
the part that industry will play in the Nation's post-war rebuilding
and development and in furnishing jobs after the war has ended.
The picture was well done and in every way worthy of praise.
However, it left out one great wing of development; that is, the rural
areas, the Nation's farms, ranches, and natural resources. _
I hope some enterprising producer will make another movie depicting
the possibilities of rebuilding, the opportunities for development, and
the furnishing of employment in the rural sections of this country.
Agriculture and industry are the twin evangels of modern civiliza-
tion. Neither can prosper without the other. If one languishes,
sooner or later the other will feel the effect. The farmer and livestock
producer furnish the raw material and, in turn, if prosperous, help
furnish a wider market for the finished article. At the same time, if
the factory wheels are turning, they afford a market for the products
of agriculture. Labor is vitally affected by any adverse influences
thatl^ouch either wing of our national effort.
I was thrilled at the screen picture that I saw of the vast new efforts
of industry: the busy spindles, the blazing furnaces, the new products
made possible by man's inventive genius, the great wealth of useful
things that industry can produce for the happiness of mankind.
But, after all, the vital spark is lit back in the far stretches of this
broad, big country.
We grow accustomed to the precious things of life, and they seem
commonplace. We take them for granted — the air we breathe, the
water we drink, and, in this very fortunate and productive country,
•the food we eat. We sometimes lose sight of the hard work that is
involved in the production of that food, as well as the fiber which
goes into the clothing and shelter of our people.
The opportunities we shall have after the war for developing our
vast resources of land and water could be fashioned into a story more
thrilling and romantic than any that has yet been shown on the screen
— one by which the imagination of the people can be stirred along
practical lines and one that can set our entire country athrill. If I
were a movie producer I would tell a screen story that would make the
following points:
1. The first point would be soil conservation. The capital stock
of the Nation is its soil resources. No business can stand a continual
drain on its capital; likewise, no nation can endure for long, excessive
drains on its capital resources.
What are soil resources? They are food and clothing locked up in
nature's warehouses against the time when man, through his efforts,
takes them out and uses them. Our great soil resources in this
1310 POST-WAR ECONOMIC POLICY AND PLANNING
country have enabled us to develop a great race of people. History
shows that the character and strength of a nation always go ud and
down with its soil. j & f ^
H. H. Bennett, Chief of the Soil Conservation Service, who has
spent more than an average lifetime in a study of the soils, is authority
lor the statement that we have ruined more land in less time than
any other nation m history and that more than 50,000,000 acres of
. land m the United States, once cultivated and fertHe, no lonc^er pro-
duce crops. That was nearly as much as our entire wheat licreage
last year. And the best topsoil has been washed away from an addi-
tional acrejige more than twice as large as that. Fortunately, we are
learning ot this growing danger before it is too late. The" soil-con-
servation and soil-building practices of the last few years have in-
creased the average yields of our major crops by more than 20 percent
i here are now more than 1,100 soil-conservation districts organized
under the laws of various States receiving Federal assitance. Track-
type tractors, bulldozers, ditching, and other machinery and equip-
ment would greatly increase the effectiveness of personnel already
available and serving farms in the conservation of soil resources
buch surplus war equipment as is suitable for the purpose should be
made avadable for these programs to expand the work of constructing
terraces, drainage and irrigation ditches, stock-watering ponds and
other conservation developments.
Once made available, farmers themselves would pay for the opera-
tion and maintenance of the equipment. I am sure my experience is
the same as many of those who have lived in rural sections, or who
represent districts a part of which are of that type. Many many
times I have had farmers say: "Where can I get the technical assist-
•^^f,^ *^u ®"'^*^® ^^ ^^^ farm— where can I get the machinery to do
It.-* That is one of the difficulties. Because of the shortage of
equipnient, farmers have been unable to go ahead with the work
planned. Additional equipment will result in greater efficiency and '
more work.
I have mentioned soil conservation first; but starting with the soil
other developments naturally flow from and become part and parcel
ot the undertaking. These include the proper use of water, the con-
struction of large and small dams, rural electrification, decentralized
industrial development, highways and other forms of transportation
and individual home ownership. They are all closely linked. '
2. I mentioned water use. Kainfall should be used on the plains
and hillsides where it falls, through soil treatment, contour plowing
cover cropping, and strip planting, instead of letting it run off in
waste to the sea, taking the soil with it. The building of ponds,
check dams, and other small dams on the tributaries and small streams
and m pastures and fields are all closely related to the conservation
and rebuilding of the soil and furnish a vast field for adding to the
wealth of our country and to the full emplovment of our people.
What IS known as the Mississippi Valley— and I mean by that the
whole area between the Alleghenies and the Rockies— is the greatest
food-producing area on earth. It all forms one great integrated river
system. Properly used, it can for centuries to come not only supply
our own people but can help supply others with its products and bring
back in trade additional goods for us to use and enjoy.
POST-WAR ECONOMIC POLICY AND PLANNING 1311
In dealing with nature's resources in any land and in any country,
there is always a conserving use and a wasteful use. The choice lies
with the people who control those resources. In the past we have
exploited our good earth with a prodigal disregard of its value to our
enduring life as a nation. We have sent the export crops down to the
sea in ships and the soil down to the sea in mud. When the Missis-
sippi overflowed toward its mouth, we built levees. W^e tried to
reverse nature ; and when nature fought back, as she always does under
those conditions, we built even higher levees. Instead of using the
water all along the line, we tried to get it into the sea as fast as we
could.
We are learning at last that the path of wisdom is to go back where
the water falls as rain and work with nature instead of against her to
utilize water at the source, thus treating it as a blessing instead of a
curse. The development of a system of use that will retain that water
and soil is- worth any national effort, however great. Far out in our
great dry land areas not a single gallon of unused water should be
permitted to reach the sea. All should be used on the land.
In other areas where it is abundant, it can be channeled and utilized
for power, for additional wealth.
What has been said about the Mississippi Valley is true of our
. numerous other valleys and river, systems tlu-oughout our great land.
After the war our people will turn eagerly from destruction in war
to the constructive activities of peace. Our engineering and technical
genius will gladly turn from its prodigious feats in jungle and desert
areas to the worth-while and useful challenge that awaits them here
at home.
The Congress, with farsighted vision, has established a Soil Conser-
vation Service and made provisions for carrying out an extended pro-
gram of preserving our greatest natural source of wealth. It has
also made provision for a wiser use of water. Millions of acres of
land are being protected and rebuilt under programs that have been
vast. These efforts and provisions will need to be greatly enlarged.
3. This leads to the construction of large dams for irrigation, flood
control, and hydroelectric power. The value of these great projects
does not need to be argued. A visit to any one of them is visual and
confirming evidence of their great worth. Nearly every great country
on earth has natural wealth that only needs the touch of the genius
and industry of man to be harnessed for human use.
4. Closely related to this is rural electrification. One of the great
advantages of the construction of large dams is the possibility of using
them for the production of electric power, not only for the cities but
flowing out to the countryside to the millions of farm homes that
need it to lift the drudgery and burdens that are connected with the
production of food. Produced and distributed in volume, electricity
is one of the cheapest of commodities. It is one of the most useful.
It affords an opportunity not only for making life easier and less
burdensome, but also for bringing about a better-balanced condition
for making our entire country a productive commonwealth. Some
of our surplus war materials could well be used for expanding the
rural electrification program.
5. I mentioned decentralized industrial developments. If we
develop a vast network of soil treatment, check-damming, and hydro-
electric-power dams on the various streams flowing through every
1312 POST-WAR ECONOMIC POLICY AND PLANNING
nook and corner of the United States, it will naturally make pos-
sible—m fact will make inevitable— a decentralized development of
industry m all parts of the country. This will brmg our raw materials
close to the heart of the business community, and the interests of
agriculture and industry can thus be dovetailed together.
Bringing the products of the farm as well as articles of industry
closer to the markets of each will bring about a better understanding
between agriculture and industry, which are natural partners, and
will help solve many of the problems of both capital and labor
6. Highways are another part of this chain of development There
should be a greatly expanded and suitable network of highways in
order to facilitate the exchange of the products of factory and farm
i his should not stop with highways. We will need all forms of trans-
portation: Railway, air-lme, and newer forms that may be developed
when the war is over. I have no doubt that through the use of air-
plane transportation, and with the advantages of improved forras of
relrigeration, fresh vegetables can be carried in a few hours from the
point of production to any market in this country— probably be there
the next naormng after being gathered the day before. That way it
can be gathered ripe and be ready for the breakfast table and in much
better lorm. The same is true of many other perishable commodities
it m this way an expanded production for expanded use can bf
developed, not only will both agriculture and industry gain advan-
tages therefrom but every form of , transportation in its fullest develop-
ment will be needed, and any man who is willing to work will be able
^^ J ? a place m it. This possibility is a challenge to the best minds
and the best thought that this Nation can produce.
All discrimination in freight rates as between different sections or
areas ol the country should be eliminated as to all forms of trans-
portation.
7 Home ownership fits squarely into this picture. The financing
ot home purchase of family-sized farms, with special provision for
returning soldiers who may desire to purchase and live on a farm can
contribute much to the stability of our country. The same is true
of the financing of home purchasing in the towns and cities. Our
laws, both State and National, should be so fashioned as to encourage
the ownership and mamtenance of family-sized farms in the country
and comfortable homes in the towns and cities. It will be difficult
for any ism or wild scheme or movement to gain any appreciable
lootliold among a home-owning people.
A great variety of agricultural land, ranging all the way from sub-
margmal to some of our very best farm land, was acquired for various
war purposes. We believe that this land should be disposed of in
accordance with agricultural policies which have been established by
Congress over a period of years. The agricultural land which is
declared surplus should be surveyed to determine its proper use on a
long-time basis. Following this, the submarginal land should be
assigned to the proper State or Federal Government agency, depending
upon location and the use to which it might be put. For example
some of the land might be included in soil conservation, erosion control'
and forestry programs of the Department of Agriculture or appro-
priate programs of other Government agencies. Such disposition of
submarginal land not only would be wise from the standpoint of good
land use but would be economical in the long run. In our judgment,
POST-WAR ECONOMIC POLICY AND PLANNING 1313
it would be unfair to sell submarginal land to individuals for farming ,
purposes.
The land which is determined to be suitable for farming should be
divided into family-sized units and sold to persons who intend to live
on the unit and operate it for a livelihood.
Lands that are suitable only for range purposes should of course be
sold in larger tracts consistent with that use.
The former owners should be given a reasonable period of about 90
days in which to repurchase the land formerly owned by them at a
price not exceeding the price which the Government paid for the land,
after taking into consideration any damage to the property, and also
the usable advantage, if any, of any improvements that may have been
placed thereon by the Government. Subject only to the former
owner's right to purchase, war veterans, who have had experience in
farmmg and who desire to do so, should first be given an opportunity
to secure a farming unit. In our opinion, it would be inconsistent
with sound public policy to permit this land to fall into the hands of
those who do not need it for homes when so many former owners and
servicemen will find it impossible to get a farm at reasonable prices
and terms.
It is our earnest hope that Congress will make sure that the good
farm land to be released by the Government is used for encouraging
the family-sized, family-operated farm ideal of America, which has
been the foundation rock not only of our agriculture but our entire
Nation.
But whatever is done, whatever plans we may make, or whatever
genius we may possess, our Nation must perish unless we take care of
the soil. The soil is our natural heritage. Wisely used, its value,
its life-giving strength, its productivity are ageless.
The children of the future have a stake in this, our greatest natural
resource. We have a right to use the soil and other natural resources.
We have no right to abuse them. They can be made to grow stronger
and more productive and be left to coming generations in richer and
better form than when they came to us. •
We want to keep this Nation a land of abundance and opportunity.
Mr. Zimmerman. Thank you, Judge Jones.
Mr. Cooper. In my years of service here I have never seen a more
constructive and helpful statement. I want to congratulate you.
Mr. Jones. I appreciate that. Praise from Cicero, himself, is
praise indeed.
Mr. Zimmerman. In expressing that sentiment, Mr. Cooper
expresses the sentiment of our entire subcommittee and our other
members who have honored us with then* presence today.
There are just a few questions I would like to ask. I don't know
that what you have said needs any clarification. You spoke, though,
of the importance of soil conservation and conservation of our water
resom-ces. And you further made reference to the fact that we pro-
duced last year more food than ever before in the history of the coun-
try. You attributed that large production, I believe, to the progress
made in the conservation of our soil, and to fertilization.
Mr. Jones. Yes; that contributed to it.
Mr. Zimmerman. From your experience, would you say, under the
present program of soil conservation, that we are holding our own and
■ preventing its depletion, as it occurred in the past?
1314 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Jones. I think we have been more than holdmg our own in the
past few years. Of course we have been compelled during the war
days to draw on our reserve bank supply, if it may be termed that,
by having an all-out production program.
Because of the great need for certain commodities, we have found
it necessary to caU on the land for a little more, probably, than we
would normally want to call on it for. But we have tried to avoid
just as far as it was possible to do so, the mistake made in the other
war of plowing up and planting land, regardless of the waste of natural
resources. We have carried on with conservation practices and urged
that they be continued just as far as they could be consistent with
getting the production. I think for the last several years we have
been' improving in our protection of the soil and on the whole are mak-
ing decided progress.
Mr. Zimmerman. Then your view is that, as the preservation of the
capital stock of a business concern is of primary importance to that
concern, you place soil conservation — wherein soil is regarded as the
capital stock of this Nation's resources — as the prime concern of this
Government, not only now, but for the years to come?
Mr. Jones. There is not the least question of that. You can look
at any nation where the soil has been neglected — not only does the
position of the nation go down, but the character of the people go
down. I checked that at the food conference. Dr. Inglesby, I think
it was, has been in charge of the soil program of the British Empire
for 30 years. He mentioned the fact that, when the soil" goes down,
the strength, character, health, and ability of the people go down.
I know I saw the old markings of the Tigris and Euphrates Rivers,
where centuries ago there were a marvelous people. They neglected
their soil and water in some of those areas and they almost dropped
out of sight. • There isn't a great race of people within the circle of
the earth in any area that has let its soil wash away. That is the
foundation of the strength and future of the country. Every man,
woman, and child in America is interested in that. We are simply
trustees of the soil for a limited period and have responsibility for it.
Mr. VooRHis. Judge, did I understand
Mr. Zimmerman. Pardon me just a moment. Mr. Dewey has to
leave and wants to ask a question now.
Mr. Dewey. I have another meeting at 11 and wish to take advan-
tage of this opportunity. I am bothered considerably regarding the
prices of foods that we may contemplate having during the aftermath
of the war. There was a very considerable pressure made in regard
to what was- called, I think, a roll-back subsidy, sometime ago, under
which the Government would subsidize the roll-back, the cut-back of
price on certain commodities. There were about six in the first list.
There were numerous statements made that if this was not done,
there would be a very great rise in prices of food during the coming
year. Now I would like, if you please, to get from you some thoughts
as to what you think the value of food, taking everything as we see it
today, will be during the year 1945. Do you contemplate an active
rise in food prices, or do you contemplate that we may have difficulty
in keeping the present value of food prices up?
Mr. Jones. A man who would definitely undertake to forecast
1945, with all the uncertainties that are in the world toda}?-, would bo
acting rather foolishly.
POST-WAR ECONOMIC POLICY AND PLANNING 1315
Mr. Dewey. We are asked to legislate on that to the extent of
$800,000,000 of the people's money, because we were told the prices
were going to rise and double and that, if we didn't make this roll-back
subsidy, it would be a terrible burden.
Mr. Jones. Understand I didn't determine the policy on the roll-
back subsidy. If we got into the discussion of the merits of that,
weeks and weeks might be spent. I think the primary roll-backs were
on certain types of meat and on butter, as I remember. Those were
the two.
Mr. Dewey. Yes. Butter, milk.
Mr. Jones. That was handled by another agency. I would
dislike to get into a discussion. Of course, I don't want to discuss the
policies that are handled through another agency. I will say this
much with reference to prices that, if the war in Europe should end,
I think that we will have more problems in connection with our sup-
port price commitments to farmers than we will have on the other
end of the line. That is assuming that that condition would be
brought about. But any statement any man makes at this time, as
you can well recognize, is hedged about with many uncertainties.
I do feel, however, that our all-out production of food has been a
magnificent thing. A Russian general sat before my staff and told
me that, if it had not been for the food which this country furnished,
they couldn't have gone forward. So, of course, to get that food and
to get it in abundance, it was necessary to have some provision for
expanding and increasing returns to the producers of food. That
provision was made. And, of course, I think having made it, it is like
a promissory note ; it must be kept,
I anticipate we will have some serious problems and that some ex-
penditure of funds will be necessary in carrying out that commitment.
I think that will be more of a problem, probably, than the other, after
a period. Of course I don't know how much food is going to be re-
quired in a temporary period following the releasing or liberating of
countries, nor how much the Army could supply, if the Army should
be reduced in number. I don't know how much reserve stock they
may have in the* countries in question. People are rather resourceful
in those countries. They found in Italy that a great many had
buried wheat in the ground and planted grass over it, even though
they would suffer the penalty of death if caught. We don't know
about those things. I do anticipate some serious problems, however,
on carrying out the support prices. For that reason I was and am
anxious for us to have full use, both at home and abroad, full use of
those products for that period and make provision so we could have it.
Mr. Dewey. I agree with you that once the tremendous production
of food in this country stops, when the war is terminated — taking into
account even the requirements of supplying food to devasted nations —
it would be more of a problem of supporting present pricing than it
would in holding dowm rising prices. I have seen no reason to change
that point of view. Therefore, I was opposed to this roll-back subsidy
price.
Mr. Jones. Of com-se, by the action of the Congress that is limited
to a definite period. I think sometime next year. The merits or
demerits of the continuance of that will be determined sometime in the
next few months.
Mr. Dewey. Thank you very much indeed.
1316 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Zimmerman, Yes. There are j.ust a few questions I would like
to ask. Continuing my questions in regard to soil conservation, you
regard the program of soil conservation for the future as probably
agriculture's problem No. 1?
Mr. Jones. Yes, I think you almost start with that. I use that in
the broad sense: That is the question of the proper cropping, the proper
use of water, the replacing of some of the soil that was wasted. People
who have studied the question tell me that even though a certain
commodity may look exactly like another commodity, if grown on
soil lacking the proper ingredients, it doesn't have anything like the
value for human food nor feed.
For instance with livestock — if you cut hay from land where there
is a shortage of lime and stack it and then tlurow up the other end of
the stack from hay where the soil is properly balanced, the livestock
will eat off the end qf the hay stack where the hay was produced on
balanced soil and let the other end go and go hunt some other feed.
They will eat out the middle of the stack, if you put it in the middle.
That has been tried. That has been tested. Human beings have to
have food sustenance on the same basis.
Mr. Zimmerman. Soil utilization, the way we are handling our soil,
goes right along with the program of the soil conservation?
Mr. Jones. Yes.
Mr. Zimmerman. Now as a corollary to that, you put water con-
servation and utilization — you put that secondary?
Mr. Jones. -Yes, almost part of it. It is an integral part of it.
Soil without water — I lived in a country where we had to go withou|
water for a considerable time. We found it was pretty tough.
Mr. Zimmerman. I have been of the opinion for a long time that
one of the great mistakes made in all of our flood-control programs in
the past has been that we started the thing in reverse; that we should
go back to the soil and impound and hold on the soil and use every
drop of water. This idea has been very clearly expressed in your
paper this morning. That is one of the big problems of agriculture.
Mr. eToNEs. Yes. I think that there is a vast opportunity. If
we want to have development or need to have provision for work,
if we start back there — just like our Government started — we build
on a much sounder basis. If people will run a government by trying
to do everythmg from the center, they get in trouble. In a demo-
cratic government, the thing starts from the grass roots. That is
the way the whole thing is built. That way you have a sounder
industry, when built on a solid basis. You get your raw materials
for your industry. You can't separate the two. If you keep the two
in balance, both going forward, then everybody can have a chance
and the country will be in much better condition.
Mr. MuRDOCK. I hope the judge can underscore that and maybe
elaborate on it in addition to his splendid statement already made.
Mr. Zimmerman. Just one or two other questions. I^was very
much interested. You started out on the premise, of course, that we
must have full production of agriculture. And we must have full
production of industry.
Mr. Jones. Yes. Otherwise, you can t have fidl production of
agriculture. Because you wouldn't have a market. We've tried full
production for agriculture with industry down to 30 or 40 percent. It
wouldn't work.
POST-WAR ECONOMIC POLICY AND PLANNING 1317
Mr. Zimmerman. Along with it we have got to have full employ-
ment of labor.
Mr. Jones. Yes, so there can be full use of the commodities that
are produced, both the finished and the raw.
Mr. Zimmerman. You mentioned the importance of bringing in-
dustry and agriculture together and bringing the raw materials close
to the factory so they could employ local people in rural sections. I
think that is a very interesting suggestion. Heretofore industry has
been more or less centralized, has it not?
Mr. Jones. Yes.
Mr. Zimmerman. Is it your view in our future program for agri-
culture that industry must be carried back, to some extent at least,
to the rural communities in order to have that close relationship be-
tween agriculture, the producer of raw material, and the factory?
In that way we may be able to utilize the labor that may be available
in that rural section that has had to go a long way to get a job, like
Detroit?
Air. Jones. I don't think it necessitates the taking up of industry
and canying it out there. I think the development out there will
make the industry already located in centralized places even stronger.
There are certain things that of necessity must be pretty well done in
one place. But there are some things that can be done in many local-
ities, if we get the proper balance and the proper going forward, and
everybody will be better off. It is pretty well illustrated by the oppo-
sition which certain companies had to rural electrification and to
similar programs. They thought it was going to ruin them, when,
as a matter of fact, the added physical value and added wealth that
came from that development made theirs even more worth while.
They have been better off than if the other development had not
come. No man can grow rich who lives in a community of poverty-
stricken people. You have to have general prosperity if you are
going to have a chance to go forward.
Air. Zimmerman. I want to illustrate that problem of expanding
or developing industry in my own section.
Mr. Jones. That is a really tremendous and important thing.
Mr. Zimmerman. In the 10 counties of my congressional jurisdic-
tion, enough cotton is grown to rank Alissouri as the ninth producing
State. The cotton growers tell us they pay a premium for our cotton
because of its grade. Yet we don't have a cotton mill in that section.
In other words, when they want our cotton they come down and pay
a premium to carry it over to North Carolina and other States, where
they operate these machines in the making of fabric. Now, of course,
we haven't any spindles there because we haven't any electric power.
So there are a lot of things I think should be taken into consideration
in bringing about that close relationship between agriculture and in-
dustry I have just mentioned. I think it is a very important program
to be considered for the future. Does soinebody else have any ques-
tions? Air. Voorhis?
Air. Voorhis. I will wait a moment. I would rather wait.
Air. Zimmerman. Air. Hope?
Air. Hope. You have outlined what I think we all agree here is a
very fine, constructive, long-term program for agriculture. We are
all in agreement with the objectives. I think every one agrees who
99579— 45— pt. 5 7
1318 POST-WAR ECONOMIC POLICY AND PLANNING
has given any thought to that consideration that our soil is our greatest
agricultural problem. But I would like to ask you if you think that
we can carry out the kind of program that you have outlined for soil
conservation, rural electrification, better rural highways, better forms
of rural transportation, unless we have a prosperous agriculture, fair
prices for agricultural products, as well as full production.
Mr. Jones. I don't think there is any question of the necessity of
having fair prices in r.ural communities. I have discussed it with you
before. We are in full accord on that.
Mr. Hope. Yes. In other words, it isn't possible for the individual
fanner, even with all the help the Federal Goverimient might give him
under soil-conservation programs, to properly conserve his own soil
if farm prices are so low that it taxes every bit of his energy to make
an inadequate living. He isn't able to secure a price for his products
which will give him the income or the capital to carry out a program
of that kind. It is hardly possible for the Federal Government, even
with all the help it might render, to carry out any adequate soil-
conservation program. Isn't that true?
Mr. Jones. That is true.
Mr. Hope. I should like to discuss a different subject — the disposal
of our food supplies which we are going to have left over at the end
of the war. I don't know how fully you would care to go into the
question of the probable extent of those supplies. That may be some-
thing that is, more or less, a military secret. I would like to ask you
a question as to just what, in general, would be the situation with
reference to supplies of food which we might have to dispose of, if
the war should end within the next 2 or 3 months in the European
theater.
Mr. Jones. Yes. That is a question that Colonel Olmstead could
answer probably better than I could. There are limitations on what
we can say on that, because of the reasons indicated. However, I do
anticipate that there will be considerable supplies of food that would
be available probably for distribution when the war in Europe ends.
Of course, there will be needs. No one can quite measure them. But
in. maintaining an armed force of 11,000,000 men, and in helping to
furnish the Allies — like Russia, where a great part of her productive
land was taken away, and England, that never does produce enough
even normally to supply her people — there has of necessity been some
stock-piling. There are of necessity reserve supplies. No one would
want a soldier to be short of food in a war like this one. We are not
dealing with the kind of an adversary where we can take that chance
any more than we can take the chance on him not having enough
machine guns. Of course, that is goiiig to bring tough problems. I
think we are going to have to arrange for as full use of food as we can
here. I don't know just when that is coming. We will have to
arrange for disposition on the best terms we can get for some of the
food that may be available when the armed forces are disbanded and
when the other nations begin to produce their own food. The worth-
while ones are going to want to do that, too, just as quicldy as they
can. We will have problems of what to do with the hundred thousand
airplanes all bristling with guns and protective armor; the hundreds
of thousands of tremendous trucks that are too big for most other
uses; and the millions of machine guns and shells. These will have
to be met when they are unfolded, and we fully know conditions. It
POST-WAR ECONOMIC POLICY AND PLANNING 1319
isn't going to be easy, and it isn't going to be done without some sacri-
fice. Naturally, there is going to be some loss. If anybody gets the
notion he can face a picture where billions of dollars have been spent
in carrying on a war that has been so tremendous and not have some
headaches, he is wrong.
Mr. Hope. What are the situations of the war-torn countries with
their need and ability to absorb the stock piles?
Mr. Jones. My information is meager on that. I would like for
you to ask Colonel Olmsted that question. I think this is true. In
Italy, so far, it hasn't taken as much food as was anticipated. In
north Africa they commenced to produce food more quickly than
some thought they would. There is a great difference of opinion as
to what the needs are gomg to be. I understand that in the parts
of France of which we have gained possession, the reports indicate
that it is not in as bad a shape as some had believed.
Now, in Greece, I understand, it is very bad; also, perhaps, in some
of the other Balkan countries. They are comparatively small. We
are going to have a problem in connection with this food. We may
just as well understand it, I think. Of course, for the intermediate
period there is going to be quite a demand for food in certain quarters.
There is going to be a tremendous supply, too.
Mr. Hope. As I understand you, the present outlook as to the
amount of food we might dispose of for relief purposes in Europe is
less than we have been anticipating. Is that correct?
Mr. Jones. That is a difficult question to answer because it hinges
, on two things: First, our meager information; and second, the differ-
ence of opinion. I suspect that the representatives of the U. N. R.
R. A. or F. E. A. who handle that problem could give you more
definite help than I could. We are trying to take into consideration
the fact that, while there will be quite a need for food in some of
these areas for a limited time, at the same time we may have large
quantities when the war ends. But we can't quit producing. We
have to go forward with our food production and food provisions as
a safeguard. It would be impossible to quit producing war supplies,
guns, and tanks and say we will let up until we get to the last bullet.
You can't risk that soldier with the last bullet. They might not
quit just when we thought they would. We have that situation
which we must face. It is a practical proposition. We can't take
chances on it. We are going to have some problems. At the rate
we have been producing things, including food, we are going to have
some problems with that. I will state this: We are trying to get
our reserve supplies down to just as close a level as appears to be
safe. We are trying to avoid any excess stock piling anywhere. I
wish I could answer your question directly. I just don't know what
those conditions are over there or when this thing is going to end.
Mr. Hope. I appreciate no one could have the complete answer
to it. But necessarily, your program for the next year in the pro-
duction of food is going to be based partly on whether you think we
will be producing for some of the war-torn countries in Europe, in
addition to our own country, I assume!
Mr. Jones. Yes.
Mr. Hope. I want to hear what your thought is as to the need over
there, not only for the present but also whether they are likely to get
into production in another year and thus obviate the need for other
supplies from this country.
1320 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Jones. They are going to want to get into production, of course.
They are going to welcome in many places capital, machinery, equip-
ment, supplies of various kinds, that we can't quite accurately gage.
In making up our production program for next year, of course, on
most of it we don't need to announce the goals until later in the year.
We are going to try- to follow this thing and act on the latest facts we
can secure at the time of making the announcement. I think that is
wise. I still feel that the world conditions which prevail after the war
are going to affect this country, as well as other countries. I don't
know to what extent the food production will be needed. We are
going to try to use the best judgment we can, in the light of the facts
that prevail at the time we are compelled to make a decision. I feel
that most of these countries are going to want to get back into produc-
tion and believe that they can do it in some instances in a surprisingly
short time.
Mr. Hope. Now we are obligated under legislation passed by Con-
gress to maintain support prices on numerous farm commodities, to
some degree on all farm commodities, for 2 years following the end of
the war. And when the war ends, if we keep up our present produc-
tion, we will be producing at a rate which is about a third higher than
we have consumed in this country, even in pretty prosperous times,
even in the last few years.
What is your idea as to what it will be necessary to do if we main-
tain this price-supporting program in the way of adjusting production?
Mr. Jones. Well, in the first place, we must try to arrange for as
full use and consumption of those food products at home as we pos-
sibly can. Of course, that is going to depend a whole lot on whether
we have a good economic condition prevailing through the country
during the period. I think there are various programs with which you
are familiar that can be used here in an effort to have as full use of food
as is necessary for the health and strength of the people. Then I
think we have to use practical methods in an effort to dispose of any
surplus not needed at home in the foreign market. And that has to
be done on a practical basis.
Mr. Hope. Do you think that we will be able in the 2 years follow-
ing the war to continue to produce on our present scale? Of course,
I realize that is subject to weather conditions and other things.
Mr. Jones. That again depends on how well the country goes along
with full employment. I hope it isn't necessary for us to have to
crowd like we have been doing since the war. I know farmers and
their women and children who have worked 12 and 14 hours a day.
Old people have worked. I saw a man roping calves in the southwest
a short time ago. He was past 80 years old. I saw a boy 10 years
old running a big combine. They are working all the daylight hours,
paying no attention to holidays or anything else in an effort to save
that food. I thought it was fine, with the world aflame and as much
as we have at stake. But I hope that kind of crowdmg for produc-
tion won't be necessary. I hope we can get on a reasonable basis
when war is over, and I don't anticipate that kind of a drive will be
necessary.
I do hope that we can so use our resources, so conserve our resources,
and so utilize our vast possibilities as to keep agriculture and industry
on a strong basis. I think it is possible. I think the research to
which I referred is of tremendous importance. I think the chief
POST-WAR ECONOMIC POLICY AND PLANNING 1321
reason that the industry of America has developed, as it has, is the
fact that it has been willing to, and has spent a great deal for research
for better articles, better uses, better facilities. The genius of Ameri-
can inventiveness has made possible the winning of this war. If we
had used the old weapons we had at the beginning of the war, we
probably wouldn't have been anything lilve where we are now. I
thmk that this thing has to be picked up and carried forward all
along the line if it is to go. I believe if we do that, that we can have
full production. I don't mean a crowded, overtime man- and woman-
killing assignment, but real work. Anybody who is worth his salt
wants to work, but he doesn't want to be overworked. Nature
doesn't call for that, either.
Mr. Hope. I agree with you as to the magnificent job the American
farmer has done in expanding his production to the extent that was
needed. I don't thmk they have to be crowded and pushed during
the next few years the way they have in the last few years. They
need to slacken up.
Mr. Jones. By the way, just an illustration: I listened to, at a
meeting a short time ago, a story of a Kentucky woman whose
husband isn't living. She had two boys in the armed services and
her tenant went to work in a war plant. She got out, learned to
drive a tractor, plowed her own land, and plowed 150 acres for her
friends. She had never driven a tractor before. That kind of
crowded work doesn't need to continue. But I know there are
problems connected with it. I understand what you are driving at.
We can't do this unless the other goes, too.
Mr. Hope. Even if we have full production and expand our
foreign markets all it is possible to do, can we still go ahead at the
rate we have been producing in the last 3 or 4 years and depend upon
having an outlet for that production?
Mr. Jones. Nobody can answer that question. I think a proper
use of the soil calls for certain rotations and certain limitations on the
use of that soil. If you go all out to planting soil-depleting crops,
the first thing you know you won't have enough production. If you
just plow up the fence corners and plant soU-depleting crops com-
pletely, you may have plenty for a little while but you have to use
sense. After you have produced enough there is no use of producing
more to rot in the barns and in the fields. Wliatever is produced
should be produced for use. When you reach the point when you
get all you have channeled of a crop, you might just as well stop
at that.
Mr. Zimmerman. In other words, we don't want any more dust
bowls.
Mr. Jones. No, sir.
Mr. Zimmerman. We don't wish any more eroded lands, such as
resulted from World War I from overproduction and improper pro-
duction.
Mr. Jones. That is right.
Mr. Zimmerman. Your idea is that, when we go along wdth this
production, we should keep in mind that we want to save and build
our soil rather than deplete it.
Mr. Jones. Yes; fit our programs to the needs and outlets. We
have to do that. Industry does it. We all have to do that.
1322 POST-WAR ECOXOMIC POLICY AND PLANNING
Mr. Zimmerman. Thank you. Air. Hope?
Mr. Hope. I was going to ask one more question. What I would
Hke to know is whether the War Food Administration is giving con-
sideration at this time in planning its programs for next year and
succeeding years, as I assume we are doing to some extent, to the
question of whether or not we can continue production at our present
scale and find an outlet for it or whether it may be necessary for us
to curtail that production somewhat. If so, what thought you have
in mind as to how that might be done.
Mr. Jones. We are going to undertake to set our goals for the
coining year as nearly as possible to fit the pattern. These goals
are determined, and should be in wartime, on a voluntary basis.
We set the goals and say we think this much will be needed. We are
not going to set goals for producing more than om* judgment dictates
we will need for meeting the conditions and any uncertainties arising
from the military needs. Of com-se, we are not going to ask for
production in excess of what it looks like the pattern calls for.
Mr. Hope. Don't you believe we may have more difficulty in
cutting down our production if that should be necessary in order to
meet diminishing requirements, than we w^ould in getting this expand-
ing production?
Mr. Jones. That is entirely possible. That again is linked to how
conditions develop and as to whether we are all far sighted enough to
keep this country balanced and whether we are sensible in our
approaches to securing markets for our products.
Mr. VooRHTS. I want to go back to soil conservation for one
moment. I understood you to say we had approximately held our
own.
Mr. Jones. I think we have more than held our own.
Mr. VooRHis. You do? '
Mr. Jones. Yes, in the last few years. We didn't begin really on
soil conservation until some 20 years ago. Some very fine-spirited
men kept working for it. But there wasn't much done. For 20
years it has been growing and about 10 years ago we really began doing
something.
Mr. VooRHis. Let me put it this way: Do you believe, if the soil
conservation program continued at the same rate it was going just
before the war — laying aside any interference the war may ha^e
caused — that the problem is being conquered on a long-time basis?
Mr. Jones. No, I won't say that; I doubt whether we have. I
think we need increased efforts. Again, we don't want to take chances
on that.
Mr. VooRHis. What kind of increased effort? What direction?
Does it need new legislation or not?
Mr. Jones. It probably will need some changes from time to time.
The difficulty is not so much in the legislation from the national view-
point. It will need additional funds from time to time and increased
provisions. I think some very thoughtful effort should be made
toward utilizing some of this surplus machinery we are going to have in
*;onnection with the work in the soil effort.
Mr. VooRHis. We tried.
Mr. Jones. From your own experience, you know that the past
tense, "we tried" isn't your philosophy. You are going to keep on
trying.
POST-WAR ECONOMIC POLICY AND PLANNING 1323
Mr. VooRHis. That is right.
Mr. Jones. In this country, you know, "One swallow doesn't
make a summer."
Mr. VooRHis. You think more eq,uipment could be given to soil
conservation? It would make a great difference.
Mr. Jones. I do. We have a great many soil-conservation dis-
tricts. A great many farmers are realizing the importance of soil con-
servation and are anxious to do something.
Mr. VooRHis. That is right.
Mr. JoxES. I think that when you find people in that mood, any-
thing that makes it possible for them to have the tools, even simple
tools, will be helpful.
Mr. VooRHis. If you were a member of this subcommittee, where
would you put youi- emphasis in regard to soil conservation? Do you
think we ought to be preparing a bill, or what do you think we ought
to be doing on it?
Mr. Jones. You Ivuow that is a Jittle difficult for me to answer
because I am not supposed to come up here and advise on legislation — ■
I haven't studied that phase of what legislation is necessary— but I
certainly think that some provision should be made in some way, for
getting the usable machinery back where it can be used in connection
with this soil program in these districts. Whatever is necessary to be
done in a reasonable way, I think should be done. I think that any-
one who can get that job done will be making a real contribution to
his CO mi try.
Mr. VooRHis. That is what I think. I want to know how to do it.
Mr. Jones. Months ago we started a drive for getting some of this
war machinery back. We have succeeded in getting some of these
trucks and other things. We have an organization that is devoting
its time to that, trying to get this machinery back for farm use. We
keep driving and are going to keep on driving as best we can under
the power that we have.
Mr. Zimmerman. All right.
Mr. VooRHis. I wanted to ask if the soil-conservation districts are
not in a position where they can pay cash?
Mr. Jones. No. Most of them can't pay cash. They are organ-
ized under State laws to cooperate with the Federal Government.
They don't have the cash in many instances. If you are just gomg
to have cash on the biirrel head, they probably won't get much of it.
Mr. Zimmerman. Here is a question I want to ask you. You have
had a part in drawing and seemg passed legislation providing for the
program of soil conservation in this country. With that personal
experience as a member of the committee don't you think that we
have an adequate program at this time to carry on the program for
soil conservation which you have expressed the necessity for, if suf-
ficient money was provided for that purpose?
Mr. Jones. We have a very good program. If we had the money
to carry out the provisions already made and to secure the equipment
for carrying it out, it would be very helpful. I was hoping something
could be done, in connection with our vast surpluses all along the line,
to further that— to just give it a little added push.
Mr. Zimmerman. That is fine. I merely asked that question,
supplementing what my friend, Mr. Voorhis, asked about what you
1324 POST-WAR ECONOMIC POLICY AND PLANNING
thought Congress should do at this time in passing additional legis-
lation. ^
Mr. Jones. I have a great deal of behef in the wisdom of Congress
when they have all the facts.
Mr. Zimmerman. If we pass the. legislation to get the funds to
contniue this program, we will continue to get the results we have been
getting oyer the years; That is my view. I don't think we have
touched the great problem of water utilization.
Mr. Jones. I don't want that to create the impression, by anything
I have said, that we have solved this soil problem. This has been
going on for hundreds of years. You can't cure a constitutional
disease overnight with a skin remedy.
Mr. VooRHis. I am going to yield to Mr. Walter for a minute,
because I want to go to another subject.
Mr. Walter. It seems- to me we have to admit the fact we are
producing more foods than we can normally consume.
Mr. Jones. Yes.
Mr. Walter. In my judgment, that excess food supply should be
treated ]ust as we are going to have to courageously treat all of those
special tools which serve no purpose in our peacetime economy.
Mr. Jones. I agree.
Mr. Walter. Yesterday it was my privilege to visit one of the
midwestern air fields where I saw a very revealing or distressing
exhibiton. We have millions and millions of dollars' worth of stuff
that cannot be utilized. It would seem to me that, in order not to
seriously affect the agency, we ought to make every effort to dispose
ot all the foodstuffs we have abroad, no matter how. Let this Itahan
keep his grain buried. He will any^vay, so long as he can get some-
thing from Uncle Sam. It certainly seems to me we ought to look
all over the world for places to dispose of this excess foodstuff, no
matter what the terms are. I am afraid the American people are of
the opinion that we are going to salvage a lot out of the money we
have expended for the war effort. I am afraid that Congress has led
the people to believe that. But on these big B-17's, for example, I
don't thmk enough stuff can be salvaged to justify the disassembling
of the plant.
Mr. Jones. That will be true as to much of that, I suspect.
Mr. Walter. The excess foodstuff is in exactly that same category.
Mr. Jones. I think certamly your analysis is good. However, I
thmk we are going to find that if the Ai-my, which has been taking
about $2,600,000,000 worth of food a year, begins to use up some of its
stock pile and quits taking so much, and we still have the farm assem-
bly line geared to the production that support prices will make pos-
sible, then in the light of reserves and stored supplies there is going
to be food in abundance.
Air. Walter. What percentage of the food that is raised now goes
to U. N. R. R. A.?
Mr. Jones. U. N. R. R. A., as I understand it, has not taken any
food.
Mr. Walter. Wliat percentage goes to our alhes?
Mr. Jones. About 11 percent.
Mr. Walter. What percentage goes to the armed forces?
Mr. Jones. About 13 percent. There is another 1 percent that
goes into foreign chaimels. About 75 percent of our food has been
used at home.
POST-WAR ECONOMIC POLICY AND PLANNING ,1325
Mr. Walter. Don't you thiiilv that, in order not to disturb our
economy, we ought to bravely recognize the fact that 25 percent is
excess and get rid of it somehow? Wlien I say "somehow," I use the
term advisedly.
Mr. Jones. We don't know conditions yet. We don't reduce pro-
duction of war materials just because it appears that we may not
need all of them. We can't take that chance. A hungry man can't
fight. Napoleon discovered over a hundred years ago that an army
can't function without food. We are watching the situation and
trying to do everything we can to make the impact as light as possible
and the loss, that we must necessarily take, as little as possible. But
I think we should negotiate as far as we can for the disposal of food
in the aftermath, in various ways. I would like to take it up with
other countries. There are agencies that have the responsibility for
that.
Mr. Walter. Your planning has to be haphazard, if you please, to a
greater degree of that, than manufacturing. When you are manu-
facturing a product, you can cut it off somewhere. But you, can't
stop the food that is growing at that moment.
Mr. Jones. No. Food is pretty well on an annual basis. When
you start, you have to finish up the year's production. For that
reason we have a very difficult assignment in setting our goals for
next year. We are going to set them as late as we can in order to
know as much about the picture as is possible. Of course, certain
ones we must set as we go along.
Mr. VooRHis. I am a little worried about a couple of things here.
In the first place, the armed forces are American citizens. Whereas
they may be getting a bit more food now than they got before, they
are still going to be eating food in the United States after the war.
Mr. Jones. That is right.
Mr. VooRHis. That 13 percent can't be subtracted, not all. In the
second place, isn't it true that before the war, we were on a balance
and America was importing about as much total foodstuff as we were
exporting? Not the same stuff, of course. Weren't we importing
about as much food?
Mr. Jones. I would rather have Mr. Wells answer that question.
We were importing certain types of food like coffee and sugar, and
many other types of food.
Mr. VooRHis. I asked that same question yesterday. I think I
got the answer that we imported as much as we exported.
Mr. Wells. That is approximately correct.
Mr. Jones. I had that impression. /
Mr. VooRHis. I wanted to make it clear that the amount of wheat
and cotton we have to export isn't a net export balance and that there
are certain food commodities that come into the country. Therefore,
I think we have to be careful not to overemphasize the fact. If we
really did have a full consumption economy in America, we still would
have vast surpluses of food.
Mr. Jones. Of certain commodities.
Mr. VooRHis. That is right.
Mr. Jones. Of course, these soldiers are going to eat, probably not
quite so much, but measureably they are going to continue to eat.
There won't be the necessity for the stock piling. I believe Congress-
man Walter's questions primarily referred to stock pUing.
1326, POST-WAR ECONOMIC POLICY AND PLANNING
Mr. VooRHis. I am attempting to indicate that this is a specific
commodity problem to a much greater extent than it is a general
agricultural pro})lem.
Mr. Jones. Oh, yes. You have a general agricultural problem^
but you ultimately go down to your specific commodities before you
have any intelligent grasp of the subject.
Mr. VooRHis. I will try to get through in a hurry. I want to ask
you something about prices and surpluses. First, how long do you
think we should have a price-support program for agriculture? Two
years, or indefinitely?
Mr. Jones. If you will define your support price, I will answer that.
I want to say this — that in the legislation that I personally sponsored
in 1938, we made provision for loans which, in a sense, were to support
prices, and authorized them on all commodities.
Mr. VooRHis. Do you think the time should come of abandoning
the policy of preventmg collapse of agricultural prices?
Mr. Jones. I think when they do, we will abandon our greatness.
Mr. VooRHis. That is what I think. You think that it should be
made a permanent polic}^?
' Mr. Jones. I think some provision should be continued. I believe
it so strongly that I helped write it in the law.
Mr. VooRHis. TMiat kind of provisions do you recommend?
Mr. Jones. I don't want to undertake to answer that, because that
requires a study of the individual commodity and its varying problems.
There are production changes. The area of production and demands
for commodities shifts. For that reason, the support price on most
commodities, outside of the staple commodities, was left to the admin-
istrative authority to determine in the light of conditions prevailing
at the time the determination was made.
Mr. VooRHis. Do you believe that provisions of loans at certain
percent of parity, or ptirity, on the one hand, and direct purchases
in case of certain cbmmodities or certain decisions ought to be used?
Mr. Jones. Yes; I think those devices should be used. I think
considerable provision should be made along the lines of section 32
funds, which gives a broader power in disposing both here and else-
where of the supplies that temporarily are in surplus. You know a
perishable commodity must be handled pretty well at the time it
becomes surplus. You can't carry it.
Mr. VooRHis. At the moment, you have so many eggs that you
don't know what to do with them.
Mr. Jones. We have got an egg problem, not quite as bad as we
had. We bought about 6,000,000 cases and have about 1,400,000
left. I am very proud of the job done in handlmg of eggs. Anybody
who might sit down and listen to that story would Icnow that if we
hadn't had the support price, w^e wouldn't have had the eggs we
needed. Eggs might be a dollar or a dollar and a half a dozen. The
consumer got a break on that support price.
Mr. VooRHis. When I was home
Mr. Jones. I understand eggs are a dollar apiece over in France.
Mr. VooRHis. One of the things my people want me to bring back
to Washington was the way that program was handled by W. F. A. at
the time. The point I want to make about this is: Isn't it true that
the possibility of carrying out that phase of a support price program
depends directly on your having proper outlets to dispose of the stuff?
POST-WAR ECONOMIC POLICY AND PLANNING 1327
Mr. Jones. Undoubtedly,
Mr. VooRHis. A specific question — this is a tough one: What per-
centage of that problem of conducting a support price program for
perishable commodities, not among the basic staples, could be handled
if Ave had developed a school lunch program geared to the nutritional
needs of the children of America?
Mr. Jones. I couldn't answer that question. It woidd make a
decided contribution.
Mr. VooRHis. It would be a substantial contribution.
Mr. Jones. Yes.
Mr. VooRHis. Do you believe, for instance, to use the present
situation, that eggs which were devoted to a school lunch program
would hurt the market for eggs in the families of the very children
eating the eggs in connection with a school lunch? In other words,
would the fact that my child ate a couple of eggs for lunch at school,
in a school lunch program, reduce the number of eggs which my
wife and I would buy at the store for our home table?
Mr. Jones. Probably not. It might encourage you to create an
appetite for them.
Mr. VooRHis. I agree with you. I don't believe that reduces the
normal market for the commodity.
Mr. Jones. No; it wouldn't any more than the extension of these
rural electrification lines have destroyed the market of people supply-
ing electricity. It widened the market.
Mr. VooRHis. Don't you believe the people then in the local
communities would become increasingly interested if they had taken
more financial responsibility than the responsibility they now take
in conducting the "programs and sponsoring them?
Mr. Jones. I think that is possible.
Mr. Zimmerman. Any questions?
Mr. AIuRDOCK. I have several. I haven't been here as long as
Congressman Cooper. When he said at the opening of the session
that it was the best paper he had heard in his experience in Congress,
I felt I can second that comment in due proportions. It is the best
I have heard.
Mr. Jones. Thank you.
Mr. MuRDOCK. Now, you have indicated that we are holding our
own in a way with soil conservation and fertilization and we have made
a temporary draft upon our productive possibilities during the war.
But we are able, and are going to be more than able, to continue a
high level of agricultural production.
Mr. Jones. That depends on whether we continue the grasp of this
subject and contmue the period for carrying it forward. Eternal
vigilance is the price of liberty. It is so old as to be trite, but it is
still true.
Mr. MuRDOCK. I hope we are going to take heed of all that and
continue on this high level of food production. I have already
indicated, Judge, that we can't be too careful in limiting production
because of the fact that the war might end tomorrow. However, I
have implied that it is possible that we might be faced with surpluses.
Mr. Jones. We may have periodic surpluses of some commodities.
Mr. MuRDOCK. Is there any safety valve, maybe not to be used at
once, but in the long run, that would take care of that hazard?
1328 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Jones. Well, of course, you need some provision if you are
gonig to have an orderly program. You need some provision for an
outlet and liandhng tlnngs that are in excessive supply over the
normal needs and the normal flow of commerce. That is easy to
have if you have some provision for outlets. Just to illustrate, the
section 32 m a limited way provides for that. I thmk that additional
provision probably should be made from tune to time to be ready to
act at once. You know, when perishable goods get on the asserably
line, they won't wait. Otherwise, they are lost.
Mr MuRDOCK. I am in hearty agreement with all that the Congress-
man from California has said about using school lunches. What I
have m mmd is this: Are there means of utilizing farm products in
industry, through chemical uses, chemurgy for instance, that would
act as a safety valve for the taking out and making use of any sur-
pluses over and above human needs.
Mr. Jones. As to some commodities in some instances, no doubt that
could be done. That would depend upon the amount of surpluses.
aT" ^a? ^^^^ ^^^^^^ ^^^^^ ^^ ^* ^^^^^ ^^ ^°^® degree limited of course.
Mr. MuRDOCK. I remember, when I came here as a new congress-
man m 1937, about the fight you were putting up. Among other
things, you asked for the establishment of experimental laboratories.
f our were eventually estabhshed. . As Food Administrator, havejyou
been pleased or disappointed with the results?
Mr. Jones. I have been greatly pleased. May I say that, during
the war, a good deal of the personnel of those laboratories has been
transferred to war work like all other industries. They have made a
distinct war contribution during this period. A great many of the
personnel went into the service. Then their work -was diverted to a
large degree to those things that would contribute toward the war.
But they have done some very fine work. Like many other problems,
the more they do, the wider the field of possibility unfolds. I thmk
there is a tremendous future for those men and women if Congi'ess will
make adequate provision for them.
^ Mr. MuRDOCK. One thing I wanted to underline in all this was the
judge s statement in regard to water utilization. If you will look at
the map there, take that region west of the hundredth meridian— say
west of the ninety-seventh meridian— more than a third of om- States
ol the Union he west of the ninety-seventh meridian, some in a semi-
arid region.
Mr. VooRHis. Those are the most important States.
Mr. MuRDOCK. Those States are more than a half in area of the
entire country. I think, Mr. Chan-man, we ought to either have
Judge Jones or some of his assistants or some one from the Bureau of
Keclamation amphfy what he has put in his statement about the need
of conserving and utilizing every drop of water that falls on these
sm-faces. I would like you to suggest that we devote an entu-e hearing
to water utilization. Our time today is so limited. I know. Judge
Jones, also of your valued fight in that respect, maybe because you
also hail from the west. You see there the challenge to the engineer
and the scientist to turn that desert into a fruitful place. We have
already done a lot of that. That is the thing I wanted to underscore
in today's statement.
Mr. Zimmerman. I will say like Air. Murdock, if we get the oppor-
tunity, as chau-man of this subcommittee and with the consent of the
POST-WAR ECONOMIC POLICY AND PLAXXIXG 1329
other members of this committee, I will assure him we will try to have a
hearing on this very important question and bring before this com-
mittee, the men connected with the different departments who can
enlighten us fully on that very important question.
Air. Wolverton, I believe you have a question?
Mr. Wolverton. Mr. Chairman, I have two or three questions
I would like to ask. With reference to the first question I will ask,
I might say that I have long sought this opportunity. Coming as I do
from an industrial community, I am very much interested in the ans-
wer to this question: What is the reason for the difference in price
received by the farmer for his products, and the price which the con-
sumer is required to pay?
Mr. Jones. That is a pretty long story and 1 suspect you would
need the aid of the Committee on Agriculture. I will state this, of
course, that the methods of industry today in handling the different
commodities must be considered. Naturally, in the perishable com-
modities there are some losses which explain some of the difference.
I have always felt there is too wide a difference, generally speaking,
between what the farmer gets and what the consumer pays, I don't
like to be bringing up the egg illustration again, but for a long time
the dealers would come to the market when the supplies were abim-
dant; buy them and store them; and later take advantage of the short-
age. I suspect some of the criticism came from some of those who
found then- little playhouse interfered with.
We sometimes exaggerate, however, in our own minds, the spread
that does exist. I think it is too much in many instances. Yet there
comes into that the handling, the loss, the slu-inkage, the transporta-
tion, refrigeration, the processing — all of which are elements of cost.
Then the chance which the businessman must take — having some of it
left on his hands or not being able to dispose of it within a limited time.
All those tilings, if a man is going to be fair, must be considered.
Even so, I think it is a long story to ferret out just where the trouble
lies. I think advantage is sometimes taken. Sometimes men have
ganged together, have their agreements to not compete.
Businessmen are pretty resourceful. They sometimes take advan-
tage of the farmer, buy his stuff when they know he must sell right at
the market time when there is a glut. Naturally, a man is going to
buy on the best terms he can. For that reason I think the supporting
loans are very effective in helping to cure the very problem to which
you refer. Then a farmer, though he has obligations, isn't compelled
to sell when everybody else is selling. He can carry it along. Those
things can be handled better with the staple products that are not
perishable than they can with the liiglily perishable commodity. Of
course there are State laws, sanitary laws, trade practices, many things
that have been developed in recent years.. We have the market agree-
ments in relation to milk. That has helped the situation. These
area market agreements you are familiar with. They have been or-
ganized under the Agricultural Marketing Agreement"^Act. Even so,
that is a problem that has to be cured gradually. I don't think there
is any single remedy. It is a growth. We learn by doing it co-
operatively. The cooperative organizations, I think, have helped to
handle the various commodities and have thus furnished a route
around the regular channels and thus helped to hold them in line. It
is the competitive nature of the thing. That is a continually chang-
ing problem. It is fraught with vast difficulties. Some practices
1330 POST-WAR ECONOMIC POLICY AND PLANNING !
have been unfair, some unjust. In many instances margins have been
wide. I thmk we are gradually approaching a solution.
Mr. Hope. I wonder if Air. Wolverton will yield to me for a verv
brief statement?
Mr. Wolverton. Yes.
Mr. Hope. The Committee on Agriculture is just beginning an
investigation into the whole field of the marketing of agricultural
products, which we hope will enable us to give you some answer to
your question. It is going to be a very thorough investigation and
win cover the whole field. It will take some time. We hope to get
some facts that wiU help solve that point, which to many people is
quite a mystery.
Mr. Jones. I am glad to hear that. It is going to take time. Prob-
ably they are going to recommend some legislation and change in
practice. You will have full information that will be helpful.
Mr. Wolverton. It is very encouraging to me to know the Agri-
culture Committee has recognized the importance of that question
and is making it the basis for a separate study. I have been here in
Congress for upward of 18 years and I have heard through all that
period of time the condition of the farmer, the different programs that
have been put forth to improve his economic standing. I realized
that the farmer was not gettmg in my opmion what he was entitled
to get for his labor that went into his products. But I have supported
all of that legislation that would tend to improve his standing.
Mr. Jones. I know you have done so personally and I think you
have taken a very broad view on that subject.
Mr. Wolverton. On the other hand, I have heard much about the
O. P. A. and the price to the consumer. I have been in favor of that
program and I have supported it. But there is the in-between posi-
tion in which I think all of the reasons you have given might be sum-
marized into a problem of marketing that does deserve very careful
consideration. I am very glad indeed to be mformed that the Agri-
culture Committee has taken upon itself that responsibility.
Now, the other question I wanted to ask is this: As you realize, we
are sitting here as a committee of the House, which placed upon us
the responsibility of studying the problems of the post-war period,
and making recommendations to the House for appropriate legislation
in dealing with, or to provide a solution, if possible, of those problems.
The responsibility is upon us to make recommendations. I am unable
to see how we can make recommendations unless we have from those
who occupy positions of importance in the admmistration of our
Government their thought as to what should be recommended for
legislation.
Taking by way of illustration the important department which you
so well head— the War Food Administration — as you pointed out in
your statement, it is an independent agency reporting dhectly to the
President. It utilizes and has control of the action agencies of the
Department of Agriculture, as well as its own personal staff. It has
the advantage of the experience of those who have long been in this
same Hne of work. Now that statement of background to my mind
lays a foundation of experience that would justify this committee in
asking you as the head of the War Food Administration, what specific
recommendations would you make, which, in your judgment, this
committee should recommend to the legislative committees of the
House as a basis for their discussion.
POST-WAR ECONOMIC POLICY AND PLANNING 1331
Mr. MuRDOCK. May I ask the chairman whether an answer is
expected at once?
Mr. WoLVERTON. No. I wouldn't ask that. I am too interested
in having a full answer and a helpful answer than to expect Mr.
Jones on the spur of the moment to outline an answer to that ques-
tion. I would be very glad if he had an opportunity to amplify his
statement.
Mr. Jones. I would be unwilling to make a recommendation at
this time. I may say under our system, whatever recommendations
we may make, or that may call for any expenditure of funds, are cleared
with the Budget. Therefore, we need to know pretty well in order
to do that. We have to go back and get that authority.
Mr. Walter. I don't agree with you on this particular question.
Mr. Jongs. Therefore, in order to do it — what do you say?
Mr. Walter. I don't agree with you. You are not making a
request for legislation to a legislative committee. You are making
recommendations as to the type of legislation this committee should
consider. Whether we accept your recommendations or not is a
different story.
Mr. JoN"Es. What I was leading up to was this: I can talk over the
problem with you, make suggestions as to what I think the legislation
should cover. Then I think this committee should give us, some of
our people, an indication of what phases of the subject, if any, appeal
to them, then make requests. On the request for the drafting of
legislation on any specific subject our people could do that work. I
don't know — I had rather this be off the record.
Mr. Zimmerman. Very well.
(A few remarks followed off the record.)
Mr. Walter. I am quite certain the legislation would be intro-
duced by the chairman of this committee and subsequently referred
to the proper legislative committee and not submitted to the Bureau
of the Budget.-
Mr. WoLVERTON. That would be the duty of the legislative com-
mittee to ascertain whether it is in accordance with the President's
program.
Mr. Jones. The committee can introduce any legislation it wants'
to, of course, but you were talking about our bringing up legislation
and asking that it be passed.
Mr. Walter. You can bring it but whether or not we introduce it
is another question.
Mr. WoLVERTON. May I indicate some other problems I think this
committee would be glad to be informed upon?.
Mr. Zimmerman. Yes.
Mr. WoLVERTON. Fhst, what should be the policy in the conversion
period relating to disposal of governmental surpluses? Second, what
should be the policy with respect to the removal of wartime controls?
Third, what should be the policy with respect to supporting agricul-
tural prices? Fourth, what policy should be adopted to encourage
foreign trade? Fifth, what policy should be adopted guiding migra-
tion and settlement? Sixth, what policy should be adopted with
respect to adjusting production? Seventh, what policy might be
suggested as to maintaining an effective demand for agricultural
commodities at a high level?
1332 POST-WAR ECONOMIC POLICY AND PLANNING
Now, those are some of the problems that are facing this committee
I have no doubt that other members of the committee could probablv
add some other questions. But they are questions that I am certa n
this committee is mterested m having answered or having brough?
to the best consideration of men such as yourself. It would be of
great assistance to us in making our recommendations to the proper
legislative committees. pi^pei
Mr. Jones. I want to thank you for the suggestion which vou make
tibere Now may I say this that some of those touch the work ?he
T\ ar Food Administration is doing. We have made some suggestions
In fact I have made some today. There are some other suggestions
that may affect us which I will be happy to give you-specificallv the
ideas we may have upon them. ^ specmcally the
There are others that cover the field of other agencies that, of course
would necessarily be referred to them. Then there are others that
thbk shouKT' r[^ 1 '^'' Department of Agriculture that I
tlimk should be handled not so much m connection with the War
Food Administration. I would feel that I was encroaching upon other
grounds and the field of other activities, if I undertook, on mv own to
make suggestions concerning them. " '
I will be glad to look over those and any other questions and give
Jh^^'ir''^?^^^ viewpoint as to what I think of the ones which I
think fall withm the field of the War Food Administration. I have
!lfi"f ^ i^ assignment as it is; I would simply have to ask some one
else to do the drafting work m connection with the ideas that I might
have because tliey keep me pretty busy down there at times with a
lot o± these problems coming up.
Mr. WoLVERTON. I have suggested some questions which I think
this committee would appreciate having an answer to, if possible-
some help as would make them able to make an answer, relatino- to
lood. I don t expect you to go out of your immediate field. I am
preseiitmg those problems in connection with food. Now if the set-
up ol departments or agencies is such that you would have some
hesitancy m expressing opinion as head of the War Food Administra-
toi I would be very glad to have the benefit of your thought in the
matter as an mdividua of long experience and recognized reputation.
+L r •/T''^- ^ Z""^'^"^ ^'¥ ^^ ^^^ ^^^^ y<^^^ do this, that you make up
the list ol suggestions and send them to Justice Byrnes who has been
asked to work on these and let him parcel them "out to the various
agencies that have jurisdiction. I want to cooperate in any efforts I
make. I don t want to run counter to the plans and have it makeshift
It ought to be integrated some way. Some of these questions so
entirely to other agencies. ^
Mr. WoLVERTON. I understand you don't want our team to get m
the position of no hits, no errors, no runs.
Mr. Jones. In connection with my job, I don't want to be doing
things that would— any army has to work pretty well together If
one division ol the army went one direction, another another without
ever thmkmg or consulting with each other, you would 'get into
A^r w "^^^^ ^^ d? teamwork insofar as it is practicable to do so
Mr. WoLVERTON. As I understand the procedure you suggest for
this committee is to send for Justice Byrnes and ask him if you may
answer those questions? "^ *^
POST-WAR ECONOMIC POLICY AND PLANNING 1333
Mr. Jones. No, sir. My suggestion is you get the various ques-
tions, some of which would go entirely into the field of another agency,
ask him and let him refer the ones that each agency is to handle to
them. And you can send any direct to me that you want to and I
will be glad to give you my personal opinion as to anything that I
touch.
.Mr. WoLVERTON. The problems I have just indicated on the spur
of the moment, so to speak, in my mind relate to food. I am per-
fectly willing that your answer should relate entirely to your views
on those problems with respect to food.
Mr. Jones. To war food?
Mr. WoLVERTON. To food.
Mr. Jones. I am a war-food administrator.
Mr. VooRHis. We want to know what you think. We don't want
to know what Justice Byrnes or the Bureau of the Budget says you
think. We want to know what you think.
Mr. Zimmerman, I would like to ask a few questions. One is this.
We had the Secretary of Agriculture before us yesterday at our initial
hearing. He stressed that we must have full production. This is a
post-war program for agriculture after the war is over.
Mr. Jones. Yes.
Mr. Zimmerman. A long-range program. And the goal to be
reached is full production of agriculture which must be accompanied
by full production of industry and full employment of labor at a
wage that will enable labor to consume our manufactured products
ancl likewise our agricultural products.
Now, that is the goal we are all striving for. We say in order to
do that we have to have a national income of about $150,000,000,000
a year. He told us yesterday that, so far as agriculture was con-
cerned, we would be able to consume about 94 percent of our commod-
ities here at home, provided we have this production of industry and
employment of labor, hopefully looked for; and that there would be
about 6 percent of our agriculture that we would have to get rid of
through our foreign neighbors. - . . .
What impact, what effect do you think the proper disposition of
that, say, 6 percent, or 8 percent, or whatever it may turn out to be,
will have on our domestic agriculture here at home? I would like to
ask you that.
Mr. Jones. You mean the disposing of it abroad or the failm-e to
dispose of it?
Mr. Zimmerman. Yes.
Mr. Jones. Failure to dispose of any surplus, a very sniall surplus,
can very greatly upset, just like a very small margin of shortage can
permit prices to go sky high. I do thmk some effort should be made
to have a channeling of whatever sm-plus remains. Some plans are
needed for channeling that abroad. There isn't any straight-edge
probably that you could lay down. But the problem will have to be
met from time to time in comiection with certain commodities.
No one can know when the farmer plants the crop just what the
seasons are going to be. For instance, in potatoes last year, they set
the goal for a certain acreage of potatoes. We had perfect weather
from Maine to Idaho, producing more potatoes than were ever pro-
duced in the world before. Nobody can tell, can lay down a thing; so
an escape valve or governor of some kind needs to be held available.
99579 — 45— pt. 5 8
1334 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Zimmerman. Can we lay this down for the consideration of
this committee: that in order to properly deal with the future of
agriculture in our comitry, we must take into consideration what we
are going to do with this surplus, 6 percent more than we can consume
domestically.
Mr. Jones. I don't like to limit it to 6 percent. That reminds
me of notes I used to make that ran 10 percent instead of 6. Cer-
tainly some provision should be made and would necessarily have to
be made. I think, too, if you have support prices, especially if you
get them at the proper place, there must be some provision made
for competing in the markets of the world on some basis of equahty.
Mr. Zimmerman. Then, in your judgment, that is one of the prob-
lems of this committee: To make some recommendation concerning
that agricultural surplus which we will have when our domestic con-
sumption reaches the highest point?
Mr. Jones. If this committee is undertaking to cover complete
post-war planning, I tliink that problem is an important part of the
undertaldng.
Mr. Zimmerman. In other words, we cannot make a recommenda-
tion that would help solve our agricultural problem unless we do deal
with that one?
Mr. Jones. That must be dealt with. There will be periodic sur-
pluses of commodities no matter how carefully any plans are worked
out.
Mr. Zimmerman. We have been told, of course, that to have tliis
full production of agriculture at home, we must have support prices.
And some say we must stimulate this school lunch for extra consump-
tion. We must have something hke the food-stamp tax also to stimu-
late consumption. We must further develop rural electrification to
improve conditions for the farmer.
But when we do all of that, then we are faced with that final prob-
lem, what are we going to do with the surplus we are going to produce?
You have just told us the soil-conservation program \vill finally reach
the point where a very few acres will produce what we are producing
now.
Mr. Jones. Of course, you, necessarily, are going to meet that prob-
lem from time to time. If the country is kept on a prosperous basis,
however, it will go far. It will do more than any other one thing
toward minimizing the difficulties of that problem. That is the
biggest way to meet it.
May I say that the stamp problem is just a part of the section 32
idea. It ah was the outgrowth of that, tied on to that provision.
Mr. Zimmerman. That is right.
Mr. Jones. The Committee on Agriculture is the one that sponsored
that original provision.
Mr. Zimmerman. I am convinced that we can never make a recom-
mendation for a healthy agriculture in the years to come, over a long
period of time, unless we work out some method whereby our country
win be able to dispose of this surplus — 6 percent or whatever it happens
to be — to the other countries of the world where there is a need for
these surpluses. It seems to me that is the big problem.
Now, we can work out our home troubles here. In other words,
we have Congress and we can set up the machinery to deal with the
consumption of agricultural products. We can make that consump-
tion just as great as we are a mind to do.
POST-WAR ECONOMIC POLICY AND PLANNING 1335
But when we go to dealing with surplus, which has a very depressing,
disturbing influence on our agricultural economy, that is a matter
which presents more serious difficulties. Those problems must be
solved.
Mr. VooRHis. Will you ask the gentleman whether he thinks the
recommendations of Bretton Woods would help to solve that problem?
Mr. Jones. I am not familiar with the details of that recommenda-
tion. I think the financial side and the proper handling of finances is
almost the lifeblood of any undertaking. I am sure their recom-
mendations were important, but I haven't had a chance to give
consideration to them.
Mr. MuRDOCK. Recognizing the difficulty of dealing with these
surpluses of which we speak, you would prefer to deal with a surplus
rather than a deficit in food production, would you not?
Mr. Jones. Yes; I think a deficit is difficult, especially in wartime.
In wartime, with all the headaches that a surplus brings, it is infinitely
less difficult than a shortage, because you can't eat the shortage.
Mr. MuRDOCK. Your philosophy has been an agriculture leading
to an economy of abundance?
Mr. Jones. Always. If you go back through the period of my
service in Congress, I emphasized time and time again through the
years, that we ought to produce all the market could absorb, both at
home and abroad.
Mr. MuRDOCK. In the House you emphasized that very fact and
I remember it distinctly — another point in your favor, always in my
mind.
Mr. Hope. Mr. Chairman, it isn't the problem, though. The basic
fundamental problem we have had to deal with continually in con-
sidering legislation for agriculture was some way to keep the farmer
from becoming the victim of his own abundant production.
Mr. Jones. That is right. He never has had the control which
seemed to prevail in, at least, certain lines of industry, in being able to
adjust his production so that he didn't produce in excess; and he had
no way of finding an outlet for this surplus. That was the reason
for certain legislation which enabled him to adjust his production in
his own interest and on a proper basis, insofar as it was practicable
to do so, to the needs and the outlet.
Now, he didn't have much voice, especially in the old days. He
went to the market with food and took what they offered him. He
went into the store or to the market and bought goods and paid the
price that they named to him. He had no voice in pricing the article
he sold nor in the article he bought.
Farmers live in widely scattered areas. The wheat producers'
activities, for instance, range all the way from the Winter wheat of
the Southwest, Spring wheat of the Northwest, and through the other
types of wheat in the far West, more than 60 — in fact, scores of differ-
ent types and varieties grown by farmers 2,000 miles apart. That is
only one of the 166 or so commodities which are grown by the farmer.
For that reason, any legislation which either directly or indirectly
gives him a part in the economy of the country, should be fitted into
the national program. This is part of the philosophy you and others
have worked on for years up there. We have done the best we could
with the limited facts and meager tools we had to work with.
1336 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. WoLVERTON. If Others are all finished, may I conclude the
hearing by saying; — ~
Mr. VooRHis. I had one more question.
Mr. WoLVERTON. I won't conclude the hearing, but say what I
wanted to say. The specific problems. mentioned by the chairman
Mr. Murdock, and Air. Hope, subsequent to my laying down what I
considered a statement of problems in general language, all come
withm one or the other of that general statement I made with respect
to problems. ^
When you speak of surplus and what to do with it, I stated it in
the words, "A pohcy for maintaining an eft'ective demand for agricul-
tural commodities at a high level."
So that, by way of illustration, every one of those problems comes
withm the general statement that I made as to the problems this
committee was interested in having a solution. Although I come
from an area mostly industrial, I have always felt— and for that
reason gave my support to you, Mr. Hope, and the others who have
sought to improve the standing of the farmer— that m this Nation
we all go up or down together and that there cannot be any real
separation between the good of the farmer and the good of the in-
dustries.
_ Mr. Jones. I think that is the true philosphy. Of course my time
IS almost completely taken up with the war-food problem. I came
over to do a war job and cannot neglect that. I want to be helpful
along other lines, and I will always be mterested m agriculture because
I gave so many years of my life to the problem. But I must do the
assignment which has been given me, because that is the thing I came
over to do.
Mr. Zimmerman. It is now 12:30. Have you any other representa-
tives whom you would like to have present their views to the com-
mittee?
. Mr. Jones. Mr. Mallard has been handling the machinery problem
and Colonel Olmsted has been handling the purchase and distribution
of the food for lend-lease, some of it for the Army but mostly for lend-
lease. If you want to ask them questions — I am simply saying that
they are available, if the committee wants to go into any of^'those
phases. They are domg public business, and they are available; if
you want to ask them a question about the situation, they may be
able to give you more specific answers about some of them than I am
able to give.
If you want to question them at a different time. Colonel Olm-
sted IS leaving sometime next week, and it would be necessary to
arrange a convenient time. If you want those gentlemen up for any
particular phase which they have been covering, they are at your
disposal.
Mr. Zimmerman. You indicated today that, when you deal with
the food problem, you are dealing with a war problem. There are
some things you would probably not want on the record. Should this
committee call Colonel Olmsted in executive session and not have his
testimony for the record?
Mr. Jones. I think he could probably talk more freely — I don't
know how far he can go. Maybe I had better consult with him
about that. <-
POST-WAR ECONOMIC POLICY AND PLANNING 1337
I will talk with you about having him up here. I suspect when he
does appear, we will let him determine that.
Mr. Zimmerman. If there are no further questions, we will adjourn.
I want to again express my appreciation of your presence here
today and the wonderful help you have given this committee in this
big job you are trying to do.
Mr. Jones. I desire to thank the committee. 'They have been very
courteous.
(Thereupon, at the hour of 12:35 p. m., the subcommittee adjourned
subject to call of the Chair.)
POST-WAE ECONOMIC POLICY AND PLANNING
FRIDAY, DECEMBER 15, 1944
House of Representatives,
Agriculture Subcommittee of the Special Committee
ON Post-War Economic Policy and Planning,
Chicago, III.
The committee met at 10:30 a. m., Hon. Orville Zimmerman
(chairman), presidmg.
Members of committee: Hon. Orville Zimmerman, Hon. William
M. Cohner, Hon. Jerry Voorhis, Hqn. Hamilton Fish, Hon. Clifford
R. Ho^e.
The Chairman. So that those present may know who is present,
to my extreme left is Hon. William M. Colmer, chairman of the I[ost-
War Economic Policy and Planning Committee of the House of
Representatives, who has honored ns with his presence here.
To my left is Hon. Clifford R. Hope, member of our Post-War
Committee on Agriculture and Mining. I happen to be the chairman
of the Subcommittee of Post-War Agriculture and Mining.
To my right is Hon. Jerry Voorhis of California, member of the
committee. Both Messrs. Hope and Voorhis are members of the
House Agricultural Committee, Mr. Hope being the ranking member
on the Republican side.
The Plouse of Representatives, early in 1944, passed a resolution
which established a special committee on Post-War Economic Policy
and Planning. The functions of this committee were to bring to-
gether the best views -available in our Nation with respect to the
many phases of our return from a wartime economy and to advise
with the various committees and Members of Congress on matters
of policy and legislation.
The committee has done a good deal of work in connection with
the immediate legislation that was needed durmg the past year.
This legislation mcluded provision for the tennination of war con-
tracts; the establishing of an agency for the disposal of war surpluses,
both of property and of commodities; and a law to facilitate the
process of transition by establishing an over-all Office of War De-
mobilization and Reconversion.
The committee has a nimiber of subcommittees which are actively
investigating special post-war problems, such as foreign trade and
shipping, construction, and public works.
In this hearing it is the purpose of the Subcommittee on Agriculture
and Mining to examine the long-range policies toward which agricul-
tural legislation should aim. It has been the committee's conclusion
that short- time programs can be sound only if they are focused in
the direction of a sound and sensible long-time program. We have,
therefore, chosen to pass over, for the moment, the very pressing
1339
1340 POST-WAR ECONOMIC POLICY AND PLANNING
transitional questions which we will have to meet in shiftino- from
wartmae to post-war agTicultiire. We are seeking to develop" those
prmciples and policies which the people of the United States feel
should bo a part of a long-tmie agricultural program
For the present hearing we have asked our witnesses to help us in
the development of a policy with respect to four major agricultural
problems. The first is the smoothing out of the violent ups and
downs in agricultural income which have in the past resulted largelv
trom crop yields or from business-cycle changes
The second question pertains to policies for putting agriculture on a
satisfactory self-sustammg basis. The major question is whether
agriculture can make the long-range adjustments needed to enable
It t^ pay it^s own way and to produce efficientlv products which the
JNation needs, without running into chronic overproduction and loss
oi income.
The third problem we have asked our witnesses to discuss is the
potential market for farm products which might be developed through
greater consumption and more adequate nutrition.
Fourth, we are interested in the problem of reconciling our own
domestic agricultural policies with the desirable national foreign-trade
policy for the post-war period.
These are examples of the kinds of problems the subcommittee has
lelt were important to investigate.
I want to introduce at^his time Hon. WiUiam M. Colmer, chairman
ol the Post-M/ar Economic Policy and Planning Committee of the
Mouse ol Kepresentatives, who has so kindly consented to be with us
on this occasion.
Mr. Colmer. Thank you, Mr. Zimmerman. I am very happy to
come out here and be with you and the other members of this sub-
committee to hear these witnesses on the future of the agricultural
industry m this country. I think you have stated the program
rather comprehensively. Since I am out here to listen and learn,
rather than to make any statements, I shaU not attempt to make a
statement at this time.
Mr. Chairman, I should lil^e to supplement your statement about
those present, by adding that we also have, for the purpose of the
record here with us Mr. H. B. Arthur, one of the consultants of the
committee. Mr. John Flannagan, chairman of the legislative Agri-
cultural Committee of the House, and Mr. John Murdock, a member
that committee, and also a member of your subcommittee, were
unavoidably detained by official duties but expect to join us for the
M onday meeting.
The Chairman. I omitted to state that the Honorable Hamilton
J^ish, a member of this subcommittee, is here and will shortly be with
us and participate in the meeting.
We have asked Dr. Theodore W. Schultz to appear as our first
witness and to outline for us the major problems as they appear to
iiim. JJr. Schultz is with us and we will now hear from him.
TESTIMONY OF THEODORE W. SCHULTZ, PROFESSOR OF AGRI-
CULTURAL ECONOMICS, UNIVERSITY OF CHICAGO
Mr. Schultz. Chairman Zimmerman, I deem it a privilege to
meet with you this morning. I would like to proceed informally in
the sense of a semmar m which you may want to, and I shall certainly
POST-WAR ECONOMIC POLICY AND PLANNING 1341
invite you to, press me with questions or observations at any point as
I proceed in the comments I am about to make.
The Chairman. May I interrupt at this point?
Mr. ScHULTz. Yes, sir.
The Chairman. Would you prefer to make your statement and
then submit to these questions from the members of the committee, or
would you welcome interruptions?
Mr. ScHULTZ, I would welcome interruptions if it would facilitate
your own inquiry.
I wonder would it help you if I put into your hands a copy of an
outline that I have prepared, in which I have stated the questions to
which I am addressing my comments.
The Chairman. I am sure that would be very helpful to the com-
mittee.
(The information requested is as follows:)
I. Problem of instability of income frona farming.
A. How important is this instability to American agriculture?
1. In absolute terms — effects on expectations and outlook of
farm people.
2. Income instability relative to other major occupational
groups.
B. What are the basic causes for the income instability? • •
1. Fluctuations in agricultural production.
1. Total agricultural production of the United States.
2. Production bj^ farm products.
3. Production by regions.
4. The production history of individual farms.
2. Fluctuations in the demand for farm products.
1. Caused primarily by business fluctuations.
2. Unemployment and demand for farm products.
3. Effects of business cycle upon American agriculture.
C. What principles should guide policj-making?
1. In lessening the instability in farm income caused by fluctua-
tions in production.
1. Should the focus be on individual farms or on the
national behavior of production?
2. Does crop insurance provide a guiding principle?
3. Can storages of crops reduce fluctuations in produc-
tion?
4. Can new practices and techniques in farming make
production steadier?
2. In lessening the instability in farm income caused by fluctua-
tions in demand.
1. Should agricultural production be curtailed during a
business depression and expanded during a boom —
that is, control agricultural output so it too rises
and falls with business booms and depressions?
2. Since agricultural production for the country as a
whole tends to be exceedingly stable, should farm
prices be maintained, supported during depressions,
in order to reduce the instability of farm income?
3. Should programs subsidizing food consumption be
geared to business fluctuations?
4. What are the merits of a system of compensatory
payments?
II. Problem of underemployment in agriculture.
(Main question is. How many farm people achieve a high level of economic
productivity based on efficient use of agricultural resources, thus over the
years, earning for themselves a high standard of living?)
A. Why are the earnings of farm people so low comparatively?
1. Low economic productivity of resources in farming.
2. Half of United States farms in 1939 produced (for sale and
household use) $625 or less.
3. Excess supply of labor primary factor.
1342 POST-WAR ECONOMIC POLICY AND PLANNING
II. Problem of underemplooment in agriculture — Continued.
B. What are the primary causes for the widespread underemploj-ment
so characteristic of modern agriculture in peacetimes?
1. The demand for farm products is growing less rapidly than
the supply?
1. Importance of the low-income elasticity of farm
products.
2. New farm technology is chiefly labor saving in its effects.
3. The natural increase of the farm population is high relative to
urban and other nonfarm groups.
C. Does the historical drift toward a smaller labor force in agriculture
reflect basic forces?
1. Proportion of Nation's labor force engaged in agriculture has
dropped from 37 to 15 percent since 1900.
2. In spite of high wartime prices and high farm income the farm
population lias dropped from about 30 to 25 million people.
D. What principles should guide policy making in reducing the excess
supply of labor in agriculture — and thus help achieve for farm
people higher economic productivity per person?
1. Should this Nation embark on a "back-to-the-land" program
for returning soldiers?
2. Do subsistence farms offer a way out?
3. Why are there so many barriers to migration from farms to
other occupations?
4. How important is the growth of business in absorbing the
excess supply of labor that is constantly accumulating in
agriculture?
5. Does more leisure on farms offer some assistance?
6. Is there need for governmental machinery to help equalize
the labor supjjly?
7. Would public investment in the human agent facilitate a
better distribution of the Nation's labor force?
III. Problem of improving nutrition and its implications to the consumption of
and demand for food.
(My outline is purposely brief here for others will develop this topic fully
in their testimony.)
A. How important and what are the magnitudes of this problem?
B. What are the major causes for such inadequate nutrition as is prev-
alent in this country?
C. What principles should guide policy making in this sphere?
D. How much additional demand for farm products will various meas-
ures to improve nutrition provide?
IV. Problem of pricing agricultural products for production and for internal and
external trade.
A. Is price the key to agricultural production?
1. Primary considerations regarding the effectiveness of relative
prices in guiding farm production.
2. Limitations of prices in the case of soil conservation.
3. Shortcomings of prices in storages of feed.
B. What can price policj^ contribute (o) to resource problem in agricul-
ture and (b) to income problem of farm i:)eople?
1. In bringing about better allocation of resources.
2. In improving the level, distribution, and stability of farm
incomes.
C. What principles should guide policy making in the field of prices?
First.
1. Are prices appropriate goals to be achieved?
2. Will prices necessarily equilibrate labor supi")lies?
3. Is the parity price formula consonant with farm prices neces-
sary to induce the best use of agricultural resources and
with internal apd external trade?
4. Are support prices tied to parity as authorized for 2 years
after the war consistent with trade and desirable produc-
tion adjustments?
POST-WAR ECONOMIC POLICY AND PLANNING 1343
IV. Problem of pricing agricultural products for production and for internal and
external trade — Continued.
C. "What principles should guide policy making in the field of prices — Con.
Second.
1. Should the first and primary objective in price policy be to
stabilize the general level of prices — and not any specific
price?
2. Should the growing gap separating internal and external
prices be closed?
3. What can be done to lessen the price uncertainty confronting
farmers?
1 . Merits of a system of forward price instead of support
prices.
Mr. ScHULTz. I have followed the instructions that you gave, which
consisted of the statement that you have just made, Congressman
Zimmerman, in the preparation of this outline, and as you note, it
falls into four major categories.
The first I have called the problem of instability of income from
farming.
The second is the problem of underemployment in agriculture, or,
to put it another way, of how to attain earnings of a high level per
person in farming, self-sustained in their own economic productivity.
The third is the problem of improving nutrition and its implications
to the consumption and demand for food.
The fourth and last is the problem of pricing agricultural products
for production and for internal and external trade.
I hasten to say I shall say very little about No. 3, because you are
having some witnesses appear who have studied that field more than
I have in the last several years. Prof. John D. Black, of Harvard
University, is to appear beforethis committee.
INSTABILITY OF INCOME FROM FARMING
By way of introduction let me say that the income problem in
agriculture is of three parts: (1) level, (2) distribution, and (3)
stability.
First, there is the level of the income, the level of the income of farm
people as compared with other people. To improve level raises the
question, how to attain a higher economic productivity for farm people.
I am not, however, taking up this part of the income problem of agri-
culture in this statement.
Second, we have the distribution of the income between agriculture
and other groups and within agriculture. I am also passing this part
of income problem, although it is very important. Our democracy,
and its values, has caused us to become increasingly concerned about
both extremes ; that is, the very low end of the income range and the
very high. You have in various legislations expressed that concern.
Yet, in the inter-war years, our Government did a number of things
with regard to agriculture which intensified the extremes, largely
unpremeditated and unwittingly, but the fact remains that income
payments — ^namely, the A. A. A. parity payments and commodity
loans — have had the effect of pulling farm incomes farther apart.
More income has gone to the higher income brackets proportion-
ately as a consequence. Yet I am leaving this problem aside; I do
not want to address myself today to the level or the distribution, but
to the instability of farm income.
1344
POST-WAR ECONOMIC POLICY AND PLANNING
NoWj^ the problem of instability of farm income is a very'acute one,
and with your permission I will use a chart to make that relevant and
evident in this connection.
Chart 3
INDEX
400
FARM and NON-FARM INCOME
1910-1914=100
Per Capita Net Income of Persons
\t?ON FARMS
Per Capita Net Income
of Persons
350
300
250
200
175
150
125
100
75
60
50
1910 II 12 13 14 1915 16 17 18 191920 2' " 2' ^^1925^ " ^ "1930^' '^ ^^ '*1935^ ^^ ^ ^'1940*' *^ **
f
'r On this chart I have had plotted the income, per person, of nonfarm
people and of farm people from farming, starting back before the other
war and through 1943. At this point I merely want to call attention
to the greater instability in agi-iculture than in other parts of the
economy. -$
The dotted line measures the changes in income per head of the
nonfarm people, rising rapidly during the other war, dropping slightly.
POST-WAR ECONOMIC POLICY AND PLANNING 1345
about 25 points, moving up some in the twenties, dropping consider-
ably in the thirties, and rising rapidly since 1939.
The farm income is shown by the heavy, solid line, and there you
have much greater instability. During the other war, with 1910-14
equaling 100, the index dropped from nearly 250 to less than 100, or a
drop of more than 150 points, whereas nonfarm index dropped about
25 points. You have the same thing after 1929, and you have it in
the rises also.
Now, I submit to you that American agriculture through its or-
ganized efforts has become very much concerned and rightly so about
this problem of instability of farm income. It certainly is appropriate
that you address yoiuselves to this problem.
The Chairman. Dr. Schultz, may I interrupt at this pomt?
Mr. Schultz. Please do.
The Chairman. Would you have a small sheet of that chart pre-
pared for the purposes of the record to insert in the record?
Mr. Schultz. I will be very glad to do so.
Mr. VooRHis. May I ask one question about it?
Mr. Schultz. Yes, Mr. Voorhis.
Mr. Voorhis. What is 100 in both cases?
Mr. Schultz. The period of 1910 to 1914.
Mr. Voorhis. In other words, that chart does not give an absolute
comparison of the two?
Mr. Schultz. No; just the relative stability or mstability of the
two.
Mr. Voorhis. You arbitrarily take whatever level they were be-
tween 1910 and 1914 and you call that 100?
Mr. Schultz. That is right.
Mr. Voorhis. And then you show the variations from that point,
regardless of whether that relationship was equitable and desirable?
Mr. Schultz. That is right. I am not addressing myself to the
level of the farm income as such, which is very important and which
you do consider in many other problems. I am addressing myself
specifically, as you just said, Mr. Voorhis, to the movement — up
and down.
Mr. Hope. Ai'e you going to discuss later on, Dr. Schultz, the re-
spective influences of prices and crop yields in determining those
fluctuations?
Mr. Schultz. Yes; not as fully as I think your question suggests,
but I shall comment on it in several regards, and then I wish you would
come back and probe further if I have not been complete.
Let me turn next, then, to the causes, which is essentially the point
you have already referred to, Mr. Hope. I divide the causes into two
groups ; those that have their origin in the fluctuations in agricultural
production, and those that arise from fluctuations in demand. Here,
we have two convenient categories in analyzing what it is that makes
this movement of farm income so erratic.
fluctuations IN production
As to agricultural production the most significant fact is this: Agri-
cutural production taken as, a whole in the United States, with its
varied climates and regions and types of farming, when added all to-
gether is very steady from year to year. It is remarkably steady.
1346 POST-WAR ECONOMIC POLICY AND PLANNING
Tliis Steadiness benefits not only the consumer, but also other parts of
the economy. This steadmess of agriculture is one of the great assets
01 the American economy.
Mr VooRHis. Which would be in striking. contrast, would it not
with the widely fluctuating curve of production of industrial goods?
Mr. ScHULTz. That is right. I myself have been struck, as I have
studied these figures, to find that even drought years like 1934 when
we had an unprecedented drought, as you well know, the index of
total agricultural production dropped only 3 points, from 96 to 93
JNow, m this steadiness we have, the American consumer has all
people dependent upon this total agricultural volume have, a safety
that few countries enjoy. Take Argentina by contrast, or Canada, or
Australia; our agric4lture— and again I repeat— is a very great asset
to the economy as a whole, because taken in the aggregate it is so very
even m its annual production. oo t, j
• l^^^T TT ^''''^ underneath these aggregate figures and look at an
individual farmer you find, of course, that there is a problem on the
production side, but distinguish that, as I think one must, from the
aggregate for this country as a whole.
The Chairman. Do you think that is due— if this is a proper point
to ask the question— to the great variation in climatic conditions in
^^l^^^^l^^^y' ^^hicli makes it possible for us to have that steady flow?"
Mr. ScHULTz. That is right. There are many compensating fea-
tures m our agricultural production that tend to bring this about—
the varied types of farming area, and it is most striking indeed really
when you look at vyhat happens in a drought year— when we are being
hit very, very hard by crop losses. One of the compensating featurel
is m livestock; we reduce our inventories by marketing a httle more
when feeds get short. In time of drought the only people in America
who really sufter ai-e the farmers who experience the crop failure
Ihey sutler primarily m terms of incomes.
Mr. VooRHis. May I ask one question on the point that Mr
Zimnierman ]ust raised? Wouldn't an equally important factor with
the diversity of chmatic conditions be that agriculture today is still
an individualistic industry and one that is still highly competitive
and that farmers produce, by and large, all they can produce regard-
less of price level, or anything else?
Mr ScHULTz. Yes. You have anticipated one very important
point i want to make, and I will make it by accepting just what you
said Agriculture stays at the job, namely, in field production,
whether you have booms or depressions. The agricultural produc-
tion ettort stays very constant, with the exception of the use of ferti-
lizer-.
.c.l'ni T.o^^ f ^^^,^ ^^^^^ individual products. Take again, from
1933 to 1934, the index dropped from 96 to 93. Feed was cut in half.
It dropped from 82 to 41.
Mr. VooRHis. When was that?
in^?'" ^^^^^'T^- That was in the drought year in 1934; from 1933 to
1934. JNow, as we look at individual crops and farmers dependent
upon particular crops, they go up and down, and the farmers producing
those crops may be hit very hard.
Mr. Hope. Please let me ask a ques-tion right here. When you
speak of production you are referring to the quantity, as far as live-
stock is concerned, which was marketed that year. You spoke awhile
POST-WAR ECONOMIC POLICY AND PLANNING 1347
ago about there being; a compensation as far as production is concerned-;
when we had a poor feed year we had more hvestock marketed. When
you are talldng about production of hvestock in that connection, you
are referring to the amount that is marketed, or are you not?
Mr. ScHULTZ. The agricultural production index of the U. S. D. A.
happens to be that way. In terms of crjDps, it measures the physical
quantity produced, as estimated by the Department of Agriculture;
in terms of livestock it measures the volume that moves into trade
channels. If you want to criticize the index, it does not allow for
changes in stocks and inventories.
PRODUCTION FLUCTUATIONS BY REGIONS
In the case of a region, tliis problem of production fluctuations
becomes very serious, for instance in the Plains States, it is one of the
serious problems of that area, and just to take two sets of four States
and make this explicit — I am not looking at any particular year now,
which would show up much more sharply for example, if I took one
of the drought years — but let me give you 3-year averages.
First, let me take Ohio, Indiana, Illinois, and Iowa, the four States
in the heart of the Corn Belt, and then take 3 years, 1928 to 1930.
Then, let me take the average annual production of feed, all feed —
corn, oats, barley, soybeans, .and hay — and convert it, as we do in
our farm-management studies, into corn equivalent with one feed unit
equal to one bushel of corn. These four States produced 1 ,600,000,000
units of feed per year in 1928-30; and, 10 years later, 1938-40, another
3-year period, they produced an amiual average of 1,900,000,000
units of feed.
Mr. VooRHis. How much* was it in the other period?
Mr. ScHULTz. One billion six hundred million feed units a year in
1928-30 compared to one billion nine hundred million feed units in
1938-40, or a 17 percent increase. Parenthetically, this occurred
while the A. A. A. was supposedly really holding corn in check. That
is not relevant to the income problem before us, but it is a fact, one to
carry in mind when considering the heart of the Corn Belt. Now,
let us look what the droughts were doing a little father west. Take
four important States that were suffering from adverse weather and
its production effects — South Dakota, Nebraska, Kansas, and Mis-
souri. They produced almost as much feed, 1,433,000,000 feed units,
in the first period, 1928 to 1930, per year. Ten years later, 1938 to
1940 they produced 950,000,000 on the average, which is 33 percent
less than in 1928-30.
The droughts of the thirties were over. We were moving into good
years by 1938, 1939, 1940, and yet that area, even in that period of
recovery, was still one-third below its earlier output in feed units,
while the four Corn Belt States made a gain of 17 percent.
Wliat I am really leading up to is this: ^ATien one addresses himself
to the effects of fluctuations in production on farm incomes, it is
essential to analyze each type of farming; you have to get right back
to individual farmers. The problem lies there, by products, by re-
gions, to farms. You cannot deal with it in the mass, in large regional
or national averages.
Mr. VooRHis. I am not sure whether this is right or not, but are
you making a very effective argument for the possibility of crop insur-
1348 POST-WAR ECONOMIC POLICY AND PLANNING
ance being used to iron out some of those differences? I mean, if total
production throughout the country is relatively stable, but if the
impact of changes in production rates is very serious for individual
farming, then is crop insurance a means of frying to soften the impact
on the individual farmer?
Mr. ScHULTz. I want to comment on that, if I may, a bit later.
Mr. VooRHis. I will be very glad to wait if jou want me to.
Mr. ScHULTz. Let me indicate my answer now. There is in the
principle of crop insurance a considerable measure of remedy for some
aspects of this income problem, by crops, by regions in the United
States. I shall elaborate on this later.
One other fact is important here, when we look at production, and
that is, going back now to national production — which does not really
help the individual farmer who has lost his crop or who has a big
crop — if we had a steady demand all along, then the elasticity of the
demand itself is a compensating factor for fluctuations in production,
ELASTICITY OF THE DEMAND
The economist defines unit elasticity as a demand when the amount
sold increases 10 percent, the price drops 10 percent, and you get ex-
actly the same income. Conversely, if the crop is short, the price
rises proportionally and you get the same income. '
Now, therefore, this principle: the closer the demand for agricul-
tural products as a whole is to unity, the more stable the income from
farming, despite fluctuations in production. This characteristic of
the demand does not necessarily benefit the individual farmer who
has a crop failure, it applies mainly to agriculture taken as a whole.
The Corn Belt obviously benefited from the droughts to the west
in the thirties, so within agriculture the income problem remains, for
some gain and others lose when droughts strike and agricultural pro-
duction fluctuates by product and by regions.
The Chairman. I would like to ask a question. Doctor. It aroused
my curiosity. Why did the Western States that had been so severely
affected by the drought not come back or recover in their production?
Wouldn't it be an incentive for them to do that? *You see, they fell
off 33}^ percent in their production of feed and crops, while the essential
corn-producing States increased 17 percent. Now, just why would a
situation like that obtain, in your opinion? I would just like to know.
Mr. ScHULTz. Well, it is complicated by many forces, and Congress-
man Hope is closer to this problem than I am, although I was reared
in that region and know it from personal experience.
Let me illustrate with Nebraska. Nebraska did not really recover
in corn until the last year or two. Things kept going wrong. They
had no reserve moisture and the hot winds came even after good rains
during most of the season, and Nebraska remained far below its former
level of production. So, in a sense, the drought years, so far as sta-
tistics show, had long after-effects.
The Chairman. It is like a man who has imbibed too long and has
been on a spree. The hang-over is with him and they were suffering
from the hang-over of the drought; is that it?
Mr. ScHULTz. That might be used as an analogy.
Mr. VooRHis. Doctor, will you go on about that last statement
you made about demand?
POST-WAR ECONOMIC POLICY AND PLANNING 1349
Mr. ScHULTZ. Yes. I just want to say, Mr. Voorhis, that as the
demand becomes more inelastic — elasticity less than unity; take pota-
toes as an example — then you get instability in income. Small crops
bring the big incomes and large crops bring the small incomes. Con-
versely, when the demand has an elasticity that is greater than unity
then the large crops bring in the big incomes and the small crops fetch
the smaller incomes.
The demand for farm products, as a whole, fortunately again, tends
to be around unity; it tends to be ^lose to unity.
Mr. Voorhis. Wliat tends to be?
Mr. ScHULTZ. The demand for farm products as a whole. Let me
illustrate: If business did not fluctuate and let us suppose our income
payments were 150 billion each year for 10 years and agricultural
production varied from year to year, then it would follow that the
income from all agricultural products taken as a whole would tend to
be about the same each year. This characteristic of the demand for
farm products cannot express itself because our national income has
been very erratic.
Mr. Voorhis. But wouldn't you maintain then that if that condi-
tion pertained then you would get compensating variations in par-
ticular products?
Mr. ScHULTZ. That is right;
Mr. Voorhis. Operating in cases where certain types of agricul-
tural production fell, which would, help out the farmer in a situation
of that kind?
Mr. ScHULTZ, That is right.
Mr. Voorhis. That was your inverse point?
Mr. ScHULTZ. If 9,gricultural production were distributed equally
among all farmers, this characteristic of the demand would be very
important.
Mr. Voorhis. And if demand were constant and high?
Mr. ScHULTZ, That is right.
Mr. Voorhis. And, of course, it isn't.
Mr. ScHULTZ. That is right.
FLUCTUATIONS IN THE DEMAND FOR FARM PRODUCTS
Now, I want to turn to the fluctuations of demand, and here I want
to say that the farm problem in the United States from the standpoint
of mstabUity of mcome from farmmg is primarily and overwhelmingly- —
in terms of the history of the last 30 years — caused by fluctuations in
the demand. These fluctuations in the dem.and for farm products
have arisen from the rise and fall of the business. The problem does
not originate within agriculture. Actually the chart above measures
nothing more than the fluctuation in demand for farm products, because
agricultural production through that period, taken as a whole, was
very steady. So the primary variable, the real variable, has been the
extreme erratic behavior of the rest of our economy, the urban-
industrial economy.
Mr. Hope. You do not happen to have a chart which shows pro-
duction during this same period, do you?
Mr. ScHULTZ. I do not have.
The Chairman. There is one question I would like to ask as to that at
this point. I notice there about 1932, according to your chart, a very
99579 — 45— pt. 5 9
1350 POST-WAR ECONOMIC POLICY AND PLANNING
sharp decline in farm income, a great deal more in the income of non-
farm groups. Now, if the price since the production remains constant
more or less, as you say, that is fundamental. Production is rather
constant, and has been.
Mr. ScHULTZ. That is right.
The Chairman. How do you account for that radical drop in
farm income m contrast? There is a drop but not so great a drop in
nonfarm income. Wliy is that variation?
Mr. ScHULTz. Nonagricultural production went down. This gets
us into the behavior of the rest of the economy. In the agricultural
economy, where production stayed constant, price became the
variable, and agriculture suffered severely.
Agriculture has become increasingly vulnerable as it has become
dependent on the exchange system, in income obtained from the
sales of crops and livestock. The erratic behavior of the industrial-
urban economy is playing havoc with farmer's income. Farmers go
on with their production, selling, by and large, through markets
which are very sensitive and competitive, and these transmit to
farm people the erratic behavior of the rest of the economy. What
you really have here is simply a measure, of that vulnerabihty of
agriculture.
Mr. VooRHis. If you charted on that same chart a graph of the
volume of money in circulation, wouldn't it parallel very closely the.
change in farm income?
Mr. ScHULZ. I haven't done that.
]\Ir. VooRHis. I mean the rise and fall of money in circulation.
Air. ScHULz. Money and credits^
Mr. VooRHis. By money, you mean both cash and credit money?
Mr. ScHULZ. Yes. I would certainly infer that would be true.
There are others here who may have actually measured the relation-
ship.
Mr. VooRHis. The sharpest dechne is from 1929 to 1932. Where
is the remedy?
Mr. ScHULZ. The main remedy to the erratic performance of the
industrial-urban economy lies in monetary-fiscal reforms.
Mr. VooRHis. But isn't agriculture much more sensitive to changes
of money in circulation?
Mr. ScHULz. That is right.
Air. VooRHis. Partly because they are about the only producers
subject to free prices.
Mr. ScHULZ. They have been freer, more open, as you infer.
Mr. CoLMER. Mr. Chairman, while we are interrupting, obviously,
then, the problem is to try to prevent the drop in agricultural products;
at least, to be consistent with nonagricultural products.
Mr. ScHULz. You anticipate the answer, arid I myself hesitate,
because I am really trying to state the dimensions of the problem!
I want to share with you in a minute what I think can be done. If
you agree with me at this point that this instability of farm income
has become an unbearable problem to the agricultural economy, I
feel I have established a point that is very much in need of careful
thought and legislative action.
Mr. CoLMER. I may have anticipated you in arriving at the
problem. I certainly have not anticipated you in answering the
problem.
POST-WAR ECONOMIC POLICY AND PLANNING
1351
Mr. ScHULTZ. Here is a table, Mr. Colmer. That table restates
the movements in income by the cycle. I have taken the periods
which represent the cycle. If, for example, you take the period of
1921 to 1929, or 1932 to 1934, you see the greater percentage rise and
fall.
Table 3. — Cyclical movements in per capita farm and nonfarm income
Per capita net income of persons on farms i
Per capita net income of persons not on farms 2
Period
Percentage
change from
first to last
year of
period
Period
Percentage
change from
first to last
year of
period
1911-19
+160
-62
+87
-67
+153
-19
+213
1911-20
+88
18
1919-21
1920-22
1921-29
1922-29
+22
—52
1929-32 ....-
1929-33 .
1932-37
1933-37
+59
7
1937-38
1937-38 . .
1938-43
1938-43
+101
1 Includes net income of farm operators from farming and wages of farm workers that live on farms'
excludes Government payments.
2 Includes net income from nonagrieultural sources and net income from agriculture accruing to non-
farm people.
Source: TJ. S. Department of Agriculture, Bureau of Agricultural Economics, Net Farm Income and
Parity Report: 1943, and Summary for 1910-42, Washingtpn, D. C, July 1944 (table 6, p. 12).
Now, with your permission, let me summarize: When business
becomes prosperous and boom- — as we look back- — the farm income
rose much more rapidly, fully twice as fast as the nonfarm income
per head; then when business slumped and became depressed, the
income from farming fell much more precipitously and decidedly
further than the income of persons not on farms.
Now, that is the story that I have been trying to put and I have
stated it there in one summary sentence.
Mr. VooRHis. Alay I ask one further question on that point,
Doctor?
Isn't this another contributing factor to the greater instability of
farm income, that when prices to farmers fall sharply, the same degree
of decline does not take place in the prices of processed food com-
modities to consumers?
Mr. ScHULTZ. That is right. The margin between stays relatively
constant, and so the relative changes on the farm end are much
greater, both rising and falling, than they are at the other end, retail
end. That is a definite characteristic of our economy.
Air. Hope. And that, of course, to some degree prevents what might
otherwise be an increase in consumption if prices went down to the
consumer proportionately, you might expect some increase in con-
sumption which you don't get if the price level to the consumer
remains constant.
Mr. ScHULTZ. Which makes it harder and harder to solve the
problem of moving supplies during a depression, and which is becom-
ing a growing problem in our economy.
1352 POST-WAR ECONOMIC POLICY AND PLANNING
POLICY RECOMMENDATIONS
Now, gentlemen, with your permission, I turn to some ideas as to
what principles should guide policy making?
This is in terms of long-run thinking, as you said, Mr. Zimmerman,
at the outset. Aly comments are in terms of fluctuations in produc-
tion and fluctuations in demand.
To lessen the instability in farm income caused by fluctuations in
production, the first principle to tie to is to focus on the individual
farms, on the type of farming area, by crops and by regions.
It is necessary to break away from national averages, because of
the distinct interests the farmer has in his own production experience,
as against the national compensating features of agricultural produc-
tion as a whole.
The Chairman. Will you translate that? Just elaborate on that
thought just a little more at this point.
Mr. ScHULTZ. It means specifically, in the case of the vulnerability
of the farmer in South Dakota, Nebraska, or Kansas, growing wheat,
you should go directly to farming areas concerned. It may be a frac-
tion of a county, or it may be a number of counties. You cannot see
a farmer's climatic hazard and his production problem, even in the
statistics and the behavior of a single State. It is not Kansas as a
whole, it is not Nebraska as a whole. It really means getting as close
as possible to the individual farm as we can. We are concerned
about farming; the climatic risk, and all that goes with it, which
involves grasshoppers and pests of other sorts associated with climate
by farms.
The Chairman. "What you mean is this, if I understand you, that
we have to find in these localities that are subject, we will say, to
certain hazardous conditions, like drought and grasshopper infesta-
tion, and some other infestation
Mr. ScHULTZ. That go along with drought; yes.
The Chairman. Some other crop that he can put in?
Mr. ScHULTZ. No; I have in mind here the problem of income
in stability.
CROP insurance
Mr. ScHULTz. Crop insurance has a contribution to make, and the
principle in crop insurance is this: It should, on the one hand, from
the standpoint of society, incorporate the cost of the climatic risk into
the parcel of land which is being insured, and, the benefits paid should
protect the farmer's income over time from excessive instability.
Now, I hasten to add that in my judgment one shouldn't be too con-
cerned whether all the risk are at once all borne by each parcel of
land, provided we are sure that we were moving gradually to that
particular point. That is going to take time. It may even take 50
years to find the precise, subtle relationships between premiums and
benefits for each farm, for each parcel of farm land. The aim is to
get each parcel of land, in the last analysis to bear in its value the cost
of its climatic hazard, and you can't get that in large State-wide
averages. It is necessary to get right down to townships and even
smaller units.
I repeat again, that that is not for the short run, even for 5 or 10
years. It seems to me we should not be worried unduly if we don't
POST-WAR ECONOMIC POLICY AND PLANNING 1353
get the cost of crop insurance allotted perfectly at the outset, because
if half of the cost is borne by the land itself, in the value of the land,
you see, society has gained to the extent that it does not have to carry
all of what might become relief costs, as it did in some States, North
Dakota for example, in extremely bad years in the thirties.
Mr. Hope. Right at that point, before you leave that, you have got
another factor there. I do not take this off into crop insurance too
much, but you have another factor there; if you are trying to base
your premiums upon the risk on each individual tract of land, in the
high-risk areas, at least, the human factor is almost as important, I
think, as the climatic factor. You could take land which is farmed by
tenants, particularly, and you have one tenant in one period who may
be a poor farmer, and the risk will be very much liigher, and you can
take a good tenant and put him on the same land and by better culti-
vation and summer plowing, and that sort of thing, bring the risk way
down. It seems to me that is one of the most difficult problems you
have in regard to farm insurance.
Mr. ScHULTZ. In principle it is easy to handle, but in practice hard.
You have to take account of management.
Mr. Hope. That is one of the difficulties, that the good farmer feels
his good farming practices are not reflected in the premium he has to
pay.
Mr. ScHULTZ. Yes; that is very important.
Mr. Hope. Which prevents your getting the volume you ought to
have, and you cannot succeed without volume.
Mr. ScHui.TZ. I agree fully with what you say, Congressman Hope.
Now, still looking at the production fluctuations, I do not want to
claim too much for crop insurance before I leave that, but it has in it a
principle, it seems to me, that we ought to apply.
STORAGE OF EEED GRAIN
Mr. ScHULTZ. The storage of grain, where livestock are produced,
where the farmer gets his income from the sale of livestock and live-
stock products, the evenness of those sales, the flow of those products
to market, depends upon his feed supply and feed is a storable prod-
uct, particularly in concentrate forms, and it happens to be most
storable in the very areas that are most affected by tliis erratic crop
production.
The Chairman. At tliis point may I make this suggestion: We
have five witnesses today, and our time is slipping by very rapidly.
Maybe we better hear Dr. Schultz tlrrough and give him a chance to
conclude as briefly as possible so we can hear these other witnesses.
Mr. Hope. I take it Dr. Schultz will be available during the entire
period of the hearings, and maj^be we can go back to him.
Mr. Arthur. Dr. Schultz will be available to the committee. I
have talked with him, and while he may not be in Chicago Monday
and Tuesday, we will be able to talk with him further about the
problems he raises.
Mr. CoLMER. In that connection, Mr. Chairman, I do not under-
stand we are going to cut him off, but we are going to permit him now
to finish his statement with possibly fewer questions.
Mr. VooRHis. What he means is that I am not supposed to ask so
many questions.
1354 POST-WAR ECONOMIC POLICY AND PLANNING
The Chairman. No; it is a reminder of the fleeting time.
Mr. CoLMER. In the interest of orderly procedure, I think it might
be well for him to at least conclude his statement.
BETTER FARMING TECHNIQUES AND PRACTICES
Mr. ScHULTZ. Gentlemen, when we look at what principle should
guide pohcy making, in the case of production adjustments, I think
those principles are at least three. One, there is considerable merit
in crop insurance. Two, there is a good deal, in the case of livestock
farming in the storage of feed to even out the production of livestock
products, particularly in the Plain States. Three, we should put
emphasis on finding new practices and tecliniques to help farmers
stabilize output; that is, the individual farmer. There has been con-
siderable success in research in this sphere. Take a single example.
In the case of corn, when we had a spring like that of 1944 with ex-
cessive rain — whenever we came into a spring, like that in 5, 10 years
or longer ago, we just came out with a short corn crop, because
farmers didn't get their crop in on time. Now teclmology has
changed that. Farmers with modern machinery and tractors man-
aged to put in their corn in good enough condition and on time so
that actually they harvested a bumper crop. This was largely due
to the difference in what you could have' done with horses and what
you can now do with the modern machinery. It is just one little
item of hundreds of tricks that farmers have introduced in production.
Congressman Hope referred to management in dry-land farming.
In that there is a whole score of advances that may be very important,
not in 1 year, not in 5 years, but when we look at direct aids I would
not minimize it. I would give it a great deal of weight.
POLICY TO CORRECT FLUCTUATIONS IN DEMANDS
Now, on the demand side — and here I get onto controversial
ground. I shall, however, state some judgments. I say this is a
big problem. It is a primary problem when you look at agriculture
as a whole, this erratic up and down of the demand for farm products
caused by business fluctuations.
Question 1. Should we try to lessen the instability of farm income
by making the production of agriculture a variable, that is, bring it
down when the demand drops during a depression, and fetch it up
when there is a boom in business and the demand increases?
My answer is categorically "No." It is an unsound approach. In-
stead, we should make agricultural production steadier, depressions or
booms, rather than more variable.
The disease is in the rest of the economy. If we could once get
the rest of the economy to do what agriculture is doing, stay on the
job producing year after year, we would have a much healthier
economy as a whole. The disease is not in agriculture. I do not
propose that farmers continue to take the .punishment they have
taken on the income side. But I do say the way out is not in adjust-
ing to this erratic demand by making the production of agriculture
a variable.
Mr. CoLMER. Before you leave that, if I may, either on or off the
record, I take it you do not approve of the killing of the little pigs.
Well, just forget it.
POST-WAR ECONOMIC POLICY AND PLANNING 1355
Mr. ScHULTz. Let me say it this way, if you want to be more specific:
Efforts at acreage controls, when it is to attain conservation, and when
it can be tested in terms of conservation, I put that over here and say
it may have much merit. When we use that technique, however, to
adjust the supply or think we should adjust the. supply down and up
for booms and depressions, then I say we are on the wrong track. I
do not want to condemn, in one breath, a whole series of activities,
for some of these activities have been multipurposed. But when the
purpose is to adjust production to fit this erratic demand, then I am
crystal clear in what I mean to say.
The Chairman. At that point I would like to interpose one sugges-
tion. I recall in 1936 and 1937 the Supreme Court lifted the restric-
tions on the production of cotton. We produced 19,000,000 bales of
cotton, almost the world's supply in 1 year. Now, if we have un-
limited production, we will say, of that product, which we don't need,
we might have a serious problem, might we not?
Mr. ScHULTz. Cotton being so peculiarly a problem that has so
many facets I may beg to bypass it in this analysis of business fluctua-
tions and agriculture.
Mr. VooRHis. May I just bring this factor in with the one Mr.
Zimmerman has enmiciated, which I think is true. In the present
period of very high demand for farm commodities of all sorts, when
production restrictions were taken off on cottoir, there wasn't more
cotton produced, but actually less. Isn't that true?
Mr. ScHULTZ. That is right.
The Chairman. Don't you think the scarcity of labor, of men being
in the fighting forces, had something to do with that?
Mr. VooRHis. I think that had something to do with it, but the
main thing I think is that the high demand and the good prices that
could be obtained for other commodities had its effect.
Mr. ScHULTZ. Yes; competing uses of the resources plus the scarcity
of one factor, that is right. They have both been operative.
Mr. VooRHis. I don't think what I said is necessarily in conflict
with what Mr. Zimmerman said. I think the two put together might
lead to something.
Mr. ScHULTz. Question No. 2 — looking at the demand. Since
agricultural production for the country as a whole tends to be exceed-
ingly staj^le, should farm prices be maintamed, that is, supported, to
keep the mcome that farmers receive stable, despite the erratic fluctua-
tions of demand? That is another way of approaching it. If produc-
tion is steady and prices are steady, you obtain a steady income.
That follows. Now 'to use support prices for this goal, agam I say
emphatically, "No." To do it that way simply means we will clog
trade channels, both externally and internally.
We are trying to remedy the instability of income from farming
caused by fluctuating demands, by a system of support prices, and
they will clog trade. They will clog domestic trade and they will clog
our foreign trade.
The Chairman. Might I interject a parenthesis at that point?
For example, you would not invoke that principle during the war when
there is, say, an acute demand for certain agricultural commodities,
like flaxseed for the carrying on of the war program?
Mr. Schultz. In pricing farm products to get production, and to
do this, bring certainty to farmers' prices so that they can feel secure
1356 POST-WAR ECONOMIC POLICY AND PLANNING
in shifting, which is the alleged intent of our flaxseed program, is on
another footing. It represents forward pricing and thereby reducing
the price uncertainty that confronts farmers. It does not necessarily
entail supporting given market prices.
What I am trying to say here is that I have misgivings, grave mis-
givmgs, about the theory that holds that the way to bring stability
to farm income is through a system of support prices.
Mr. Hope. Your chief reason for saying that is that that isn't the
solution, the effect which such a program would have on the flow of
the commodity in trade?
Mr. ScHULTZ. That is right.
SUBSIDIZED CONSUMPTION OF FOOD TO STABILIZE FARM INCOME
Now, in my outline you note that I say there is a third possibility,
namely, programs to subsidize food consumption, and to have such
programs geared to depressions and booms. When there are booms
you quit them, and when there are depressions you open them up.
Now, I do not know what Dr. Black will say, who is to appear
before you. He has given much thought to this issue. But my
tentative judgment is that nutrition and adequate diets should be
the governing criteria of such programs, and not the booms and
depressions of business. Such programs should be based on the needs
of our population in terms of diets, w^hether they are adequate or not
adequate. They should facilitate better diets. To do this they
should not be geared to depressions and booms.
The nutritionists have an important point. They believe we may
endanger the real merit of these consumption programs by tying them
too much to booms and depressions instead of to nutrition. This is
again in principle. When you apply it you have to take account
of certain qualifications.
Mr. Hope. You wouldn't apply it either, I take it, to the problem
of getting rid of agricultural suipluses. The reason I mentioned that
is that in the past the stamp plan has been based entirely on the
availability of surpluses.
Mr. ScHULTz. I would not base a stamp plan on surpluses but on
nutrition.
Mr. Hope. And the need for getting rid of surpluses.
Mr. ScHULTz. I would be reluctant to tie the food stamp plan
solely to surpluses.
Mr. Hope. The school-lunch program has been very largely
dependent upon the food that was available that was surplus items.
Mr. VooRHis. Except, Dr. Schultz, in time of depression the
nutritional situation among the great mass of people is hkely to be
much more serious than in times of relative prosperity.
Mr. Schultz. When you look at it from that point of view, they
converge to some extent but less than is commonly supposed.
Mr. VooRHis. You might get a convergence of two desirable ele-
ments.
Mr. Schultz. I think there is less convergence than is usually
supposed. I have a fear that increasingly we will get vested interests
who want the stamp plan to benefit their products without really
taking account of nutrition. When they converge, my argument dis-
appears, but I am increasingly concerned that they do not converge
as much as we thought 4 or 5 years ago.
POST-WAR ECONOMIC POLICY AND PLANNING 1357
Mr, VooRHis. What I am trying to say, isn't one valid argument
for such program the reason for supposing they will converge.
COMPENSATORY INCOME PAYMENTS TO FARMERS
Mr. ScHULTZ. Now, let me recapitulate my analysis up to this
point: In an effort to lessen the instability of mcome from farming
I would not employ agricultural production controls; that is, make
production a variable; nor would I use price supports to keep farm
prices up durmg a depression; nor would I rest on programs that
subsidize foods; but instead of these approaches I would go directly
to what I call compensatory income payments to farmers during a
depression. Meanwhile, I would keep agricultural production at a
high level and steady ; I would let market prices essentially free to
clear all of the production; and I would subsidize foods to consumers
according to criteria based on nutrition.
In principle we ought to strive to get agricultural production even
steadier, depression or no depression. We ought to let market prices
clear internally and externally the volume of farm products that are
produced and sold. We ought to make diets better both during
booms and depressions. Then, how can we stabilize farm incomes?
I w^ould say when unemployment goes beyond a given figure, say
two million, and farm prices go down, then make up the difference
by means of Government payments until unemployment' is reduced
to 2,000,000 or less.
The Chairman, Who is going to make up that difference?
Mr. ScHULTZ, These compensatory payments will have to come
from the Government. Compensatory payments will be a counter-
cycle in their effects.
The real remedy lies in lessening business fluctuations. We have
to get at our urban-industrial economy, and put it on an even keel.
But until this is accomplished farmers cannot continue to stand the
instability in income this causes. They won't take it, I do not see
why our society can expect them to, because they are performing
their production job, from the cycle point of view, much better than
is industry. They are staying at the job. Let us keep them at the
job and make their output as steady as possible. Let prices chan-
nelize the products of our farms wherever they will be used for the
income can be safeguarded by compensatory payments.
The Chairman, What would you call that, the money you are
going to make up the difference now, in one of these unfortunate
periods? What are you going to call that? Let us name that now.
Mr. ScHULTz, I am calling it compensatory income payments,
and I use the word "compensatory" merely to give the payments their
counter-cycle emphasis, thus tying them back into the industrial
economy, Wlien the industrial economy is going at high gear, there
is little unemployment, and no payments to farmers; and conversely,
when the industrial economy is performing at a low level of production.
The Chairman. WTien we start to make a slate on this question,
things are given names that are used whether correctly or incorrectly,
and I mean such things as subsidies, A lot of people think they are
opposed to aU forms of Government subsidy. Would this be a
subsidy?
1358 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. ScHULTz. Well, it is a subsidy in the sense that the market
price during a depression will not provide a price high enough to
keep the income from farming from dropping sharply.
The Chairman. Yes, that is correct.
_ Mr. ScHULTz. One may call these payments a subsidy or a grants-
m-aid, or, as I perfer, compensatory income payments as a part of
fiscal-monetary policy because they do help counteract the cycle.
This proposal for compensatory income payments to farmers fits in
with monetary-fiscal thinking, it is consistent with the growing bodv
of thought in that field. ^ & j
I am worried about names, too, because it is very serious when one
considers the emotional connotation that certain words carry.
Air. VooRHis. I think we are right up against the fundamental
problem here that is confronting us and I cannot fail to bring it up.
If you are going to make these compensatory payments, are you going
to make them on a crop basis, or how, and if you do that, then aren't
you up against whether you are going to have some degree of crop
control in order to make certain that those compensatory payments
are made primarily on the products that go into American markets
or are you gomg to make them freely on all that the farmer as a whole
chooses to produce, including the commodities that flow into the
world markets?
Mr. ScHULTz. I would apply this proposal both to products sold
domestically and abroad when a depression strikes. To illustrate
procedure, suppose hogs were sehing at $9, when unemployment
reached 2,000,000 or more. Then, and from then on out, farmers
would receive $9 for hogs until the depression was over, no matter
how many they produced whether they are exported or used domes-
tically, stays the same.
But there would be no incentive to shift from hogs to some other
commodity. The price of hogs might go down to $6 yet the difference
between $9 and $6 is to be made up during that period. The same
would be true of other farm products. Then, just as soon as unem-
ployment dropped to two million or less, the market price of hogs
and other farm products would govern again.
Mr. VooRHis. And the same principle would apply to cotton and
to wheat?
Mr. ScHULTz. Yes, all other products.
Mr. VooRHis. And you are going to make a lot of payments on
stuff moving into the world markets, isn't that correct?
Mr. ScHULTz. That is right. I have taken this up quite in detail
with regard to the Canadian economy, and it makes more sense in
the Canadian economy than in some other situations. I don't want
to get into a comphcated trade analysis here, but I assure you in
terms of the effect on balance of payments it will benefit the economy
taking the action.
Mr. VooRHis. But you are going to be asking for money from
Congress m order to subsidize American production that does not
benefit American consumers, isn't that correct?
Mr. ScHULTz, Not necessarily so.
Mr. VooRHis. And you are puttmg no limit on that degree, are you?
Mr. ScHULTZ. Well, the price of cotton and wheat stays the same
relative to corn and hogs, we will say, and in that case there is no
mcentive for the farmer to shift to export crops.
POST-WAR ECONOMIC POLICY AND PLANNING 1359
Mr. VooRHis. I am wondering if there should not be an incentive for
him to shift to some other crops, that is, some crops needed in greater
vohime domestically?
Mr. ScHULTZ. We woidd produce the same as before, which is an
important point all the way through.
Mr. Hope. Your idea there is to have them shift to some domestic
crops which they are not now producmg, and that there should be an
incentive for them to shift from export crops to one of those crops?
Mr. VooRHis. That is correct; the commodities that go into world
markets.
Mr. ScHULTZ. Now, you are introducing a new factor that I am not
considering, and if I were to take that into consideration, I would
come up exactly where 3^ou have, Mr. Voorhis. However, I am
looking at pricing now in the sense of getting the resources into the
right enterprises. For the moment, I am looking only at it in terms of
income effects, and abstracting from the problem that you are raising.
Mr. Voorhis. I am sorry.
Mr. ScHULTZ. Not at all, but I do want to take account of it later.
Mr. CoLMER. Before we leave this, I would like to ask a question.
This may be a bit too realistic, but have you taken into account the
cost of such a system to the Government?
Mr. ScHULTZ. Yes; the cost would be very large during a severe
depression, and it should be very large as it would compensate the
economy, and it would protect agriculture. Yes, it would run to a
very large figure. I believe there is no escape from that fact.
Mr. CoLMER. However, I assume you don't have any specific
figures, but how would that compare with the present cost of Govern-
ment subsidies, speakmg m general terms?
Mr. ScHULTZ. I have not worked on that in any systematic sense
as yet and I would not want to guess. I would say this: That in the
end, my judgment, is you would have a procedure which is constantly
preservmg what is good in agriculture and at the same time helping
the rest of the economy out.
What we do now, in large measure, is to upset agriculture when the
origin of the problem of income instability from farming rests in our
urban-industrial economy, and not in agriculture for it stays at the
job producing.
Mr. CoLMER. I understand that.
Mr. ScHULTZ. As to the relative cost— the question you put to me
specifically- — I cannot answer that because I have not done any sys-
tematic figiu-mg.
Mr. CoLMER. Of course, when it comes again to the question of
practical legislation, that would be an item that would have to be
considered and especially in a post-war era where we would be con-
fronted possibly w4th a national debt of maybe 300 billion.
Mr. ScHULTZ. Well, let me just repeat my conclusions because I
accept all of your concern there, Mr. Colmer. I am saying that the
first line of defense in this problem is getting our industrial-urban
economy to perform at full gear, and stay there. The farmers have a
tremendous stake in that. We have not done it. That is what is
upsetting agriculture.
Mr. CoLMER. But you will pardon me again, please. Maybe I am
all wrong about it, but being realistic again, it seems to me that that is
a question that would have to be considered.
1360 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. ScHULTZ. Yes; you mean the financial side?
Mr. CoLMER. Yes; if we were goirxg to adopt such a policy.
Mr. ScHULTZ. I agree with you fully, without any reservations, and
that remains to be determined certainly.
Mr. Hope. Before you leave that point, I would like to ask you a
question. You have not said, or I did not understand you to say that
you suggested any level at which you would base these compensatory
payments, and that would have a lot to do with the cost. Now, all
the talk we have had on that in Congress during the last 3 or 4 years
about the pork prices has been based on a certain percentage of parity.
Mr. ScHULTz. That is correct.
Mr. Hope. Now, I think you are not using parity as a base of your
calculations, are you?
Mr. ScHULTz. No; I am not. Public policy should determine how
far you are going to hold farm income up. I don 't see why you should
hold it at 100 percent of the pre-depression level. You may want to
stop it at 85 percent,of the pre-depression level. It went to 33 percent
in the depression of the 'thii^ties. You cannot afford to let it drop
that far again.
Mr. VooRHis. I thought you had a base and I thought you said
whatever the price actually was at the time unemployment passed
the measure.
Mr. ScHULTz. Yes; to illustrate procedure I used 2,000,000 unem-
ployed. The 2,000,000 line for unemployment is an arbitrary figure.
My guess is that about 3,000,000 unemployed in peacetime after the
war would show a drop of at least 15 percent in farm prices. As a
matter of public pohcy you would try to determine at what point you
would decide to hold the income, whether it is 85 percent of the full
employment level or 90 percent or 75 percent, or some other figure.
Now, that is the main factor in cost. It is extremely important.
You cannot let it go down to 33 percent again as we did in the early
thirties, however.
In this proposal of compensatory income payments you have a
procedure that does not upset agriculture, but helps agriculture stay
at the job better, and at the same time channels farm products into
markets and consumption both at home and abroad. Finally these
payments are very important in monetary-fiscal policy for they are
counter cycle. The payments should be timed right and they should
come when we need to stimulate' our economy and stop when the
economy gets into full gear.
Now, I would suggest, since I have taken so much time on No. 1,
The Problem of Instability of Income From Farming in order to
facilitate your program, that I pass by what I wanted to say, which is
quite long on points 2 and 4 in the outlme and see whether or not it
will fit into your program alter.
No. 2 is the question of level of earnings of the farm people where
they are so low. How can they be brought up? We have to look at
this on the basis of 10 to 15 years. Then, the last thing is the pricing
problem.
Mr. Hope. Sometime in the course of this hearing, I would like to
have Dr. Schultz go into that.
Mr. Schultz. I must be away Monday and Tuesday, because I
have to be in Washington. However, I will leave it to you to decide
when I am to appear again.
POST-WAR ECONOMIC POLICY AND PLANNING 1361
Mr. Hope. I assume even if we do not get it on this trip, we can
get it later in Washington, perhaps; is that correct?
Mr. ScHULTZ. I will be very happy to do that.
Mr. Hope. I think we should go into it because it is very important.
Mr. ScHULTZ. However, let me give way now, so that you can
proceed.
The Chairman. We will do our best now to develop the thought
that you have in mind, Mr. Hope.
Mr. ScHULTZ. Thank you very much for your courtesy.
Mr. VooRHis. You don't want to give us your answers on 2 and 4,
do you?
Mr. ScHULTZ. I would rather not, because I think they would sound
very brash, because I do come out quite differently from where we
have been in the ground that we have covered.
The Chairman. Do you object to working some evening?
Mr. ScHULTz. Not at all. I would be very happy. I will leave
that to you, Mr. Chairman. I am at your call.
The Chairman. We appreciate your presence and your very in-
formative statement.
We will now hear from Prof. L. J. Norton, professor of agricultural
economics of the University of Illinois, who has consented to come
here and discuss some of these questions that we are interested in
today.
TESTIMONY OF L. J. NORTON, PROFESSOR OF AGRICULTURAL
ECONOMICS, UNIVERSITY OF ILLINOIS
Mr. Norton. Mr. Chairman and gentlemen: I would like to say
at the outset, any time you want to cut me off, it is quite all right
because what few ideas I have had time to crystallize, I have put in
a mimeographed statement, and it will be available for anybody to
read.
The Chairman. I am sure the committee would like to have it.
(The statement requested is as follows:)
Statement by L. J. Norton, Professor of Agricultural Economics,
University of Illinois
A. A certain degree of flexibility and instability is desirable in a dynamicand
progressive society. Canals replaced some teamsters; railroads largely replaced
canals; trucks cut into the business of railroads; automotive power replaced horses
and reduced the requirements for blacksmiths, timothy hay, and oats; rayon is
cutting into cotton; machines replaced men.
New industries, processes, and firms often rise at the expense of older industries
or firms. This process cannot and should not be stopped.
B. Over-all instability in income would be reduced by —
1. Maintaining reasonable stability in the general level of prices, chiefly through
monetary and credit controls. We should not consciously deflate.
2. Avoiding excessive credit creation and speculation in good times.
3. Maintaining adequate flexibility in prices and wage rates to permit rapid
adjustments to changing conditions.
4. Maintaining controls over prices and wages in wartime in order to limit the
extent of post-war adjustments. To the degree that you avoid inflation, you make
deflation unnecessary.
5. Establishing and maintaining conditions which stimulate venture capital to
create new enterprises. Tax policies are of primary importance in this connection.
6. Establishing and maintaining conditions which stimulate the greatest
freedom of both internal and foreign trade.
1362 POST-WAR ECONOMIC POLICY AND PLANNING
7 Pursuing diligently and forcefully an intelligent foreign policy lookin- to-
ward a long-sustained peace, the expansion of needed world trade, and the financ-
ing on long terms of self-hquidating enterprises throughout the world
_ 8. ii^stabhshing and following an intelligent, long-run Government policy of
mvestmg in capital improvements of types contributing to the well-beine of the
country and its development: roads, health facilities, schools, waterways, forests
JlTfVT'T'''7!f '^^"^"^ ^^ '^ *'"'^^ ^' ^° ^-^'P^^d ^aP^tal outlays in depressions
and to contract them m prosperity. ccioiv^uo
C. To place agriculture on long-run self-sustaining basis
1. Maintam a reasonably high level of national income. The first essential for'
a good farm income is a good market.
2. Establish and carry out workable policies for exporting surplus products
This involves 1) competitive prices; (2) playing the game required of a creditor
nation by freely importing needed items and making intelligent long-time self-
liquidatmg investments. ^ o & ^> '^^^
3. Support by Government of soil conservation on an adequate basis The
entire Nation has a vital long-run interest in doing this.
4. Support adequately programs for agricultural education and development
Working farmers need vigorous and scientifically trained leadership in periods of
developing technology and adjustment. ^ i'
5. Eliminate present high level price supports, subsidies, etc., at earliest possible
dates that are economically and legally feasible. If continued, these will lead to
(a) a tremendous drain on Treasury; (b) the accumulation of huge burdensome
ynneeded surplus stocks which will act as a dead weight to hold down prices'
• (c) incomes from staple crops which will vary more from year to year with fixed
prices than they will if prices are permitted to vary; (d) the delaying of needed
adjustments in production.
6. Confine Government price supports to emergencies (in peacetimes) The
objective should be to establish a minimum below which prices or incomes are not
permitted to go rather than to maintain a high level.
7. If parity is to be used as a guide to price supports of individual commodities
some more realistic and up-to-date system of parity prices, which recognizes
present cost and demand relationships, must be worked out and adopted A
group of competent students of farm price and cost relationships should be
assembled to make recommendations.
8. Establish adequate educational facilities in rural areas, which give an even
break to rural youth when they go from areas of surplus population to seek urban
jobs.
p. In connection with higher level consumption and nutrition the following
points are noted: °
1. High-level consumption and nutrition depend on availability of food income
habits, and education. '
2. A high-level national income with reasonably complete employment is
needed to provide the economic basis for high-level consumption.
3. Agriculture should maintain adequate production of needed foods to permit
high-level consumption. Food cannot be eaten unless it is available.
4. All foods should be priced competitively.
5.. All kinds of low-cost systems of food distribution should be encouraged
High-cost service systems will also flourish in a high-income economy, and these
should not be discouraged in any way.
6. Educational programs to acquaint all people with desirable dietary standards
should be carried on.
7. School-lunch programs on self-sustaining basis except in needy cases are
desirable.
8. Food-stamp plan, with emphasis on nutrition rather than on disposal of sur-
plus products, should be revived if widespread unemployment persists for any con-
siderable length of time.
E. Foreign trade policies have been discussed above.
Foreign trade is desirable in order (a) to acquire needed goods not available in
this country at all or in inadequate quantities; (b) to employ people in our export
industries; (c) to help maintain peace by aiding people in other countries to make a
living; (d) to aid investment of a portion of our surplus capital. If promoted on a
sound basis, foreign trade tvill aid in mamtaining and raising our standard of living.
To encourage such trade we must price goods competitively, be a good customer,
do intelligent financing, and build up adequate sales and' service organizations!
The volume of our foreign trade (imports) will depend in large measure on how
good a job we do in maintaining our domestic income because our imports are so
largely raw materials and their volume will depend on the state of business in this
country.
POST-WAR ECONOMIC POLICY AND PLANNING
1363
1364
POST-WAR ECONOMIC POLICY AND PLANNING
Percent
BJBXTop uoTTTTa
POST-WAR ECONOMIC POLICY AND PLANNING 1365
The Chairman. Just a moment, Mr. Norton. Mr. Schiiltz, could you
furnish copies for all of the members of the committee of your mimeo-
graphed statement which you gave to three of us?
Mr. ScHULTz. It will take a couple of days.
The Chairman. That is all right. I only wish to have it before
the hearing closes. I think the other members would all like to have
the statement for their individual files.
Mr. ScHULTz. I will be glad to do that.
Mr. Norton. I would hke to say this first: I own a farm and get
some of my income from it, and I think that the inconie from the
farm will be more dependent upon the over-all economic situation
than on any specific actions by the Federal Government with respect
to agriculture.
Now, I don't mean to infer that many of the policies of the Federal
Government may not have much to do with the over-all economic
picture, and therefore with farm income, but it seems to me that some
of the over-all things are more important from the standpoint of farm
income than are the specific aids to agriculture, if I may use that term.
That may be erroneous thinking on my part, but that happens ta
be my belief. I approached each of the committee's questions on that
basis, and I have set down here some general ideas without very much
supporting evidence. Maybe you will say that I merely gave you
my opinions, but these were the things that I would want to look at
under the various headings, if I was responsible for national legislation.
In the first place, I would like to point out that I believe a certain
degree of flexibility and even instability is desirable in any dynamic
society. New things come along and they replace old things, and are
upsetting to the people in the old lines. But I do not think we can
avoid that, and I don't think we should try to do so.
Getting into this question specifically, I would like to say first, in
regard to the over-all stability in income, that maintaining reasonable
stability in the general level of prices, chiefly tlu-ough monetary and
credit controls, is very important. Now, it is not my purpose to dis-
cuss those points because I am not an expert on them. However, I
believe that a considerable part of the instabiHty of income to agri-
culture and in the general economic structure is due to the major
fluctuations in our price levels.
Therefore, it seems to me that they are most important.
Mr. VooRHis. I want to ask you about your statement there to the
effect that we should not consciously deflate.
First of all, do you mean we should not ever consciously deflate?
I do not think we should ever deflate. I don't think of any situation
where it would be sound public policy to deflate.
Mr. Norton. We might have such a degree of inflation that we
would have to deflate, and start all over again, but we are not in that
position now. They went to such extreme forms of inflation in some
foreign countries after the last war, that they had to deflate,and start
all over again.
Mr. YooRHis. That is true.
Mr. Norton. One of the points on which I am more hopeful about
the present situation than the situation which developed at the end
of the last war is that I believe that there are more people who agree
with my view, and the view you just expressed, Congressman. I
99579 — 45— pt. 5 10
1366 POST-WAR ECONOMIC POLICY AND PLANNING
think we almost automatically deflated after the last war, and we ^ot
into a lot of difficulty.
I think it should be the cardinal point in our posf-war economic
policy to avoid deflation. That does not mean we will not have some
readjustments in prices. The general level of wholesale prices is up
about 30 percent, and the level of agricultural commodities is up about
100 percent. As a landowner — and I cannot classify myself as a,
farmer— I expect prices of farm commodities to be lower after the
war than they are now. I might say the majority of the farmers agree
with this view.
In fact, in connection with a post-war survey that we are making,
we asked the farmers what they thought prices would average 5 years
after the war. I am speaking now from memory, but about a thou-
sand Illinois farmers said that they thought the average price of corn
would be 77 cents a bushel, which is 25 percent less than the present
price, and they thought the average price of hogs would be about $9
a hundred.
This is the average of answers that farmers made not to Government
or university people, but to the farmers who asked these questions of
their neighbors.
I want to make clear that by arguing against deflation I am not
arguing for a complete absence of readjustment in farm prices, which
it seems to me is inevitable after the war.
Now, my second point in the outline follows from the first: We
should avoid too extensive credit creation and speculation in good
times.
The Chairman. Let me ask a question right there. Do you think
that readjustments in farm prices are inevitable after the war?
Mr. Norton. Yes.
The Chairman. Do you not agree also that a readjustment, pos-
sibly, of industrial products will necessarily have to be made after the
war
Mr. Norton. Well, so far as industrial raw materials are concerned,
they have not gone up very much in price, and therefore I do not see
where there is any necessity for readjustment. Now, if you are think-
ing of fabricated products, that situation is so complicated that I do
not think I wish to express an opinion.
The Chairman. Let Ine finish. What about labor, too?
Mr. Norton. Well, there has been an increase in earnings of labor,
a large increase in total earnings, and some increase in wage rates.
The Chairman. Now, we must have a medium there where the
labor, industrial, and farm products are on a prettv even keel. That
is the ideal, isn't it? We' used to call that parity."
Mr. Norton. To answer your question specifically, I would like
to say that I am one of the pessimists on post-war incomes. I say
that, because otherwise my testimony would not make sense on this
general question of post-war income. I am not a rank pessimist,
however. I don't think national income is going as low as it was
before we got into the war, but I don't think we can keep up wartime
income levels in times of peace. Just as I think farm prices will be
reduced, I think that labor income will be reduced through the
elimination of overtime, the smaller number of hours worked, and the
fact that a lot of people will shift from wartime jobs back into peace-
time jobs where then- wages will be much lower.
POST-WAR ECONOMIC POLICY AND PLANNING 1367
Therefore, I believe that farm prices will be lower and that labor
■earnings will be lower per week.
Now, as to the question of particular wage rates, I do not think
that I am competent to pass judgment on that.
Mr. Fish. You don't believe that we will keep up the national
income that we have today?
Mr. Norton. I said, sir, that I am a pessimist. I do not think so.
Mr. Fish. Well, you are not alone in that.
Mr. Norton. I realize that, but I think it would be desirable if
we could. However, just looking at the realities of the situation,
I do not see how we can. That is my personal belief.
Mr. Hope. I want to ask you a question with reference to your
statement a while ago as to what farmers thought about post-war
prices. Do you believe that the farmers are now adjusting their
operations in general on the basis that prices will be about where they
think they will be? In other words, it is going to make much less of
a problem from a good mauy standpoints, and I am thinking par-
ticularly of the problem of what Congress might be confronted with
in the demand for farm legislation and that sort of thing. If farmers
are adjusting themselves to accept this particular level of prices that
you mention, or whether they are not adjusting then operations on
that basis.
Mr. Norton. In connection with my work, I talk to a considerable
number of farmers and I describe the post-war situation to them as
I have done here. I think that there is almost unanimous agreement
among them, that is, among the farmers that prices will be lower.
There is a rather considerable reluctance on the part of farmers to
buy land at current prices, at least in this part of the Corn Belt,
and it seems to me that this is evidence that farmers are not thinking
that prices will stay up after this war as they apparently thought at
the same period in the last war period.
The only specific evidence that we have of what farmers are thinking
is these answers that have been made by about a thousand farmers in
connection with a survey that we are making in regard to what
farmers are planning to build and to buy after the war.
Later on, when we have that complete study summarized, we could
furnish you more complete information based on a larger sample.
I merely gave you a few figures offhand. If you would like the
complete information later on, I shall be very glad to send it to you.
Mr. Hope. I think that would be very interesting information.
Mr. Norton. My second point is, if we are going to maintain
stability, we should avoid excessive credit creation and speculation
in good times. Now, it is perfectly obvious you cannot avoid the
creation of excessive credit in wartimes, because the Government
has to finance the war and therefore we have inflation. I am not
criticizing the Government when I say that, because it has to be done.
It seems to me thai, looking ahead and also looking back to what
happened after the last war, "if we go into a period of relatively good
incomes, at least in certain parts of the country, it is going to be very
easy for private business to expand and make undue use of credit.
I refer to such things as the Florida land boom after the last war,
and the building boom which occurred then. Very excessive use of
credit was made in that period, private credit, which I think had a
great deal to do with the depth to which we fell in 1930.
1368 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. VooRHis. I agree with you and I would just like to ask you
how you would prevent that happening now?
Mr. Norton. Well, I think partially through a rather strenuous
educational program. That may not sound very good and you may
disagree with me.
Mr. VooRHis. No; I don't disagree with you, but I do not think
that will do the job.
Mr. Norton. Well, I have not thought through how that would
be implemented, and I am not going to guess here before you gentle-
men. I do think, however, that if you are going to carry through a
policy of never deflating, we must avoid periods when private credits
are excessively inflated.
Mr. VooRHis. Absolutely, I agree with you.
Mr. Norton. Because, when you have reached that stage, then
sometime you will have to pay off.
Mr. VooRHis. That is correct.
Mr. Norton. And you pay off through scaling down or banli-
ruptcy, or some other process.
Mr. VooRHis. I wondered whether you had considered 100 percent
bank reserves against demand deposits.
Mr. Norton. I have set this point down as a goal and I do not
have the means for implementing it.
Mr. VooRHis. AH right, proceed, please.
Mr. Norton. My third point is tied into this same process. It is
listed as my fourth point on the outline. We should maintain control
over prices and wages in wartime in order to limit the extent of post-
war adjustments.
In other words, to the degree that you avoid inflation, you make
deflation unnecessary. One of the reasons why I have been very
favorably inclined toward the present policies of price and wage con-
trol is that such poHcies would not only cause less difficulty now, but
would cause a whole lot less difficulty later on.
This, however, is something that is purely a wartime situation.
The fourth thing is that we should maintain sufficient flexibility in
prices and wages to permit rapid adjustments to changing conditions.
That is an easy thing to set down on paper and a very difficult thing
to do in practice. In agriculture we find almost complete flexibility
in prices, leaving out such Govermnent controls as are in effect. In
other words, our agricultural prices normally fluctuate and adjust to
whatever the level of demand and supply warrants, and we find the
same thing true in agricultural wage rates. Normally speaking, the
wages that a farmer pays his hired man varies pretty much with the
amount of income that the farmer receives.
So when you are going to attack this problem, you must attack it in
the industrial sector and in the labor sector. Again, I will say it seems
to me that education is important there. Somebody, it seems to me,
has got to tell the people what the consequences are of unduly inflex-
ible wage and price policies. I don't know of any other procedure for
doing it, but I might say, incidentally, that I do not have too high an
expectation as to the results. However, I would like to say that it
is extremely important. If you run into a period of declining demands
and you attempt to maintain prices or wage rates at too high a level,
you are simply going to force a reduction in sales or you are going to
enforce a reduction in employment. If you want to maintain stability.
POST-WAR ECONOMIC POLICY AND PLANNING 1369
you must put enough flexibility into your structure so that it will be
flexible.
Mr. Hope. Eight at that point I would like to ask you a question.
Would you consider in that connection that there ought to be some
compensating payments like Dr. Schultz mentioned a while ago, to
smooth over the rough places so far as agricultm^e is concerned? Does
your program contemplate that?
Mr. Norton. All of my comments on agriculture are in the next
section, and if I can pass that for the tune being, I will take it up
later.
Mr. Hope. You are talking now about the general picture.''
Mr. Norton. That is right. The question the committee sub-
mitted to me was: How maintain over-all stability? My point is
that there must be enough flexibility in some parts of the economic
structure if we are to maintain over-all stabihty.
My fifth point is that we should establish and maintain conditions
whicii stimulate venture capital to create new enterprises. While I
am not an expert on that subject, it seems to me that tax pohcies are
of primary importance in this connection. . In other words, the tax
policy should not discourage people from setting up new enterprises.
The Chairman. But you are mindful of this fact, I am sure, that
since we are dealing with a post-war problem, that has to be taken
into consideration?
Mr. Norton. That is right.
The Chairman. And we all know that we are going to have a
national debt of something like $300,000,000,000, and it is going to
take a lot of money rised by taxes to approach the liquidation of
this debt, pay the interest on it, and carry on the normal functions
of Government. That is one thing that we have to keep in mmd,
don't we?
Mr. Norton. I have three reactions to that question. The first
is that I realize the taxes after the war are going to be liigher than
they were before the war. The second is that the taxes will be paid
by people who earn incomes, and the third is that therefore the tax
pohcy, granted that it wifl be at a high level, should be so set up to
encourage the creation' of enterprises which will earn money to pay
taxes, if you want to put it that way.
I am quite conscious of the fact that we are going to have high
taxes after the war and that might also color my answer to the
question as to whether I agree with Professor Schultz on compensatory
payments. I will point that out later on.
Mr. CoLMER. As I understand what you are trying to say — and I
am not saying you are wrong — but I believe you are saying this: If
we are going to reach anything like the goal of employment set up
for the post-war era, to maintain anything like an adequate employ-
ment program, we are going to have to encourage capital to venture
and to expand as it goes out of the production of war materials into
normal activities of an economy. They are going to have to be
encouraged, and you cannot do that by taxing them beyond the
point where it woidd not be profitable to venture.
Mr. Norton. I would agree with both of your statements. That
is what I am trying to say. I think it is very important.
Mr. CoLMER. I think the full committee is more or less of that
opinion, and so stated in its report.
1370 POST-WAR ECONOMIC POLICY AND PLANNING
^ Mr. VooRHis. I am of that opinion. I think that that is half the
job, perhaps, and the other job is the maintenance of consumer pur-
chasing power,
Mr. Norton. I am taking up these things one at a time, or trying
to. The sixth thing is to estabhsh and maintain conditions which
stimulate the greatest freedom of both internal and foreign trade.
The seventh thing is pursuing diligently and forcefully an intelligent
foreign policy looking toward a long-sustained peace, the expansion of
needed world trade, and the financing on long terms of self-hquidating
enterprises throughout the world.
It seems to me that the two big points of attack bv the Federal
Government— and I never had the opportunity to sav this to a Con-
gressman before, or to a group of Congressmen— are to attack the
economic situation through, first, the fiscal field , which involves money,
credit, and taxes; and second, tlirough the foreign trade field. These
are both prime responsibilities of the Federal Government, and it
seems to me if we could work out good pohcies in these two areas, a lot
of our other troubles would take care of themselves.
Mr. Fish. What are the policies? What do you suggest?
Mr. Norton. I am saying that we should pursue diligently and
forcefully an intelligent foriegn policy looking toward a long-sustained
peace, the expansion of needed world trade, and the financing on long
terms of self-liquidating enterprises throughout the world.
Those are in general terms, and it would take several books to ex-
pand them.
Mr. Fish. We cannot discuss world peace, because everybody is
for world peace and peace generally. The question we can discuss,
however, is the expansion of foreign markets and particularly for farm
products. Wliat have you to suggest on that?
Mr. Norton. I have some suggestions in my next section on that.
I merely mention them here.
The next thing is the establishing/ and following of an intelligent,
long-run Government policy of investing in capital improvements of
types contributing to the well-being of the country and its develop-
ment, such as roads, health facilities, schools, watei^ways, and forests.
I think there is no question the Government is committed to that
policy, but it seems to me that the time for the Government to expand
capital expenditures is during times of depression and the time to
contract them is in prosperity.
In other words, we should, to some extent, compensate for the
boom periods and the depressions in private investment.
Mr. Hope. Getting back to No. 7, I would like to have you elabo-
rate a httle more on what you refer to as self-liquidating enterprises
throughout the world. What do you have in mind there?
Mr. Norton. I am not an expert on world business, but I cannot
help but beheve that there are places in the world where it is possible,
with the present state of economic development, for American capital
to be invested in certain forms or in certain enterprises, and eventually
the earnings from the enterprise will repay a sufficient return so that
the investment will either yield a dividend or the loan will be paid off.
Mr. Hope, Oh, you have in mind there that that would not only
furnish us an outlet for capital and for capital goods, an export outlet
we might not have otherwise, but it would raise standards of living in
those countries which would give them a greater buying power?
POST-WAR ECONOMIC POLICY AND PLA'NNING 1371
Mr. Norton. That is correct. We have reached a stage in this
country where we can produce capital goods in excess of our own needs.
We have machine tools, and so forth, and if there is some place in the
world where these things can be used in production — that is, to pro-
duce goods and employ people — I cannot see why such sales cannot
be handled on a basis where they would provide the mcome to pay off
the debt.
I am not arguing for loans made on the basis of sustaining activities
here with the expectation that that is all we are doing, sustaining
activities here and not expect anything back. I do not believe that
is so in the long ruD. It may be all right for relief, but we need to do
more than extend relief.
I think we can do it on a basis where we can get back returns if the
enterprises are carefully selected.
Mr. .VooRHis. The loan will stimulate an enterprise in a foreign
country which will yield to that country considerably more than the
actual economic benefits and the amount of money necessary to repay
the loan. In that case, you believe it is worth while?
Mr. Norton. Yes. Just to make work here, I do not see any point
to that. Of course, if you are going to get back income on these en-
terprises, you are going to have to take back goods or services, and
this would be tied up with my second clause, expansion of needed
world trade. I am sure there are many things which foreigners pro-
duce which we use and would use more of in this country. I am not
worried about the effect of these imports on competition with our own
domestic products. You gentlemen are familiar with the major ele-
ments of our imports. There are things which we either do not pro-
duce at all or we do not produce enough of, as otherwise we would
not buy them.
Mr. CoLMER. In this connection I would like to say that the com-
mittee has a subcommittee on foreign trade and shipping which is now
conducting hearings.
Mr. Norton. Well, let me repeat again. I took the question of
the connnittee literally, that you asked for a discussion of factois in
regard to the over-all instability.
Mr. CoLMER. I realize it is all interwoven:
Mr. Norton. Yes; and I set down here the thmgs I thought were
important in reducing over-all instability.
Now, we turn to page 2, upper section, under "C" to place agricul-
ture on long-run self-sustaining basis. The first point, it seems to me,
is maintaining a reasonably high level of national income. It seems
to me the things which I have mentioned before would aid in that
process.
Mr. Hope. You are putting that numerically first because you
think that is the most important?
Mr. Norton. I would not say that the ideas are listed on this sheet
in strict order of importance, but I believe that this is the most import-
ant item so far as agricultural stability is concerned.
Mr. Hope. I understand.
Mr. Norton. There is a graph attached to this statement on the
last page. It is a rather crude graph, but it was available to me and
I put it in. It shows at the top the national income paid out, exclud-
ing Government pajonents to farmers, from 1910 to date, and you get
the same fluctuations which you saw in Dr. Schultz's chart.
1372 POST-WAR ECONOMIC POLICY AND PLANNING
The bottom line is the cash farm income to farmers from marketings
and not from other sources of income. I don't know that these two
series should be directly compared, but I have compared them, and
the middle line shows *the percentage which marketings by farmers
have been year by year of national income paid out.
You will notice that since about 1925 the middle line, while it has
fluctuated up and down, has had an almost horizontal trend. The
range of percentages is from 10.7 percent to 13 percent. Well, it
seems to me it is pretty obvious that, whatever the cause or connection
is, the gross income of agricultm-e is very highly correlated with the
income of people as a whole.
The Chairman. Mr. Norton, would you supply the reporter with
a copy of the graph to go in the record with your statement.
Mr. Norton. He has them. I would put national income first.
This would largely take care of the market condition of the branches
of agriculture that are dependent upon the national home market, the
meats, the dairy products, the fruits, the vegetables. Those products
by and large in peacetime are sold in the home market and the kind
of a market we have in this market depends primarily on the national
income.
Now we get to the other commodities where we have surpluses in
addition to our home requirements. The outstanding commodities
are cotton, tobacco, wheat, some of the dried fruits and sometimes
lard. It is highly important that we establish and carry out workable
policies for supporting surplus products.
I have been a little more specific here. This involves, first, com-
petitive prices. You can't sell these goods to a foreigner for any
higher price than he can buy comparable qualities elsewhere; that is
obvious. Second, we should play the game required of a creditor
nation by freely importing needed items and making intelligent long-
time self-liquidating investments.
Now, I am not so naive as to believe or even to suggest that we are
going to do away with a great many of our tariffs. These are too
thoroughly integrated into our system. I did not mean to imply
that we would do so when I said we should freely import some items.
I think that we should make some adjustments in spots in our tariff
structure.
The Chairman. You have thought a good deal about that point
haven't you?
Mr. Norton. Yes, sir.
The Chairman. Would you advocate a revision of our tariff laws
along the line you have just suggested — maintaining certain tariffs
which are so integrated with our economic set-up — or would you
resort to reciprocal trade agreements or some other vehicle for bring-
ing that about?
Mr. Norton. May I answer in the abstract, realizing that when
you are dealing with legislation of that type you don't come out with
the ideal. I know that. But it seems to me it is very likely that our
tariff laws could be revised at spots, which would more nearly bring
our tariff structure into the proper position it should occupy with
respect to the job of encouraging world trade.
Now, I have answered your question in the abstract. A tariff act
was passed back in '29 or '30 and modified somewhat by the trade
agreements. It probably is now out of date for any piu-pose, certainly
POST-WAR ECONOMIC POLICY AND PLANNING 1373
for its original purpose. I don't know that I have answered your
question, but I have given you my idea about it.
The Chairman. I have asked the question m connection with a
post-war program after the war is over and we settled down to
normal life again. . i o tj.
Mr. Norton. May I make this concrete suggestion, then.^ it
seems to me if the Congress or some other Government agency desig-
nated by Congress would consider our present Tariff Act in the light
of how well it fits the present position of the United States m the
world-trade picture, it would be a highly desirable thing.
If you want a specific recommendation, I would make this: Just
examine the tariff, the whole structure from the standpoint of how it
fits m with present conditions. Now, when you have done that, I
am sure that you would leave a lot of protection for certain elements.
I do not think, after having left such protection, that it would seri-
ously interfere with the type of trade which I have envisioned in my
statement. , /-. •
The Chairman. Of course, we all know this, that as Congress is
made up of representatives from various different sections of the
country representing different industries and commodities, you would
have a powerful urge there to take care of each individual, and when
you would get through, you would have a patchwork that would not
accomplish what we started out to do. _
Mr. Norton. I told you that I would answer your question from
an idealistic standpoint, recognizmg fully the difficulties of doing
anythmg m this field. I tliink I had in my mind just what you have
stated. . J
Third, I would support Government soil conservation on an ade-
quate basis. The entire Nation has a vital long-term uiterest in doing
this. The whole Nation is mterested m maintaining our basic agri-
cultural plant in a sound condition.
I think the widest possible use of local people should be made, how-
ever, in actually developing the conservation program for different
areas. In other words, I think the formidas ought to be worked out
in such a way that they make possible the greatest use of local knowl-
edge in developing the specific conservation practices put uito effect.
I thmk also that the programs for agricultural education and devel-
opment should be supported. That is a problem I know something
about from experience. Working farmers need vigorous and scientifi-
cally framed, leadership in periods of developing echnology and
adjustment.
There are a great many shifts that will have to be made and farmers
need good leadership and well-trained leadership in domg that.
Fifth, I would . ^ .
Mr. Hope. Are you referring there to the work of Extension bervice
and that sort of thing?
Mr. Norton. The work of Extension Service and any supporting
agencies or any other agencies that are working with farmers to help
guide them m"^this process of adjustment. If we are gouig to make
shifts, we must have a sound basis for such shifts and we need good
leadership in making them. • i -.
Now, I expect the next point is extremely controversial, but 1 am
going to make it. I would eliminate present high-level price supports,
1374 POST-WAR ECONOMIC POLICY AND PLANNING
subsidies etcetera, at the earliest possible dates that are economi-
Stz diseased.'"" " ""' ^'^^^ ^^^' ^^^ ^^^-^^ ^^^^ P-^-o^
TwTo°.^ ^^''^''' programs were set up to get increased production.
That IS an economic problem. The Congress has already established
no'trinHo ""^"'^ nT ^^^"^itments and, presumably,^Congress 's
legalfy ''^'' commitments. That is what I mean by
\}^^ Chairman. You mean after the war is over?
Mr. Norton. Yes If continued, these wUl lead to, first, a tre-
hZtZ '^''"^ '''' 'h Treasury; second, the accumulation of huge,
buidensome, unneeded surplus stock which wdl act as a dead wei4t
cron^ tn^r P"^^^'/^^^' ^^^^^'^' they will cause incomes from staple
nermitl^/Jfl^T' \'^^y^^^' to year than they would if prices ire
permitted to fluctuate, because if you get one of these ever-normal
hold "n^f "' r^'/^Yi ^"'^^ warehouses filled up and th^e stols
hold prices at a f^xed level and crop yields are down 20 percent for
some crop, you don't get any increase in price to offset the lower
thh.1 fW ?l''^^ ^ ^^^ Professor Schultz woidd agree with me. I
thmk that there are distmct limitations to the desirable nature of the
so-called ever-normal granary. Moreover, these high-level price sup-
ports ;vnai delay needed adjustments in production. ^
hJr.t.]''^^f I^^'^'i'!'^ you say about his suggestion that we
dfnncl t^P^^ ""Vf '^ '^''^' '^ *^^^ P^^"^ States so that hi case of extreme
Sf? "mTt^abrtXt." "^"^^"^ '^^^ '' "^^^^ P^'^^^^^^ '^ ^^^
Mr. Norton Theoretically, I would agree. That is ideal, but as
,r. nnt?'""'''''iT^ ^"''''''''7 ''^^''^^'^ ^^^' ^^ S^t your big accumuktion
m corn— and I am speaking now of corn— in the cash corn areas where
the corn sunply backed up and was stored there
Now, It was tune that we had it to help out and make possible this
huge war production of livestock, but I don't think, gentlemen you
can always count on a war to come along to empty out these gran-
r^f- ^ ^^ a^tmg on the assumption that you can't.
Ihe Chairman. You don't beheve in the"' old Egyptian's theory of
aT^x'i'P '"^ ^^^ 5^^^^^ «^ Plenty for the years of famine?
Mr. Norton WeH, we have had 8 years of plenty now so far as corn
IS concerned. If you were sure, Mr. Zimmerman, that we would have
7^years of famme and 7 years of plenty, I would agree with a storage
The Chairman. I made that remark facetiously, of course
Mr. Norton. Well, dealing with the realities of the thing, unless we
are very careful about our price levels, we are going to build up
excessive stocks which will have the effects that I mention here and I
am very apprehensive about them.
t.r-^^'"* ^OPE. Do you think you could have a system of support
^ A r AT ^^ ^ .^^ without some program for production control?
Mr. Morton. I would say no. It is perfectly obvious, if you are
going to support prices and such action leads to an accumulation of
stocks beyond what will be sold, then you have to control production.
POST-WAR ECONOMIC POLICY AND PLANNING 1375
However, I am skeptical about the ability of anybody to design a
program that will actually control production that you can actually
jgetfarmers to follow. .
The experience of farmers with production control, at least m the
North, and I can't say anything about cotton, has been with an
extremely mild form of production control.
In corn we had an acreage regulation and at the same time we came
along with hybrid seed and grew more bushels than we did before on
each acre. We were able to put the land in some other crop, soy-
beans or clover, and the clover crop made for better corn crops. The
result of it all was, when we came out of a period of several years of
so-called production control, at least in the Corn Belt, our level of
production was higher than it was when we began.
I would say that you would have to have 'effective production
control, and that that would mean, it seems to me, rigid marketing
quotas and then some way of actually getting rid of the excess.
Mr. Hope. You would have to at least limit the quantity of the
product upon which you would maintain this high price level?
Mr. Norton. That is correct. All I am saying is that, based upon
my observation and experience, it is extremely difficult to do it.
Mr. Hope. I agree with you as to the size of the problem.
The Chairman. You have said a while ago that a large number of
Illinois farmers have been interrogated, I don't know how many
thousands.
Mr. Norton. About a thousand.
The Chairman. Did you ask them about their views on this
question?
Mr. Norton. No, sir.
The Chairman. Have you ever taken a poll of farmers on that?
Mr. Norton. No ; we have not. I understand that the Department
of Agriculture has, but we have not. We have no opinions or sample
of opinions as to what farmers think about crop control.
The Chairman. Do you know what the results of the Department
of Agriculture were?
Mr. Norton. I can't quote them offhand. The only impression
I have is that the percentage of people who look with favor upon the
Government program was higher in the South than in the Corn Belt ;
but whether it was a majority or not in either region, I do not remem-
ber.
The Chairman. I know that the cotton farmers have generally
favored such a program. I don't know what the wheat farmers have
done. I believe they have, too, haven't they?
Mr. Hope. Well, "the wheat farmers have voted marketing quotas
twice.
The Chairman. That is right. What about corn?
Mr. Hope. That has never been true.
Mr. Norton. I am speaking here as an individual and not as a
representative of the college of agriculture, because it does not have
an official opinion. I am not representing any group of farmers, but
I am here to give you my views solely.
Sixth, I would "confine Government price supports to emergencies;
that is, in peacetime. The objective should be to establish a minimum
below which prices or incomes are not permitted to go, rather than to
maintain a high level.
1376 POST-WAR ECONOMIC POLICY AND PLANNING
I don't want to comment on the scheme that Professor Schultz
proposed ni full, but I have the hnpression, however, that as he stated
It, it mi^ht yield a level of prices or returns somewhat above what I
contemplate in this recommendation here.
Mr. VooRHis. Tell us what you mean by "emergency."
v.^o?'• Norton. Well, you always get to the question of a definition-
1933 was certainly an emergency,
Mr. VooRHis. Was 1920 an emergency, after May, I mean?
Mr. Norton. Well, I expect 1921 was.
Mr. VooRHis. Well, the latter part of '20 and '21?
Mr. Norton. Yes. What I mean here is that the Government
policy should be to cut off the low end of the dips and prevent the
decidedly low prices that come at such times rather than to support
them at high levels.
Mr. VooRHis. What you are intimating is what a group of poultiy-
men told me when I was out there, namely, that they want support or
some kind of a backstop to prevent prices from falling out of sight,
but they don't want it maintained so high that you' eliminate 'the
possibdity of adjusting production. That was their point of view. I
am not saj-ing what mine may be.
Mr. Norton. That describes what I mean here.
Mr CoLMER. Right there, Mr. Norton, what you do there is, you
would put a floor under the prices. In other words, you would do for
farm production what the Congress attempted to do for labor a
minimum beyond which they could not fall. Is that correct? '
Mr. Norton. Suppose we put it this way: We started out with a
minimum or with a floor, and we gradually got our floor so it is up
pretty close to the ceiling. When you have a possible fluctuation, as
we have now m corn, of only 10 points on parity, you do not have any
leeway there.
What I am saying in point five is that we should eliminate them
as quick as we can and get our price supports back to a lower level.
Then you have an argument as to what the level will be.
Mr. Colmer. I want to develop that further. We hear a great
deal about governmental regimentation of the people, about the
Government fixing the price of labor and of commodities, and there
IS apparently a great desire, because we hear a great deal about it,
to take the Government out of business, out of mdustry, and get
back to individual initiative and enterprise — is ' that possible in
agriculture?
Mr Norton. Well, my recommendation would be a movement in
that direction, but the Government would stay in this far, namely,
to step m and support the prices or support income from falling below
certain levels. I won't argue about the technique provided it is at a
relatively low level ; that is, at not such a relatively high level as at
the present time.
Mr. CoLMER. But you do feel that the Government has got to
maintain some control?
Mr. Norton. WeU, I think it is wise for it to do so.
Mr. Colmer. All right.
Mr. Norton. I think the point which Professor Schults made to
the effect that agriculture continues to produce during depression—
and by the very nature of its operation it does so, and it is mighty
fortunate for us as consumers that it does, because we all want to
POST-WAR ECONOMIC POLICY AND PLANNING 1377
•eat three meals a day — even though industry and other elements of
the economy may cut production, then it seems to me that it is de-
sirable public policy to maintain a certain minimum level of income in
agriculture as a reward for continued production.
Now, the argument is, at what level? And my minimum would
be at a low level.
The Chairman. You mean, maintain farm income at a low level?
Mr. Norton. No; I mean the level below wliich income would not
be permitted to fall would be a relatively low level. The floor would
be a low level.
The Chairman. The Government would not operate until the
farmer was in a losing position.
Mr. Norton. All right. I don't know that I like the word
* 'losing."
The Chairman. Well, if it is a relatively low level, it might be.
Mr. Norton. I have used the word "emergency," and I would say
when the farmer showed signs of getting into extreme distress.
Mr. VooRHis. May I pursue that point a second, because you said
that 1933 was an emergency, and I suppose you would go beyond
1933 a few years, wouldn't you?
Mr. Norton. Yes; I would stop before we got that low,
Mr. VooRHis. And 1920 and '21 was an emergency. Well, in
other words, aren't you saying that Government price support should
be confined to the time when government price supports are needed,
and if that be true, why not have them continue as a proposition?
Mr. Norton. Yes.
Mr. VooRHis. If you are going to have the price support at a level
such as I understand you to mean, it would simply be of no consequence
when farm income would be high. I don't see what your first sentence
signifies, Mr. Norton. I don't think it means anything.
^ Mr. Norton. Maybe it does not. If you and I could get together
on what we mean by the word "needed," then I would agree perfectly
with your statement. That is what I meant to say.
Mr. Voorhis. But your kind of price support would be inoperative
at a time of high farm income?
Mr. Norton. That is right.
Mr. Voorhis. Wliy not leave it in effect, and it wiU be in effect
when needed?
Mr. Norton. All right; if you want to change my language and
say "establish a system of price support that would become effective
at such a time," I would be quite agreeable to that. That is what I
meant.
Mr. Voorhis. It seems to me if they said all the time that you would
accomplish your purpose just as well if you would invoke it all of a
sudden, then when you had a depression
Mr. Norton. That is what I meant to say, and if I used poor lan-
guage, I did not mean that.
Mr. Voorhis. I think I understand.
The Chairman. You don't think we should hazard agriculture to
a policy of letting the commodity seek its natural level of income?
Mr. Norton. I don't want to be misunderstood here. I would
say, if we can maintain a reasonably high level of national income and
reasonably good markets for farm products, the type of price support
1378 POST-WAR ECONOMIC POLICY AND PLANNING
that I am talking about would not operate most of the tune. Does
that make my position clear?
The Chairman. But you think we should have that stopgap there
to rely on in times of emergency?
Mr. Norton. Yes, sir.
The Chairman. And only as such?
Mr. Norton. Yes.
The Chairman. The idea would be to let the price demand for the
product fix the price?
Mr. Norton. That is correct.
The Chairman. Normally?
_ Mr. Norton. Yes. Now, I might say that I have been speaking
in general terms; there are some people who would take violent excep-
tion to what I have said, and I would agree with them in particular
cases. Some of the pricing mechanisms which have been worked out
since the depression began it seems to me might well have been left
in effect.
I am referring now to some of the milk-marketing mechanisms which
provide for a considerable degree of flexibility. I can see that in
abbreviating this statement, I have eliminated several things. I was
thinking mainly in this discussion of the prices of the commodities
which flow out mto the competitive markets.
I would want to have the record show that I did not intend No. 6 to
include elimination of these milk-marketing agreements where they
had been established to include a proper degree of flexibility.
Mr. Hope. You are referring to the multiple price system so far as
your milk marketing is concerned?
Mr. Norton. That is right.
Mr. Hope. Wliere the use determines' the price?
Mr. Norton. That is right.
Mr. Hope. You think that is a good program?
Mr. Norton. Yes; I think that there have been some very good
agreements worked out there.
Mr. Hope. Do you think that should apply to other commodities?
Mr. Norton. Well, the reason that those have come in the milk
market is that for a long, long time milk was almost a subject of war-
fare, because milk moves from a particular farm to a particular dealer
and there is no open market for milk.
Personally, I cannot see how that this plan can be applied to many
other commodities. It may be that I have not thought the problem
through. How you would apply it in the pricing of wheat or in the
pricing of livestock, I have not been able to see.
Mt. Hope. I was wondering about wheat. We use wheat for live-
stock feed to some extent, and it can be used and used when the feed
supply is short enough. It is used in the manufacture of alcohol when
there is a shortage of other materials, and I am wondering if you have
given ,any thought to the idea we might use the multiple price system
so far as a commodit}^ like wheat is concerned, where there are inferior
uses to which it might be put?
Mr. Norton. On that point, I think you have changed the problem
somewhat. In milk the question is the^ constant warfare between the
producers and one buyer. So agreements were worked out.
Wheat goes through multiple channels. But I would say this: if the
two-price system for wheat were put into effect, it would be more work-
able in the long run and less costly to the Covernment than our present
POST-WAR ECONOMIC POLICY AND PLANNING 1379
system of attempting to maintain the price of the whole wheat crop
at 90 percent of parity.
Mr. Hope. Yes; I would think so.
Mr. Norton. It has interesting possibilities. Let's put it this
^ay— as a device for maintaining the price of wheat, or the price on a
certain fraction of the wheat crop, and getting the surplus out of the
way where it won't do so much trouble.
Mr. Hope. Have you thought about the marketing agreement
program as it is used on milk in the marketing of fruit and vegetables?
Mr. Norton. I can claim only slight familiarity with problems in
the marketing of fruits and vegetables. It is my understanding that
to some extent marketing agreements are used mainly in the deter-
mination of the total volume that will move in a particular time period.
It is used to regularize the movement rather than to provide a
basis by which returns to producers are determined. That is about
as far as I could go with my present knowledge in discussing marketing
agreements for the perishables. I don't see how it can be applied to
vegetables as it is to milk.
Mr. Hope. ■ The effect on prices is very marked.
Mr. Norton. That is right.
Mr. Hope. By cooperation among farmers, they put themselves m
the position to get a better price than if they do it individually.
Mr. Norton. I w^ould not raise any question about the desirability
in that case. ^ ■ ^
Mr. Hope. I don't know anything about the marketmg ol grape-
fruit, but I understand that the surplus frequently goes into juice.
I suppose that is the case with oranges, too.
Mr. VooRHis. To some extent.
Mr. Hope. I think some sort of an arrangement could be had,
like tiiat with milk, and a certain portion of it go in the juice. It
seems to me there are some interesting possibilities there, b^it I don't
know much about it.
Mr. VooRHis. That is what the co-ops do.
Mr. Hope. I don't see how you can have a marketing agreement
with multiple prices unless you have growers' organizations that are
strong enough as well as a system of distribution which is very largely
in the hands of great organizations which cover the whole territory
in a given area.
Do you think that is an essential ingredient for that type ol two-
price svstem?
Mr. Norton. That certainly would be essential to the way they
work out for horticultural products. In the dairy field, as I have
observed them, the market administrator and the cooperative seem
to get along together and more or less supplement each other in many
markets. In some markets they don't agree too well, I understand,
but it is certainly true that in any market where a milk market agree-
ment has been put into effect, there was prior to its adoption a working
functionmg cooperative.
Now, my last point is that if parity is to be used as a guide to
price supports for individual commodities, some more reahstic and
up-to-date system of parity prices, which recognizes present cost and
demand relationships, must be worked out and adopted.
I have no quarrel with parity as an over-all concept as a general
average, but we have had so many changes in the relationships in
connection with relative cost and demand for individual products
1380 POST-WAR ECONOMIC POLICY AND PLANNING
in the 30 years that have elapsed since our base period, 1910-14,
that I think some of the individual relationships are getting out of
date. I make a concrete suggestion here. A group of competent
students of farm price and cost relationships should be assembled to
make recommendations on that point, because I think you will find —
if you explore into the views of most students of farm cost and prices —
you will find that they will toll you there are some things, on which
the present parities are out of balance or out of line.
My eighth point is establish adequate educational facilities in rural
areas, which give an even break to rural youth when they go from
areas of surplus population to seek urban jobs.
Now, it is a fact that, from very large sections of the country, a
considerable number of people have to leave in order to make a
living. They ought to have as good an education for the job into
which they are going, as the people have got in the area from which
they came.
Now, in connection with the higher level of consumption and
nutrition, my observations are all very general because I have not
made any special study of that problem and I will read tlu-ough them
hurriedly.
(1) High-level consumption and nutrition depend on availability
of food, income, habits, and education.
(2) A high-level national income with resaonably complete employ-
ment is needed to provide the economic basis for high-level consump-
tion.
(3) Agricultm-e should maintain adequate production of needed
foods to permit high-level consumption. Food cannot be eaten
unless it is available.
(4) All foods should be priced competitively. -
(5) All kinds of low-cost systems of food distribution should be
encouraged. High-cost service systems will also flourish in a high-
income economy, and these should not be discouraged in any way.
May I elaborate on that point? If you go into the marketing
system, in the retail field in particular, you will find that there are
some markets where relatively low cost systems of distributing
products have developed.
I think particularly of the distribution of milk in some cities where
it is done tlu-ough stores. All right; encourage that. At the same
time in these cities there are a lot of people who, if they have the
money, want the milk delivered every day in a small package on their
doorstep. I certainly would not discourage the businessman who
wants to furnish the high service.
Mr. VooRHis. Would you encourage consumers' cooperatives?
Mr. Norton. If they can do it more efficiently than the present
system of food distribution; yes. Now, that question is answered
without any regard of desnability or undesirability of consumer
cooperatives. In answering your question, I judge them solely on
efficiency. There might be other reasons than efficiency why the
consu7ners want to develop cooperatives.
(6) Educational programs to acquaint all people with desnable
dietary standards should be carried on.
(7) School-lunch progra?ns on self-sustaining basis except in needy
cases are deshable. I realize that you get into a very difficult admin-
istrative problem there, but it seems to me there ought to be some
POST-WAR ECONOMIC POLICY AND PLANNING 1381
practical way whereby the Government carries the cost of the folks
who need food and who camiot pay for it and not bear the cost of
those who can pay.
Mr. VooRHis. You mean that children who are able to pay for
the lunches must be made to pay for them?
Mr. Norton. That is right.
Mr. VcoRHis. It has been done in most cases, I believe.
Mr. Norton. There are variations, I understand.
(8) Food stamp plan with emphasis on nutrition rather than on
disposal of surplus products should be revived if widespread unem-
ployment persists for any considerable length of time.
I agree with Professor Schultz that the emphasis should be on
nutrition rather than on disposal of surplus products. I don't see
why the food stamp plan should be used to encourage people to
contmue to produce things that the consumer says he does not want.
The consumer should have the choice there. I personally would not
put such a food stamp plan in at the first sign of unemployment.
I would wait until you had a serious problem and really know that this
was going to cause people to be undernourished.
Now, I have a section on foreign trade which repeats what I said
above and I don't think I need to read it.
That completes what I have prepared and I will be glad to answer
any further questions.
The Chairman. It is now 1 o'clock and time to get a little lunch
and we appreciate your appearance here. You have given us some
food for thought with your splendid suggestions. We appreciate
your coming.
We will now adjourn until 2 o'clock.
(Whereupon, the committee recessed mitil 2 o'clock.)
AFTER RECESS
The Chairman. The committee will please come to order. Mr.
Brandt, we will be glad to hear from you. Will you give the reporter
your name, address, and affiliation?
TESTIMONY OF JOHN BRANDT, PRESIDENT OF LAND 0 'LAKES
CREAMERIES, MINNEAPOLIS, MINN.
Mr. Brandt. My name is John Brandt. I am president of the
Land O'Lakes Creameries and of the National Cooperative Milk
Producers Association.
The Chairman. Mr. Brandt, we will be glad to hear from you.
If you have a paper, you may present it.
Mr. Brandt. I haven't any paper. I got the request to appear at
this meeting at a time when I was just getting ready to go to another
meeting of the National Cooperative Milk Producers. Therefore,
I didn't have any time to prepare a statement. I got back just in
time to clean my desk and get down here again.
I have some material that I will let you have a little later, which is
not quite up to date, but it will express some of the general views and
the principles that I have in mind with respect to post-war planning.
While this was not prepared at the time when we were in war, it was
99579 — 45 — ^pt. 5 11
1382 POST-WAR ECONOMIC POLICY AND PLANNING
prepared at a time when we were in at least an internal war of our
own making here, of trying to get ourselves out of the depression.
I also have some charts that I will want to present. Those, likewise,
arc old but, with some explanations that I can give, I can possibly get
them to fit into the presentation that I want to make here today.
To begin with, I am going to try to deal with my subject and my
presentation from the standpoint of one who is a farmer and has
operated a farm, still operating my own farm and, from the standpoint
of the place I think agriculture has in the national economy and its
place in post-war prosperity.
As a farmer, I quite likely may differ from some people with respect
to what is basic with respect to maintaining agricidtural prosperity. I
know there is a lot of discussion today to the effect that if we can main-
tain high industrial earnings and high wages we can tie the kite of
prosperity of agriculture to the cord strings of prosperity of the other
two groups and, of course, as a farmer and in my experience in that
line, I am maintaining that while we need high industrial earnings,
we need high income and high wages and that we can't maintain
either one of them unless we do build on a foundation of high income
to agriculture.
I tliink this is the basic position to work from. I don't think we can
maintain high income to agriculture in any way except as agriculture
receives a price at the market place for its products and that we
commence to understand our situation with respect to the gratuities
that we seem to be handing out to agriculture at the present time and
accept them, not as subsidies to agriculture, for they are virtually a
method whereby we want to keep down the cost of living. There is
a lot of difference between benefit payments that are dished out to
agriculture and a program of maintaining price levels and keeping
down the cost of living to the consumer. I think all through this
discussion we should differentiate between those two.
Furthermore, I am of the opinion that with the national debt, which
has the possibility of reaching the $300,000,000,000 mark, there isn't
anybody in tliis room, who sincerely thinks we have any hope of ever
retiring this debt in an orderly manner unless we can maintain a high
national income. If we go back to an income of the highest level that
we have ever known of in peacetime and we attempt to liquidate this
debt on a normal inconre basis, we will find ourselves in a position
where we will either have to print money or we will have to default
when tliis great debt, a large part of which is a current liability, comes
due.
There are many thousands of E bond holders and, when this war is
over and the incentive of patriotic duty to hold these bonds is over, a
large percentage of these bonds will be cashed and put into circulation.
They are almost the same as money now and can be cashed on presen-
tation. Unless we can retire these bonds through current tax assess-
ment and in an orderly way, we will have to print money and, once
we start that, we are running into trouble. I am of the opinion that
our only salvation is to maintain a high income for industry, high
wages for labor and a comparable income of equality to agriculture.
Air. Fish. Wliat is the amount that you set as the minimum for the
national income?
Mr. Brandt. I do not believe we can hope to retire our present
indebtedness in an orderly manner unless we can maintain at least a
150 billion dollar national income or higher.
POST-WAR ECONOMIC POLICY AND PLANNING 1383
Mr. Fish. Of course no one would love to see that done more than
I would, but do you happen to know what the highest income was in.
peacetime in the history of America?
Mr. Brandt. I think around 95 to 100 billion dollars.
Mr. Fish. Well, it was 90 billion dollars back in 1929, but right
before the war it was only 67 billion.
Mr. Brandt. That was just before the war, and I said the highest
peak income we ever had in peacetime would not suffice.
Mr. Fish. The liigh one in the thirties was in 1937 and 1938, which
was 67 bilhon. Now you are talking about 150 bilHon. I hope you
can give us some idea how you arrive at that.
Mr. Brandt. I am going to try to do so. I am not maldng tliis
preliminary statement without having in mind an explanation of some
method of arriving at the goal we are trying to reach. We have too
many promises and too many ideas. We say we have to do this and
that. We had a lot of these promises in the last campaign. Both
sides promised 60 million jobs, high income to agriculture, high income
to labor, short hours, more pay, but nobody told us how to get it.
Mr, Fish, I will have to differ with you and, although I think it is
highly desirable, I think only one side promised 60 million employed.
Mr. Brandt. Leave that as it may be, I still say that one of the
first things we have to do is to realize that we can't liquidate this debt
that this Nation has today out of income tax alone because, when we
assess taxes too heavily against net income, we finally get ourselves
in a position where we take all the net income a-nd when we do that,,
we stifle business; business cannot operate and we finally get ourselves
in the position where the Government takes all our earnings and then
dishes them back to us in the amounts they think each one of us ought
to have or in relation to its effect on the support of the beneficiary
for those who seek power and advantage and are in a position to dish
out somebody else's money.
Therefore, I think we must come to the consideration of lowering
income taxes in order that business can expand to furnish work for
labor and in turn furnish purchasing power for agricultural produc-
tion and, by so doing, maintain an income of equality to*agriculture
that will permit farmers to purchase goods that labor and industry
produce. There are between 30 and 35 million people who live on
farms, and they are the Nation's best customers.
As a nation, I Imow we are trying to dodge the issue of a basis of
taxation that seems to lend the only hope of liquidating this national
debt, which is a national sales tax. I doubt that we can avoid this
this issue. If we do, we are bound to drift into a position which we
are all trying to avoid, where the Government takes nearly all the
net income and leaves nothing for business expansion. A sales tax
is a degree of inflation but its degree can be governed and regulated
by the amount of sales tax, which in itself is in addition to the price
we must pay for the products we buy.
This naturally is mflationary, but there is a lot of difference be-
tween taxing on net income and gross turn-over in business. One
represents a cost of doing business — the other, if large enough, takes
away all incentive by confiscating all earnings, and then we have to»
stop doing business entirely. When we stop doing business, jobs
go out the window and we start down the road to depression.
1384 POST-WAR ECONOMIC POLICY AND PLANNING
It is my intention here today to present a program of price support
for agriculture which is in itself self-supporting and not a drain on the
taxpayers' pocketbook of the Nation. I am absolutely opposed to
any program that is in the category of paternal assistance except
where we have distress due to drought or other uncontrollable ele-
ments that may bring distress where charity may be needed.
I believe that any program for agriculture must permit of the great-
est freedom of action, and I do not believe that any central force of
planners can plan a program for the 6,000,000 farms of America with-
out being wrong as many times as they are right with respect to
guessing the hazards that come with respect to farming operations.
We have had some sad experiences in the past of centrally planning
farm crop programs, and we find the pendulum swings so far one way
or another or weather conditions interfere and we either have an uncon-
trollable surplus of one product and a shortage of another or we miss
the boat entirely.
This deals with all the problems of crop insurance, allocations and
crop control. It carries with it all the hazards of a program that sets
out to define and direct the operation of each individual farm. I
think it is too complicated to ever work out as it should, and we must
deal with it on a much broader basis. I think that if we are to main-
tain the freedom of America, a freedom that is guaranteed to us under
the Constitution of the United States, we must develop a program
of broad governmental assistance that will leave the freest individual
action in the operation of our business affairs, whether they be in
business, labor or in agriculture.
I will say this much — that certainly we are going to have some degree
of control, some degree of regulation, but whatever we do in this respect
should be so well defined by Congress that it will not permit of a legis-
lative act on the part of an administrative bureau. I think one of the
biggest dangers we face in America is that congressional legislation is
so indirect and indefinite that it extends authority and permits of
administrative legislation, which is bad in any nation and will lead us
into trouble and the loss of our liberties. Too much paternalism
carries with it paternalistic control.
I do not believe that this Nation can survive the post-war period
without some degree of inflation if we are to avoid repudiation, of our
debts. We must manage some way to maintain a high income for all
three branches of the Nations activities and, ceitainly, when we
attempt to do this by whatever means we may follow, our dollars will
not be worth as much money as they have been in the past. In fact,
who is there today wdio is foolish enough to believe that we aren't
already in a highly inflationary period.
Mr. Fish. What are these branches you refer to?
Mr. Brandt. I refer to agriculture, labor, and industry. That is at
least the broad definition that I give it. I do not believe there is
anyone in this room who believes that we can go back to a peacetime
income or that we can get wages, price levels, and industrial earnings
down to a basis of world levels. I don't think anyone believes that
labor will want to go back to the long hours and low pay that will
exist in many foreign countries. I do not believe that we can expect
industry to expand as it has in the last 165 years if we are going to
cramp it with controls and low income as we will have in many
foreign countries. Neither do I believe that we can maintain national
POST-WAR ECONOMIC POLICY ANI? PLANNING 1385
prosperity if agricultural products must seek world levels. I think
it would be disastrous to agriculture and we would never be able to
maintain our national income at the necessary high level without
agricultural prosperity. • ^ -j
Mr. VooRHis. Without disagreement with what you have just said,
what would you do about the exportable surpluses in certain agricul-
tural commodities? i r. •,
Mr. Brandt. I will come to that pretty soon and i have a detinite
idea of what we could do with agricultural surpluses and exportable
surpluses and the uses of these surpluses within our own markets.
This Nation is without question geared to thinking of maintaining
agricidtural prosperity by tying it to the cordstrings of prosperity
for labor and industry, but we should stop and give this idea some
consideration and realize the fact that the Minute surpluses appear,
they will immediately depress the price of agricultural products unless
there is a home made for such surpluses. Human beings are funny,
but maybe they are not so funny after all, as everybody wants every-
body else to have a good income, but they ah want to buy things as
cheap as they can and, whenever a surplus tries to find a market for
itself, it will depress the market price for all the production to the
level of where the surplus will find a market outlet at a price that will
move it. , . i i ^ i i.
To prove this statement all you have to do is to go back to last year,
and that was in a wartime period when certainly nobody felt that we
had too much food, but we ran into periods where surplus egg pro-
duction and surplus pork production had a very depressing effect
upon the market. We saw eggs reach a position where you could
hardly give them away, and certainly nobody could say that this
Nation was lacking in earning power sufficient to buy all the food it
wanted, but still eggs were a surplus. That in itself disproves the
fact that high earnings in labor and industry will always mamtam
high prices for agricultural products.
When surpluses appear everybody buys as cheap as he can and the
price goes down. Nobody wants to pay more than he has to and
some people don't even want to pay that much. I am associated
with a cooperative association, and it is in the interest of our patrons
that we try to get as much for our products as we can, as the farniers
need it. But, in spite of all that we can do, we cannot maintain prices
when surpluses appear. Our Government stepped into the picture
when we had the surplus of eggs and made a home for the surplus at a
price level at which they wanted to maintain the egg market.
It must be remembered that in wartime the Government can buy
some of the items and store them and justify this action, but the
Government itself cannot be the granary for all surpluses, and this is
especially true in peacetime. Whether the surpluses exist m manu-
factured goods or in agriculture, the cost of the disposal of surpluses
must be borne by those who create the surpluses.
We haven't any right to expect a price for the products we produce
in excess of that which we can use in our home markets that is higher
than the levels at which we can dispose of these products m some
manner other than through our normal home markets. If we produce
■ for export or if we produce products that may go into certain types of
chemurgic development, then we ourselves, and we only, should pay
1386 POST-WAR ECONOMIC POLICY AND PLANNING
the bni for the loss through the disposal of the surpluses in such man-
ner. Ihis is the only basis upon which we are going to establish a
sound basis lor business and agriculture as a whole.
^v^'^^S Chairman. Industry carries its own surplus, doesn't it, and
they do that because industry has been able to get together and or-
ganize Itself so as to curtail production down to the national need
Isn't that right?
Mr Brandt. They may not have gotten together to do it, but the
very tact that they operate a business requires that they do regulate
their surpluses. If they do not want to produce a binder, they do
not have to do it, but we are unable to do that in agriculture Farmers
have no control over the weather. We have 6,000,000 farmers
scattered all over the country and they do not have the organized
control that mdustry has. Industry can get together and discuss
theu- problems and then govern their own production according to the
situation they find themselves in. T\Tien a farmer plans his crop he
never Imows just what he is going to produce and, if he produces
more than he can sell, he has it on his hands.
-Mr VooRHis. You do not want to say that industry never gets
together to do that.
Mr. Brandt. I wouldn't say that. They do get together on a lot of
tJamgs. In tact, there are a lot of people who get together on control
or matters that are not for the best interest of the farmers. The only
way farmers can merge their interests is through cooperative organiza-
tions, i don't want to build a case for agriculture on anyone else's
shortcomings, but I do thmk agriculture must get together to produce
manutacture, and merchandise its farm products so far as this is pos-
sible. ^
The Chairman. But in buildmg that case you must recognize the
tact that industry can do and does do what agriculture has never been
able to do up to this time.
Mr. Brandt. That is right, but it is agriculture's own fault, so far
as their being able to get together is concerned. I am not excusmg
agriculture m any way. I am pointing out that we ought to give them
the luUest opportimity to conduct in its fullest the job of producing and
marketmg agricultural products.
The Chairman. I would like to find out how vou can do it.
Mr Brandt. I am going to use this chart to show you how we must
provide the opportunity for farmers to deal with their sm-pluses.
Ihis hrst chart (see exhibit 3, p. 1694) is one that is representative of
the situation with respect to the market for dairy products and, inas-
much as dairying constitutes about 20 percent of the national income,
It is a tremendous item, and in dairying we have an opportunity of
absorbing surplus labor, as it requires more work in the dairy business.
IJairymg also affords a sound basis of soil conservation. Surplus
larm products that are converted into butter, cheese, and other dairy
products provide a means of reducing bulky farm surpluses into
concentrated items that are easier to handle.
The total farm income is a governuig factor of national income. If
you were to review the experience of past years you would find that
the national mcome bears a direct relation to the farm income. You
can multiply the dollar the farmer gets by eight and you will have the
national mcome.
POST-WAR ECONOMIC 'policy AND PLANNING 1387
This chart represents the market trend for butter over a period of
Jidy 1943 to June 1944, which is just about a year. Note the erratic
market changes durmg this period, which are due to the reflection ot
temporary surpluses and market manipulation. D urmg the sprmg ot
1943 statistical information from the Department of Agriculture indi-
cated that we would have production of butter of about 60 000,UUU
pounds in excess of that which we usually produce, which would
present a picture of storage holdings in this amount m excess of the
normal holdmgs. , , , . ^ xi • • +
Our markets were headed right down to the bottom, to this point on
the chart, which is 15 cents per pound. Certainly everybody m the
butter busmess foresaw a situation of this kind. The bear traders
were doing all they could to crowd it down and theu- contention was
supported by an ever increasing supply of butter. Just to give you a
little illustration to show you what effect a little market stabilization
wUl have in maintaining a stable market for butter, this straight line
on the chart indicates the period when a small amount ol butter was
removed through the operation of a surplus holdmg pool that made a
home for this surplus butter. . lo
Mr Hope. Those figures at the side are price per poimd/
Mr Brandt. These are all the per pound price ranges. I happened
to be in Washington at the time this market declme reached the
lowest point. I attended a coiiference with the Secretary ot Agricul-
ture where there were a number of Government men representative ot
farm groups and at least one dean of a college present. Everyone recog-
nized that something should be done if we were to avoid a disastrous
situation so far as the entire dairy business was concerned, which
would have a bad economic effect on the entire farm mcome. ,
The Land O 'Lakes Creameries was asked to assist m averting this
downward trend and to take over the market stabilization until the
Government could arrange some program whereby it could stabilize
the butter market. This was on the 19th day of Augiist. Dean
Christensen; who was at one time secretary of the Farm Boarcl and
was at that time dean of the college of agriculture of the University ot
Wisconsm, made the statement that during the Farm Board operation
they had asked Land O'Lakes to help stabilize the butter market and
asked if something on the same order might not be accomplished at
this time. ^ , ^ • t i *r,„4.
As a representative of the Land O'Lakes Creameries I agreed that
we would help out until the Government could prepare itselt to do the
iob We agreed with the officials of the Departhient of Agriculture
that we would step into the market the next day and, if necessary,
would handle the market situation for a period of 8 or 10 days until
the Government had its own machinery set up, and during that time
all we would ask was that the Government would take the butter olt
our hands at the price we paid for it. We would furnish the capital
and take all the risk so far as the use of our capital was concerned.
Someone in the group asked when the farmers would feel the ettects ol
the stabilization. This meeting was held on August 19 and i said
they would get the benefit of it "tomorrow morning.
We used the machinery of the Land O'Lakes branches at Mew lork,
Chicago, and Boston. I got in touch with these branches the same
afternoon and made it known we wanted to buy butter the next
1388 POST-WAR ECONOMIC POLICY AND PLANNING
morning When the next morning arrived we offered to take butter
both on the Exchanges and through private offers, at a cent above the
market lor the previous day. We noticed immediately a definite
reaction, and many pressure sellers were not ready to sell when there
was a ready market for their product. Each dav we moved the market
a httle higher until it reached the high where vou see this straight line
as this is the market level at which the Government wanted to stabHize
the butter market.
This was accomplished without a very heavy purchase, and it is
lunny how sellers react. When somebodv wanted to buy nobody
wanted to sell. The market moved right up to this level, as indicated
on the chart, and stayed there all during the period through which we
tiandled the stabilization operation. You will notice this little upward
jot m the straight line, indicating the market trend. At this point
dealers in the market who were in the habit of speculating and trying
to make nioney through manipulation tried to run the market up
above the line at which we intended to stabilize the market, and vou
will note that this little upward jog in the market line lasted only a
short time as, when buyers stepped into the market to advance the
market, we had some of the butter on hand that was purchased in
stabilizing the market and we started to sell. When they found that
the force that was holding the market up was ready to release some of
its butter when they attempted through manipulation to advance it
above the reasonable level we had set as the basis of stabilization
buyers again became inactive and the market settled down to carry
out the program indicated by this straight line.
During all this entii-e period the market was in the rut indicated by
this low point m the market Ime until this pomt, where you see the
?^ nnn*n?f ^"^ ^^^^^. \^ ^''''^^- ^^ ^^^ ^^^^^ uccessarv to purchase
ll,UUU,OUO pounds of butter in order to maintain this market at the
desired level. At this point where the market line again breaks there
were circumstances that entered into the case where we felt that we
should not stay m as the operating unit for market stabilization As
you will note, we only agreed to do the job until the Government could
set up the machinery to do the work for itself, and it took them much
longer to get ready to act than we had anticipated, but we did carry
along many weeks longer than we originally agreed to do.
When the Government program was finally set up it operated on a
purchase and bid program without making any special home for the
surplus at a stipYilated market price. You will note by the trend of
this market line that the speculators got into the picture again and
when the Government was getting ready to make another purchase'
they depressed the market so as to grab the butter at a low pomt and
then made a bid on a higher quotation and manipulated the market to
run it up at the time deliveries were made. This market line is a
definite illustration of how a market can be manipulated when there is
a small surplus that buyers and sellers can use for that purpose.
Ihese market lines indicate where the speculators got together and
ran the market down and then, on delivery, would up it because they
were bidding on a delivery of certain quantities of butter at a premium
over the market on day of delivery. You can take every bid and
delivery date and show exactly when each took place by the low and
high m these market lines.
The funny part of this whole surplus scare was the fact that we
really had no surplus at all. The market could have carried along on
POST-WAR ECONOMIC POLICY AND PLANNING 1389
the basis of this straight line and all these dips could have been
avoided, all of which indicates a severe loss to dairy farmers and the
economic welfare of the Nation as a whole. A stable, fair market is
always inducive to high consumption, as consumers are always upset
by wildly fluctuating markets. An item of 50,000,000 pounds of
butter in excess of normal should not be a worry to either dairymen or
the Nation as a whole, as this is only a little over a third of a pound of
butter per capita, but does represent the production of a lot of bulky
surplus that has been converted into a concentrated product.
The market stabilization that we operated at the time this chart
illustrates gave us experience as to what could be done if a home were
provided for surpluses that otherwise would have to seek a home of
their ow^n. In June of 1938 our butter market was again in a tailspin.
The Department of Agriculture called a group of cooperative leaders
to Washington to discuss with them a program of market stabilization
that would protect the market at a level of 80 percent of parity.
While I do not agree with past or present parity formulas, neverthe-
less it was the basis that we had to follow. Parity for agriculture is
only parity when it gives agriculture equality with industry and labor.
This group of leaders got together and organized what is known as
the Dairy Products' Marketing Association. The membersliip of this
association consists of eight regional cooperative marketing associ-
ations. We put in just enough capital to incorporate it a,nd set it up
for operation. We then had an agreement with the Secretary of
Agriculture and the Commodity Credit Corporation in which we set
up our stabilization operation on the basis of the ever-normal-granary
idea. We use the principle of grain loans on the farm, but everybody
realizes that you cannot take butter and store it on the farm as you
can corn, oats, and wheat. It is a higlily perishable product and
therefore must be handled in an entirely different manner.
We had an understanding with the Secretary of Agriculture that the
butter that was needed for relief purposes should be taken from the
surplus holding pool and out of the stocks that have there accumulated.
Secondly, we had a deal with the Commodity Credit Corporation to
the effect that we would operate tliis holding pool for butter in exactly
the same manner as farmers operate the ever-normal-granary loan
program on their farms. We were to seek loans on butter on the
security and delivery of warehouse receipts with Government certi-
ficates attached indicating that the butter was in approved warehouses
and that it was of a certain grade. The loan value, as I remember it,
was around 28 cents, which was supposed to be 80 percent of parity.
We had an agreement that we either pay our loan tlu-ough the delivery
of butter or in cash, the loan being a nonrecourse loan just exactly the
same as loans on the corn or wheat in the crib on the farm.
However, I am going to say that there is a real fault in this method
of handling a surplus holding pool, as I am firmly of the opinion that
if the farmer produces a surplus he should be the one who should take
the loss caused by the disposal of the surplus, but the surplus should
not be permitted to depress the market on his total production. If
he produces 10 percent more than the Nation requires he should at
least get a price that will give him equality of return for his labor
covering the 90 percent used in the home market. If he has to dis-
pose of the other 10 percent at a discount, he can well afford to take
this loss rather than take the discount price at which he must sell the
surplus for the total 100 percent he produces.
1390 POST-WAR ECONOMIC POLICY AND PLANNING
We, as farmers, do not want to depend upon assistance from the
taxpayers' pocketbook. We are willing to pay our own way, but we
do want assistance from the Government in providing a means whereby
we can dispose of our surpluses without affecting the price of the total
production.
The new marketing coi;poration set up its headquarters in Chicago,
and you may be surprised to Imow that when we finally got organized
we operated a butter marketing stabilization program with a person-
nel of less than 25 people. We did tliis from June 1938 to 1942 and,
if you will study the market during this period, you will note the
absence of the dips and peaks in the butter market. There were few
of these — occasionally the market would rise above the stabilized price
but never went below. \
We didn't interfere with anybody's production or marketing. All
we did was to say "Anybody producing butter should market it where-
ever he wants to sell it, to whom he wants to, and in any form he wants
to." We only stood ready so that if there were no buyers for the
butter the Dairy Products' Marketing Association would take the
butter on a basis of 80 percent of the parity price. Here is just what
happened. We operated from 1938 to 1942, and at this time the war
emergency cleaned out all the surplus on hand. During that period
we handled what appeared to be 250,000,000 pounds of surplus butter,
but which was actually not a surplus at all. Surpluses usually appear
in the spring of the year during peak production at the time when
farmers produce the most. It is then that he always gets the least
for his product, and by no means does an average market indicate the
actual price the farmer receives, because if he produced three times as
much when the market is low as he does when the market is high, the
average does not work out. Without interfering in any way with
manufacturing controls, price ceilings, or anything else, we simply said
"Here is a home for your butter. If nobody else wants it, we'll take
In handling the 250 million pounds of so-called surplus we made
deliveries to the Government for relief purposes, but a lot of this butter
went back into regular distributing channels. Whenever the market
went above the stabilized price line, the Dairy Products Marketing
Association sold butter and it went back into the regular trade chan-
nels. We did not in any way interfere with the normal merchandising
operations of any dealer.
When we finally disposed of all the surplus we did so without any
loss to the Treasury except that the Government bought such butter
as it needed for relief purposes from the surplus holding pool and, of
course, such purchases and deliveries into relief cannot be considered
the responsibility of the farmer. He is only to take the loss on such
sales as are actually disposed of in a manner that cannot be considered
either relief or normal markets.
As I have already stated, this program was self-supporting. In
fact, when we finally disposed of all surplus butter, the Dairy Products
Marketing Association had over a million dollars left in its treasury.
This is still intact and ready to start a program of stabilization if and
when it is again needed. There is only one thing wrong with this
type of program. If we had sustained a loss we would have had to
go to the taxpayers to pay the bill and, therefore, we as cooperatives
and members of the National Cooperative Milk Producers Federation
POST-WAR ECONOMIC POLICY AND PLANNING 1391
believe that we should set up a permanent program whereby any losses
sustained in the disposal of actual surpluses should be made up through
an assessment against the producers, which should be in the form of
an equalization tax. This, of course, cannot be done except as it is
made possible through some act of Congress, as no one in either a
cooperative or other corporation has any authority to assess producers
for losses. Everybody can get the benefits of a stabilization opera-
tion, but he does not need to contribute unless he so desires. There-
fore, it requires legislation to bring about the desired results.
Mr. Hope. That is essentially the McNary-Haugen plan?
Mr. Brandt. Yes, it is something on the same order. The McNary-
Haugen plan didn't carry through on a method of disposal of the sur-
pluses; it did not have the pool operation but, in general principle,
it operates in about the same manner as was suggested under this
bill. If the Dairy Products Marketing Association had not been in
operation or some similar method of stabilizing prices, butter would
have sold for less than the farmer was paying for wagon grease. Back
in 1933 butter did decline to a point where many farmers paid more
for wagon grease than they got for their butter.
Mr. Hope. Let's ask why you select this figure of 80 percent
parity. I don't know why, but you had some reason, no doubt.
Mr. Brandt. The reason we selected it was because that was all
that was provided for under the act whereby farmers could secure
loans on farm-stored grain, and we merely used the basis provided
for in the law as it existed, but I want to be sure you understand that
I do not consider the present formula for parity one that gives farmers
equality of price. It is a makeshift set-up and needs a lot of improve-
ment, as it does not take into account the item of labor in producing
farm products.
Mr. Hope. What I wanted to ask you is whether you thought you
could have maintained the price at parity, if you had had the oppor-
tunity, just as easily.
Mr. Brandt. Very definitely we could have maintained it at parity,
and I feel sure that even under the most adverse circumstances we
could maintain a parity price for that part of the farmer's production
that is used in normal American markets. The only loss he would
have to sustain below parity would be on the disposal of that part of
his production which is surplus, that would have to be diverted either
to foreign markets or into some channel such as the manufacture of
grain alcohol and many other things that could easily be developed
for the disposal of the surplus.
So far as butter is concerned, during that period of 1938 to 1942
when we really seemed to have a surplus an assessment of 1 cent per
pound against the total production would have established a stabili-
zation fund for the disposal of the surplus that would have given the
farmer a full parity price minus what might be the possibility of a
loss of this 1 cent per pound.
There was a period during the operation of the D. P. M. A. that we
had over 100,000,000 pounds of butter in the surplus holding pool.
We were doing some negotiating with the British Government just
before the war broke out in Europe for the sale of 50,000,000 pounds of
butter to England. There are a lot of people who say we cannot
sell our surpluses in foreign markets. You cannot sell anything if
you say you can't sell it, but I never saw anyone yet who wanted to
1392 POST-WAR ECONOMIC POLICY AND PLANNING
buy something and wanted to pay more than you asked for it. The
butter on which we were negotiating a sale with England could not
have been sold at the price we were getting for butter in American
markets, but it could have been sold for a small discount and on a
basis of world markets. Certainly, we have no hope of selling our
products in world markets above world levels, but we cannot let the
sale of surpluses in world markets at woild levels depress the total
American market without courting disaster so far as the future of
America is concerned.
Mr. Hope. On this particular transaction how much did you have
to dispose of in other than the normal channels of trade?
Mr. Brandt. Relief agencies took about two-thirds of what we
had accumulated. That went into relief channels. ReHef agencies
were at that time giving away oranges, apples, and many other kinds
of food. That was charity. Farmers should not have to slipply food
for charity, as that is the business of the Government as a whole and,
therefore, any charity items should always be taken from the surplus
holding pool and the Government pay into this pool the cost to the
farmer so that the farmer would not have to pay the cost himself.
He pays his share of the taxes the same as the rest of the people but,
if the farmer disposes of any of his surpluses in foreign markets or
through the development of some new use, then that is his obligation
and he should pay the bill, and nobody else.
Mr. Hope. Your idea, then, is that for any that might be disposed
of in that way you should assess the fariner?
Mr. Brandt. The farmer should pay for the disposal of his surpluses
except that which goes for relief purposes. Certainly we cannot con-
tinue to subsidize everybody in this country. Congress is going to
soon realize that we cannot appropriate any more money but that we
will have to start cutting down on our expenditures. Otherwise taxes
will have to be increased so high that the Goverimient will take every-
thing away from us that we earn and start giving it back to us in the
form of subsidies and gratuities, and that is the straight road to
communism.
Business is charged with the responsibility of furnishing jobs for
workers and an outlet for farm products, but they cannot do it unless
they have an opportunity to expand and exert their efforts. Pretty
soon you will hear the same ones who are charging business with the
responsibility of furnishing jobs, even though they do not have an
opportunity to do so, accusing business of not doing it and, therefore,
the Government must take over all business, and that is something
we must avoid at all cost.
Mr. VooRHis. I want to tie up what Mr. Brandt has just given
us. Would this be a fair statement: Under this system of cooper-
ative marketing and because your regional cooperatives were big
enough and strong enough to do the job, what you did was prevent
the price of butter from going down to the level it would otherwise
have been driven to?
Mr. Brandt. That's right.
Mr. VooRHis. In view of speculative conditions and in view that
prices would have declined in the flush periods of production, you
held it at a fair average level based upon the real over-all annual
demand of the American people. That is about what you did, isn't it?
Mr. Brandt. That's right.
POST-WAR ECONOMIC POLICY AND PLANNING 1393
The Chairman. Now I would like to ask you this question. You
have pointed out that your plan, which is virtually the McNary-
Haugen plan -r •„ • . i ^ i ^i, 4.
Mr. Brandt. It has features of it. I will go into a chart here that
will give more explanation of it.
The Chairman. In connection with the dairy industry?
Mr. Brandt. That's right.
The Chairman. And but for the war coming on, it would have con-
tinued to work?
Mr. Brandt. That's right.
The Chairman. Is it your opinion that the same program could
work with cotton?
Mr. Brandt. It will work with all agricultural products. It could
not work over a long period of time with one product alone because
sooner or later we would shift production to the one product that had
the market protection. If we maintained butter prices at a fair level
which was comparatively higher than the price of other farm products,
we would gradually pull production into that field. Butter is one
item upon which the program would work longer than any other farm
product because you cannot, move into the production of butter as
fast as you can other agricultural crops but, in order to make it work
successfully over a period of time, it would have to include all major
agricultural crops. The program should only include major agri-
cultural products and not deal with specialized crops. If we make
it possible for a farmer to have a reasonable prosperity by producing
any of the major crops such as cotton, corn, wheat, hogs, beef, dairv
products, and so forth, the question of his raising certain specialized
crops such as seed, certified milk and others is a matter of the farmer s
own determination and we should not involve a stabilization program
in handling the deal. We cannot guarantee security from all hazards
to everybody, as the people still are the Government and must carry
their own responsibility. / i • .
The Chairman. Do you think, then, since we are working out a
post-war program, that this principle should operate with reference
to all?
Mr. Brandt. That is right.
The Chairman. All commodities?
Mr. Brandt. All major farm commodities.
Mr. Hope. You mean all the important ones?
Mr. Brandt. Yes.
The Chairman. The major farm commodities. Let me ask one
further question: You took 80 percent of parity as the basis for your
butter price? ^ , _ u ,- j
Mr. Brandt. We took that because the law said we couidn t do
anything else. , , , i ^ ^.r, +
The Chairman. The law said they would make a loan up to that
point, but now would you say we could take the parity?
Mr. Brandt. The parity, but not the present method of computing
parity but a method of computing parity that is so definitely fixed by
an act of Congress that some administrator cannot juggle it to suit
himself.
Mr. Fish. I think that is right. , n i- n
The Chairman. Then you would start from that figure lor all
foreign products, and you vs^ould eliminate the necessity for any loans.''
1394 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Brandt. That is right, no loans because you hare made the
sale and once you have marketed it, it is gone and you ha\-e received
the parity price when you marketed it. The farmers in this Nation
can never maintain their position unless we maintain paritv for
agriculture.
The Chairman. For example, here is your cotton. We, I think
will produce m.ore than we can domestically consume in any normal
year. There isn't any doubt about that. The local mills and local
users of cotton would pay the price, the parity price, for cotton.
Mr. Brandt. They couldn't help themselves because, if they didn't
pay it, there is a place m the surplus holding pool for it to go.
The Chairman. Then you have here a farmer who sells to an
exporter, or part of his cotton crop goes into export. That goes on
the world market?
Mr. Brandt. That is right.
The Chairman. Then the farmers, as I understand it, have an
assessment on all of the cotton?
Mr. Brandt. When you see this chart you will see that a basic
assessment will go against all major crops and all the assessment will
go into the pool and take care of the disposal of our surpluses.
The Chairman. Then they will make up the difference?
Mr. Brandt. Yes; the farmer will pay his own bill.
The Chairman. And the American farmer will make up that
difference?
Mr. Brandt. The American farmer has to pay the bill himself.
^ The Chairman. In other words, a man produces cotton and it goes
into the foreign market. He will get the parity price for that product?
Mr. Brandt. He gets the parity price for all his cotton but that
part that is sold m foreign markets. Therefore, the price he actually
receives would be parity minus the equalization fee, which is deducted
from the sales price at the first point of sale.
Mr. Hope. He gets the parity price for all of it except you deduct
the tax that he pays?
Mr. Brandt. That is right. That tax he pays furnishes the money
for the revolving fund of the pool.
The Chairman. That is what I was trying to understand. The
tax that he pays and all the other men pay goes to help make up that
difference, but the man who sells it gets parity for his cotton. Is
that right?
Mr. Brandt. Yes; except that the equalization fee is deducted
from the parity price. The first figure on this chart (see p. 1694)
deals with long-range planning and utilization of submarginal
land. Such land should be withdrawn from regular cultivation
and taken back into the public domain until needed to supply the
necessary production. The withdrawal of any amount of land will
not, however, take care of seasonal fluctuations in production and,
therefore, this figure on the chart only illustrates the one step in a
'land-utihzation program. The next figure on this chart represents
the surplus holding pool. The Dau-y Products Marketing Asso-
ciation that I spoke to you about before operated such a holding pool.
Its operation should be in the hands of a board, not by any one
individual, but a bipartisan board which has a long tenure of office,
and the members of which are paid a substantial salary.
Mr. VooRHis. Is this going to be a governmental board?
POST-WAR ECONOMIC POLICY AND PLANNING 1395
Mr. Brandt. It would have to be a governmental board because of
tax complications. You cannot turn taxes back to individuals, but
this board and its activities should be governed by legislation that is
definite in its limitations and restrictions and operates as an adminis-
trative body. The first appropriation to be made by Congress is to
furnish the capital for its operation, but this appropriation would
only need to be made once. The amount that we put m subsidies
each year would easily furnish the capital for the operation of this
The pool would not suffer losses in its operation, as the revolving
fund would always be replenished through the imposition of an
equahzation fee or a tax on the first sale of the product protected by
the price level of the surplus holding pool. Just as an illustration,
this pool would operate on wheat, corn, butter, beef, hogs, and all
other basic crops. The pool operation would have no control what-
soever over farm operations or where the farmer marketed his product.
It would merely stand ready to accept the farm commodity at parity
price, and certainly no one could buy the product for less than the
sm-plus holding pool made a market for it at the established price.
It could seU for more, but no one would seh for less.
The pool does not actually handle the commodity but accepts official
warehouse receipts with Government inspection certificates attached
as the evidence of ownership of the commodity and, therefore, its
operation would not interfere w^ith any normal business activity that
is now conducted by elevators and warehouses. The pool operation
would permit of the freest planning and operation on the part of the
individual farmer. We would not try to dhect the detaded farm
operations of 6,000,000 farmers from some central point. It has
been proven that to try to do that runs you into many hazards that
cannot be controlled and the planners miss their calculations more
times than they are right. We have seen the program of central
planning in action for 13 years, and certainly in that time we have
seen some very disastrous results. We should give farmers general
assistance in the way of statistical information as to the crops most
needed, but every farmer should and knows best how to operate his
own farm, .
As a representative of a cooperative, I am not asking for any special
consideration for cooperatives. Nobody has ever heard me try to
build up the position of a cooperative by saying that somebody else
doesn't do the job for him. We build our cooperatives on a sound basis
by educating our farmers into appreciating the advantages of bargain-
ing for themselves and doing a complete job of producing and mer-
chandising their farm products. If any farmer believes he can do a
better job through any other processor or wholesaler, that is his privi-
lege. We do not believe in coercion or mernbership or in having a
third party force anyone to join our cooperatives.
The Chairman. That is what we have; is it not? '
Mr. Brandt. We are interested that everyone should have the free-
dom and guidance of his own judgment in handling his own business
affairs. Freedom of enterprise is what made this Nation. The sur-
plus holding pool will protect every farmer's price as every buyer,
whether cooperatively or privately owned, can hardly expect to buy
products from farmers unless he at least pays the price the farmer can
get by marketing direct to the surplus holding pool.
1396 POST-WAR ECONOMIC POLICY AND PLANNING
As an example, if the pool were willing to accept butter at 30 cents
and with a 5 percent equalization fee the farmer would receive 28K
cents for his butter at the market place, the 1 ]i cents would be absorbed
ool pool in maintaining the appropriated capital for the revolving
The Chairman. You fellows setting up that pool assume vou are
up there and the co ton farmer down here. Say we are going to pay
you 15 cen s a pound for it, but this processor-and that is wh?re most
of It goes, the gmner-he says, "I won't pay you but 15 cents a pound,"
and you boys say "If you ship that cotton to us we will pay you 20
cents —that is what you say— I say if it goes to 20 cents, you fix it
at 20 cents. Then you say, "If you ship that cotton, Mr. Farmer to
us, we will give vou 20 cents a pound "
Mr. Brandt. That is right. He has to pay for it or he can't get
It. 1 he pool furnishes the basic competition and you either pay that
price or you don't get it. The farmer can do anything he iants to
with his crop, but he is always protected by the price he can get at the
surplus holding pool. Take wheat as an example. We have a basic
equalization fee of 5 cents and want to maintain the wheat price at $1
The farmer would get, 95 cents for his wheat, the 5 cents would go into
the revolving fund of the surplus holding pool
In the case of cotton, instead of getting the full 20 cents, if that
were the pool price, you would get 20 cents minus the 5 percent equali-
zation lee. Ihe farmer would always have parity minus the equaliza-
tion lee, and this equalization fee is charged in order that the farmer
pay lor his own losses where the products are marketed in foreign
countries or through certain types of chemurgic development
Wow, on this chart we have completed the niustration of how the
iarmer produces what he wants, sells where he wants to, but always
has the pool operation standmg ready to take his product, but he
must pay the established equalization fee regardless of where he sells
the product, whether through the pool or to some other buyer In
this manner every farmer is forced to pay his share of the loss sustained
on his surplus production.
Mr. Hope. Right at this point, is your board going to determme
the amount of equalization fee?
Mr. Brandt. Yes; the basic equalization fee should be a matter of
congressional action, but the board should be authorized to make
changes in the equalization fee to permit of the handlmg of excess
surpluses. ^
Mr. Hope Let me ask you this question. Would you have an
equalization fee in effect all the time?
Mr. Brandt. I would have an equalization fee in effect all the time
and have it just high enough to take care of the general average situa-
}\ ^.Jl^"^ amount would have to increase under certain conditions
and 1 will bring out this point later. It is surprising how buyers wHI
hang onto surpluses if they are sure there is a home for them because
when somebody else wants it, everybody seems to want it
Up to now you have an illustration of the operation of the surplus
holding pool, and now what happens to the products once thev are
m the surp us holding pool? Certainly we are apt to get more products
m the pool than should have been placed in there and that may be
needed back m the^home market. You notice that situation in the
butter illustration I have already given you. Whenever the normal
POST-WAR ECONOMIC POLICY AND PLANNING 1397
demand exceeds the supply of merchandise in the hands of the regular
traders, the pool goes into operation and the products start from the
pool back into normal consumptive channels.
If the Government needs commodities for relief purposes, Congress
should provide that such relief needs should be taken from the surplus
holding pool but at no discount, as it is everybody's job to finance
relief and, therefore, the pool should not suffer any loss to be made up
by the equalization fee for products that are used for relief purposes.
Now, as to new developments — you can all remember when we used
to feed our horses from the grain we produced on the farm to produce
the power on our farms. The production of nearly 20 percent of the
farm acreage was used for feed for horses and furnished the power
energy to operate our farms. Now the tractor does the job and, instead
of producing our own power from the production of our farms, we get
down under the soil for it, and we are fast depleting this source of
power. Now is it beyond the realm of reason that this farmer, in-
stead of going to his corncrib and his oat bm for his power that he
might have some of this production transferred from the surplus hold-
ing pool into a processing plant that would make alcohol to be used
for his tractors, should fall back on his own production of surpluses
from his own farm for the production of at least part of his fuel? It
has already been established that fuel made from alcohol with a water
supplement has great potential power possibilities so far as the farmer
is concerned, possibly far beyond anything any of us appreciate at the
present time.
I cannot see why the farmer, who is often plagued by surpluses,
should not have the opportunity to furnish his own power on his own
farm and run a tractor with his own fuel the same as he did when he
went into the corncrib or the feed bin to get the grain to feed his
horses that furnished his power. So, it is plain to be seen that the
need for developments of this kind can furnish a great outlet for farm
surpluses, possibly not at the parity price but at a price comrnen-
surate with what he is now paying for power, and any loss sustained,
thi-ough this diversion of farm crops would be made up out of the
equalization fee.
Take the matter of cotton. I can easily visualize the cotton that
is piled up and going to waste coidd be easily made into a product to
pave roads, if we couldn't find any other outlet for it. I can think of
hundreds of things we could do with it. Of course, you couldn't get
the price for the cotton used for this purpose that you could if it were
made into a hat or a shirt, but this could be considered a develop-
ment that is not your normal market and, therefore, the losses would
be financed by collections through the equalization fee method. Then
take our foreign markets.
The Chairman. Pardon me just a minute. I come from a cotton-
producing district, one of the biggest in the country, and I am very
much interested in the future of that product.
Mr. Brandt. So am I because I don't want you to go into the dairy
business.
The Chairman. That is right, and we could do it. Now, we make
a loan on cotton of — it is now 95/2 percent of parity.
Mr. Brandt. How did you ever get that amount? It is more than
I can understand. We can't get that much of a loan on our northern
crops.
99579— 45— pt. 5 12
1398 POST-WAR ECONOMIC POLICY AND PLANNING
The Chairman. Congress passed that law. Now, the Government
with these loans has come into ownership of I don't know how many-
millions — I believe something like 10,000,000 bales — of cotton. In
other words, that cotton is in that pool and, I might say, is Govern-
ment cotton. Maybe there is not quite that much because evidently
somebody has not bought that cotton, has not needed it. Of course,
we know the foreign markets have been closed because of the war.
Of course Federal relief has not been using it, and someone is trying
to do something about new uses. What I am thinking about is this:
Might we reach a situation where that pool would have too much cot-
ton or so much surplus wheat that the equalization fee wouldn't take
care of it or wouldn't give you enough purchasmg power to buy that
much?
Mr. Brandt. If you will wait until I get through with this chart I
will have answered that question. One of the reasons you are now
stacking up so much cotton, more than you should, is because back
in the old Farm Board days we started a program of accumulating
surpluses without any thought as to how we were going to get rid of
them after we got them. You held up the price of cotton so high
that you gave the world our cotton market, and they developed it
under the umbrella of the American protective markets. The world
was short of cotton and needed ours. We held the price up instead
of finding a way to give it to them at a world market price. We held
an umbreha over the situation to the extent that we only exported
what they couldn't produce for themselves. They took only what
they needed from us and went on and developed their own markets.
We went ahead and held our cotton off the world markets, let our
surplus pile up and took losses on it while the world increased its
cotton production to take the place of that which we usually produced
for foreign use.
The Chairman. Assuming we had a foreign market now, we would
be confronted with that same situation now, wouldn't we?
Mr. Brandt. We would be confronted with it and, in any case, you
are confronted with the proposition of selling m foreign markets at
world prices. It takes salesmanship to sell in foreign markets as weU
as any other place and, whenever the board determines a surplus
exists in the surplus holding pool, anyone should be permitted to
withdraw products from this pool and sell them in foreign markets and,
upon the presentation to the pool of a legitimate foreign transaction,
should be permitted to make deliveries and be paid a commission on
the transaction. This would keep the business of selling and mer-
chandising in the hands of the regular business people and keep the
Government out of business so far as possible.
We may need to have some reciprocal trade arrangements that will
encourage the trade in our surplus products. I am sure that if we
had this arrangement in cotton whereby products could be withdrawn
from the surplus holding pool for certain new American developments
and for foreign markets, we could easily dispose of our surpluses.
Many people say we cannot sell in foreign markets because it would be
considered dumping. Everyone of us knows that right now Russia,
England, and other countries are making arrangements for their raw
materials to be ready for business following the war, and they are
making these arrangements where they can make them the best.
They won't come to America and pay the price we think we need in
POST-WAR ECONOMIC POLICY AND PLANNING 1399
order to maintain the American standard of living. They will go to
other markets for their products and come to us for what they can't
get other places.
If we permit the sale of American surpluses in these markets at the
prices which they can afford to pay at world markets, we will help
American farmers and also help these countries raise their standard
of living because they will be able to get products at a price which is
in keeping with the limits of their pocketbooks, and we will help to
maintain world peace by being able to feed other people at a price at
which they are able to buy. People must have food or they will get
unruly. We are already facing that— people are turning their guns
around on us because they expect somethmg to eat and are not
getting it.
The Chairman. It is an admitted fact, I believe, by most economists
that about 5, or whatever the percentage is, or 10 percent, that surplus
is the thing that operates against our prices in this country.
Mr. Brandt. That is right. Supposing you have a hundred units
of a given product and you have 10 units too many and you try to let
the 10 units find their own market. The 10 units will set the price
of the 90. If, on the other hand, you make a home for these 10 units
that are surplus through the operation of this surplus holding pool,
you are making a home for it at a price level that will bring all of the
90 units up to the parity price level. Then, if you take out of this
pool the 10 units that are surplus and sell them for only 50 percent of
what the 90 percent sold for in the home market, you will only have a
loss of 5 percent and you will still have the sure price for 95 percent of
the total. If you do not do that, your whole price structure will
break down to the level at which the 10 percent will find a home.
If we are to continue to let farm prices be governed by supply and
demand we will have to do away with all other regulations governing
labor, immigration and protection for manufacturing groups. Let the
farmer take off his coat and go to work and I venture to say that in a
free world without having to compete in a protected market he would
hold his own with any farmer in the world. If we are going to have
the farmer compete with the world as a whole, then we are going to
have to deal with matters that involve our monetary system and all
regulations of hours, wages, and industrial earnings. '
We cannot maintain prosperity to agriculture by suspending his
future on the cord strings of prosperity to other groups. His surpluses
will not only break down his prices but will tear down the high stand-
ard that we try to maintain for other groups. If we are going to
maintam our high national income following the war, we are going to
have to protect farm prices and make farm prices the basis of pros-
perity rather than suspend agricultural prosperity to the cord strings
of other groups.
This Nation is getting into the philosophy today where we are
teaching ourselves that we can do less and have more. We hear so
many people say today that we cannot afford to buy the things we
need because they cost so much. The cost of living is too high. The
general feeling is that farmers are getting too much and that is the
reason the cost of living is too high and, yet, when we really figure it
oirt, most of what goes into the high cost of living is the in-between
operating cost. The price of the raw material has very httle to do
with the price of the finished product.
1400 POST-WAR ECONOMIC POLICY AND PLANNING
We should remember that if we want to buy more with what we-
earn we will have to produce more for the pay we get. We will never
have prosperity through the accumulation of scarcity. It is only when
we produce plenty that we can buy a lot with the money we raise and
that does not only apply to the farmer but everyone, from the farmer
to the ultimate consumer. The purchasing power of the farmer is a
tremendous item. Thirty-five million people living on farms furnish
a great purchasing power, and it is the basic foundation that will
affect high wage levels and industrial earnings.
Mr. Hope. I want to ask a little about the mechanics of the exports.
Now, if I understand you correctly, and I want to be sm-e that I do,
I am going to consider myself as a cotton exporter, and I will go out
and make a sale at the competitive world prices. Now, I want to
come to you to get my cotton; is that right?
Mr. Brandt. If there is anything in the pool and, if there isn't
anything in the pool, you will have to run your own show. However,
if there is something in the pool and it is declared a surplus, you can
withdraw it at the world price.
Mr. Hope. But you would let me have it on the competitive world
price and you would pay me a commission to sell it?
Mr. Brandt. Yes; you deliver to the board controlling this surplus
holding pool the documentary evidence that you have sold it in a world
market at world prices and you will receive the cotton to make the
delivery and a commission for having carried out the sale.
Mr. Hope. Who would be a dealer, then?
Mr. Brandt. Anyone who has made the sale and can make delivery
would be a dealer.
The Chairman. Supposing that I am a cotton exporter and I go
down here to this cooperative marketing that you show over here or
to a processor or to a wholesaler and I buy cotton. I can buy from
him, can't I?
Mr. Brandt. Yes; you can.
The Chairman. But I have to pay the price in the pool?
Mr. Brandt. You don't have to if he will sell it to you for less, but
I am sure nobody would be foolish enough to do that.
The Chairman. That is right, because the pool will give it to him.
Then, he sells it to a fellow in England at the world market price?^
Mr. Brandt. Not if he buys it direct from the farmer. His sale
is his own responsibility. The only place he can sell it in the world
market at a discount is when there is a surplus in the pool and he is
authorized to take the cotton out of the surplus holding pool.
The Chairman. I would like to have that line dkect there from
the cooperative up to the foreign market explained.
Mr. Brandt. He can always sell to a foreign market if there is
none in the pool and at a world price level. If there is no surplus
in our pool, it is likely the world price will be equal to ours but, if
there is a surplus, we cannot afford to hold the umbrella over world
prices.
Mr. VooRHis. You say the world price will come up to ours?
Mr. Br'andt. That is right if we have no surplus and they need
cotton.
Mr. VooRHis. Why?
Mr. Brandt. If the world does not have enough cotton they will
nve to come and get ours and if we haven't a surplus pressure on
"^rld prices, we will naturally find a good market.
POST-WAR ECONOMIC POLICY AND PLANNING 1401
Mr. VooRHis. What you mean is if the world has no surplus.
Mr. Brandt. That is right. ^■^ .
Mr. VooRHis. However, it would not follow, because we did not
have a surplus. ■ , i i . + .„
Mr Brandt. If the world had a surplus they would not want ours
at our price. Our trouble is that we feel that we have no way oi selling
our surpluses at a world market except at the price at which we can
afford to buy it m this country. We have great productive possibilities
and can maintain high prosperity in our country and help the rest ot
the world if we will find a way to give them what we do not need at
a price at which they can afford to buy it.
Mr VooRHis. This thing sounds very good, and I have been trying
to find out what is wrong with it, and I don't know that 1 have.
However, here is what I want to ask you: As I understand it, you
assume absolutely no type of production control? , , .
Mr. Brandt. Just wait a minute. You are getting ahead ot me.
I may show you some of these features before I get through.
Mr. VoQRHis. All right, I will wait.
Mr Brandt. There is one thing I haven't fully explained and that
is the question of having an expected surplus that was not really a
surplus in our own country; some of this product would have found
its way in the pool and then would push outward and we would get
it back into our own markets. We do not want the pool to cany all
the Nation's seasonal surplus and, therefore, if any of the products
that are to be used in home markets find their way into the surplus
holding pool and our dealers have misjudged or deliberately put it
into the pool and want to get it put back into our own markets,
naturally our own market will rise and they should be able to take
it out at the price at which it went in. If they put too much butter
into the pool as you noted in my previous illustration and they wanted
to take some out again, they had to pay a profit to the pool, all ot
which helped finance the revolving fund to the pool.
Mr. VooRHis. Are you going to say to the managers ol the pool
that they cannot sell commodities out of the pool unless they charge
Mr Brandt. That is right. If it is to be used in ordmary domestic
markets, otherwise, everybody would be putting their products m the
pool to make the pool hold all the surplus and we would destroy our
whole marketing system. We have had an illustration as to what
happens to our markets when our Governments starts to sell com-
modities back into the market. They immediately break the market
but if they cannot sell it back below the pool price plus a reasonable
carrying charge and a penalty for having put it m the pool, there is no
danger of breaking our market.
Remember, I do not advocate holding products m the pool regard-
less of how much may accumulate. I have already told you that there
are outlets for American use and in foreign markets that will absorb
our surpluses at prices below the pool level, the loss to be made up
through the equalization fee. „ „t i i v.- t.
The Chairman. Mav I interrupt at this point? Would you object
to having a small print made of the charts you have presented.^
Mr. Brandt. I have some prints here with me that 1 will give to
you.
The Chairman. I want it in the record.
1402 POST-WAR ECONOMIC POLICY AND PLANNING
Mr Brandt. These are rather old and the reading matter that goes
with them may not be too clear but, after you have heard my explana-
tion, you will be able to follow the charts very easily
The Chairman. All right, that is fine.
Mr. Brandt. Before I go further I want to give another explanation
of the variation in the equalization fee. We sometimes have shiftine^
crop production that creates excessively heavv burdens with respect
to certain crops. The basic equalization fee should be applied to all
major crops but if we get rather a heavy sliift to any one item, then
this particular item should be assessed a higher equalization fee
wluch would automatically change the income to the farmer on that
particular product and, by shifting too heavily to one item, we might
be short on another with a resulting price increase above the pool
price, but the equahzation fee would not increase in that respect
VVe might m the operation of the pool have an equalization fee of
5 percent over all, and this might be raised to 7 percent, 10 percent or
whatever is necessary where a certain crop furnished the surplus
holding poo beyond a certain weighted average that could not be
hnanced with the 5-percent equalization fee. Increasing the equaliza-
tion lee would automatically control shifts in production, as it would
have a tendency to decrease certain prices a certain percentage de«^ree
below the parity basis. The pool could easily handle items such as
beet pork, wheat, corn, butter, poultry, and eggs, but we should not
go beyond crops that are considered basic crops, otherwise we get
mto too much detail m specialized crops and we get all tangled up
with what we are trying to do. If farmers have a decent income on
these major crops, it is their privdege to sliift to speciaUzed crops if
they want to. ^ i-
The complete operation of this plan mav require further develop-
ment ot marketing agreements but, remember, marketing agreements
wi 1 not work when applied to the entire crop. Marketing agreements
only work when they control a market for a certain type of product
and, when the surpluses appear, these surpluses are shifted into other
processes This is illustrated in milk. Marketing agreements work
an right tor milk so long as there is a place to dump the surplus fat by
manulacturmg It into butter and cheese, but, when we com^ to take
the whole product, it requires a surplus holding pool to do the job.
It a surplus holdmg pool handled butter, cheese, and dried milk
marketing agreements would easily take care of the fluid-milk
markets.
I want especially to have you understand that changes in the equal-
ization lee will be necessary and wiU be eft'ective in balancing produc-
tion among the various major crops.
Mr. Voorhis. Just a moment, I want you to give that to me agam.
Mr. Brandt. Well, just take wheat and butter, for example. Say
we have $1 wheat and 30-cent butter. The 5-percent equalization
lee on wheat would bring the farmer 95 cents; the 5-percent equaliza- '
tion lee on butter would leave the farmer 28K cents. All right wheat
seems to look better to the farmer than butter. We do not want to
control his ideas, therefore he goes heavily into wheat. The produc-
tion ol wheat starts to overload the surplus holding pool. When he
increases wheat, he decreases butter, and there is no butter in the pool,
i herelore, the butter price might conceivably go above the pool price.
I he butter price might go to 40 cents. His equalization fee would
POST-WAR ECONOMIC POLICY AND PLANNING 1403
still bo 5 percent of the 30-cent pool protection price and, instead of
the farmer getting 28]^ cents, he would get 38 J^ cents for his butter.
Now, with respect to wheat, he overproduced and the surplus piled
up in the surplus holding pool. He certainly could not get more- than
the $1 but, if we increased the equalization fee because wheat over-
loaded the pool beyond the ability of the basic equalization fee to
finance its operation, it would be necessary to increase the equaliza-
tion fee on wheat to 10 percent. Therefore, instead of getting 95
cents he would only get 90 cents. You can easily see how a change
in the basic fee would influence the switch in production, but at no
time should the equalization fee be changed unless excessive produc-
tion in certain lines overbalanced their weighted average in the surplus
holding pool. . „ , , ,„
Mr. VooRHis. That would be within the discretion of the board:'
Mr. Brandt. Yes; but only when wheat or certain other commodi-
ties contributed more than their share to the surplus in the pool.
Mr. VooRHis. How do you determine the proper contribution? Do
you determine it on a historical basis, or how?
Mr. Brandt. Within the limits of the pool to finance the losses on
surpluses out of the 5-percent equalization fee, everj^thing rests on that
basis, but let me say again, when certain items make excessive contri-
butions then such commodities must bear a heavier equalization fee.
Mr. VooRHis. In other words, you would make the adjustment on
a basis of whether or not it is costing more to handle certain com-
modities.
Mr. Brandt. Yes; you are making your adjustments on certam
commodities as they make contributions beyond the ability of the 5-
percent equalization fee to finance such surpluses. When we reach
the point where our surpluses as a whole too far exceed the ability of
the 5-percent equalization fee to handle the surplus, then we should
inaugurate a program of production control, but not until then.
The Chairman. How much money would it take to finance a pool
or finance these products?
Mr. Brandt. If you put a couple billion dollars into the pool I be-
lieve that would be sufficient. We talk in billions now, so what's a
billion more or less? There's another feature in this surplus holding
pool operation which is knportant. Prosperity is definitely tied to
the ebb and flow of currency. There is little question about that. In
this surplus holding pool you have a 2-billion-dollar appropriation that
is not going to be dissipated. It will always be the property of the
pool. The money will either be out in circulation or in the hands of
the pool. When times are good and commodity sales are active there
are no commodities in the pool and then the money goes out of circu-
lation. The minute surpluses appear, and they always appear at times
when trading is not too active, the money automatically goes out
into circulation.
Through the operation of a surplus holding pool you have the foun-
dation of the much-wanted commodity dollar. It may be heresy to
say that you could print money for the operation of this pool, but it
is no worse than the money we are printing now. If we were printing
money to use as a revolving fund it would always have a guaranteed
backing when the money was out in circulation, as it would be backed
by commodities and a program of guarantee that these commodities
when sold would not create a loss to the pool. I would rather have
1404 POST-WAR ECONOMIC POLICY AND PLANNING
money that is issued against an actual usable commodity than some
ot the money the world is using today.
Mr. VooRHis. I agree most heartily with what you just said
+1, ^f^,^H AIRMAN. As I get It, when there is no surplus in the pool and
the lellow sends a bale of cotton or a bushel of wheat into the market
lie pays that equalization fee and that goes to the pool '
Mr. Brandt. That is right.
The Chairman. So you build up a surplus there
Mr. Brandt. That is right.
The Chairman. Wlien you have no surplus in the commodity pool
you mean. -^ f^^^t
Mr. Brandt. That is right. If the Goverimient made an appro-
priation lor the use of this pool, remember that this appropriated
money would not be m circulation unless you had surpluses. On the
otlier hand, it you have surpluses, and surpluses do occur when nobody
wants them, the market becomes stagnant, and then what happens?
Ihe $10 bill that you may have in your pocket is kept there for some
time and does not circulate. On the other hand, if you have good
times, the same $10 bUl may turn over two or three times in the same
clay. Ihat gives us an active flow of currency.
We are creating money every day with every bond issue that is put
out and these bond issues are creating credit that is floating around
Only a small part of the money that is floating around in America
today comes from the production of wealth, and every bond issue is
inflationary to the extent that it brings new money into the picture
and, when this war is over, we must remember that all the E bonds are
a current liabihty against the Government and, if people once get
the idea that they would rather have commodities than E bonds
inflation is on. '
Mr. VooRHis. The E bonds are not inflationary bonds. You do
not mean to imply that, do you?
Mr. Brandt. The inflationary possibflities come when people
decide they want to cash the bonds and buy commodities with them
and don t let us fool ourselves — that time is coming. '
Mr. VooRHis. Just a moment. You mean that ah of the bonds
might at some future time potentially increase the buying power of the
pountry, but the effect of the sale of E bonds today is not immediately
Mr. Brandt. The effect of the sale of E bonds today is a method of
stabflization so that each man wifl have something with which to pay
his income tax when this is over. Every bond that is outstanding
is an asset on the ledger of the buyer. It is a liability on the side of the
(jrovernment, but they have a tax lien against your ledger asset So
long as we can keep these bonds scattered among the great masses of
people and keep them from cashing them in, it is anti-inflationary,
but the minute we start the run, it is like a run on a bank, and the
Government will have to turn around and borrow more money to
retire the bonds from those who are holding them, and this money will
be borrowed from financial and banking institutions, as it i"s the
mdividual who holds the E bonds who is going to do the cashing
Mr. VooRHis. However, when you sefl bonds to commercial banks
you are immediately selling bonds that will be inflationary because
new money is created immediately.
Mr Brandt. That is just what I have said. So long as the buyers
ot E bonds hold them they are an obligation against the Government
POST-WAR ECONOMIC POLICY AND PLANNING 1405
and, if we all retired them at the same time we would pay our income
tax to pay off our bonds. The minute the masses start to cash the
E bonds, the Government either has to print money or borrow from
commercial banks and other financial institutions.
Mr. Fish. What you mean, to all intent and purposes, is that these
bonds are moijey?
Mr. Brandt. Certainly they are money. I can walk nito any
bank and cash them, and what happens when I cash them? I im-
mediately turn them into money, and this money goes into circula-
tion amfthe Government must either get the money to retire these
bonds through taxation or further borrowing from large financial
institutions or they will have to start printing money.
Mr. Fish. Are you going to say anything about milk? You talked
about butter, didn't you?
Mr. Brandt. I am talking on general commodities. Remember,
this won't work alone on butter. It has to be on all major products.
I do want to say something about production control. There may
conceivably come' a time when the surplus production may be so
much in excess of our normal requirements that some form of pro-
duction control will be necessary, but this control must be actual
control and must actually take the acreage out of crop production.
Past programs have been largely crop switching, and many farms
that have followed the provisions of the production control program
to the letter have never had an idle acre. Take my own farm m
Meeker County, for instance, a farm that I have operated and still
do operate myself. I have comphed with every single production
program absolutely to the letter, but during all the time of production
control I have never had an idle acre. I have, with being in complete
compliance, switched production and, of course, that program is
wrong.
Production control is only production control when it actually
withdraws acreage from harvested crop. Soil conservation is a pro-
gram of national interest and national responsibihty. We who
operate farms only have tenure of the land. The soil belongs to
future generations and, therefore, there is full justification for soil
improvement programs and benefit payments made on that basis.
In the past we have had a program of production control that
applied to each individual farm; the bigger the farm, the more the
acreage and benefit payments. Some western farms had land that
never had been under "^cultivation, and many of them made more
money out of the benefit payments than tlu'ough the actual cultivation
01 their land. «
This chart (see Exhibit 3, p. 1697) is an illustration of how the pro-
duction control program applied to all farms and, therefore, in order
to get compliance, rather large benefit payments had to be made,
otherwise the small farmer would not comply, as he had the help and
machinery to operate his full farm and could operate it economically.
Remember, I am not for crop control until it is actually needed and,
when we do need it, it should be a matter of removal of the acreage
* from any-harvested crop. We should make the control by areas and
allocate a certain amount of acreage that is to be taken out from
under production and then take this land out on a rental basis whereby
we accept the rental of whole tracts of land on a basis of the lowest
bidder. Such land could be posted and put under contract to keep
down weeds and carry on soil practices, but no crop should be planted
1406 POST-WAR ECONOMIC POLICY AND PLANNING
or harvested. It should be posted to the effect that this land has
been rented and the original owner is receiving benefit payments.
The provisions of such contracts for rental should be public knowledge
and everyone should know what these contracts contain.
You can be sure that those who have rented their land to the
Government and are paying for the removal of acreage tlii'ough their
equalization fee would watch to see that cows did not run on the land
for pasturage that is rented to the Government and that the weeds
were kept down and other soil practices carried out. This program
of actual removal of the land could apply very well even to fruit
production. Instead of destroying the trees you could destroy the
fertility of the blossoms in the spring, and such acreage could be
kept out from under production exactly the same as other farm
acreage. There may be geographical crop control programs that
would apply in a greater percentage in certain regions than in others.
If, for instance, cotton were overexpanded and we did not have an
overexpansion of other crops, the acreage removal could apply
geographically in the areas that are overproducing cotton or on a
voluntary rental basis. This would eliminate crop switching.
Mr. VooEHis. How do you know you will reduce wheat production?
Mr. Brandt. You will reduce any acreage where surpluses appear.
This is automatically brought about by the fact that when a certain
irem of production becomes excessive with respect to its contribution
in the surplus holding pool, the equalization fee is increased and you
just naturally reduce returns on that item and make it more profit-
able for the farmer to produce the one with the lower equalization fee.
Mr. VooRHis. That is a dift'erent question.
Mr. Brandt. It is a factor, however, that enters into this whole
picture. Remember this: Relative price levels usually determine pro-
duction trends.
Gentlemen, you have my story and I do not want to keep you any-
longer. I thank you very much.
The Chairman. I think you have made one of the most interesting
and informative statements that I have heard in some time, and in
behalf of the subcommittee I want to thank you for your presence
here today and for this statement.
Mr. Brandt. I wish to say this; that I claim no special credit for
this presentation, as it is only made on the basis of experience in con-
nection with other farm cooperatives, and I have presented to you
the program as has been discussed and worked out among the various
cooperative groups. I am giving each one of you a copy of the
charts that I have presented and a detailed explanation of each pro-
cedure with respect to the operation of the surplus holding pool.
The Chairman. We are now to hear from Mr. Karl Brandt, Food
Research Institute, Stanford University.
TESTIMONY OF KARL BRANDT, FOOD RESEARCH INSTITUTE,
STANFORD UNIVERSITY, CALIF.
Mr.^ Arthur. May I mention parenthetically that Dr. Brandt was
in Chicago and I imposed upon him to ask him to appear before the
subcommittee without giving him time to prepare a statement. Dr.
Brandt, however, is so thoroughly familiar with the problems, par-
ticularly the world aspect of some of the agricultural problems, that
POST-WAR ECONOMIC POLICY AND PLANNING 1407
I thought it would be a great help to this committee to have an
opportunity to hear what he has to say.
He may not want to cover all of the problems of agricultural ad-
justments as mentioned in our invitation to some of the other wit-
nesses, but I beheve on the particular subject that he wishes to present
to us we will profit greatly by his observations.
The Chairman. I am sure we will enjoy hearing from him.
Mr. Brandt. Mr. Chahman, I have heard about your invitation
to appear before the committee only yesterday through Mr. Arthur
and have had no time whatsoever to prepare anythuig. I will try,
therefore, to draw on the studies that have been carried out m the
Food Research Institute by my colleagues and myself during the
last few years.
It is my impression that the general situation in the world markets
may not be quite so comfortable for American agricultural exports as
it seems to be generally assumed. Some of the assumptions of the
preceding witness, Mr. John Brandt, about the always present and
insatiable demand of the world market are hardly in tune with the
facts. The war has done a great deal of damage to agriculture on the
European Continent, but the major part of the actual physical de-
struction hes so far in Soviet Russia. In large parts of western and
central Europe, the damage has been amazingly small. That goes
in spite of heavy local losses for France and Belgium. What the
ultimate damage in Holland will be we do not know. The flooding
which the Germans and the Allies apply there may have its evil effects
for a number of years.
Mr. VooRHis. How about livestock in France and Belgium?
Mr. Brandt. The cattle herds in France and Belgium including
the dairy cows have been maintained remarkably well. During the
assault in 1940 about 10 percent of the French cattle was lost but from
1941 on gradual recovery took place. From the various reports that
we receive it appears more and more that the Frenclnnen have either
succeeded in evading many of the restrictive measures of the Germans
or the Germans assisted in reorganizing French agriculture because
they wanted to stay and needed the output of French war industries
much more than French food.
I do not claim that the dairy cattle herd in France is already yielding
again as much milk as it did before the war. Agriculture in general
suffers from the fact that the French transportation system is badly
shot to pieces, but there is no reason to assume that after reconstruc-
tion of the railroads and trucking and restoration of more normal
markets the French farmers will not be able to produce very shortly
again the same amount of milk, butter, and cheese, beef, veal, poultry,
eggs, bread, and potatoes that they did before. I expect them to
produce at least enough for France and perhaps some products for
export-
In Italy the AlHes have taken so far mostly the ''bones" of the
country. The most productive agricultural areas are to be found in
the immensely fertile Po Valley, which is still solely in the hands of
the Germans. We do not know how much damage will ultimately be
' caused when the Germans are forced to retreat.
Well, I don't want to go down country by country, but on the whole
there is at the present time no indication that up to date the productive
capacity of European agriculture has been damaged to such an extent
1408 POST-WAR ECONOMIC POLICY AND PLANNING
that we could anticipate that there would be for a period of 6, 8 or 10
years a vast market for American agricultural exports. ' '
In Russia the recovery of grain production and crop production is
on Its way. It will take Russia a long while to get the hvestock back
to the pre-war level. Livestock was, even before the war, short
However, I do not see yet that beyond the period of international
tood rehet there will be a vast market in Europe for our agricultural
commodities. In saying that I make many assumptions which I
cannot prove and which anybody can challenge. I assume for instance
that Russia will have a considerable economic influence upon her
western neighbors, including the Balkan countries which have always
exported agricultural commodities. I am referring particularly to
Rumania, Bulgaria, Yugoslavia, Hungary, and Poland. The three
Baltic states which exported food to England are absorbed, anvway,
and their agricultural export wori'ies are over. They will feed the
Russian market.
^ Some people conclude that since these agrarian surpluses will go
in the future to Russia the remaining industrial part of Europe will
have to buy so much more from the United States and other countries
overseas. I thmk that may turn out to be an illusion, because one of
the great question marks there is to what extent these countries will
be able to pay for such imports. Agriculture is, after all, the indus-
try that can be revived with the least amount of large-scale invest-
ment. If you have skilled farm people and you have land, and the
urban population is desperate because of large-scale unemployment
the chances are that the governments will first of all create more em-
ployment in agriculture. Even with rather primitive methods one
can produce quite a lot.
Moreover, it is questionable whether European industrialized
countries which before the war obtained such a high level of food
consumption and diet and nutrition can afford to restore such levels
by heavy food imports.
One of the solutions for western Europe's food problem will consist
of maintaining a very frugal diet or the same policy which we have
seen operating to our amazement during the war, when the nations
behind the blockade turned the clock back in their nutritional history
by 30, 40, or 50 years, tightened the belt, ate less meat, less animal
products m general, and more cereals, more green vegetables. If
these nations cannot export enough industrial goods and thus acquire
the foreign exchange to pay for large food imports they will mamtain
the diet that was habitual m the poorer countries before the war, and
as it was in the wealthier countries generations ago.
I cannot see in the slightest how any governments that struggle
desperately with their budget and cannot quickly revive their exports
of industrial goods can choose any other way. If need be they will
maintain rationing for years and they will forego the costly foods until
gradually, out of their own strength, they arrive at a solution. Rapid
and effective reconstruction of agriculture and maintainenance of
food economies will probably take care of a large part of this fictitious
vast demand of continental Europe for our agricultural exports.
It is not impossible that industrial countries in Europe may absorb
substantial amounts of food coming from other parts of the world.
If a full swing industrial prosperity would create full employment in
many of these European countries, if money would flow more easily
POST-WAR ECONOMIC POLICY AND PLANNING 1409
and the masses could spend freely for consumer goods again, it is
theoretically conceivable that they would eat more of the more
costly types of food. ,, . , .,. . r -i a
However, if I try to place myself m the position ot one ot the ad-
ministrators in any one of these states there in Europe that have
suffered so much from the war (and I do not think particularly ot
Germany) it occurs to me that the first thing I would do is to rebuild
durable goods that make life livable— the houses, schools, hospitals
roads bridges, and power plants. That will absorb a large part ot all
mcomes. Therefore the people will have to tighten their belts, spend
little on food and much more on shelter, fuel, transportation, clothing,
and other goods, besides paying high taxes. There will be enough
purchasing power for bread, potatoes, cabbage, and carrots, but not
enough for plenty of butter or meat or eggs, to say nothing of such
luxuries as real ice cream, which the Europeans could not afford even
before this war. , . ^ x i.- i +
I anticipate that every effort will be made m Europe to stimulate
agricultural production with subsidies. In some countries the gov-
ernment may go so far as to lend the farmers the most costly farm
machinery at a nominal cost. Governments will try to save whatever
foreign exchange they can secure for the goods that are needed to
rebuild the basic industrial economy for railroads, for budding roads
and bridges, and for rebuilding the cities. They will not use it lor
givinc^ their people an optimum diet by way of big and costly imports.
Summed up these hasty observations should remind the American
farmer that it is very treacherous to rely on the expectation that the
foreio-n markets will absorb at good prices any amount of agnciiltural
surpluses which mav bother us here. Within 2 or 3 years after \ E-day
it is quite conceivable and even probable that American agriculture
will have to shrink its output very substantially and that it will be
very hard to place on the foreign markets any very large amounts
of foodstuffs from our country.
If we want to place food surpluses abroad it has to be on an equal
footing with the products of other competitive countries m quality
and price. I cannot see, for instance, why a European nation that
is hard pressed to get back on its feet should buy wheat, meat, or
dairy products from the United States if it can get the same prod-
ucts at say 15 or 20 percent less from Canada or Argentma or some
other country. , . , , ,. /• ^i, t +
The Chairman. Wliat do you think the results of the inter-
national Food Conference in Hot Springs some months ago wdl have
in solving the food problem of Europe?
Mr. Karl Brandt. Well, the United States Conference on i^ood
and Agriculture which had a high level of discussion and was borne
by a noble spirit of advancing the welfare of the nations was, at the
same time, very realistic and cautious m making assumptions about
the possibility of improving the diet of nations quickly. It laid great
stress upon the axiom that each nation is responsible for the nutrition
of its people. , ^ ... - ,
Wliile all nations strive hard toward the goal of an improvemerit
m the diet we must see also, if we want to keep our feet on the ground,
that nations can improve their diet in the long run only msotar as
they succeed in increasing their social product and m contributmg
more goods and services to the international community.
1410 POST-WAR ECONOMIC POLICY AND PLANNING
In Other words, nations can ultimately improve their economic
status and their plane of living including their diet only by their own
work. It seems to me quite fantastic to believe that even with the
tremendous wealth of the United States by giving away free huc^e
amounts of food, we can do more than just temporarily improve the
food situation of some social group or some smaller nation.
Of course, if we would concentrate on food gifts on such a small
population as that of Greece, for example, we could, if we wanted to
make the sacrifice, lift the diet of the Greeks to a substantially higher
level. However, even if that were done, I do not believe that one has
actually accomplished much. Beyond a temporary emergency the
recipients of such gifts may be impoverished by them by having become
social wards of the donors. So far as I know, all nations are reluctant
to build their economic policy on the assumption that they will take
lor a long stretch of years food or other goods as a gift. That is true
lor all of the nations where statesmen are surviving for the very good
reason that living on charity diminishes a nation's economic and
political standing, while buying restores it. When you buy food you
gam the first opportunity of selling in the world market and of recon-
necting your country with the normal international flow of goods and
services. A Norwegian, a Dutchman, or a Dane, or any foreign states-
nian, knows that. The tendency of all nations is therefore not to take
gifts, but to obtain credit if free funds are lacking, and to enter foreio-n
trade as a self-respecting party. Once a nation buys it will place ft^
orders where it can get what it wants at the least expense, or where it
can drive the best bargain in selling its products.
Mr. Hope. Could I interrupt you right there? I am thinking of
wheat After the other war, practically all of the nations of conti-
nental Europe put restrictions upon the importation of wheat, not
only high tariffs, but import quotas and other methods of restricting^
importations, and they also paid bonuses and subsidies to their own
producers to induce production of wheat and, I presume, of other
commodities, but I have not looked into that so much.
_ Do you think the same thing is likely to happen following this war
in an efl'ort to become self-sufficient to improve their foreign-exchange
situation?
Mr. Brandt. Many of these nations did not subsidize domestic
lood production immediately after the war. Most of them began
with tariff protection in 1924 and 1925. Import quotas and other
forms of protection were introduced only in the last years of the
twenties and the early thirties.
But to answer your question for the future: There is reason to
believe that the tendency will be strong to mamtain high unport
duties, quotas, and other forms of protection for the farmers.
Mr. Hope. You say stronger?
Mr. Brandt. It will carry on. I don't think the urge for farmer
protection m Europe needs to get any stronger. It was driven to
excess before this war. However, I do not mean to say that it is
impossible to change that situation, but that to change it would
require very large trade concessions on our side. The United States
would have to make it a well-paying proposition for these nations to
follow a different course and not to subsidize domestic food produc-
tion.
Mr. VooRHis. What kind of concessions?
POST-WAR ECONOMIC POLICY AND PLANNING 1411
Mr Brandt. Concessions either in the form of large loans on long
terms from the United States, which is perhaps the less objectionable
form to our producers and laborers here, or of tariff reductions. If
other nations can get from us a loan, say, for 15 years with no heavy
instalment to repay in the meantime, they may make enough adjust-
ments in their agriculture and industries to get along and may forego
high-cost food-production subsidies. . , .
The other much more effective concession would require a lowering
of our import duties in multilateral trade agreements. A country hke
Switzerland, for example, produces wheat at a terrific price, mainly
as a matter of national security in case of war. To persuade the
Swiss to import a major part of the wheat they need it would be nec-
essary to open the American ports to low-duty importation of Swiss
watches, of fine mechanic products, or of certain types of electric
engines. The discussion of exports of American farm products coniej
riolit back to the opening of our foreign-trade doors. We cannot build
real peace on the assumption that we can somehow coerce other
nations into buying our goods through cartel or quota arrangements.
Mr. VooRHis. May I go back to your loan for a minute? If the
loan can start you, that is not the real concession, but the real con-
cession is when you make a loan and you assume that the other
country is going \o pay the loan back, you commit yourself to an
excess of imports from that country over your imports to it.
Mr. Brandt. Yes; you delay the question of receiving payment.
You postpone it into some future time, but that gain m time may be
vital for making the necessary adjustments in our domestic industries.
Mr. VooRHis. The only way you can collect the payment is by
having that country have so-called favorable balance of trade and
on the balance you will have to have an unbalance of trade if you
want to get paid. .
Mr. Brandt. Well, if you grant a loan to a foreign country, you
immediately get an expansion of exports because the foreign debtor
country uses its loan for purchases in this country. The repayment
can take many forms. American tourists can spend the money
abroad. American individuals or companies can buy insurance
abroad. We can take gold in payment, or goods.
After 1 5 years, the question of payment is still there, but it makes
a great difference whether you can gradually over the years prepare
for that shock that may come rather than to have immediately
the iDalancing of that account. . .
So loans do not permit forever exporting without importing. 1 et
I anticipate some other partial solution. With the high savings rate
to be expected in the future as a result of the great productivity of
our industries, I do not see why we should insist upon gettmg all
that capital back from foreign countries in such intervals. _
After all, the British have invested in loans to other countries like
Argentina for many generations. That country was built with
British loans and they have not msisted on getting it all back. This
creditor-debtor relation has not been a cause of friction bet\veen
Great Britain and Argentina. In fact, the relations between Great
Britain and Argentina are substantially better than the relations
between the United States and Argentina, although we have held back
in making long investments in Argentina. That resentment follows-
constructive foreign mvestment is not necessarily so.
1412 POST-WAR ECONOMIC POLICY AND PLANNING
However, the possibility of counteracting the protectionist in-
fluence of farmers in Europe will ultimately depend on concessions
all around among all countries concerned. American agricultural
exports will flow only if the victorious powers succeed in establishiiig
the freest flow of capital, goods, and services between the nations.
Mr. Hope. To what extent do you think an effort was made to
build up agriculture between the two wars based upon the desire to
become self-sufficient so far as food is concerned?
Mr, Brandt. In several countries, particularly in Germany and
Italy, a great deal was said about the necessity to become self-
sufficient in food. The question is What were the motives behind the
proclaimed desire of self-sufficiency? Self-sufficiency is an end or,
better, a goal, not the motive. From my knowledge of the psychol-
ogy of a few of the European countries where I watched the self-
sufficiency drive, I think that one of the most powerful motives
behind it was the fear or the expectation of another war.
. That fear never subsided fully, even during the years of industrial
prosperity, 1927 to 1929, with full employment. Even then many
Europeans pondered anxiously the question whether war would not
break out anew soon and whether if peace should last the food-
importing countries would not face eventually a real famine if they
could not pay for the imports of food, or once economic sanctions
should be applied by the signatory powers of the League of Nations.
So if a determined policy of international security could relieve that
fear one key motive for food self-sufficiency policies would have been
eliminated.
Another motive was the inability of maintaining a high rate of
employment and the general economic warfare of retaliation in foreign
trade which closed more and more lanes of international trade. The
more protection depressed industries obtained, the more the farmers
called for the same protection against foreign competition for their
products.
The third reason was that when in 1927-28 the prices of farm
products collapsed in the world market before the general depression
hit, farmers asked for Government action toward preventing the price
decline. You may recall in 1927 there was the first price slide of
basic agricultural world commodities. When farmers, for instance, in
Germany, faced the collapse of the prices of rye, wheat, and barley,
they began to pressure for higher prices. One way to camouflage this
pressuring for higher prices and for restoring their profits was to speak
of food self-sufficiency as a necessity of national defense and as a
necessity of balancing the national economy.
Finally the German farmers got even the support of the labor unions
for a policy of lifting the prices of food commodities.
Food autarchy is a goal blanketing many mLxed motives. The
military men saw it as a matter of military strategy. They were not
afraid, but they wanted preparedness. They considered a maximum
of domestic agricultural production as a war essential.
I am not so certain that at the end of hostilities in Europe all of
these motives will be invalid. The consumers' fear of future famine
will be greater than ever, and the farmer will not have lost his fear of
powerful competition by farmers overseas. If during the years
between 1923 and 1933 (the only period of relaxation because after
1933 preparation for war began) it was difficult to combat the efforts
POST-WAR ECONOMIC POLICY AND PLANNING 1413
to build up agricultural autarchy, I have a notion that this time
it will be much harder to do so with success,
Mr. Hope. From what you said a while ago, you don't think it is an
impossibility?
Mr. Brandt. No, it is not impossible by any means. I stress so
much how difficult it will be to defeat protectionism elsewhere because
I feel that in order to accomplish anything we should fully realize
what is involved in the task of getting the European nations on a line
where they are actually willing to abandon heavy subsidies of wheat,
oilseeds, and other foodstuffs.
The Chairman. You may resume, Mr. Brandt.
Mr. Brandt. In looking at the future situation for American agri-
culture I find that it is important to realize what it will mean if the
outlets in the world markets should be very narrow. It seems obvious
that we would have an even harder task of adjustment to accomplish.
Our present system of publicly supported prices is completely out of
gear with any competitive level in other countries. To add a little
more skepticism on the prospects in the world markets I may mention
that I expect the British to be so immensely pressed for more exports,
indeed, so much so that I doubt whether they will be able to maintain
the present relation of the pound sterling to the United States dollar.
This will not be a question of deliberate action on their side alone, but
there are larger forces and economic necessities which compel nations,
as the British were compelled when they devalued the pound before.
If the pound should come down from its present level artificially
maintained at $4 to, say, something like $3, it is quite obvious that
it would put our exports into an even much harder position than now.
Domestically I find that the policy of guaranteeing the farmer an
income tlu-ough the medium of fixed prices which we have pursued in
recent years will within this general world situation lead very quickly
to a perfect impasse.
' The burden on the Treasury may assume such proportions that it
may become questionable whether the Confess can live up to its
commitments of price support given our farmers. The potential
capacity of American agriculture to produce is still much greater than
the actual capacity in effective use. If in his desire to lower costs
the American farmer with the purchasing power that he has now ap-
plies the multitude of new mechanical labor-saving devices, the new
variety of seeds, better insecticides, and other technological methods,
we will be able to produce with less people employed on the farm than
we have now, considerably more than the present output.
At the same time there are tendencies, powerfully supported by the
general public, for placing in agriculture more people than we have
now.
Nothing is more popular in the country than the idea of paying our
tribute to the veterans by giving them a chance to found a home on a
farm. There is considerable economic leeway for that. Older men
will retire. We have in the West probably quite a good basis for more
farmers. But I do not think that it is really a square deal to the
veterans to place perhaps hundreds of thousands of them on farms,
because they will have to meet the hard competition in a market that
will be glutted in many ways.
The capacity of production can be trimmed down. If we try to
maintain the security for the income of the farmer by price support
99579 — 45— pt. 5 — —13
1414 POST-WAR ECONOMIC POLICY AND PLANNING
and subsidy devices, the logical supplement to that is the restriction of
production by quotas. This throws open another question: Is it
really desirable from the national standpoint of maximum welfare
and maximum employment to enlarge and keep the total employment
and investment in agriculture larger than the demand for the goods
justifies?
"When I listened to the arguments presented by the preceding
speaker, Mr. John Brandt, I felt that there were several points of
serious weakness in the scheme he suggests. It has a certain sound
basis of equalizing the seasonal fluctuations in the marekt. But when
it comes to balancing the income and the production of our national
agriculture by such schemes, I abhor the idea, for they all lead ulti-
mately to the necessity that by political decree the Government has
to decide who stays in agriculture and who must be transferred into
other jobs. All the political regimes which have tried to establish
profitable prices for all farmers have been compelled to tell the mar-
ginal farmer that he must quit farming and go into some other type
of work.
The entire concept of American democracy is incompatible with
policies which compel the Government in times of peace to decide
who may stay within a profession and who must leave.
Mr. VooRHis. I agree with you, but is the alternative to have people
just driven out of business because they fail and cannot get a sufficient
income to maintain themselves?
Mr. Brandt. There is certainly nothing more repugnant to me
than the idea that the alternative to this one extreme is the opposite
one of doing nothing and just to choose laissez faire. There are many
alleys of considered action which do not lead to this ultimate curtail-
ment of freedom.
On the one hand, it is not possible to guarantee the security of
income to everybody. It is, however, possible and desirable that
society assure the majority of the farmers against the catastrophic and
drastic changes which will overnight spell disaster for everybody, the
competent and incompetent, the industrious and the lazy ones alike.
To that end we should adopt a policy which guarantees a certain
minimum of income. If this is to be done in a statesmanlike way, it
must be a relatively low floor of guaranteed income. The floor must
not eliminate the necessity of fighting with the utmost energy for the
lowering of costs by efficiency and it must not guarantee a good income
to the man who ultimately rides on social security without making his
fair contribution. That reasonable degree of farmer security can be
accopmlished with a minimum of regimentation and Government
intervention. I consider it in no way a perfect solution, but the
Government can, in connection with carefully established production
goals, set the low floors of prices from year to year with the intent to
use the prices and price relations as the steering mechanism for
shrinking or expanding production of specific products, and as the
steering mechanism also for giving the Nation the benefit of a maxi-
mum of consumption of these foodstuffs.
It is impossible to maintain the prices high and at the same time
to have a maximization of , consumption. If you keep the prices
high in order to keep the profitability for all farmers, the result is
you thereby eliminate a large part of marginal consumption whfle
at the^ame time you pay a premium for an increased production and a
shift of more manpower and capital into agriculture.
POST-WAR ECONOMIC POLICY AND PLANNING 1415
The Chairman. Some economists tell us in order to meet the post-
war needs of om* Nation we must have full production of industry,
full employment, and full production of agriculture at a fair price.
Mr. Brandt. To have full employment in industry and agriculture
is an honest desire and the hope of all people who think of the national
welfare, but I do not think this term full employment
The Chairman.^ You do not think it can be done?
Mr. Brandt. I think we can strive toward that, but if we are too
maximalistic in our expectation of how full an employment we want
we may play havoc with our economy. I am not so sure, as many
people seem to be, that we have found the effective mechanism of
avoiding a decline in our rate of long-term industrial investment which
after all controls essentially the rate of prosperity that we can accom-
plish. Nor do I think that we have found the method of stopping a
general downward movement of prices with anything less than dic-
tatorial powers.
To that extent I would also take exception to some, of the under-
lying assumptions that Mr. John Brandt has made. I do not think
it is possible to establish and secure prosperity for the Nation simply
by giving the farmer a satisfactory income.
The Chairman. He is the big consumer, isn't he?
Mr. Brandt. Yes; but still, if you give all the farmers a satisfactory
income it may still leave any number, 8 or 10 or more million people
unemployed. Unless we get with our wealthy economy, and with our
tremendous capacity to produce the heavy industries, the construction
industries, housing, railroads into the full swing of employment, we
will still be in a situation where the farmer may be kept above water
but where the Nation is in a real and prolonged depression.
The Chairman. Just one moment. You think we have to lower
the prices which the American farmer will receive for his commodity?
Mr. Brandt. I think so.
The Chairman. All right. Do you believe in the philosophy that
a farmer is now and always has been entitled to parity for, say, corn,
wheat, and cotton; that is to say, a bushel of corn or a pound of cotton
or a bale of cotton will buy a corresponding amount of manufactured
products or services. Don't you think that that ratio of parity rela-
tionship which means equality in purchasing power should always
exist under all conditions?
Mr. Brandt. No, sir; I definitely do not believe that.
The Chairman. You think the farmer should be under the others?
Mr. Brandt. No; I don't believe that for his income which is de-
cisive the farmer depends on the price of the commodity. On the one
hand, it depends on his cost of production; it secondly depends on the
volume of production he can sell. It is quite possible that the con-
trast of parity applied long enough will frustrate any progress in
agriculture and will thereby make the agricultural sector of our
economy the losing end.
The Chairman. Parity is a variable thing under the law. In other
words, it is rewritten as the cost of labor, services, and manufactured
commodities go up or down, so parity for farm commodities likewise
goes up and down, but that relationship, over-all equal relationship,
should always exist. That is fair is it not?
Mr. Brandt. No; I do not think that this is of primary importance.
There should be, first of all, a fair opportunity for developing the whole
1416 POST-WAR ECONOMIC POLICY AND PLANNING
economy. It is not the purpose of the American economy to maintain
a certain volume of agricultural production or agricultural employ-
ment. It is important that all Americans make use of the freedom
to choose their profession and choose to work where, according to the
plebiscite of the consumers with dollars and cents spent, it pays best.
The Chairman. Now, doesn't everybody agree that balanced econ-
omy, the best balanced economy we ever had in ouj- country is where
that relationship existed?
Mr. Brandt. Yes, sir; but I claim the parity concept as it is ^vritten
in the law and conveniently revised from time to time is a political
device which unintentionally leads to a destructive unbalancing of our
economy. Progress in the efficiency of manpower changes the basis
of what the Congress calls parity. Why should a bale of machine-
produced cotton buy as many, say, shoes, as a bale cultivated with a
man and a niule and picked by hand? The parity formula is based
mostly on price relations of 30 years ago and makes no allowance for
technological progress. I think the use of that formula will lead to a
situation where we will be bothered so much by the surpluses that we
will have to choose between maintaining this exaggerated production
and giving away the surpluses at the expense of the taxpayer, main-
taining parity prices and throttling production by acreage or market-
ing quotas as we have done before this war.
We have no other choice; either we can fix profitable prices and
must then determine by regimentation how much shall be produced,
or we can use prices as the medium through which to guide the farmer
to produce the amount the market will absorb.
This involves the possibility of a certain economic hardship, but
the only security agamst it is Government regimentation, which I
consider as the far greater political hardship.
The Chairman. Well, people generally complain about any control
or any fixing of prices as regimentation, don't they? ,
Mr. Brandt. For the past 11 years the experiment has been going
on which has shown that a planned economy, with perfect economic
security for everybody, is possible. It was believed by the majority
of the economists in the world that it could not work. I have seen
that machinery being built and have argued in vain with German
farmers against the consequences, as Hayek in his book The Road to
Serfdom, argues with the poeple in the United States and Great
Britain today. Contrary to the belief of the economists the world over
the German planned economy did and still does perform amazingly
well. Its mechanism, however, comprised inevitably the absolute
power of the state over the life and death of every smgle person working
or living within its fold.
That was the case in Russia as well as in Germany, as it will be
in every country where the Government undertakes to guarantee full
economic security to everybody.
If we want to avoid wholesale regimentation, the price has to be a
flexible means of adjustment. Fixed prices according to parity may
well lead to the situation where we produce, for example, so many
eggs that it finally becomes senseless to even process them and we have
to dump them into the feed troughs. The only way to issue orders
for a reduction in egg production without limiting the freedom of the
individual farmer is to let the price fall to the point where production
is still profitable for efficient producers, but where the less efficient
producers stop.
POST-WAR ECONOMIC POLICY AND PLANNING 1417
The Chairman. Don't you thiiik anything under parity for a farmer
is not profitable?
Mr. Brandt. No.
The Chairman. You do not agree with that?
Mr. Brandt. I know that at any given time there are farmers who
at a certain price make so much profit that they can still expand,
while there are others who just cut even, and still others who go
banla-upt at that same price.
The Chairman. What farmer, for example, can do that?
Mr. Brandt. They are to be found in any commodity field or type
of farming. Take wheat: there are areas with such a comparative
advantage of production that they are able to grow wheat at a very
low cost per bushel. The same holds for cotton. When I lived for 8
months in the deep South and traveled widely among cotton farmers
I found areas where due to natural conditions cotton can be produced
at an exceedingly low cost. Low values of land, large acreage, mech-
anized methods in cultivation and harvesting all result in low costs
of production. But then you travel 50 or a 100 miles farther on,
and you find areas where the rolling leached land m smaU patches
make cotton production m any case exceedingly expensive. You
could double the price of cotton for the hill patches in the old planta-
tion belt and the people would still not be on a sound level.
With the parity concept which is based on a certain historical
distribution of production and on historical cost relations, we are
bound to establish production quotas and with quotas we freeze the
economy on high-cost areas, and deprive it of its adjustability. Parity
prices, guaranteed and fixed by the Government, establish social
security for farmers but do not guarantee that American farming
will remain on a competitive level of efficiency.
During the 10 years before this war, with the best intentions, we
frustrated the great ability of our agricultural economy to adjust by
subsidizing, for example, the maintenance of cotton production on
land where it would be 10 times better to find another job for the
farmer than to keep him on too little and too poor land that should
go back to the pine woods. W^e have made it a paying proposition
for him to stay there. This was all in line with the philosophy
behind our economic policy, which could be summarized as an atternpt
to make ourselves comfortable in the midst of a permanent depression
or a stagnant economy. I don't believe in the soundness of that
defeatist philosophy of which parity is a symptom. If we accept a
static economy as our destiny we subscribe to the procrastination of
the best abilities of our people.
If we have the opportunity to give another paying job to this
poor fellow who in spite of the parity price for cotton cannot pay for
cotton sheets on his bed, we ought to do so. If we had no other
opportunity, because industries were stifled, investments did not
flow at the proper rate, because foreign investment was at a low
ebb, we should shape national policies which lead to an expansion
of our economy. Thereby w^e could offer that man soon a better
job somewhere where he would produce something that really con-
tributes a share to the welfare of the Nation.
Mr. Voorhis. May I interrupt you there and ask this: Then what
comment would you make on a situation where a group of farmers,
without the Government coming in the picture at all, get together
1418 POST-WAR ECONOMIC POLICY AND PLANNING
and form a cooperative for their mutual protection when they market
their crops? Would you object to that?
Mr. Brandt. No; I find the law that gave the farmers the right
to operate cooperatives without paying a corporation tax very wise
legislation. It has been adopted for good reasons in many countries.
It the farmer makes use of that special privilege, he proves that he
understands the necessity of operating efficiently in the market
Mr. VooRHis. Yes; they do.
Mr. Brandt. There are many examples of successful farmer coop-
erative associations. When these co-ops are good business enterprises
which create competition where there was none, I am wholeheartedly
for them. If intelligently cooperating farmers can improve their
lot by better marketing methods it is fine. I do not consider agri-
cultural cooperation as a form of subsidization. I referred earlier
to policies where subsidies are paid which are a premium for staying
on a job that is on the losing end.
Mr. VooRHis. That is, of course, not the case with the coopera-
tives?
Mr. Brandt. No; the cooperatives are a diff'erent proposition.
Mr. VooRHis. I just wanted to get your idea on that. In other
words, where farmers can by their own efforts through cooperative
action make it possible to have more to say about the price at which
products are sold, you do not think that is unsound?
Mr. Brandt. No; not at all. The private initiative of the farmer
should have every encouragement. If the cooperatives are operated
on a sound business principle and do a better job of either buying or
selling more efficiently than does the trade, so that the farmer recetves
a better share in the consumer's dollar, it is only common sense to
say that this is an advantage for the common welfare.
The Chairman. Let me ask you this: In our country every de-
pression we have had has started with the farmer, has it not, when
he did not get enough money to pay him for growing his crops and
when he has no purchasing power? Then it was that the mills had
to shut down because there was no market for their products, and
the laboring men were let go because they no longer had need for
them. That has been the cycle of every depression in this country.
Mr. Brandt. I would not subscribe to the accuracy of the his-
torical observation. However, even if it were correct that every
depression in this country did start with agriculture, I would still
say that this might be nothing more than a symptom, but not the
cause of the evil.
The Chairman. But nevertheless it is a painful experience we have
passed through. Whenever the American farmer gets less than the
cost of producing his crops, he goes in the hole and he cannot buy, and
then it moves along the industrial life of a nation; then labor is
affected, and then we are in the throes of a depression and we cannot
turn the farmer loose, can we?
Mr. Brandt. No. I have been a practicing farmer myself and
still have not only sympathy but a warm affection for that profession.
I£do not see any reason why economic policy should begin with or
have any interest at all in putting the farmer into a tight spot where
he has fewer rights than other people.
The Chairman. If you remove all restrictions and let him produce
what he wants to and get what he can, you know what is going to
happen to him?
POST-WAR ECONOMIC POLICY AND PLANNING 1419
Mr Brandt. Yes, sir. I do not suggest that we use that method.
This is not a sensible alternative. The alternative which I prefer is
to use appropriate methods for giving the farmer a certain degree ot
modest security against such economic cataclysms where he is
^ThTcHAiRMAN. Now, then, there are just two ways to do that:
One is to do something about fixing prices, fixing some floor below
which the price cannot go, and you have to have some restrictions
on the amount of products he produces; isn't that right.''
Mr Brandt. I doubt whether that is necessary. I could conceive
of a system of a minimum-price guaranty with deficiency payments
as it has worked for many years very well, for instance m Great
Britain This is a system which does not require any interference
in the market. The Government announces sufficiently m advance
that it is interested in maintaining a certain production goal of so
and so many bushels of wheat. It guarantees the wheat producers
a minimum price on the wheat. The farmer produces as much as
he thinks profitable and sells at the best price he can get m the
market Everybody who sells wheat must obtain a sale certiticate
indicating the quantity, the quality, and the price received By the
end of the year these certificates are collected and a calculating office
finds out what the average price actually received for the wheat was
and whether this price was lower than the guaranteed minimum, and
if so how much it was deficient. Then the Government pays the
dift'erence the so-called deficiency. If the farmers produce much
more than the goal for which the minimum price guaranty holds,
they receive a correspondingly smaller deficiency payment per bushel
actuallv sold. , , p n ■ ^^- ^^^
The Chairman. Well now, if we do that for all our agricultural
commodities we would have to have a powerful sum of money m the
Treasury, wouldn't we?
Mr Brandt. That depends on where you set the fioor. it we go
on the assumption that the floors have to be set as high as the present
parity price the result would be— not only a heavy burden on the
Treasury every year, but on top of that we would have to adopt
regimentation because our excessive production would spell rum in
the markets. , ,^ -^ i o
The Chairman. The floor sets the price, doesn't it, always;'
Mr Br VNDT. No; because there are many market situations where
the floor would not carry any weight. The prices can at any tinie go
above the floor. Farmers have no accurate control over the volume
of their production. They may expand the acreage and yet make a
very short crop. Then you may have unmediately a situation where
the market warrants a much higher price than the guaranteed floor
The Chairman. But over a long period of time the floor will set the
price and that price determines the purchasing power of that farmer.
So unless you get it up to where he can afford to grow the commodity
at a profit he is going to go in theliole and parity is the only thing that
win let him do that, isn't it? . , i n ^.
Mr Brandt. The point I would raise there is that the floor must
lie so low that it does not keep the inefficient producer in production,
and therefore there would always be quite a few people on the marginal
side who would thereby stop producing one specific commodity and
shift into the production of others. For a number of years it is quite
conceivable that this security of the floor would never be touched by
1420 POST-WAR ECONOMIC POLICY AND PLANNING
many commodities. If the economy has in general a good rate of
mvestment, industrial employment is good, the market absorbs not
only the goods, but the market will drain away those people who earn
a lesser income m agriculture than elsewhere. We would carry this
disaster- or economic-emergency insurance of the floor and yet have
practically no indemnity payments or very few made by the Govern-
ment. It would really be an insurance against the worst, but leave
the mam adjustment to the farmers' initiative. This deficiency-pay-
ment policy would be, to my mind, a means which, with a minimum of
interlerence m the market and a mmimum of administration would
possibly accomplish that insurance feature. Its satisfactory func-
tionmg would require, of course, that our statesmen in the Congress
have the nerve to set the floor in the different fields in such a way that
one would not get general overproduction over several years which
would clog the markets.
Mr. Hope. Well now, you mentioned awhile ago the productive
capacity that we might expect to have after the war on our farms due
to the use of the unproved machinery and better breeds and strains of
livestock and crops. What do you think of our capacity to support
increased production on the farm with out consumptive capacity
following the war? Can we absorb the production in excess of what
we had during this war period?
Mr. Brandt. I do not think so. If the whole economy is in a
prosperous state and expands, and if foreign trade is gomg strong I
am confident that we can absorb considerably more food and fibers
than we produced in the years 1935 to 1939.
Mr. Hope. But what about our per capita consumption of agricul-
tural products? Do you expect that to go up or go down after the
war?
Mr. Brandt. I thinly, sir, that given an optimum rate of employ-
ment m all trades, shifts into a higher per capita consumption on
certain food commodities will emerge. This would be only a natural
re^iunption of the long-run dietary trends. There are a lot of people
who would like to eat more butter, cream, and ice cream, and would
have done so m the past if they had had a good income. I think
that when it comes to certain fruits and some vegetables, some types
of meat, it is conceivable also that we w^ill have a rising consumption
of those. At the same time I doubt w-hether it is true that there was
in the United States such, a vast unsatisfied demand for calories. If
that should be correct I do not see that we can expect a phenomenal
rise m the per capita consumption of all foods combined. It will be
a shifting of the volmne and the proportion between dififerent com-
modities, with more expensive ones displacing the cheaper and
commonest ones.
Air. Hope. What effect would you think that would have upon our
agricultural production in the sense that it will increase or decrease
the number of people that we can employ on the farms?
Mr. Brandt. We have two different types of farms in the United
States.
We have roughly 2,000,000 commercial farmers who with the major
part of their output are actual competitors in the whole market
economy, and we have some 4 or 4)^ million farm families who either
have no other choice or who live on the farm because they like it and
are not figuring precisely in dollars and cents that they can make more
POST-WAR ECONOMIC POLICY AND PLANNING 1421
somewhere else, but where they are forced also to work under orders
and to forego a lot of pleasures of real country life. The question
of how many people are needed to produce a certain amount of agri-
cultural products will ultimately be decided by the desire and prefer-
ence of the people on the 4,000,000 or more noncommercial farms. I
know many people, particularly in the Southern States, who have
knowingly and wiUingly stayed on poor famis where they carve out a
poorer existence because it offers some of the intangibles of what they
call gracious living. I think we will have some of that forever.
But in the commercial sector of our agricultural economy we will
have a decreased demand for man-hours due to increased efficiency
in the use of manpower, even in view of a higher per capita spending
for food than in pre-war years. And gradually the noncommercial
farms will become more commercial, too.
Mr. Fish. May I ask a question along your lines there?
Mr. Hope. May I get in another first?
Mr. Fish. I am sorry. Go ahead.
Mr. Hope. Then, of course, to the extent that there are large numbers
of people who are willing to do that, you are likely to have an excess of
labor on the farms beyond the amount that would result in an income
for farmers which is somewhat comparable to the income received by
the average person in other walks of life. Do I make myself clear
there?
Mr. Brandt. Yes; but I consider it one of the essential rights in
a democracy that as long as they do not ask for Government aid
people who do not want to work hard have the right to loaf and to
produce little so long as that is their preference. But insofar as
these people increase their expectations of consumption of goods, of
doctor and hospital services, of travel and recreation, I see no other
way than to give them the opportunity to earn a better income, which
requires that they make a better contribution to the goods and serv-
ices produced by the Nation. For the Southern States, the war has
offered to a lot of people that opportunity to contribute more and
in turn to consume more. But there still are millions of people who
will not participate in that soon.
Mr. Hope. What I mean is that these people who are not putting
the maximum effort into farm production would be willing to take
less than what they could earn if they were putting the maximum
effort into some other — or who are willing to take less than they might
earn in some other occupation. To that extent that they are creating
the surplus of agricultural products which pulls down the income of
the man who farms more as a business, who is in there from the stand-
point of what he can make out of it. That is true, is it not?
Mr. Brandt. The total contribution to the markets from this farm
segment is relatively small. The greatest pressure will be exerted by
the commercial farmers, because their ability as businessmen is so
much greater. However, the national policy should not ignore the
possibilities of improving the lot of their noncommercial farm people
also. I see many opportunities which do not exert more pressure on
the market by dumping more goods there. Many of these people
are very inefficient as consiuners and as producers. Many of them
insist upon buying through the stores goods a highest retail prices
from a thousand miles away rather than to produce a part of them
in their own household and garden. If they sell their produce for
1422 POST-WAR ECONOMIC POLICY AND PLANNING
far less than wholesale prices but consume many goods at more than
retail prices, there are substantial opportunities for improving the
real income of these people.
Mr. Arthur. This represents nearly half of the farmers of the
country, too, does it not, that are not important in commercial
markets?
Mr. Brandt. It is hard to define the two groups accurately enough
for a statistical count, but I think it is a much large segment, probably
in the neighborhood of 60 to 65 percent. If you count the members
of the families the percentage is still greater owing to the larger number
of children on the noncommercial farms.
Mr. VooRHis. Is it not true that 10 percent of the farmers produce
about 50 percent of the marketed farm commodities?
Mr. Brandt. I have not the exact figures at hand. I can only
I say from memory that the much larger proportion of the farm popu-
lation is living on noncommercial farms. None of them are self-
supporting. They all have some connection with the market.
Mr. VooRHis. There is a certain value today, I am sure, to any
democratic nation in the contribution to that nation, the strength of
the democratic contribution, which is made by a large group of people
living on their own farms which can hadly be made up by any other
group in the population. In other words, entirely aside from purely
economic consideration, there is a socialogical factor of stability and
so on and so forth, that has to be found in that sort of life and existence
which, if lost to a nation like America, would make a tremendous
difference in the future.
Mr. Brandt. This is the question of the importance of the middle
class. You have the same in the retail business, and in the small
work shops. I do not say that the farm middle class and the middle
class in urban business are identical, but you have similar attitudes in
both. Yet it seems also clear that it is not strengthening the Nation
politically and socially if these people find themselves in such misery
that they have to be maintained all the time at a substandard income
by subsidies.
In other words, you may block the normal economic progress and
the progress through education in those segments of the economy if
you use improper policies.
Mr. Fish. Has it ever occurred to you that we may reach the situ-
ation, and we may reach it very rapidly, where a very large number of
people might lose confidence in the future and in values and may think
that land is about the only thing that has any value and go out on the
farms and cease being merchants and lawyers and so on, and leave the
cities and go to the country to purchase their farms so they can have
something that retains values and they can get a living? Have you ever
studied that problem, because I am very fearful of it myself, from the
psychological problem rising in the not distant future.
Mr. Brandt. Nobody could have lived through the G-erman in-
flation of 1923 without being very mindful of such psychological
sways •
Air. Fish. That was going to be my next question.
Mr. Brandt (continuing). And I know there are many people in
this country who entertain such fears of continuous inflation and who
try to escape into the ''real values." My observation in the German
inflation was that there were very few people who really succeeded in
POST-WAR ECONOMIC POLICY AND PLANNING 1423
that race. But I doubt whether one can base the general agricultural
policies on this fear against the maintenance of the purchasing power
of the currency.
Mr. Fish. I was going to ask you whether you had studied the
problem at all. I have to say that I have not, but I have discussed it
with a great many people who have this fear, and say that if it goes
on any further they are going to buy a farm and just retire to a farm
and grow their own food. When that thing becomes general, the
opinion of many people, it becomes a tremendous factor.
Now the second question I wanted to ask you was: What did happen
in Germany when the mark blew up and all the prices went with it?
Did they go out — those who had any money left — did they go out on
the farms themselves and try to survive, or what did happen?
Mr. Brandt. The farmer in Germany understood the inflation
earlier than many other people, because he always thought more in
terms of real vakies than of money. He thought more in barter terms
than the others. The result was that it was exceedingly hard for any
speculator to get a piece of land. Everybody held tight to his land
and therefore very few speculators succeeded at all in escaping from
the inflation that way.
Of course, there were some people who succeeded in getting hold of
urban property or in industries bought streetcar hues and similar assets.
Insofar as they succeeded in exchanging paper marks for real estate
they of course made a fortune out of it.
Mr. Fish. I know that they bought real estate and everything else,
but I am talking about going onto the farms ; the farmers did not have
such a bad time, they did not suffer so much from inflation, did they''
Mr. Brandt. No, the farmer during the inflation was better off
than the other people. This caused a lot of resentment in the cities
against them, but the farmer was getting it in the neck very quickly
in the first year after the inflation. While the debts were wiped out
the Government had in that first year slammed on high taxes. The
farmer was dried out of any cash, so that in one year the farmer had
to accumulate debts which stuck afterward and which cost at the
beginning 50 and 60 percent interest per annum.
Mr. Fish. The final question is more of interest, because you seem
to know about it. How after this war will Europe feed its people,
particularly how will Germany and Belgium feed themselves? They
will not have any purchasing power to buy food with, I don't think
even from Argentina. Did you give us the difference of the price
levels between Argentine production of agricultural, products and our
own?
Mr. Brandt. I did not attempt it. I just assumed it would be
cheaper.
Mr. Fish. And then the other question is: How will Belgium, which
is an industrial country, and a large part of Germany, and others, due
to the chaotic conditions as a result of the war, feed themselves with
no purchasing power to buy food from the outside?
Mr. Brandt. I think the historical example of the years after the
First World War might give a good hint as to how that operates.
The food blockade was maintained against Germany long after the
armistice. Thus, rationing had to be maintained for several years.
During the war millions of consumers had learned to produce supple-
mentary food for themselves on little garden patches and to feed
1424 POST-WAR ECONOMIC POLICY AND PLANNING
rabbits, chickens, and even a few pigs. During the last 2 years,
1943 and 1944, the same tendency has created in Germany such a
problem that the Government had to take measures to keep it down.
The backyard feeders of small animals illegally used too much grain
and other feedstufFs. Self-help by the consumers who turn part-time
farmers will close a part of the gap. Impoverished Europeans, who
have never enjoyed the material plane of living that the people in the
United States do, will go far beyond the toUs done in our victory
gardens.
Besides that, I anticipate that the Government will maintain
wartime controls over the food economy, with certain modifications,
and continue to eke out the small supplies as evenly as possible, and
will see to it that no large number of people will go hungry, in spite of a
very frugal and chiefly vegetarian diet. If you maintain the war diets
with cereals and potatoes as the main source of calories, you can
stretch short supplies to a considerable length. I anticipate that
necessity will force some of the European nations, particularly the
defeated Germans, to make both ends of the food account meet by
continuing to live on a war diet for several years.
Besides that I don't think that the absence of cash necessarily
prevents a nation from buying food. If Belgium, for instance, had
no gold, not a single dollar, or any other currency available, she would
still be able to buy food in other countries. Other nations with
exportable stocks of food will ofl:er such supplies to Belgium on a
credit basis, because it would be good business for them, particidarly
if they have faith in the economic future of Belgium. I would be
surprised if countries like Argentina, Brazil, or Canada, to mention
only a few, did not make such moves soon, once it is clear that Belgium
will remain independent and will not be absorbed into the Russian
orbit.
Mr. Fish. Have you discussed that here today? I had to go out,
and I am not sure whether you have or not. There is an issue, and
I do not know who is going to discuss it, Mr. Chairman, but someone
has to discuss it. I do not like to throw monlcey wrenches and I do
not like to express my views on this thing, but I am going to tell you
very frankly they are my views and I think communism is inevitable
in Europe, and if you have communism you have state-owned pro-
duction.
Mr. Brandt. I would not say that communism is inevitable every-
where in Europe, although the danger is imminent. Wliether this
danger materializes will depend much on the action of the big powers.
I doubt particularly whether you will have state ownership in agri-
cultural land in central and western Europe.
Mr. Fish. I say if you do have.
Mr. Brandt. That is something we have to watch. It is possible
that we will have for many years in Europe revolutions, political
upheaval and unrest, governments thrown out and new ones rapidly
coming in. In that period the food situation just could not really
improve. In fact, I anticipate the possibility of really ghastly and
devastating famine in the center of Europe, particularly in Germany
and Austria. If after Germany's military defeat, civil war of the
type waged now in Greece breaks out, such famine is almost inevitable.
The German food economy has so far functioned well only because
the most competent and able German civil service has managed to
POST-WAR ECONOMIC POLICY AND PLANNING 1425
stretch the scanty available supply far enough to keep the last civilian
alive. Once that precision machine breaks down, waste, unequal
distribution, black markets, and food chaos wiU create starvation.
Mr. Fish. Your answer is, it is on an efficient basis today?
Mr. Brandt. Yes, the record of 5 war years shows it.
Mr. Fish. If they had a chaotic condition it would break down —
you did not answer the question. If communism does take over all of
Europe, then you would be dealing with the state and everything
would be through the state and not through private enterprise or
individual producers of food or anything else. It would be entirely a
state system, would it not?
Mr. Brandt. Yes. So far as Russia is concerned, she is a vast
potential market for food and all the countries that have something to
export could actually, for the next 15 years, export immense amounts
of food to her. But when it comes to the question ' whether the
Russian Government will adopt a policy of importing much food if it
has to pay for it, I doubt very much whether she will buy much food
from overseas. Probably the Russian Government will see to it that
the Russian people keep their belts tight. It will first of all strengthen
its own food resources. Beyond that, the Soviet state will import-
what it wants from the Balkan countries, Poland, and the other buffer
states. Beyond the relief period it seems very improbable that Russia
will buy in the United States large quantities of agricultural products.
If it comes to a state socialistic or communistic regime in a large
part of the rest of Europe, I think such economy would begin also
with planning on an order of continental reconstruction where im-
provement in the diet would be ruled out or at least be postponed
for a decade or more.
Mr. Fish. Of course, they can get loans from us, can't they — two
or three billion dollars on what we call lend-lease, after the war?
Mr. Brandt. The question is whether they want to take that. If
they have no opportunity of securing the payment.
The Chairman. Mr. Arthur wishes to ask a question.
Mr. Arthur. I think you discussed the cotton situation, but
probably one of the major readjustments we will have in this country
will be in the fats and oils situation. Do you have any observations
as to the kind of adjustments that will be required in this country in
particularly the vegetable oils produced that we have developed
largely during the war?
IVIr. Brandt. Well, shortly before this war America was gradually
approaching the situation where the domestic market was being sup-
plied with more and more domestic fats, because it was the main
import gap still open in the domestic market for agricultural raw
materials. High duties and excise taxes on foreign fats and oils paid
a premium for expanding the domestic supply.
During the war this gap has actually been closed. Under the emer-
gency of the war we have anticipated developments that otherwise
would have come at a slower pace over the years.
We have expanded our production of soybean and peanut oil and
even more so the production of lard and tallow, to such an extent that
at the present time we produce more fats domestically than we con-
sumed before the war, and are on a net export basis for fats and oils.
We have made up for all the losses of imports from the Pacific area
by increased domestic production. The future situation for fats and
1426 POST-WAR ECONOMIC POLICY AND PLANNING
oils in our own market and in the world market is of importance to
our farmers.
In different parts of the world powerful forces are at work to do
exactly what we do, namely, to produce more fats and oils. The
whaling business in the Antarctic will revive strongly. Norway and
Great Britain are preparing for that. It is possible that in one single
year six, seven, or eight hundred thousand tons of a first-class whale
oil will come to market. It is the lowest priced full-fledged oil that
exists in the world. After hydrogenation it is edible, has a ready
market as the best margarine raw material, and it will fill a substan-
tial part of the European demand for edible fats. It will again take
the place of American lard as it did in the thirties.
I anticipate that in the field of vegetable fats the Tropics will come
back, so that coconut oil, palm oil, and palm kernel oil will again flow
to Europe in large amounts.
Moreover, a more spectacular rise than that of the acreage of soy-
beans in this country in the last 15 years is to be anticipated in the
world economy of vegetable fats. Sunflowers are going to be pro-
duced on a very large scale. They fit well into many agricultural
systems, for example, in Argentina, Russia, India, and. many other
countries.
Mr. VooRHis. Wliat about Kansas?
Mr. Brandt. I do not think that sunflowers have a particular ad-
vantage in this country as a crop. However, this is something that
can be judged only by trial in the field.
The Chairman. What about soybeans?
Mr. Brandt. The soybeans have their definite place among the
important American field crops, but it is not certain that we will plant
as many acres of beans for oil crushing as we are cultivating now.
They will definitely cover more acreage than before the war, but per-
haps fewer acres than now.
The Chairman. It has been expanding recently because of the war
needs?
Mr. Brandt. Yes.
The Chairman. And I do not think there is any doubt but what
after the war soybeans will be with us, but of course the acreage will
be reduced to meet the needs of our country. I think it is here as a
permanent oil crop in our country and a feed crop that has many
other uses.
Mr. Brandt. Yes; it fits so well into the rotation and its cultivation
and harvesting are completely mechanized. In the Southern States
I think many, many changes are coming. The peanuts for oil crushing
will also stay, will gradually drift toward the best locations, and the
technique of harvesting will be improved with the aid of machines.
Besides that I anticipate for the animal fats in 2 or 3 years after
the cessation of hostilities in Europe a very hard competitive situation,
with heavy price pressure on lard and, indnectly, upon the production
of hogs.
The Chairman. Are you about tlu'ough?
Mr. Brandt. I am, sir.
The Chairman. I want to thank you for j^our appearance here.
Mr. CoLMER. Mr. Chairman, before we leave this witness, who has
made a very interesting statement, I would like to ask him a question,
with apologies for the fact that I did not hear all of the witness'
POST-WAR ECONOMIC POLICY AND PLANNING 1427
statement. I wanted to summarize just a moment and see if I did
get the gist of his testimony. i i •., <■ ^i
As I understand, Mr. Brandt, you do not look with favor upon the
parity payments? You would not be favorable to just turnmg agricul-
ture loose to the law of supply and demand, but that you did favor a
low— a comparatively low— floor for agricultural prices. I am just
wondering if there was something else that I missed, or if that is your
recommendation? Will that, within itself, solve the rather acute prob-
lem of post-war agriculture as we view it?
Mr Brandt. Definitely not, sir; but I spent only a lew words on
that It is my observation that the key to the prosperity of agricul-
ture lies outside of agriculture, and that every policy that tries to
create prosperity for the farmer separately and emancipated from the
other sectors of our economy will be doomed to failure. It has been
tried in vain in other countries. It was tried under the Weimar
Republic in Germany with the most drastic agricultural pohcy. Yet
so long as the Government did not succeed in getting mdustrial em-
ployment to a rather high pitch, all these measures, applied with the
greatest energy and with vast funds paid out of the Reich Treasury,
did not succeed in improving the lot of the farmer. In spite of a
maximum of Government aid the German farmer finally voted for the
Nazis, because they said, ''With these depressed conditions, we cannot
So the key to farm prosperity lies in the general employnient in
industries, in the expansion of the economy, in the rate of invest-
ment All of this will be made much easier to accomplish with the
aid of healthy foreign trade, and foreign trade will flow freely only
when the nations can lay aside their apprehension about more war.
Congressman Hope posed earlier the question as to what extent we
can abate the subsidization of agriculture in foreign countries and the
policy of self-sufficiency m food, which hurts our farm export, ihe
paramount prerequisite for a really prosperous agriculture is the
creation of military Tind political security for the small and the big
nations. . 1,1 ^i ^ .
If you have after this war again a world where the statesmen are
chiefly concerned with the fear that another war may break out any
moment, you may be sure that the consumers in food-importing
nations will insist in paymg heavily for keeping domestic food produc-
tion at a high level. I think, Mr. Colmer, you summarized correctly
the gist of what I said. I do not claim that the altexnative agricul-
tural price policy I suggest is a simple or a wholly satisfactory recipe.
I do consider it as a national necessity to change the method of insuring
farm income through guaranteeing prices according to a politically
manipulated historical formula. My suggestion that the Congress
should put a sufficiently low floor under the prices still requu-es a very
intricate adjustment of the relationships between the floors of the
different farm commodities, because through price relations and price
differentials the farmers' actions must be guided. To set the relations
between commodity floors right is a very intricate assignment which
requires much knowledge and teclmique. Yet the mam stimulus to
expansion or contraction of the production of specific commodities
should come from the side of a strong demand which m turn must be
generated by a reasonably high rate of employment. I hesitate to
speak of "full" employment, because I think the rate of employment
1428 POST-WAR ECONOMIC POLICY AND PLANNING
we have, now, applied to peacetime, is detrimental to our society.
Considering all people in the armed forces as gainfully employed, we
have overemployment. Continued beyond the emergency such over-
employment breaks up families, corrupts home life, and victimizes
children, for instance. I do not think it desirable to maintain that
exalted pitch, but I consider it essential to create the conditions in our
private enterprise economy which result in a reasonably high rate of
steady employment. Reasonable expectations involve the considera-
tion that a lot of young people of high-school or coUege age who are
working or fighting now as a patriotic duty will quit or stay away for
several years from gainful employment in order to finish first a
thorough education. They also involve the consideration that older
people who are over 60 and who still ride the tractors in wartime will
retire. We will need more teachers, more research workers, more men
in professional services, not only people who produce physical goods.
With such adjustments we will be able to have next to no unemploy-
ment. To repeat it once more: The essential roots of agricultural
prosperity are a general high rate of productive (not lean on shovel)
employment, and an expansion of the economy.
Mr. CoLMER. I agree with you on that score.
The Chairman. When shall we meet tomorrow?
Mr. Arthur. Our meeting is scheduled for 10 o'clock, our witnesses
will be due to arrive at that time.
(Discussion off the record.)
The Chairman. We will meet at 9:30 in room 14.
(Whereupon, at 5:45 p. m., Friday, December 15, 1944, the hearing
was adjourned to 9:30 a. m., Saturday, December 16, 1944.)
POST-WAK ECONOMIC POLICY AND PLANNING
SATURDAY, DECEMBER 16, 1944
House of Representatives,
Agriculture Subcommittee of the
Special Committee on Post- War
Economic Policy and Planning,
Chicago, III.
The committee met at 9:45 a, m., Hon. Orville Zimmerman
(chairman) presidmg.
Tlie Chairman. The hearing will be in order.
Mr. Arthur, will you read the communication we have from one
of the witnesses who was to testify and cannot be present today.
Mr. Arthur. This is a letter from Allen B. Kline, president,
American Farm Bureau Federation, regretting his mability to appear
before us personally, but mentioning the resolutions which he expects
to be submitted to the committee by Edward A. O'Neal, of the Farm
Bureau Federation, at a later session of these hearings. He also has
some very helpful comments that I think will be valuable for the
record.
Statement of Allen B. Kline, President, Iowa Farm Bureau Federation
December 14, 1944.
Hon. William IVI. Colmer,
Chairman, House Special Committee on Post-War
Economic Policy and Planning, Chicago, III.
Dear Mr. Colmer: Due to circumstances beyond my control, it is not going
to be possible for me to appear personally before your committee on December 15.
I have just completed several days work as a member of the resolutions committee
of the American Farm Bureau Federation. I understand that these resolutions
will be presented before your committee by Mr. Edward A. O'Neal some time
later.
Since these resolutions have been so carefully worked out, and since they do
cover the areas suggested as agenda for your hearing, they will have more signifi-
cance than a personal statement which I might make. I should like, however,
to enter a brief statement of attitude.
Any peimanent prosperity in agriculture depends upon the maintenance of a
high national income. Full employment is a "must" for prosperity in agriculture.
The maintenance of a high and stable income in all of the areas in the economy
is the very heart of the post-war agricultural problem. Farmers are more aware
of this fact than they have ever been before.
At the same time, the importance of agriculture as a consumer deserves to be
stressed. There is no question either about the desire of farmers to produce fully,
or about their ability to produce. There is question about their ability to con-
sume. Full production in agriculture does not mean full consumption by agri-
culture. It is for this reason that a sound program for the maintenance of agri-
cultural prices and income is essential to the national welfare.
So far what I have said is that this country requires a high national income,
that agriculture is able and desirous of making its contribution to that income by
producing its full share, and by being able to consume its share. I should like to
make the further point that we are tremendously interested in the distribution of
1429
99579 — 45 — pt. 5 14
1430 POST-WAR ECONOMIC POLICY AND PLANNING
population. Agriculture is the one area in the whole economy which has ap-
proached the limits of our need in its production. In addition, we are the only
large area of the economy which will start the post-war period with an actual,
visible, and considerable surplus. It is a well-known fact that we do now have
in rather extensive areas in agriculture, underemployment and extremely low
annual gross incomes per family. Certainly it is apparent that there is limited
opportunity in agriculture for additional labor resources. On the other hand,
there is relatively unlimited opportunity in the field of other goods and services.
What we need is an expanding economy, and the room for expansion is much
greater outside of agriculture than inside agriculture. If the people of the United
States wish to have food at reasonable prices, that objective can hardly be main-
tained by forcing an inefficient agriculture, or low production per man in agricul-
ture. This might easily result from unintelligent programs for resettlement on
the land during the post-war period.
Very truly yours,
Allen B. Kline,
President, Iowa Farm Bureau Federation.
The Chairman. Mr. Heline, are you ready to proceed with your
statement?
TESTIMONY OF OSCAR HELINE, PRESIDENT OF FARMER GRAIN
DEALERS ASSOCIATION
Mr. Heline. I am president of the Farmers Grain Dealers Associa-
tion, and it is an organization of about 325 cooperative elevators out
there having a membership of about 75,000.
Before I go into the question that was presented for discussion, I
would like to say just one word, unless I might forget it, on the co-
operative thing.
Mr. VooRHis. How many farmers are owners of those 300 elevators?
Mr. Heline. About 75,000. It may be 80,000 or 85,000, but
approximately 75,000.
Mr. VooRHis. What was the name?
Mr. Heline. Farmer Grain Dealers Association of Iowa.
Mr. Hope. Let me ask you this question. You are familiar with
the Farmer Grain Dealers Association in Kansas?
Mr. Heline. I am president of the national association, which
includes Kansas.
Mr. Hope. And your organization is very similar to the one in
Kansas?
Mr. Heline. That is right. They are very much alike and, in fact,
we just had a meeting in Kansas City where we had conferences which
included some questions which we may discuss here.
The Chairman. Do you have a prepared statement?
Mr. Heline. No ; I do not. I prefer to visit with you and have you
ask questions as we go along if that is satisfactory.
On the cooperative front it seems to me we have a lot of oppor-
tunities to aid agriculture and at the moment we do have some rather
severe attacks being made upon the cooperatives. I hope that
within the Congress there won't be a lesseniiig of interest in our
cooperatives, or a weakening of them, because I can see opportunities
for them in the future much greater than of the past, in that we can
have a narrowing of the distribution cost on the products which we
produce and also on the products which we consume.
If we can extend that cooperative aspect into other fields more
fully than we have at the moment, it can act as a yardstick and,
should we say, be a pattern for some of the rest of the economy.
POST-WAR ECONOMIC POLICY AND PLANNING 1431
The Chairman. Pardon me. Is the Missouri Farmei"s Cooperative
Association affihated with your group?
Mr, Heline. No; it is not affiliated because it is not the same type
of organization, but our organization does a lot of business with the
Missouri Farm Organization in the grain end. We send a lot of our
corn into Missouri to the M. F. A. and to the Farmers Union that
has headquarters in Kansas City. There are business relations
between cooperatives whether they happen to be the kind of asso-
ciation that I represent or whether they are the marketing organi-
zation, because we have both.
We have what we call a service agency in our association as well
as a grain-marketing agency.
Mr. VooRHis. In other words, you market grain and buy grain for
your members; is that right?
Mr. Heline. Well, we are nearly altogether sellers of grain rather
than buyers. There is but little grain that comes into our State.
There is feed, but not much whole grain.
Air. Hope. But you do, however, deal in things which farmers
use in production, do you?
Mr. Heline. That is right,
Mr. Hope. Oil, coal, and other products of that kind?
Mr. Heline. Yes; we have a purchasing organization in our State
that serves these local elevators, so that we have both the buying
and the selling so far as farm needs are concerned, or farm supplies.
Mr. VooRHis. I might go back, if I may, to the last point you made,
which is of great importance. Isn't this the essential thing? By
means of cooperation there can be introduced, either in the marketing
of a farm product or into the purchase of something needed on the
farm for farm operation, a competitive element which is actually
devoted to the interest of the farmer himself. Therefore, you have a
yardstick which tends at least to bring about dealings at reasonable
markets and prices in both instances and you thereby benefit not only
your own members, but every other farmer in the whole country.
Mr. Heline. That is right. I am happy to have you say it that
way because there has been some concern because of the attacks as
to the influence there may be upon the Congress with regard to
legislation.
Mr. VooRHis. You mean the National Tax Equality Association,
so-called?
Mr. Heline. That is right.
Mr. VooRHis. I understand,
Mr. Heline. Going away from that at the moment
Mr. VooRHis. Before you go away from that, I think you should
tell the committee what the National Tax Equality Association is
really up to. I don't think Mr. Hope or Mr. Zimmerman will mind.
Mr. Hope. I would be very glad to take some time on that. I
think that is something that we can study,
Mr. VooRHis. Tell us about that.
The Chairman. I want you gentlemen to understand this. W^
are here to try to develop facts and information which we hope will
be helpful in the future study of these problems, and I want you
gentlemen to feel perfectly free at all times to ask any questions and
pursue any theme that you think is pertment to our inquiries.
1432 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Heline. The National Tax Equality League is made up of
memberships in the private trade. It is organized by people stem-
ming from the grain trade first and then they have affiliated member-
ships from all of the various activities in private business.
It started in Minneapolis, where there is apparently a lot of com-
petition from the cooperatives as against the old-line grain trade,
and so we feel it in the heart of the country because its home is
near us.
They have held many meetings and have tried to impress upon the
public the dangers of the cooperative movement. They have pre-
sented this tax thing as the important thing. They have been advis-
ing the public that in times like this, when the Government needs
funds, needs high taxes, no organization should be exempt from
paying on the same basis as corporations or other businesses pay.
They take the position that the patronage dividends that are
earned by cooperatives should be treated the same as profits on the
part of corporations. The contention for a long time on the part of
cooperatives is that patronage dividends are not a profit as you would
consider it in a corporation but a payment which is made on the
product that is left over after all of the cost of business has been
absorbed or considered.
Mr. VooRHis. May I interrupt there? And which money never
does belong to the co-op, but which the co-op by its own charter
and constitution is compelled to pass on to its membership.
Mr. Heline. That is right. However, they have been able to
make a lot of friends from the point of view that they should be
considered profits, and they use the argument that if they are not
profits to the farmer why do they continue to do business with the
cooperative? Why don't they just as well do business with any other
private organization or dealer?
Well, those of us who are acquainted with the cooperatives and know
how the patronage dividend and savings are handled, know the
answer, and I think a lot of people do, but there are still many in this
country who are paying some attention to the propaganda and the
argument of the National Tax Equality League.
Before anything is done that would interfere with the functioning-
of the cooperative, I should certainly want to recommend that a full
examination be made relative to the operation of the cooperative
versus private business.
Mr. VooRHis. Aren't you a little mild? You say, before anything^
is done to interfere with cooperatives. As a matter of fact, the
National Tax Equality Association, if they were able to put over their
program, would simply ruin every cooperative in the country.
Mr. Heline. That is right. I say, before anything is done to
change the present functioning of our organization, the rights under
the law in either the United States or within our State should be
examined. Nearly every State has laws that protect and encourage
cooperatives, the same as the Congress.
We are going to do everything we can so far as the cooperatives are
concerned to advise with legislators on the matter, but I don't know
whether this is the time to continue the discussion, except that I am
happy to have had the opportunity to raise the question, because
certainly in my State they are vitally interested in what happens on.
this front.
POST-WAR ECONOMIC POLICY AND PLANNING 1433
Mr, VooRHis. I would like to put this in the record, if I may. I
happen to know from some of our cooperatives in California that this
outfit, the National Tax Equahty Association, not long ago wrote a
letter to the president of a western railroad and asked for a contribu-
tion of $25,000 for their work.
In other words, this is a kind of a big league enterprise with a lot
of money behmd it, and I think it is something that everybody who
is interested ui agriculture has got to be deeply concerned about.
Mr. Heline. The fact is, they have done more than that. They
have done more than merely raise a great fund. They are practicmg
some tactics or using tactics that even force some of their members
to make a deal not to do business with cooperatives.
It is part of their program to cramp the style of cooperatives wher-
ever they can by such pressures as are within their power to control.
That, of course, could lead to some very serious difficulty with many
of our consumer type of cooperatives, those who purchase supplies
for farmers, such as hardware organizations, machinery organizations,
or any of the supply industries.
If they refuse to- do business with the cooperatives, that in itself is
a very major thing to us ui the cooperative field. Therefore, it prob-
ably would be worthy of some investigation of some kind. I don't
know whether that is the answer, but certainly people need to be
informed, and I don't think that we have all of the information.
I wish I knew who all of the participants in the organization are.
They chahenge us because we don't pay the tax; however, when they
solicit membership, they suggest that they are a tax-exempt organiza-
tion and the contributions which they make are not subject to income
tax.
Mr. VooRHis. Is that so?
Mr. Heline. So it is rather interesting to note the extent to which
they go in making their solicitations for membership.
Mr. VooRHis. I don't want to pursue this too far, but there are two
things that can be done. First, don't you think, Mr. Heline, that the
main group of people that needs to be informed about this matter are
members of the Ways and Means Committee?
Mr. Heline. I think it would be very fine if they could be impressed.
Mr. VooRHis. That is my belief, too. In the second place, what is
your estimate separating the patronage dividends or separating the
money which the co-op is compeUed to pay out to the members and
which never really belongs to the cooperative as income which they
may actually retam — that is, separating those two things? How
much revenue do you think the Federal Goverimient is losing from the
actual real income that the co-ops receive? Do you want to estimate
that?
Mr. Heline. I don't beheve I could make a good statement on that.
Mr. VooRHis. Well, the best figures I have seen on it estimated it
at not more than $10,000,000 a year at most.
Mr. Heline. Well, it is a rather insignificant amount.
Mr. VooRHis. That is right, if you are talking about income under
the sixteenth amendment. That is the point I want to make.
Mr. Hope. I would like to ask one question before we leave that.
There is one thing that bothered me about this whole question of
taxation of cooperatives, and that is: What should be done in the way
of taxing income which comes from nonmember business?
1434 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Heline. That is taxed now.
Mr. Hope. Well, is it all taxed?
Mr. Heline. Yes; I am sure all income to the cooperatives, so far
as we are concerned in our organization. The audit statement sets
out the amount of nonmember business and the member business,
and the member business wherein you pay patronage dividend is the
exempt amount, and that which you made any profit on, on the non-
member business, is treated exactly the same as any other private
business, and there you do pay income tax.
Now, many of the cooperative organizations are totally exempt
because they are altogether membersliip organizations, but we do have
some in my State some members of our organization wherein there is a
portion of the business which is done by nonmembers', and that is
separated from that which is member business, and we have some
cooperative organizations that pay a very' high tax. They are no
different whatever from private business on that portion of business
done with nonmembers.
Mr. Hope. I was under the impression there was some nonmember
business or some types of noimiember business that were not subject
to taxation. I just wanted you to clear that up a little bit. You say
there are no types of nonmember business that are exempt from
taxation?
Mr. Heline. Not if they follow the rules of the game. There may
be some companies that have exemptions that have — well, like any
other organization, they may not have kept their membership right up
to date, and they may ask for some exemptions that they are not
entitled to. In those cases there is no excuse.
In other words, they should not be excused from paying tax. We
don't hold any brief for any organization that is trying to take ad-
vantage of its opportunities because they may have 60 percent mem-
bers and 40 percent nonmembers, or nonmember business, and then
try to get by with some part of that 40 percent as being exempt.
In other words, there can be this: In the income-tax laws there is
some leeway on that last 10 percent — that is, from 90 to 100 percent —
that could be probably exempted. In other words, where is the line
of demarkation between what they call 100-percent cooperative and
one which permits a very small amount of business with nonmembers?
There could be a very small fraction of a cooperative business that
would ge^ into that category. However, as I say, that is still much
more insignificant than the total amount to which we first referred.
Mr. Hope. Let me ask you one other question that has bothered
me somewhat. The tax of reserves — that is where you accumulate
reserves by withholding the payment of dividends and you use those
reserves for expansion. As I understand it now, it is up to the Com-
missioner of Internal Kevenue to determine when a reserve is a re-
serve— that is, whether you are entitled to an exemption. You are
entitled to a reasonable reserve, and it is up to him to determine what
is a reasonable reserve, and beyond that you are taxed on what
you might hold out as a reserve. Is that correct?
Mr. Heline. It depends a little how you handle a reserve. If it is
thrown into the present surplus or reserve, that is one thing; but if it is
allocated for postponed dividends, that could be another. There
may be a question, however, on the part of the revenue people as to
POST-WAR ECONOMIC POLICY AND PLANNING 1435
the length of time that they will permit the allocated dividend to
remain in the business without being subject to tax.
In other words, if you have a revolving fund and it does not revolve
freely or soon enough to suit the revenue people, it could be subjected
to tax. Up to this point, I think there has not been any question if
the funds would be revolving on the basis of approximately 5 years.
There could be some change in the attitude of the revenue people
with regard to that. • i v • ] i
Wliat happens is that in this retained or unpaid allocated dividend
there really is no difference whether that is left in or whether it would
Ibe paid to me as a patronage dividend and I would return it to the
company for use. . , . .
Mr. Hope. That is true, but I suppose when it is retained, it is
done by an order or direction from the member — that is, the board
of directors of the cooperative does not say we are going to set aside
so much for reserve or revolving funds this year and we are not going
to pay that out in patronage dividends. If they do that — I am assum-
ing they do it for expansion of the business — they have some authoriza-
tion from the members, do they not? • • • i
Mr. Heline. That is right. The board will no doubt take initial
action and make the recommendation to the membership, and the
membership will support the action or reject it. So it does have the
approval of the membership, certainly.
The Chairman. Do the cooperatives have a uniforrn method of
dealing with this problem or does each one deal with it as it determines
it is to its best interest?
Mr. Heline. It is quite uniform, because the requirements of the
revenue people are pretty clear on that, and unless you do take ac-
tion, board action and membership action, then always there is a
questiouiwith the revenue people as to whether or not it can be ex-
empted. So I think generally it is very clear on the part of the cooper-
ative what the requirement is.
Mr. Hope. I want to add this comment: I don't think you people
have done a very good job yet in selling the public on your side of
this controversy. Don't you agree with me?
Mr. VooRHis. I do.
Mr. Hope. I know you have done some things, but you are taking
too much for granted, because the National Tax Equality League is
doing a lot of work among small businessmen who have no interest in
the thing at all. They are making quite an impression on them and
they are making them think that their interests are at stake in this
thing. As a matter of fact, I don't think they are at all, but they
are making a real impression upon the small local businessmen all
over the country, and I think you should get your story out over the
country and refute the argument that they are using.
The Chairman. I think they are hkewise bombarding Congress
rather vigorously with this propaganda that they are putting out m
statements and arguments. Therefore, it might be well for friends of
the cooperatives likewise to furnish Members of Congress with the
other side of the story. I am speaking now from my own personal
experience.
I have received strong letters from men whom I am sure had no
interest in this movement whatever, but it was due to the propaganda
that the league placed in their hands and they were passing it on to
1436 POST-WAR ECONOMIC POLICY AND PLANNING
the representatives and asking them to take action. So it seems to
me tliat is a problem that you boys have to attack just as du-ectly
and eflectively as the league is doing.
Mr. Heline. We are just perfecting a national association for the
purpose oi domg that very thing. I am certainly glad to know about
your mterest m this matter and hear the statements that you have
made about it.
Mr. Arthur. Mr. Helme, there are a couple of questions that have
come to our attention on which I would like to get your answers mto
the record.
Fhst, are the earnmgs of cooperatives subject to the excess-profit
taxes? ^
Mr. Heline. If they are the type that do business with nonmem-
bers then they are subject to the same taxes as any other corporation.
Mr. Arthur. The same taxes that apply under the normal mcome
tax apply under the excess-profit taxes?
Mr. Heline. That is right.
Mr. Arthur. To the extent, however, that cooperatives are gen-
uinely member cooperatives, you would be exempt from the excess-
profit tax?
Mr. Heline. That is right.
Mr. Arthur. Do you have any views with respect to this: Is that
exemption of cooperatives from the excess-profit tax consistent with
the policies that are underlymg the excess-profit tax as a wartime
measure?
+1.^^^?'^^^^^' ^®^^' •"■ ^^^™^ probably I would answer that by s^iymg
this: Ihere may have been too many difiicult requu-ements on cor-
porations. In other words, we probably ought to have some leniency
on the tax question with regard to corporations, and I doubt very
mucli whether there has been too little restriction on the cooperatives.
After all, cooperative organizations that invest their own funds into
expansion should not be considered the same as excess profits in a
corporation that might be used for expansion purposes.
Mr. Arthur. What is the distinction? I just want to get it for
the record and for our own thinking.
Mr. Heline. One would be actual profits, and the other would be
savings that belong to the members that they themselves would sub-
scribe for the expansion.
Mr. Arthur. What if these same farmers that subscribed and
organized were to call themselves a corporation mstead of a coop-
erative?
Mr. Heline. That is the unfortunate part about it. I think that
we are trying to treat our cooperatives as corporations and they are
not. In other words, they should be looked upon as an association
ot people doing busmess for and with themselves rather than bemg
placed m the same category with corporations.
Mr. Arthur. That now raises my second question. In talking
with some people in the Treasury, they have felt that the cooperative
form is being used for the development of some pretty big business
the development of oil fields, for instance? '
Mr. Heline. That is right.
Mr. Arthur. Do you have any reaction as to how that problem
might be handled by the Treasury? Would it be through more
leniency to the corporations in the field? Or would you define your
POST-WAR ECONOMIC POLICY AND PLANNING 1437
cooperative as I think you almost defined it a moment ago as a
movement that is of and by tlie members, and in which they are very
closely tied up?
Mr. Heline. There is no reason why we should not have expansion
on the part of the cooperative so long as the members are willing to
make that expansion out of their own funds. Whether or not it
would be wise to lessen the difficulties so far as corporations are
concerned is questionable. My own opinion is that they have prob-
ably been restricted too much.
Mr. VooRHis. May I interrupt, Mr. Heline, because I think Mr.
Ai'thur's question should have quite a direct answer. It seems to me
that the direct answer to it is that we should define what is the income
to a cooperative. Now, money that flows into a cooperative is
precisely the same, or almost all of it, as the money that flows in from
purchases or from a sale of crops which are sold for members. That
money in the hands of the cooperative for a temporary period is
precisely the same as money in the hands of an automobile concern or
any other industrial concern if under its charter and articles of
incorporation it was duty bound to pay out in profit sharing to its
workers or to pass on to the purchasers of its goods in a reduced price
or something of that sort.
In other words, it all comes back to the question of a definition of
what income is. Now, I think any cooperative to the extent that it
has income is subject to just the same tax as anybody else.
Mr. Heline. That is right.
Mr. VooEHis. But to the extent that it does not have income, it
cannot be taxed.
Mr. Heline. That is right. I think that is stating my position
exactly.
Mr. Hope. So far as the difference between a corporation and a
cooperative is concerned, if any corporation wants to give up the
privileges it has as a corporation and become a cooperative and share
the profits with the people who do business with it, it has that privilege.
Mr. Heline. Exactly, any time.
The Chairman. You may proceed.
Mr. Arthur. May I ask one more question?
The Chairman. Surely.
Mr. Arthur. Is there a difference in your opmion from public
policy's pomt of view between the farmer cooperative and a coopera-
tive such as the small grocers' associations that have developed?
Assuming that we are picking out those that are bona fide coopera-
tives from the small grocer memberships' point of view?
Mr. Heline. Just what do j^ou mean by "difference"?
Mr. Arthur. Should they be treated differently taxwise; or how
far should the cooperative go in opening its advantages to small busi-
ness organizations?
Mr. Heline. I think any group of people regardless of whether they
are producers or consumers should have the right, if they so choose,
to band themselves together for the benefits that could accrue to that
cooperative, regardless of the business in which they want to enter.
Mr. Arthur. What if they are retailers, would that rule them out?
You said producers or consumers.
1438 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Heline. No; I think that they could. In other words, you
are thmking of strictly the consumer type of cooperatives in the cities
where they are not producers and where they are
Mr. Arthur. No; I am thinking of the group of small grocers who
form a cooperative for the purpose of buying, advertising, and so
forth. Should they be extended all of the benefits of the cooperative
taxwise?
Mr. Heline. Well, that depends a little. We have much the same
kind of organization among cooperatives in regional groups. The
distinction I think between the kind you are talking about and what
we have in the producer field is that after all the member back here
is the one who receives the ultimate benefit.
Mr. VooRHis. And pays the taxes.
Mr. Heline. Yes; that is correct.
Mr. Arthur. The member retailer would, too, wouldn't he?
Mr. Heline. The member retailer, that is right, but it stops there.
In other words, it does not pass on to the ultimate consumer in that
event. However, there is no reason why he could not have all of the
benefits of mass purchasing power, even though he did not have all of
the benefits of the individual cooperative, that is, a cooperative made
up of individuals.
We have a number of them that are going ahead and doing a good
job, mostly becausp of their combined purchasing power. There
could be some question as to the difference between that type of co-
operative. It gets into the field of what we might call a pseudo type
of cooperative; that is, trying to get all of the advantages of a co-
operative, but stm retaining all of the privileges of the private busi-
ness. I think there should be a distinction between those two types.
Mr. Arthur. But you would think of a small business as being a
socially desirable candidate for the same privileges that cooperatives
have? I am trying to get a clarification of j^our position because I
think there is a very broad social interest in these extremely small
businesses which are alleged at least to be handicapped by their very
size.
Mr. Heline. Well, I would hesitate to make a positive statement
on that point, because it is always the question of the size of that
individual operation to the extent that they are small, and that
they have difficulty in competitive society. In that case they should
probably be granted some of the same privileges that some of the
producer type of cooperatives now enjoy, because after all, their
business might be quite comparable to the same kind of business
which we have in the producer's field.
Mr. VooRHis. Aren't you talking about a situation where a couple
of dozen grocers get together and form a cooperative in order to mal^e
mass purchases?
Mr. Arthur. That is right. I would like to distinguish these from
the purely formal retailer cooperative of the sort that is engineered
and in fact owned by a wholesaler or by some other organization. I
am thinking of the genuine small business and tlie fellow who is having
a hard time getting along as an individual who decides he ought to
get the advantage of mass buying by combining the purchasing
through a wholesaler or cooperative buying arrangement.
Mr. VooRHis. In such an instance, won't you agree, Mr. Heline,
that those grocers, if under their cooperative charter they are com-
pelled to repay to all of those 12 stores that make up the co-op at the
POST-WAR ECONOMIC POLICY AND PLANNING 1439
end of the year, the margin in savings which it effects, that then it
should have exactly the same privileges?
In other words, that is no more income to that co-op than it is the
income to a farm co-op — the money that it derives from the sale of a
farm commodity.
Mr. Heline. I think it is hard to distinguish between them.
There could be some question as to the extent that might be done,
but in the instance that you suggest, I think that they could qualify
under any of the existing cooperative laws of our State and Congress.
Mr. Arthur. Aren't there laws that specify bona fide farmer or
producer cooperatives that would exclude these by definition?
Mr. Heline. You could to that extent, but they could have the
same advantages even though they were not producers.
Mr. VooRHis. The point I was trying to make a while ago is that
Mr. Arthur is correct. There would be a distinction under the
present law between a bona fide cooperative and the kind of coopera-
tive he is talking about, insofar as they have actual mcome to the
cooperative.
In other words, if they make a profit from doing business with
nonmembers, or if reserve funds or something could be conceivably
considered income to the farm co-op, then there is an exemption ex-
tended to the farm co-op that would not apply to the other co-op,
but that is not the important thing. Now, the important thing is.
What you are going to do about patronage dividends? It is the
only matter of real consequence, and in that state they both are com-
parable.
Mr. Heline. That is correct.
Now, there is another front it seems to me that we ought to go into
if we are going to make any suggestions relative to the questions raised
and that is this: Is the farmer going to have reasonable stability of
income or are we going to have to attack that from other angles than
from the purely agricultural field? In other words, it is not going to
be enough to enact legislation for agriculture as such?
I think we are gomg to have to think of it m terms of the rnuch
broader field and if we are going to have adequate incomes for agricul-
ture in the post-war period, it is going to be because of Nation-wide
substantial income and probably some kind of a prosperous world that
will accept reasonable percentages of our goods, both frotn industry and
agriculture.
I believe that we are going to have to look to the future prosperity
of agriculture on that front and that we are gomg to have to participate
with other countries in various types of organizations giving more
stability to the other countries than existed between the two wars.
Whenever a country can do much as it pleases, as was demonstrated
between the two wars, it was a constant battle from whom purchases
were to be made. No one country could depend upon an outlet for
any given period of time.
Therefore, it seems to me that such suggestions as were made at
Bretton Woods, for instance, regardmg the internatonal fund and
the international bank, had in it some of the stabilizing factors that
we need from a world trading point of view. ■
If you have enough nations subscribing to that kind of thinking, it
would give us the necessary stability to depend upon outlets in foreign
trade.
1440 POST-WAR ECONOMIC POLICY AND PLANNING
Suggestions have been made from time to time that we cannot
depend upon the rest of the woild to purchase many of our supphes
because they are going to be very poor; they are going to have to
tighten their belts and the possibihty is not going to be there. How-
ever, if on the whole front of international tradeVe could create that
stability, then I think that it would enlarge the opportunities on all
of the fronts and that they could be purchasers. In other words,
we could have trade both in buying and selling with those nations.
The Chairman. Did you hear Dr. Karl Brandt late yesterday
afternoon?
Mr. Heline. Yes.
The Chairman. I am sure you were impressed with the fact that he
pamted a rather stark picture of our future relations with the countries
of the Old World now involved in war as affected by the war.
Mr. Heline. I would not like to be as gloomy about it as he.
The Chairman. The point I want to make is this: Do you think
that that is going to be one of the problems of our Nation and our
allies, and other nations that band themselves together in a cooperative
effort, we will say, first, to prevent the recurrence of another world
war? We have got to do something about the economic problems of
these nations as well as the peace policies of these nations, don't vou
think?
Mr. Heline.. That comes first. In other words, unless we have a
very satisfactory solution to some of these economic things, we cannot
hope to develop the peace front.
The Chairman. That is right, and if we use the foresight and avail
ourselves of our experience of the past, it does seem that we ought to
be able to solve some of these problems and bring out a more orderly
economic condition in these countries with relation to our own country.
Mr. Heline. On that point, the experience of the United Kingdom
must be referred to. I spent a couple of months there last winter
visiting with the farmers. I think the question that was raised by
the farmers in the United Kingdom more than anything else was what
our policy would be after this war with regard to pricing.
Agriculture over there became quite dereUct in the interim because
of competitive prices that the world had to offer that country and the
farmers said they are desperately in need of supported prices. ^Tiat
happened was that there was a war on between the various surplus-
producing countries as to who could supply the surpluses at the lowest
price.
It does not seem to me that we can present a program that will
again dump our surpluses in competition with other countries' sur-
pluses, and expect to have the right kind of relationship to maintain.
In other words, those people over there found that we were using
various devices to permit our surplus-products to get into their coun-
try, the same as other surplus producing countries, and it merely drove
the price so low that they themselves had to get out of the business.
Now, that does not build for the good will or the peace that we hope
to have in the future. Only by international negotiation and conver-
sation can you arrive at conclusions that will make reasonable prices
to those countries, protect their own industry, and keep from breakmg
down the price levels the world over.
Mr. Hope. Are you speaking of agreements like the international
wheat agreement?
POST-WAR ECONOMIC POLICY AND PLANNING 1441
Mr. Heline. That is right.
Mr. Hope. Is that something Hke what you have in mind?
Mr. Heline. That is right. I think we are going to have to have
various understandings on practically all of the commodities that we
have surpluses on, because if we don't, and if we follow the suggestion
of some in this country, that we have a two-price system, for instance,
and that the surplus which goes on the world market merely seek its
own level, and every other country does the same thmg, after a while
there won't be any level because they will beat each other down.
Therefore, we have to take into consideration the internal economies
of the' countries on the other side.
Mr. Hope. I want to interrupt you again. These agreements that
you are talking about would have to be agreements which would in-
clude consumer countries as well as producing countries?
Mr. Heline. That is right.
Mr. Hope. And they would not be worth much unless they did
include consumer countries?
Mr. Heline. I think you would have to have a very large number of
countries involved so that your agreement would be between the
producers and consumers.
Mr. VooRHis. Do you think those agreements should govern price
or volume of exports, or both?
Mr. Heline. Both. I think one would be useless without the
other. . . 1 .
Another thing that seems to me to be vitally important is this:
In addition to the discussion and agreements that we might have on the
agricultm-al products themselves, the way m which we develop the
monetary aspects and the exchanges between countries is very impor-
tant. The last time it was possible by a country adopting cetrain
tariffs, for instance, and the next country by adjusting its currency
exchange, and by various methods, there was a constant vying with
each other to see who could do the thing that would be to its benefit
rather than solving the problem by any common agreement. This
time it seems to me we are going to have to think in terms of how we
can have some stability in exchange, monetary matters, and exchange
rates, so that it won't break down the other kinds of agreements that
we might concm^ in so far as price or amounts are concerned.
I thmk it is equally true in this country that the thing we do in the
fiscal and monetary field will have as much to do with the price which
we receive as farmers as some of the other things which we might
legislate about on the farm front.
In other words, it is something which is both national and inter-
national in character. For instance, on the tax question, yesterday
it was mentioned a number of times that we have a very high national
debt and that we are going to need high incomes to carry it. This is
true, but it seems that the national debt, if it was properly managed,
may not be the deterrent or altogther a deterrent or detriment to this
country.
If it was properly managed and if a policy was promulgated that
would be flexible so that it could bring benefits to us, that would be
very important.
Also, since we have a pay-as-you-go tax progi'am and if we have
high incomes — as we have at the moment — there is no reason why the
authorities, a monetary authority, should not tax heavily and create
1442 POST-WAR ECONOMIC POLICY AND PLANNING
additional funds probably substantial liquidation of the national
debt and then when thnigs begin to drag and get rather tough, and
when It looks like deflation is hitting us, there is no reason why we
should not quiclvly remove the high tax and have it lowered to the
point where we would have greater spending power— for example
dehcit spending. ^ '
In other words, we could have a flexibility in there, it seems to
me that would give us the protection of very high inflated periods
and also a relief from the dips in. the valleys of depression which we
have to go through. That is only on the one front.
Then, there has been a lot of manipulation on the part of thethin^
we call money, that is, on the monetary side. I can remember back
m the last war when there was considerable expansion of money and
we went into that very high price period. Then when there was too
rapid contraction, we took the tail spin.
The Chairman. Concerning that question— yesterday you were
here during most of the discussion, weren't you?
Mr. Heline. Yes, I was.
The Chairman. One man made the suggestion that there was no
way out, and he made a very positive statement, unless we resort
to a sales tax. Did you hear that statement?
Mr. Heline. Yes, I did.
The Chairman. What do you thinly about that?
Mr. Heline. I do not thinlv that is necessary. I thinlv there are
other methods and ways m which this thing can be regulated, but
1 don t think it can be regulated in the haphazard manner in which
it has been handled before.
I thinlv we have got to have some definite thinking on the part of
people who know something about it and not leave it to chance.
I think if we had a nonpartisan board made up of people from the
various industries m this country that they could really devise a
plan which would add up and give more stability than we have ever
experienced before.
Mr. VooRHis. Would you agree, Mr. Heline, that the taking of
salutary measures m the field of monetary and fiscal policy to the
end of stabilizing our economy, our supply of the medium of exchange
and to a great degree our price level, is the proper function of Gov-
ernment and to the extent that Government discharges that function
well and sufficiently, it becomes to the same extent less necessary
lor the Government to interfere with individual activities in the
economic sense of the people than it would be if they did not do that
particular job?
Mr. Heline. Exactly, I agree with your statement.
^ There are other international organizations that could affect us
mternally For instance, food and agriculture. There has been a
lot said about the nutrition topic and how important it is to us in
agriculture.
The first statement I want to make is that if we are going to have
good nutrition, we must have good incomes. Nation-wide and world-
wide.
The other is that we should have much more education on that
pomt than we have had up to date. But surely there are opportuni-
ties for agriculture in the field of food and nutrition the world over,
and our greatest market probably is here in this country among the
large group of people who haven't been eatmg sufficient amounts
POST-WAR ECONOMIC POLICY AND PLANNING 1443
The Chairman. Would you include clothing in the nutrition field?
Mr. Heline. No; I am thinking of food.
The Chairman. But would you include it?
Mr Heline. I think you might include it because after all m
addition to having sufficient food it is necessary to have sufficient
The Chairman. During the darkest days of our depression we had
a surplus of some farm food products, and yet we had people starvmg
to death. We had a surplus of cotton, and we people in the South
who were trying to get a market for our cotton found people who
were in tatters and rags and didn't have any clothes. So it seems to
me that those things go right together. ^ .. t
Mr Heline. That is right. I think there is a place tor it. i was
thinking mostly about food, but from a farmer's point of view, you
make a point. . i i i ^i at i
The income, the total national income, is probably the No. 1
thing, and then a balancing as between the several segments of
society; that is, a proper relationship of incomes as between the
different groups is certainly going to be essential. From the point
of yiew of agriculture itself I would want to disagree with those who
think that we ought to brmg more people into agriculture m the
post-war period. .
, We have now a very large proportion of people m agriculture wno
are our lowest in income in the Nation, and as we bring more people
into agriculture we will mcrease that number rathet than decrease it.
Probably we ought to take a couple of million out of agriculture
rather than putting them in. I do not know what the answer would
be as to where to put them if we did attempt to take them out m this
period, but certainly I do not think there is any room for them m
agriculture.
The Chairman. At a cotton meeting which was held in Washmg-
ton last week, Secretary Wickard, and some other speakers, suggested
that we decentrahze industry— that that process must come about.
For example, we should inclustralize the South as it has not been
before, and make a place for people who should not be engaged m agri-
culture and who are not now engaged in agriculture comfortably.
Now, that was a suggestion that seemed to me to be food for thought;
that might help work out the social problem which will obtain if a
large group of farmers are displaced, because of mechanization of
agriculture that is going to bring about improved and more efficient
methods of farming. I think that is going to result m the displace-
ment of a large segment of our agricultural workers.
Now, we have got to find a place for these people. What do you
think about that suggestion? n . i t j <-
Mr Heline. Well, as a subsistence thing, it is all right. 1 do not
like to think of the thing as being the answer. We may have to do it.
The Chairman. No, wait. You say it is a subsistence thing We
have to be realistic about this. If we displace these people who are
now engaged in agriculture, take them out or make it so unprohtable
that they can no longer pursue that occupation, it is still more than
subsistence. These people have to be established m some other mode
of making a living. . -11 +
Mr. Heline. I would be in hopes that it would be possible to
develop a type of agriculture, or kind of agriculture, that would be
1444 POST-WAR ECONOMIC POLICY AND PLANNING
able to pay somewhat nearer tbe same kind of rates that industry
could pay. At the moment they cannot, and I think that the worker
in agriculture probably should be seeking employment in the indus-
tries that can pay more than agriculture can now afford to pay.
When you begin to divide the earnings of a man who gets it partly
from industry and partly from agriculture, I do not think he would be
too valuable in either one. To me it just doesn't seem to be the
answer. It may be the necessary thing to do in some areas. There
has been a lot of discussion about it, but not very much has been
accomplished.
The Chairman. Suppose we, as is being advocated, increase the
minimum wage and give these people a chance to make not a mere
subsistence but to live as American citizens should live. Wouldn't
some program like that have to go along hand in hand with this decen-
jralization?
Mr. Heline. It may be necessary as a conversion measure.
The Chairman. In other words, I do not think we can hope to get
along in om- country with a large segment of our people on just a bare
subsistence basis.
Mr. Heline. That is right. That is the thought I had in mind.
The Chairman. That is the problem I think we have to consider.
Mr. Voorhis. May I ask a question at that point, Mr. Chairman?
The Chairman. Yes, indeed.
Mr. Voorhis. I think, Mr. Heline, there is real hope in the kind of
thing you are doing right now, and I would like to>ask you to comment
on this statement: Isn't it possible by means of cooperation to broaden
the periphery of the field of business from which the farmer derives a
portion of his income? What I mean is this: Let us take one farmer
over here, and all he does is grow a staple crop, sells it for cash and
purchases all the things he has to have. Over here is another farmer
who belongs to a marketing co-op which assists him in getting a better
price for his commodity when he sells it, which brings, therefore, to the
farmer a portion of the margin from the same, and the handling of his
commodities that formerly went elsewhere, and adds that to the farm
income. This same farmer also belongs to another cooperative
which may manufacture fertilizer or feed or something of that sort,
where he, in effect, is a part of a copperative business manufacturing
those things and where the margin of profit from the manufacture of
those things is likewise added to farm income. Isn't there some hope
in that direction?
Mr. Heline. Oh, yes; a great deal of hope; but that is only one.
In other words, that won't solve the problem if the other things are not
in balance or if they are, they aren't on a reasonable level. We think
there are very great opportunities in the very thing that you mention,
and in many instances it is the thing that creates that difference
between, say, profit and loss.
Mr. Voorhis. It has this great advantage also, that it doesn't rely
on governmental assistance and is somethmg people do for themselves.
Mr. Heline. That is right.
Mr. Hope. I know you have answered the question, but I want to
comment a little on that myself. That reahy isn't going to do
anything — and Mr. Voorhis Ivnows I am a very strong believer in
cooperatives. I am not sure that the figures are correct, but 50
percent of the farm population produce something like 10 percent of
POST-WAR ECONOMIC POLICY AND PLANNING 1445
the crops and have 10 percent of the income. That, of course, mcludes
some part-time people. That is not quite as bad as it sounds. But
nevertheless if you double the price of farm commodities, you still
have those people way below the decent margin for existence as far as
income is concerned, and even if you did everything that you are
suggesting here, you would not give them enough to really amount to
anything.
Mr. VooRHis. I think that is probably true. .
Mr. Hope. While we are on that particular point, there is nothing
in any of the remedies that anybody has suggested that can do very
much for that 50 percent, is there, as far as giving them a decent
income is concerned?
Mr. Heline. That is the reason I made the suggestion that we
probably ought to have a couple of million taken out of agriculture
from that group that do not make enough for a decent living, and
where their incomes per hour are much less than incomes in industry
would permit. If they could be shifted out of agriculture, then you
could take that lower 50 percent that you refer to and divide the total
income of that percentage with a lesser percentage and probably get
some kuid of decent living. You cannot take such a- small amount
as they receive and buy or sell anything by the cooperative method,
as far as the management of that small group or volume is concerned,
and give them a decent living. You have got to have less people to
divide that income with.
Now, as to the other 50 percent that you talk about, the suggestion
made by Congressman Voorhis would apply very materially. In
other words, there the savings of a large volume of business would be
very important to that particular farmer. In other words, in my own
case it might mean several hundred dollars per year. It could mean
more dollars per year to me than the total annual income of the
farmer in the lower 30 or 40 percent. What applies in one case does
not necessarily mean anything in the other. You are going to have
to do somethmg to lift that great number of people that now receive
such a small total annual income.
Mr. Voorhis. Except the very experience of joining together in a
"cooperative effort to solve one's problems in many instances gives
people a new hope and new pooling of ideas which may in and of itself
be of some assistance — I do not mean to solve the problem but to
start folks on the way to a solution of the problem. I think even that
that spiritual value, if you will, from the experience of cooperation,
may be important for almost everybody.
Mr. Heline. T would not disagree with. that.
The Chairman. All right, sir; proceed with your statement.
Mr. Fish. There is one tiling. I wonder if you would care to dis-
cuss and recommend anything to the committee in the way of substitu-
tion for subsidies.
Mr. Heline. I do not particularly like subsidies, but sometimes
they are very necessary. I do not like to think of them in terms of
being a permanency in agriculture. I think there ought to be some
way in which we could in the long run get away from them.
Mr. Fish. That is my question. Leaving out what we might call
a war emergency and high costs, and so forth, lack of labor, machin-
ery, and all that, we are plamiiiig for the future, and we assume and
99579 — 45 — pt. 5 15
1446 POST-WAR ECONOMIC POLICY AND PLANNING
hope on a permanent basis. What would you suggest, as an expert on
faiTii problems, to replace subsidies?
Mr. Heline. Subsidies might always have to be used to a limited
degree. I think at the moment we would probably get further if we
would reduce some of our high support figures. The high support
values of agricultural products today do not give us very much chance
for the flexibility necessary in agriculture to adjust for the demand.
Mr. Fish. You see, the difficulty that I face is that a great many
farm organizations and a great many farmers themselves say: "We
don't like subsidies. We will take them in an emergency, of course,
but we would like to do away with them. We are opposed to them."^
I would like to have a concrete suggestion. It is sometliing I would
like to find an answer to here from you people who are experts.
Mr. Heline. I am not an expert. I am just a farmer. But the
point is, if we have to have subsidies constantly in agriculture, then
my opinion would be that it would not be in a healthy state and there
must be something else done to it; that it should only be in the emer-
gency, in the valleys of depression, and other difficult times, that you
should depend upon subsidies as any major part of income to agricul-
ture. We are probably going to have to change some of the rules and
regulations of the past number of years where we have made our
agricultural program more or less inflexible, and again get back on a
basis where we will have a little more freedom of change from com-
modity to commodity; independent action upon the farmer himself,
in order that we can do away with tliis constant subsidization.
For instance, at the moment, with a 90-percent or better supporting
price of agricultural products, if I happen to be a grower of the
product that has that kind of support price in the area in which I can
produce it quite cheaply — that is, at the average cost or less than the
average cost of production — there is no reason why I should get out
of it even though we are producing too much of the product. In
other words, there is a very great danger, it seems to me, of having
accumulation of surpluses that become uncontrollable by having that
kind of a high support price.
A year ago, to make a case in point — —
The Chairman. Pardon me just a moment. We all realize that
is the bane of agriculture — surpluses — isn't it?
Mr. Heline. That is right.
The Chairman. Unwieldy surpluses. Yet I recall that in the
depths of our depression that was the thing that brought disaster
to the farmer. You had no subsidy, no control. In other words, he
produced at his will. It was surpluses, they told us, that utterly
destroyed his prices and drove literally thousands of American farmers
into .bankruptcy .
Then we embarked on the program, and you think — and we will
all have to agree with you — that when you put a floor, 90-percent par-
ity, under farm products — cotton is now 95, I believe — we are still
confronted with the problem of unwieldy surpluses that just threaten
to upset our whole agricultural program.
Mr. Heline. That is right.
The Chairman. So we have the two situations. Now, the thing
that bothers me is what are we going to do about it? I am in accord
with Mr. Fish on that point. How are we going to handle it? That
is the thing we want to work out.
POST-WAK ECONOMIC POLICY AND PLANNING 1447
Mr. Heline. I am sorry that I cannot give you the answer.
Mr. Hope. On that point, you heard Air. John Brandt yesterday
afternoon. Would you want to comment on the plan that he sug-
gested?
Mr. Heline. What point do you have in mind?
Mr. Hope. His program, which amounts essentially to the McNary-
Haugen plan of Government agency which would be handling
Mr. Heline. That was John Brandt. Well, of course, I think that
he was using entirely too narrow a figure in what he had hopes would
control the thing; in other words, using 5 or 10 percent as the amount
which would be used as equalization fee. In other words, when you
actually get into real surpluses, I think it would bog down under its
own weight. It would be quite impossible to have it as a solution,
although it had in it some of the elements that we have when you have
a lower support price so that you have some flexibility of price, and
it may have something of merit in it.
The thing that bothered me more about that than any other thing
was the fact that the surpluses at a price would be used for export.
There again I would have to go back to what I said first — that I think
there is a great deal of danger from an international point of view to
the peace that we hope to have, of having these exportable surpluses
at a price so low that it bears down the world price. That is prob-
ably what would happen under his plan, if you ever got into real
surpluses.
Mr. Hope. But if you had his plan and had these international
agreements, might not the international agreements take care of that?
Mr. Heline. You might then be able to set that exportable surplus
to where it would fit into the international agreement so far as price
and amount is concerned.
There is one other thing that might be coupled with it, and he did
raise the point, of using surpluses in industry. I think it has a lot
of possibility in some of our commodities that we could in times of low
prices, times of surplus, when prices should be permitted to seek a
lower level, utilize in mdustry quite satisfactorily maybe as much as
10 or 15 percent of a total product.
For instance, our grains in alcohol. We have the plants and facili-
ties now existing, and it might be very possible to utilize a lot of our
commodities in that and other fields.
Of course, again you get into the question of competition with
imports that we might want to again revive, that it would be com-
petitive with, unless you used it altogether in the fuel front. If you
used alcohol in the fuel front, then I think it would have a lot of
opportunities.
Mr. Hope. Now, there is another question I wonder about — I did
•not ask Mr. Brandt about it yesterday, because it was getting late —
but you are a businessman who deals in farm commodities, and I was
wondering if there would be any difficulty in applying an equalization
fee to a commodity where you had a good many different types or
grades of the commodity .' He has simplified, of course, what he was
talking about — that is, an equalization fee of a certain percentage,
just on the theory that, cotton was cotton and wheat was wheat, I
suppose — but, you probably would have to work out some differential
there, wouldn't you, or would there be any difficulty in that?
1448 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Heline. I do not think that there would be any particular
barrier, because you deal in the commodity by grades rather than as a
commodity, and your equalization fee would be on a percentage basis
rather than a total value of the product. I do not know that that
would be too material.
Mr. Hope. I do not have any ideas on it at all; but I wondered if,
as a practical matter, it would be somewhat difficult to handle.
Mr. Heline. I do not think, too much.
The Chairman. Now, I have one other question. You started out
with the premise that you think we have to have higher income for
the farmer in order that he may have the necessary purchasing power
to stabilize our economy.
Mr. Heline. I do not know that he should be first. I think it
goes together. I think we have to have a total high national income.
The Chairman. Did you hear Mr. Karl Brandt, of Stanford Univer-
sity, yesterday afternoon?
Mr. Heline. Yes.
The Chairman. He advocated a low, comparatively low, ceiling
for farm commodities, which, of course, means a lower price for farm
commodities. What would be the effect of that on our economy?
Mr. Heline. I did not understand him to say "a low ceiling";
a low support price.
The Chairman. I understand; a comparatively reasonably low
support price.
Mr. VooRHis. Not a ceiling.
The Chairman. No; a support price.
Mr. Heline. Of course, I have said almost the same thing.
The Chairman. He said we could not afford to have a floor price
at parity, as we are now figuring it. He advocated, as I understood
him, a reasonably low floor or support price. Now, what do you
think the effect of that program would be on the purchasing power of
the American farmer in the post-war economy that we are trying to
work out?
Mr. Heline. Well, the fact that you would lower the support
price would not necessarily mean that you would lower the price to
the farmer. That does not always hold. In other words, there are
times when the support price adds to the income, but there are other
times when it is totally ignored, and we have that now. For instance,
since last winter, when we had the very great difiSculty of keeping
hog prices at the support price
The Chairman. Let me interpose. We are dealing now with an
abnormal war condition. We are trying to think about a time when
we are back to a normal peacetime program that we can tie onto and
go forward with. Everything is upset now — we know that — like
fats, oils, meats, everything. It is all directed to our war effort.
I am thinking now of looking beyond that time.
Mr. Heline. Well, if our support price is high so that it is profit-
able for me to produce that particular item, and enough of. us pro-
duce it, unless we have a very large market such as we have at the
moment, there is only one answer. There will be gluts again of
surpluses, such as we have had even in wartime and as we had with-
out any of these rules and regulations prior to the war.
The Chairman. Then you look with favor on his suggestion?
POST-WAR ECONOMIC POLICY AND PLANNING 1449
Mr. Heline. I probably would not want to 0:0 as low as he may-
want to go, but I think we should have a lowering of the support
price. . . , ,
The Chairman. You think there is something to the prmcipie he
advocated?
Mr. Heline. That is right; because it is going to be necessary lor
some of us to get out of the business of producing certain commodities,
and there is no inducement nor necessity to get out of producing cer-
tain commodities that now have such a high support level that we
just cannot afford to attempt anything else. It is unnecessary for
us to do anytliing else, because that support price to us is entu-ely
satisfactory. „r - i , ^1 i.
Mr. VooRHis. May I ask you this, Mr. Helme: Would you say that
the support price or floor price should be handled in such a way as to
be a positive inducement to farmers to produce those things which
we are still reasonably short of from the point of view of domestic
need and to encourage them to go out of producing those things m
which we have a large exportable surplus?
Mr. Heline. That is all right. That makes sense.
Mr. VooRHis. Is that what you are saying?
Mr. Heline. Whenever you use it as an inducement for the pro-
duction of things we have as against having a support price on a
product which is exportable, that is a different tiling.
Mr. VooRHis. Do you thuik that is a principle that should apply
to a support price?
Mr. Heline. That is right, rather than the way we have it now,
now, we have a support price whether we need it or not.
Mr. Hope. Right at that point it seems to me there is a lot of
confusion over the use of this term, "support price," because we have
used it in two different ways. Before the war we had commodity
loans on some of the staple crops, and we called that a support price,
and they were down — well, they started out at 60 percent of parity,
and then they kept creeping up. Now, we called that a support
price, and those support prices obviously were not designed to increase
production of the^commodity, because they applied to surplus commod-
ities. We were trying to keep the floor there, to keep the price from
going clear to the bottom.
Now, since the war has been on, we have had support prices on a
lot of other things, some of them way up above parity — weU, I am
not sure about soybeans. I think that is above— but there have been
some commodities where the price is above parity because we want
to expand production, and in order to induce farmers to go into those
crops, we put those floors way up.
In our talking here, I think, in this meeting and other places, we
have confused those two different purposes. It seems to me m con-
sidering the post-war situation we have got to keep in mind that there
are two different kinds of support prices that we are talking about.
Mr. Heline. That is right. If we will differentiate, and if we will
use support prices for the purpose of getting into the kmd of com-
modity that we need, that is fine.
But in this recent period we have been jnoving all support prices up
right near the parity mark. Then what has happened is, we have
had to have material increases further and further for the other sup-
port prices for the purpose of getting added production. In other
1450 POST-WAR ECONOMIC POLICY AND PLANNING
words, when I can get 90 percent of production for producing corn,
the only way in which I will produce soybeans is if the support price
ig very materially above the parity level, and so probably we ought
to do a little lowering as well as raising. Then we would have more
flexibility in production.
Mr. Hope. But I still maintain the distinction after the war be-
tween the two types of support prices. Mr. Voorhis suggests you
might have one support price as a method of supporting production
in the way of a deficit crop, but you wouldn't want to confuse that
with a support price on cotton or wheat or some other surplus, that
is, you couldn't apply the same principle.
Mr. Heline. I agree.
Mr. CoLMER. Mr. Chairman, may I just ask Mr. Heline: You
wouldn't say you were opposed to support prices as such?
Mr. Heline. Oh, no. It is just a question of the level at which
they are placed. In other words, I think the principle of support
prices is fine, because it gives you a stop in what otherwise could be
suc^i a seriously low price that it could ruin agriculture. I think
the public interest is great enough in maintaining agriculture on a
good basis that it can afford to make some contribution in the way
of support price during those periods.
Mr. CoLMER,. The Congress has already passed legislation author-
izing support prices for 2 years after the war. That may not be the
answer during that transitory period, but have you any suggestions
of what might be more adequate than that?
Mr. Heline. The only thing, if we went back to what we just said,
that if the support prices would be on a different level from what
they are. I appreciate that Congress is no doubt going to attempt
to live up to the agreement it has made with the farmer. It is very
nice that those who are in the farming business have that kind of
guaranty, but it could also lead us to very grave consequences
following that period. I am just as much worried about that period
2 years after the war as I am the 2 years immediately following the
war. In other words, you can establish such rules and regulations
and such a policy that when we get to the jumping off place it can
be a very difficult one either for the farmer or for the Congress to
maintain any semblance of the same kind of relative values, because
of the creation of such burdensome surpluses. As I say, it just
seems to me it isn't the only answer by any means.
_ Mr. CoLMER. I don't think it is, either. It is a stopgap proposi-
tion, and an over-all attempt to do something during this transitory
period.
The Chairman. Have you any further statement on the cooperative
movement you would like to make?
Mr. Heline. I don't beHeve so.
The Chairman. We certainly appreciate your coming before us
and the very fine statement that you have given. I am sure the in-
formation you have conveyed to this committee will be veiy helpful
in our study of the big job that we have ahead of us.
We now have with us Prof. Noble Clark, of Wisconsin University,
who has consented to makq a statement. Will you please proceed.
Professor Clark?
POST-WAR ECONOMIC POLICY AND PLANNING 1451
TESTIMONY OF NOBLE CLARK, CHAIRMAN, COMMITTEE ON POST-
WAR AGRICULTURAL POLICY, ASSOCIATION OF LAND-GRANT
COLLEGES AND UNIVERSITIES
Mr. Clark. I assume I am here in my capacity as chairman of the
committee on post-war agricultural policy that was appointed by the
Land-grant College Association.
The Chairman. That is right.
Mr. Clark. So I have brought with me the secretary of the com-
mittee, who is in many ways the brains of the organization. If you
ask me questions that I can't answ^er, I would like the privilege, of re-
ferring them to him.
The Chairman. Mr. Clark, have you a prepared statement?
Mr. Clark. Yes, I have.
The Chairman. Would you prefer to read that without inteiTup-
tion?
Mr. Clark. I would be glad to.
My name is Noble Clark. I am chairman of the committee on post-
war agricultural policy that was appointed a year ago by the Associa-
tion of Land-grant Colleges and Universities. That is the organiza-
tion that is made up of the agricultural colleges of the Nation. I hap-
pen to be the associate director of the Wisconsin Agricultural Experi-
mental Station.
My associate, who is with me, and who is the secretary of our com-
mittee, is Prof. Leonard A. Salter, Jr., of the department of agricultural
economics at the University of Wisconsin.
At the request of your committee, I have sent you previously copies
of the preliminary mimeographed report of our committee, but I will
be glad to supply the printed copies which will be complete, which
are expected from the printer in the very near future.
The Chairman. We would greatly appreciate receiving a copy, of
the report. , t
Mr. Clark. The committee on post-war agricultural policy of the
Association of Land-grant Colleges and Universities was appointed m
January 1944, to draw together a statement on farm problems and
agricultural policies for the post-war years. After a series of dis-
cussions with representatives of the national farmer organizations, the
United States Department of Agriculture, and all of the land-grant
colleges, and with some other consultants, the committee presented a
report to its association at its annual meeting in Chicago on October
25 1944.
We are ablc' now to present mimeographed preliminary copies of
the report. Printed final copies, which vary in some details from the
mimeographed edition, will be off the press within a week or 10 days,
and we shall be glad to make them also available to your committee.
The report explains the set-up, purposes, and point-of-view of our
committee, and deals with a wide range of agricultural policy problems.
Time does not, of course, allow a full review of this report, so
my statement is pointed toward the specific request contained in
Chairman Colmer's telegram of December 1, 1944. This telegram
requested —
a statement regarding: (1) Basic long-run policies to lessen instability of income
resulting from variations in production and demand, (2) basic policies to place
1452 POST-WAR ECONOMIC POLICY AND PLANNING
agriculture on a satisfactory self-sustaining basis in long run, (3) policies to pro-
mote higher levels of consumption and nutrition, (4) relationship between oi
foreign-trade policy and domestic agricultural policies. i^^tween our
Herewith is a brief outline of the views of our committee in respect
to these topics Prof L. A Salter, Jr., secretary of the committee,
who IS here, and I will be glad to expand on such of these points as
you may be interested m, insofar as our committee has dealt with
(1) POLICIES TO LESSEN INSTABILITY OF INCOME
Our committee puts first emphasis on full industrial production and
nontarm employment as important factors for stabiUzing the level of
agricultural income. We feel that no issue is of greater importance
to stabilizing farm income than that of maintaining urban purchasing
This problem is not, of course, within the hands of farm people
but farm groups should put their weight behmd measures that would
encourage substantially full employment. Some programs that will
help meet this goal are given in our report. They include coordma-
tion ot public hscal, credit, and economic policies through some such
agency as a national economic policy board, that would advise Con-
gress, the public, and governmental agencies as to adjustments and
procedures m monetary, debt, public works, or other programs to off-
set trends toward inflationary booms or deflationary troughs
Our suggestions also include tax reforms toward personal income
and death taxes instead of consumption and business taxes, extension
ot social-security plans, and possibly the establishment of a general
economic stabilization fund for encouraging continued production.
Uur committee also recommends subsidized consumption of low-
income groups at all times, and expansion of such a program if
uneniployment develops. /
'Within agriculture, there should be crop insurance programs for
farm products that are particularly susceptible to climatic hazards,
it widespread urban unemployment should develop in spite of the
measures urged to offset it, there should be a system of supplementary
income payments to farmers, based on farm family living needs and
the cash outlays necessary to maintain farms in productive condition.
Also, m periods of widespread hardship, farm mortgage payments
which constitute one of agriculture's most rigid fixed costs, should be
waived except to the extent of a landlord's rental share.
^ All farm people should be covered under the old-age and survivors
insurance features of the social security system, and farm wage hands
should be covered under the unemploj-ment compensation provisions
as well. ^
(2) LONG-RUN ADJUSTMENT POLICIES
Our committee is very much interested in the idea of setting the
goals for agricultural programs on a long-run basis so that, in the
words of Chairman Colmer's telegram, agriculture may be put on a
satisfactory self-sustaining basis in the long-run."
Basically, this means that farm programs must be flexible and must
help to bring about socially necessary changes rather than merely to
stave them off. Our committee emphasizes the statement that —
public funds should be used primarily to bring needed adjustments about more
easily and rapidly than they would otherwise take place and to cushion the shocks
POST-WAE ECONOMIC POLICY AND PLANNING 1453
involved; the public interest will not be served by maintaining resources in uses
for which the}' are not needed.
It is necessary to recognize that over time, the proportion of
people engaged in farming falls, even as the supply of food and fiber
available for consumption increases. At the same time, the rural
segment of our population more than reproduces its own numbers.
Therefore, the movement of people from dependence on farm income
to essentially nonfarm employment is continuous.
We must, therefore, see to it that instead of freezing a certain pat-
tern of agriculture, we must put our efforts directly to encourage shifts
in tj^pes of farming away from production that is not needed. Also
we must have public programs that will better train our rural youth
to take their place in nonagricultural occupations and that will bring
more nonfarm employment opportunities closer to the places where
our surplus rural population is. This means the encouragement of
industrial decentralization and a more adequate program of employ-
ment services for rural people.
It also involves a much improved rural educational program, includ-
ing vocational training in nonagricultural subjects. To make this
effective, increased State aid and generous Federal assistance will be
necessary. Always our emphasis must be in terms of opening doors
of opportunity for farm people and their children to make the greatest
use of their talents rather than in terms of freezing some historical
pattern of agricultural production.
If I could paraphrase, I would say that that sentence is my text,
the one I just read.
It is also important for long-run stability in agriculture that positive
action be taken to allow farmers greater security in the holding of their
land. This means further improvements in farm credit, land tenure
and farm tenancy policy, and in action to prevent excessive land prices.
(3) CONSUMPTION AND NUTRITION
As already mentioned, our committee favors a subsidized consump-
tion program for low-income people even in good times. If unem-
ployment develops, such a program should be expanded. We must
recognize, however, that such programs must be based on the needs
of the consuming families and not on the existence of surpluses in
certain products.
Along with this, there should be provided a larger and more thorough
program of nutrition education and research.
Among our farm people, there is need for a nutritional program
which would involve not only hot school lunches for rural school
children, but also an expanded program of nutritional education among
farm families.
(4) FOREIGN TRADE POLICY
The position of our committee with respect to foreign trade policies
may best be presented by a few direct quotations from our report.
In the long run, thisi country cannot expect to sell abroad unless it is also willing
to buy. If we follow a policy of narrow economic isolation, discouraging the
importation of foreign goods into the United States, part of the price we shall
have to pay is a curtailment of the overseas market for American farm products.
An even larger price we might have to pay is another world war.
1454 POST-WAR ECONOMIC POLICY AND PLANISHING
Full opportunity to engage in export and import trade will be realized only if
nations the world over permit it, making possible what is known as multilateral
trade.
In the past, obstructions to international trade have hit particularly hard the
American producers of cotton, tobacco, wheat, hogs, and certain fruits. But
farmers who produce for the domestic market also have been injured, because
when export outlets are reduced, the tendency is for those who would ordinarily
produce for them to shift to commodities sold at home, thus intensifying competi-
tion in those lines.
A two-price system to dispose of surpluses is being advocated. Under this
plan, products would be offered abroad at lower prices than those prevailing in the
domestic market. This proposal has decided limitations. For one thing, it
assunses the existence of an active world market ready to absorb any and all
products which may be exported.
It assumes further that other nations will not oppose a practice of dumping
by the United States. This is unrealistic, because most nations, including our
own, have restrictions against dumping. Moreover, it is questionable public
policy to supply consumers in other lands with products at lower prices than those
charged our own people, except as this may be a part of a program of foreign
relief.
Were such a program to be employed, it would tend to restrict rather than
expand foreign trade opportunities because it would lead to demands for additional
barriers to imports to keep the products sold in this manner from returning to our
own markets. This program clearly offers no solution for the problem of exports.
Quite aside from the need for foreign outlets for agricultural products, farmers
stand to gain from international trade on two other counts: (1) Expanding over-
seas markets for industrial goods favors a high level of employment in the cities,
promoting a good domestic market for farm products; and (2) farmers as con-
sumers benefit from having access to various imported products.
Assuming that we shall be able to hold foreign markets for farm products, we
nevertheless need tq recognize that our agricultural exports will consist largely
of the same kinds of commodities we shipped before the war. Although lend-
lease has moved abroad American butter, cheese, eggs, and beef, we do not
ordinarily export much of these products because we are at a relative disadvantage
in producing them, and hence cannot expect to continue exporting them in large
quantities.
Because of the extent to which cotton has been grown for export, the question
of whether permanent acreage curtailment will be needed will be answered
mainly by what happens to the foreign market. This in turn depends upon the
trade policies of other nations as well as our own, and the price policy which the
United States may adopt.
One lesson of the 1930's is that artifically high prices for cotton in this country
invite increased competition from other areas, and thus lead to a loss of foreign
outlets for the American product.
A sound policy on cotton must provide for an international'trade program which
will enable the United States to retain as much as possible of the world market.
It may also need to include a domestic program to encourage a shift in American
cotton productoin to those areas best able to hold their own in world competition
and best able to yield a satisfactory scale of living for cotton producers.
Shifts already have begun, and are bound to continue, in the relative importance
of cotton in various parts of the South, with areas having greater advantages in
the production of this crop tending to replace some of the less favored sections
of the Cotton Belt. As mechanization progresses, the pressure for a shift to
move level areas can be expected to increase.
Public assistance will be needed in certain areas requiring large-scale shifts out
of cotton production. Such aid should be positive in character, reasonably
temporary in nature, and directed toward the partial replacement of cotton by
other types of activity including the production of food for consumption by the
farm family. At the same time new and adaptable tyjjes of farming will need
to be developed, and in some areas part of the population may have to be en-
couraged to engage in part-time farming and nonagricultural emploj'ment.
. Mr. VooRHis. Mr. Chairman, how long is each ©f us going to have
to ask questions about this?
The Chairman. Well, we certainly want to give every member of
the committee a chance to develop any thought that he may have in
mind.
POST-WAR ECONOMIC POLICY AND PLANNING 1455
We certainly appreciate that statement, Dr. Clark,
Mr. VooRHis. I would like to say there is about as much in those
seven pages as I ever heard in a comparable length of time in my life.
Mr. Clark. Thank you, sir.
The ChaIrman. There is one thing I would like to ask you about.
I am primarily interested in cotton, because I come from a cotton-
producing section, Missouri.
Mr. Clark. Yes, sir.
The Chairman. You have stated here some of the things that we
must do to solve the cotton problem. What is your idea about the
effect of synthetic products on cotton in the future?
Mr. Clark. I don't think that our committee has made any ex-
amination of the progress of synthetics in replacing cotton that
would be any contribution to your knowledge on this subject. We
have not gone into that. I can simply say that we feel that we have
got to expect technological progress, both within agriculture and out-
side of agriculture, and if we want a rising level of living for people
on the land and for all citizens, we should be in a position to take
advantage of that technological progress, rather than try to freeze
any present pattern in order to protect the people that are in it.
The Chairman. In other words, the cotton farmers might as well
make up their minds that they have to meet that problem when it
comes?
Mr. Clark. I would think so. If I could say off the record ■
The Chairman. You may do that.
(Discussion off the record.)
Mr.. Voorhis. May I follow that up? It would be important,
however, in the case of technological improvements in farm produc-
tion, to try to take measures which would protect the farm producer
against having all of the advantages from increased production go to
somebody else while all the disadvantages from reduced price accrue
to him.
I don't know that I make myself clear, but I can see that the in-
creased mechanization and technological improvement in farming is,
of course, going to come, like it comes other places. I think there is
every chance, if we are not careful, that the farmer will get it in the
neck as a result of that, not merely because of the fact that more
can be produced, but over and beyond that, because he does not
receive the corresponding benefits from increased per-acre production
and production per unit of labor which he would be entitled to as an
offset against the tendency to produce more.
Mr. Clark. I merely want to refer to the statement .that I just
read, copies of which you have. I quoted the committee as saying
that in our judgment. Government efforts to help farmers in produc-
tion adjustment matters should be aimed at the facilitating of those
adjustments, not prevention, and to cushion the effects so as not to
make it impinge too heavily on the people who are most adversely
affected. You remember I made that statement, which I think
checks exactly with your thought, but my associate, Professor Salter,
has said he has an idea.
Mr. Salter. It is simply on the point that different technological
changes have different effects with respect to the speed with which
the benefit is either passed over to the consumer or the processor or
retained by the farmer. If the technological development results
1456 POST-WAR ECONOMIC POLICY AND PLANNING
in a very rapidly increased output, then, of course, the benefits tend
to move quickly over to the consumer. Other technological changes
don't have the same elements in them, and the benefits are more nearly
all retained by the farmer. It depends on the particular techno-
logical development.
Mr. VooRHis. But there is a third possibility; namely, the techno-
logical change might reduce the cost per unit, but because of a bottle-
neck or tightly controlled marketing situation, the benefits will all
be taken by the people in the middle, between farmer and the con-
sumer.
Mr. Salter. I mentioned there were three ways.
Mr. CoLMER. In that connection, Mr. Chairman, if I may, -I am
very much interested in your statement, Dr. Clark
Mr. Clark. Just for the record, I am not a doctor. I am just a
plain layman like the rest of you.
Mr. CoLMER. Fine, Mr. Clark. About the future of cotton.
Now, we are talking about these teclmiological advancements. I can
see in the plains of Texas, in the Mississippi Delta country, where
these improved methods of cultivation and harvesting would be very
advantageous. What is going to happen to the small hill cotton
farmer when that has reached some degree of perfection?
Mr. Clark. I am going to read my text again, if you don't object,
which says this:
Always our emphasis must be in terms of opening doors of opportunity for
farm people and their children to make the greatest use of their talents, rather
than in terms of freezing some historical pattern of agricultural production.
There are people in the hills who have been raising cotton. The
biggest opportunity, in the judgment of our committee, for the Gov-
ernment to aid those people, is not to subsidize them, and thus say,
"Stay in the cotton business," where they are at a decided competitive
disadvantage, but rather through educational methods and other
alternatives, open up new opportunities for these people to use their
labor in some other enterprise, either at home or, if necessary, else-
where, but preferably and above everything else, to give every rural
boy and girl an education that will enable them to go any place in
America and compete, if possible, on a parity with other boys and
girls who are born in areas where there is larger economic wealth to
provide an education. Opportunities anywhere in the United States
should be made widely known to all of these rural boys and girls, so
that they have the same chance to improve their economic position
that any other youth has.
Mr. CoLMER. That is splendid, Mr. Clark, in its theory, and that
is already being done, as you are aware, on a small scale, although
inadequately.
Mr. Clark. I agree with you, sir, that it is going to be a long
drawn-out process.
Mr. Clark. I would say that the trouble has been that most of our
attempts to deal with agriculture's problems in America, in the words
of our committee, have been in terms of trying emergency remedies,
and treating the symptoms, instead of getting at the causes. We
should undertake these long-time programs, for we believe if we are
going to get anywhere, we have got to remove the underlying causes.
To the extent that we can, we of course should use palliatives to take
POST-WAR ECONOMIC POLICY AND PLANNING 1457
care of immediate symptoms. But we should not limit our programs
to treating symptoms the way we have in the past.
Mr. CoLMER. I say that I cannot argue with that, because it is
sound. On the other hand it must be borne in mind that a large
percentage of the people engaged in producing cotton are on these
small farms to which I referred. I am thmking about the time before
you reach the fruition of this theory, what is going to happen to these
people? It is rather a perplexing thing. I agree with you, sir, that
you should not attempt to stop progress in the development of farm
machmery, and so forth, but there is going to be a period in there
when these people are going to suffer materially. You don't force
people out of their traditional habits and methods of livelihood
overnight.
For instance, I represent a district, if you will pardon that personal
reference, where about 15 counties of my district have been producing
cotton for many many years. The only other industry of any size in
that district has been saw milling.
Now, the timber has been largely cut and the only thing left on
any large scale is cotton. It is going to be a very slow process in this
educational program of getting those people out of cotton into some-
thing else. As I said a moment ago, there is an educational program
going on now for a diversification or change, but it is necessarily a
slow process.
Mr. Clark. Well, speaking for the committee, I would say, sir,
that we certainly have no objections, and in fact we are in coniplete
sympathy with any program which attempts to alleviate the distress
that these people find themselves in who are on units that are so small
or so unproductive or otherwise inadequate to provide them with
what we think of as an American level of living.
We would regret to see Federal money or any other public money
used to try to stabilize those people or the enterprises in which they
are engaged, if to do so merely means freezing a pattern which is
inefficient and incapable of holding its own in a free economic situation.
Mr. CoLMER. I am merely groping in the dark, trying to get the
benefit of your study on the problem.
Mr. Clark. But if I could just take the next step, it would be that
I think too often we talk about decentralization of industry so as to
use some of this surplus labor, and I referred to it in this manuscript
which I just read, but we forget that industry is not likely to move
into areas where you have both raw materials and raw labor. They
want trained labor and too frequently the areas of the United States
where we have large numbers of the rural people who are unable to
make a good living in agriculture are not areas in which we are train-
ing those people in anything like an adequate manner for nonfarm
occupations, and it is merely wishful thinking to talk about industrial
decentraHzation until society does somethmg to develop in those
areas a type of education which will develop those people to where
they will be something more than unskilled laborers.
Mr. CoLMER. I do not know, sir, that I am in accord with that
statement. Again referring to my own local district in which there
has been a gradual tendency to shift to manufacture and other
industries, the manufacturers who have come uito that district —
garment manufacturers, and in another instance a paper bag manu-
facturer— have talked with me and tell me that the labor they get
1458 POST-WAR ECONOMIC POLICY AND PLANNING
there is far superior to the labor that they have found in other sec-
tions; that these farm boys and girls make most excellent laborers,
and they find their experience very profitable.
Mr. Clark. You did not ask me a question, I take it; you made a
statement?
Mr. CoLMER. No, sir; I am just answering your statement.
Mr. Clark. I think we are agreed. I am only saying that I think
you would go along with my earlier statement that if these folks are
going to get wages of skilled workers, and if the enterprises that are
going to be decentralized are something more than those who just
use relatively unskilled people, it would be very helpful if our educa-
tional system trained these rural folks so that an industry that did
decentralize would have the advantage of skilled labor immediately
available.
Mr. CoLMER. Of course, I agree with that.
On the other hand, the experience of these manufacturers to whom
I refer, has been that they have found that they can train these boys
and girls, who normally have a fau- education, very rapidly and have
found it profitable to do so.
Mr. Clark. Could I have Mr. Salter supplement my statement?
Mr. CoLMER. Certainly.
Mr. Salter. I really believe the committee is thorouglily sympa-
thetic with the statement you make in general. I would like to point
out that in the full report of the committee there is every indication
that such a program as rehabihtation aid is good, and the type of
program you refer to is going on. To try to help these people change
their type of farming, and so on, is all to the good ; but the type of thing
that worries the committee is that we must have agricultural programs
so that if these people have resources and abilities to be shifted Tnto a
different type of agriculture, we must have a national program that
will allow them to go into that type of agriculture. That is not
exactly true at the present time. In order to get into certain other
crops or products they might very well be able to produce, they may
have to get quotas, and a lot of other things that are now not open
to them.
In your very section of the country that point was made clear. A
good many people whose land might be useful for other types of agri-
cultural products are not able to get into them because the production
pattern of those products in the past has already been frozen. That is
why the committee puts its emphasis on this opening of doors of oppor-
tunity to make it possible for people to use talents and resources in
the best way they can.
The committee is also in favor of the kind of statement which has
been made when the previous witness was before you, that industrial
decentralization should be encouraged in the South. Really the com-
mittee is in favor of what you are referring to as temporary programs
of immediate action.
Mr. CoLMER. Then it would be your idea that the Government
should step in and assist these people in this shifting?
Mr. Salter. Exactly, that is what the Government assistance and
public funds should be spent for, to encourage shifts, rather than to
merely say you cannot go into this, or you cannoUgo into that, or you
cannot go into some other crop, because someone else with an his-
torical base, who produced the crop before, has monopolized the right
to produce it.
POST-WAR ECONOMIC POLICY AND PLANNING 1459
When you begin to talk about nonfarming opportunities, tlien you
have to talk about the same type of governmental encouragement.
But as Professor Clark points out, and correctly, we must not get
ourselves in a position where so much of our attention is ^iven to
unmediate details that w^e forget long-time development. There is a
tendency, we beheve, to think so much in terms of our past pattern
of activities that we forget that the long-rmi opportunities must be
kept open, and people prepared for them.
Mr. CoLMER. Mr. Clark, you would not go so far as to say that the
Government should make it mandatory upon these people to leave
these unproductive fields?
Mr. Clark. I would not even think ki those terms, let alone talk m
those terms. .
Mr. CoLMER. I thought I understood you, but 1 wanted to make it
definite. . i • i •
Mr. Clark. I am almost tempted to read my text again, which is
called Opening Doors of Opportunity.
Mr. CoLMER. Yes.
Mr. Hope. Before we leave that paragraph, I wanted to ask a
question. I think I am very much in agreement with what you say
in this particular paragraph you have been reading, this entne para-
graph, with this exception: It seems to me that if you are going to
have these educational programs to educate boys and girls away from
■fVtp fnTiris
Mr. Clark. Could I interrupt you there for just a moment?]
Mr. Hope. Yes.
Mr. Clark. I did not say "away from the farm" and I do not think
that. I am merely saying that •
Mr. Hope. Then I misunderstood your statement.
Mr. Clark. I am merely saying that a son of a barber has no feeling
that he is automatically trained as an apprentice to go into that voca-
tion, and that vocation only. Barbers' sons have open to them alter-
natives that permit them to go into any field they choose, and we hope
that every American boy and girl, including those on farms, has the
chance to make the most of their innate capabilities and their willing-
ness to work, no matter what field they desire to go into.
Our committee feels that many farm boys and girls do not have that
freedom of opportunitv, and we would like to see to it that they get the
type of training and of education that will fit them for whatever they
would most like to do, and where theh employment would most likely
supply them an adequate income.
If they happen to be living in an agricultural area where the ratio
of people to natural resources is unfavorable to the people, let us help
them get into another agricultural area or into another occupation in
which the ratio of people to the resources is more favorable than it is
in producing an agricultural product of which we already have a sur-
plus. That is not moving people out of something; that is opening
doors, especially for the younger generation, to go to the occupations
where at the present time there happen to be the largest mdividual
opportunities. . .
Mr. Colmer. Mr. Clark, again isn't that being done, possibly
inadequately, but it is being done now through the consolidated and
vocational school systems in the rural areas?
Mr. Clark. Unfortunately, sir, about half of the children of the
United States are born and educated in rural areas. We do not have
1460 POST-WAR ECONOMIC POLICY AND PLANNING
half the adults, but we have just about half of the youth, and the farm
people do not have the money with which to provide an educational
system which, except in a few instances, is the equal of those m the
cities. At the same time farm people are now paying in taxes toward
the support of education as large or larger portion of their family
income as city people, but by the very nature of the fact that their
incornes are small, and that they have a very much larger proportion
of children than the city families, they simply cannot provide, and are
not providmg, except in a few instances here and there, educational
facilities comparable to what we find in most of our cities.
Now, those people at the present time, those rural youths, go to the
cities m large numbers. Too often they go as unskilled workers and
have to do menial jobs, have to compete with city youths who have
had a better education, and too often these rural youngsters, when
they do get to the cities, have to take unskilled jobs.
We would like to see the same type of education for rural youths
that there is for urban youths, and see that Federal and State aid will
make up the difference that would be required in making that possible.
But, we would like to see control of the educational policy left very
largely in the hands of the local communities and of the local States.
Mr. CoLMER. Again I cannot find any fault with that statement,
sir. I just merely wanted to point out that some of that was being
done through the methods that I mentioned.
Mr. Clark. Yes, sir.
Mr. CoLMER. Comuig from a rural area, naturally I would be in
accord with your statement.
Mr. Hope. Well, I have not gotten my point yet. I do not disagree
with anything you have said or Mr. Colmer has said, and of course, I
realize that the farm has to replenish our population pretty generally
in the cities, and everywhere throughout the country, but the only
thing that bothers me is that in the past it seems to me we have had
too much of our talent, too much of our brains, you might say, from
the rural areas going into the cities. I would like to keep it back in
the rural areas. If we make it too attractive and too easy, I am just
wondering if there is not a possibility that we will drain our farms of
the best ability and brains that we are developing there.
Mr. Clark. Would you like to have me discuss that?
Mr. Hope. Yes, I would, because I think the attractiveness of in-
dustrial occupations and city life in itself is enough to take boys and
girls off the farm, taking some of the ones that ought to stay there,
I am just wondering if you should not counterbalance that trend with
something that would offer an mducement to the farm boys and girls
of ability, to stay on the farm rather than be attracted by the greater
opportunities elsewhere.
Mr. Clark. I think that our committee is in complete accord with
your desire, and to implement that desire, we have recommended in
our report, a number of programs of improving the level of living in
rural areas which we think would help to encourage these brighter and
more able rural youngsters to stay on the land.
Now, let us get back to this educational business. A young rural
couple would be encouraged to stay in a rural area if they felt that their
youngsters were going to get just as good education as if they had
moved to the city and had a chance to educate their youngsters in an
urban school. The provision of good schools in rural areas is going
POST-WAR ECONOMIC POLICY AND PLANNING 1461
to have positive effect toward making rural areas attractive just as
much as it will in making people discontented with the rural area and
wanting to move elsewhere.
My other point is this: That in our report we suggest programs, of
improving the health facilities of rural areas by some sort of coopera-
tive or public health program-. We suggest better housing, minimum
housing standards on rented farms. We suggest extending rural elec-
trification so as to improve the level of living of the people, and so as
to encourage the decentralization of industries that would be benefited
by having electric power available.
We make the flat statement that we believe that this Nation can-
not be satisfied to see the number of rural telephones decrease, as they
have decreased, that instead farm people need phones as much or more
than urban people, and that the Government can encourage and help
get those phones on American farms.
I could go on and enumerate other things in our report which we
believe would make rural life more attractive, but over and beyond
that, I am wondering if you will not agree with me that if we have
situation in which rural incomes are inadequate, because we have sur-
plus production, that the cure, or at least part of the cure, for that
situation is to get some of the people that are competing with each
other to produce this surplus product into nonfarm occupations where
they become consumers instead of producers of agricultural products,
so that the people that are left will have a larger economic opportunity.
In other words, a program of education should not only benefit
those who go to the cities but should also benefit those who are left
on the farms, for the reasons I have just enumerated.
Mr. Hope. I agree with you 100 percent. My only fear is that you
will take the best ones and leave the poorest ones. I am speaking
there, not only of the farm but of the rural communities, of the county-
seat towns. If you are going to have increased mdustrial develop-
ment in these communities, it is probably going to have to start right
at home. You are going to have some bright young men who are
engineers and who are able to see tnat there are opportunities there
in those local communities to build up small industries. As it stands
at the present time, the boys who go to our agricultural college in
Kansas are all visited by someone from General Electric and other
great corporations, and they offer them some inducements to go with
them, which they cannot resist, as there is nothing back in the home
town to compare with it.
That is the thing that bothers me. I have just noticed that year
by year the young men, particularly those who have the greatest
amount of ability, m the rural sections, are going away to the large
population centers. If we had them back in those counties, in those
county-seat towns where they could use then* brains to build up local
industries and to contribute their ability to industrializatix)n, we will
say, I think we would be farther on our way to accomplishing what
we ought to be doing and what must be done if we are going to main-
tain our rural communities.
Mr. Clark. I am sure everything you have said will be approved
by our committee.
Mr. Hope. I did not think there was anything inconsistent between
what I have said and what you have read.
Mr. Clark, Quite the contrary ; we are in agreement.
99579— 45— pt. 5 16
1462 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Hope. It seems to me that we have to be somewhat careful
that we do not put too much emphasis on the idea of taking able yoimg
people out of the rural communities.
The Chairman. May I ask one question? You speak here of the
problem of freezing agricultural patterns?
Mr. Clark. Right.
The Chairman. In our rural sections, that practice or program
has resulted in a lot of people being engaged in unprofitable agricul-
ture ; that is true, is it not?
_ Mr. Clark. I think that it has tended very often to perpetuate a
situation which we were trying to cure instead of facilitating the
adjustments that are necessary if we are to correct the situation.
The Chairman. To take an illustration, a program to make it
possible for a man on some marginal land to grow cotton where cotton
should not be grown, and where, with all of the nursing that the Fed-
eral Government or any other source can give that man, would stiU
keep him in the low-income group, is an undesirable situation.
Do you think our present farm program of putting a floor, say, 90
percent of parity, on cotton and other agricultural commodities, has
had a tendency to accentuate that problem in these sections?
Mr. Clark. I think that you, from the South, know at first hand
the answers to your questions much better than I. In general, I will
say this — that our committee, which also includes representatives
from the South, recognizes that during the war it was necessary and
thorouglily justified for the Government to do a lot of things which we
do not think would be desirable in peacetime.
Now, our committee has made no study of these price floors and
ceilings during the war period, feeling that that was not our assign-
ment.
We are saying that, in our judgment, in the post-war period, when
we get back to this normal condition that you referred to earlier this
morning, the type of arrangement that I read before is better than the
one that we have now and better than the one we had just before the
war broke out.
We will go further in saying that the present wartime programs
of support prices, we believe, are not designed to facilitate a gradual
readjustment to a post-war period but have the eff'ect of continuing
production in excess amounts up to a chopping-off place instead of
taking it down in steps and easing it off". The effects of some of the
present legislation may be to accentuate the drop' from the war to the
peace period and to complicate the Government's problem of handling
both prices and products.
Mr. Salter. May I just add something here?
Mr. Clark. Will it be all right for Mr. Salter to say something at
this point?
The Chairman. Yes. Go ahead.
Mr. Salter. I would like to make a specific answer to your direct
question — that the evidence that the committee has — and it is re-
flected in the report — is that the maintenance of a little better than
the unusual price has encouraged the continued production from sub-
marginal areas that normally would have gone out, and that in the
long run will have to go out or make some other adjustments. Added
to that, when the programs are undertaken through a price procedure,
the small fellow is not getting as much help as he might out of some
POST-WAR ECONOMIC POLICY AND PLANNING 1463
other program that would help him make shifts. A program in
which benefits are distributed on a price basis automatically means
the greatest benefit to the fellow who has the greatest amount to sell.
The small fellow on the marginal land is encouraged, whereas he
might be better helped through a program to get him into something
else.
The Chairman. I think we are facing in agriculture the greatest
change immediately after this war that has ever taken place, in that
we are going to have mechanized farming. For example, in the cot-
ton industry we are going to develop the cotton picker, that will
supplant this labor that used to depend on that crop for a livelihood.
They are developing a flame cultivator that does, away with the
cotton chopper who relied upon that period in the summer to earn a
livelihood, and, of course, we are going to produce agricultural com-
modities faster, we will have mass production, and they are going to
produce it cheaper than they have ever produced before, so you can
see the plight of this small man, the fellow on the marginal land,
where it is difficult to get along at all.
Mr. Fish. Can I ask you, Mr. Chairman, what is going to happen
to these Negroes who have been picking cotton for years? I saw a
movie the other day of a great big machine that picks the cotton and
does the work of so many hundred Negroes. It seemed to be quite
effective. Now, what is going to happen to them?
Mr. CoLMER. Isn't that the question I addressed to Mr. Clark a
moment ago?
Mr. Fish. That is what I wanted to get more specifically. We
should have it more specifically.
The Chairman. May I answer that question? My way of think-
ing is- this — we have got to find anouther job for that Negro or that
white man, or else move him out of that section of the country, which
would greatly upset the social situation.
Mr. Clark. And I should say further that I think you have got
two phases of that problem. One is the immediate distress of that
family, the adults; another one is the youth, whether they be white
or black. Should these youths be put in a position where they must
repeat, generation after generation, the misfortunes of their parents
simply because they happen to have been born in the open country in
a particular county in a particular State?
The Chairman. I want to agree with you on education, I think it
is the hope of America, the future of this country. I was reared in a
rural community, and I know something of the handicaps of youth
in such communities. I think that the youth is as much entitled to
a good educational training that will equip them to do something more
in life as they are to good food and good clothing. There is a program
on now to provide Federal aid for the States in order to supplement that
educational program, and there is some opposition to it from some
sections. There is a pretty strong demand for it, and it looks to me
like we must move in that direction and do the very thing that you
have recommended here in this report. I thinlv, Mr. Hope, it will
supplement the well-being of that local communit}^ as well as give the
boys a chance to go out in the city of Chicago or Pittsburgh and get a
good job and do it eft'ectively.
Mr. Clark. You m.ust realize that it is a wholly diflFerent matter to
move an adult family, whose habits are fixed, than to give the youth
1464 POST-WAR ECONOMIC POLICY AND PLANNING
of that community training and facilities so that when they start to
make their career there is no problem of pulling up roots, because
they have none. They can establish a new home and a new job in
some other enterprise, locally or elsewhere.
The Chairman. You favor, then, a Federal aid for the giving of
proper educational advantages to the youth of our country?
Mr. Clark. Absolutely. I think that if we assume that we have
some responsibility for getting mail to rural people through the
R. F, D., if we have some responsibility for seeing that in periods of
depression some kind of employment opportunity is available to all
people, no matter where they are, to m.e it is just as axiomatic that the
rural youth ara entitled to a type of training which wUl enable them
to compete, without being at a disadvantage, with youth born any
place in America, and that they may be acquainted with opportunities
in all parts of the country and all types of occupations, wherever the
job may be. We do not have that system now, and we ought to have
it.
I do not want to subscribe to any particular bUl. I do not know the
phraseology of the bill, and I do know that the details have to be
worked out, but on that policy in principle our committee is united.
The Chairman. I think the land-grant colleges have got a very
important program ahead of them, and that is to sell that idea to the
American people. That is the biggest job that I see that confronts
you people right now — that confronts all of us, for that matter — to
sell the importance of that program to the American people.
The Chairman. Mr. Voorhis.
Mr. Voorhis. I wanted, first of all, to comment on what Mr. Hope
said from the point of view of my own section of the country, which
is a rural area in southern Cahfornia — not altogether rural, either —
and to say that in that section, where I think I am justified in saying
we have pretty good schools, that our high schools do not provide as
good training as we would like to see, but they do provide reasonably
effective vocational training in both agriculture and in other types
of occupations.
Our junior colleges carry that on a little bit farther, and it has been
my observation, and I am sure I am right, that that has not drained
competent young men out of agi-iculture. On the contrary, some of
the very best people that go through those schools go through them to
be better trained to carry on farming, in spite of the fact that there
are in that particular area a great many city opportunities only 20
or 25 miles away.
Mr. Clark. Right.
Mr. Voorhis. So that I think, and I might put in another plug on
cooperatives, one reason for that is because our agriculture is as largely
protected by cooperatives as it is, so that there is greater security,
perhaps, about it.
Now, I just want to nail down this one tiling that has already been
answered: You do favor a program of Federal aid for education?
Mr. Clark. My answer is unequivocally "yes."
Mr. Voorhis. Some of my school people have suggested after the
war, particularly in view of the G. I. bill, that we were going to have
to do a lot better job of education along certain lines than we have
ever done before — they do not believe our existing high schools
can do it.
POST-WAR ECONOMIC POLICY AND PLANNING 1465
They are now proposing regional vocational training schools where
a number of communities go together to estabhsh an institution where
it would be a little freer from the educational ladder provisions that
has been true in the past, where you would not always have to have a
diploma from certain grades, but where they would do a job of broad
vocational training and would be in part supported by Federal grant
and Federal aid. Would you favor such a thing?
Mr. Clark. I want to disclaim any special knowledge as an edu-
cator, particularly on the high school level. My regular occupation
is administrator of agricultural research.
Mr. VooRHis. But the high school level is the crucial one, don t
you think?
Mr. Clark. I agree with you, absolutely, it is important. 1 want
to say, in my personal judgment — I am not speaking for the com-
mittee now — but I feel that no part of our American educational
system can be considered as 100 percent the way it ought to be, that
there is need and opportunity for improvement, and that we have got
to look for changes in our education just the same as looking for
changes in the economic order, and I want to say further that the
educational program that would work in southern Cahfornia, where
you have no snow in winter
Mr. VooRHis. We do on the mountains.
Mr. Clark. But not where your childi'en are — that that might be
a different pattern than it would be, we will say, in the Upper Peninsula
of Michigan, where they have deep snow during the winter months.
I would hope that anything that we might do toward increased
aid— Federal and State— for education, would be flexible in its nature
so as to facilitate the local people working out a system that fits
their local needs, rather than to give anybody at any central location
a mandate or authority to impose a pattern on the Nation.
Mr. VooRHis. I agree with you completely about that, but I think
it would be disastrous if the latter should happen.
Mr. Clark. You know, there are people who have that notion.
Mr. VooRHis. Well, I am one that does not.
Mr. Clark. I am glad to hear you say that.
Mr. VooRHis. Now, I wanted to ask you a question apropos of
Mr. Colmer's comment, because I think that we are going to lose
sight of the main thing here if we lose sight of the people, and I think
there is a tremendous national asset in every single family-size farm
unit, so that aside from economic efficiency we have got something
there that we should lean over backward to try to protect.
May I ask you this. In this transition period that is going to have
to take place, you cannot jump from here to there in a moment of
time. What do you think about proposals for gradually reduced
support for prices, for example, instead of cutting the whole thing
off at once; suppose you cdme down gradually and perhaps had com-
bined with that some additional inducement of some sort on alterna-
tive crop production so as to tide the people over a Httle better,
even from a financial standpoint?
Mr. Clark. Your words are almost the words of our report, sir.
Mr. VooRHis. That is very flattering. Now, then, I wanted to
ask you this, in this matter of trying to get people out of one line of
production into a more profitable line
Mr. Clark. Again, please, I do not want you to think I am q^-
bling, but we are never trying to get people out of anything. We
1466 POST-WAR ECONOMIC POLICY AND PLANNING
are trying to make people aware of larger opportunities than are
locally available and to train them for them.
Mr. VooRHis. Yes, but the effect of it
Mr. Clark. No, there is a lot of difference. Psychologically
people resist any program which implies that a committee, or the
Congress or a governmental agency is going to push people around
ajid tell them where to go. If some man wants to live a hfe like
Henry Thoreau on Walden Pond, we are not fighting with such a
person who wants to go out and live like a woodchuck in the woods
but we are saying that his children should have the education and
knowledge that will help them to do something else if they want to.
^ Mr. VooRHis. Even having said that, nonetheless, do you think
it would be desirable if people who find it impossible to produce
cotton, for example, and to make a decent hving out of it produce
something else; you would like to see it made possible for them to do
so, is that right?
Mr. Clark. Exactly. You see why I don't want that phrase in
my testimony? People would be quick to say that I am favoring
people being pushed around. Our committee does not beheve in
that.
Mr. VooRHis. We have had a 'lot of discussion in Congress about
the work of the Farm Security Administration and I am talking only
about the rehabilitation loan part of their program; I am not taildng
about anything else.
Mr. Clark. Right.
Mr. VooRHis. Do you beheve that basically that program has
been good and should be continued?
Mr. Clark. Our committee made no study of any agency as such
so in the first place ^
Mr. VooRHis. I did not ask you about an agency as such.
Mr. Clark. Or a program as such. I think I can say this, and I
do not beheve I do violence to the thinking of the committee, that to
the extent that the rehabilitation loans and other aids given farmers
by the Farm Security Administration help people, deserving people,
efficient people, to become established in units that are of economic
size, and where, as far as we can see now, the particular farm is an
enterprise that should continue into the future, we are for it.
We have seen instances where they have set up people on units that
were too small, on land that was hardly above that of the marginal
farm
Mr. VooRHis. May I interrupt you? I am not talking about set-
ting people up. I am talking about people already there.
_ Mr. Clark. Even if they are there, perhaps the"^ pro vision of build-
ings, or livestock, or tools, on lands that were inherently so unpro-
ductive as to not make it possible for any permanent prosperous
agriculture to exist in units of that size, would be hard to justify.
Mr. VooRHis. Of course it would, but let me put my question this
way:
Do you feel that in trying to achieve these objectives that a program
conducted by some agency of government which would furnish the
cheapest possible credit to farmers to enable them to secure necessary
livestock or niachinery or additions to their farmstead, or better
buildings, or in other words to give them a better-balanced agricultural
plan, plus scientific technical advice and guidance in enabling them
POST-WAR ECONOMIC POLICY AND PLANNING 1467
to improve their farming operations, would be an essential part of
their programs?
Air. Clark. To the extent that the unit as finally set up was one
that could hold its own in competition, and did not have to have a
crutch under it indefinitely into the future.
Mr. VooRHis. The next question is: What agency do you thirds
ought to do that?
Mr, Clark. We have not studied that
Mr. VooRHis. Do you think the Extension Service ought to do it,
or do you think it is wise to have a special agency directly devoted
to do that job?
Mr. Clark. Again I cannot speak for the committee. We thought
our job was to determine policy and not assign tasks to given agencies,
but I am willing to answer it as an individual.
Mr. VooRHis. Yes, sir.
Mr. Clark. I do not think it is half so important that we decide
what particular agency should do it as it is that when it is undertaken
that the program is integrated with what else is going on in that
county in the way of agriculture education and action programs,
It should not be something separate and distinct and unrelated. I
believe further it ought to be something in which the State, county,
and other local organizations have some degree of participation. I
do not like the word "control," but partnership in carrying it out,
rather than a program which somebody thought up a long- ways
away and imposed on the local community without the local com-
munity having very much voice in determining policies in matters of
administration.
Mr. VooRHis. I have a little bill here, "All agricultural programs
should be managed and supervised on the local level by one local
democratically elected committee of farmers."
Mr. Clark. We are talking the same language.
Mr. Fish. What about setting up the farmers in Alaska?
Mr. Clark. I do not get your query, sir.
Mr. Fish. Do you favor sending farmers up to Alaska?
Mr. Clark. I don't know enough about the situation in Alaska to
pass judgment, but I woidd say that if there is evidence that the
opportunities for farm people to earn a living are greater in Alaska
than where they are now, they shoidd be told of those opportunities.
Mr. Fish. But they would not have the facilities you have been
talking about.
Mr. Clark. I beg your pardon?
Mr. Fish. They probably would not have the facilities you have
been talking about, up there.
Mr. Clark. Do you mean facilities up in Alaska?
Mr. Fish. Yes.
Mr. Clark. Then I would say it was not an opportunity. I am
interested in opportunities for people to improve their situations, not
just looking for an alternative.
Mr. Fish. They might grow enough vegetables to make a living,
but they would not have the facilities that you have been talking
about.
Mr. Clark. I see.
Now, if I can answer your question, sir, our committee secretary
has just handed me a copy of the report, and on the next to the last
1468 POST-WAR ECONOMIC POLICY AND PLANNING
page, page 50 of this mimeographed preliminary edition, this para-
graph appears:
Since the work of the land-grant colleges is largely educational, their leadership
should be clearly recognized in this field and they should not be called upon to
perform lending, regulatory, and similar activities unless required to do so bv
btate law. ■^
Now, to the extent we are helping these farmers to become estab-
lished and the job is an educational one, we believe the land-grant
institutions have the experience and technique and the method, and
it they need more help, let us give them help. Do not make them a
' collection agency to collect Government loans.
Mr. VooRHis. On that basis, then, you would say that the making
of loans should be the function of some other agencV'^
Mr. Clark. Eight.
_ Mr. VooRHis. But that the giving of farm advice and the develop-
ing of farm plans, and that sort of thing, should properly be a function
of the Extension Service?
Mr. Clark. That is exactly my judgment, and the judgment of
our committee.
Mr VooRHis. Now, gentlemen, I have got an awful lot of questions
that I want to ask and I will gladly wait, but before Mr. Clark goes,
1 would like to be able to ask my questions.
The Chairman. In view of the very interesting paper that he has
read and the fact that a number of the committee have questions they
would like to ask, do you mind coming back and resummg after lunch?
Mr. Clark. I would be very happy to do that, sir.
The Chairman. I think it is time for lunch.
Mr. VooRHis. May I have this understandmg, whatever time it is,
that I will get a chance to finish?
Mr. CoLMER. I suggest that he be given priority.
Mr. VooRHis. I do not want a priority.
The Chairman. I do not think we are in a position to conclude this
very interesting discussion, so we will now adjourn the hearing until
2 o'clock unless there is some objection.
(A recess was taken until 2 p. m.)
AFTER RECESS
(Whereupon, the committee reconvened, pursuant to call of the
Chair.)
The Chairman. The hearing will be in order. Mr. Clark, if you
are ready, we will resume yom- testimony, and I believe Mr. Voorhis
of California wishes to ask you a few questions.
TESTIMONY OF NOBLE CLARK, CHAIRMAN, COMMITTEE ON
POST-WAR AGRICULTURAL POLICY, ASSOCIATION OF LAND-
GRANT COLLEGES AND UNIVERSITIES— Resumed
Mr. Clark. All right.
Mr. Voorhis. Mr. Clark, the next question I wanted to ask you is
this: Going to what seems to me the heart of your proposal on
this question of not freezing patterns of agricultural production which
are undesu-able, would you take the position to the extent that any
governmental pohcy encourages a certain type of production, that that
POST-WAR ECONOMIC POLICY AND PLANNING 1469
type of production should be of a sort which we in the domestic mar-
kets of America have a current deficiency of supply from our own
agriculture? And conversely, to the extent that if any program dis-
courages production, it should be production of which we have a large
exportable surplus.
Mr. Clark. I would think that is almost axiomatic, if we are to
proceed on the basis that we are trying to get the most efficient use of
our resources and labor.
Mr. VooRHis. In other words, just to have foreign trade is no real
object, is it?
Mr. Clark. No.
Mr. VooRHis. The kind of foreign trade you want is foreign trade
in commodities where America can normally produce at an advantage
against foreign competition?
Mr. Clark. Yes, sir.
Mr. VooRHis. Now, then, I want to go to a couple of points you
made earlier in your statement. In the first one, policy to lessen the
instability of income, you mention something and then you go a little
later on into the question of subsidizing, consumption of low income
groups at all times and, in times of unemployment, the stepping up
of those programs.
I feel that that is very important and I wish you would go further
into it as to how you think it ought to be carried out — by what types
of program.
Mr. Clark. Our committee has made no attempt in connection
with any of its recommendations to formulate in detail the legislation,
or even the procedures, to be followed in carrying into effect these
policies. We felt that our largest opportunity and responsibility
were to try to analyze the available information and determine recom-
mendations as to policy rather than how those could be carried into
effect. I will say that I have the conviction that a boy and gnl going
to school need food in their stomachs just as much as they need a
textbook in their desk.
Mr. VooRHis. And if they don't have food in the stomach, the
textbook in the desk will be 50 percent efficient.
Mr. Clark. Maybe less.
Mr. VooRHis. That is right and I have some very interesting
figures on the effect of the school-lunch program on school attendance
and scholarship which show it has a marked effect m improving both.
Mr. Clark. That is right.
Mr. VooRHis. Now, then, you would say that the basis that they
should attempt to use besides increased consumption, must be the
improvement of the nutritional standard.
Mr. Clark. Right.
Mr. VooRHis. And the absorption of farm surplus should be a
secondary consideration?
Mr. Clark. I don't think it should be a consideration as such.
Mr. yooRHis. You don't believe, if we had our choice between
furnishing one of two commodities for school lunches, both of which
were reasonably equal with one another in their nutritive values and
in the type of nutrition they supplied, that we should use one which
was produced in surplus at a given time rather than the other one?
Mr. Clark. I think there is another factor that would come in,
sir, and that is the unit cost of the product.
1470 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. VooRHis. Yes, it would, of course.
Mr. Clark. And I question the advisability of buying for the food
consumption program the more expensive product simply because it
was being produced in surplus.
Mr. VooRHis. I am not sure whether I agree with that, but at any
rate, the second part is that in times of unemployment, you would
step up the program. That, of course, would also be a time of low
farm income and difficulty of marketing farm commodities, wouldn't
it?
Mr. Clark. Right.
Mr. VooRHis. Now, then, would you increase the programs that
you already had in effect in their scope or would j^ou use additional
programs under that circumstance?
Air. Clark. Again, that is a problem which our committee has not
considered specifically. I do not think that I have any information
not available to your committee that would enable me to give any
judgment on that any better than your own.
Mr. VooRHis. If you were basing it on nutritional standards,
wouldn't it be almost inevitable that you would have a greater problem
of undernutrition, and consequently unemployment, than otherwise?
Mr. Clark. Yes.
Mr. VooRHis. And so it would be almost self-adjusting, wouldn't
it?
Mr. Clark. Our statement specifically states that in times of
unemployment this nutrition program would be stepped up enor-
mously; but your question, as I understood it, was: Should a separate
agency handle it in a depression period?
Mr. VooRHis. No; my question was really this: Assuming you had
a school lunch program going on all the time, as I believe there is
sound reason for having, would you in timp of unemployment attempt
to expand the school lunch program, or would you add to that some
kind of a stamp program, or something of that kind?
Mr. Clark. Our feeling is — and I speak for the committee nOw —
this other program, in addition to school lunches, whether it is a stamp
plan or something like it, should be under way even in times of
prosperity.
Mr. VooRHis. That answers my question.
Mr. Clark. Widows and people who for one reason or another
have low earning power should get adequate nutrition in good times
and in poor times, and able-bodied people who for no fault of their
own are unemployed or have theu- income taken away in a period of
depression should have this food.
Mr. VooRHis. I agree with you. Do you believe or do you not
believe that this approach, the approach of bringing up the nutritional
standard of the United States, offers a more solid hope by and large,
for agriculture than does an attempted expansion of exports, or don't
you want to compare those two?
Mr. Clark. I don't think I want to make the comparison. It may
be that that is true. I won't say that is not true, but I have made no
attempt to evaluate the comparison.
Mr. VooRHis. This is the last question I want to ask. I have heard
all of these programs to increase consumption criticized by certain
farm groups and representatives of farm groups on the ground that a
POST-WAR ECONOMIC POLICY AND PLANNING 1471
comparatively small proportion of the Government dollars that might
be expended in such a program actually gets back to the farmer.
Do you have any comment on that?
Mr. Clark. "Are you thinlving now in terms of a depression period,
or of a period of relativelj^ full employment?
Mr. VooRHis. Let's take them one at a time. Let's take a period
of depression first.
Mr. Clark. In a period of depression, it is the conviction of our
committee that this nutrition program will help to create demands for
farm products, but it does not in itself represent a method of pegging
price. We feel that in a period of depression, after we have done all
we can to increase demand by subsidizing nutrition where it needs to
be subsidized, and giving farmers protection against losing their farms
by not permitting foreclosure so long as they pay the normal rental
value of their land, that any additional payments to farmers to help
farm income should not be based on any restriction of production. It
should not be based on the unit produced necessarily, but in terms of
direct payment to farm people to help them pay their living cost and,
in addition, to pay their out-of-pocket costs which are required in
order to keep their agricultural enterprise in production. That will
include things like fertilizer, spray material, and other things that
they have to have in order to run their farm.
We don't want that to be considered as a method of giving farmers
income by influencing the price of the product, but rather a direct
payment to farmers for maintaining production.
Mr. VooRHis, I thinlv I understand. In other words, what you
are saying is that a nutritional program is not going to be the full
answer, or anything lil^e the full answer, to the problem of farming or
to the farm problem in times of depression, and I would heartily agree.
But nonetheless, it does seem to me if the program of increasing con-
sumption could increase the demand for farm products 4 or 5 percent,
precisely the same argument can be used here that I heard over
and over again with regard to foreign trade: "Although foreign trade
only accounts for a small percentage of the total sale of American farm
commodities, the difference between having that additional outlet and
not having it will have a marked effect on the price of the entire com-
modity." Isn't that same argum.ent pertinent here?
Mr. Clark. Yes; our committee agrees with the statement yau
just made, but you remember that your question addressed to me
was: ^Miat is my reaction to the criticism that had been made that
some of these nutrition programs reflect to farmers only a percentage
of the amount that the Government spends?
My reply was: "We look upon this as only one way of helping farm
income during a depression. After that is done, all it will do, the
additional job that the Government will undertake in a depression
period to aid farmers, should be on the basis of family need and the
costs, the out-of-pocket costs, which farmers must have to keep their
farm in good production instead of contracted production."
Mr. VooRHis. Would you keep it on that basis rather than on a
basis of price adjustment?
Mr. Clark. We are opposed to having it on the basis of price ad-
justment for several reasons. First, if you attach it only to price,
the large producers who have the largest income are going to get the
largest share of the Government's investment in the price program.
1472 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. VooRHis. That is true.
Mr. Clark. I can give you other reasons, but I think that is enough
to answer the question that you raised.
Mr. VooEHis. It is, I think. Now, I want to ask you about your
proposal here that farm mortgage payments should be waived to the
extent of the landlord rental share in periods of widespread hardship.
What would the landlord's rental share be?
Mr. Clark. It would vary a great deal from area to area, but the
assumption is that some local board would determine what going rates
for the rent of land are in that particular county and that particular
type of agriculture, and that the man who holds the mortgage, or the
company, has a right to exact from the debtor only that amount of
cash which would be equivalent to what this man could be expected
to pay as rent.
Mr. VooRHis. Inother words, he would pay rent on the land during
that period instead of paying interest and part of the principal on the
mortgage?
Mr. Clark. Those would be deferred.
Mr. VooRHis. Those- would be deferred, but not forgiven; is that
right?
Mr. Clark. That is right. It is to give the man a sense of security
in a depression period, that a family knows it is not going to be dis-
possessed because it cannot make the cash payments, because of the
price situation.
Mr. VooRHis. Finally, I want to say that I was glad that your com-
mittee has apparently arrived at the conclusion that farmers and farm
workers alike ought to be included under the protection of the social
security program. After all, farmers are indirectly paying part of the
cost of the present program without getting any of the benefits from it.
I noticed in my own section of the country a very marked change of
the point of view of farmers toward that question and a much greater
desire on their part in recent years, if not months, to have farm people
included.
I wonder if you can give us any information that would bear upon
what the attitude of farmers is on this question right now and how
much support your committee's position has.
Mr. Clark. When we were in the process of preparing the material
that went into our report, we conferred with the officers of the national
farm organizations and with the United States Department of Agri-
culture officials and also with representatives of every one of the
agricultural colleges in the Nation, all 48 of them.
In every one of these sessions we asked those in attendance the
question you have just asked me. We did not go out and talk with
farmers directly, but these people having a great many farm contacts
were questioned, and the sentiment seems to be widespread on the
part of farm people that they are paying for these social security
benefits and that they ought to be getting a share of them themselves,
particularly "the old-age and survivor insurance should be made avail-
able to all farm people, and the unemployment phases of it certainly
should be made available to farm labor.
Air. VooRHis. That is all, except to express my appreciation for
this very excellent paper that has been presented here.
The Chairman. Any questions?
POST-WAR ECONOMIC POLICY AND PLANNING 1473
Mr. CoLMER. I have just one over-all question, Mr. Clark. I am
not sure whether or not it has been answered, but I wonder if you
agree generally with the proposition that the best assistance to the
farm group is a stepped-up economy, full employment, and high
wages?
Mr. Clark. That is right.
The Chairman. I have one matter that has been bothering me
somewhat. This committee has had before it — the full committee
and the subcommittee — many promment economists and industrial
leaders, and they all agree that our national debt of $300,000,000,000,
and the demands made upon this Government for money to retire
that national debt and pay the interest on the debt and current oper-
ating expenses of the Government, are going to require full produc-
tion on the part of our manufacturing establishment, and we must
have full employment of labor as well as full production on the part of
agriculture at a fair market price. Of course, the farmer cannot be
a part of that consuming public which is so vital to the welfare of our
national economy unless he gets a fair price.
Your view is that there should be no legislative machinery set up for
the control of the price of agricultural commodities; am I clear about
that?
Mr. Clark. I think if our committee was here, they would say we
now live in a managed economy in which the Govermnent has come
in and influenced price and influenced production. You can't over-
night abandon that and go on to a completely free market basis.
VVe would say that we have the conviction during the transition
period from war to peace, that the welfare of the Nation, as well as of
agriculture, lies in the directing of, or getting away from, managed
prices to a free market system, and that with some products it may
take longer to make that* transition than with others, but that the
progress should always be in that direction, and that we hope it will
not be too long before we can allow the give and take in the market to
provide the incentive and the guides in determining the volume of
production of products. I am not trying to quibble.
The Chairman. I understand your position. You maintain that
we should gradually recede as conditions will permit from the support
of farm prices and also of production to the extent where you would
have no fixation of price, and you would let production take its
course according to the needs of the Nation- — and of the world, for
that matter.
Air. Clark. That is right; but recognizing that if we are unable
to get essentially fidl employment and full production in the city so
that we have abnormal conditions both in the city and on the farm,
we may have to make some compromises with those ideals and those
objectives.
The Chairman. Well, I am calling on my experience and thinking
back to a time before we had any war, when in the year 1936 we
produced 19,000,000 bales of cotton, nearly 20,000,000 bales. That
was almost enough cotton to supply the whole world's demand.
I believe 24,000,000 bales was at that time the world's need of
cotton. Cotton sold in our country for 5 cents and dji cents a
pound, and as a consequence thousands of American farmers went
banlvrupt. That resulted, of course, in a terrible panic that almost
destroyed our country.
1474 POST-WAR ECONOMIC POLICY AND PLANNING
Do you think it is possible for us to hazard the future of our economy
because a lot of men tell us we can't afford to have another depression
and we must not have one? Can we afford to subject our Nation
to such a situation without having some machinery set up to protect
us against that very eventuality?
Mr. Clark. Well, you will recall, sir, I said that our committee
believes that Government policy should be of the kind outlined in
this statement I read, if we can get reasonably full employment and
production; but if we get a depression in which nearly all prices drop
a great deal, then we suggest in the report that a great deal more
needs to be done. You have to have the plan ready beforehand and
not wait until you get hurt, and it should be put into effect promptly.
The things that we recommended are the widespread expansion of
the nutrition program, the provision that the farmer did not have to
pay in cash to the mortgage holder m.ore than his landlord share of
the rend of the land; and then, on top of that, there should be direct
cash payments given to the farmer to take care of his family living
expenses and to keep his farm in production.
In our report we say that type of procedure has value in industry
as well as in agriculture. We say, if the Government will use its
resources, and the opportunities that it can create for itself, to stim-
ulate employment instead of rewarding people for not producing, or
for treating merely some of these sym.ptoms, that we believe the
public welfare will be served.
The Chairmaj^. Now in that you recognize the dole, don't you,
or what we call the dole?
Mr. Clark. I object to the use of the word "dole."
The Chairman. You may give it whatever name you wish, but
that is the public concept of dole.
Mr. Clark. In the dole, you keep a man in idleness, and you tell
him that you are going to give him something so he won't starve.
But the essence and the heart of what I have said on behalf of my
committee is that under our proposal you are paying the farmer for
keeping his farm in production. In the depression period, when the
railroads need volume of business, when the flour mills and the paper
mills and textile mills need volume of business, for they have to have
raw materials, and if you are going to keep up the morale of your people
in a depression, you must not let food production go down. It is not
a dole.
The Chairman. I will agree with your explanation, and we may all
agree that that is not a dole, because the object there, as you say, is
to stimulate rather than to maintain in idleness, or to breach over a
bad situation. I guess we might call that a kind of a subsidy.
Mr. Clark. That has a bad flavor.
The Chairman. I know that, but in dealing w^ith the pubhc, and
we are representatives of the public, we have to keep these things in
mind.
Mr. Clark. I would call it a maintenance-of -production payment,
or something of that kind. That is what you are trying to do. You
are trying to reward the man and his family that will maintain produc-
tion and will not contract simply because it is not as profitable as it
once was.
The Chairman. That is all right; but I think we should give it
some savory name, because the pubhc is allergic to subsidies and doles,
et cetera, and they would resent anything that would resemble that.
POST-WAR ECONOMIC POLICY AND PLANNING 1475
Mr. Clark. That is right, and I think upstanding farmers would
not want to be told they are getting a dole, and if you want their co-
operation, you have to keep their self respect.
The Chairman. And I think if you remember, all of the prominent
farm organizations came out and condemned and denounced subsidies,
that the farmers did not want subsidies, but they wanted to get a
price for their agricultural commodity at the market price.
Mr. Arthur. Mr. Chairman, I would like to suggest a clarification
of one phase of this proposal. If you are going to stand behind the
farmer when the markets are demoralized and give him payments to
maintain his income, will that not tend to perpetuate inefficient util-
ization of our farm resources by giving a farmer a base and expecting
him to stay on the farm in order to continue to retain that base which
means payment from the Government if a depression came along, and
payment for continuing to produce goods which may at that time be
in surplus?
Is it possible to accomplish this program without compromising our
efforts to facilitate the needed readjustments?
Mr. Clark. You are talking, I assume, about a depression period?
Mr. Arthur. I am talking about these supplemental income
payments.
Mr. Clark. They only apply in case of a depression when all types
of employment are inadequate to take care of the available labor, and
the amount they would give any particular family would be very
much less than the cost of production.
I am not talking about a cost-of-production formula, but income ta
the farm family to take care of their living expenses because they are
the farm labor, and the out-of-pocket cost for things like fertilizer,
spray material and seeds, et cetera.
Now, no farmer is going to be content with a standard of living^
which only takes care of those minimum payments, and the principle
on which this whole thing is premised is that these will only be made
available when farmers do not have alternatives in the way of employ-
ment opportunities.
The significant thing, is that, whereas during the last depression
when rural people needed money, we told them they had to go and
work on the road or build a swimming pool in order to get any Govern-
ment payment to pay their bills, even though they went off and left
their farms and stopped producing the things which the raikoads, the
factories and other folks needed.
Under this new scheme, the farm family can get these payments to
pay theu- living costs and will be paid for maintaining production on
their farm instead of building swimming pools. I don't object to
swimming pools, but I am saying that the farm family can probably
do more toward helping restore normal economic conditions by main-
taining relatively full production in agriculture than by engaging in
these other enterprises, which do not have the same effect of stimulat-
ing economic development in the other branches of our industry.
Have I answered your question?
Mr. Arthur. I don't know that I differed with you, but I wanted
to get the point clarified. The first point, I take it, is still that there
may be during that period some freezing of the status quo, so far as the
kind of agricultiu-e that may be producing large surpluses, that is,
that you would try to minimize the extent of that, but it would work
in that direction during a depression, probably.
1476 POST-WAR ECONOMIC POLICY AND PLANNING
The second question I am wondering about now is what criterion
for these payments would be used?
Mr. Clark. I am going to let Mr. Salter answer the first part, and
if he cares to, he can answer the second.
Mr. Salter. I w-ould like to add these comments. Fii"st of all,
the committee said there is no way to have a painless depression!
When you are talking about the depths of a depression, you are patch-
ing up something to try to take care of a bad situation. There is no
easy formula for it.
The question is whether or not you might be freezing some past
pattern of production, et cetera, making more rigidities rather than
making more flexibilities under this program Professor Clark has
outlined. The committee feels that under the type of program out-
lined, there will still be more flexibility of adjustment within agri-
culture than there would be under a price-propping program, because
under a price-propping program you make it impossible for the person
you are trying to help to see, according to the market, the alternatives
if he could do something difi^erent.
One of the greatest things is to have a supplemental income pay-
ment program rather than a price-propping program. The first gain
is to maintain a flexibility of adjustment according to relative prices,
and secondly, you will not encourage in the products of w^hich you
may have a particularly excessive surplus, a lot of new producers to
come in to get the benefit of it and accentuate the difficulty.
The third point refers to the question of making your Government
payments in accordance with the needs of the farnily and the farm
situation rather than simply in terms of the total number of units
produced.
Mr. Clark. I want to answer the last part of your question, and
that w^as, "When does depression begin and end in terms of these pay-
ments?" We feel that the yardstick might well be some measure of
unemployment, or size of the national income, or something like that.
It should not be a situation on a particular farm, or the agriculture of
a particular county or State. It should be some measure, reasonably
objective, of the volume of production, average per capita national
income, or other measurement of alternatives for the farm family to
do something else than what they are doing.
Mr. Arthur. One further clarification. In determining the amount
of such income payments that an individual farmer would be entitled
to, would that be based upon past income family needs or what criterion
in the selection of the amount to be paid to the individual farmer?
Mr. Clark. We have not worked out any detailed chart on that,
but we believe that the level of living in that particular area should
be one of the dominant factors, and the other w^ould deal with what
represents the normal out-of-pocket costs that are involved in main-
taining a farm in production, which will vary a great deal from area
to area, and one type of farm to another.
Mr. Arthur. How would it be administered?
Mr. Clark. It would be done tlu-ough local boards where the
Government has large representation, but the local people also have
a voice.
Mr. VooRHis. Under your proposal here in dealing with depression
problems, prices would seek their own level?
Mr. Clark. That is right.
POST-WAR ECONOMIC POLICY AND PLANNING 1477
Mr. VooRHis. You would do nothing to prevent them from going
down?
Mr. Clark. We want to move the goods into consumption.
Mr. VooRHis. I agree with the difficulties about the name "subsidy,"
but the fundamental justice of this proposal would be this: That in-
dustry docs and can restrict production in time of depression which is
the thing that causes the depression to get worse.
Mr. Clark. That is right.
Mr. VooRHis. And so these pajmients would be made to the one
line of business in America that goes on producing during times of
depression in order to say to the farmer, "If you will go on producing
even though your price drops to a very low level, we will make it up
to you so that you can keep on producing," and that is doing the ono
thing that is most basically necessary to overcome a depression.
Mr. Clark. We will go further than that and say we believe, and
we are only an agriculture committee, that this kind of: procedure and
policy deserves consideration by urban industry as well as agriculture,
and Government efforts should be used to stimulate urban production,
instead of taking it for granted that people are not going to produce
when their profit margin is reduced. Now, I would like to say some-
thing else before I am through.
The Chairman. Go right ahead.
Mr. Clark. I want to express the personal conviction that a great
deal of the fear that some people have that a depression is inevitable,
and it has got to come, and how are we going to find work for all of
these people, is premised on the fact that our inventors, and research
people, and the folks who make the decisions that create jobs, will not
be as competent in the future as they have been in the past.
Personally, I think that if there has been one development that
stands out above everything else in American economy in the last
quarter of a century, it has been the enormous increase of private
research. It is creating new products and new jobs and, if we can
find some way to maintain the rate of research, and stimulate it on
the part of industry and Government, that factor alone ofters a lot of
promise in helping to remove this hazard that we are talking about.
In terms of agriculture, I hope I will not be accused of special plead-
ing, when I say I have been disappointed, and I say this in no spirit
of malice, that the Congress is much more willing to find funds for
extension in agriculture than they are for research in agriculture, and
that research is the driving force that gives power to any extension
program. It is the force that creates jobs and creates employment.
If the Government wants to help to remove this hazard of who is
going to find the jobs and what kind of products they are going to
make, you will find a way of encouraging industry in providing money
for research, and in providing money for your governmental agencies
that are engaged in research even though there are not many votes
in it.
The Chairman. We certainly thank you for coming here today
and giving us this very thought-provoking statement. Personally,
I want to thank you, and I want to thank you on behalf of this com-
mittee.
Air. Clark. It has been a pleasure and I thank you lor being patient
with me.
99579 — 45 — pt. 5 17
1478 POST-WAR ECONOMIC POLICY AND PLANNING
The Chairman. We will now hear from Dr. Black, of Harvard
University.
TESTIMONY OF JOHN D. BLACK, PROFESSOR OF ECONOMICS.
HARVARD UNIVERSITY
The Chairman. Haye you a prepared statement that you would
like to present, or do you want to make an ord statement?
Mr. Black. I have a prepared statement.
The Chairman. Would you rather not be interrupted until you
conclude reading it? If so, we will be glad to accord you that privilege.
Mr. Black. I have copies of a prepared statement here that I am
going to read to you. I also have some other material that I will
hand you later. First, however, I shall comment on some of the
points that have been raised in the earlier testimony. You have
been talking about subsidies. If one could lay down an ideal rule
for subsidies, it would be that no subsidy should be made except in
such a way as to end the need for it. This need not be in the next
few years — some subsidies might end the need for them in 5 jears
and some of them might take 25 years or more. Hand-outs of any
kind are objectionable except under dire need. In most cases a way
can be figured out of making subsidies contribute to important agri-
cultural adjustments which will have the effect of discontinuing the
need for paying them ind^efinitely. . „ ,
Mr. CoLM-e:R. You are' the man we have been lookm-g for all the
time. You suggested in your remarks the speeding up of that day.
That will be fine. I wish you would show us how to do away with
subsidies and arrive at that as eoon as possible. Some of us think
we have to have them.
Mr. Black. If I don't throw some light on this question before
I get through, you can come back at me.
In this connection, there has been some discussion this mornmg
about the setting up of a structure of prices that would lead to an
increase of those products that we want more of and reduce the output
of those that we want less of. There was an implication in some of
the remarks this morning that, in the sort of times we are going to
have 3 or 4 years from now, a structure of prices set up on this basis
will be an acceptable structure of prices.
I predict that $10 hogs in those years will lead the farmers to
produce all the hogs that we can consume in this country or export;
that 10-cent cotton, particularly if we get the cotton picker going,
will produce all the cotton that we can dispose of in this country or
export. Likewise, 75-cent wheat.
The Chairman. How are you going to be sure of gettmg that 10
cents for cotton?
Mr. Black. The 10 cents will produce all the cotton we can use.
If a bill were presented to Congress, however, that would mean such
a set of prices, and clearly indicate that is what it would do, it would
not get by this Congress, nor the Congresses that we will have in
1948, 1949, or 1950. , . w
Hence there is a fundamental conflict that must be met. We can
talk about getting along with a free market, but a free market, taking
agriculture as it is and as it is going to be in the next 10 years, will
not give us prices under which our farm people can Hve the kind of
lives we want them to live.
POST-WAR ECONOMIC POLICY AND PLANNING 1479
The Chairman. I recall that we sold wheat on the farm with the
hope of getting a little money to support the family and pay the cm--
rent expenses of the household, and when we threshed our wheat, we
would go down to the buyer and ask him the price of wheat and it
would be 40 or 45 cents a bushel, which was really in that country
a low cost of production.
In other words, the farmer lost money in that operation. Then we
found some time in May or the first of June, after the farmer had
marketed all of the wheat, and that applies to cotton as well' the price
of wheat would go up to $1 a bushel. However, the producer does
not get that. The wheat is in the hands of a few people who are hold-
ing it, and it got as high as $1.15 and they made a fortune on it.
The farmer got less than the cost of production and that happens
to our cotton farmers of the country, too. It happened up until the
time we began to try to do something to stabilize that price for the
farmer so he could not be robbed. Aren't we going to face that same
situation unless we evolve a different program than we followed in the
past? What is your idea?
Mr. Black. There has been a tendency in the past for more than
the usual quantity of a product to be in the hands of the processors and
the warehousemen in years when the prices went up, and less than a
usual amount of it to be in their hands \<^hen the price went down.
The trade has outguessed farmers in deciding when to hold and when
not to hold. Is that what you are trying to say?
The Chairman. In other words, the ordinary farmer has never
been able to hold the commodity; he has to sell his commodity to
operate and live.
Mr. Black. We can talk about this in terms of the ever-normal
granary. It could be operated in such a way as to enable the farmers
to hold without, putting a bottom under prices. That is the way in
which Secretary Wallace conceived it. The first ever-normal granary
legislation, you may remember, set the minimum at 52 percent of
parity. Its purpose was to put the farmer in the position where he
did not have to sell at harvest time and glut the market. But this
worked so well that Congress kept raising the minimum until the
granary became a method of putting a support price under farm
products at 85 or 90 percent of parity. This pegged the prices at level
that took us out of the foreign market.
Now, for another point: If we are going to use subsidies, or any
other kind of device, when the war is over, when we get into the
continuing post-war program which your committee is primarily con-
cerned with, we need to start now with some of these measures or we
will be in a mess before 1948 comes.
The Chairman. That is the purpose of this committee.
Mr. Black. You must think in terms not only of the continuing
post-war program, but also ot the transition, of how to get from here
to there.
I am just going over some things at random that were suggested
by the discussion this morning. Your committee has expressed a good
deal of interest, not only in full employment, but also in an expansion
of industry. If we are going to have full employment after the war
we must find jobs for more workers than we ever have found jobs
for before. There never has been in our histroy an expansion of
industry and trade at the rate that is going to be necessary to take
care of the situation. We will need a tremendous surge in industry.
1480 POST-WAR ECONOMIC POLICY AND PLANNING
Historically, our manufacturing started in the East and spread out
into the Midwest, and a little into the South and out onto the Pacific
coast. The percentage increases from decade to decade, of course,
have been highest on the Pacific coast, next highest in the South.
Up in New England, where I now live, we have had very small per-
centage increases, but we had such a large amount to start with that
a 5-percent increase has represented quite a bit. A 100-percent in-
crease in California back in 1900 did not mean very much.
We must in some way bring about a distribution of industry over
this country so that the national resources of all parts of it are more
equally utilized. The T. V. A. is undertaking to develop the latent
resources of the valley parts of seven States. There should be enough
industry and trade to employ all the people now in the valley parts
of these seven States. Manufacturing and trade will in this way
spread all over the country. We need to have the resources as fully
utilized in one part of the country as in the other. We must make
tremendous strides in this direction in the next 10 years if we are going
to have the full employment we are talking about. A lot of our talk
about full employment is either wdiistling in the dark or else it is just
star gazing. We must get down to earth and work "out vigorous
programs to expand industry and trade in the South and West.
You talked about cooperation this morning, Mr. Voorhis.
Mr. CoLMER. Before you leave that subject — I don't want to
disturb your orderly procedure or your statements, but I just would
like to hear you elaborate a little further on this matter of full em-
ployment. This whole Committee of the Congress on Postwar
Economic Policy and Planning, I think, is convinced of one thing:
The demand for this increased employment that you referred to is
going to be tremendous. Some people talk about one figure and
somebody else talks about another figure, but regardless what that
figure is, we all are in accord with your statement that it must be
accentuated beyond anything we ever had in the history of the country.
I am not trying to put words in your mouth — is it impossible of
attainment?
Mr. Black. No; I don't think it is impossible.
Mr. CoLMER. On a practical basis.
Mr. Black. Yes.
Air. CoLMER. Frankly, if it is not obtainable, I think the picture
is very, very dark. I would like to have your comments on that.
It is difficult to differentiate between agriculture and the whole post-
war economy because they are all so interwoven, and I don't want
to go too far afield, but I would like to get your reaction.
Mr. Black. I think it is entirely possible to have such an expansion
as I have described. I think your committee, the C. E. D., the
National Planning Association, and all of the groups working on it
can develop a combined program of expansion of industry and trade,
and taxation. That will maintain high level employment. They can
do it, but I am not sure that there is sufficient awareness on the part
of many people as to what is involved. We have been talking today
about a free market, and about working toward a free market. The
toughest part of that is not to get a free market in agriculture, it is to
get a free market for industrial products.
Mr. Hope. We have a pretty much free market in agriculture,
haven't we?
POST-WAR ECONOMIC POLICY AND PLANNING 1481
Mr. Black. Yes; except not always in the market in which we buy.
A good many explanations have been offered for the depression of
1929-33. One of the contributing factors, it is now pretty generally
agreed, was the failure of prices of manufactured products in the
1920's to come down with increasing efficiency. If they had come
down, all kinds of consumers, workingmen and farmers, salary
receivers and people with incomes from accumulated wealth, would
have bought many more of those things and this w^ould have given us
larger employment.
Now we will be faced by a similar situation again after this war.
Are prices of manufactured products going to reflect the lowered costs
of large volume and improved technology, or are they going to be held
at present levels? The O. P. A. has an opportunity here, as well as
the manufacturers. I have been very pleased to see some of the big
manufacturers, the General Electric and others, come out with
statements that they are going to keep their prices low so that they
can sell their products in large volume. But I doubt if a third of the
manufacturers of this countr}^ really appreciate what they are called
upon to do.
Now, to return to the subject of cooperation introduced by Mr.
Voorhis this morning. You asked Mr. Voorhis whether a voluntary
chain organization shall be permitted to operate under the tax-free
provisions. This was a proper question. I will say "yes" if it is
really functioning cooperatively. Then I would add that another
very large and important group in this country is being dragged into
this same controversy, and you may need to consider them also.
Back in the da;/s when we first started our w^orkingmen's compensa-
tion, Wisconsin first, and then Massachusetts, provided that a group
of employers could get together and form a mutual and carry their
own compensation insurance. Today the largest companies writing
such insurance are mutual companies, and the National Tax Equality
League is insisting that they shall pay taxes on the so-called rebates.
Two of the largest of these mutuals are in Boston. They handle the
records and accounts with their members from year to year, and of
such new members as come in, at a cost of about 4 percent of the so-
called premiums. In contrast the brokers who write this insurance
for the stock companies receive a com.mission of anyv/here from 10
to 30 percent. They have been conducting a vigorous fight over the
years to hamstring the mutual companies, and they now have joined
up with the National Tax Equality League. It should be obvious that
the return payments of the mutuals or what is left over from the
advances at the beginning of the year, which are larger than they
need be because the mutuals handle their business for 4 percent in
place of the 20 percent and more needed by the broker-stock company
combination. The Tax Equality League now wants the mutuals to
pay taxes on the 20 percent savings in costs from handling their own
insurance on an efficient basis.
Mr. Hope. That is like when you pay too much to somebody.
Mr. Black. That is all it is.
This group of mutual insurance companies is involved in tliis con-
troversy along with the co-ops.
Mr. Voorhis. And for precisely the same reasons.
Mr. Black. And if the cooperatives will get together with them,
they will be a good deal of help in the struggle.
1482 POST-WAR ECONOMIC POLICY AND PLANNING
Now, I want to be slightly facetious in this connection by remarking
that the most important co-op in the United States is the Associated
Press, and it might be interesting to look into their tax program and
see whether they pay taxes or not. They arc doing the job in the
nature of rendering a service at cost for their members.
Now, there are, of course, several principles in cooperation, and one
of them is freedom for anybody to become a member. Now, when
you write your tax laws, are you going to make that a requirement for
tax exemption? I will let you Congressmen decide. But so far as
principle we are talking about, the principle of doing service at cost
and returning advances not needed, all kinds of service companies
qualify. The rural electrification associations render service at cost
and return what they don't need. I have raised this point again
because I thought it might help to broaden out the discussion of this
morning, Mr. Voorhis.
Mr. Voorhis. Yes; thank you very much.
Mr. Black. About social security. The National Planning Asso-
ciation, with which Dr. Arthur and I are connected — we are on its
agricultural committee — has a subcommittee drafting a statement on
social security for agriculture. We are reading a first draft of it at a
meeting on Monday, and we will have a report before long that we can
turn over to you that I think you will find will be of considerable
inte -est. You may be interested, Mr. Voorhis, that more of the wor):
on this was done in California than anywhere else.
Mr. Voorhis. That was very logical, I believe.
The Chairman. May I ask here, are you going to have a report oti
post-war agricultural policy from that subcommittee on agricultuie
that might also enlighten us?
Mr. Black. We haven't yet set up a subcommittee to draft, a
general long-time agricultural policy.
The Chairman. We will be highly pleased to be favored with that
report just as soon as you get it out.
Mr. Black. All right. We are working on it.
If Dr. Schultz appears before your committee — I don't know
whether he is going to or not
The Chairman. He ah-eady has.
Mr. Black (continuing). You put that up to him.
Now, one other point — and I am not taking issue with Mr. Clark
on this matter, because I know he and I agree on the essential point —
but he did talk to you as if agriculture did contract in the last big
depression, and as if large numbers of people quit producing and went
on W. P. A., and so forth, and as if that would happen again in
another depression. I do not think I am misstating you on that,
Dr. Clark.
Mr. Clark. I did not mean to leave that impression, Dr. Black.
Mr. Black. Then I am sorry, but I got that implication.
Air. Clark. What I meant to say was that I did not think it would
be desirable for a farm family in a depression to have to build a
swimming pool in order to get money to get income on which to live;
that that income should go to the farm family for continuing produc-
tion on their own farm .
Mr. Black. I think that is where your statement led around to
in the end, but it began the other way. I think you conveyed a-
wrong impression in some of your opening remarks. Actually, agri-
POST-WAR ECONOMIC POLICY AND PLANNING 1483
culture never has contracted during a depression. The index num-
bers of agricultural output for 1932 and 1933 show a slight decline
under 1928 and 1929, but that was because of the droughts. It is one
of the unfortunate things about agricultui'e, perhaps, that it does not
contract during depressions.
Mr. VooRHis. \V ill you pardon an interruption? There are just a
few figures that I carry around in my head ; one set of them are these:
That between 1929 and 1932, when we were going down the toboggan,
agricultural production declined only 6 percent, but agricultural prices
fell 46 percent. The production of farm machinery declined 80 per-
cent, and the price of farm machinery declined only 12 percent.
Mr. Black. Your statements are entirely in keeping with mine.
That 6-percent decline that took place in agriculture was due to
drought.
Mr. VooRHis. But that is the contrast of how agriculture behaves
and how industry behaves under similar circumstances.
The Chairman. May I at this point, Mr. Voorhis, ask: Do you
think there is any relationship there in these figures to the fact that
w^e can generally assume that business manages to control its produc-
tion when it is deemed necessary?
Mr. Black. Yes.
The Chairman. And agriculture until the recent programs had no
machinery or power to do that.
Air. Black. Yes. Some of this control, Congressman Zimmerman,
is the result of certain kind of monopolistic action.
The Chairman. The effect.
Mr. Black. But most of it is not monopolistic.
To illustrate my point, early in the last depression, Mr. Henry
Dennison of Massachusetts — he has been on about all the liberal
businessmen's committees in the world — 'Started proclaiming that
we have just got to keep on producing and give everybody jobs. He
started on a tour around the country preaching this. Out in Wiscon-
sin was Governor Kohler, of Kohler, Wis., who also thought it was a
good idea to keep his manufacturing plant going. But when Dennison
got back and saw what had happened to his inventories, he just had
to slow down or go out of business. He would have been wrecked. I
benefited from Mr. Koliler's liberality, because when I built my house
in 1931, in the midst of the depression, I got my Kohler 's plumbing
fixtures very cheap.
I am not scolding businessmen because they do slow down at such
times. They are in a position to do it, and they are foolish if they
don't do it.
The Chairman. Don't get the idea I am trj^ing to scold them either,
but I am talking about the practical effect.
Mr. Black. Agriculture isn't in a position to do it, and business is.
Now, there is also some rigidity of prices in business that has a cer-
tain amount of concertedness about it. There is such a thing as price
leadership, you know. I hope that the price leadership after this war
will move prices down.
I agree enthely with Mr. Clark's statement that when and if we
get into a period of depression, and prices of farm products go down
we should supplement the incomes of these folks. I would not use
just his argument for it, but I am for it. I would prefer, however, to
pay as little of the supplements as possible in the form of cash and as
1484 POST-WAR ECONOMIC POLICY AND PLANNING
much as possible in some other way. I will say more about this later.
Suffice here to say that if a cotton picker came into the South in the
midst of a depression, and it becomes obvious that large numbers of
folks down there cannot make a living from cotton, it will be better
to use any contributions to fa'rm families to help them make over their
agriculture into a kind that will stand on its own feet afterward, and
pay out our money for that, than to hand them out cash to keep them
going.
The Chairman. Now, just a moment. I may not be in agreement
with the other members of this committee, but I am m agreement with
the m.en who have heretofore appeared before our committee, who all
agree that this Nation cannot afford to get into that depression that
you are talking about. In other words, we should have some kind of
a program that will avert a depression and keep us out of the depths
of a depression.
Now, if we wait until we get into it, why, then, of course, calamity
is upon us. I do not know whether that can be done or not.
Mr. Black. Yes. You see, I am in full agreement with your posi-
tion, but I think that when folks like ourselves get together and plan
future policies, we are not doing all we should if we just assume full
employment and stop there.
The Chairman. I know that.
Mr. Black. Suppose we do not have full employment, what will we
do then? There has been too much of a tendency to make plans that
proceed on just that one assumption, and then stop. If your com-
mittee were to draft an ideal agricultural program and present it to
Congress and do no thinking about what to do if Congress refused to
accept it, you would not be going far enough. You had better think
out also what compromises you will make if you have to.
Mr. CoLMER. That is what a good general does in battle.
Mr. Black. Now, I shall read my prepared statement. You may
interrupt as I go along.
I had the same four questions to answer that were given the other
persons appearing before your committee. I chose to deal first with
the second one; that is, with the policies that will place agriculture
on a satisfactory self-sustaining basis from now on after the beginning
of the war.
1 . Basic policies to place agriculture on a satisfactory self-sustaining
basis in the long run. Three things are necessary to accomplish
this:
(a) Agricultural production needs to be brought into balance with
demand at a reasonable level of prices.
(b) A large fraction of our farmers need to have more land, live-
stock, and farm machinery to work with.
(c) Many of our farmers need to become more efficient and pro-
ductive.
Mr. Hope. Now, right on that second point, I suppose that carries
with it the corollary that we need less farmers.
Mr. Black. I am going to discuss that later on.
Now as to the first point: From the First World War to the second,
the supplies of farm products were pressing upon the market. Con-
sumers did not have money enough to buy what the farmers produced
at a good price. The "terms of trade" were against agriculture in
POST-WAR ECONOMIC POLICY AND PLANNING 1485
this country, and in most other countries. The years 1925-29 were
almost an exception to this statement — the terms of trade in these 5
years were almost satisfactory.
One way to bring the terms of trade into line is to reduce the
volume of agricultural output.
Mr. Hope. Now, jou mean by the terms of trade, the terms of
trade in relationship to prices?
Mr. Black. Yes. If you have too much of one product in relation
to the others, you have to sell it cheap. It is a term taken out of
discussions of foreign trade.
Mr. Hope. Yes.
Mr. Black. I heard Dr. Copland from Australia a few weeks ago
say that Australia suffered between the world wars because the
things she was producing and exporting were things that were cheap
in the world market, and Australia did not get enough back for the
things she sold to have a prosperous economy. Agriculture has been
sellmg its product to the rest of society at such low prices that its
people haven't had a decent standard of living.
One way to bring the terms of trade into line is to reduce the
volume of agricultural output. The A. A. A. program undertook
this in some measure. Its principal object, however, was only to
bring the production of certain products back into line with demand —
cotton, tobacco, wheat, corn, and hogs, and rice. To the extent that
it undertook to reduce agricultural output, it failed largely, since
agricultural production averaged 7 percent greater in 1938-39 than
in 1930-32, before the A. A. A. program was started.
Moreover, this is not a good way to improve the terms of trade so
long as many millions of our people are underfed. A half billion
dollars spent on supplementary food-distribution programs wiU add
as much, or as nearly as much — and I want Mr. Voorhis to listen to
this statement
Mr. Voorhis. I am.
Mr. Bi>ACK. As if it were paid farmers directly, and the food that
would not have been produced will have been produced and eaten.
The country will have gotten two uses out of that income. The
farmers will have gotten it and the consumers will have had the food
to eat.
Mr. Voorhis. May I interrupt you, Doctor? Is the reason that
you make the statement that a half billion dollars spent on supple-
mentary food-distribution programs will add as much or nearly as
much to farm income as if it were paid to farmers directly; is the
reason for that statement the one I suggested this morning?
Mr. Black. The basis for that statement is a report prepared, not
by propagandists in the Department of Agriculture, but by very
careful students. There is not a better or sounder economist in the
Department of Agriculture than Dr. Fred Waugh. He and his
group of workers made an analysis of the stamp plan and the school
lunch plan, along with others, from this point of view, and concluded
that even taking a year by itself, the money paid out in school lunches
was nearly aU added to farm income, no.^ quite, but nearly all.
Mr. Voorhis. I mean, was the reason for that the fact that by
increasing the
Mr. Black. You gave the reason for it this morning.
Mr. Voorhis. That is what I want to know.
1486 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Black. The fact is that an extra 5 percent which added to
demand raises the price of farm products more than 5 percent because
of the inelasticity of the demand for food.
Mr. VooRHis. And raises the price of all farm products.
Mr. Black. That is right. My statement was about the short-
run effects. If money spent on school lunches did not more than
half pay for itself in the year in question, it might well pay the farmers
because of the effect which they have in building up future demands
though establishing food habits.
To make this point as effectively as possible, suppose we refer to
the 10,000,000 people now -in the armed services. Large numbers of
these came from sections of the country where diets are poor. Un-
usually large numbers were rejected because of this. Many of those
who were not rejected were not good fighting men when they were
inducted because their bodies were not well developed. Army tests
and experience have shown that they could not stand up under severe
strains. But these men have had balanced diets in the Army and
they have learned to eat what they need. They will never go back to
their poor diet again.
Mr. Hope. Now, the reason they had. poorly balanced diets before
they went into the Army was not from choice, was it? It was because
they did not have the opportunity to get a balanced diet, wasn't
that it?
Mr. Black. The reasons were mixed. Food habits as well as low
incomes. We like what we have learned to eat as we grew up, and
we can learn to eat and like a poor diet as well as a good one. In
sections of the country with low incomes and poor diets, bad eating
habits are formed in infancy and childhood. But some children from
well-to-do families form bad habits. The Consumer Purchases Study
showed that one-sixth of the families in the upper-third income groups
had poor diets. Among my students at Harvard University, I find
boys and girls with poor diets formed in their childhood. Lack of
income is the major factor in poor diets, but not the whole story.
If we were to spend a million dollars now on helping school children
to eat the right kind of foods, we would be building good eating habits,
such as our soldiers are building in the Army, and when the boys and
girls finish school, they will go on wanting the same foods. They will
do their best to get them. Probably they will spend more of their
income on food than their parents. So though we might not get our
million dollars all back this year, we would get it back in the next 10
years, and more besides.
Mr. Hope. How far could you go in extending such a program
beyond the borders of this country; that is, to people of other nations?
Do you think there is any possibility along that line?
Mr. Black. I will discuss this matter under the fourth head in
your outline.
Mr. Hope. All right.
Mr. Black. The best way to improve the terms of trade is to
strengthen the demand for farm products. This can be done, so
far as the home market is concerned — we are talking about that
now — by maintaining a high level of employment, and by helping
low-income families to get more food. The first is not enough because
millions of our families do not earn enough even when fully employed
to buy the food they need for health. Several other millions do not
^OST-WAR ECONOMIC POLICY AND PLANNING 1487
have good eating habits, and need a lot of strong education in order
to form better habits. The strongest kind of education is learning
by doing.
A supplementary food program should be conducted on the theory
that it will eventually be self-terminating so far as any individual or
family is concerned. The children that get one good meal a day at
school will be more likely to feed themselves adequately, and earn
enough to do it when they grow up. If _ for pne generation every
school child could get one good meal a day, after being supplied with
orange and tomato juice while an infant, the malnutrition of our
people would be half eradicated, and with it much of the low earning
power of the poorer part of our people. A child that is never well
grows up into a man or a woman that is half sick and is not likely to
get ahead in the world or have much buying power.
I think you folks know that the average expectation of life in India
is about 30 years. A former student of mine, now in the overseas
army in India, wrote me recently that down in Texas, where he came
from, he used to think there were a lot of shiftless, improvident
people who just did not seem to have any ambition to take care of
themselves or to get ahead in the world, "But", he said, "you ought
to come over to India. But suppose you put yourself in the place of
a person who is not going to live more than 30 years. I doubt if
there is ever any time in his life when he is not half sick. How can
you expect him to have any ambition to do things?"
Providing supplementary food for grown-ups helps many of them to
be more productive within a few years. Army experience indicates
that large numbers of men whose bodies were relatively weak have
been made into good fighting men in 6 months. We talk about
toughening these men up so they can stand hard military duty.
Feeding them up is the most important part of this toughening.
If all our pporly fed families ate the kinds of food that they need,
this alone would step up the demand for food in this country enough
to use up the surplus foods that we will have within 2 or 3 years after
the war. With high-level ern.ploym.ent, many of these families will
buy this food. But many will not, because they do not earn enough
or because they have poor eating habits that must be corrected.
Mr. Hope. Right at that point, it is my understanding that prob-
ably our people now, our civilians, are eating better, probably doing a
better job of eating nourishing food, than they have ever before.
Is that correct?
Mr. Black. That is correct. A survey was made in 1936 and an-
other in 1942. There was im.provem.ent of at least a third between
these dates, mainly as a result of the better incom.es.
Mr. Hope. Now, after the war — ^we will assume there is no rationing
then and they will be free to buy what they want — ^what do you esti-
mate we can expect in the way of — -assuming full em.ployment — how
much more people will eat of the proper type of food than they are
eating now?
Mr. Black. My analyses of the data of the Bureau of Agricultural
Economics indicate that counting the increase in population that will
have taken place after 1935-39,' our people with high-level employ-
ment will consume 20 percent m.ore food in 1948-50 than they con-
sumed in 1935-39. Of that, about 9 or 10 percent will represent
increased per capita consumption; and the rest, the growth in
population.
1488 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Hope. How does that compare with what they are consuming
now?
Mr. Black. It is more than they are consuming now. Mr. Tolley's
recent statement was that we are consuming 7 percent more now
than in 1935-39.
Mr. Hope. That is taking into consideration, of course, the full
employment they will have of other goods which will compete with
food for the consum.e^'s dollar.
Mr. Black. Yes; that is correct. "Full employment" surely won't
be any fuller than it is now. But we won't have rationing then.
Who is going to eat the additional food when we take off rationing?
It is not going to be the low-income people. Rather it will be those
who cannot buy all the butter, meat, camied fruit, and sugar they
want now. The working classes will do very well if, in 1948-49, after
the war is over, they have 80 percent of their present incomes. Take
out overtime, extra pay for overtime, let those return to their homes
who want to return — the married women and the others^and main-
tain the present basic wage rates, and the labor income of this country
will fall off at least 15 percent and maybe 20 percent. This will be at
high-level employment.. It is to be doubted if this group in the
aggregate will consume more food than they are consuming now when
rationing is lifted and their incomes reach normal position levels.
Mr. Fish. Of course, that is fundamentally true, and everybody
agrees with that, but have you any break-down as to the number of
people who will be employed? I am referring particularly to the wage
earners, the consumers. Do you believe there will be 60,000,000
people, as the President has suggested; and if so, have you any break-
down of that 60,000,000?
Mr. Black. I have no break-down here, and if I were to supply
you with one it would be one I have borrowed from somebody else.
Mr. Fish. The reason I asked that is because I have been very much
interested. After all, the whole objective of this committee is to try
to employ as many people as possible after tliis war is over. They
will be demobilizing several million after the war. Now, the President
said that there are going to be 60,000,000 taken care of. I am very
anxious to get the break-down. Someone gave it to me at lunch today,
and it was a very extraordinary break-down, and I wondered if] you
had one other than the one that was given to me.
Mr. Black. I have worked up no break-do vn of my own. I have
in my files one from the Committee for Economic Development and
one from another source. One of the startling things about such a
break-down is how large a proportion of the increase is not in industry,
but in trade and services. But I don't want to go into this, because
we want, I think, to keep the discussion as near to agriculture as
possible.
Mr. Fish. But agricultural prices depend on the consumption, the
wage earnings, and the ability to buy agricultural products, and that
is the main thing.
Mr. Black. I agree; and yet we must limit our discussion here,
I think, if we are going to get anywhere with agriculture's part in the
post-war contribution. '
Now, I am making another point. If there can be combined with
this stepping up of food consumption, as a result of supplementary
food distribution and its educational effects, some important shifts
POST-WAR ECONOMIC POLICY AND PLANNING
1489
in production, the results will be even more important. One of the
reasons that improving diets is so effective is that good diets include
more dairy products, eggs, and meat, as well as more fruits and vege-
tables. These are the "protective foods" that include the vitamins,
minerals, essential fats, and essential proteins. Only certain of the
fats and certain of the proteins are specifically necessary to health.
You can add them all up and say you must have 70 grams of protein
a day but included in that must be certain proteins that are essential.
The same is true of fats. Onl}'" a few of the proteins and fats are
specifically necessary, and those that arc specifically necessary are
mostly of animal origin. A few of the very best of the vegetable foods,
like soybeans, will almost entirely take the place of animal foods,
but only a few. Now, it happens that the foods of animal origin use
much more land than do cereals, sugar, potatoes, and the like. In
fact, as an average, they use about 10 times as much land. If
40,000,000 acres were taken out of cotton, wheat, rye, rice, sugar
beets, potatoes, and corn for direct human consumption and used to
grow pasture, grass, and other forage, plus grain to feed cows, hogs,
lambs, or poultrv, the efl^ect on surpluses would be the same as taking
36,000,000 acres^ out of use.
The accompanying table I gives the supporting data for these
statements. I don't want to go into this table, except to have you
look down the line at the animal products — dairy products, beef,
pork, and eggs. The highest of these is pork, 500,000,000 calories
per acre. Dairy products, at 235,000,000 calories, come next. The
next column presents the same comparison in terms of protein.
Note that in terms of protein, eggs are the highest in the list. More
than this, eggs contain larger proportions of one or two of the vitamins
than the other animal foods. Put all of these together and match
them against wheat, corn, soybeans, dry field beans, sugar beets —
I haven't got rice here — and the comparison is about 10 to 1. Now,
as I pointed out, and now restate, if you could take 40,000,000 acres
out of these cereals and beans and put them into these animal prod-
ucts, it w^ould be like taking 36,000,000 acres out of use, and that will
go a very long way toward getting i-id of our agricultural surplus.
Table 4. — Calories and proteins from an average acre of land and day of man labor
in the United States used in the production of different foods ^
Per acre
Per man-day
Calories
Proteins
Calories
Proteins
Wheat, used as white flour
835
1,880
1,545
1,250
2,285
6,250
235
45
500
145
Grams
56
96
340
150
118
0
22
7
18
26
740
550
1,030
335
270
545
50
25
30
25
Grams
50
Corn, used as meal ._ ._'... . . ...
28
Soybeans, used as human food
226
Dry field beans ... ..
46
Potatoes --- - ..
14
Sugarbeets . .
0
Dairy products s .
48
Beef
3.6
Pork ].
4.6
Eggs - . - ^
4.5
' From John D. Black, Food Enough, Jacques Cattell Press, October 1943, pp. 133 and 139.
2 The dairy enterprise as a whole.
1490 POST-WAR ECONOMIC POLICY AND PLANNING
If people are to cat more of these animal foods, however, they
must have more income, because they c'ost more to buy than cereals
and potatoes. Keeping workers employed will help considerably, but
it will not be enough'. Low-income people will need to be helped
to buy these foods of animal origin. It is these that must be especially
included in school lunches, stamp programs, and the like. If our
people form habits of eating these, they will keep on buying them
when their incomes increase. Many of them ^^ill spend a larger
part of their income for food because of wanting these foods. Thus,
if production can be shifted to produce the foods needed for a really
good food and nutrition program, this will make it much more effec-
tive in reducing surpluses.
Now, this is all I am saying under my first point A, under the head
of how to get agriculture and the rest of society in such a position that
the terms of trade will be fair to agriculture, so far as the domestic
market end of it is concerned.
If we could work out a supplementary food-distribution program
that would have the effect of gettmg these underfed people enough
food, plus enough of these animal foods, we would get rid of all our
surpluses. We wouldn't need anj^thing more we could put this
over. And if we get into a tough spot in 1948, 1949, and 1950, and
go about this kind of a program hard, we can make a lot of headway
in 2 or 3 years.
Mr. VooRHis. Now, Doctor, may I interrupt, because at the be-
ginning of your remarks I understood you to take exception to a point
which I had made this morning, which was that it was sound policy
for any program that we might adopt to attempt to encourage the
production of things that were needed by our own people in the do-
mestic market, and it was sound policy," conversely, for the impact of
any program that might be encountered not to encourage the pro-
duction of things at below cost of production.
Now, it seems to me that your suggestions here, which some of the
other IMcmbers of Congress would tell ytou are things that I have
advocated myself for a long time, are precisely in Ime with that very
principle, aren't they?
Mr. Black. I didn't take exception to your statement this morn-
ing on this point, I said that a set of free-market prices will not give
us the shifts in production we need. If we really want to get the
shifts that will improve diets and reduce our surpluses, we must set
up a structure of prices that is different from a free-market structure
of prices. We must go out and pay liberally for the foods we want
more of — pay our subsidies on those.
Mr. VooRHis. That would be a program, though.
Mr. Black. That is right.
Mr. CoLMER. Doctor, before we leave that, you have stated that
all supplementary food-distribution programs should be conducted on
the theory that they wUl be eventually self-terminating so far as any
individual or family is concerned.
Mr. Black. That is right. I want to get this family the kind of a
diet that will make it healthy eiiough and ambitious enough so that
its members will go out and earn enough to take care of themselves.
Mr. Colmer. Yes. Now, pending that, and in this period that
you anticipate but hope that we will not arrive at, is it your thought
that it is the function of the Government, in the interest of society
generally, to furnish this program?
POST-WAR ECONOMIC POLICY AND PLANNING 1491
Mr. Black. Yes.
Mr. CoLMER. I just want to be straight on that.
Mr. Black. Yes; very much so. We were spending $725,000,000
a year in 1937, 1938, and 1939, on a production-adjustment pro-
gram. Let's consider spending something Uke that on a consump-
tion-adjustment program instead, and see if it will not accomplish
more.
Mr. CoLMER. I wanted to get that clear in my mind. Ever so
often down in Washington the question of school lunches comes up.
It is always a very controversial matter, and I wanted to get your
views.
Mr. Black. I regret very much that at a certain stage in the evolu-
tion of these food-distribution programs, they came before Congress
in such a way that it appeared that farmers generally were going to
get less if more was appropriated for these programs. These pro-
grams being brand new, Congress had not done much thinking on the
subject. Its offhand reaction was: "We don't want these programs
to take the place of the parity payments."
Now, I think that the attitude of the people of this country toward
this program, and that of many Congressmen, has shifted since then.
I want to make sure that Congressman Hope doesn't think I have
turned my back on production adjustment here. I am as strongly
for production adjustment as I ever was, Congressman Hope, but
Mr. Hope. You would rather have the a,djustment in consumption
first, and then whatever production adjustments are necessary after
that
Mr. Black. I want both of them together, I want to integrate
them. I want the production-adjustment program to be built not
just around soil conservation, but around human conservation, too.
Put production and consumption adjustments together and have one
contribute to the other. Producing animal products means putting
more land in grass, and gives us conservation at the same time that
we get improved consumption.
Mr. Hope. You will be employmg more labor on the farm, accord-
ing to this table.
Mr. Black. Yes; other things being the same, animal production
means additional labor. Let's put it this way: When I went to the
State of Minnesota some time in 1918, the farmers there were already
well advanced in the process of making a transition from an economy
with a great deal of crop production to one with much livestock. An
index of production showed that over a 30-year period the agricultural
output of Minnesota had very nearly doubled. How? Because the
agricultural products that the farmers had formerly sold for cash
were now put through a second production process. They were manu-
facturing livestock products out of them. This manufacturing process
used more labor, and more capital, buildings, and farm machinery.
\h\ VooRHis. You mean the value of Minnesota's agricultural
products had doubled, don't you?
Mr. Black. No; I mean the physical volume of it, not measured in
tonnage, however, had increased. The index took account of the
fact, in its weights, that a pound of butter was worth more than a
pound of wheat.
Air. VooRHis. Would you say it would be very far wrong if you say
the value of Minnesota products doubled?
1492 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Black. You would be all right if you made a correction for
changes in the prices of these products.
The rest of the job of putting agriculture on a self-sustaining basis
must be done on the farm. One part of it is to get farm people more
land to work with, so that they will produce more and earn more per
worker. The other part is to make them better farmers.
Now, getting farmers more land to work with does not mean making
larger farmers out of them. All it means is getting them enough land
and working capital so that they can be honest-to-goodness farmers.
This means farms large enough to support some kind of a tractor in
most cases, and some kind of an automobile. Tractors are getting
pretty small now, and of course hundreds of thousands of farmers who
can't afford a new tractor can afford a second-hand one, just as they
have afforded a second-hand automobile.
The Chairman. If you will pardon my interruption at that point,
you are m favor of the family-sized farm made large enough as an ■
economic unit to profitably support a family?
Mr. Black. That is exactly what I am saying.
The Chairman. In some sections it might be a smaller number of
acres than in others, depending on what the farm produced in that
area?
Mr. Black; That is right. The famUy-sized farm should have
income enough so that the boys and girls can go to high school. We
should not think of any kind of a farm on which a family makes some
kmd of a hving as a family farm. A million or two farms on which
families are now living are npt large enough to provide an ordinary
sized farm family with a decent livdng. They do not have enough
productive land.
Both party platforms in the last elections had statements favoring
family farms. One, at least, expressed itself in terms of family-sized
farms. The way to preserve the family farm in this country is to
make it produce enough so that people will be satisfied to live on it.
This means a family must be able to achieve the equivalent of the
living obtained by the families of union labor in the cities.
Nearly three million of the farms in the United States are too
small to be called family-sized farms. Many of these, however, are
part-time farms — the family has another source of employment as its
principal source of income and does more or less farming on the side.
Another small group of them are owned by families with income not
currently earned — that is, income from social security or other
pensions, from inherited wealth, from accumulated savings and the
like. We need have no major concern over increasing the farming
income on part-time and residential farms of these two descriptions.
But at least half of the 3,000,000 of the small farms in this country
are undersized family farms. The proper term to apply to them is
small holdings as distinguished from family-sized farms." This is the
kind of farm that is dominant in the overpopulated parts of Europe,
the farm of the Euoprcan peasant. The one-mule farm of our South
is really a small holding. So are many thousands of farms in the
Appalachian and mountain sections of this country.
Mr. VooRHis. Doctor, do you mind another brief interruption?
It is true farm income is more important, but aren't some other factors
important too, like education, health, electrification, and things like
that? Don't they come into that picture to some degree?
POST-WAR ECONOMIC POLICY AND PLANNING 1493
Mr. Black. Yes.
Mr. VooRHis. I mean an equality of those things between the farms
and the city.
Mr. Black. Yes. A very large and important part of living these
days consists of public-school education, roads and streets, health
protection, police protection, fire protection, and a lot of other things.
We must not forget military protection just now. As our society has
evolved, these have become more important. Up to 1920 I do not
think farm people shared equally in these. I think they are more
nearly doing so now. Surely these are important and must be included.
To refer again to what I have called small holdings. This is the
European term for farms so small that much of the farm work is
done by hand. It is the characteristic farm of central Europe. It
contains perhaps 20 acres and the plowing is done on many of them
with oxen or even cows. Such farmers are called peasants. Many
farms in our own South are really European smallholders.
The Chairman. You refer to the sharecropper tenant with the
one-mule operation?
Mr. Black. Yes, sir. Something also needs to be said about land
that is called poor. We talk too much about poor land. The diffi-
culty often is rather that the families do not have enough of it to
make a good living from it. The land we call poor does not have
as much fertility per acre as other lands, but this does not mean that
you cannot make a living on it if you have enough of it. Let's look
at two counties in Illinois, Jasper and Douglas, almost side by side.
In Douglas the average acre has twice as much humus and nitrogen
and phosphate and so forth as the average acre in Jasper County.
Mr. VooRHis. Approximately where are those two counties?
Mr. Black. Douglas is just south of Champaign, where the uni-
versity is located, and Jasper is the county farther south.
If the Jasper County farms had enough more acres to offset the fact
that each acre had less fertility, and if it were farmed properly with
lime and fertilizer, and sweet clover and improved pastures, and had
enough livestock and equipment to go with this larger acreage, a
family could live just as well on it as on the farms in Douglas County,
At least this is what the soU scientists tell me.
Actually, however, the farms are smaller in Jasper County than in
Douglas. They tend generally to be smaller in poor-land areas. The
reason for this is usually historical. These counties both started out
as l()0-acre homesteads, the land in neither had to be cleared. In
Jasper County the yields and incomes were never good enough to
enable the farmer to buy more land or buUd a good house. Also poor
families tend to be larger than well-to-do ones. So the poverty of the
land was passed on to its people. In the other county, the families
were able to save some money and buy more land. Today, 70 percent
of the land in Douglas County is rented. The original families have
retired from the land.
Now, we do not have in this countr}^ at the present time adequate
facilities for helping these people in the poor-land areas to get the kind
of farms and amount of land and kind of farm organizations they
need. If we could do that, we would have fewer farms in these poor-
land areas, but those that were there could be prosperous farms.
]Slr. Hope. You would have fewer farms, and then what is going
to become of those farmers that go off the land?
99579 — 45— pt. 5 18 /
1494 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Black. I would not propose that this be done overnight. A
program that would assist those families on these undersized farms to
get more land, who looked like good credit risks, would accomplish
much in one generation.
The Chairman. You approve the Jones-Bankhead Farm Tenant
Act, don't you?
Mr. Black. Yes.
The Chairman. Where they assist the tenants to buy a farm large
enough to support a family?
Mr. Black. That is right. The Tenant Ranches Administration
has always insisted that the unit be an economic unit. That is one
of many good things about it.
Mr. VooRHis. May I suggest a theoretical possibility? Anyway,
assuming you can increase the size of farms on poor land, and assum-
ing we could have a good enough program under the farm-tenant pur-
chase plan, we might be able to break up some of the over-large hold-
ings of the good land. There are instances in my own State where
tremendous tracts of better land, or of the best lands, have become a
virtual corporation proposition, not family-sized farms at. all, but a
corporation working the land.
Mr. Black. I would agree entirely that that is one way of getting
more family-sized farms, particularly in certain States. California
has one-thh-d of all the large farms in the United States. In the poorer
land areas, like a great deal of Piedmont area of the South, what is
needed, however, is not a program of breaking up too-large holdings,
but rather of consolidating too-small holdings. Om- present facilities
for helping people do this are not very good. The tenant-purchase
program, as far as it goes, is all right. The Farm Security Administra-
tion did have a small program for this purpose just before the war.
It loaned a few thousand families some money to buy more land.
The Farm Credit Administration can make a loan to buy additional
land provided the farmer does not have too much of a mortgage on
what he already has. But it hesitates to make such loans in poor land
areas. Its experience on small farms in such areas has been discourag-
ing. It takes a long time to pay off a mortgage on a small farm.
The Chairman. The farmer first has to get a living off a small farm
before he has anything to go toward making improvements or paying
off the mortgage.
Mr. Black. That is right. So it happens that in the poor land
areas, the farmers do not have enough land to accumulate anything
and to pay off then- mortgages. They inherit farms with mortgages
out of proportion to their earnings and they never get out of debt.
These farmers also need credit in order to buy the equipment and
livestock needed to farm the additional land. Alany of them would
be helped if they could just get equipm.ent and livestock enough to
farm theh- present holdmgs. Wliere the Farm Security Administra-
tion has helped farmers to get livestock and equipment to work |their
present holdings, their record is generally good.
Mr. Hope. Let me ask j^ou right there, because the question has
been up before in Congress and it will be up agam. How far do you
think there should be supervision of those loans? I mean, do you
think that they should be closely supervised?
Mr. Black. Yes. I understand your point. Let me open it up
this way: Mr. Clark this afternoon spoke of making loans to farmers
POST-WAR ECONOMIC POLICY AND PLANNING 1495
who meet certain specifications, and let the word "efRcient" sUp in.
Many of the farmers living on these farms do not qualify as efficient.
They never had a chance to be efficient. I do not like to call loans to
these families rehabilitation loans. That is the wrong name for
them. That name came into use because when this program started,
we had a million farm families in the Dust Bowl and around the South
who had suffered severe adversities because of drought, or the agricul-
tural depression, who had been loiocked off their feet and needed to be
helped get on their feet again. They needed rehabilitation. But
since about 1937 the loans have mostly been "habilitation loans," not
"rehabilitation loans." They have been loans to equip families to
make a decent living who never had been so equipped, and that is
"habihtation" and not "rehabilitation."
Mr. CoLMER. Don't you think that of necessity there has yet to be
some selection in the loans that are made?
Mr. Black. Yes; I have studied the records of the Farm Security
Administration rather carefully. A year ago last June I went down to
Washington at Chester Davis' request, as chairman of the special
group, to make an inside administrative review of the Farm Security
Administration program. The report we made has never been made
available to the public. It was for the guidance of the administrators.
Our analysis of the records showed great differences in loan policy and
experience in different parts of the countr}'^. In the region centering
around Raleigh, N. C, for example, the loans were prudently 7nade,
and the collections better than in the other regions of the South, and
repayments have been poorest in the section where the president of
the Farm Bureau Federation happens to come from. The reasons for
these differences are largely historical. This loan program grew out
of the F. R. A. and F. E. R. A., which started out to make grants to
families that needed help very badly. Later the F. E. R. A. con-
verted many of these grants into loans. The loan program got
started sooner in the Montgomery district than it did in the Raleigh
district, with the result that a large number of loans were made to
one-mule cotton farmers who do not make enough to pay back any
kind of a loan. Similarly in the Dust Bowl region, many grants were
converted into loang. In one county in North Dakota, over a thou-
sand loans which the families could not pay back were thus created.
Most of the Dust Bowl loans thus set up have since been classified as
"collection only."
Mr. Hope. You are going to talk about supervision now?
Mr. Black. Yes. Yes, clearly there are weaknesses in the super-
vision as it has been practiced.
Mr. CoLMER. Before you leave that, I want to make an observa-
tion rather than ask you a question: Of course, we are all in sym-
pathy with this small farm.er, and I am talking about the small hill
farm.er in my section, in Mississippi, but the argument that is m.ade
against this type of loan down there — and 1 want to get your reaction
to it by analogy or illustration — may run som.ething like this: You
have two men, one living on one side of the creek and one on the
other. One is frugal, industrious, and he builds himself a modest
home and he makes a go of it. Then the Government comes in,
under this loan provision, goes across the creek to this man's brother,
who has the same type of farm., who has had the same type of oppor-
tunity, but who had not applied him.self, and builds him a better
1496 POST-WAR ECONOMIC POLICY AND PLANNING
house and furnishes him with some of the necessities and even some
of the luxuries that this other man did not have. A\ hat is the answer
to that argument?
Mr. Black. Well, one answer is that building a house for such
family was not good administrative sense. It is necessary to recog-
nize community attitudes when we undertake this sort of a program.
Mr. CoLMER. Well, that comes back to the selective loan; does it
not?
Mr. Black. Well, partly. If we get the participation of local
people in such programs, so that local leadership largely determines
local policy, with less domination from the regional and central
offices, such criticisms are likely to disappear. Do you hear such
criticisms of the tenant-purchase loans, which are made upon recom-
m.endation of local committees?
Mr. CoLMER. Well, no; I cannot say that I do; but the point is
that the people locally do not difi'erentiate. They do not know the
two program.s apart. They come to the conclusion that the Gov-
ernment is putting a premium upon idleness.
Mr. Black.- Well, all right
The Chairman. Let m.e say here on that point, Mr. Hope and
m.yself were on the Cooley committee that went out to study the
operations of the Farm Security Administration, and we brought
back a bill which was approved by the House Agricultural Com.mJttee.
Mr. Black. Yes; I have read it.
The Chairman. It is now pending before the House, recommended
by the committee. The selection of these men was left to a committee
of local people who were qualified to say wdiether or not this man was
industrious, whether he was honest, and whether it would be probable
that that man would make a success if he w^ere granted this loan.
So we have really taken the matter out of Washington or the
regional office and placed it in the hands of a local committee
Mr. Colmer. Where it belongs.
The Chairman. And we hope that that bill will ultimately pass
and will correct that trouble.
Mr. VooRHis. But that still leaves the basic program in effect.
The Chairman.' Oh, yes; it leaves the program in effect; that is
right.
Mr. Black. Yes. I am familiar with the Cooley bill and that
feature of it I like very much.
I have not fully answered your question about expansion. I want
to make a statement about the families that are said to be shiftless.
Many of them when they are looked into closely are found to be
half sick from malnutrition or suffering for lack of medical care. You
may say that they are half sick because they do not earn enough to
feed themselves properly and to feed their children property. This
is another of those vicious circles that we must break into some-
where. I am more concerned over the children than I am over the
parents. Somehow or other we must make it possible for the children
to get a fair start in life. You asked about supervision.
Mr. Hope. Yes.
Mr. Black. Families in the condition I have described will not
make good with their loans in most cases without supervision. If
you take the supervision out of these loans you have removed their
most essential character. But although supervision is highly neces-
sary, it should be applied in such a way that it is self-terminating.
POST-WAR ECONOMIC POLICY AND PLANNING 1497
It is the ambition of the Tenant-Purchase Administration to get
famiUos set up under a good plan, help them a little in carrying it
out at the start, but after 3 or 4 years, not to have to pay any atten-
tion to them. Rehabilitation loans ought to work out in the same
way. A good rehabilitation loan ought to take a family that does not
have resources enough, that is not properly habilitated, and get it
started on the way to becoming, if it is a tenant famil}^, a good candi-
date for a tenant-purchase farm 5 3^ears later. The F. vS. A. loan pro-
gram can be run in this way. With the kind of collaboration and
participation in it by local people that one can get, it can become such
a program.
Mr. Hope. You would say, then, that a family that did not get in a
position, say, after 5 years, where it could go ahead under its own steam,
might as well be dropped as sort of a loss?
Mr. Black. I would, in general, agree to such a statement. The
families that show that they cannot make good under such conditions,
I would take out of the Farm Security program and put them under
some public welfare agency. We have large public welfare organi-
zations in our cities. They look after families that are not getting
along in the world — ^" cases," they call them. They have specially
trained people that do "case work" among them. A statistical
analysis of the success of the case workers in what we might call
"habilitating" urban families, in getting them in shape so they carry
on from there, will not show a very high batting average. The Farm
Security Administration, working with its so-called "poor trash," has
the better batting average with such families. The reason for this,
1 am inclined to believe, is that having a piece of land on which to
habilitate them is an advantage. Nevertheless, I wish that such
families could be handled outside the Farm Security Administration,
by some kind of public welfare agency, preferably State and local.
In the area around Taos, N. Mex., they pushed a thousand of such
families out of the F, S. A. They said, "You will never be able to
pay your loans, so you are out of our program." What became of
them? We cannot forget about such families. Merely to hand out
charity Is not enough. We need to do something that will really
build them up, and particularly to build up the children. But this
should be a separate program.
Mr. VooRHis. Let me see if I understand this. A separate program
from the program of Farm Security loans to the family that can with
some help be enabled to either get more land or to get more stock or
improve the use of the land?
Mr, Black. That is right.
Mr. VooRiiis. You are distinguishing such families from those
families that are quite hopeless; is that the idea?
Mr. Black. I would prefer to say, from families that we must
work on longer and harder.
Mr. VooRHis. Where you cannot reasonably expect the repay-
ment of a loan?
Mr. Black. Where you cannot reasonably expect the repayment
of a loan in a short period.
Mr. VooRHis. Can you in very many of those latter cases expect
they will make a go of farming ultimately?
Mr. Black. It is hard to draw the line.
Mr. VooRHis. Yes; it would be.
1498 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Black. It is hard to draw the hne between these two groups,
I agree; but I still would put in a different eategor}'- those that appear
not to be able to stand on their owil feet and repay a loan after a
reasonable period of time. The Coolcy committee in effect drew the
line at 5 years; or at least it said that after having received loans for
5 years a family could not get any more until it had paid back what
it had got already.
Mr. VooRHis It said more than that in the final form of the bill.
I think it chopped them off at a 5-year period,
Mr. Black. Well, we do not want to go into that now.
Mr. Hope. No, we did not chop them off at 5 years, that is, they
could still renew their loan, but they would have to show some real
reason — we had it several different ways. It is a very difficult problem.
I have not read the bill lately. I would not be really sure how we
finally left it, but my impression is we did not chop them off at 5 years,
Mr. VooRHis. I think we said we would put it in the bill that at the
end of 5 years they would have to repay the loan, and if they had not
done so we would figure they were not going to make a go of it. Then
it was pointed out in the committee that, however, there was no
requirement that the}^ should be foreclosed on at that time. It was
within the discretion of the Administrator to let them go along,
Mr. Hope. That is what I had in mind.
Mr. Black. I am not sure, judging from the experience so far, that
5 years is not too short a period in some cases to enable some promis-
ing families to get on their feet.
Mr. Hope. I think the position of the committee was that that was
something that could be left to the discretion of the Administrator,
but in the case of most families, if they were not able to make a showing
by that time, ther it would seem that they could never make a showing.
Mr. Black. I think that is as much time as I can give to this,
because there a few other things I want to cover.
The next point I want to make is not with respect to getting these
families more land, but rather with getting them some help in making
the land they have now more productive. They may have land that
needs draining, or some small-scale irrigation work, such as a well; or
they may need to improve their pastures or woodlands. It is not an
easy matter to establish a good pasture in the South. It may need
to be fertilized, or have some contouring on it to retain the water.
If these faims are to have more cows, they must have good pastures
and it takes money to establish pastures.
Probably most important of all, a million or so farms in this couhtry
need to have their woodlands improved. The land in woods on a
majority of these farms is yielding very little income at present, and
it could be made to add importantly to the farm income. Timber and
wood products aie going to be in great demand in the next 50 years.
The farmers in this country are not very well informed as to good
woodland practices. They have not had 25 years of good extension
education in this as they have in production of crops and feeding and
care of livestock. The extension work in farm woodland management
needs to be greatly expanded. Woodland owners need help in making
plans for improvement of their woodlands and in selecting the troes to
be cut.
For all of these types of improvements of land now within farms, a
special type of credit is needed that might well be called land improve-
POST-WAR ECONOMIC POLICY AND PLANNING 1499
ment credit. The ordinary production credit loan will not serve be-
cause it does not run for a long enough period. The Farm Credit
Administration loans can be used for this purpose in case the present
mortgage is small. JNIoreover, some of these types of improvements
will not yield any increased income in the near future. This is par-
ticularly true of woodland improvements. The schedule of repay-
ments needs to be adjusted to the timing of the probable income from
these improvements. This might well mean, in the case of some
w^oodland improvements, no payments for 40 years or more. The
repayments probably ought to be designated in terms of a fraction
of the income at the times of sale of woodland products.
Probably, also, the interest rate on loans of this sort, particularly
the long-term woodland loans, should be reduced to the low^est pos-
sible figure. The Nation has an important interest in having these
woodlands improved. Not only w^ill the oncoming generations need
this timber, but it is important to keep rough and erosive land in
forest growth as a way of reducing run-off and preventing floods and
the siltation of streams, dams and reservoirs.
Probably a special kind of credit instrument is needed for such
loans, something in the nature of a lien against the land that will be
passed on from one owner to the other.
Mr. CoLMER. Would you expand a little bit on this subject of land
improvement? Are you talking about fire protection, and what else?
Mr. Black. No, I did not mention fire protection.
Mr. CoLMER. I know you did not. I was just trying to find out
what you did mean.
Mr. Black. Fire protection has to be organized and supported
publicly in large measure, out of Federal, and State funds. By
woodland improvement, is meant such things as cutting out weed
species of trees, or poor trees, so as to give the rest a chance to come
along and make a good crop of trees. It also means replanting on
parts of tracts that do not have any trees started. It means taking
the poor woodlands of the country and working out plans for their
development that will result in their having some timber w^orth cut-
ting, in 25 years or less if they already have some second-growth on
them, perhaps in 40 or 50 years if the stands are very young. The
full harvest may not come for SO years in some cases. I have assisted
in working up such plans for some tracts of land in New England, also
in the TVA region. We have made estimates in some cases as to
what the woodlands thus developed will contribute to the farm income
by 5-year periods and what the expenses and labor inputs will be.
The farm woodlands fit into the farm operations as something to
work on during the times of the year when there is no field work to do.
They thus afford an important opportunity for additional income.
Involved in these woodland improvements are expenditures of
various kinds that the farmers are not likely to make. Particularly
is this true of the planting. But more important is it that many of
them will not do the necessary labor if they are to get no immediate
return for it, upon which they can live in the present. Hence the
need for advances or loans against such improvements.
Similarly much land in farms around the country needs draining.
The three farms that I grew^ up on had from 10 to 50 acres of land that
needed tilhng and drainage that would have made them much more
productive.
1500 POST-WAR ECONOMIC POLICY AXD PLANNING
Mr, CoLMER. Are you leaving this subject of land improvement
loans now?
Mr. Black. This is all the time I can give to land improvements.
Let me remark, however, that if it is important to improve the land in
these farms, it certainly is worth while to improve the farm families
themselves. It is not enough in many cases merely to get the low-
income families more land and working capital. The farmers them-
selves are not capable at present of farming what land they have as it
should be, to say nothing about additional land.
Many of them need help in planning their rotations, in deciding
what fertilizer m.ixture to use and how much fertilizer, and in balancing
the rations of their cattle. The agricultural extension services of the
States and the county agents are helping these families at present,
but there are many more of them than they can take care of. Also in
many cases the methods the county agents have to use do not get
close enough to the actual farmers and farms. It is not enough to get
these farmers together in meetings and talk to them. The extension
workers must sit down with them and help them work out the steps
in the reorgiinization of their' farms. The F. S. A. and S. O. S. are
assisting some of these farmers in the way that they need it. They
and county agents can work together on it to very good advantage.
2. Let us now turn to a second of the four subjects listed for dis-
cussion, namely; Basic long-run policies to lessen instability of income
resulting from variations in production and in demand.
There is not much that needs to be said on this subject that has not
already been covered under the discussion of the first point. If the
long-continuing disparities between agriculture and the rest of our
society are removed, the effect of temporary recessions will be less
serious. Farmers will be able to carry themselves along during ordi-
nary depressions. This does not mean, however, that depressions are
not a great evil and should not be prevented.
Such prevention is a problem for the general economy and not for
agriculture. It is possible for industry and trade to prosper while
agriculture is still considerably depressed. This happened in the twen-
ties and has happened before in our history. It will be more likely
in the future than it has been in the past because people will be spend-
ing smaller proportions of their incomes for food.
Some attempts have been made to prove that general business
depressions have their origins in agriculture, but the proofs have no
scientific standing. The most recent attempt to show this appears in
an article in the Country Gentleman. This article is said to present
the results of a study made by the research staff of the National Asso-
ciation of State Commissioners of Agriculture.
The Wages and Hours Administration proved by exactly the
same methods that agricultiu'al prosperity depends upon high wages
and the earnings of labor. It pointed out that when factory pay rolls
were $12,000,000,000 a year, farmer's incomes totaled about
$12,000,000,000. During the depression both went down together
until 1932 when they stood at $5,000,000,000. By the end of 1939
both had climbed back to a level between eight and nine billion dollars.
The truth of the matter is that agricultural incomes, factory pay
foils, and business incomes all move down and up together in and out
of general business depressions. No one of them is the cause of the
other. They are all caused by the same thing. They appear to move
POST-WAR ECONOMIC POLICY AND PLANNING 1501
together on the charts because the general price level moves down and
up in and out of depressions, and prices, wages, and incomes move,
with them.
The problem of preventing business depressions is very important
for agriculture, but it cannot be solved by anything which may be
done with and through agricidture. If agricultural incomes could
be kept up by finding markets for surplus farm products somewhere
outside of the countr}^ at good prices, this would contribute several
billion dollars to the national income, and would add to the general
prosperity to that extent — and a little more besides because the
railroads, processors, and middlemen would earn a little more from
handling this product.
This is not the place to discuss this problem, nor the question of
how to prevent general business depressions. A few suggestions can
be made, however, as to how agriculture can be helped in case a
depression does develop.
(a) The more widely that social security can be extended, and the
more of the unemployed that receive unemployment compensation,
the better will the demand for farm products be sustained. The
reduction in purchases of food by unemployed people is what largely
causes prices of farm products to decline relatively more than other
prices during depressions.
(6) For the same reason, the development of public work projects
so as to keep up the income of the otherwise unemployed urban
workers will be of benefit to agriculture.
(c) Public works in rural districts at such times can provide an
additional source of mcome for unemployed members of farm families.
(d) At such times, land improvement loans should be increased.
This will provide additional employment on the land in case these
improvements are made with hired labor. Many of them should be
made by the farm families themselves when they are otherwise unem-
ployed. A plan could be developed under which work done by the
farm working force in improving their own land can be appraised,
and advances, in the nature of loans, made to cover a safe fraction,
perhaps 70 percent, .of the value of these improvements. These
advances will become an immediate source of income to these families,
which will help out greatly in depression periods. A good forester
would go onto a farm woodland and work out a plan for its improve-
ment. The plan would say "This is what needs to be done on this
woodland. This represents, over the next 3 years, 100 days of labor.
You go ahead and do this work and we will come back and appraise
it, and make you an advance of 70 percent of the labor it represents."
This will be in the nature of work relief on the farmer's own farm,
putting it in a state of production. I would rather contribute in the
form of low interest rates, perhaps no interest at all, to this kind of
subsidy than to give hand-outs to these people. The Nation will get
repaid in the erosion and flood control resulting, and the increased
timber supply in the future. The Soil Conservation Service has
already done a little of this. The Farm Security Administration
tried it out on a small scale in a few areas in Mississippi. I visited
one of these in 1941.
(e) 'Supplementary food distribution needs to be stepped up at these
times as a way of supplementing the social-security payments of un-
1502 POST-WAR ECONOMIC POLICY AND PLANNING
employed workers. An effort should be made to maintain the diets
of unemployed workers at a full working efficiency level.
(/) Loans without recourse can be used to advantage during such
periods, but they should not be set very far above prevailing market
prices. To do so reduces the consumption of these products just at
the time when it needs to be expanded. It is must better to spend
money on expanding the various forms of sup]3lementary food dis-
tribution at these times and sustain prices in tliis way, than to peg
prices at levels that result in the accumulation of large stocks.
(g) An effort should be made, through the International Food and
Agriculture Organization which is now being formed, to move food
and fibers into countries with large ill-fed and ill-clothed populiitions.
It is better to make outright grants to farmers — call them parity
payments or anything you wish — than to hold up prices at a level
that will keep the product from moving through the channels of trade.
But better than to make outright grants is to work out a program
that will facilitate the needed improvements in agriculture and shifts
in production. In place of outright cash payments without any con-
ditions attached to them, there could be a greatly expanded program
of advances on land improvements with low interest rates. If this
was not adequate, outright grants could be made to assist in making
some of these improvements. These would be in the natiu'e of work
relief for farmers on their own farms or in their own communities.
If outright payments were made, they should be in proportion to
the output of products that we need to shift to, rather than in pro-
portion to output of those we need to shift away from. For example,
they had better be in proportion to output of dairy products, eggs,
and meats, rather than in proportion to the cereals and cotton which
we need to produce less of in order to reduce our surplus. These
additions to the prices of products that we should shift toward would
be in the nature of premiums, or possibly support prices such as we
are now using during the war. They could be varied by areas in
such a way as to equalize the subsidies of the different areas.
With respect to (b) in the above outline, if the International Food
and Agricultural Oi'ganization operates as it should, it will have a
central body that will say, "Now," the United States has a lot of sur-
plus cotton, also the Brazilians. What can we do about getting this
used anywhere in the world where they need it, and then try to work
out a plan for getting it distributed? This plan need not be cumber-
some. An administrative committee could get the facts as to how
much cotton the Greeks could use, how much the Czechoslovakians
could use, and so forth, and how much their governments would be
willing to distribute as supplementary cotton, and make a pool of it,
and then get in touch with the countries that have cotton and divide
the pool among them. Such pools need not be limited to European
countries.
Mr. CoLMER. But who would pay for that?
Mr. Black. The governments would pay for it, just as we dis-
tribute food to our own ill-fed people. If the Greek Government were
in a tight spot and could not appropriate the necessary funds, it could
be handled on a credit basis.
Mr. CoLMER. I suspect they are in a tough spot and those other
countries would be in a tough spot, wouldn't they? So we would have
to figure on some other basis than their paying for it.
POST-WAR ECONOMIC POLICY AND PLANNING 1503
Mr. Black. Immediately after the war, yes. Another part of the
international program now being developed is provision for agricul-
tural credit. The plan for F. A. O. goes so far as to provide t!iat in
case the International Credit Bank that is set up does not include
agricultural credit adequately, F. A. O. can go ahead and do this itself.
Mr. CoLMER. Was that the Export-Import Bank's function?
Mr. Black. That was a national undertaking as I understand it.
I want to wind up the discussion of the first two subjects in the list
by saying again that it is better to make outright grants to farmers —
call them parity payments or anything you wish — than to hold prices
at a level that keeps them from moving through the channels of
dom.estic and foreign trade. I agree with Dr. Clark's statement on
this point. But better than to make outright grants to farmers is to
work out a program that will facilitate the nqeded improvements in
agriculture and the needed shift in production.
If outright payments are made to farmers, however, they should be
in proportion to the output of the products they need to shift to rather
than in proportion of the output of those they need to shift away from.
To be specific, they had better be m proportion to the output of dairy
products, eggs, and meats, rather than in proportion to cereals and
cotton which we need to produce less of, in order to reduce our sur-
pluses. These additions to the prices of products that we should
shift toward would be in the nature of premiums, or possibly support
prices such as we are now using during the war. For example, I
would pay premiums on milk in Mississippi to help the cotton farmers
who need to shift to something else.
Mr. Hope. That is all right. That's sound. But when you go to
put something of that kind into a legislative program, you are going
to run into a pretty difficult proposition. I think I know what the
reaction, say, of Minnesota or Wisconsin farmers might be to the
payment of a premium for dairy products in Mississippi.
Mr. Black. I know very well what it was.
Air. Hope. You remember the Boileau amendment, perhaps.
Mr. Fish. Don't overlook New York in that statement, either.
Mr. Black. At the time the Boileau amendment was passed
however, nobody said to the dairymen, "If we get too much dairy
product, we will see that it is distributed to underfed people that
need it." We could say that now if we were so mirded. We could
take care of the dairy products in school lunches and in stamp-plan
distribution, because we want our people to have more dairy products.
Mr. Hope. I agree with you that this would certainly make it less
controversial from the standpoint of the people already engaged in
.dairy production. I think you would have to assume that with the
program.
Mr. Black. Let me continue on this piont. There are many
farmers in the South who do not have even one cow at the piesent
time. The South is not going to get its dairy products if its people
have to go into the market to buy them. But if we can get the South
to produce its own dairy products, it will consume more of them. A
major part of the expansior of dairy production in the South will not
add anything to the commercial supply. It will add to local con-
sumption, and that is where to put the first emphasis.
At a conference of extension workers and others in Hot Springs,
Ark., in the winter of 1941 I asked the question: "How many families
1504 POST-WAR ECONOMIC POLICY AND PLANNING
are there in this city that do not have enough milk? Eventually a
social worker rose and estimated that half of them didn't. I then
called on a county agent and asked: "How many farmers are there
aroiind, here that would like to produce more milk if they could be
assured of an outlet?" He made quite a statement on that subject.
Thus right at Hot Springs itself was an opportunity to bring producfcion
and consumption into line with each other. If all the cities of the
South would make a similar adjustment the farmers of southern Wis-
consin would not be affected at all.
Mr. Fish. Alay I make a suggestion? It is very charitable and
very fine and very idealistic — nobody will deny that — but there are
probably a million consumers in the city of New York who would like
to have more milk, perhaps two bottles instead of one. I think it is
a great idea, but who is going to pay for it?
Mr. Black. We paid $712^,000,000 m 1938 and 1939- on a triple A
program. I think half of that would go a long way toward financing
needed shifts in production.
Mr. Fish. You would take it out of the A. A. A. program?
Mr. Black. The A. A. A. is not a $712,000,000 program now. We
are talking about what to do in place of the old A. A. A. program as
we come out of the w^ar. As we proceed to mcrease our expenditures,
as we will do if we find ourselves threatened with surplusses, if we
will just spend half of what we might be tempted to spend on pro-
duction and spend it on consumption adjustment instead, the farmers
will get just as much for their })roducts as they would if the money
was spent on production directly.
Mr. Fish. W ell, w^e have this enormous market in New York City
and if we can increase it and give these fellows two bottles where
they had one before, at a reasonable profit to the farmer, if some
governmental agency can do it, 1 think it would be a very fine thing.
I want to say this: that I would far rather have that done than what
we probably will do, that is, send it all over the world to other nations
who need it probably even more so than our people. We have an
awful lot of people in New York City that are underpaid white-collar
class suffering from taxes, high cost of living, that are in need of milk.
I know where my preference would be. I like 3'our argument, but I
want to get something a little stronger to show m^e how I can go out
and advocate that on a sound basis and still not have people say,
"You are just as bad as the rest of them, you want to give everything
away." I would love to have that.
Air. Black. I cannot take time to go further into the details of this
now.
The next section of the outline is called 3. Policies to promote higher.
levels of consumption and nutrition.
These policies have already been discussed in some detail under the
first two lieadiTigs. They had to be because expanded consumption
of food and cotton has a major contribution to make to the long-run
prosperity of agriculture.
It was pointed out under these heads that many families on these
poor farms are not doing well partly because they are malnourished.
All of the surveys that have been made of the diets of farm families
in the areas of poor and small farms indicate that half or more of
them have diets that are lacking in very important foods. Many of
the families in the South live on a diet that contains too much corn,
POST-WAR ECONOMIC POLICY AND PLANNING 1505
and in consequence they do not obtain enough of the vitamin niacin
to keep them healthy and industrious. Many of them have poor
health for other reasons. They did not receive the necessary medical
attention when they were growing up or are not getting it even now.
It is highly important that rural health services be strengthened. The
home demonstration agents have many more families than they can
help properly in such areas. ,
These families can help themselves also if they will j)roduce on their
own farms much more of the protective foods. Much progress has
been made in getting them to do this in the last 10 years, but the
program needs still more emphasis.
However, a good deal more needs to bo said on this subject from the
standpoint of the importance of improved nutiition itself. I have
been working for the past year with a special committee of the Na-
tional Planning Association consisting of representatives from agricul-
ture, business, and labor in developing a statement on a national
food* and nutrition program. This statement is in its final stages.
It is likely to be approved for publication at the next meeting of the
three overhead committees Of the National Ilamiing Association,
those on agriculture, business, and labor. It will probably be issued
some time in March. This, I hope, will be in time to help you with
your final deliberations on post-war policy. In the meantime, I have
enough copies of this confidential statement so that I can leave them
with you for your personal use, but please understand that this state-
ment is not a part of the record.
The Chairman. Very well.
Mr. Black. I can, of course, indicate the nature and content of
this statement. It reviews the measures to be taken to secure im-
proved nutrition under three heads: Individual or private; group or
organizational; and public or governmental. It develops at consid-
, erable length what individual consumers can do to improve their diets,
what the medical profession can do to help them, what the producers
of food can contribute to such a program, and finally, what business,
including the processors and distributors, the operators of restaurants
and the like, can contribute. It then takes up what consumer organ-
izations, labor unions, farm organizations, and various business organ-
izations can do that will help. The last section of the report is de-
voted to the public or governmental measures which are needed.
These are considered under the heads of education, research, and finally
services, under the latter head coming services to consumers, to food
producers, and to food distributors and processors.
The last subject on the list which you asked me to discuss is: 4.
Kelationship between our foreign- trade policy and domestic agricul-
tural policy.
What I am presenting to you on this subject is stated more fully in
an article in Dun's Review of last June, a few copies of which I am
handing you. I have no doubt that the way of disposing of the agri-
cultural surpluses that will be most favored by many will be in the
foreign market. The trade generally prefers this because it thinks it
interferes less with domestic trade. Present surplus-property legisla-
tion already authorizes such a procedure. Exports have been of great
importance to our agriculture in the past, and cculd well be in the
future. There can be no doubt that we needed a foreign market for
farm products before the war. The article staTts out by comparing
1506 POST-WAR ECONOMIC POLICY AND PLANNING
two periods in our agricultural history; the first, 1910-19, when we
were exporting 13 percent of our farm products, and the second,
1934-40, when we were exporting 6 percent of them. After due allow-
ance for differences in the price level and in the general levels of labor
income and bujang power in these two periods, agriculture appears to
have been definitely better off in the fust period than in the later
period. More than this, in tha earlier period, the larger the agricultural
output the more real money it brought the farmers. Tlie peak year
output of 1912 sold for a fifth more than the small output of 191G.
In those years it was more than wise to expand our agriculture. It
yielded big dividends to do so.
But after 1934 this was not true any more. The year 1940 had the
largest crop in this period. But it did not sell for as ro.uch m.oney as
the short crop of 1936. One could not honestly say to the farmers
of the country in 1934-40: "Go ahead and produce all you can; the
more you produce next year the more money you will get for it."
What actually seems to have happened is that the large outputs sold
for about the same m.oney as the smaller ones. But since the costs
of the larger crops were more, the net returns to the farm.ers were
less.
Another part of this article discusses the extent of the agricultural
surpluses after the war and the period of relief and reconstructfion are
over. The conclusion, as I indicated earlier, is that Ave will have a
surplus representing about 10 percent of our food and fiber, even with
high-level em.ployment. This represents about $2,000,000,000 worth.
If we were accumulating a surplus before the war, this 10 percent will
be in addition to the surplus that we were accumulating then.
Later sections of the article discuss what to do about obtaining
better markets for farm products. First of all, we should not do the
things we did from 1929 to 1940 to take us out of the foreign market.
Some of these were done under the Federal Farm Board and some,
under the Agricultural Adjustment Act, Both had the effect of
raising prices in this country above the world level of prices. We in
effect acted like monopolists and tried to hold up the rest of the world..
We failed in that effort.
The article also advances the usual cogent arguments against
export dumping and paying export subsidies. It does not condemn
the two-price plan but neither does it approve it. All that I wish to
say on that subject at this time is that the two-price plan can be
operated in such a way that it is neither an export subsidy nor export
dumping in the usual sense of the word. It also can be handled in
such a way that the receiving countries can have no important objec-
tions to it and so that it will be much less objectionable to competing
export nations than any alternatives that have been suggested — other
than straight reduction of tariff" barriers in one form or another.
It is to be doubted if the kind of two-price system authorized by
present legislation will prove to be acceptable. The deficits made up
out of the Public Treasury — ^arising from selling products at foreign
prices that are bought from farmers at parity prices — are essentially
export subsidies. Other exporting nations will pay similar subsidies,
and our exports will be very little larger after all. International
agreements already drawn contain commitments not to pay such
subsidies. The m.ost feasible type of two-price proposal is still that
suggested by.Dr. Beardsley Runil m 1928, and presented to Congress
POST-WAR ECONOMIC POLICY AND PLANNING 1507
and the public by the senior author as the domestic allotment plan
in chapter 10 of his Agricultural Reform in the United States.^ Under
this plan the grower would have received the export price for the
part of his product that was exported, and a higher Governm.ent-
supported price for the part of it which was sold abroad. He would
have received a quota covering only his share of the domestic market.
He would have been free to produce as much or as little as he wished
at whatever price the export market would bring. Thus no direct
subsidy would have been paid on exports. The Government would
need to make no subsidy payments out of the Public Treasury. If
such a plan were to be applied, the prices of the different products
could be held at parity or other desired level in the domestic market
and the country would still be in a position to export freely, and to
take part in international efforts to make staple foods m.ore available
to the underfed millions of Europe, Asia, and South and Central
America.
Perhaps I can conclude the discussion of the international aspects of
this subject by a paragraph from the review that I have just written of
the report of the special committee of the Land Grant College Associa-
tion on post-war agricultural policy:
The discussion in this report of the international phases of agricultural policy
runs pretty much in old grooves — tariff reduction, multilateral trade, the United
States as a creditor nation, we can't sell if we don't buy, etc. Back in the early
thirties we broke out of what were then the old grooves and came forth with re-
ciprocal trading agreements. They represented a new approach to the problem.
We are greatly in need right now of another new approach, one that will accept
the principles of the trading agreements, but go well beyond them in application.
The nature of such an approach is perhaps suggested by the word "positive."
This means not stopping with attempts to sell abroad, but also helping to develop
buying power abroad. It means planning production and exchange in advance
and internationall3^ It means that this country will deliberately plan with other
countries to produce certain foods needed to raise their dietary levels, and to im-
port other products, including foods, to balance the accounts. The exchanges
can be as many cornered as the heart desires. Unavoidably a limited amount of
direction and control will accompany such collaborative efforts — but it will be
public and not cartel control.
I have in this form covered the four questions that you gave me,
but I have not gone into detail in the last two because I knew there
was going to be a shortage of time, and because I can leave this supple-
mentary material with you.
The Chairman. We are certainly appreciative of your appearance
here, Doctor, and I am sure that the information that you have given
us will be very helpful.
Mr. CoLMER. Mr. Chairman, I would like to add my appreciation.
Mr. VooRHis. So would I.
Mr. CoLMER. And I am sure it is on behalf of the whole committee.
The Chairman. Yes.
We will adjourn until Monday at 9:30 in room 15.
I may state that we will quit promptly at 12 o'clock so that we may
visit the Swift plant and return at 2:30.
(Whereupon, at 5:30 p. m., Saturday, December 16, 1944, the hear-
ing w^as adjourned to 9:30 a. m., Monday, December 18, 1944.)
' McGraw-Hill, 1929.
POST-WAR ECONOMIC POLICY AND PLANNING
MONDAY, DECEMBER 18, 1944
House of Representatives,
Agriculture Subcommittee of the Special Committee
ON Post-War Economic Policy and Planning,
Chicago, III.
The committee met at 10 a. m., Hon. Orville Zimmerman (chair-
man) presiding.
Members of committee: Hon. Orville Zimmerman, Hon. William
M. Colmer, Hon. Jerry Voorhis, Hon. Hamilton Fish, Hon. Clifford
R. Hope, Hon. John R. Murdock.
The Chairman. The committee wil come to order. We have
with us today Hon. Edward A. O'Neal, president of the American
Farm Bureau Federation.
Air. O'Neal is one of the outstanding thinkers on agricultural prob-
lems of our Nation. He is a practical farmer, and he has the cause of
agriculture in his heart. Therefore, this committee is honored and
pleased to have Mr. O'Neal appear and give his views on wiiat he
thinks we should do for agriculture during the post-war period, when-
ever that time comes.
Mr. O'Neal. Thank you. I appreciate this opportunity of pre-
senting it to you.
The Chairman. We have with us today Hon. John Murdock, of
Arizona, wdio was unavoidably detained in Washington on Friday
and Satm-day, but who has made his appearance here today. He is a
member of this subcommittee. We are mighty glad to have him wath
us. I want to make that announcement so that you will all know
who he is.
Mr. Colmer. And he is a very able asset to the committee.
The Chairman. Wouli you prefer to read your statement, Mr.
O'Neal?
Mr. O'Neal. Yes, I would.
The Chairman. That will be satisfactory and you can proceed in
yom' own way.
Mr. O'Neal. Thank you.
TESTIMONY OF EDWARD A. O'NEAL, PRESIDENT OF THE AMER-
ICAN FARM BUREAU FEDERATION
Mr. O'Neal. This committee is to be complimented for the interest
shownin agricultm-al problems. It is hoped that out of these hearings
programs may be developed that will help the Nation meet the chal-
lenge of the post-war period.
In a telegram received from Chairman Colmer, I was asked to
present a statement regarding four important and closely related
1509
99579 — 45— pt. 5 19
1510 POST-WAR ECONOMIC POLICY AND PLANNING
topics. They are as follows: (1) Basic long-run policies to lessen
instability of income resulting from variation in production and
demand ; (2) basic policies to place agriculture on a satisfactory, self-
sustaining basis in the long run; (3) policies to promote higher levels
of consumption and nutrition; (4) relationship between our foreign-
trade policy and domestic agricultural policies.
The twenty-sixth annual convention of the x\merican Farm Bureau
Federation was held last week here in Chicago. It was very gratify-
ing to me, as I am sure it must be to all friends of agriculture, to know
that the American Farm Bureau Federation now has a membership of
828,000 farm families, an increase of over 141,000 families during the
past year. Our organization now represents over three and one-half
million individuals.
The convention adopted an extensive set of resolutions. Twenty-
five men from all over the United States served on the resolutions
committee. These men spent nearly a week drawing up resolutions.
Open meetings were held where delegates, members, and others
presented their views. The resolution were debated on the floor of
the convention before adoption.
1 know of no better source of information that represents the grass-
roots thinking of farmers than these resolutions. Therefore, most of
my testimony today will be the reading of certain of our newly
adopted resolutions, which bear on the problems under consideration.
Never before have I witnessed as much willingness on the part of
any group to meet with others and seek a common solution to mutual
problems as was demonstrated at our convention. Farmers' realiza-
tion of the mutual interdependence of the various segments of our
society is demonstrated by the first two resolutions adopted by our
convention. They are as follows:
Democracy and economic balance. Several years ago the American
Farm Bureau Federation, in annual convention, called public attention
to the threat to democracy all over the world in the development of
the philosophy of statism and totalitarianism.
We recognized the fact that our own sacred traditions and our own
institutions of democracy were imperiled by the machinations of
fanatical political leaders in cerain other countries who, utterly with-
out conscience and lacking all principles of human decency, were lead-
ing their peoples to degradation and destruction.
In an appeal to our own people, we declared in effect that economic
liberty is prerequisite to political liberty; and we emphatically urged
all groups to pool their strength in voluntary and coordinated efforts
to formulate and maintain in our beloved Nation broad policies
designed to achieve the economic balance among groups, which is
essential to the employment by all citizens of our heritage of liberty
and freedom.
"America," we said, "needs an economic balance which will assure
security for labor, stability for industry, and parity for American
agriculture."
Today, with increased emphasis, we renew that appeal to all groups
in America. At war's end, the situation will be one of extreme
urgency, its critical importance intensified by the world-wide obliga-
tions we have assumed through our participation in this war, which
already has brought to our people a greater measure of suffering and
heartbreak than any other war in our history.
POST-WAR ECONOMIC POLICY AND PLANNING 1511
It is our profound conviction that unless we do achieve domestic
economic bahxnce in the immediate post-war years, we are bound to
fail.
We are fortunate above all other nations in the fact that our re-
sources, our productive facilities, our political stability, and the
physical strength of our people will be less disrupted and less impaired
than those of any other nation. If we will utilize our unparalleled
resources of men and materials so as to assure material abundance
and political freedom to all our people, we can, by the force of our
own example, profoundly affect political and economic trends through-
out the world.
In attempting to pool our forces in a great movement on behalf of
the national welfare, all groups must be prepared to minimize their
former differences while they magnify their respective responsibilities
and obligations to labor faithfully for the welfare of the entire people.
We hope and trust that all groups may approach their task in a spirit
of prayerful humility, in full realization of the sober fact that the
pattern of American life for the next century will depend in large part
on decisions that they must make. The goal is very great. It can
be reached if our people will rise to the heights of greatness that the
times demand. They will be making the future for them and their
posterity. They must not fail.
Therefore, with all the earnestness of which we are capable, we appeal
to the leaders in other groups of agriculture and the recognized leaders
in labor and in industry, to join in a series of conferences in 1945, to
formulate a program necessary for the establishment and maintenance
of policies designed to assure large-scale production of the products of
both agriculture and other industry, and their interchange on a basis
of true economic balance and the establishment and maintenance of
a standard of regular wages for workers on such a basis of economic
balance.
Importance of a prosperous agriculture to national welfare: In the
post-war period this Nation will be faced with a situation in which
the maintenance of a high national income is imperative to our na-
tional welfare. The post-war national debt is now estimated at
$300,000,000,000, the principal and interest of which can be re-
tired only by a prosperous nation with full production and full em-
ployment in industry and agriculture. The war has demonstrated
conclusively that this Nation has a vast productive capacity wdiich
can be used to supply our peacetime wants if only we have the fore-
sight and ability to adjust our economy in such a manner that will
permit our productive capacity to function.
We believe that a stabilized prosperous agriculture is essential to
the maintenance of a prosperous nation. Rural America offers a
vast potential market for the mass production of industry. Nearly
one-fourth of the population of this Nation lives on farms. The
economic well-being of another 21 percent of our population who also
live in rural America and perform services for farmers is directly
dependent upon the production and the buying power of agriculture.
Agriculture is the Nation's greatest producer of basic new wealth upon
which the economic well-being of a large proportion of our urban
population is dependent.
The capital invested in agriculture approximates the investment in
all manufacturing industries and exceeds the combined investments in
1512 POST-WAR ECON^OMIC POLICY AND PLANNING
railroads, all utilities, and corporations of trade, Agi'icultiire employs
as many workers as all manufacturing industries.
The importance of the farm as a market for industrial products is
not fully appreciated. The farmer spends a greater proportion of his
income for the products of the heavy industries than does any other
large segment of our population. Continuous operation of the heavy
industries is essential to maintain satisfactory business activity and
industrial employment.
The demands of farmers for industrial products and services will be
the greatest single contributing factor to a continuous prosperity of
all segments of our economy. Undreamed of markets will exist for
all types of new machinery, new trucks, new automobiles, new buildings,
fences, farm home improvements and conveniences of every character,
and thousands of other articles essential to agricultural production and
farm living.
The Nation should recognize that only a small percent of the farm
homes of America yet have modern improvements, and certainly
farm women are entitled to every modern home convenience that is
now being enjoyed by a large percent of the women of the cities. To
fill these needs alone will afford industry and labor a vast field for
expansion of business activity.
Farmers will not purchase industrial commodities beyond their im-
mediate and essential requirements unless they are assured that farm
prices and farm income will be maintained at reasonable levels.
Therefore, the welfare of labor and industry — in fact, the national
well-being — requires the adoption and maintenance of economic poli-
cies and relationships necessary to assure a fair exchange value for
the products of mdustry and agriculture, and the maintenance of
continuous and substantial wages for labor in line with such a balanced
price level.
National farm program: The following resolution was adopted con-
cerning the national farm program. The national farm program is the
outgrowth of basic laws enacted by Congress as a result of 25 years of
struggle for economic equality by organized farmers with other groups/
The American Farm Bureau Federation played a leading part in
getting these laws enacted and in preserving and improving them from
time to time. These laws have served as a framework of the wartime
program to secure maximum production of food and fiber required
for wartime needs, and to safeguard farm prices. The entire Nation,
as well as every farm family, is enjoying the benefits of this legislation.
The American Farm Bureau Federation again reaffirms its support
of these basic laws. Necessarily, they will have to be modified from
time to time to meet changing conditions and needs in the light of
experience. Likewise, they must have sufficient flexibility to meet
varying conditions with respect to commodities and areas.
The transition from war needs to peacetune needs will bring many
difficult problems to agriculture and the Nation. We believe the
adjustments involved in this transition can best be achieved through
the retention and strengthening, wherever necessary, of these basic
laws. We recognize that a high level of industrial employment and
urban income is essential, but we learned through sad experience
after World War I that these alone are not enough to assure parity
for agriculture. We must have an effective national farm program
to safeguard farm prices and farm ' income and assure economic
POST-WAR ECONOMIC POLICY AND PLANNING 1513
balance between farm prices, industrial prices, and wages which will
assure the maximmn exchange of goods and services between all
groups.
Farmers want an economy of abundance and they stand ready to
join with industry and labor to achieve such abundance thi-ough
price policies and wage policies which are geared to a maximum level
of consumption. The public should understand, however, that
farmers are already producing at record levels and that one of the
majoi- objectives of the national farm program is to assure adequate
supplies to meet all domestic and export requirements plus reasonable
reserve supplies for emergencies which are a safeguard to the welfare
of the Nation.
It should also be recognized that under the parity principle, farm
price goals will be reduced or increased in direct ratio as industrial
prices (and industrial wages as reflected in industrial prices)* are
reduced or increased. Whenever surpluses reach unm_anageable
proportions, however, it is imperative that farmers have the necessary
machinery to control these surpluses and to adjust supplies to total
demands of markets, so as to prevent such surpluses from wrecking
farm prices and destroying farm purchasing power, and resulting in
an unbalanced national economy.
Specifically, we insist upon the following basic measures:
1. Retention and strengthening of the Agricultural Adjustment
Act and related measures covering the conservation of soil, water,
and forest resources; price stabilization by means of mandatory
commodity loans for basic commodities, and price supports for non-
basic commodities under the Steagall Act; continuation of section 32
funds to promote the disposal of surpluses in domestic and foreign
outlets; continuation and strengthening of section 22 to provide for
import quotas, whenever necessary, to safeguard domestic agricul-
tural programs.
2. Continuation of the present mandatory loan rates on basic
commodities and the price supports which are now provided under
the Steagall Act, as amended, for the period of the present emergency,
as defined in that act.
3. Continuation and strengthening of the Agricultural Alarketing
Agreements Act of 1937.
4. Adoption of a positive, effective policy and program for regaining
our fair share of world markets for our exportable surpluses and
developing new and expanded outlets in domestic markets.
5. That the foregoing programs be carried out, msofar as possible,
in such a manner as to enable farmers to obtain parity prices in the
market place; that ceiling prices be adjusted so as to eliminate sub-
sidies in lieu of fair prices.
6. Intensification and expansion of research, particularly in the
fields of plant and animal breeding, improved methods of production,
development of improved products to meet new requirements and to
meet competition with synthetic products, and the reduction of costs
of distribution.
7. That necessary appropriations to carry out the foregoing pro-
gram be provided, including the payment of any losses occasioned by
operations under commodity loans or price supports or in regaining
our fair share of world markets. Consumers are protected against
scarcity in these programs and producers must be protected against
losses due to price-depressing surpluses.
1514 POST-WAR ECONOMIC POLICY AiVD PLANNING
We reiterate our previous recommendations for the improvement of
administration of all agricultural programs. We commend the prog-
ress that has been made and urge the utmost cooperation of all con-
cerned in carrying out further improvements in the interest of
economy, simplification, better coordination, and a greater measure
of decentralization.
In this connection we commend recent trends toward greater de-
centralization of the agricultural conservation program, and we urge
that hereafter no soil-conservation practices be included in any pro-
gram for any State which is not approved by the State experiment
station or the State extension service.
Education and research : Other resolutions dealing with farm prob-
lems covered a wide variety of subjects. Realizing their splendid
work, and ' realizing the tremendous contribution the land-grant
colleges can make to the solution of post-war agricultural problems,
we favored an increase in the appropriation to the extension services
adequate to provide CA^ery agricultural county in the United States
with a county agent and a home demonstration agent, and on the basis
of need, such assistant agents as are necessary to discharge fully the
duties imposed upon the extension service.
We stated that special emphasis must be given to research in order
to develop better methods of production and soil use, new crops and
improved varieties of crops, new and better breeds of livestock, and
new and expanded uses for agricultural commodities.
More efficient methods in the distribution of agricultural com-
modities in order to avoid costly waste and extravagant handling
must be devised. We commend Congress and your committee, Mr.
Zimmerman, for setting up a special committee to make a study of
distribution, and believe this will assist to a great extent in solving
some of these problems.
Special emphasis must be placed on the problems in production and
distribution of food in general, and methods of enabling agricultural
fibers to compete successfully with synthetic products.
We recommended that the research program of the regional agri-
cultural laboratories be broadened, and additional funds be provided
to carry on their work in cooperation with our presently established
land-grant colleges. We insisted upon the more effective coordination
in the planning and conduct of all agricultural research.
Rural electrification and roads: We also stated that the extension
of electric service to rural areas should be pushed with renewed
energy just as soon as men and materials become available. Our
board of directors, followang the annual meeting, has instructed the
officers to investigate the possibilities of developing a program for the
extension of rural telephones.
We reiterated our long established policy in favor of Federal-aid
appropriations to the States for the construction of a Nation-wide
system of highways, but w? insist that such funds be based upon
justifiable highway needs; that Federal funds be matched by the
States on a 50-50 basis; that the historic formula for apportionment
of Federal-aid funds to the States be preserved ; that greater emphasis
be given to the construction of economical all-weather low-cost farm-
to-market roads, including school bus and mail routes, which will be
connected with Federal and State highways; and that any Federal
POST-WAR ECONOMIC POLICY AND PLANNING 1515
superhighways constructed after the war be routed to serve existing
market centers.
Fa'-m credit: We adopted a very extensive and detailed resohition
concerning farm credit. Some of the high Hghts of tliis resohition
are as follows : We believe the time has come for a careful reappraisal
of our farm credit needs and facilities and for reorganization and
coordination of such facilities and services in the light of experience
and the needs of agriculture.
We will continue to oppose any and all efforts to convert the
Farm Credit Administration into a Government-owned or Govern-
ment-operated system. The federation has recognized the need for
emergency types of governmental credit, especially to low-income
farmers who cannot secure credit elsewhere in order to meet temporary
needs or to assist in genuine rehabilitation.
All farm credit agencies, including the cooperative credit agencies
now under the Farm Credit Administration and all governmental
direct lending agencies making loans to farmers or farmers' cooperative
associations should be placed under the direction of a single independ-
ent national policy-making bipartisan board.
Credit should be so administered and regulatsd that it will not
contribute to land inflation. Unwise credit policies are one of the
important factors in stimulating inflation.
In regard to our returning veterans and farm credit, we had the
foflowing to say: We strongly urge that the Veterans Administration
cooperate closely with the Farm Credit Administration, farm organi-
zations, the Agricultural Extension Service, and its advisory com-
mittees of farmers to the end that returning veterans may be safe-
guarded against unwise loans and against the purchase of farms at
inflated prices or the purchase of uneconomic farm units, which would
place the veterans at a great disadvantage and possibly bring ultimate
financial disaster. Every eft'ort should be made by these and all other
interested agencies to furnish reliable information and soimd advice
to veterans interested in engaging in farming.
All public agricultural credit agencies lending money on farm real
estate, should use the Appraisal Division of the Federal Land Bank
System. The services of tliis system should be made available to
the Veterans' Administration at cost for any veteran desiring to buy
a farm.
Returning veterans and agriculture: The following resolution
regarding returning veterans and agriculture was adopted: As a
national farm organization, we recognize the debt which all of us owe
the members of the armed forces. Also, we appreciate our responsi-
bility to promote the best interests of returning veterans.
A certain number of veterans can and should be taken into agricul-
ture. It is our considered policy to do everything possible to make
their operations a success. We commend the policies of establishing
local advisory committees, and aggressively support their develop-
ment and use. They are the best means for enabling the serviceman
%vith the desire to farm in that community to determine what his
prospects are and to become properly located.
Attention is called to the fact that rural communities need many
services outside those rendered by farmers. Servicemen who desire
to live in rural communities should be helped to understand what
these services are and how they may get into these fields. Where
1516 POST-WAR ECONOMIC PO^ilCY AND PLANNING
training is necessary, they should be fully informed regarding train-
ing opportunities and how to secure thorn. There is relatively much
more room for expansion in services, which mean real, useful employ-
ment, in other fields than in th3 actual production of agricultural
commodities.
For a truly successful post-war economy, most of the expansion
must of necessity be in the production of nonagricultural goods and
services. The American Farm Bureau Federation recognizes and
accepts its responsibility to work for that sort of a national economy
wliich makes expansion probable. Here lies the real field for service
to veterans.
Bonuses and special privileges can be only a temporary assistance
to veterans in becoming adjusted to civilian life and in getting a start.
They cannot substitute for real opportunity, wliich will inevitably
depend upon being part of a successful community, where he can
choose his own work, have a chance to be of real service, and prosper
accordingly.
Surplus property: We passed the following resolution regarding
surplus property: The American Farm Bureau Federation insists that
in the disposition of all suitable surplus property the needs of all
farmers and all rural areas be given paramount consideration by the
Surplus Property Board.
The farmers and the farm economy can best be served if the prop-
erty declared by our Government to be surplus is kept out of the
hands of speculators. We, therefore, recommend that every precau-
tion be taken and every safeguard effected which will insure the great-
est return to our Government with the widest and most equitable
distribution of surplus commodities to consumers at fair price.
We insist that such property disposal be made with due regard for
the protection of free markets and competitive prices, and condemn
uncontrolled dumping and the accompanying economic dislocations.
Because of the enormous governmental investment in war facilities
and supplies which will become surpluses and the great interest the
farmers of the Nation have in its disposal, the American Farm Bureau
Federation insists that the statutory created Advisory Board to the
Director of War Mobilization and Reconversion be permitted to func-
tion as representatives of the general public and their interest, as
Drovidpd by law.
We commended Congress for its action in enacting legislation
advocated by the American Farm Bureau Federation to safeguard the
sale of surplus Government lands, and especially for its action in
requiring that this land be offered to the former owners at the original
purchase price, adjusted for damage or improvement.
International trade and international cooperation. Our »inter-
national trade resolution is as follows : International trade is basic to
the well-being of this Nation and of the world.
We must not repeat the mistakes made after World War I when the
nations of the world resorted to extreme nationalism and isolationism
to promote self-sufficiency and to secure selfish advantages through
raising tariffs and trade ba'rriers, through competitive manipulation of
currencies and international exchange, through international cartels,
and other restrictive trade practices. The present war will have
been fought in vain if the nations of the world return to such nation-
alistic policies when this war ends.
POST-WAR ECONOMIC POLICY AND PLANNING 1517
During this war we have witnessed an enormous expansion of the
productive capacity of this Nation. We know that abundant pro-
duction can become a national blessing rather than a calamity. If
we would live the fullness of life, we need just as abundant produc-
tion in peace as in war. But in order to maintain this abundant
production we must have outlets for it. When wartime needs end,
this enormous productive capacity may produce surpluses that will
wreck our economy unless we can find sufficient outlets in foreign
markets to help sustain this volume of production. Our domestic
outlet is the best market for most commodities produced in this
Nation, and must be preserved on the basis of efficient abundant
production; but international trade is essential if full production and
full employment are to be obtained in tliis Nation during the post-war
period.
We cannot sell our surpluses abroad unless we are willing to buy
from other countries. Unless other nations have sufficient dollar
exchange to pay for our goods, they cannot buy from us, even though
our goods may be offered at competitive prices with those of other
coimtries. Merely lending money is not a sound basis for permanent
trade. Unless the barriers to trade are removed, such loans become
merely gifts; and when this credit ends, trade stops and repudiation
of debts may follow.
In order to facilitate international trade on a sound basis and
thereby lay the foundation for an economy of abundance and economic
security m our Nation and throughout the world, which are so essen-
tial to the maintenance of a lasting peace, we recommend :
1 . That an international trade conference be called for the purpose
of attempting to lower the trade barriers among all nations and to
discourage the creation of additional trade barriers.
2. That the United States participate in international action on
monetary matters and favor the adoption of monetary and credit
policies — domestic and international — that will encourage and facili-
tate maximum production, distribution, and consumption of goods
and services, on a fair exchange basis. A stabilized price level, both
domestic and international, is essential not only to international
trade, but also to the maintenance of a fair balance in domestic prices
of raw materials with other prices.
3. That foreign and domestic barriers be gradually adjusted or
removed so as to facilitate the maximum exchange of goods and
services between nations, and between groups in our country, to the
end that maximum employment and production may be achieved
throughout the world.
4. That the trade agreement program be improved and expanded.
We believe that much can be gained by including more than one nation
in specific agreements.
5. That new and improved international commodity agreements for
surplus agricultural products be developed among the various nations
of the world ; and to the extent practicable, these agreements should be
coordinated closely. These agreements should not be confined to
producer nations, but should also include the principal consumer
nations.
6. That, if peace is to be maintained in the world, all nations be
given the opportunity to obtain essential raw materials necessary to
the development of a reasonable peace-time economy.
1518 POST-WAR ECONOMIC POLICY AND PLANNING
7. That, during the immediate period of post-war reconstruction,
necessary exports for the purposes of rehabihtation be treated pri-
marily as expenditures, provided the purpose is to effect real rehabili-
tation and to assist nations to help themselves and lay a sound founda-
tion on which to build world trade.
8. That our Government adopt a positive program to develop world
trade. However, it is realized that in the immediate post-war period,
certain realistic approaches will have to be made to meet maladjust-
ments. Pending the attainment of sound foreign-trade policies, our
Government, if necessary in older to regain our fair share of the world
market, should enable domestic producers to meet world prices through
export subsidies; and ways and means should be sought to provide
other nations with dollar exchange with which to buy our surpluses.
On international cooperation, we specifically recommend coopera-
tion with other nations along the following lines :
1. A general international organization for maintaining world peace.
The American Farm Bureau Federation favors the participation of the
United States in a general international organization for maintaining
world peace, in accordance with the broad principles contained in the
plans developed at the Dumbarton Oaks conference.
The United States should accept its rightful share of the responsi-
bility with the proper executive authority for the enforcement of the
decisions of the Security Council, by military force, if necessary.
Before the final adoption of the plan by Congress, we recommend
that further attention be given to clarifying the manner in which the
Economic and Social Council would operate, particularly as it applies
to international agricultural organizations and problems.
2. International cooperation on monetary programs. The Ameri-
can Farm Bureau Federation favors the participation of the United
States in the proposed International Monetary Fund and the proposed
International Bank for Keconstruction and Development, as outlined
in the Bretton Woods monetary conference.
In adopting these new international institutions, it should be realized
that they are not substitutes for sound domestic fiscal policies. Unless
sound domestic and foreign trade policies are adopted by the nations
of the world, no plan of international monetary stabilization or mone-
tary cooperation will succeed.
The International Monetary Fund and the International Bank
should not be used as relief agencies in the post-war period, but
should be on a business basis, leaving relief grants to other agencies
of government. In adopting this plan, it should be clearly understood
that the United States will not provide funds to perpetuate uneconomic
trade practices or unsound monetary policies through the operation of
the stabilization fund. Foreign trade must be developed upon a basis
of the exchange of goods and services among the nations of the world,
and not upon the basis of extending credits.
These proposed international institutions should be operated in
such a manner as to promote stability in the general level of prices
within the various countries of the world.
Since the proposals by necessity leave wide discretionary powers to
the administrators of the two institutions, the individuals chosen to
operate these institutions must be high type men, representative of the
various segments of our economy, experienced in international affairs,
and free from political domination.
POST-WAR ECONOMIC POLICY AND PLANNING 1519
3. International food and agriculture organization. We favor the
cooperation of the United States in the proposed International Food
and Agriculture Organization. We urge that a conference between
the appropriate authorities and leaders of farm organizations be held
in the immediate future in order to clarify the functions and methods
of operations of the proposed organization.
We deplore the manner in which the plans for this organization have
been developed. The secrecy surrounding the Hot Springs interna-
tional food conference was unwarranted, as has been the secrecy of
much of the work of the interim commission which that conference
created to develop detailed plans for the creation of an International
Food and Agriculture Organization.
In the development of the proposed organization, proper recognition
has not been given to the fact that agriculture is a basic industry and
that the solution of agricultural problems should be the major function
of the organization.
Therefore, we insist that the duly elected representatives of agri-
cultural producers should be included in all future developments and
in the administration of this proposed organization. We believe that
the primary functions of the organization should be the collection of
facts and research in the field of agricultural production and distribu-
tion. Action programs should not be undertaken without the specific
approval of the nations involved.
It is understood that there are several special committees of the
interim commission preparing reports on various phases of the proposed
International Food and Agriculture Organization. These special
reports should be made available to the general public prior to the
presentation of the proposed constitution of the organization for
congressional approval.
Proper plans should be developed for incorporation of the Inter-
national Institute of Agriculture in tli6 proposed International Food
and Agriculture Organization prior to the approval of the proposed
organization by Congress.
The w^ork of the proposed International Food and Agriculture Or-
ganization should be coordinated with the work of the existing and
other proposed international organizations.
Taxes, price control, and a monetary program. We developed a
rather definite post-w^ar tax program which w^Ul be presented to the
Congress at the appropriate time. We are particularly interested
that a tax program will be developed which does not unduly stifle
business initiative and free enterprise.
Farmers realize the importance of controlling inflation. They
remember the bitter experience following World War I, when the price
of farms products dropped drastically. They well remember the long
period of disparity between agricultural prices and production cost
and how thousands of far.mers lost their homes and life savings. We
passed the following resolution covering inflation control and price
control.
The American Farm Bureau Federation reaffirms its position in
favor of a strong aggressive program to control inflation. As you
gentlemen know, every time the O. P. A. bill has come up, we have
always appeared in favor of that bOl. As a matter of fact, we were
the only national organization that went on record for it in the early
days when it started. We said, "All right, we are willing to have
1520 POST-WAR ECONOMIC POLICY AND PLANNING
agriculture in there, but you have to have labor and industry in there.
You have got to have it all across the board." We reiterate that any
plan to control inflation must be equitably applied to industrial prices,
farm commodity prices, and wages.
We favor the continuation of price ceilings on agricultural and other
products when necessary and workable. We urge that the existing
law be broadened so that price ceilings and floors for agricultural prod-
ucts will be announced for a specified period and far enough in advance
to permit farmers to plan their operations accordingly, and should not
be lowered during such period.
We insist further that all administrative agencies follow the intent
and specific provisions of the laws passed by Congress to the end that
faith in government be preserved.
We deplore the experiences of the past year in the marketing of
certain agricultural commodities, and demand that support prices be
enforced as rigidly as price ceilings. We heartily commend the War
Food Administrator for his diligent efforts on behalf of agriculture,
but deplore the delays in effectuating price regulations between the
War Food Administration and the Office of Price Administration under
the present system.
We recognize the value of high annual wage income of industrial
workers to agriculture, but insist on the retention of the Little Steel
formula at least for the duration of the emergency as essential to the
prevention of wholesale inflation.
We commend Congress for the enactment of provisions in the Stabil-
ization Extension Act to safeguard agriculture in the administration
of price control, to clarify and improve the agricultural provisions, to
liberalize the regulatory and court review provisions, and to prohibit
consumer subsidies after June 30, 1945, except by special appropriation
by Congress.
We reaffirm our unalterable opposition to subsidies in lieu of fair
prices in the market place.
Enormous surpluses of farm produced commodities, with decreasing
demand and terrific dearths of industrial commodities for which there
will be unprecedented demands following the war, point definitely to a
drop in farm commodity prices and enormous increases in the prices of
things the farmers buy.
We urge the continuation and strengthening of the Commodity
Credit Corporation as a constructive means of handling the surpluses
and effecthig price supports.
As a guaranty against run-away prices of those commodities which
the farmers have to buy, we recommend that price controls be con-
tinued until there are sufficient amounts of goods available to effect
balance between agricultural and industrial commodities.
Realizing the importance of a stabilized general price level to the
price of farm products and the general welfare of the Nation, we passed
the following resolution on monetary control and price stabilization —
a broad resolution.
Agricultin-e is most seriously injured by a widely fluctuating price
level. We have no doubt that a coordinated, well conceived, and well
administered Federal monetary and fiscal program can do much to
stabilize the general price level and to encourage satisfactory produc-
tion and distribution.
POST-WAR ECONOMIC POLICY AND PLANNING 1521
• Many of the major dislocations caused by the war are in this field.
Failure to cope successfully with ensuing problems will impede expan-
sion in the rest of the economy. The American Farm Bureau Federa-
tion will work to formulate and support measures designed to meet
problems in this field.
Military- training. In regard to military training, we recommended
that a broad program leading toward physical fitness be incorporated
in our high schools. The sj^stem of military training as provided in
our land-grant colleges since their establishment has proved con-
clusively that American youth can carry on their education and still
be prepared to assist in the defense of their country should the need
arise.
We favored the continuation and expansion of the military training
program as a part of our education system; and aggressively oppose
the national program of compulsory military training now being
publicly advocated, as leading inevitably into some form of mili-
tarism.
Gentlemen, I have tried to present to you some of the high lights of
our newly adopted resolutions, which bear on the questions jou
requested me to discuss. Naturally, I did not go into all of them in
detail. I am therefore submitting for your files a complete copy of the
resolutions as approved by the voting delegates of the American Farm
Bureau Federation at the .twenty-sixth annual convention, Deceniber
14, 1944, here in Chicago.
I am also requesting permission to put into the record a statement
which deals specificall}'' with one commodity. It is a statement of the
American Farm Bureau Federation pertaining to the cotton situation,
which was presented in Washington on December 4, 1944, to the
Subcommittee on Post-war Planning for Agriculture of the House
Committee on Agriculture.
In addition to that, Mr. Chairman, I would like to have Mrs.
Se%vell, who administers the Associated Women's Group, make a sup-
plemental statement on some phases of rural health and education,
and so forth.
Thank you very much for giving me this opportunity of making this
presentation. It is a pretty broad program, don't you think, Mr.
Chairman?
The Chairman. I agree with you, Mr. O'Neal. I would like to
say that you have presented a most excellent paper.
There are one or two things that I want to refer to. First, I would
like to ask you a question in regard to the farm credit. Of course, I
am sure you are familiar with the fact that a committee has been
appointed in the House to make a study of all agricultural credits.
Mr. Hope is a member of that committee and I am also. If the com-
mittee's work is continued, they are going into that subject in a
thorough way and before we conclude our investigations, I am sure
that we will want you and other representatives of agriculture to give
us an extended statement on that very important question.
I also was glad to hear you say another thing. You stated that we
must not let the veterans be imposed upon. If we sell the veteran a
farm or give him the aid of going into agriculture as a means to earning
a livelihood, we must see to it that he gets an economic unit that will
support him and his family and that he is not imposed on by the land
sharks and induced to buy land at inflated prices.
1522 POST-WAR ECONOMIC POLICY AND PLANNING
That is one of the things that must be guarded agaiiist or we will*
have a lot of badly disappointed veterans who will have to start life
over in some other field.
Mr. O'Neal. I might say, Mr. Chairman, right in this hotel the
American Legion met here and the commander, who is Past Com-
mander Atherton, the former head of the American Legion, asked me
to come over and meet with his group. It was a big committee
meeting of about 40 men and they were sitting in executive session
discussing this very matter. They wanted to know our attitude, and
I, of course, wanted to know their attitude.
I was greatly delighted at how sensible they were in their approach.
There is no need for me taking your time on that subject. They had ^
bitter experience before and I was glad to see they were aware of that.
So far as I can see in the laws passed by Congress, Congress seems to
be pretty well trying to safeguard that also. We are also anxious to
help in that direction.
You would be astounded to hear the reports of a number of our
highly organized States of the work that is being done now by com-
mittees, farmers, businessmen, and so forth, out there in trying to
safeguard that particular viewpoint. Even now, we are getting back
a lot of our boys who are interested in agriculture.
The Chairman. We have had several witnesses here who have
advocated that we must get away from the parity concept of income
to our farmers — in other words, that in order to meet world competi-
tion after this war is over, we are going to have to produce our farm
products at a cheaper price in order to compete in world markets.
Do you disagree with that philosophy?
Mr. O'Neal. I believe in equality. That is what we have always
fought for and we have always stood for. After all I have said to
industrial leaders, labor leaders, and financiers, you gentlemen don't
understand parity. Parity is a fair exchange value. A bushel of
wheat should have a purchasing power of the time and the money
and the goods that you men produce. That is all we ask for. If you
want to make it high, that is up to you, because you are the ones who
makes it high. The farmer is not the man who makes it high.
The Chairman. Mr. O'Neal, it is your view that in order that the
American farmer may consume these products that industry is going
to produce at a high standard level of wages, that farmer likewise has
to get a fair price and we say parity?
The American farmer is one of the greatest consumers of our Nation.
We say that parity is a fair price.
Mr. O'Neal. Leave that off and say "Fair exchange value."
The Chairman. Or he cannot consume those goods; is that right?
Mr. O'Neal. That is right. After all. Congressman, the farmer
spends 70 cents out of his dollar while the city man only spends 40
cents for industrial commodities. In other words, as I say in these
resolutions, we have a broad field there of purchasing power. You
are all thoroughly aware of that, because you have farms and you
know what that means.
The Chairman. Are there any questions that the committee would
like to ask? Do you have any questions, Mr. Colmer?
Mr. Colmer. I will defer any questions that I have to ask to the
balance of the committee.
POST-WAR ECONOMIC POLICY AND PLANNING 1523
Mr. Fish. In the first place, Mr. O'Neal, I want to thank you for
your exceedingly able and comprehensive report on the solution of the
post-war farm problem. It is very clear and to the point.
However, there are some things that I would like to have you
elaborate on a little more.
You merely say, "We reaffirm our unalterable opposition to sub-
sidies in lieu of fair prices." Well, I come from a very large milk-
producing district — perhaps one of the largest in America — Dela-
ware County. The milk farmers, of course, are receiving substantial
subsidies.
Now, you come out here and say that you reaffirm your unalterable
opposition to subsidies. I agree that it is very fine to have fair prices,
but I wonder what I should take home to those farmers in regard to
that?
Mr. O'Neal. I will be glad to reply to you.
Out of the 24 men who met to discuss this problem, there were a
number from New York State and adjoining States who helped pre-
pare these resolutions. As I said, they had plenty of time to discuss
these various problems very fully.
We have always held that you have marketing agreements in that
section that really can take care of your situation, where you recognize
the increased cost of feed, and increased cost of labor. I approve of
Mr. Dumond's theory, who is Air. Dewey's commissioner of agricul-
ture.
The Office of Price Administration is a later law, and there is a
conflict between the Office of Price Administration and the original
Alarkcting Agreement Act, and the matter is in the courts at the
present time. By the way, Chester Bowles has gone through the
motion of having an advisory committee set up consisting of the vari-
ous national farm organizations to advise him on the administration
of the O. P. A. as it affects farmers.
Now, what you should do in places like that is you should raise the
ceiling on your prices. That would take care of you. All right, we
will agree with you that a lot of people will say that will cause inflation,
but I think that is what you should do.
Mr. FiSH. Your answer is to raise the price ceiling on fluid milk?
Mr. O'Neal. Raise the price ceiling and adjust the cost. Of
course, the public does not realize, as it is brought out in this resolu-
tion, that the farmers are not responsible for the price that the con-
sumers pay, because thej only get 30 cents out of the dollar or 50
cents out of the dollar. Lay the blame on the other fellow, the
distribution cost, etc. We have always said that.
Now, I realize this and I have stated it to congressional committees
before. You will be in bad shape unless you do raise those ceilings,
and I know of some dairy farmers who have gone bankrupt ; and others
who avoided banlvi'uptcy, like Henry Morgenthau, who sold his dairy
cows.
Mr. Fish. I see that you know my district pretty well.
Mr. O'Neal. I was just up in New York — at Syracuse and Buffalo.
Mr. Fish. Your answer to my question then is that they have got
to raise the prices and face the situation and the consumers will have
to pay more?
Mr. O'Neal. Yes.
1524 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Fish. In lieu of subsidies?
Mr. O'Neal. Yes; it would be a minor thing. Let us illustrate
that with two commodities:
Take the poultry business. We have always said, "Give the farmer
a chance and he will produce, and the law of supply and demand will
take care of that."
Look at hogs and poultry, and what happened in that production
program? There was an enormous, overwhelming supply.
Now, I do not say to Chester Bowles this: Use the ceiling where it
is necessary, but don't just make a flat rule all the way across. Do
you see the point there?
I wish that you would review that law because the marketing agree-
ment of 1937 in the days to come has to be considered much more
than it has been in the past. That is particularly true with perishable
crops, fruits, and vegetables, and things of that sort, where you have
a regional and sectional problem to meet.
Mr. Fish. I thoroughly agree with you. Mr. Dumond is an ex-
tremely able man, and I believe that he suggested that.
Mr. O'Neal. I told him to make a test of the law. I told him to
make a test of the Marketing Agreement Act,
Mr. Fish. What is the name of that law?
Mr. O'Neal. The Marketing Agreement Act of 1937. It is a part
of the Agricultural Adjustment Act of 1937. Isn't that right?
Mr. Hope. That is right.
Mr. Fish. Where would you get a test of that law?
Mr. O'Neal. In court.
Mr. Fish. Would you go to court with it?
Mr. O'Neal. That is right. I would go to court. This case is in
court now, as I understand it.
Mr. Fish. There is nothing that the State legislature can do. That
is what I really want to find out.
Mr. O'Neal. I think .«o.
Mr. Fish. I wonder whether we can do anything.
Mr. O'Neal. Those marketing agreements fit into the State laws
to a certain extent. I am not a lawyer, although I studied law 50
years ago. There is a State function in the Marketing Agreement
Act.
Mr. Fish. Dumond would know about that?
Mr. O'Neal. Yes; that is right.
Mr. Fish. Now, there is another matter I would hke to ask you
about. You quoted here that —
Foreign and domestic barriers be gradually adjusted or removed so as to
facilitate the maximum exchange of goods and services between nations, and
between groups in our country, to the end that maximum employment and
production may be achieved throughout the world.
Are you advocating a free trade?
Mr. O'Neal. Not to that extreme. Of course, we as farmers
have always said this: If you in labor and you in industry and you
in finance will take all barriers down, just sweep it all out the door,
the farmers will meet that situation and that will be all right. How-
ever, we realize that that is an impossible situation and cannot be
done. But we do know, at least that adjustments can be made.
Mr. Fish. But you are not actually doing away with all barriers
and having free trade?
POST-WAR ECONOMIC POLICY AND PLANNING 1525
Mr. O'Neal. No; I mean the lowering of tariffs.
Mr. Fish. Adjusting, but not an out and out wiping of them out?
Mr. O'Neal. No.
Mr. Fish. Not on wheat or anything else?
Mr. O'Neal. No. We have a wheat agreement, you know, an
agreement between nations, and I am glad to see some of them
advocating the same thing with cotton. I frankly believe that our
old Yankee trading philosophy that we had back yonder of the
Jefferson and Hamilton combination, will work in this country. I
think we can do that.
The Chairman. May I ask a question there? Do you think we
ought to have an international conference on cotton like on wheat?
Sir. O'Neal. That is an excellent idea. What is our big surplus
crop? Our biggest surplus crops are cotton and wheat, as you know.
Well, if we have a wheat agreement, it is between the big wheat-
producing nations and it .works fairly satisfactorily without destroy-
ing anything. I think Congressman Hope will agree with that. If
it is working out properly, that will not destroy our price level. I
think we can do the same thing with cotton.
The Chairman. And help solve this mternational trade problem
by getting rid of our surplus commodities?
Mr. O'Neal. Surely. As a matter of fact, as you note in there I
have said this: I think they ought to broaden it out. I am a great
admirer of Secretary Hull and he is a friend of mine and has been
for 30 years. He is one of the ablest men I ever knew in my life and
a very forthright fellow. He looks you in the eye. I have had
many arguments with him on tariff. We had a lot of fun in one of
the committees that you were on.
I am saying this: That trading is a practical thing and we should
have the nations with the surpluses and the big nations trading.
That is the way you really trade.
How do you trade in this country? How do we trade? We look
into the eye of the other fellow, the one who wants to buy and the
one who wants to sell, and we get around and trade. I am one of
these fellows who believe that we should keep our merchant marine.
We have spent the people's money and so let us sail the seas and do
our trading.
I heard one of the finest speeches I ever heard out in Idaho Falls
this summer given by a fellow by the name Maloney. He is an
Irishman with determination and he made a speech. I do not know
whether your political faith is the same as his or not. He told about
the Mom-oe Doctrine and he said:
Let us extend that line. It goes down through South America, and after the
war let us spread it all over. It goes to the South Pacific now and our boys are
over there shedding their blood and spending our money, and so let us run it to
China, if necessary, and run it around into Russia.
I believe he was secretary of the congressional committee meeting,
and he flew around the world battle fronts with Chandler, Lodge, and
others, to all of the ports.
However, I think we have got to do that, gentlemen, and that is all
there is to it.
Mr. Fish. Don't you think we have got to try it? The question
is a little bit out of our control, I believe, but I think it will depend
on whether Soviet Russia controls Europe, and if so, they will control
99579 — 45 — pt. 5 20
1526 POST-WAR ECONOMIC POLICY AND PLANNING
the marketing there and they are going to make the laws themselves,
and we will have to deal on that basis. That is something new.
I also want to ask you this question: In your reference to military
training, you come out very forthrightly and oppose compulsory
military training, Is that the general view among the farmers?
Mr. O'Neal. It is among my group.
Mr. Fish. I am very open-minded and I would like to know a little
more about it.
Air. O'Neal. I have observed a few things, and I might give you
my observation.
George Marshall was at the Virginia Military Institute when I
was at Washington-Lee. I have watched the progress of the war
under his leadership. If you check the records you will see that the
good mass of his officers, probably the majority, are men who were
not trained at West Point, or who were not trained at Annapolis,
but were trained at these State institutions.
Now, I think that is very effective. I am deathly afraid of forced
military training. 1 think our boys will do as they did in the past.
My youngest son is in the Army, and I recall 15 or 20 years ago how
he took the training at his institution. I think it is well worth while
for you gentlemen, the leaders of our Nation in legislative matters, to
get that record and just to see how this has worked.
I know I was profoundly impressed when I was in Texas by the
spirit of those fellows before we got into the war. They claim they
have more aviators than any other part of the country, and they went
and joined the English aviation before we got into the war. Those
boys were being trained by, the thousands down there in Texas and
Oklahoma, and they have certainly made a swell record.
Mr. Hope. I think Texas A. and M. College claims to have more
officers in the Army than any other school in the country.
Mr. O'Neal. That is right. I think they have more in the Army
than any other State in the United States, especially among the
aviators.
Mr. Fish. I am inclined to agree with you. I want to make sure.
You are opposed to compulsory military training?
Mr. O'Neal. That is right. Have it voluntaiy.
Mr. Fish. But you believe in the voluntary system, and you
believe that would be adequate?
Mr. O'Neal. Sure. Some of these people advocate these large
camps. There is one in my State of Alabama, over at Anniston,
that has been there for 30 or 40 years. I remember the R. O. T. C.
boys by the thousands would go there voluntarily and spend a couple
of months. There were big training camps, and they could keep
them ri^ht up to date. You gentlemen are familiar with that.
Mr. FisH. You are also very strongly in favor of international
cooperation. I think everybody is for that, but you go on and
definitely favor the security of the Dumbarton Oaks proposal. Then
you take a step further and you say the Executive should be given
the power, without the consent of Congress, to use the armed forces.
Have you really taken a strong stand on that — that is, your organiza-
tion— or is tha^t just a suggestion?
Mr. O'Neal. I will say we considered it very thoroughly. When
I studied law — John W^. Davis, who ran for President in 1924, was
my teacher— I read an opinion, and I was delighted to see this,
POST-WAR ECONOMIC POLICY AND PLANNING 1527
gentlemen, in the New York Times, where they had a leading editorial
on international policies, the power of the President of the United
States under international law. It was very impressive. It was by
a committee of five men, five very distinguished lawyers — John W.
Davis was chairman- — and when you read that I think you will get
away from a lot of worries that I have had concerning international
law — that is, on the declaration of war. When I go to Portsmouth,
N . H ., I always salute John Paul Jones, who sailed the seas and whipped
the Moors in north Africa. That was the intent of the law. We
did the same when we went to Texas in the old days. I don't see
any difficulty in that provision of it.
Mr. Fish. I just want to get your views. I am strongly in favor
of international organization and world security, in spite of being
charged with being an isolationist. I have been all in favor of inter-
nationalism to prevent future wars. It all depends on whether you
get the other nations to agree.
Mr. O'Neal. Your distinguished colleague, Congressman Wads-
worth, is forthright on that subject.
Mr. Fish. But he is on the extreme of compulsory military service.
Mr. O'Neal. I wouldn't agree with him on that.
Mr. Fish. I don't know. I want to find out.
Mr. Hope. I want to ask one or two questions. On this matter
of compulsory military service that you have just been discussing,
would you care to say whether in your recent meeting the sentiment
was pretty much all the way on that?
Mr. O'Neal. Yes.
Mr. Hope. Would this represent practically a unanimous agree-
ment?
Mr. O'Neal. There were about 5,000 farmers from 45 States here
with their wives, and in a debate of the resolutions, as I said, after
they were carefully prepared, which took about a week, they had open
hearings — if you had been here we would have been delighted to have
you there — there wasn't a single protest.
Mr. Hope. So it is practically unanimous then so far as the group
was concerned?
Mr. O'Neal. Yes.
Mr. Hope. There is one other point I would like to have you
develop a little bit more, if you will. You state here, in quoting one
of your resolutions, that you favored continuation of the present
mandatory loan rates on basic commodities and the price supports
provided for in the Steagall Act for the duration of the emergency. I
assume, of course, that it is more a matter of appropriations than
anything else. I do not think we will repeal the act. It is a matter of
whether Congress will make the appropriations. Of course, I feel we
cannot very well keep faith and not make the appropriations, unless
we can find some better way of handling it. I have no suggestions
as to that, but this committee, of course, is interested in a period of
longer than the 2 years following the duration of the emergency. We
are working on what we hope to recommend as a permanent program.
I was wondering what your thought was in regard to after this 2-year
period, whether we should continue mandatory price supports on
these commodities, at something like the present level, or just what
you thought ought to be the program.
1528 POST-WAR ECONOMIC POLICY AND PLANNING -
Mr. O'Neal. I think you have put your finger on a very vital
thing. As a matter of fact, I told Marvin Jones — we have been good
friends for years — ^that my organization would not hesitate at all to
ask for the appropriations to carry out the promise of Congress that
the producers of food under the war effort would be supported on their
prices, it matters not what the amount was, where properly used.
Certainly it is a mere bagatelle, compared to what has been done in
the war effort in giving the big corporations money to build these
additional plants, and all those various things. It is a very small item,
as you know. But on the other hand, we feel the farmers have a great
responsibility, and it is up to them to safeguard that. We have got
to be very constructive, because if we build a bad house it will fall on us.
Now, the commodity loans on the basic commodities has been a very
fine program.. You know yourself, compared to R. F. C, it is just
monkey business. It is just little stuff. There have been very few
losses there over the years.
But on the support of prices — and I am very glad to see my con-
vention was very serious about that — ^there are a lot of things we
have to do ourselves to make it practical.
Mr. Hope. I am thinking more, of course, about the period follow-
ing the 2 years after the war, what your position is as to the con-
tinuation of that program after that time. I am assuming in good
faith it will be carried out during the 2-year period, that we will
have to maintain it, but after that time I just wondered if your con-
vention had taken any position on it, or if yOu personally had any
thoughts.
Mr. O'Neal. I think our emphasis was on the reiteration of the
necessity of the adjustment of production and expansion of markets.
We realize perfectly that the burden of carrying the enormous surpluses
by the Government is a very dangerous thing. It is a bad thing,
and we want to avoid that, I am sure of that, all the way through.
So we have got to think out carefully some sort of an adjustment. A?
I said and pointed out to the gentleman from New York, a marketing-
agreement provision would in a great degree take care of that situa-
tion, where you would have some reasonable adjustments.
Mr. Hope. It will take care of some of the perishable commodities,
particularly, very effectively.
Mr. O'Neal. That is the group I am more worried about than the
others, because you know your wheat farmers, and cotton farmers,
and tobacco farmers, are perfectly willing to adjust when your sur-
pluses become burdensome.
Mr. Hope. Of course, we have the legislation now on the statute
books which calls for adjustments, which sets up the machinery for
adjustments, but would you mind telling me your views on this thing?
With reference to these other commodities that are covered by the
Steagall Act we have, of course, no machinery for adjustment now.
What is your thoughtj* Do you think any program of that kind,
if it should be continued, would have to have some provisions for ad-
justing production?
Mr. O'Neal. Assuredly. I was greatly impressed when I was in
the east, in Mr. Fish's area, to find that the poultry men there, as I
understood it, did not want any ceiling price nor support price, but
just to let the law of supply and demand take care of the situation.
There is an indication of the views of one of the big surplus producers. •
POST-WAR ECONOMIC POLICY AND PLANNING 1529
Mr. Hope. I know some of them have talked to me about it.
Mr. O'Neal. That is one approach to it. I believe that nearly all
farmers are pretty well in agreement- that they must adjust. Some of
them say, "Just let nature its course and don't let's have any law."
Others realize the danger — I think all of them do — of that support
price problem.
The Chairman. May I ask a question there? Do you think we
can afford to hazard agriculture to that program or policy of letting
nature take its course on, we will say, basic commodities like cotton
and wheat?
Mr. O'Neal. Not \mless everybody else agrees. Labor and finance.
As 1 said, unless labor and industry and finance all tear the barriers
down, no, we just can't do it. We tried it. We told them in the
twenties, you know. "Now, just give us time." All this enormous sur-
plus, the burning of wheat and the burning of corn, cheaper than coal,
the bread lines increased; we told labor at the time, "All right, now,
you keep your high hourly wages; limit your hours of work; food will
accumulate; your bellies will get emi3ty; and the bread lines will get
bigger," and they did.
I met with a group of these leaders informally in executive session,
and I don't hesitate to say out in the open that there is fine unity of
purpose. The trouble is, just like the Presbyterians and the Baptists
and the Catholics, when you get right down to going to heaven they
all have a different route. That is our difficulty, how just specifically
to work it out. There is no great difference with the groups. It is
fine. W^e meet about every 2 months. I think it is a great thing.
1 think we ought to meet in public — have public meetings.
I told President Franklin D. Roosevelt in the early days of his
administration, "You should do that. You should call in these
folks," and his answer was, "How would I know w^ho to call?" J said,
"Don't call who you want to call, but you call the men whom the
folks have called to represent groups. Let's sit around the table
here; let's get Bill Green, Phil Murray, Mr. Patton in the Farmers
Union, Mr. Goss of the grange, Johnston of the Chamber of Com-
merce, the National Manufacturers' Association, and all the other
groups. Let's get all the national groups around the table."
The Chairman. This then is certain. You don't agree that in
order to meet world trade in the future, in the post-war era, after the
2 years have expired, as provided in this Steagall Act, you don't
believe the farmer ought to be compelled to take a price that is below
parity for the crops that are consumed in this country?
Mr. O'Neal. He wants to be on an equal basis with other groups,
that is all he asks.
The Chairman. And we will have to handle the foreign trade in
some other way, you think?
Mr. O'Neal. I think the converse is wise, as I said to you. I was
passing through Washington before you had your hearing. I talked
to leading Republicans in the Senate and the leading Democrats in
the Senate. They asked me the question, "Wliat are we having the
hearing for? We presently have laws on the statute books," and we
have. Now, we have got, of course, a lot of laws which have been
written which are not properly administered.
The Chairman. That is not the fault of Congress.
1530 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. O'Neal. That isn't your fault. We have to get that done
right, and so haye you. It is a mutual responsibility, to carry out the
law.
The Chairman. That is right.
Mr. O'Neal. But I want to say to you gentlemen, as I have said
again and again, as I have said all over America, "Just look; we have
12 great broad basic laws that have been passed, that it administered,
right would safeguard the interests of the American farmer at no
heavy cost to the American people." They are on the statute books.
The Chairman. I agree with you.
Mr. Hope. You are in favor of the provision that is contained in the
Surplus Property Act with reference to the disposal of siu'pluses
abroad under which we are operating the program now?
Mr. O'Neal. Sm-e.
Mr. Hope. You expressed yourself at this cotton conference.
Mr. O'Neal. Yes. I just want to say this: I was delighted to see
the Congress adopt our policies which we recommended to this group
of outside representatives of the general public to advise the Adminis-
trator, and I notice that Congress adopted that. Mr. Byrnes is the
Administrator. I have a copy of the law right here that covers this
reconversion program.
Mr. Hope. Of course, the State Department is supposed to be
opposed to that, and Mr. Clayton is supposed to be opposed to it.
Mr. O'Neal. Well, I think Clayton is a very fine fellow. I do not
agree with his free trade thing. I tell him he reminds me of my great
grandfather. Fi-ee trade is marvelous, if everybody will do it. Fine.
I will say this for him, though, he is a very good trader, as the record
will show. He knows the foreign markets. He really does. That is
something we Yankees — sometimes I call myself a southerner, but
I am a Yankee when I talk about trade^we Yankees have got to use
good sound trading methods; we are going to have to trade and not
give stuff away.
Mr. Hope. Doesn't it seem to you in the next few years, at least,
a lot of international trade is going to be carried on, maybe not by
governments, but through governmental agencies? We know that
Russia will carry on its trade that way; we know that the British plan
seems to be a good deal along that way; that probably the occupied
countries and all the countries in central Europe are going to be so
situated in respect to credits and foreign exchange that they will
probably have to have very strict regulation of foreign trade. It
seems to me whether we like it or not, probably most of our foreign
trade will have to be carried on with some Government supervision,
Mr. O'Neal. You are right.
Mr. Hope. Or through governmental agencies, because you will be
dealing with governments and government agencies, in other countries.
Mr. O'Neal. You are right. I think you put your finger on a verv'
important thing, and I say this: We ought to study a little better
how England does her trade. She is pretty smart, you needn't fool
yourself. It is the Government, all right, but wait a m.inute. It is the
banks, it is the industries, it is organized labor, Wliile it is done under
the Government, every one of those agencies have a lot to say about
formulation of policies. So I am saying, as I have said to the Ameri-
can bankers, and I have said to union labor and all the rest of them,
"Now, listen! To be practical men, don't turn your thimibs down on
POST-WAR ECONOMIC POLICY AND PLANNING 1531
England." You have to take your hat off to her. We know she is
in a desperate situation. She has been marv^elous in centuries past,
and she has been bled white several times, but she has come back due
to the things you can put your finger on right there. In this country
statesmen have not only to be diplomats and wear long-tail coats and
black ties and drink plenty of liquor, they have got to be more than
that. They have got to be men with brains.
I have no fear at all, if the administration and you gentlemen in
Congress will demand it, that you can get around the table and do
this thing, in spite of wdiat Russia may do or what England may do.
We have all the cards, if we just have sense enough to play them.
Mr. Fish. We have the goods, and we have to have sense enough to
meet the situation.
Mr. O'Neal. We have more than that. We have them in our own
hands. When you play a game, solitaire isn't worth anything. You
have to have a real poker game and just play it all around.
Mr. VooRHis. Mr. O'Neal, in the matter of exportable surpluses of
our commodities, do you mclude as part of your program export
subsidies on those?
Mr. O'Neal. Yes.
Mr. VooRHis. That is what I understood.
Mr. O'Neal. That is right.
Mr. VooRHis. Then I want to ask, "Who is going to pay the
subsidy, Mr. O'Neal?"
Mr. O'Neal. The taxpayer. Let me ask the chairman and you a
question right there, if I may. Who pays the tariff?
Mr. VooRHis. The people; the country ultimately.
I would like to comment tliat I do not agree with what somebody
said, that if a law is not properly administered, it is not the fault of
Congress. I think it is partly Congress' fault. I think it is one of
Congress' responsibilities to see that the laws Congress passes are
propei'ly administered.
Mr. O'Neal. I certainly agree with you. I have seen speeches by
you and others, and I would like to see Congress really reorganize
itself. This isn't officially for my organization, but I think you ought
to have better salaries. I know the agony 3^ou go through up there,
and you ought to reorganize yourself and be familiar with all these
administrative agencies that you have set up. This country is a very
large country, and the people are looking to you 435 men.
Mr. VooRHis. I w^ant to ask about one question — I want to ask
about a million, but I will ask one more only.
Mr. CoLMER. Before we leave that, Mr. Voorhis, I don't like to
leave this thing about enactment matters, but how is Congress going
to aflminister and enforce the laws? I wish you had included some-
body else in there besides them.
Mr. Voorhis. I didn't say it was all Congress' fault. I said it was
partly Congress' fault.
Mr. Colmer. After all, the executive agencies have more to do with
the adm inistration of the laws than Congress.
Mr. Voorhis. Of course, but if an executive agency fails to carry
out a law in accordance with the intent of Congress, it is up to Con-
gress to check that executive agency and do it by the amendment of
the law, if necessary.
1532 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. CoLMER. Then, agreeing with the distinguished farm leader
and with you about the woes of Congressmen, when are Members of
Congress going to find time to check the administration of laws, with
all the other duties that they have to perform? I think that the
administration is squarely in the lap of the executiv^e branch and not
Congress, but I say that academically.
Mr. VooRHis. I would like to answer your last statement, but I
won't. I think the committees of Congress could do it with regard to
laws we have passed.
The Chairman. May I suggest we have set up a committee to do
that very thing?
Mr. O'Neal. I understand you have, and I congratulate you.
In other words, what Congressman Voorhis means, under the Con-
stitution— you are all constitutional lawyers — you are right. On
the other hand, parts of Government are interlocking and mLxed up
a little bit. I am glad you have a committee to check on those matters.
Mr. Voorhis. Now, I tried to divide your statement up into major
points and minor points, Mr. O'Neal, and I got down to 12 on majop
points, and I have 28 minor points, and I am only going to ask you a
question on one of them. This is maybe a little bit of a mean -ques-
tion, but I wonder whether, in connection with the stability of price
levels — I agree with you completely that we should attempt to get
mternational monetary stability, and I agree with you even more
that you cannot have international monetary stability unless you
have domestic monetary stability — do you believe that it is possible
for Congress to pass a law governing the creation of monej^, including
credit money, to pursue a tax policy on the other side of the question
which would render inflation and deflation virtually impossible, or
that could control them very substantially?
Mr. O'Neal. I think you can go a long way, as you know, even
before you cume to Congress, way back yonder in the twenties. I
remember when I heard Fisher and Commons and other economists,
and I remember well the World Economic Conference in London and
what was said about it. I tell you, that is something that Congress
has neglected.
Mr. Voorhis. I agree with you.
Mr. O'Neal. You agree on that. In other words, great progress
has been made along that line, as I see it.
Mr. Voorhis. I have a personal interest, because I have had a bill
there for 8 years to try to do that.
Alay I ask you this one thing, and then I will quit: Do you believe
that the better job the Government does of maintaining a stability
of price level and a true honesty in the value of its dollar from decade
to decade — that the better it does that job the less necessary it becomes
for a government to control the intimate economic activities of the
people? In other words, the more completely it does a good job of
controlling the monetary and fiscal end, the less necessary other types
of control become?
Mr. O'Neal. Of course, you can illustrate that easily. Just the
common little illustration of Brazil's inflated currency. Brazil pro-
duces cotton. We have a tariff, a quota, and so on, and Brazil takes
our market. If you are going to have that sort of policy, it is going to
be awfully hard to have world trade. In other words, you have got to
have — and I have sat down with these fellows right in this hotel; I sat
POST-WAR ECONOMIC POLICY AND PLANNING 1533
down with President Chase, of the Chase National Bank; and the
president of the American National Bank, Burgess; and Brown here,
of the big First National Bank, and we discussed this thing, and they
asked me frankly about it, and I said: "I will tell you; you talk about
tariffs, talk about world trade, and all of these things; this monetary
thing, to a great degree, is the key to all of it, both domestically and
foreign." There isn't any question about it. I don't think anybody
denies it. Wlien we set up the Federal Reserve System the back-
ground was pretty good. It needs improving, but it is a pretty good
fiscal agency. Is there any reason why that agency could not be ex-
tended further? It is here. I do not see why it couldn't begin to do
these things.
Mr. MuRDOCK. Mr. O'Neal, I think you have given us a very
thought-provoking presentation here, and I find myself agreeing with
it in very large measure, especially with the part regarding compulsory
military training. I notice, beginning on page 14 of your paper, that
you specify eight points to justify your attitude toward foreign trade.
Earlier you have given a lesser number of points to show how domestic
agriculture and industry can be balanced. You leave some ground
uncovered, I think, in this first presentation.
I want to know how we are going to be protected from the crushing
surpluses which w^e have had and will be having again as soon as the
world is less hungry. You favor support prices. Where is the money
coming from for that? As now, from the Public Treasury, or would
it be better if we had some excise tax so that the consumer, the whole
consuming public, would pay for the financial support of the price
program?
Mr. O'Neal. As I said, Mr. Murdock, I think the farmers are per-
fectly willing to adjust so that there will not be any great burden. I
think I have got that here in my folder. I remember the Commodity
Credit Corporation made a report, I thinlv it was last year, when we
were carrying on the Steagall provisions then to a limited degree, and
the commodity loans losses at this time were not very great. As a
matter of fact, the greatest surplus we had was cotton; and I had a
letter from the commissioner of agriculture in Georgia saying the
Government had made a hundred million dollars in handling cotton
and it ought to be given back to the farmer. My reply was: "No ; the
Government is still carrying 2,000,000,000 bales of cotton and has pro-
tected the domestic price level to a great degree, and that money should
go to the people."
As a matter of fact, it has not in the past cost us so much money.
Farmers now realize the danger of it, and most of them are willing to
adjust. But they want to see developed, as far as possible, an outlet
for these surpluses in foreign markets — ^that is, certain groups of
them — and try to keep full production, because, after all, peacetime
volume is where the money comes from.
Mr. AluRDOCK. I agree with you fully that full produqtion is our
goal, and stimulating the proper foreign outlet is the safety valve.
Mr. O'Neal. That is right.
Mr. CoLMER. I wonder if Mr. Arthur has any questions?
Mr. Arthur. Mr. O'Neal, you mentioned that your organization
has supported the selling of cotton in the world market at below
domestic prices.
Mr. O'Neal. That is right.
1534 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Arthur. Do you distinguish in your mind between that activ-
ity, Government-conducted, and the cartel activities, or the kind of
activities associated with Russia and Government buying and selhng
in world markets?
Mr. O'Neal. Yes. That cartel thing is very debatable. I think
cartels ought to be controlled. We really have a cartel with this
wheat agreement, you know, selling surplus wheat. I think, properly
safeguarded, it might work.
Mr. Arthur. You are in favor of properly safegu arded cartels?
Mr. O'Neal. Yes. In other words, just to be a practical man, I
see no reason why we could not have a round-table discussion with
India, Egypt, China, cotton-producing Brazil, and South America,
and discuss those surpluses. You can call it a cartel the way it is.
The Chairman. You wouldn't say a Government agreement is a
cartel. What we think of as a cartel is what some business concerns,
international businesses, get into; but I do not think we ought to
brand an international agreement like our wheat agreement as a cartel.
Mr. CoLMER. It depends on whose ox is being gored.
Mr. O'Neal. Yes. In other words, it is a business transaction, and
it depends on whether it is done by Government or by private industry.
The Chairman. Government agreements are made in the interests
of the general public and for all the people, and the business cartel is
made for a limited special group. There is a difference there.
Mr. O'Neal. Wait a minute, now. Just check the record. I am
like Al Smith. I remember when the steel industry was developed in
this country. Do you remember that?
The Chairman. I am not quite as old as some of you fellows.
Mr. O'Neal. I saw the brains of man, maybe Government helping
a little bit, build in my old State of Alabama the only big industry we
had in the South, an enormous steel industry. I saw around Lake
Michigan these -great ore beds in Michigan developed. Well, the
Goverimient was here. You were still in Congress, or your predeces-
sors were, and you could check them. M}^ conclusion is, and I am
saying to big businessmen now: "Don't make it so that the Govern-
ment has to step in here. You fellows developed that great industry,
go and develop more." I think that businessmen ought to be con-
sulted, ought to participate in this thing. Check them when they do
wrong. That is all right.
Mr. Hope. Mr. Chairman, I would like to make an observation
just on that point. It will just take a minute. When we had the
cotton hearings down in Washington, I asked Mr. Wliecler, of the
Department of Agriculture, that very question: What is the differ-
ence between a Government agreement, like the wheat agreement,
and a cartel? Well, he thought a Government agreement in itself was
somewhat different than a private agreement. He made that dis-
tinction, but I am not sure that is a very valid distinction. But he
did make a further distinction, in that he said these Government
agreements which we hope to make would include consumers as well
as producers, which I think is — — -
Mr. O'Neal. That is protection.
Mr. Hope (continuing). Which is protection, and is considerably
different so far as the objectives are concerned.
If you take the consumer into consideration you have a different
objective than the mere agreement of producers to control prices.
POST-WAR ECONOMIC POLICY AND PLANNING 1535
The Chairman. That is exactly the point I was trying to make. In
other words, it represents all the people. ^
Mr. O'Neal. The point that I am driving at is this: Let's get big
business concerns into these agreements. They know the game. Do
you men think that General Motors or General Electric are worrying
about these things? They have a world market for everything.
They know how to sell. Now, let's get around the table with the
steel people, and all that, and let's get around the table with the con-
sumer and producer that is trained — not a politician — a world diplo-
mat, that is trained in rock-bottom business methods, that is trained
in business methods in trade.
The Chairman. In other words, we had some of these cartels in
Germany that were dealing with things vital to our war effort that
embarrassed us.
Mr. O'Neal. And it fooled us. You still had Congress. In other
words, you didn't check. I remember when the potash business was
developed. As I understand, the German interests did it and it is
now owned by the Surplus Property, or whatever it is. But they
developed it, after all. Now, if we had checked it, you see what I
mean.
The Chairman. That is right.
Mr. Arthur. I have one other question. You mentioned that
farmers recognize the need for adjustment. I take it what you have
in mind is that <here may be prices which would tend to price the
farmer out of a part of his market, and the farmers are willing to
accede to some adjustments that would recognize the trade situation.
Mr. O'Neal. That is right.
• Mr. Arthur. That, I take from your previous statement, does not
mean adjustment of the Steagall prices, the support prices for 2 years
after the war; is that correct?
Mr. O'Neal. That is correct.
Mr. Arthur. It would be after the Steagall period you would feel
that these price levels should be reexamined and a new basis con-
sidered, but that the program might be carried on after that period
on somewhat the present basis so far as our support prices are con-
cerned.
Mr. O'Neal. It might be with a broadening out, as I say. The
farmers will adjust, so you don't have these enormous surpluses. The
farmers will agree with that. They don't want to carry these enor-
mous surpluses.
Mr. Arthur. One other question, in order to help us in developing
the material that will be in this record. I understand at your con-
vention in Chicago last week you had presented before you the views
of this land-grant college committee through Mr. Noble Clark, who
was our witness Saturday. Can you give us, very briefly, any points
of violent disagreement that your members presented after hearing
his views? They are not exactly in line with the program presented
by the Farm Bureau Federation. I think it would be profitable to
see that sharpened.
Mr. O'Neal. There is quite a disagreement shown in the brief.
Mr. Arthur. I am thinking of the personal reactions.
Mr. O'NsAL. We took contrary proceedings in that group, as shown
in this brief. I can't go into the detail. I would have to go all over
it again. But we were in sharp disagreement with some of the things,
1536 POST-WAR ECONOMIC POLICY AND PLANNING
although I think it is a wonderful statement. But we were frankly
in great disagreement with parts of it.
The Chairman. Air. O'Neal, are you going to file that brief with
the record?
Mr. O'Neal. Yes, sir. I will give you the brief and then I would
like to have the privilege of giving you the resolutions, and then you
can see what it says in more detail. If you want to read it, I will
give you the speech I made at the farmers' convention. It pleased
me greatly, as it would you. It is one of the times I can just speak
what I have on my mind, and I did, and it tickled me to death that
the farmers agreed with me.
The Chairman. We would be glad to have it.
Mr. Hope. Air. Chairman, as I understand, we have a 12 o'clock
luncheon. Airs. Sewell is here, and I do not want to confine Airs.
Sewell to a few minutes. We have not had any other women or any
other farm groups before us.
The Chairman. Would you rather come back after lunch?
Airs. Sewell. I would rather not.
Air. Hope. Aly only thought, in fairness to Airs. Sewell, is that we
ought to give her more time than we have now. She represents a
great organization and has been in this sort of thing for many, many
years. I would like her to have all the time she needs.
Air. CoLMER. Air. Chairman, may I make a suggestion? There
were a few observations I wanted to make and a few questions I
wanted to ask Mr. O'Neal. I wonder if it would be agreeable if it
could not be arranged that Air. O'Neal's time was such that he could
meet back with us for a few minutes after lunch, and then we would
hear Airs. Sewell, too. I agree with Air. Hope. I would like to hear
her at more length.
The Chairman. I suggest you ask Air. O'Neal your questions now,
and then we will have Mrs. Sewell.
Mr. CoLMER. Just briefly, there is just one question that might
take a little time. I understand you are not in agreement — Mr.
Arthur touched on that — with Air. Noble Clark and Dr. Black. You
did not hear Dr. Black's testimony. The trend of it was what we
needed was a floor in a long-range agricultural program for agricultural
products. All of these support prices could go out of the window.
1 think that is a fair statement. You don't agree with that?
Mr. O'Neal. No.
Mr. CoLMER. Very well. I shall not take the time to ask any more.
Air. O'Neal. I would just like to say this: I was impressed with
Mr. Clark's statement, but I do not think, frankly, he took into con-
sideration this factor — it is a tragedy to me that in my 69 years the
farmer most of the time has really not been recognized as a part of
our basic economy. Now, you have been good to us, and all that,
but the American people as a whole do not really understand that.
His paper was mostly that the prosperity of American agriculture
depended primarily on the workers having wages and industry being
fully employed. I agree with hanging together or we hang separately.
I tried to bring that out, but the thing that distresses me is that the
public does not really realize what I brought out in my paper and in
my address. I gave definite figures showing here the place of Ameri-
can agriculture in our economic life. In other words, he does not
believe in controlling surpluses.
POST-WAR ECONOMIC POLICY AND PLANNING 1537
Mr. CoLMER. I am inclined to be iii accord with you, sir. I also
got the impression that you thought we had a very good legislative
program now, and if it were properly administered we would be in
pretty good shape.
Mr. O'Neal. Yes, that is, if the farmers do their part — let me add
that.- You Congressmen have done. your part. A lot of the farmers
are worried about the very thing you and Mr. Hope and the other
gentlemen asked questions about. They are worried about these
enormous subsidies.
The Chairman. I want to get you right on this very point. As the
law is now wi'itten, of course, the farmers by vote can control the sur-
plus of wheat and cotton.
Mr. O'Neal. Corn, tobacco, rice, peanuts.
The Chairman. Do you think we ought to keep that law and when
the clanger pomt is reached on the surplus question, there ought to be
some restriction then on production to meet that situation?
Mr. O'Neal. That is what rny farmers said in this resolution.
The Chairman. In other words, we should never abandon or lose
the machinery that we now have to control production when surpluses
get clear out of bounds?
Mr. O'Neal. Let's put it this way: Wliere would we have been when
this war came on if we had not had these surpluses? Where would wo
have been? The cost to the Government, as the record will show, has
been very minor, as you know, if you wUl look at the commodity
credit account. As I say, we are willing, yes, to adjust.
You take the tobacco fellows right now, they are just scared. Of
course, the processor wants to take the lid off. I remember when
tobacco was 8 cents. It has not penalized the American people.
I would like to ask Mr. Hope, don't you think the wheat farmers
are afraid of the surplus?
Mr. Hope. Very definitely so.
Mr. CoLMER. Now, a general question: This committee here this
morning is, you know, a subcommittee of the full Post-War Economic
Policy and Planning Committee of the House. This Committee, if
you have honored us by reading our fourth report, came pretty well to
the conclusion that the best method of the solution of the post-war
problems, agriculture, industry, and all other segments of our economy,
was to maintain a high level of production with companion high level
of wages and national income ranging from one hundred thirty to
one hundred fifty billions of dollars. Do you agree with that philos-
ophy generally?
Mr. O'Neal. I certainly do, with this opinion, that it can't be done;
that is a pipe dream, unless some of these things that I have definitely,
and my farmers have, put then' finger. on, are done. It just can't
be done.
Mr. CoLMER. I agree with you, sir; that agriculture is a necessarily
component part of that program and a very essential part of it. I
agree with you. But I was speaking of the over-all picture.
Mr. O'Neal. Sure.
Mr. Colmer. Now, I wish I had a Uttle time to discuss another
matter.
The Chairman. I don't want to leave that. Let me ask this:
you can't have industry protected and labor protected and then put
farm commodities down where it will be on a competitive basis with
an unprotected world market, can you?
1538 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. O'Neal. No.
Mr. CoLMER. Certainly not.
Mr. O'Neal. I would like to take the time to give you some figures,
I will read 6 points. Here is 1, just 1, and you know there is not
1 in 10,000 people who knows that; that in 1940 those working on
farms, including farm families and hired labor, numbered 10,580,000
souls compared with 11,288,000 employed in all manufacturing.
People in America do not know that. They just don't understand it.
I remember Senator George Norris, and men like that in the past — ■
and I have spent 25 j^ears in the Congress working for farmers — who
said to me, "Ed, we have struggled, we have struggled and we have
struggled, and we have accomplished a whole lot and all that, but, you
know maybe the farmer has lost the trick. He ought to know how to
strike. Maybe he should learn how to strike."
Well, you know a farmer isn't going to do it. He is not going to do
it. That is not in his make-up.
Now, we all hang together or we hang separately. That is what
I tell union labor. All we want of that pound of cotton is 20 cents
for parity, and you have half a pound in that shirt you have got on,
that is all you have got. Is there anything wrong for you to give the
producer lo cents for the shirt that covers your nakedness? Is
anything wrong for you to pay the producer for wheat?
I remember one time Mr. Hope and Jim Carey and I were on a
radio program up at Des Aloines. Well, now, what does the farmer
get out of a bushel of wheat, with bread 10 and 12 cents a loaf? The
difficulty is the consumer doesn't understand and labor doesn't under-
stand.
Mr. VooRHis. Doesn't the farmer get about a cent and a half out
of such a loaf?
Mr. O'Neal. Just about. Now, I am glad that you set up in your
committee — and John Flannagan has asked me about it, with other
farm leaders — ^to study this distribution cost problem.
But getting back, we have got to do this, and in order to do it,
Congressman Colmer, we have got to produce. We have got to trade
and all segments must have purchasing power. That is all there is to
it, and it is the most stupendous thing.
I take off my hat to industry. I take off my hat to organized labor.
A half-fool can get in the assembly line at Ford Motor Co. Just a
sap can get on there.
Mr. VooRHis. That is right. I did.
Mr. O'Neal. I did, too. I did. Now, the farmer, he has pro-
gressed along these production lines. He is efficient, too. He has
no assembly line. You talk about little business now, there are
6,000,000 farms. The only really little business you have right now
in America is the American farmer, and it is a sound business, and you
have to protect it.
Mr. Colmer. Mr. O'Neal, just to demonstrate that, I am in thor-
ough accord with what you say and I am finding no fault with that.
I am going to jump quickly to the $64 question and quit with that.
You and I were reared in adjoining States. We know that the chief
problem down there in Alabama and Mississippi is the small cotton
farmer.
I have been quite a bit disturbed in these hearings by hearing some
of these economists talk about liquidating these little fellows.
POST-WAR ECONOMIC POLICY AND PLANNING 1539
I think when you liquidate the small farmer you are going to
liquidate, or at least injure, the society of this country, because they
are a very, very stable people and contribute substantially to the
stability of the country.
Now, I know you have given a lot of thought to that. Possibly it
is not fair to ask that question, but I could not let this opportunity go
from a witness such as you. Could you give us just a brief statement
on that?
Mr. O'Neal. I have never changed. I told Jim Carey the other
day in a conference: "Well, you want annual wages. Everybody is
for that. It would pay you to go with us down South and study
the sharecropper and tenant system." Jim held up his hands, both,
of them, this way, and surrendered.
I said: "Do you really know the philosophy? It has been abused,
sure, just as business practices, labor practices,' are all abused, but I
am saying fo you if you give that farmer, that tenant farmer a price and
let him have a volume he is rewarded according to the labor he puts
out." What other industry in American does the same thing? \\Tiy
do capital and labor meet? So a man is rewarded for his toil on the
basis that you have acknowledged over hundreds of years in my
section and your section of the South. It is sound and fair, and I will
challenge anybody — I will show the records of those tenant, farmers
and those sharecroppers, and it would make some of you fellows
sitting up there look a little cheap, the income they make when they
get the price.
There is a principle involved there. So I say that we will always
have tlie tenant farmer, we will always have the sharecropper We
will always have the little farmer.^To illustrate the point: I was down
in North Carolina. I went to the meeting of the Grange at Winston-
Salem and then went over to Raleigh. I declare, it just filled my heart
with joy to hear the story of a man that had 28 acres of land. Under
the price he was getting for peanuts, and he was getting for tobacco
and he was getting for cotton, 28 acres of land is not too small a unit
in certain areas of the United States. Naturally, when we come up
here, we have to have 160 acres, but in your State and mine 70 or 80
acres is a unit. We have to have it. That is all right. But we are
always going to have that little farmer. If we don't, we are going to
go naked and we are going to starve. That is my philosophy.
One of my old friends wrote me and said that they always call me a
Tory farmer. The enemy call me a Tory farmer. Well, I know but
one man in the United States that has more long-time tenants, and
that is Harper Sibley down in that part of the country. Sons and
grandsons of old slaves and white men that I have known, and worked
with for generations, my tenants, and I will tell you their net income is
bigger than you fellows and anybody sitting along here who gets in the
neighborhood of $10,000 from Congress. That is true when you
give them a price. They don't have to have many acres of land.
Now, down in your State they make a bale an acre.
Mr. MuRDOCK. In Arizona, nearly two.
Mr. O'Neal. Yes. All right. There is $200 an acre. They handle
8 to 10 acres of land, and the seeds in addition to that. The same
thing with tobacco, seven or eight hundred pounds of tobacco an
acre, and they have up to 40 to 50.
1540 POST-WAR ECONOMIC POLICY AND PLANNING
The Chairman. Mr. O'Neal, we will have to go to lunch now.
Mr. O'Neal. I hope that Swift & Co, will give you plenty to eat.
I will leave this material with you, or send it to you.
Mr. Hope. I want mine now.
The Chairman. I would like to have mine now, and I want to say
for the record that we appreciate this wonderful discussion that you
have given us today.
We will adjourn until 2 o'clock.
(A recess was taken until 2 p. m.)
AFTER RECESS
(Whereupon, thei committee reconvened, pursuant to recess.)
The Chairman. The committee will resume.
We are honored to have with us today Mrs. Sewell, from whom we
would be very pleased to hear at this time.
TESTIMONY OF MRS. CHARLES W. SEWELL, OTTERBETN, IND.,
ADMINISTRATIVE DIRECTOR, ASSOCIATED WOMEN OF THE
AMERICAN FARM BUREAU FEDERATION
The Chairman. Mrs. Sewell, will you give the reporter your name,
your afhliations, and the subject that you wish to discuss today?
Mrs. Sewell. I am Mrs. Charles W. Sewell, Otterbein, Ind. I am
administrative director of the Associated Women of the American
Farm Bureau Federation, an organization of 880,000 farm women.
Mr. Chairman, if I had gone on before noon, I would not have taken
very long, but I have had time while you were visiting to think up
several more things that I want to tell you. So with your indulgence
I would like to start out.
The Chairman. Mrs. Sewell, I know that my friends, Mr. Colmer
and Mr. Hope, will be especially interested in knowing that you have
more time to give us, so we will proceed to hear from you at this time.
Mrs. Sewell. Thank you. I will try not to take too long.
To start out with, I think the fact I have been granted this privilege
marks a high spot for farm women. We have been accustomed to
stay home and take care of the children and doing the usual duties of
the farm, but we have not been found in public places or making
public speeches very long.
A number of years ago, when the noted philosopher, George Russell,
better known as AE, was in this country, I chanced to hear him make
an address at a banquet at which Glenn Frank was presiding. I shall
never forget Mr. Frank's discussion of how Mr. Russell spoke to him
when he was introduced to him. He said, "May I inquire if 3''0ur
interest in agriculture is passionate or purely professional?"
Mine is passionate. I am interested in agriculture and the problems
of the farm home and farm women, because I am a farm woman and,
since Mr. Sewell's death 1 1 years ago, I have been carrying on my own
farm in partnership with my son.
The Associated Women of the American Farm Bureau Federation
is an affiliate of the American Farm Bureau Federation, made up of
the membership on behalf of the wives and members of the farm fami-
lies, associated also with about 50,000 other farm women in home-
demonstration councils and organizations in a number of our States.
POST-WAR ECONOMIC POLICY AND PLANNING 1541
I think the reason we wanted to make this appearance while you are
discussing post-war planning for agriculture might be found very
comprehensively in some figures in the 1940 census report. We read
there that 89 percent of the farm homes today have no bathtubs, 85
percent have no electric refrigeration, 82 percent have no running
water — it runs, but you run after it — 69 percent have no electric light,
and 40 percent have no radios.
There, I think, gentlemen, you have a big American market, ready-
made.
The Chairman. What about telephones?
Mrs. Sewell, I do not have that figure, but it is one that needs to
be investigated.
Now, I should like to read you some of the resolutions which the
ladies have prepared and which are not incorporated in those which
President O'Neal read to you:
While our United Nations are winning the war, women on the home front must
hold fast to the faith of our fathers, cherish the ideals of our democracy, and
strive for higher spiritual, intellectual, and physical values to cope with the emer-
gencies beyond the present crisis. In the days and years to come, our democratic
institutions which have guaranteed our liberties will be faced with critical ordeals
as never before. Farm women must assume their big share of responsibility in
the protection and perpetuation of these historic institutions.
The American home is the foundation of our faith and ideals and must be pre-
served at any cost. It is the institution for which our boys and girls are fighting
and dying. Upon the parents in the home rests the responsibility of preserving
the traditions that have made America great. This world conflict has brought
about many new problems in family relationships, management, and income.
Parental apathy is proving to be the most fertile ground for the delinquency
of j^outh. Too often we have thought juvenile delinquency as a separate and
distinct problem when in reality it is actually the result of adult delinquency.
The home is still the basic unit of society and it is in the home where we inculcate
the fundamental ideals of character and the customs and traditions of American
life. In the period of readjustment we must do everything in our power to pre-
serve and protect the inherent values of the home and family. The future world
depends upon the high ideals of Christian homes.
We appeal to farm women within our respective communities to develop prac-
tical and effective services in befriending and counseling of youth.
On education, we have this to say:
Fulfillment of our American ideals will depend to a great degree upon a high
standard of public schools.
Thirty-four percent of the farm population but only 23 percent of the urban
population are under the age of 16 years. Many rural children are penalized by
the following disadvantages: Inadequate school facilities, in many instances
shortened or interrrupted school terms; insufficient school transportation, and
frequently lack of coordination in the provision Of same by governing bodies and
inadequate and inequitable support.
Because of the mobility of our population, the local taxing unit is no longer
solely responsible for the health and education of the children living within that
unit.
We favor reasonable Federal grants-in-aid, to supplement State funds to be
allocated in proportion to State needs, dispensed by State boards with adequate
agricultural representation and entirely independent of Federal jurisdiction.
We favor the maximum amount o*f local guidance and initiative consistent
with operating efficiency and sound program of education.
On health, I should like to read a resolution w^hich we passed last
year, which we say we reaffirm, and I think you wUl understand this
one:
We favor an intensive attack on the problems of better medical care for all
groups, particularly in rural areas. In general, we favor action on this problem
99579 — 45— pt. 5 21
1542 POST-WAR ECONOMIC POLICY AND PLANNING
'^l-*u\^°^"",*^'"^^ organization of cooperative health and hospital associations
which have already proved their value. ^i^'""*,
In 21 of our Farm Bureau States, Mr. Chairman, we have a coop-
erative agreement with the Blue Cross or similar plan of hospital
msurance on behalf of our Farm Bureau membership.
Mr. VooRHis. May I interrupt, Mrs. Sewell?
Mrs. Sewell. Certainly.
Mr. VooRHis. Does that cover all of the Farm Bureau member-
ship m those 21 States?
Mrs. Sewell. Yes.
Mr. VooRHis. It does?
Mrs. Sewell, If they choose to apply for it.
Mr. VooRHis. That is what I mean.
Mrs. Sewell. It is voluntary.
Mr. VooRHis. Each individual family on its own motion has to
take advantage of it?
Mrs. Sewell. Has to take advantage of it; that is right. And'^in
Ohio and Indiana we have surgical benefits added to the hospital
care and conducted through their own life-insurance companies.
Now, this is what they say this year:
We reaffirm our long-time position on the health problems of rural America
We recommend full cooperation with established units, with emphasis on clinics
dental, hospital surgical, and medical care, immunization and other preventive
measures. ^
We also lend our support to the Federal piogram for the control of verereal
disease.
The Chairman. Pardon me, before we pass from that very inter-
esting question. Do you work in comiection with the Farm Security
Administration?
Mrs. Sewell. No.
The Chairman. A program with the same objective?
Mrs. Sewell. In some of our States we have worked in cooperation
with that, but this does not reier to ihat at all. We are thinking
rather, of voluntary, rather than anything of a compulsory nature. "'
The Chairman. I see. Thank vou.
Mrs. Sewell. Continuing under "Health":
To meet the problem of maternal and child care, we favor the continuation of
the present plan of administering such services.
To the extent Federal assistance is needed it should be limited to financial
grants, without Federal control, to the States on the basis of need, with local and
btate governments responsible for performing this function.
The Chairman. Do you think it is possible for us to rely upon our
States to do that very important job for its citizens rather than ask
the Federal Government to come in and make a contribution?
Mrs. Sewell. I think the program has to be an integrated one,
Mr. Chairman. I think we have^got to look after the income of the
farm family. If they are granted a parity of income and equal
opportunity, I believe they can take care of their own needs at a much
lesser cost than can be done through the Federal Government.
The Chairman. In other words, you think that program should be
carried on by the States if the people are in financial condition to take
care of it?
Mrs. Sewell. Yes.
The Chairman. And you agree that if the farmer gets a fair orice
for his commodity he will be able to do those things?
POST-WAR ECONOMIC POLICY AND PLANNING 1543
Mrs. Sewell. I fully believe that. On nutrition:
Since nutrition is an important part of personal well-being and national welfare,
we believe a well-rounded national nutrition program should be developed for
attaining better health for the whole population.
The need for measures to expand consumption, such as the school-lunch pro-
gram, is made more urgent by the prospect of food surpluses. Dire need for food
in the face of food surpluses is not good for the future peace of the world.
We believe the best course of action is to combine measures for raising income
with educational programs for improving nutrition.
We recommend the development of a national nutrition program. We believe
that any such program for improving national health should make use of existing
agencies in its educational program, but should serve to integrate their various
activities.
On citizenship:
The Associated Women have made notable progress in programs of citizenship.
This year for the first time women were included in the delegations from the
American Farm Bureau Federation to the platform committees of the two major
political parties. In our member States women took definite action to encourage
the voting of farm women.
We believe our obligation of citizenship does not end here. We should be fully
informed on matters of proposed legislation and its probble impact on rural home
and community life.
We appreciate our freedoms and right of self-government which can be retained
as our forefathers acquired them by diligent effort of every citizen.
We urge that rural women study not only their own local legislation, but State
and National as well.
We recommend the continuance of study groups and legislative forums, ^\ here
the now exist, and the organization of such units, in other areas, in order that we
may be prepared to express our convictions at the proper time and place.
Now, on military training, President O'Neal read you the resolution
adopted the American Farm Bureau Federation. I don't know
whether he knew or not, because he is very busy, but the women wrote
this resolution first and passed it, and then the men adopted the first
two paragraphs and added the last one which was a little stronger.
There is a passage in that that I should like to call to the attention of
the Congressmen present, and I believe it is found in this statement:
The relative merits and disadvantages of such procedure should be carefully
studied and freely discussed throughout the Nation.
Oftentimes we jump to conclusions and do things very quickly. If
it won't bear study and discussion in various parts of the country then
probably it is not the best thing for us to have. So that is our resolu-
tion on military training.
On peace: . ■
Today, the nations of the world are in closer contact, by communication and
transportation, than the States in our Nation were a few years ago. The hope of
the Allied Nations for peace after military victory depends upon an acknowledg-
ment of mutual interdependence and a willingness to cooperate one with the other.
Women pay a great price for the waging of war. They give their husbands,
brothers, sons, and daughters. Their homes are endangered or entirely destroyed.
The welfare of the family and everything women hold dear is threatened. But out
of the suffering and hardship women around the world inspired by the same ideals
will be able to do much toward solving the problems which inevitably result from
war.
We must not repeat the mistakes of a quarter of a century ago. From the
experiences gained through united effort to win the war we must, with broader
and more sympathetic understanding, win the peace.
We believe that the American Farm Bureau Federation and the Associated
Women should use every rightful influence to see that farm men and farm women
be represented at the peace conference.
1544 POST-WAR ECONOMIC POLICY AND PLANNING
These are the resolutions, and if there are any questions I shall be
glad to try to answer them.
The Chairman. Well, Mrs. Sewell, you have made a very interest-
ing and helpful statement and this committee appreciates your pres-
ence here in giving us the benefit of your thinking on these very im-
portant subjects. I don't know, maybe these gentlemen may have
a few questions to ask you.
Mrs. Sewell. I would be glad to answer them, if I could.
Mr. VooRHis. I would like to go back and just ask you as to some
figures you gave. Did you say 85 percent of the farm homes have
no bathtubs, and 85 percent of them have no refrigeration?
Mrs. Sewell. Eighty-nine percent, Mr. Congressman, have no
bathtubs, and 85 percent no electric refrigeration, 82 no running
water, 69 no electric lights, and 40 percent no radios. I do not have
the figure on telephones, which Mr. Zimmerman asked for.
The Chairman. I would like to ask this question, Mrs. SeweU:
Did you ladies adopt a resolution on the importance of extending
rural electrification to these
Mrs. Sewell. No; because that was taken care of in the resolution
of the American Farm Bureau Federation, We have, of course, asked
that that be done in former years, and reaffirmed our stand on that
in some of the others. These figures bear that out, that of course
there must be an extension.
The Chairman. I understand that Senator Hill of Alabama has
introduced a bill which has for its purpose the placing of a telephone
on the same line of wire, that is made possible through some new
scientific discovery, that will enable every farmer on rural electrifica-
tion lines to have a telephone.
Mrs. Sewell. I am very much interested in that, because in my
own community the telephone line has almost been rendered inade-
quate because of the electric line. It has made it almost impossible
to hear over it, because of some method of installation which will have
to be rectified, and I might say that I wish Senator Hill a great deal
of success in that undertaking.
The Chairman. I want to say further that Congress has in the
last few days of this session passed a very comprehensive bill for
post-war development which will spend more money for farm-to-
market roads than ever before in the history of our country.
Mrs. Sewell. I am quite sure that the farin women will be very
much interested in that program. *
The Chairman. So when we get these farm-to-market roads and
rural electrification extended to the remote sections of our country,
and a telephone in every home where we have electricity, rural
America is going to become a very happy place in which to live.
Mrs. Sewell. It would not be a bad place. The roads have a
very profound bearing on hospitalization and schools.
The Chairman. And on mail, too.
Mrs. Sewell. Yes, and on mail.
The Chairman. When you folks in the country — I was reared
there, too — when we get those hard roads and electricity, telephone,
and the daily mail, we are going to be just about as well off as people
living right here in the Loop in Chicago.
Mrs. Sewell. We will not need to apologize to our grandsons for
leaving them a farm.
POST-WAR ECONOMIC POLICY AND PLANNING 1545
Mr. CoLMER. Would it be a fair deduction from the latter part of
your statement to say that if the price of farm commodities might
be kept up in the post-war era these people could afford the bath-
tubs and so forth that you just mentioned and that it ought to fit
hand in glove with our whole economy, stepping up our whole
economy?
Mrs. Sew ELL. I think I said before you came in that there was an
American market with a challenge to industry and labor to produce
or manufacture and install and service all of that right there within
the farm, but we cannot buy it unless the farm prices are commensu-
rate with the rest of the cost.
Mr. CoLMER. Well, if the farmer has the means of purchasing
these articles, he would be inclined to do it ; would he not?
Mrs. S.GWELL. Absolutely. If he was not, his wife would be.
Mr. CoLMBR. All of wlwch recalls that when agriculture is prosperous
all other segments of the economy are prosperous?
Mrs. Si'SWELL. I think so. That is the way I feel about it.
The Chairman. I would like to supplement that by saying that the
farmers as yet are not enjoying half the things that they are entitled
to have, and really need.
Mrs. Sew ELL. That is right. They have not got half the things
they really need, your entire standard of living.
Mr. CoLM.GR. i think you will find this group of Members of
Congress in accord with your views. We are all for the farmer.
Mrs. Sewell. Thank you kindly.
Mr. CoLMER. We all come from farm districts.
Mrs. Sewell. I appreciate this very much. Is there anyone else
who has anything to ask? I do not want to take a minute longer
than you want to give me.
The Chairman. We will give you all the time you would like to
talk to us. We appreciate it.
Mrs. Sewell. May I tell you what my definition of parity is?
I think I have a story that might fit in here and I can tell it very
quickly.
In the reader that I used as a young girl there was a picture of a
man who was probably a kinsman of my husband. His name was
Sewell. John Sewell was the mint master in the early days of the
colony, and part of his pay was gold coins each day that he got when
the coinage was made. When his daughter, who was rather heavy,
was being married, he brought a great scale in and stood Betsy on one
side and balanced her weight with gold coins on the other.
My husband used to say that that was probably the reason the
Sewell men usually picked out plump wives from then on.
You see there, the things you buy and the things you have to sell
are in a balance, and that is what I think we mean by parity. Thank
you.
The Chairman. Thank you very much.
Mr. Arthur. Mr. Chairman?
The Chairman. Mr. Arthur.
Mr. Arthur. Is it proper at this time to report for the record on
a couple of witnesses who have sent us a message that they would
not be able to attend the hearing?
The Chairman. If you will read them, why, it will be in order at
this time, and we will be glad to have it in the record.
1546 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Arthur. We had called Mr. Anderson Pace, who is chairman
of the Illinois Post-war Commission. Mr. Pace was sent to keep an
appointment at the hospital which he said he could not change. He
hopes he will be back with us tomorrow morning, and we will hear
him at that time.
The Chairman. Very well.
STATEMENT OF RUSSELL SMITH, LEGISLATIVE SECRETARY,
NATIONAL FARMERS UNION
Mr. Arthur. The other is a whe from Mr. Russell Smith, legisla-
tive secretary of the National Farmers Union.
His wire from Washington reads as follows:
Sorry that illness prevents my attendance as scheduled.
Then it goes on to say:
We would greatly appreciate it if you can either read to the committee, or
have inserted in the record of the hearing, the following statement of principles
that we regard as governing in consideration of post-war agricultural legislation.
I believe the first paragraph is a statement of purpose.
To make secure prosperous family-type farming the predominant pattern
of American agriculture.
|r Second, to assure to the Nation an abundant supply of the food and fiber it
needs.
To preserve American soil as a permanent national resource.
Now, the program which follows has 11 points:
First, every national farm program must be shaped to promote the security of
the family farm through the principle of greatest benefit to those whose need is
greatest.
Second, the programs of individual Government agencies must reach the indi-
vidual farm as a single program through the use of a single negotiated voluntary
agreement between the farmer and his Government.
Third, democratic control of national farm programs in farm communities must
be assured through elective farmer committees with full power to ratify agreements
between farmer and Government.
Fourth, parity of citizenship for farmers with city people must be achieved
through works and services programs for rural areas that will provide schools,
health facilities, roads, housing, libraries, electricity, and the benefits of technology
for farm home and farm plant, on a basis of equality with urban areas.
Fifth, a new parity price formula must be adopted that will provide a minimum
wage and maximum hour standard for agriculture and that will provide an agri-
cultural income adequate for the maintenance of such a standard.
Sixth, a large-scale Government land-purchase program must make more
family farms available through resale to working farm families at a price low
enough to enable them to earn a living.
' Seventh, soil conservation must be extended by making it possible for every
farm family to use good conservation practices.
Eighth, the national interest in agriculture must be safeguarded through the
establishment of national production goals, announcement of prices ahead of
planting, continued levels of production, and continuation of barriers to inflation.
Ninth, a carefully guided program of subsidies must assure farmers a decent
return for their labor, and consumers a minimum adequate diet from a nutritional
standpoint.
Tenth, Federal-aid funds must be withheld in those States that sanction use
of such funds and personnel to promote the interests of any private organization.
Eleventh, the United States must share in international agreements that will
assure orderly and expanding world trade.
The telegram is signed by Russell Smith, legislative secretary,
National Farmers Union.
POST-WAR ECONOMIC POLICY AND PLANNING 1547
The Chairman. Now, Mr. Arthul-, we regret that Mr. Smith was
not able to appear before our committee in person and give a more
extended statement. We hope that we will have the benefit of his
testimony at a later date.
Mr. Arthur. Thank you.
The Chairman. The next witness that we will hear is Mr. G. N.
Winder, president of the National Wool Growers Association, who
comes from Colorado, I believe; is that right?
Mr. Winder. That is correct, sir.
The Chairman. And we will be glad to hear from Mr. Winder at
this time.
TESTIMONY OF G. N. WINDER, PRESIDENT, NATIONAL WOOL
GROWERS ASSOCIATION
Mr. Winder. Mr. Chairman and gentlemen of the committee, upon
receipt of the telegram inviting us to appear here, I proceeded to
draft a short statement.
The Chairman. Would you prefer to read that statement without
interruption?
Mr. Winder. It does not matter. Interruptions do not bother me
at all.
The Chairman. All right.
Mr. Winder. I proceeded to draw up a short statement covering
the outline as set forth in Congressman Colmer's wire. However, Mr.
Wilson, who is chairman of our legislative committee, would like to
have an opportunity to present a statement in regard to the wool
situation now and future, after I get through.
The Chairman. Very well.
Mr. Winder. Post-war economic policies for the sheep industry of
the United States are dependent upon an affirmative answer to the
following questions: Is it necessary and desirable to maintain a
domestic sheep industry? Assuming that the answer is yes, the
stability of income of this industry, therefore, hinges on productive
employment of a majority of the citizenry, thereby stabilizing to a
degree the demand for the products of the industry, which in turn
creates sufficient production to take care of this demand. A high
rate of employment is essential to the determination of all policies
which your committee has requested action upon.
Men engaged in the sheep industry are continually improving the
quality of the products for sale. They are doing a fine job in the pro-
duction field and will continue to improve the quality of their herds.
Production in the sheep industry, of course, depends upon the utiliza-
tion of natural resources, the value of which varies from year to year,
but which resources are continuous when properly utilized. .Of course,
there is a variation in the amount of production of these products,
which is deprived from the natural resources; and it is necessary that
proper practices of conservation and maintenance of these lands be
continued. This policy has been established and is being improved
all the time.
One of the major problems of this agricultural industry is to improve
distribution of the products. A subcommittee of the House Agri-
cultural Committee has been set up and is working on a part-time
1548 POST-WAR ECONOMIC POLICY AND PLANNING
basis to investigate the marketing of our products. Until these find-
ings are before us, we hesitate to announce what pohcies should be
adopted in the post-war period. We are sure, however, that with
better distribution and better merchandising methods, that greater
stability of income will result.
Now, under the heading of "Stability of income":
The sheep industry is a high-cost industry when compared with
the industry in foreign countries. However, it has cost the Govern-
ment very little money and has been of great help at the present time
in supplying the extreme need for meat and fiber during the present
war period. The predicament with which the industry is now faced
has been created by many factors beyond the control of the sheep
producer. Therefore, it is absolutely essential that our Government
develop policies which will protect the industry during this period.
It is not meant by this that further controls are needed, but that
policies be adopted which will allow future production of lamb and
wool in this country.
A good example of what may be expected in the future relative to
the income from products of the industry is shown by what happened
to the so-called Government shearling program. When our armed
forces needed pelts of a certain type in order to provide warm clothing,
the announcement and the request was made for growers to increase
the production of these pelts as rapidly as possible. This the industry
did. When the demands for this product were no longer needed by our
armed forces, an announcement was made that the Government would
no lopger need the shearlings. Immediately the price for shearlings
dropped materially and at the present time our shearling pelts are
selling at a price 50 percent below that paid by the Government.
This same principle will hold true
The Chairman. Pardon me just a moment. I do not know that I
am familiar with that term "shearling." Will you describe it, please?
Mr. Winder. Those are pelts from lambs that have been shorn
about 6 weeks before the pelt is removed and they were used at the
beginning of the war for aviators' uniforms and jackets.
The Chairman. I see. Proceed.
Mr. Winder. This same principle will hold true for the other
products of the industry, if and when consumers are unable to i)urchase
the products. Therefore, as stated before, the variations in production
and in demand hinge on the high rate of employment and the relation-
ship of the agricultural industry with that of all other industries in
the productive field in the United States.
The next heading is "The sheep industry on a self-sustaining basis:"
In normal times the sheep industry can and has maintained its
operations on a self-sustaining basis without Government regulation
as we know it today, provided that the industry's products are pro-
tected from low-cost producing countries with a materially lower
standard of living. Here, again, we are assuming that the answer is
that there should be a sheep industry in the United States. There
must be a price relationship between the commodities produced in this
country and those imported into this country.
There is, of course, definite need to study and alayze the supply and
demand situation of these various products. It seems quite natural
that there would be a lag between the supply and demand and that
the price peaks and valleys camiot be entirely eliminated, but it is
POST-WAR ECONOMIC POLICY AND PLANNING 1549
impossible to minimize these high and low periods by proper protection
measures which could be established for an industry such as ours.
The next heading is "Higher levels of consumption and nutrition."
Some years ago an organization was created by the livestock and
meat industry known as the National Livestock and Meat Board.
This board was set up to promote the iise of meat and to carry on re-
search regarding the nutritive value of meat. This organization is
financed by donations from livestock producers and meat packers and
the policies are determined by a board of directors representmg all
branches of the industry. This organization has rendered mvaluable
service to the Army and Navy services of supply durmg this war
Mr. Chairman, the National Livestock and Meat Board has carried
on an extensive campaign with the Army and with the Navy m per-
fecting better methods of cutting and preparing the meats m messes
and they are just now completing that program.
Some consideration might be given to the idea of the Government
giving some financial support to this organization to enlarge and
expand its activities.
More recently an organization has been created Imown as the
American Wool Council, which is designed to function for wool very
similarly as the National Livestock and Meat Board does for meat
If wool is to maintain its rightful place among fabrics a great deal of
consumer education must be done and it was for this that the Amer-
ican Wool Council was created and financed by wool growers and
aided to some extent by contributions from other branches of the
mdustry. Some thought should be given to the Government partici-
pating in this undertaking also. Just recently the Australian Gov-
ernment levied a substantial tax on all wool grown m Australia for
promotion work and in addition the Australian Government contrib-
utes ap amount equal to that raised by the tax. A considerable part
of this money will be spent in the United States to promote the use
of Australian wool here.
The next heading
The Chairman. Will you pardon me, here? Is that organization
something like the National Cotton Council of America that is sup-
ported by the producers and processors and spinners and all different
persons interested in the cotton industry?
Mr. Winder. This American Wool Councd you are speaking of (
The Chairman. Yes.
Mr. Winder. We hope that it will be supported by all parts of the
industry. Up to date, the growers have financed it almost entirely,
but this year a good many of the packers are contributing materially
to the program and we hope that the dealers and the wool manufac-
turers can be brought in also. .
The fact of the matter is that I think they are more vitally con-
cerned than the producers are in a program of that kind. I might say
that all the time we are running up against weird advertisements m
regard to synthetic fabrics and fibers. It is my suggestion that it
would be a proper function for the Government to set up a research
laboratory and a testing laboratory to protect the producers of the
natural fibers and to protect the consumers, especially against these
weu-d advertisements that you see all the time about comparing it
with the natural fibers.
1550 POST-WAR ECONOMIC POLICY AND PLANNING
The Chairman. Well, don't you think that industry itself might
set up a research division like the Cotton Council has done to find
new uses for the cotton?
Mr. Winder. It is supposed to do that with this American Wool
Council. My idea is that there should be an impartial source for
making these tests.
What I was getting at was that in order to have an unbiased agency
to make proper tests so that these advertisements would not go
unchallenged. You could have them tested in private laboratories.
However, anyone can challenge the validity of those tests that are
made.
Mr. MuRDOCK. Is there nothing of that sort done by the Bureau
of Standards now?
Mr. Winder. Very little.
Now, there will appear to be some repetition in this next paragraph,
but I wanted to make it plain. That is relating to the "Relationship
between our foreign trade policy and domestic agricultural policies."
Before going into this matter it is necessary to determine whether
policies should be designed to encourage or discourage the production
of sheep in this country. For several good reasons we feel that a
thrifty sheep industry must be maintained.
It has been proved during this war that there is no suitable sub-
stitute for wool to clothe fighting men. When Japan threatened to
close the sea lanes from Australia and New Zealand and the German
submarines were preying on our ships to and from South America,
it was fortunate that we had as healthy a sheep industry in this coun-
try as we did have.
It is necessary to maintain a sheep industry in this country because
there are communities and even counties in some of our Western
States where the entire economy and existence is dependent upon the
sheep industry. In some Western States the sheep industry ranks
right at the top so far as cash income is concerned. Also the sheep on
the western ranges consume and make use of a natural resource which
otherwise would be a total waste.
Mr. MuRDOCK. Pardon me, before you leave that last item; isn't
it true that in many of the Rocky Mountain States 90 percent of the
entire area is fit for grazing only?
Mr. Winder. Yes, sir.
Mr. MuRDOCK. And much of that is used and fit only for the
grazing of sheep?
Mr. Winder. Yes, sir. In my own county 48 percent of the land
is Federal range and practically all of the balance of agriculture in
that county is dependent upon sheep grazing on those ranges, so in
my county the entire economy of the whole county is dependent
upon the sheep industry.
Mr. MuRDOCK. A witness pointed out this morning that there were
about as many millions of people employed in agriculture as in in-
dustry, the total number, a fact that is not known to the American
people, he said.
I think another fact not known to the American people generally
is the enormous proportion of agricultural income that is derived
from livestock, and a large part of that is from sheep.
Mr. Winder. Especially in our Western States, Congressman, it
has been found that meat is an essential part of a healthy diet and
POST-WAR ECONOMIC POLICY AND PLANNING 1551
certainly we do not want to become dependent upon some other
nation for meat and wool both of which contribute so much to the
health of our Nation.
Assuming that the premise is correct that a thrifty sheep industry
should be maintained and conceding that the cost of production is a
great deal higher in the United States than in other sheep-producing
countries, this higher cost is caused chiefly from the demands of a
much higher standard of living here than elsewhere in the world.
The Chairman. Now, tell me this: why is the cost of production
higher in our cQuntry than, we will say, in Australia?
Mr. Winder. Well, the sheep in Australia are run on very low
value lands. The fact of the matter is they are grant lands from the
Commonwealth Government. They have very small taxes to pay
and their labor charge is nU as compared with ours, and that is the
largest cost of our production in this country today, our labor cost.
Mr. MuRDOCK. I think in my State there is a State law that re-
quires two herders with every band of sheep.
The Chairman. Do you mean regardless of size?
Mr. MuRDOCK. How?
The Chairman. Do you mean they have two herders with every
band of sheep regardless of size?
Mr. MuRDOCK. Two must be in charge so that one is a companion
to the other in those remote sections.
Mr. Winder. So that something will not happen to a man and he
will be out there for a week or 10 days alone.
The Chairman. Do you have any minimum-size herd
Mr. Winder. That is up to the individual.
The Chairman. We will say that a man has 100 sheep, do you
mean to say that he would have to have 2 men to tend them?
Mr. Winder. I do not think he would have them on the range if he
had only 100.
Mr. MuRDOCK. May I add, in a good many western communities,
especially in my own State, the sheep are brought down from the
mountains in the wintertime and ranged on alfalfa, which adds to
then- cost, because they are taken off the natural range.
Mr. Winder. That is right.
Mr. VooRHis. I should think what Mr. Murdock just mentioned
would make a lot of difference between the Australian cost and ours.
Mr. Winder. Yes; that is a big item; our feed item is large. ,
Mr. VooRHis. But I camiot understand why Australian labor costs
should be so low. I have always understood that wages in Australia
were comparatively high.
Mr. Winder. Well, I think that a good many of the sheep in
Australia are running on pastures, fenced, probably where it does
not take much labor.
Mr. VooRHis. I see.
Mr. Winder. And they are run on grant lands mostly.
Mr. VooRHis. I don't know anything about it, but I just wondered
about that.
Mr. Winder. And the same thing applies in Argentina.
Mr. VooRHis. That I can see.
Mr. Winder. A sheepherder down there will probably get two or
three pesos a month against a man getting $150 to $175 a month here.
1552 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. VooRHis. I can understand that, but in Australia I should
not think the same thing would be true.
Mr. Winder. I do not think to as great an extent there, but there
is a difference.
The Chairman". Well, now, have you any figures to show what
percentage of the sheep of our country are produced out in the West
on the ranges, that is, the broad expanses, as compared with the
number produced in the Midwest in areas which include almost all of
the United States where there are small numbers of sheep and they
are grazed on farm land and fenced in, and they do not need any man
to go with them?
Mr. Winder. About 75 percent of the total sheep population is in
the thirteen Western States. That includes Texas as the thirteenth
Western State. About 35,000,000, that was the figure. There has
been considerable liquidation in the last 2 years. We do not have the
figures up to date.
Mr. Colmer. I am interested, too, in that cost you referred to.
I understood you to say that about 48 percent of the sheep in some
portions of the country out there graze on Federal lands.
Mr. Winder. Not all Federal land. It is all grazing land. A good
portion of it is Government-owned ground.
Mr. Colmer. Well, do you have
Mr. Winder. That is not free grazing, Congressman.
Mr. Colmer. I know, there is a nominal fee paid to the Government
for that; yes. I was familiar with that. But do you have figures on
the cost of labor in Australia, as compared with here?
Mr. Winder. No; I do not have up-to-date figures on Australian
labor costs.
Mr. Colmer. I was under the impression that they drew fairly high
wages out there and were fairly well paid for their labor.
Mr. Winder. I do not think they compare anywhere near with our
scale of wages in this country. We can get those figures for you if you
would like them.
Mr. Colmer. What is the average wage scale for these herders you
are speaking of?
Air. Winder. $150 a month, and keep.
Mr. Arthur. May I interrupt
Mr. VooRHis. Just one second, please.
IVlr. Arthur. Very well.
Mr. VooRHis. How does that compare with the pay before the war?
Was it about the same?
Mr. Winder. No; it is about twice.
Mr. VooRHis. Twice what it was before the war?
Mr. Winder. That is right.
Mr. VooRHis. Now, one other unrelated question. I am worried
about your 13 Western States. What is the thirteenth one — Okla-
homa?
Mr. Winder. No ; South Dakota. I should have said western range
States, perhaps, Congressman.
Mr. Voorhis. Yes.
Mr. Winder. Then assuming that these two things
The Chairman. One further question. Do you consider the range
territory as being west of the lOOtli meridian? Does it come east of
that?
POST-WAR ECONOMIC POLICY AND PLANNING 1553
Mr. VooRHis. It does in Texas and South Dakota, but not in
Kansas and some of those other States.
Mr. Winder. But most of your sheep population of Texas is in
the western part of Texas.
The Chairman. Most of it is west of the 100th meridian?
Mr. Winder. I would think so. Perhaps my geography is a little
vague. I cannot picture that 100th meridian.
Mr. VooRHis. The 100th meridian bisects Kansas, does it not?
Mr. Winder. I think so.
The Chairman. It is the beginning of the arid section.
Mr. VooRHis. It is the beginning of those expanses you were talk-
ing about.
The Chairman. Yes; that is what I had in mind, exactly.
Mr. Winder. Then assuming these two things, it becomes necessary
to design our foreign-trade policies so that our desire to build up an
industrial foreign trade does not condemn our agriculture to extinc-
tion. We feel that it is possible to build up our foreign trade and at
the sa.me time protect and encourage the development of the necessary
agricultural enterprises. When trade agreements are made with other
countries, there is danger that agriculture will be traded down the
river so that it will become necessary to inauguarte a system of sub-
sidies and programs designed to curtail production. We must not lose
sight of the fact that we have here the greatest market in the world
today and our policies must be designed to prevent this country from
becoming a dumping ground for the products from other countires
which compete with commodities produced here at home. It has
been suggested that a system of quotas be set up, liberal enough to
encourage foreign trade and yet strict enough to protect our American
markets for American products so that our high standard of living can
be maintained rather than lowered to the point where we can co.m-
pete with other lower-standard-of-living countries.
Mr. Voorhis. Now, may I be a little mean at that point?
Mr. Winder. Yes, sir.
Mr. Voorhis. I want 3^ou to tell us what it means to have a policy
liberal enough to encourage foreign trade but restrictive enough so
that you do not disturb domestic industry or cause those industries to
operate, as I take your meaning, below the American standard of
return. How are you going to do both those things at once?
Mr. Winder. I am speaking chiefly. Congressman, from the view-
point of a sheep producer.
Mr. Voorhis. I know.
Air. Winder. And I can see where a system of quotas could very
well protect the wool grower, the producer of wool in this country, and
also the manufacturer of wool and fabrics in this country.
Mr. Voorhis. That is what I am trying to get at. Go on and
explain a little bit more.
Mr. Winder. In normal times, for instance, we are producing
approximately half of the wool that we would consume normally;
tluit is, the average consumption before the war, probably about one-
third of our wartime consumption. We are not producing in this
countiy sufficient for our use and to make up the difference we must
import wool from some foreign country or we must import finished
products, one or the other, to make up the difference between con-
sumption and production.
1554 POST-WAR ECONOMIC POLICY AND PLANNING
f The Chairman. If we were to import the finished fabrics, our mills
would be idle?
Mr. Winder. That is right.
The Chairman. Let us talk about importing wool.
Mr. Winder. All right. If we normally consume 600,000,000
pounds a year and we produce 300,000,000 pounds a year — these are
just approximate figures — we will say 350,000,000 pounds of wool,
there is a difference to be made up there of around 250,000,000 pounds.
If the quota system works correctly, as I conceive it might in this
particular instance — it may not apply so well to some other prod-
ucts— then we could ask South America or Australia, or whomever
you care to make trade agreements w4th, for the difference between
our consumption and our production.
Mr. VooRHTS. Would you have a tariff connected with those
quotas?
Mr. Winder. I do not think we will ever get away from our tariffs.
Of course, they can be gotten around so much easier than quotas can,
though.
Mr. VooRHis. Yes. In other words, what you are suggesting is
that in view of the fact that we do not produce normally as much
wool as we need domestically, that the imports should be handled on
a controlled quota basis?
Mr. Winder. That is right. You would still have to maintain a
tariff" there to equalize the cost of the finished article from the foreign
wools and the domestic wools.
Mr. VooRHis. Well, now, suppose we applied that same principle
a little more broadly. Your statement there in your paper applied
primarily to your own products, rather than to a general — —
Mr. Winder. That is what I was thinking about.
Mr. VooRHis. I see your point.
The Chairman. Now, who establishes that quota? Is that done
by reciprocal trade agreements?
Mr. Winder. It is not done. That is merely a suggestion.
Mr. VooRHis. It is not being done.
The Chairman. I am asking, if you should do it, would you do it
by what you would call reciprocal trade agreements?
Mr. Winder. I guess it would be reciprocal. I don't know. It
might not have to be reciprocal. You might have an agreement with
Australia to take some of their wool, and you might have an agreement
with Great Britain to take some — or with some other colony of the
United Kingdom— to take some other product.
Mr. CoLMER. What you are talking about is extension of the good-
neighbor policy?
Mr. Winder. I would not say it was an extension, Congressman,
I would say it w^as a restriction of the good-neighbor policy.
The Chairman. I thought the good-neighbor policy was where we
would mutually trade witn each other to each other's advantage.
Mr. Winder. Yes.
The Chairman. You do not want to upset that, do jou?
Mr. Winder. Let me cite you an example. We made an agree-
ment with Mexico to reduce the duty on sheep and lambs from $3 a
head to $L50. ^ ,
This fall there were a great many lambs came from Canada, guar-
anteed to dress certain quality. They were able to sell here on our
POST-WAR ECONOMIC POLICY AND PLANNING 1555
market for perhaps $2 to $2.50 a hundred less than lambs produced
here of the same quality.
Mr. VooRHis. That is under the most-favored-nations clause?
Mr. Winder. That is under the most-favored-nations clause of the
Reciprocal Trade Agreement Act.
We lowered the duty, I think, 50 percent on certain manufactured
articles from Great Britain, and I think on those articles, during the
first year of the war, our imports increased 500 percent, if I am not
mistaken on that. Is that right?
Mr. Wilson. I do not remember the percentage, but it was an
enormous increase.
Mr. Winder. It was an enormous increase, right at the time when
England was busily engaged in fighting a war in Europe. They were
sending manufactured woolen goods into this country at a reduced
duty.
Mr. MuRDOCK. Mr. Chairman, I would like to emphasize for the
record the difficulty that we westerners are up against, and that is this:
The Western States are raw material producing States, and we are
always the best market for the eastern part of our country, for their
industrial output. We are a little bit fearful of the good-neighbor
policy, and yet we have little voice in the councils of the nations.
The good-neighbor policy should be mutuall}'" beneficial to the entire
Nation, the agricultural element and the industrial element.
Mr. VooRHis. But by so doing, we run great risk of limiting the
productivii^y of the raw-material States, and that is not only true with
regard to wool and cotton, but it is true with regard to cattle and min-
eral wealth. It puts us in a predicament, because our local interests
seem to clash with national interests.
Mr. Winder. That is the very thing I was trying to bring out,
Congressman, in my statement here.
The Chairman. Isn't it true, when we started to write the last
tariff act and revise the tariff, as we used to do occasionally, that each
industry in every section had its peculiar problem. When you got
through with it, you had a high protective tariff on everything and that
ultimately resulted in barrier tariffs being erected in other countries
and had a lot to do with our internal trouble here; did it not?
Mr. Winder. I don't quite agree to the full extent that that was to
blame for all our troubles, Congressman. I don't know, if we took
all our tariff barriers down, I am wondering if the other nations would
not still keep up some of their tariffs and quotas. I don't believe we
are ever going to be able to get away from tariffs. They are necessary
to adjust the differences, as I see it, in the cost of production.
Mr. VooRHis. This is a broader statement, but what you just said
would not happen if those reductions are made under reciprocal trade
agreement methods. I can see no reason why they should not be
multilateral instead of just bilateral. I think if that were true you
might get away from such situations as the Mexico-Canada deal, if
you can get more than two nations together. But I think the pro-
tection against, the thing happening that you suggested— our lowering
our rates without other people doing the same — is to be found in
reciprocal trade agreement methods.
Mr. Winder. With certain precautions. I do not doubt but what
reciprocal trade agreements can be worked out.
Mr. VooRHis. It is the best way to do the job, if at all.
1556 POST-WAR ECONOMIC POLICY AND PLANNING
The Chamiman. We can eliminate the "favored nations" clause.
That would help,
Mr. Winder. That would help. I don't think it would cure it.
Mr. MuRDOCK. Several times I have gone before the committee
on reciprocity information. Maybe I have caused the chairman of
the committee to smile when I said I did not envy him his job, that
I wished the Angel Gabriel were a member of his committee. This
matter of entering into trade agreements in such a way as to benefit
the whole economy without injuring any particular part of the
country is particularly difficult.
Mr. VooRHis. What makes you think the Angel Gabriel would be
always on the right side?
Mr. CoLMER. I expect that he would be outmoded, anyway.
The Chairman. You may proceed.
Mr. Winder. That completes my statement, if there are not any
more questions, Mr. Chairman.
Mr. Arthur. We are interested in getting help on the question of
longer-range objectives in agricultural policy. I wonder if you could
indicate for us what you see as the future scope of the wool-growing-
industry producers. You mentioned that they have in normal times
produced about half of our domestic requirements.
Mr. Winder. A little over half, about two-thirds.
Mr. Arthur. Nearly two-thirds.
Mr. Winder. We did, but we are not producing much over half
of what our normal requirements were. In other words, there has
been a considerable liquidation in the sheep industry in the last 2 or
3 years, so we are not producing today as much as before the war.
Mr. VooRHis. Is that on account of the demand for meat?
Mr. Winder. No; I think that is mostly on account of the fact
that the sheep growers have not felt very secure in the business, and
I think labor shortage has had considerable to do with it.
Mr. Arthur. Under the program you suggest, how much expansion
do you visualize would occur in the wool-growing business after the
war?
Mr. Winder. I think very little, if any. The fact of the matter is,
I look for a little more liquidation. I think there would have been
considerable more liquidation this fall if prices had been maintained
as earlier this year.
Mr. Arthur. How about the long-term "normal production"?
Mr. Winder. I don't see much opportunity for a great expansion
in this country. Our ranges are being pretty well utilized at this
time. Any expansion, as I see it, would have to come in the Middle
East here.
Mr. Arthur. Then if the demand expanded with full employment
presumably we can let more woo] in from outside of the country?
Mr. Winder. That is right, and that is the hope of the Australian
wool growers in setting up this tax for promotion work and the con-
tribution from the Commonwealth Government. They are matching
the amount raised through the tax for promotion of wool and wool
products in this' country, mostly because they know that this is the
one great market in the world today.
Mr. Arthur. Now, in the land used for wool growing in this,
country, are there other possible uses for that land with which the wool
grower has to compete?
POST-WAR ECONOMIC POLICY AND PLANNING 1557
Mr. Winder. Some of it could be utilized for cattle, but that is all.
It has to be used by livestock of some kind, and there are some ranges
in the West that are not suitable for cattle, but are suitable only for
sheep.
Mr Arthur. Then the problem boils itself down to a fairly well-
defined capacity in this country for the growmg of wool and it is your
desire that a market for that volume be assured the domestic wool
grower, supplementing that to meet our needs with wool miported
from other countries? ....
Mr. Winder. We feel that we should maintain in this country a
greater number of sheep or at least as great a number of sheep as it is
possible to run on the land that is fitted for it. In order to main-
tain a constant supply of wool for this country in case of emergency,
such as we had in 1941, I think that we should maintain that number
of sheep. . . • • i
Mr. Arthur. Now, am I correct m saymg that your principal
desire in protecting the market for wool, as against competing fibers,
lies in an effort to do research work and to see to it that competing
fibers are promoted in this country on the basis of true qualities of the
competing fibers? ^ . . , • i i-
Mr. Winder. That is right. Certainly there is a place lor syn-
thetic fibers and synthetic fabrics, but we want that expansion made,
not at our expense, especially that which is untruthful.
Mr. Arthur. Then if the cost of competing fibers and fabrics were
reduced sharply, presumably wool w^ould be pulled down by that
competition; is that correct? , ^ u
Mr Winder. Well, if the true values are known and the truth told
about it, I don't think that anything is going to replace wool. Our
Army has proved that this time.
Mr. VooRHis. You fellows would be for something along the line
of grade labeling?
Mr. Winder. We do have that.
Mr. MuRDOCK. How about the truth-in-advertismg measures that
we have?
Mr. Winder. We have the truth-in-fabric law.
Mr. Murdock. I meant that. t i i- a
Mr. Winder. Yes; that is correct. We have that Labeling Act,
but in spite of that a great many claims are made. All I was sug-
gesting there was that it would be a proper function of the Govern-
ment,"^I thought, to set up an impartial testing laboratory where
claims can be analyzed. , . , , o rrn
Mr. VooRHis. You know what the 'trouble is, don t you.'' .ihe
Bureau of Standards is scared to death to give out any information
about anything like that for fear they will step on somebody's toes.
You cannot get information out of them with a can opener. At
least, I don't think so.
Mr. Winder. I think you are right.
Mr. VooRHis. I think it should give out that information.
Mr. Arthur. To follow up my question, I would like to go one
step further. W^e mentioned that wool will compete to your satis-
faction with the synthetics and other fibers and then that would be-
come the primary element in determining the price that wool would
bring?
Mr. Winder. No.
99579 — 45 — pt. 5 22
1558 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Arthur. You are assuring your wool people that foreign
fibers will not be brought in to compete with them and that they
will be restricted to the amount that supplements the domestically
grown wool. There would be no limitation on the amount that you
could get for your wool as a result of foreign competition, and it
would presumably be the competition of other fibers that would be
the price governor in your eyes, or ^n your industry?
Mr. Winder. To the extent that they would compete, I think
that that is correct.
Mr. Arthur. Do you have any other ideas about price programs
by the Government to maintain the level of wool prices?
Mr. Winder. Well, I thought I would leave that to Mr. Wilson
when he came on, if that is all right with the committee. He was
going to take up the wool question in moTe detail.
Mr. VooRHis. I suggested to Mr. Zimmerman and to Mr. Colmer
if they could only persuade a portion of the American people who now
use wool to use cotton instead of that portion of the wool having to be
imported, then we might solve both the cotton and wool problem.
Then you would not have to worry about the competition of imported
wool and they would not have to worry about the cotton surplus.
Mr. Winder. You might have a thought there, Congressman, to
the extent that cotton can be substituted for wool.
Mr. VooRHis. That, of course, is the only problem.
Mr. Winder. I agree with you.
The Chairman. You know the cotton people in America lic^.xj
established considerable research in America to determine new uses
for cotton; to prove the value of cotton; and do for cotton just exactly
what you said should be done for wool. They are doing that from the
funds raised by the industry itself.
Mr. Winder. That is what we are doing, too.
The Chairman. This wool question is a pretty difficult question and
I think we all realize that. The growing of wool in this country is a
byproduct of mutton, or is mutton the byproduct of wool?
Mr. Winder. In most cases it runs close to 50 precent, that is the
income from wool and the income from meat, from the sheep animal.
Your income is split about even. In some States, probably, the
income from wool will be the major part and in other places the
income from lamb will be the major portion.
Mr. Voorhis. How do the prices run relative to mutton and w ool?
Do they rise and fall together?
Mr. Winder. Yes; the value of wool has a very definite effect on
the value of the lamb. The lamb has wool on it, too, you know.
Mr. Voorhis. As the price of wool rises, does the price of mutton
have a tendency to rise also?
Mr. Winder., Ordinarily, yes.
The Chairman. What about a surplus of beef? What does that
do to mutton?
Mr. Winder. There is not too much connection. I think about 4
percent of the total meat consurhption is lamb in this country.
The Chairman. You say that the wool growers are worried about
the security of the sheep industry and that they are liquidating at
this time rather than increasing the production of sheep?
Mr. Winder. They have been liquidating for the past 2 years.
The Chairman. Well, has that been due to the price of wool?
POST-WAR ECONOMIC POLICY AND PLANNING 1559
Mr. Winder. No; I think not.
The Chairmak. What has been the cause, in your opinion?
Mr. Winder. Well, there are two or three factors. There is the
labor situation, for example.
The Chairman. Yes; you told us about that.
Mr. Winder. And as near as I can gather from the wool growers,
they don't look into the future with much security.
The Chairman. Why?
Mr. Winder. Well, we have on hand in the world today enough
wool probably to supply all of the mills under normal conditions for
2 or 3 years, or 2 years, anyway, with another clip coming on.
The Chairman. You mean you have that much stock on hand in
this country?
Mr. Winder. No; in the world.
The Chairman. Well, there is a tariff against that wool, isn't
there?
Mr. Winder. Yes; and they are importmg wool into this country
today and paying the tariff and it is selling for about 10 cents a
pound in the grease less than our wools can be raised for in this
country.
The Chairman. Now we are getting down to the crux ot the
proposition.
Mr. Winder. In fact, during the last 2 years that has been
happening. This is something I thought would come up when Mr.
Wilson gets on the witness stand.
The Chairman. Has there been any change in our tariff laws in
recent years?
Mr. Winder. No.
The Chairman. I want to go back to about 1932. \'Vhat was the
price of wool at that time?
Mr. Winder. Mr. Wilson can answer that question.
Mr. Wilson. It was 2 cents below the protective duty. We were
selling at 32 cents and the duty was 34 cents.
The Chairman. Back in 1932?
Mr. Wilson. That is right.
The Chairman. That is what you get for wool out in Wyoming?
Mr. Wilson. That is what we were supposed to be getting. I
doubt if we got that.
The Chairman. What is the price today?
Mr. Wilson. The same wool today is $1.18.
The Chairman. $1.18
Mr. Winder. The same wool today is $1.18 and perhaps $1.16.
The Chairman. $1.16 a pound?
Mr. Winder. Yes; cleaned.
The Chairman. We are taking the two of them. The $1.16 a
pound for the wool today and 32 cents back in 1932; is that right?
Mr. Winder, That is right.
The Chairman. That is quite an increase; isn't it?
Mr. Winder. Yes; it is.
The Chairman. Has it increased steadily over the years?
Mr. Wilson. It increased immediately. In 1933 it w^ent up. I
don't happen to have those figures with me, but my recollection is
that it was somewhere around 60 and odd cents, and the normal
price of wool— well, I can give you those figures when I am on the
stand.
1560 POST-WAR ECONOMIC POLICY AND PLANNING
The Chairman. You say sixty-odd cents a pound?
Mr. Wilson. Yes.
The Chairman. Almost double the '32 price?
Mr. Wilson. Yes.
The Chairman. And since then it has doubled almost again?
Mr. Wilson. That is correct.
The Chairman. And still the wool growers are not satisfied and
going out of business?
Mr. Winder. It is not a question of being satisfied, but making
both ends meet. They were not making both ends meet at 32 cents
back in 1932.
The Chairman. Well, there are very interesting things in that
connection about some of the wool- growing States, their reaction to
what they were getting.
Mr. Winder. If the committee would like to have the figures on
costs of production of both lamb and wool, we can give them to you.
We don't have them available, but we can make them available to the
committee.
The Chairman. I think that would be rather interesting.
Well, you say that the world supply is about $1.06 a pound?
Mr. Winder. It is about $1 a pound.
Mr. Wilson. About $1 a pound, paying 34 cents duty.
The Chairman. They can export it for about $1 a pound?
Mr. Wilson. That is right.
Mr. Winder. You see, the British Government bought all of the
Australian, New Zealand and South African wools from their colonies
and then they set a price at which they would sell that wool either to
our Government or to individual importers. Then, they increased
the price to the Australian wool growers 15 percent, but they did not
increase their issue price.
So, in order to get the wool into this country so their wool will sell
at a price under our wool, they are buying the wool from the Aus-
tralian wool growers and selling it at a lesser price. In other words,
they did not increase their issue price to the same extent that they
increased the price to the grower.
The Chairman. I understood you to say that we reached the
maximum of production of sheep and wool?
Mr. Winder. We have.
The Chairman. We have now, you mean?
IVIr. Winder. Yes. Well, there is possibility for a little increase
or a little expansion to take up this liquidation that has occurred in
the last 2 years. I don't think it should ever be taken up entirely.
The Chairman. Generally speaking, you would say we reached
the saturation point and that that represents in peacetime about
50 percent of our needs of wool?
Mr. Winder. That is right.
The Chairman. And we are dependent upon foreign countries for
50 percent?
Mr. Winder. Approximately, yes.
Mr. Wilson. We produce now 60 percent and we need to get 40
percent.
The Chairman. For 40 percent we must look to the foreign markets?
Mr. Winder. That is right, and if we can't increase the con-
sumption of wool in this country, we will have to look to foreign
countries for a larger percentage.
POST-WAR ECONOMIC POLICY AND PLANNING 1561
The Chairman. Do you advocate the raising of the tariff on wool?
Mr. Winder. Well, I have not advocated that up to date.
The Chairman. I mean, do you? What is your private opinion?
You are a wool producer, aren't you?
Mr. Winder. I don't think it is possible and I don't think it is
feasible, no.
The Chairman. You don't advocate that?
Mr. Winder. No.
The Chairman. What can we do for you fellows under the cir-
cumstances?
Mr. Winder. The only thing that I can see is to set up, as I sug-
gested, a quota system whereby we will not import any more wool
than is necessary into this country. There is not a pound of domestic
wool going into civilian consumption and has not been in this country
for 2 years.
The Chairman. Then we would have to enter into an agreement
with all wool-producing countries to make that effective?
Mr. Winder. Yes; perhaps so, but Great Britain controls the major
portion of the wool in the world.
The Chairman, We would have to deal with the country that
furnishes this extra 40 percent that comes into this country annually?
Mr. Winder. Yes.; that is correct.
The Chairman. Well, the only solution then is the right kind of a
reciprocal trade agreement or a reciprocal trade treaty with each
other?
Mr. Winder. I would think so.
The Chairman, Are you for reciprocal trade treaties?
Mr, Winder. If they have to be, yes.
The Chairman. Do you know of any other way out?
Mr, Winder, No.
The Chairman. Then, if there is no other way out, aren't you for
them?
Mr. Winder. Well, that is the only way that I can siee. Congress-
man, that you can handle trade with foreign countries.
The Chairman. Well, we find a lot of men out here raising hell for
Congress promoting reciprocal trade treaties and condemning them,
and yet they come along
Mr, Winder, It is not the idea of a reciprocal trade agreement as
much as if you have a reciprocity agreement and you get value for
what you are giving, I think that is the main objection to them.
The danger is that one industry may be traded off to help another,
and this is especially true regarding agriculture. Most agricultural
products need some protection to equalize costs of production, either
through a tariff or restriction on imports or both.
The Chairman. Reciprocity? Well, of course, you know you have
to have a meeting of minds before you can have an agreement.
Mr, Winder, That is right.
The Chairman, And if you sit down across the table and reach
an agreement, there is a meeting of minds of the two contracting
parties and you say that that is the only way you know to solve this
problem?
Mr. Winder. That is the only way I know.
The Chairman. And yet I believe your organization has given
the reciprocal trade agreements the dickens, haven't they?
Mr. Winder. Yes; that is correct.
1562 POST-WAR ECONOMIC POLICY AND PLANNING
The Chairman. What do you advocate?
Mr. WiNDEE. Setting up quota systems.
The Chairman. That is with reciprocal trade?
Mr. Winder. Yes; there is no other solution that I know.
The Chairman. That is why I cannot understand your position.
You condemn the Administration and condemn the reciprocal trade
agreements and then say that that is the only way we can solve the
problem.
Mr. Winder. That particular phase of it has never been in any
reciprocal trade agreements, Congressman, to restrict the amount
that you will take.
The Chairman. How do we handle wheat? We have an agreement
or an international agreement, don't we?
Mr. Winder. Very recent origin; yes.
The Chairman. It has been in effect for quite awhile, I believe.
Mr. Winder. I don't know. I am not a wheat grower.
The Chairman. Well, then, I believe if the quota system is the
solution
Mr. Winder. So far as our industry is concerned, that is our
suggestion.
The Chairman (continuing). You believe that that is the only
way you can get away from these reciprocal trade agreements that
you think are bad?
Mr. Winder. Yes; and your most-favored-nations part of your
trade treaties, too.
The Chairman. You cannot discriminate among nations, can you?
Mr. Winder. Not unless you set up a quota system, unless you
restrict the amounts; no. So far as our industry is concerned, that
is the only solution I see of it, or else we will have to lower our prices
to compete with world prices.
The Chairman. Personally, I have heard a good deal about
reciprocal trade treaties, and a lot of people have condemned them,
but they do not offer some better plan. That is what I think you
wool growers ought to do for the Congress. I think you should give
them a plan that will solve the problem. I don't know whether the
quota system will or not.
Mr. Winder. I think Mr. Wilson will tell you that we are prepared
to offer that plan.
I want to thank you again, Congressmen, for giving me the oppor-
tunity of appearing before you today.
The Chairman. I want to say that I appreciate the fact that this is
one of the toughest problems of American agriculture, wool and sheep
problems. There is no doubt about that.
Mr. Winder. If there is any information that we can furnish the
committee in the future, we will be very glad to furnish it.
The Chairman. We have one more witness, Mr, Wilson, of Wyo-
ming, who has given the wool and sheep problem a lot of thought, and
he is vice president of the American Wool Council. It is my privilege
to have known Mr. Wilson for quite a number of years, and we are
happy to have you here today.
POST-WAR ECONOMIC POLICY AND PLANNING 1563
TESTIMONY OF J. B. WILSON, CHAIRMAN OF THE LEGISLATIVE
COMMITTEE OF THE NATIONAL WOOL GROWERS' ASSOCIA-
TION
Mr. "Wilson. Thank you, Mr. Chairman. Permit me to say first
that train reservations are hard to get, and I am leaving at 5:45. I
would prefer to have you interrupt me, Congressmen. I want to clear
up or amplify some of the questions that you asked Mr. "Winder.
"With reference to the situation in Australia; Australia's costs of
shearing are about half of ours. Their labor costs, of course, are
much lower because they run their sheep in fenced pastures. The
Government there, as Mr. Winder pointed out, has a very liberal land
and tax policy.
Our costs are fully twice the cost of producing wool in Australia;
and I say that because not over 3 years ago I had with me for a week
the president of the Australian Grazer's Association, who was going
through Wyoming. I find that their costs, according to him, are not
more than one-half of our costs. It is reasonable to assume that their
costs have probably increased proportionately since that time to the
same extent that our costs have increased.
Now, with regard to research. Air. Chairman, I think that the Gov-
ernment, the Department of Agriculture, properly should do some
research. They are doing a tremendous amount of research in other
lines. They tell me that the research in cotton has, perhaps, been
more b^^neficial than the private research. They have discovered
that there is much misconception about the necessity of long cotton,
that cotton an inch in length is just as strong and just as desirable as
the longer cotton.
There has never been any research done on wool by the Govern-
ment. Any research which has been done has been done by the mills
themselves, and, naturally, they don't give that information to the
public but use it for their own advantage.
Wool needs research and needs it badly, and that is one thing to
which I think your committee should give attention.
The Chairman. I want to say this : I heartily agree with you that
is the way, the logical way, to approach these problems, and if there
is anything I think we should do in the future, it is to do more re-
search and find new uses for agricultural products that will stimulate
and sustain wool, cotton, and other industries, rather than to have
them go out because of improper knowledge of what they are useful for.
Mr. Wilson. And there never has been, shall I say, Mr. Chairman,
any research on wool.
The Chairman. I think you are right.
Mr. Wilson. It needs it a little more than any other fiber. We are
unfortunately not in a position, perhaps, any more than the cotton
people are, to compete with the synthetic people in research. They
have millions of dollars and are spending millions of dollars each year
in research. They are in the 80-percent tax bracket, so it is not cost-
ing them quite as much as it would cost some of the wool growers who
are not in the 80-percent bracket. If any wool grower is in the 80-
percent bracket this year, I will be very much surprised.
The Chairman. The truth is, these synthetic products are the result
of research.
1564 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Wilson. Certainly. They have done a remarkable job — you
gentlemen are, naturally, more familiar with that than I — but it is
confined comparatively to a few companies, five or six; and doing the
amount of business they do, they can do a tremendous amount of
research, where the wool growers cannot, as such, afford to do it.
Let me say, too, there is a general misunderstanding about the pros-
perity of the wool growers. Wool growers this year generally — I say
"this year," I mean 1944 — will actually lose money on their opera-
tions. Now, that does not mean that every wool grower will lose,
but the rank and file of the wool growers will lose money on their
operations.
May I suggest to your committee that the Tariff Commission is
now bringing their so-called cost of production study up to date. It
is not -as complete as I would hke to see it, but they are the one
agency of the Government where the cost studies have been usually
accepted. I probabh^ will not agree with it entirely when it is avail-
able, but it should be ready by the first of the year, and I think it
should be made available to your committee.
It will show, I think, that the wool, the present ceiling price on wool,
is below the cost of producing that wool.
Now, I want to advert, if I may, to another point that Mr. Winder
brought out, and that is the quota system. The one thing, I think,
Mr. Chairman, that made the reciprocal- trade agreenients work, in
the case of many commodities, was that they estabhshed a quota
system. In the "trade agreement with Mexico, to which Mr. Winder
referred, they estabhshed quotas on cattle at a point where no serious
damage was done, and again referring to quotas, there are quotas on
many products. You have a quota on wheat and a quota on cotton,
a quota on flour, and you have a quota on coft'ee, which is not pro-
duced in this country.
The Chairman. We had a quota on beef from Canada, too, didn't
we?
Mr. Wilson. The same thing regarding the Mexico treaty applies
to Canada and other favored nations. You have a tariff on oil, crude
petroleum, which was reduced 50 percent and a quota on imports
established. The bulk of that quota goes to Venezuela and is par-
celed out to other countries. The same thing is true, I think, with
the cotton quota and the wheat quota. The bulk of the wheat quota,
as I recall it, 95 percent, goes to Canada. That seems to me to be
our one hope of salvation; it is a properly applied quota system.
Now, our imports on wool
The Chairman. Let's get that clear. Since these quotas are a
part of the reciprocal trade treaties, then you do favor them?
Mr. Wilson. I have never heretofore favored it, congressmen; I
want to be honest with the committee.
The Chairman. I want to talk frankly about it.
Mr. Wilson. I think it is the only way that our industry can be
protected. I agree with Congressman Sabath in one respect, and
about one only, that we must get away from the support prices. Now,
your committee may be interested in knowing that the War Food
Administration is again going to support wool prices this year; that
is, they are going to purchase the wool clip, the domestic wool clip,
on the same basis as last year. That was agreed to Saturday after-
noon about 5:30, just before I left Washington.
POST-WAR ECONOMIC POLICY AND PLANNING 1565
"We normally import wliat we call apparel class wool. Carpet
wools come in free of duty, and we don't produce ^.ny in this country.
There may be a little on the Navajo Reservation, but very little.
The dutiable wool — that is, the apparel class wool — from the period
1892 to 1940, we imported an average of 121,243,135 pounds. In
1909 to 1940 we imported an average of 147,330,896 pounds. In
1931 to 1940 — and, of course, as you well know, Mr. Chairman, 1932
was a rather unfortunate year for all agriculture; wool was not alone —
in 1931 to 1940 we imported an average of 63,406,934 pounds. The
high is — aside from the present war period — in the last war the high
was 415,000,000 pounds. "We are now unporting about 600,000,000.
We will import at the rate of 600,000,000 pounds this year.
So, allowing for the average consumption, which is about 600,000,000
in normal times, a quota could be arrived at which should be feasible;
as the demand or consumption mcreased the quota should increase.
"We want to be fan about this, but it is the only way I can see, frankly,
to save our bacon.
The Chairman. I agree with you.
"Sir. "Wilson. Now, there is one other question. "We, like many
other agricultural commodities, feel that a change in parity is neces-
sary. The average price of fine combing wool, Boston, for the 1895
to 1941 period — and we don't have figures beyond that — was 82.89
cents. The present ceiling price is $1.18, although my figures are
based on $1.19. So the present price of wool is 43.5 percent higher
than the 47-year average price, which I submit is not a big increase.
The wages in 1895 — I know what the wages were, because I was in
the sheep business at that time — ^they were $30 a month for herders,
and today they are $150 a month.
The Chairman. I thinlv another thing you might add there to that
cost, as well as hired help, is feed.
Mr. "Wilson. The feed has gone up proportionately. Congressman,
In 1900 to 1940, the average price of fine combing wool in Boston was
88.79 cents. The present price is 33.87 percent above that 41-year
average price; and, again, I submit that that is not a very big increase.
The price of fine and fine medium combing wool from 1909 to 1940,
a 32-year period, was 97.71 cents, an increase of 21.78 percent — that
is the present ceiling price, I should say — was an increase of 21.78
percent.
The price of fine and fine medium combing wool — and all of these
prices are based on Boston — and all clean basis in the parity period
was 61.8 cents, and the present price is 92.4 percent above the parity
period, but the parity period is, so far as wool is concerned, the lowest
5-year consecutive period, with one exception, in the history of the
business, and I assume that other agricultm-al commodities are going
to ask for a change in parity.
The Chairman. In other words, your index number there, the basic
period
Mr. "Wilson. The basic period was bad.
The Chairman. In other words, we have taken a low period that, of
course, does not reflect the true parity relationship?
Mr. "Wilson. That is right. We should have taken a leaf from the
tobacco people and had our parity period changed at the time they
did. But at that time we were riding on^the top of the world. We
didn't need anything. We were all right.
1566 POST-WAR ECONOMIC POLICY AND PLANNING
You take today, when you compare the increases, wool has increased
less, as compared with the average price for 1909 to 1940, than any
other important commodity. There was an increase of 36 percent on
beans; peanuts, 73 percent; rice, 60 percent, and so on down the line.
Wheat has increased 28.3 percent, which is the nearest to wool,
which has increased 21.78 percent.
There is just one thing that has to be taken into consideration in
considering quotas, and that is if a quota is fixed on wool, considera-
tion will have to be given to fixing a quota on the manufacturers of
wool. Our domestic manufacture is the only market we have for wool,
and it would have to apply to tops in yarn and the various processes
beyond the raw wool itself. Otherwise we would merely be left with
the wool on our hands, and it would come in in the form of goods,
exactly what happened in the case of flaxseed when they passed the
emergency tariff along in the twenties sometime, as I recall it. They
increased the duty on flaxseed, but they forgot to increase the duty on
linseed oil. The consequence was, there was no market on flaxseed.
It always came in in the form of oil, and we have to import flaxseed
from Argentina.
Those, I think, are things that can be done, a change in parity and
a quota system to save the sheep industry of this country; otherwise
you are not going to have a sheep industry,
I think you can get figures from the Tariff Commission which will
be Qiore authoritative, although we might not, perhaps, agree with
them, than the figures we can give you, because they are now making
that study.
The Chairman. Let me ask you one question. Is the base period
for computing parity fixed?
Mr. Wilson. July 1, 1909, to June 30, 1914. It was changed for
tobacco from 1920 to 1929, as I recah it, or 1919 to 1929, and it was
changed the second time for tobacco.
The Chairman. I think you are right about that.
Mr. Wilson. I think you will remember it. Congressman, because
you were on an agricultural coQimittee part of that time. They didn't
have the data on parity for peanuts, so they made a new parity period
for peanuts. But we really need a new parity period, because an
examination of the record will show it was an extremelj^ low figure.
The Chairman. I agree, the figures you read in the record do bear
out that fact.
Mr. Wilson. I should like an opportunity, Mr. Chairman, if L
may, to present a prepared statement to the committee.
(The statement referred to is as follows:)
Statement of J. B. Wilson, Chairman of the Legislative Committee
National Wool Growers Association, McKinley, Wyo,
The United States is the second most important apparel wool-growing country
in the world. The products of the wool-growing industry are wool and meat.
While sheep are raised in most of the States in the Union, 75 percent of the
industry is located in the western range States and Texas. Sheep in these particu-
lar States produce an average of approximatelv 300.000,000 pounds of wool grease
weight with a value of approximately $120,000,000 and 1,000.000,000 pounds of
meat with an average annual value of $150,000,000 or a combined annual value
of $270,000,000.
Investment in sheep, land, buildings, and other equipment necessary in the
wool-growing industrv in this area is estimated at between $750,000,000 and
$1,000,000,000.
POST-WAR ECONOMIC POLICY AND PLANNING
1567
More than 500,000 persons are engaged in and employed in wool-growing and
-wool industries throughout the country. A very large percentage of the western
range lands used by the wool-growing industry are adapted only to livestock rais-
ing. Much of the rest of the area in the Western States is used to raise food for
livestock. Sheep harvest an annual crop — native grasses and browse plants — ■
which if not used for sheep grazing would be entirely wasted and a large and im-
portant segment of our country would be useless unless it could be adapted to
some new and as yet undiscovered replacement industry.
To illustrate the fundamental importance of the livestock industry, I desire to
point out that the cash income to the 13 Western States in 1943 from sheep, in-
cluding both meat and wool, the percent which it represents of the total income
and its importance in relation to other industries in these States. . The States in
question are Arizona, California, Colorado, Idaho, Montana, Nevada, New
Mexico, Oregon, South Dakota, Texas, Utah, Washington, and Wyoming.
Table 5. — Cash income of various products and relative importance in 13 Western
States for 1943
Products
Cash income
Percentage
of total
Rank of im-
portance
Petroleum -.- - .- --
$887, 404, 000
709,082,000
697, 399, 000
626, 161, COO
409, 272, 000
334, 684, 000
301, 778, 000
289, 589, 000
266, 689, 000
84, 671, 000
72, 033, 000
43, 786, COO
41, 638, 000
29, 213, 000
15.0
12.0
11.0
10.0
7.0
5.0
5.0
5.0
4.0
1.0
1.0
.7
.6
.5
1
2
3
Vegetable crops .,
4
5
Food grains - -
6
7
Sheep, lambs, and wool - ...
8
Copper --
9
10
Turkeys
H
Gold -
12
13
Silver . ....
14
Totnllivestock and wool - $1,288,766,000
Dairy products 409,272,000
Other agricultural products 1,868,269,000
Total agricultural ventures 3,566,307,000
Total minerals and petroleum... 2, 539, 604, 000
Total cash income 6,105,911,000
In my own State of Wyoming, wool growing ranks second only to petroleum in
■cash income for the year 1943.
It will be seen from the above table that in these 13 Western States wool
growing alone is the eighth largest industry. The income of cattle and sheep
combined is larger than any other single industry.
The present war has again established beyond argument that wool is a fiber most
necessary to the proper clothing of military forces on land, sea, and in the air.
The most far-reaching mass tests in history conducted by scientists on behalf of
our Army and Navy have proved this. The experience of troops in the field, at
sea and in the air has confirmed it.
Thus, in discussing wool, we are dealing with a basic agricultural commodity
the production of which must be maintained in a healthy condition as a funda-
mental requirement of both our national welfare and our national defense. We
cannot afford to become entirely dependent on foreign sources of supplies for wool.
Early in December the Quartermaster General's Department of the Army
called representatives of the Ameircan wool textile industry into conference and
notified them that it faced emergency requirements for nearly 100,000,000 yards
of uniform materials and blankets which must be delivered during the first 6
months of 1945. As a result, the production of the entire worsted division of the
American wool textile industry has been restricted to military requirements until
June 2, 1945.
These demands were for adequate clothing to protect the health and lives of our
soldiers on the battle fronts and will necessitate the emergency consumption of
nearly 400,000,000 pounds of wool, grease weight. These demands are in addition
to the wool requirements of the Navy and Marine Corps and the 50,000,000
yards or more of relief fabrics for the United Nations Relief and Rehabilitation
Administration. •
1568
POST-WAR ECONOMIC POLICY AND PLANNING
The following table shows an estimate of world wool production:
Table 6. — World production of wool
[In millions of pounds, grease basis]
1943
Australia
Argentina >
United States
New Zealand
British South Africa
Russia
Uruguay
United Kingdom
China.-
1937
1942
1,023
1,120
366
518
424
459
297
340
233
260
260
270
116
124
123
104
80
90
1,110
510
448
310
250
230
136
103
90
I While Argentina raises more wool than the United States, their wools are largely below 44's, which are
not classified as apparel wools.
Domestic wool has accumulated in unused inventories during a period of wool-
textile production that never were equalled in this country because imported wool
sells for about 20 cents per pound clean basis less than domestic wool.
By far the grextest proportion of wool imports during the war have come from
Australasia, the largest wool-growing area in the world. Lesser imports have
come from British South Africa, Uruguay, and smaller imports from Argentina.
It is estimated that there is at the present time an accumulated inventory in
excess of 700,000,000 pounds of low-cost wool in Argentina and this inventory
wool will be increased to more than 1,000,000,000 pounds by the end of this year.
These wools have accumulated because of loss of world market, lack of shipping,
and our present unsatisfactory relations with the Argentine Government.
An enormous surplus of wool is in Australia. These wools are the property
of the British Government which purchased the wools of its Dominions for the
duration of the war and at least 1 year thereafter.
In order to obtain the widest market in the United States, which is not only
one of the world's richest markets, but at the present time one of the few remain-
ing markets, the British Government is reported to be selling wool here at prices
less than it pays the Dominion growers.
May we suggest to your committee the following ways in which the wool-growing
industry may be helped and maintained in a healthy condition in this country.
RESEARCH
One of the greatest needs in all branches of the wool industry is research. So
far as we know, the only research work ever done by the Department of Agricul-
ture has been in breeding and on wool shrinkages. They have left entirely unex-
plored research on wool fibers. We believe great service could be done to the
wool growers of the country if a wool research laboratory were established and
properly staffed.
The most extensive research ever done on wool by ajiy governmental agency
has been done during the war by the Army and the Navy, who have done much
research on wool to determine the best type of garmen u to be used by our fighting
forces.
Some of the mills in this country have done considerable research, but this
research has been used for the benefit of the particular mill doing the research
work and has not been made available, as Government research would be, to all
. mills.
While in other fibers there has been a great deal of technological developments,
very little has been done on wool. There is need for much research on wool fibers,
the effect of dyes on wool and particularly to discover new uses for wool and new
methods of using wool. This seems to be a proper field for governmental research
and we hope that your committee will give this matter consideration.
IMPORT QUOTAS
In view of the extremely large stocks of wool in all of the major wool-producing
countries of the world, it would seem as though some means should be provided
to put the imports of wool on a quota basis as is now done with many other
commodities.
POST-WAR ECONOMIC POLICY AND PLANNING
1569
The Commodity Credit Corporal ion is now purchasing the domestic wool
clip at ceiling prices. Yet these ceiling prices are below the cost of production.
For confirmation of this we suggest that the committee ask the United States
Tariff Commission for the latest studies on the costs of producing wool in this
country. The United States Tariff Commission has long been recognized as a
fact-finding body and they have for many years been making studies on the cost
of production of wool. So far as we know this is the only governmental agency
that has made such studies over a period of years, and we feel certain their studies
will show that the present ceiling prices on wool and lambs are well below the cost
of production in this country.
The present ceiling price of fine combing domestic wool is approximately $1.19
clean basis. In November prominent manufacturers told us that if we were to
get the domestic wool clip owned by the Commodity Credit Corporation into
consumption, the Commodity Credit Corporation would have to reduce the
price of fine combing domestic wool to 88 cents per pound clean basis. This
would mean a reduction of from 10 to 15 cents per pound grease basis, which
would absolutely ruin the wool-growing industry in this country because, as we
have pointed out previously, present prices of wool and lambs are below the cost
of production.
We desire to call the committee's attention to the fact that the present ceiling
price on fine and fine medium combing wool clean basis Boston has advanced less,
compared with the average price from 1909 to 1940, than any of the other impor-
tant agricultural commodities, as is shown by the following table:
Price,
1909-40
Market
price,
Sept. 15,
1944
Increase of
present prices
over price for
1909-40
0. 4721
.803
.4359
.997
.1643
.406
.7588
1. 0518
.1685
.1519
.6046
29.51
8. 591
.9771
0.642
1.47
.751
1.60
.237
.642
r.i6
1.35
.429
.2102
.953
52.30
13.50
1.19
Percen/.
35.9
83.0
72.31
60.48
44.24
Oats -
58.1
52.87
Wheat
28.3
154.6
Cotton -
38.38
57.62
77.2
Hog^ - - --- - --- --
57.14
Wool fine and fine medium combing wool clean basis Boston
21.78
It will be seen from above that wool has advanced less than the other com
modifies.
It is interesting to note that the average price per bale of Australian wool in
1940-41 was 18.49 percent higher than the average price per bale of Australian
wool for the 1909-40 period.
The average importation of apparel-class wools into this country during the
period 1892 to 1904, inclusive, amounted to 121,243,135 pounds grease weight.
During the period 1909 to 1940 the average importation of wool amounted to
147,330,896 and during the period 1931 to 1940 the average importation of wool
amounted to 63,406,934 pounds grease weight. There was a wide variation in
the imports of these wools by years going from the low of 8,478,809 pounds in
1894 to 415,468,893 pounds in 1917 and, of course, during the present war we have
been importing wools at the rate of about 600,000,000 pounds per year. During
1944, the sales of wool in Australia to be exported to this country for the period
August 1 to December 15 were 430,105 bales compared with 320,195 bales during
the same period in 1941. During the period 1923 to 1942 inclusive 25.4 percent
of the mill consumption of apparel-class wools in this country were imported.
We suggest the establishment of an import quota on wool which would permit
the importation of enough wool to make up any^ deficiency above the domestic
wool clip for manufacturing requirements. This quota would have to be flexible
and, as manufacturing increased or decreased, the quota would likewise have to
be increased or decreased.
If an import quota were fixed on wool there would likewise need to be an import
quota on the manufactures of wool which would include tops, yarns, noils, wastes
and goods, otherwise the wool would come in here in the form of manufactures of
1570
POST-WAR ECONOMIC POLICY AND PLANNING
wool and we would be left with the domestic wool clip as an unusable surplus in this
country. An exanaple of what might happen if an import quota were placed on
wool and not on manufactures of wool is shown by what happened to flaxseed.
When the emergency tariff of 1921 was passed the duty on flaxseed was increased
without any change on the duty on linseed oil. Within 20 days after the passage
of this emergency tariff the importation of flaxseed in this country ceased and the
finished linseed oil was brought in instead. This obviously caused the domestic
manufacturers of linseed oil to close down, creating a serious disarrangement and
substantial unemployment. This situation was corrected in the regular tariff bill.
Every yard of fabric imported into this country deprives the wool grower of his
market for the quantity of wool contained in that particular yard of fabric. From
a broad economic standpoint every time a yard of woolen fabric is imported into
this country a job for an American worker is exported abroad.
In the post-war era unemployment will be a vital problem, so it is of interest to
note the importance of the woolen and worsted industry in this country. In a
list of 177 of the largest manufacturing industries in the United States, the woolen
and worsted manufacturing industry ranked seventh in the number of workers
employed and fourteenth in importance, so far as the value of its finished product is
concerned. This industry has a very high ratio of employment compared with
the value of the product produced.
Without a quota on the imports of the manufactures of wool not only would the
wool grower be affected by being deprived of his market, but it would at the same
time very seriously affect employment in the seventh most important manufactur-
ing industry so far as labor is concerned.
The importation of fabric into this covuitry, like importation of wool, has varied
tremendously over the past 25 years. Approximately 85 percent of these imports
originated in the United Kingdom. Over a 25-year period these total imports
have averaged approximately 2}-^ percent of the total fabrics used for apparel pur-
poses by this country.
Unlike the quota on wool, which should be on a flexible basis, the quota on the
manufactures of wool should be on a fixed basis. There is ample precedence for
the import-quota system, as import quotas have been estaVjlished on sugar, coffee,
red-cedar shingles, tobacco, cattle, petroleum, cotton, wheat, silver-black foxes,
fresh milk and cream, codfish fillets, i^otatoes, and probably other products.
It has been generally recognized that the 1909-14 base period for figuring parity
was very unfortunate so far as wool is concerned. The period 1900 to 1905, in-
clusive, was the only 5-year consecutive period when wool was lower than during
the base period of 1909-14. During the period 1900-1905 the average price of
fine combing wool Boston was 56.66 cents per pound. During the period 1909-14
the average price of fine combing wool, Boston, was 61.8 cents. During the
parity period fine combing wool was 74.5 percent of the average price for 47
years (1895-1941). During the parity period wool was 69.54 percent of the
41-year average price (1900^1940). During the parity period wool was 63.27 per-
cent of the 32-year averageprice (1909-40).
The following gives the relationship, percentagewise, of ,the average price during
1909-14 base period (parity) to the average price during 1909-40 (32 years):
Table 7. — Relationship of prices during 1909-14
[Base period (parity) to prices during 1909-40 (32 years)] ,
Percent
Beans 84. 51
Potatoes 82. 19
Rice 81. 54
Peanuts 97. 5
Chickens 69. 38
Oats 98. 0
Corn 84. 6
From the above table it will be seen that the price of fine combing wool was
lower than the other important commodities during the 1909-14 period with the
exception of tobacco. It will be recalled that Congress recognized that the
1909-14 period was unfair to tobacco and changed the parity period for that
commodity and yet, it will be noted that the relationship of wool during the base
parity period compared with the average prices for 1909-14 was but very little
Percent
Wheat 83. 55
Tobacco 59. 3
Cotton 81. 63
Cottonseed 113. 9
Barley 102. 38
Hogs 84.6
Fine combing wool, clean basis.. 63. 28
POST-WAR ECONOMIC POLICY AND PLANNING 1571
higher than tobacco. This should indicate clearly that a change in the parity
period for wool is necessary.
We hope that your committee will call representatives of the Tariff Com-
mission and ask them to give you figures on costs of wool production which should
be made a part of the record, because there seems to be a general impression —
which is held both in Congress and by the public generally — that the wool growers
are all making a great deal of money from both wool and lambs. Your com-
mittee can be of great service to the industry by helping to dispel this false impres-
sion.
We would be glad, if the committee so desires, to go into any of the matters
mentioned herein more fully.
We have tried to keep this statement as brief as possible and get the situation
covered by suggesting three matters of paramount importance that can be done to
help the wool-growing industry. First, research; second, import quotas; and
third, a change in the parity period.
The only market we have for domestic wool is the Army and, to a lesser extent
the Navy. The Army in 1940 gave domestic wools preference in Army contracts
by paying more for goods manufactured from domestic wools than for goods manufac-
tured from lower-priced foreign wools. This is in accord with the "Buy American"
policy. Be it said to the credit of the Quartermaster's Corps of the Army that
they have always given preference to the use of domestic wool even though it was
higher priced.
It must be remember that our costs of production in this country are much
higher than in any of the wool-e.xporting countries. It should also be remembered
that, while great j^rogress has been made in the development of machinery for
manufacturing and for agriculture, thus reducing the costs of production of manu-
factured products and some agriculture products, no machinery has yet been
invented which will reduce the cost of production of wool and lambs. It is true
that by improved breeding and selection we have increased the weight and quality
of both wool and lambs, yet in spite of this improvement, our costs of production
are still much higher than in any of the exporting countries.
Mr. Wilson. If there are any questions at all about anything on
wool, I would be glad to try and answer them. I think I am somewhat
of an authority on wool. Incidentally, it may interest you gentlemen
to know that we were seriously worried about the wool stocks that the
Commodity Credit Corporation has, but if we can keep the Army
using it — you see, the Army has been following the principle of Con-
gress' enacting the "Buy American", Act, and they have been giving
a prefersnce for domestic wool, and if we can keep them from doing
that, we will dispose of upward of a hundred million pounds of that
stock pile. The Army's requirements for the next 6 months are the
largest ever — a hundred million yards of wool goods.
The Chairman. Don't you think the prospects are that that
demand will continue?
Mr. Wilson. It will continue for this 6-month period, and then I
tliink it will fall off.
The Chairman. I don't see any hope for it.
Mr. Wilson. I hope you are wrong, and so do you.
The Chairman. I know; but I am talking about — I think we have
got to be realistic about this thing.
Mr. Wilson. The fact is that they have come in for the largest pro-
curement, Congressman, that they have ever had. A hundred million
yards in 6 months is a tremendous amount of yardage. It means
they are taking all .of the output of the worsted mills for 6 months;
they have frozen the top makers and the spinner, and the weavers,
and about 50 percent of the wool macliinery.
The Chairman. Are there any further questions you gentlemen
would like to ask?
We certainly apnreciate your presence, sir.
1572 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Wilson. I thank you very much, Air. Chairman. I don't
envy you gentlemen the job you have.
The Chairman. I m^ight say, Mr. Wilson, some people think Con-
gressmen don't do any work for their pay.
Mr. Wilson. I know much better than that, because I spend too
much time in Washington.
Mr. CoLMER. We are honored here this afternoon by having the
distinguished chairman of the powerful Rules Committee of the House,
the dean of the House and the dean of the Congress, whose district
we are .meeting in, Congressman Sabath. Wliile I don't think he is
what you might call a large farmer, he has some ideas about farming,
or agricultural problems, and, as chairman of the Rules Committee,
he has uniformly been cooperative in getting far.m legislation to the
floor, notwithstanding the fact that he represents an urban district.
So I wonder if we might not have a statement from Judge Sabath.
I don't know exactly the nature of it, but I a.m sure it will be very
instructive.
The Chairman. Mr. Colmer, I want to say, as a member of the
Committee of Agriculture of the House of Representative? and chair-
man of this subcommittee, that we all know that Judge Sabath has
always been a friend of agriculture, that he has been most helpful in
legislation affecting agriculture.
When legislation was pending, he has been helpful in getting it to
the floor of the House. We in the Midwest, especially, look upon him
as a friend of AmerLcan agriculture. As chairman of this subcom-
mittee, I am proud to have him with us this afternoon. We will
appreciate any statement that he might make,
TESTIMONY OF CONGRESSMAN ADOLPH J. SABATH, CHICAGO, ILL.
Mr. Sabath. Mr. Chairman and gentlemen of the committee, I am
indeed pleased that I have been able to pay you a visit. I have been
under the weather for several weeks, and this is my first day out, and
I could not forego the pleasure of seeing how you are getting along in
the hard task before you.
Of course, I maintained early that the first duty before us was to
win the war, bring about a lasting peace, and bring our boys home
to their dear ones as speedily as possible. After we have succeeded
in that, we should devote our energy, our thoughts, and our efforts
to other matters.
I am indeed gratified that my friendship for the farmers is recog-
nized. For the last 36 years, I have been friendly to their interests,
because I realize that if the farmers and agriculture are prosperous,
the entire Nation and all of the people benefit.
I have been attacked in my district freely and severely, because I
was voting against the best interest of the consumer and the people of
my district. I have always tried to the best of my ability to point out
and make clear that when I was aiding the cause of agriculture I was
aiding the cause of business and also the cause of labor, because if
agriculture is prosperous, the farmers have money enough to buy
things for their families and buy new implements, and as they buy, the
demand is created for these things which must be manufactured and
which require labor. Later on, labor creates business and profits to
the businessmen as well as profitable employment to labor.
POST-WAR ECONOMIC POLICY AND PLANNING 1573
H*owever, I am not here today really to plead or aid the cause of
agriculture, because I don't think that is necessary. Because I have
been at all times a real friend of agriculture and the farmer, I thought
1 would take the liberty to bring home to you gentlemen some impor-
tant matters that have been troublesome to me and that I felt for over
2 years, and nearly 3 years, should be rectified.
As it is, we have today in our country, notwithstanding the great
prosperity, nearly 20,000,000 people who are earning less than $1,300
a year, and half of them less than ^$1,200 a year, or $20 or $25 a week.
Meanwhile, the cost of living has been going up.
We passed the Wage and Hour Act to aid the underpaid workers of
America, but it cannot cope with the increase in the cost of living.
Unfortunately, most of the meager earnings of these men must be
spent for food.
I venture to say that about 60 percent of the earnings of those
white-collar and low-paid employees is spent for food, because they
invariably have large families. Although the cost of living may now
have gone up 30 or 40 percent — there is a difference in opinion as to the
increase in the cost of living, but we will say that it is only 35 percent — ■
I venture to say that nearly 60 percent of the earnings of these low-
paid workers goes for food that the farmer raises,
I feel that the farmer is more prosperous than ever before in the
history of our country — and I am mighty glad and proud of it — and
that he has nearly eliminated all of the mortgages that used to plague
him and on which he paid 6, 8, and even 10 percent interest. He has
now some money in the bank, and he is obtaining a splendid price for
all of his commodities.
I can remember when I bought 50 bales of cotton at 4 or 5 cents to
help the cotton growers and I did not represent any of the cotton
growers. I did it to help conditions, but I do remember that only
10 or 12 years ago the price of cotton was about 6 and 7 cents and
even lower. Today I thinlv it is about 21 cents.
Therefore I complimented in my speech the gentleman representing
the cotton section in calling a conference in Washington of Members
of Congress as well as the Senate and others in an effort to develop a
program or policy or plan that would aid the cotton farmer and that
would not leave him in a dangerous position as soon as the war is over.
They must have realized and recognized what happened to the wheat
growers and other farmers in 1930 or in 1928. We appropriated at
that time $500,000,000 to keep up the price of wheat and shortly
after the $500,000,000 was expended the crash came and wheat went
down to about 46 or 47 cents. What applies to wheat applies to corn,
rye, barley, and to cotton, and even to tobacco; in fact, all com-
modities.
The Chairman. It went to 25 cents a bushel for fruit, and corn to
10 cents a bifshel.
Mr. Sabath. I fully appreciate that, but I don't want to quote the
lowest prices. I want to be as fair to the committee and to you
gentlemen and to the country as I possibly can and as I have always
tried to be.
I know what the prices were, and I know that the cattle and hogs
were selling at 1)'i and 3 cents on the hoof, and I know the prices of
all of these commodities that prevailed in 1930 and 1931 and 1932,
and I am afraid, if we don't keep up the demand, with everybody
99579— 45— pt. 5 23
1574 POST-WAR ECONOMIC POLICY AND PLANNING
increasing the price for farm products, no matter how much money
we will appropriate to keep up those prices, the day will come when
I feel 'it will be a complete wreck and ruin to the farmers of this
country.
Therefore, I have pleaded and suggested that a real study be given
by your committee and by everyone else as to the future of the
farmer, and I have had some experience in farming; I know som.ething
about it. I know that the lot of a far.mer or a grower and a cattle
raiser or hog raiser is hard. I know from when I was quite a shipper
what the commission men used to do to me, and I presume that they
are still practicing the old game.
Now, I am asking you, when you go on with this investigation, to
pay serious attention to the things that are to come, and they are
bound to come unless we do something. We will say that the prices
of farm products have gone far enough and we cannot listen to Mr.
O'Neal or to Mr. "Woolgrower" or to Mr. Clark or any representatives
of the cotton grower even if it would be Mr. Clayton, or it does not
matter who it is, or Mr. Borden or those people who control the milk
and dairy industry of the Nation, because if we do we will find our-
selves in a plight that will be detrimental to the farmer and to the
country as well.
Now, I am especially interested in the consumer and the 20,000,000
underpaid and undernourished people in our country, notwithstanding
that when you call for the reports of the corporations you find that
they have billions upon billions in surpluses and" in reserves, and are
making greater profits than ever before.
Now, what good will it do them and what good did it do them in
1932 or '29 when the crash came? I called the attention of President
Hoover, then, that we should stop the gambling in the Stock Exchange
in New York, and everywhere else, but, unfortunately, I was not
strong enough because when Mr. Morgan and — who w^as the president
then, that went to jail?
Mr. VooRHis. Mr. Whitney.
Mr. Sabath. Mr. Whitney— and others who made their appearance
in the White House, the assurance that was given me then went sky
high. I pleaded with Mr. Whitney and the board to stop this artificial
game and quit dealing with marked decks and playing with loaded
dice. If they did not stop that, the day would come when they would
regret it. My last telegram to Whitney was, "If you don't do it for
the country's sake, do it for your own sake, because I know what will
happen to you." Of course, I knew of some of the ramifications of
Mr. Whitney.
Now, I fear the same thing that happened before may happen
again and so you have a real task before you. I know these influences.
I have been with you for many years and I know that the wool growers,
the cotton growers, the wheat growers, and the orange growers, and
vegetable growers, and cattle and hog growers, are all demanding a
little more and a little more, and that is only natural. That is human
nature, but they should be made to realize and understand that they
have to stop, and think, and cease the continued and persistent demand
for increases in prices when conditions do not warrant it and when it
brings about such an unfortunate situation and condition as it does
to the 20,000,000 of workers of America.
POST-WAR ECONOMIC POLICY AND PLANNING 1575
Now, that is my main plea. Perhaps you heard me make that
speech on the floor of the House for those white-collar people many
times, and 1 think it fits in because they sufi'er more than anybody else,
because they consume more and they are obliged to consume more
because thej^ are obliged to work and the system requires more
sustenance.
All of these gentlemen from Wall Street, or some of these other
places, might not haye to eat so much, but they drink a little more
champagne and their appetites for food are not as great as for profits.
However, if they even made a great deal of profit and much more
than they are entitled to, it will not avail them anything if we do not
arrest the unfair and unjustifiable increases jn the cost of living.
That is about all I wish to bring home to you. I know that you
are all sensible men and that you know I am trying to be helpful and
I have been helpful in the past. I repeat that I have voted for every
agricultural bUL
Wlien I came to Congress the entire expenditure of the Government
was not as great as it is today to maintain the Department of Agri-
culture. Now, we have done a great deal for the farmer, but you
cannot satisfy everyone and there are a lot of people who won't be
satisfied no matter what you do for them. However, there is a limit
to everything.
Now, I noticed only yesterday an article stating that 4 cents more
on a bushel of wheat is being allowed by the Office of Price Administra-
tion. _ I have a letter on my desk from Mr. Davis urging permission
of an increase to the low-wage people. He said, it will require an act
of Congress. It is the same thing as an increase of 4 cents per bushel
of wheat. That is necessary because of the acts of Congress and so
I am not quarreling wdth them, but I can bring it home to the people
who will have a great deal to say in the next Congress and whose re-
port and recommendations will be looked forward to anxiously to
enlighten both Houses and the country as to what is the best thing to
do for the Nation and for the people after the war is over.
I am grateful for the opportunity once more to express my viewpoint
in behalf of the underpaid and underprivileged and. yes, in many
instances undernourished people, and I hope that we wih not be a
party to granting every reckless increase for food which operates
against these 20,000,000 or 25,000,000 of our people.
I want to thank you men for giving me the chance to express myself
and, if you wish to ask any questions, I will be only too pleased to
^ns^^ er them, if I can.
Mr. CoLMER. May I take advantage of that and lead oft" by making
just a brief statement? The purpose of this committee, this sub-
committee of the Post-W ar Economic Policy and Planning Committee
is to do just what you are talking about, to make a study of post-war
agriculture, to see that agricultm-e is not ruined and the farmer is pro-
tected and at the same time to see that he gets the protection that
you have been talldng about for this 20,000,000-class.
Now, I am sure that you agree with that. I am just wondering if
you are not on a false premise when you implied by argument that the
farmer is getting so much the better of this deal. The most ardent
advocate of the farmer has only asked for parity with these workers
that you are talking about. You believe in that, don't vou?
1576 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Sabath. Oh, yes; but we have gone above parity.
Mr. CoLMER. No, sir; not in Congress, we have not. I don't think
that the record mil show that.
Mr. Sabath. I will say this: Do you recollect when the chairman
of the Agriculture Committee came before us and urged the resolution
giving the Agriculture Committee the right to investigate the spread
between what farmers were receiving for their crops or products and
what the consumers paid, I immediately urged the passage of that
resolution giving that committee that power, because for years I have
maintained that it is manifestly unfair and I can't reason why there
should be such a great difference between the price that the farmer
receives and the consumer js obliged to pay.
Mr. CoLMER. I don't find any fault with that. However, I say
on the broad basis the farmer ought to be brought up to a parity with
these workers that you are bespeaking.
Mr. Sabath. Mr. Colmer, you are a sensible man and so are the
rest of you gentlemen. Well, taking cotton, we have over 12,000,000
bales of cotton in our warehouse on which the Government is paying
tremendous amounts for warehousing, et cetera.
Mr. Colmer. Pardon me just a moment.
Mr. Sabath. I just want to finish that. We have a great crop
coming again. Now, if you will keep the price above the market of
the world, you will never get rid of those 12,000,000 bales of cotton
and they will hang over you, and instead of giving the farmer or the
grower a little advantage now, the little that he will gain by the in-
crease of price now, he will lose doubly and trebly later on when he
finds himself with all of that cotton on hand, while all of the other
countries will be able to unload the tremendous quantity of cotton
that they have. Have I made myself clear?
Mr. Colmer. You made yourself very clear, sir, and from your
point of view, I would like to say that that is one of the things that
this committee is studying, agricultural surpluses. However, I would
like to point out to you again that the people who produce this cotton,
the majority of the small type of farmer, the tenant farmer and the
individual farmer, did not receive an income of twelve or thirteen
hundred dollars a year, net. You are talking about your constit-
uents. I am talking about my constituents.
Mr. Sabath. I agi-ee with you and you know I have supported
every proposition that came before the House to help the tenant
farmer and I think it is an outrage and a shame that these men should
be worked as they are at such a small income and derive such a small
return for- their hard labor. I agree with you.
Therefore I advocated years ago to stop these stock exchanges,
and these produce exchanges. The gentlemen who do not know the
difference between corn and rye or rye and wheat are selling thousands
and millions of bushels of stuff which they have not got; when the
farmer is obliged to sell, they will bring the price down and when the
farmer is through with selling, they start to boost it up.
Those things should be stopped and eliminated. I have been advo-
cating that in the interest of the grower and in the interest of the
farmer.
Mr. Colmer. I agree with that, fine, but I am sure you don't want
to leave the impression that you think the solution to the agricultural
problem in the post-war era is to beat the farmer down to even a
smaller income than the inadequate one he is getting.
POST-WAR ECONOMIC POLICY AND PLANNING 1577
Mr. Sabath, No; I will tdl you, a man should not grow cotton if
he has only a small ^plot. At the prevailing price, he should make
twelve to fifteen hundred dollars a year. Why he is not compensated
■for his services or his work is beyond me. There is something wrong
somewhere and that is the thing I think you ought to find out.
Mr. CoLMER. That is the thing we are trying to find out, but we
don't think the solution of it is to knock the price down or keep the
price down.
Mr. Sabath. I am giving you an idea where the trouble lies, in the
speculator, or hoarders, or manipulators. They are responsible for a
great deal of this.
The Chairman. Don't you think this: I have been sort of dis-
appointed with the work of that committee you granted a rule for
to investigate the spread between the man who produces a bushel of
wheat and the cost of the loaf of bread to this man who works down
here for $15 or $25 a week, or whatever it is. It is too low during
wartime, we know^, and I will agree with you 100 percent on that. I
regretted that that committee has not done more,- but, of course, we
lost the chairman of the committee by death and I hope the next
Congress will continue that committee and get some action, because
I thinlv that lies right at the root of a lot of the trouble that these
people are having.
In other words, they are paying more for food than they should pay
when you consider the initial cost of that food and where it is
produced.
Mr. Sabath. Go in any store aro,und here and buy oranges, or a
head of cabbage, or turnips, or lettuce, or a pound of prunes, or anything
you w^ant, and you will see how much you will pay. Or go to a butcher
shop and see what you pay for the meat and everything else. When
a poor woman goes there with thi'ee and four dollars, she brings home
nothing.
These things come to me every day and that is why I am making
this plea. For years I have been advocating cooperatives, but un-
fortunately the farmers did not seem to have enough confidence in
themselves. It they had joined and handled the things as they should
be handled without letting interlopers and professional manipulators
step in, I don't think there would be that difference between the, cost
and the price.
Mr. Voorhis. May I interrupt you there and say I think that is
absolutely true, but it is not quite as discouraging as that. There are
a lot of farmers who have farm cooperatives
Mr. Sabath. I am glad to hear that.
Mr. Voorhis. And they found them tremendously beneficial
precisely at that very point, of enabling those farmers to get a portion
of the protection when they marketed their crops M^hich they cannot
have under the circumstances of marketing that you described a
while ago. vSo, cooperatives have helped and they are going to help
more, I thinlv.
Mr. Sabath. There should have been more of them.
The Chairman. We are going into that.
Mr. Sabath. I have been advocating that for some time and you
cannot charge me with not being fair to the farmer. I am fan to the
farmer because I want him to get a fair share and a fan- profit for
everytliing he raises, but, on the other hand, I want those prices not
1578 POST-WAR ECONOMIC POLICY AND PLANNING
to be too high for these men who are earning such low wages and
salaries — these thousands of clerks in various stores and in the banis
and everywhere else — because they are not organized.
The Chairman. Your policeman, school teacher, and minister are
in that group of people.
Mr. Sabath. Yes; that is right. Well, as a rule, the policemen
are organized, the school teachers are organized and they are getting
better wages and salaries, but there are thousands upon thousands of
others who are not organized and those are the people who are earning
these low wages and are obliged to work for the low wages and low
salaries and that is the thing that you must give a great deal of con-
sideration to and not how much more should the farmer receive.
If the farmer is getting a good profit now for the thing that he raises
and he has been able to pay off his mortgages and he has been able to
buy new machinery and properly clothe his wife, and have money in
the bank, he should be satisfied not to demand additional profits as
long as his profits the last few years were high enough.
Mr. VooRHis. The problem is going to be— what is going to happen
after the war is over, and the problem is to prevent a disastrous decline.
Mr. Sabath. That is the thing J am trying to bring home, and I am
afraid if we continue by artificial methods to keep the prices of all of
these products up, there is bound to be a crash.
Do you know what they are doing now? They are burning wheat
in Argentina. Do you know how many more millions of bushels of
corn and wheat are now above possible consumption? What will be
the result in 6 months, 9 months, or a year? That is what I am trying
to prevent, and that is the reason I thought I would drop in and say
hello to you.
I am grateful for the kind words you have said about me, and I
hope that I will continue to deserve them and that the farmers will
look upon me as their friend.
What I have said today is for their interest, too. 1 don't know
whether Mr. O'Neal is here, but they always want to get more and
they always want to show how much more tliey can do. Well, some-
times they ask for too much and we have been giving them nearly
everything they ask for and so we must see that they are satisfied so
lon^ as they are getting a good price.
Tlie Chairman. We appreciate your being here very much. We
will adjourn until 9:30 tomorrow morning. (Whereupon, at 4:50
p. m. the hearing was adjourned to 9:30 a. m., Tuesday, December
19, 1944.)
POST-WAR ECONOMIC POLICY AND PLANNING
TUESDAY, DECEMBER 19, 1944
House of Representatives,
Agriculture Subcommittee of the
Special Committee on Post- War
Economic Policy and Planning,
Chicago, III.
The committee met at 9:30 a. m., Hon. Orville Zimmerman (chair-
man) presiding.
Members of committee: Hon. Orville Zimmerman, Hon. William
M. Colmer, Hon. Jerry Voorhis, Hon. Clifford R. Hope, Hon. John
R. Murdock.
The Chairman. The committee will please come to order.
We have with us today Mr. Fowler McCormick, president of the
International Harvester Co., who has consented to appear before this
committee and give us his views on some of the post-war problems of
agriculture, which we know are going to be helpful. So, at this time,
Mr. McCormick, we would be glad to hear from you.
TESTIMONY OF FOWLER McCORMICK, PRESIDENT OF THE
INTERNATIONAL HARVESTER CO., CHICAGO, ILL.
The Chairman. If you have a prepared statement, you may read
that, and we will not bother you, or if you prefer to be interrogated,
we will follow that policy.
Mr. McCormick. Whichever you choose, Mr. Chairman. I have
a short statement here, and that might form a basis, if you care to ask
questions.
The letter which I received from Mr. Arthur, consultant to your
subcommittee, suggested that I direct my comments before the
committee to two principal points: (1) measures that might be taken to
reduce the wide fluctuations in farmers' purchases of capital equip-
ment, and (2) the prospective adjustments likely to occur in post-
war agriculture resulting from changes in machine use and teclmology.
With your permission I should like to comment on those topics
separately and in the order in which they were presented, and I might
say, Mr. Chairman, if it is your pleasure to ask questions during the
paper, that is quite all right.
The Chairman. Thank you, sir.
Mr. McCormick. First, as to measures that might be taken to
reduce wide fluctuations in farmers' purchases of capital equipment,
such as farm machinery.
The first point to be understood, I believe, is that the fluctuations
in purchases of capital equipment closely correspond with and are
caused by fluctuations in farm cash income. There is a direct rela-
1579
1580 POST-WAR ECONOMIC POLICY AND PLANNING
tionship between the farmers' current income and what he considers
to be his prospective income, and the amount of machinery he buys.
This is because farm equipment is to the farm producer what
machine tools are to the industrial producer. Farm machines are
never bought for display, or for pleasure, but are bought only because
the farmer expects by theii* use to reduce production costs or to
improve the quantity or the quality of his output, or all three. They
are tools of production purchased only when the buyer expects to make
a profit by their use.
Since this is so, it follows that any measures or conditions which
tend to maintain the cash income of farmers on a steady level will also
result in maintaining their purchases of capital equipment at a steady
level.
Man}^ factors tend in that direction, with most of which I am sure
you gentlemen are familiar. Among them might be mentioned the
tendency toward greater diversification of farming in areas which have
historically been predominant one-crop territories, such as the cotton
country. Another tendency is toward development of industrial
markets for farm crops. In addition there are and will be many
governmental policies and programs all having a similar objective.
To the degree that these various factors succeed in equalizing the
peaks and valleys in farm cash income, they will also automatically
equalize the peaks and valleys in farmers' purchases of capital goods.
Mr. MuEDOCK. May I ask a question there? Will you elaborate a
little bit on industrial uses of farm products? Are you thinking of
new uses?
Mr. McCoRMiCK. Congressman, I think that is a tremendous
field. It is termed, as you laaow, the chemurgic movement in general,
aftd that is a movement which
The Chairman. What is that word you used?
Mr. McCoRMiCK. Chemurgic.
The Chairman. How do you spell it?
Mr. McCoRMiCK. C-h-e-m-u-r-g-i-c. That is just a fancy name
for the industrial use of farm products.
The Chairman. It is a perfectly good word, although some of the
dictionaries don't give it.
Mr. McCoRMiCK. That is right. I am sure many of them don't
give it.
The Chairman. But it is recognized.
Mr. McCoRMicK. That is right. Certainly, we feel that the
industrial use of farm products, farm-grown crops, is one of the
greatest potential fields for the betterment of farm conditions and
farm life that there is. As you know, there has been a certain amount
of movement in that direction, but I don't think that any of us can
but feel that the thing has just started. The future effect of tech-
nology, chemistry, and various different sciences cannot but be very
great as time goes on. I don't think I need to enlarge on that,
because others are more competent than I am to discuss the full scope
of that question, but I think it is fair to say that there has been a
healthy growth over the past 15 years, and I think that growth is
increasmg in size.
Mr. MuRDOCK. You are engaged in the mechanization of the farms
of America. It has been mostly the large farms heretofore, but there
will come a time when small farms will be mechanized.
POST-WAR ECONOMIC POLICY AND PLANNING 1581
Mr. McCoRMiCK. Very greatly.
Mr. MuRDOCK. And that will mean an increase in productivity.
Mr. McCoRMiCK. That is correct.
Mr. MuRDOCK. And unless we have a sort of safety valve, as the
one you are suggesting, we will be apt to have these great surpluses,
Mr. McCoRMicK. That is correct, with the added comment, too,
that with the improvement, invention, and design of smaller tools,
we may hope also that we may operate smaller farms profitably.
I am coming to that a little bit later m the paper, but that is a very
important point.
The Chairman. Will you pardon an interruption at that point?
When you use the word "production," do you think another vital
word to the farmer is "consumption"?
Mr. McCoRMiCK. Of course I do; you can't have one without the
other. They belong together.
The Chairman. And the more we have of both, the higher our
standard of living and the more things people may enjoy?
Mr. McCoRMiCK. Definitely. The two things go hand in hand.
The Chairman. I think we should always keep that in mind.
Mr. McCoRMicK. Shall I continue?
The Chairman. Yes; proceed.
Mr. McCoRMicK. Second, as to the prospective changes in machine
use and technology and the effects of these on agriculture, I can say
to you, first, that I am sure the post- war period will see many new
and different farm machines as the result of engineering advances. I
know this is true with respect to the Harvester Co., and I would be
very much surprised if it were not true also as to our competitbrs.
In my opinion, the outstanding result of this technological progress
will be to give the small one-family farm every advantage available
through mechanical equipment to the larger farm. It was true before
the war, and is true today, that the large farms and medium-sized
farms of the country were operated largely with mechanical equip-
ment. It is also true that at the present time there exists farm
machinery adapted to the needs of many of the small farms of the
country. But, unfortunately, there are still areas of the United
States where relatively low farm income and small acreages under
cultivation have restricted the use of machine power. It is to those
localities and to those little farms that we hope to be able to bring
the benefits of power farming, with equipment of a size and price
adapted to their needs.
Before the entry of our country into the war, our engineers had been
working on many new developments in the design of farm equipment
and our other products, such as motortrucks, mdustrial power, and
refrigeration equipment. Work of this sort, of course, was almost
entirely brought to a halt by wartime tasks. More recently, the
progress of war production and the termination of some of our larger
war contracts have enabled us to resume development work on some,
although not all, of these products.
Some of the machines, which may well be regarded as post-war
machmes, are already m limited production. They camiot be pro-
duced in quantity now because of necessary wartime restrictions on
materials, manpower, machine tools, and plant construction.
Typical of these machines are the new automatic pick-up hay baler,
the self-propelled combine, and the cotton picker. You may be inter-
ested in a little description of them.
1582 POST-WAR ECONOMIC POLICY AND PLANNING
The pick-up hay baler makes a one-man job of what has usually
been a four-man job, the baling of hay. This makes it unnecessary
for the farmer to draft his family for field work on the hay crop or
to make arrangements for work sharing with his neighbors, and also
makes it possible for him to handle his hay crop at just the right time
to get the best results. In most cases, the baler will eliminate the
use of two other machines.
The Chairman. Will that be produced at a cost at which the
smaller farmer can afford to buy it?
Mr. McCoRMicK. It will eventually, Congressman. At the pres-
ent time the price, due to the limited number of machines and its
novelty, is not as low as I am sure it will be later.
Mr. VooRHis. May I ask this, Mr. McCormick: Isn't the forma-
tion of cooperatives for the joint purchase of some of these macliines
an important factor in making them available to small farmers?
Mr. McCormick. For the manufacture or the distribution, Mr.
Voorhis?
Mr. Voorhis. To make them possible for the small farmer to use.
In other words, you may have a machine that a single farmer could
not afford to buy, and where it would not be economical to keep it
on a single farm all year and maybe only use it a week or so, whereas,
if you could get a dozen farmers together to purchase it and own it
cooperatively, it might be practical.
Mr. McCormick. You mean a cooperative in the sense of the use
of the machine itself?
Mr. Voorhis. Yes.
Mr. McCormick. I think in regard to certain machines that is a
very good idea, and I think in regard to certain machines that Avill be
the way, and should be the way, in which it is first introduced. I
have in mind, for example, a subject we will come to in just a moment,
if I may digress, such a machine as the cotton picker.
_ Now, that is a pretty big and complicated machine. It is a very
difficult and technical job to pick cotton by machine.
The Chairman. The same thing is true of the corn picker.
Mr. .McCormick. Yes, farmers share corn pickers, and, of course,
there is nothing new in one sense in the cooperative sharing of ma-
chines. We have the old tlireshing ring, and things of that kind,
where it really was the cooperative sharing of a machine in a way.
So, Mr. Voorhis, I think it is entirely true in regard to certain of these
machines, the cooperative i use will be a very desirable thing.
The CrfAiRMAN. That will mean, of course, increased production,
too, won't it?
Mr. McCormick. Increased production on the farm?
The Chairman. That is right.
Mr. McCormick. Well, the use of the machine in itself does not,
I think, necessarily increase production. The thing that would in-
crease production, as I see it, is your soil-conservation program, your
intelligent crop rotation, your fertilization, your better seed, your
better use of manure, and other things like that.
The Chairman. I agree with you on that.
Mr. McCormick. That is what increases the yield.
The Chairman. But, still, the farmer who gets a small tractor is
going to make a bigger cotton crop or corn crop than the man who
makes a cotton crop with a mule and double shovel plows, as is done
in certain sections of the country.
POST-WAR ECONOMIC POLICY AND PLANNING 1583
Mr. McCoRMicK. I think that is right. The intelUgent use of ma-
chinerv should yield better crops.
Mr. VooRHis. It will give increased production per man, and it will
reduce the cost, perhaps?
Mr. McCoRMicK. In other words, the use of ■ machinery is only one
method of increasing the yield per acre, but the use of machinery is
the essential thing in increasing the production per man.
Mr. Hope. It will save crops that will not otherwise be saved.
The hay baler is a very good illustration of that.
Mr. McCoRMicK. That is right. In other words, the use of
machinery, properly designed and properly used, will lend a timeliness
to the farm operation which is not possible otherwise.
The Chairman. I was raised on a farm in Missouri, and, as I, recall,
it was a laborious job to get hay into a hay baler. We first went out
and cut our hay, and then we went out and what we called shocked
it in nice, round shocks that would turn rain, and sometimes stand
there for days. Then we would haul it into the barn or rick and stack
it. That was another laborious operation. Then, sometime that fall,
somebody would bring in a hay baler, and we would pitch it out of the
barn or off the rick.
Mr. McCoRMiCK. That is the typical method.
The Chairman. Those are the distinct operations we went through
to get a bale of hay.
Mr. McCoRMicK. This new machine is much simpler and lighter
than old-type balers. It is pulled by a farm tractor. It travels along
the windrows of hay, gathers up the hay, presses it into a rectangular
bale, with each charge sliced into sections for easy feeding to livestock,
binds the bale automatically with heavy twine, and expels the com-
pleted bale. It will handle from four to six bales a minute. The
pick-up baler also provides the first practical method of gathering
and baling the straw from threshed grain in a field which has been
harvested by a combine. Baled straw has both farm and industrial
uses.
Mr. Hope. What are your prospects during this coming year for
the production of these ba ers? I ask that because I don't think
there is anything farmers have asked me any more about than hay
balers. I am very much interested. The production has been very
small.
Mr. McCoRMicK. That is right, it has been. As you know, there
are at least two of our competitors who are now putting out a similar
type of hay baler, a pick-up baler. As far as we are concerned, we
only put out a handful in 1944, that is all we were able to put out.
We are going to increase that for next year, in 1945, but it won't be
nearly enough to satisfy the demand. It can't possible be. The
question of manpower, principally, makes it impossible to do more
right now.
Mr. MuRDocK. May I ask a question about the mechanical cotton
picker, but before I ask that, I want to say of all the machmes men-
tioned here as being able to save crops by getting at them at the right
time, I think none surpasses the mechanical cotton picker. A lot of
cotton is ruined because it isn't picked, or it is lowered in grade, in
quality.
Mr. McCoRMiCK. That is right.
Mr. MuRDOCK. Are you manufacturing a mechanical cotton picker?
1584 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. McCoRMicK. We are on a very limited scale. We put out some
15 machines, I think, this year, which one could call mostly of an ex-
perimental nature. They were put out, in fact, by our engineering
department, not by our regular production department.
Now, for next year we hope to be able to get out an increased num-
ber, but still in absolutely inadequate number. The main reason we
can't get more out next year is we simply have no plant capacity or
machine tools we could do the job with.
Mr. MuRDOCK. Do you know whether any of your machines are
being used in Arizona on the long fiber cotton?
Mr. McCoRMiCK. Yes; there are at least one or two there. At
Phoenix, I understand, we have four.
I might say we have experimented many years at PhoenLx. The
Mississippi Delta, the Arkansas Delta, southern California, and
Arizona have been the four main places for experimental work.
The self-propelled combme, or harvester-thi-esher, is an important
development. At present our machine is made in only one model,
ha^/ing a 12-foot cutting width. As you Imow, conventional combines
are drawn by a tractor, and a conventional combine of the same
capacity as our self-propelled model requires one man on the tractor
and another on the combine. The self-propelled machine offers the
advantages of one-man operation, lower fuel costs, and greater flex-
ibility in field work. In addition, of course, it frees the tractor for
other work.
I Imow all of you have heard of the mechanical cotton picker, and
some of you may have seen the machine at work. Our picker is the
result of more than 40 years of engineering work. It offers niecharical
power for the harvesting of the most important American field crop
which is still harvested laboriously and expensively by hand. More-
over, it conipletes the mechanization of cotton production, since all
other steps m growing cotton can be and are performed by machines.
If American cotton is to compete successfully with foreign cotton in
world markets, or compete successfully ui the American market with
competitive fibers, the costs of cotton production must be reduced.
The cotton picker can make an important contribution to that end.
Speaking rouglily, the machine will harvest in a day about as much
cotton as could be picked by from 40 to 50 average hand pickers.
You may be interested to learn, too, that w^e are experimenting with
smaller cotton pickers to be powered by small tractors.
Mr. Chairman, that is the end of my cotton picker paragraph.
Mr. CoLMER. There are just one or two things I want to talk to
you about briefly. First, is this the Rust picker?
Mr. McCoRMiCK. No, sir. Our picker is our own development.
As I said, we have been striving to perfect a cotton picker for a great
many years. As you can wofl appreciate, it is about the most diffi-
cult mechanical harvesting job there is. The cotton plant itself is a
very complex thing. The bofis don't open all at the same time, as
■you know. The cotton varies in amount of leaf and size of stalk, in
dryness, in greenness of leaf. You encounter so many conditions
that it has been a very, very difficult problem to solve.
Now, over the years, of course, many other people besides ourselves
have been working on the problem. Rust Brothers is one group of
those who have been working very conscientiously over a great many
years. Now, we understand, I think it is a fact that the Allis-Chalmers
POST-WAR ECONOMIC POLICY AND PLANNING 1585
Co. have associated themselves with the Rust Brothers, they are
working on their ideas. Deere & Co., I understand, have associated
themselves with a picker called the Berry picker, and they are going
to carry on experimental work along those lines, so you will see a gi-eat
deal of experimentation and improvement as these next years go by.
Our machine is the result of having done our best to survey the
field over a great many years, pick out the best things that we could
in our own development, and it is really our own machine.
Mr. CoLMER. You feel, Mr. McCormick, the cotton picker is here
to stay? You thinlc that much progress has been made?
Mr. McCormick. We do. In other words, we made the statement
about 18 months or 2 years ago that we felt that the cotton picker was
a commercial product. By that, we meant that it was a machine
that could go at the present time into the field with only a reasonable
degree of trouble or breakage or what not, that it could be manufac-
tured at a cost that was economical. That is about what commercial
means.
Mr. CoLMER. It might be interesting, at least to me — you speak of
40 years of experimentation. I recall that my father, about 40 years
ago, lost what little capital he had acciunulated trying to help de-
velop a commercial cotton picker. I don't know what the principle
was, but I remember that one was on the old suction basis.
Mr. McCormick. Yes; that was tried in many forms, vacuums and
such.
Mr. CoLMER. Of course, this would have a tremendous effect upon
the economy of certain sections of the country, particularly the
South.
Mr. McCormick. That is right.
Mr. CoLMER. I don't mean by that that I question the wisdom of
it, but I am just viewing the effect upon the economy of that section.
Now, out in Mr. Zimmerman's country and up in the Mississippi
Delta and up in Mr. Murdock's country, where you have broad
plains, I can well see how it would work very effectivel}'- and be a
boon to those large producers. When we get down into the hill
sections where a large portion of the cotton, after all, is produced,
these small farmers are not going to be able to purchase them.
Whether we would be able to work out some cooperative basis or not
for them to purchase them would be another question. Then the
question of operation on these smaU farms, whether it would be
economically profitable
Mr. McCormick. There are two points there. There are two
reactions to that. One is the possible cooperative use, and the
second one is that we are also working on a picker which would go
on a smaller-sized tractor, in other words, a picker that we could
produce for less money than the big picker for the high cotton.
Those are two possibilities that might fit in to what you are referring
to. Of course the way, if I may say so, that we look at the part of
the cotton picker in the general economy of the South, is that the
cotton picker is only one factor in a very broad series of changes that
are evolving throughout the South today, that you are more familiar
with than I am.
Mr. CoLMER. Quite true.
Mr. McCormick. I think it is generally being recognized that the
old thought of cotton on small plantations or farms as a one-crop
1586 POST-WAR ECONOMIC POLICY AND PLANNING
source of income is not something that can exist economically. That
has been pretty well proved. Your whole Southeast is trending in
a broad way toward diversification, toward rotation of crops, toward
soil conservatiori. towai'd a greater amount of livestock on the farms,
and personally, T think that is the healthiest and soundest thing that
could happen. I think that it is a splendid movement.
Now, in other words, there are grc^at things going on at the same
time the cotton picker is coming along, and we have the feeling that
the cotton picker may be an answer to and fit into some of these
developments, rather than being a great cause of change.
Mr. CoLMER. It possibly may. I just wanted to get your views
on that particular thing.
Mr. McCoRMiCK. Viv. hope it will fit into these great, broad changes
that are occurring in the South in a way that will help the general
economy of the South.
The Chairman. I would like to make an observation there in
answer to Mr. Colmer's question that it would disturb the economy
of the South. I remember in our section of Missouri, when men
cradled their wheat, the farmer would go out and engage 6, 8, or 10
men to cradle wheat, and that was hard work. The\^ paid them a
certain stipulated sum, and thesf' men looked forward to that em-
ployment. I remember that my father was one of the first men to
bu}^ a binder in that country, and those men complained bitterly.
They said, ''You are taking away our means of livelihood." The
same thing happened, I remember, about these combines.
Mr. McCoRMicK. Exactly.
The Chairman. When we raised wheat out in Missouri, we would
cut and shock it, and then after w^e let it cure, we would stack it, and
then, sometime that fall, a threshing machine would come tlij-ough
and do all the operations.
Mr. McCoRMiCK. It did away with the itinerant harvest crew.
The Chairman. That is right. But it hasn't interferred with the
social life of that community; neither did the binder interfere with it.
Mr. McCoRMicK. It was a change we adapted to.
The Chairman. But I contend that progress never interferes with
the healtlw social life of anybody.
Mr. Colmer. Of course, the same thing happened back further
than that when they introduced the spindles in England. It may have
an effect on some social problems, too.
Mr. VooRHis. Mr. McCormick, I would like to ask you, in the case
of this cotton picker, do you thinlv it is even conceivably possible that
the average small farmer in the South can individually ow^n one of
these cotton pickers? In other words, isn't this a case that follows
up the question I asked awhile ago where it is absolutely certain that
either groups of these little farmers ar(^ going to own these things co-
operativel}^ or they are just not going to have them? What the prac-
tical result will be is that the growing of cotton will go over to big
farms in the most-favored sections of the country and the little farmer
will just not be able to compete?
The Chairman. May I just answer that question? I think that
out of riiy experience J can answer that. I recall when the binder
made its appearance that in a few cases they bought it together. In
many cases, the small farmer who would have, say, 40 or 50 acres of
wheat — it wouldn't take long to cut his wheat — and the neighbor with
POST-WAR ECONOMIC POLICY AND PLANNING 1587
a small crop of 20 acres, who didn't have a binder, would wait. The
man with the binder would cut 150 acres of wheat in that community
for hire, and they relied upon it, instead of going back to the old
method. So I think that is exactly what will happen with the cotton
picker. They can either form a cooperative, and certain limited groups
of men will own it together, or put it out to hire.
Mr. CoLMER. They do that now with tractors with small farmers
in my section.
The Chairman. I don't think there is any danger on that score
itself. I think this thing will solve itself.
Mr. McCoRMicK. I think the cooperative, Mr. Voorhis, would be
one answer to the question. 1 don't think it is the only answer. I
think what these gentlemen have said is true, that you will get the
case of a custom operator, you will get the case of a man doing work
for his neighbors and then the neighbors exchange some other work,
like we do in filling silo, and things like that. There are those com-
mon farm practices. Then I think there is another aspect that we must
take a look at, at the same time we are considering that effect; that
is that I believe it is a fact that the areas of the heaviest per acre
production of cotton, by which I mean the" Mississippi Delta, the
Arkansas Delta, the Arizona region and the southern California
The Chairman. And don't leave out Missouri.
Mr. McCoRMiCK. And we will put in Missouri, too. It so happens,
I think the individual acreage is larger, generally, than in the South-
east, for instance. I thinlv it is also true that not only are the acreages
larger in those regions, but the per-acre yield is also larger, due to the'
richness of the soil. Your Delta, of course, is a rich crop-raising area.
You can raise any crop you want in enormous quantities. We know
of the conditions in the Southeast, where a great deal of the soilneeds
replenishment, or soil conservation measures. So, whether you have
a picker or not, the cotton on the whole is not going to be as good.
Now, I think that whole situation must be borne in mind in looking
at this question of small or large farms. If I wanted to guess, and I
hope not to guess too much today, but if you just want an offhand
guess, I would say that in the Southeast a^ou are going to see a con-
tinuance of this trend of diversification with less and less cotton grown.
Now, that in itself will begin to take care of some of the problems
you are referring to, and I would like to point out the principal reason
for that will not be the cotton picker, but the trend toward greater
diversification. Then, I think, you will see a continuance of the
growth of large quantities of the cotton in the Deltas and in the other
regions I mentioned, and I am hopeful that land holdings in those
areas can come down in size. In other words, we can go toward
smaller farms than the present farms on an average, and I think that
will be possible by the us& of mechanical equipmicnt.
Now, if we consider those large areas, those large cotton-growing
areas, we must bear in mind that on the larger plantations of those
areas 3^ou will need more than one picker. One picker won't do the
whole job. They will have to have several pickers. That implies,
naturally, that there is an economically smaller limit on which you
could use one picker, for instance.
Now, that is just the trend of our thinking. As we see it, the cotton
picker is going to have an effect on Southern agriculture and Southern
economy, but it is a concomitant of other developments and not the
sole development. That is the way we see the picture.
1588 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Hope. I would like to ask a question. Isn't this generally
true, however, that the mechanization of agriculture has brought about
a trend toward larger operational units? It certainly has in the
wheat area, and I think here in the Corn Belt it has brought about a
larger use.
Mr. McCoRMiCK. Don't we have to think of the answer to that
question in a little bit of a historical sense? There is no question hut
that taking from the middle of the last century until, say, 1925 — let's
take 1930; I think that is a little better date — mechanization, or the
use of machinery on farms, was conducive toward larger farms. I
think that is true. In other words, naturally one man with a machine
could handle very much more acreage than one man with your cradle,
so the natural development was toward larger farms.
Now, I have a feeling that there has been a reversal of that trend
during the thirties, and I think that is continuing now. I don't mean,
by that, that there aren't still large farms. I don't mean to say
without exception all farms are smaller; but I have a very distinct
feeling that the trend is again toward the smaller farm, that is, the
family owned, family operated farm, which is a sound economic unit
and a sound operating unit with present machinery, and, as I am
coming to a little bit later in the paper here, we want to play as large
a part as we can in providing equipment so that the smaller farm can
be as economically run as the larger farm.
Mr. Hope. My observation has been, in the plains country par-
ticularly, there is a sort of leveling process going on. The larger
farms, maybe, are being broken up, and the smaller farms are increas-
ing somewhat in size.
Mr. McCoRMiCK. That might be, that could be.
Mr. Hope. In eastern Kansas — I happen to live in western Kansas,
where our wheat farms are quite large, and most farms to be consid-
ered a good operating unit for a wheat farm, are, perhaps, two sections
of land. They have a big tractor and combme outside, and they
summer plow a part of their lands, and they will have, perhaps, two-
thirds of that in crops. They consider that as an economical oper-
ating unit.
Now, you go down in eastern Kansas, and the combine has more
recently come into use. They have these little combines, which work
very well. But I notice there a farmer who only had 50 or 60 acres
of wheat before might be renting an additional quarter of land and
putting out some more wheat in order to get the maximum use of
that combine, but if you go out in the west, some of the larger farms
are being broken into smaller units.
I am glad you are going to touch on that matter of machinery for
the smaller farms, because it seems to me that is really the answer
to it. There is one of your competitors who has done quite a bit of
advertising along that line. I am referrmg to the Ferguson people.
Sometime ago they conducted a demonstration in Washington to
which they invited some Members of Congress. I was really amazed,
and no doubt if we went through your plant we would see the same
thing, but I was really amazed at the number of small tools of various
kinds which they had and which could be operated with a smaU
tractor. So you could take a very small farm, a diversified farm,
and get all these different gadgets and mechanize the whole thing.
POST-WAR ECONOMIC POLICY AND PLANNING 1589
It seems to me that is one direction, in which we can very profitably
go, and one that will meet this situation Mr. Voorhis is talking about,
and one which I think concerns everybody, because we don't want
the little farmer off the land.
Mr. McCoRMicK. Definitely, Congressman. I can say to you
unreservedly that the whole thinking in our company and our whole
planning for the future is along the line of the social and economic value
of the family-sized farm. We feel that very strongly. We believe in
it, and we are designing to the best of our ability equipment which will
fit that.
Now, of course, if you will remember, our company, back in 1924,
brought out the first tractor that could be operated in row crops.
Before that time the tractor had simply been a power implement to pull
something. After working a great many years on the row-crop type
of tractor, we evolved the Farmall. That was about 1924.
Now, that tractor was the opening wedge for bringing mechanization
to the Middle West and the South, the row-crop areas. Since that
time, I say our whole effort has been toward puttmg more on the
tractor and pulling less behind. Now, putting it on the tractor
means that you do away with your wheels, your axle, your frame, and
your hitch. Therefore, little by little we should be able to reduce the
price and the cost of a similar implement, because there is less of it.
A part of that whole movement has been the effort to get snialler
tractors. Now, I believe it was in 1934 that we came out with a
tractor that was at that time the smallest tractor. We called it the
F-12. That was a smaller tractor than we had ever built, and I think
it was a smaller tractor than anybody else had ever built, and one of
the principal reasons was just what we are talking about. Shortly
after that, Allis Chalmers came out with an even smaller tractor.
That was not a three-wheel type, it was a four-wheel type tractor.
It could only cultivate one row at a time. That was at that time the
smallest tractor. Since that time we have come out with what we
call the A type tractor and the B type. The A is the four-wheel and
the B is the three-wheel.
Since then Ford and Ferguson have come out with their smaller
tractor and tools that go along with them. I do want to stress that.
I am coming to it a little bit later. We are heartily in favor of that
trend.
Mr. Hope. I am very glad to know that.
Mr. MuRDOCK. May I ask you one question? You may or may
not bring it out in your paper later. Have all of these concerns you
speak of, yourself and your competitors, provided for such a hitch
that enabled the small tractor to get traction without tipping over,
rearing up, and falling over backward, and that sort of thing?
Mr. McCoRMiCK. That question. Congressman, is one that I would
like to answer off the record, but I will try to answer it in a way that it
does not have to be off the record. It so happens that there was only
one tractor that I know of which had a notorious reputation for
tipping over backwards.
Mr. MuRDOCK. I know that, and that was a competitor. I under-
stand your situation.
Mr. McCoRMicK. Our designers have been conscious, as any farm
equipment designer is conscious, that in order to make a tractor safe
to operate, you must balance its front end with weight; you must have
99579 — 45— pt. 5 24
1590 POST-WAR ECONOMIC POLICY AND PLANNING
the proper type of ^eai-ing in the transmission and in the rear end; you
must have your hitch at proper levels, and properly adjusted. All
those thuigs are absolutely essential. It is the exceptional tractor—
I wUl put it that way — which, properly operated, can overturn back-
wards. Now, I don't care wdiat tractor you have, you can take any
tractor and tip it over backward if you do the wronj; thing with it.
The Chairman. For the same reason that the finest automobile
that has been produced can be turned over
Mr. McCoRMiCK. If you run into the ditch— definitely.
The Chairman. And wrecked.
_ Mr. McCoRMicK. Yes. But what we are talking about is a ques-
tion of reasonable operation. Now, we have in all our tractor design,
all our history, worked to build a tractor that was practical and safe'
and we never have and never would design a tractor that we felt was
anything else but that. The great effort to do that that is being made
by one of our competitors on that score is simply for the reason that
I mentioned before.
It is probable that one of the greatest effects of technological change
in farm machinery will be manifested in soil-conservation work. Im-
proved farming practices have been developed by the Soil Conserva-
tion Service which not only will help to preserve our topsoil but will
aid in rebuilding its fertility. Many examples of the effectiveness
of this work have been seen during the war, when acreage which had
been retired from production and treated according to the recom-
mendations of the Soil Conservation Service was returned to produc-
tion and produced excellent crop yields for the war food programs.
One of the important phases of soil conservation practice is the
construction of terraces for the control of erosion. In previous prac-
tice this terracing work was ordinarily done with heavy earth-moving
equipm.ent, such as large, crawler tractors and graders, which were
not owned by most farmers and whose use involved considerable out-
of-pocket expense.
In future, this work will be done by farmers, themselves, using
standard farm equipment. Moldboard, disk, and harrow plows, for
instance, have proved entirely satisfactory for such work. The im-
portance of soil conservation has been in "our minds in designing our
new machines. It is our objective to make it possible for farmers to
carry on an adequate soil-conservation program with the same tractors
and implements which they use for other farm work.
We beheve one of the factors which will profoundly influence the
post-war farm is the great development which has taken place and
undoubtecOy will continue to take place in rural electrification. This
development will affect the farm both as a place to live and as a pro-
ducing unit. There will certainly be much greater farm use of all
types of electrical equipment.
One important phase of that development, w^e believe, will be a
great increase in refrigeration equipment on farms. With that in
view, our company is preparing to produce and market in the post-
war period a complete line of electrical refrigeration, designed to meet
all farm needs. This will include zero-temperature refrigeration for
freezing and storage of perishable foods, as well as. refrigeration in the
ordinary 38° household range, and combinations of both. The units
will range in size from relatively small chests to large walk-in type
refrigerators.
POST-WAR ECONOMIC POLICY AND PLANNING 1591
Adequate refrigeration on farms will save much food that is now-
wasted and should result, through better storage, in improved nutri-
tion. Refrigeration equipment, like other electrical equipment, will
be important also in making the work of farm women easier.
In connection with all these developments that I have sketched, I
should like to speak one word of caution, so far as our own company
is concerned. That caution is that not all these machines will be
available in the first year after the war, or, possibly, in the second.
Some of the machines still require a certain amount of engineering
and field testing work. Others which are ready for production must
await the construction of new factories or the retooling of existing
factories before they can be placed in production. Consequently, we
are not able to say just when all of the new developments will appear.
I do believe, however, that by 5 years after the war the mechanical
equipment in use by farmers wUl be different and better than the
machinery they now have.
As to the effects of the new machines, I have already said that we
believe they will bring power farming to areas where it is not now
generally used. I have in mind particularly the Southeastern States.
We believe the general use of more and better farm machinery will
result in eventual increases in the earnings of farmers. The earnings
of farm workers, as the National Resources Committee found in its
study of technological trends and national policy, tend strongly to
increase with the increase in power and machinery available for their
use. 1. 1 • 1
We believe a powerful factor in spreading the usa of mechanical
equipment to new areas may well be the return from military service
of thousands of farm boys and men from those areas who have become
accustomed while in service to the use of a great variety of rnechamcal
equipment. Having seen what proper machinery can do in war, it
seems probable that they will want the assistance of proper machinery
in their peacetime occupations.
The war, of course, has emphasized and dramatized the importance
of farm equipment, not only to city people previously unaware of it,
but to many farm famihes. Without the mechanization that had
taken place"^ in American agriculture, our farmers could not have
produced the crops necessary to sustain the war effort. On thousands
of farms in this country, farmers and their wives or daughters, with
the aid of machines, have carried on successfully despite the absence
of the young men who ordinarily would do so much of the work.'
This has not been easy. It has meant that elderly people and very
3^oung people have had to work long, hard hours every day, and then,
in many instances, turn on the tractor lights and work well into the
night. The marvelous job that has been done is a great tribute to
the patriotism and devotion of American farmers.
We believe the great majority of American farms, in the future as
in the past, wih be one-family farms, owned and operated by the
members of the family with little or no assistance from hired labor.
To these families, the continuing development of farm equipment
means more profitable farm operation and an easier and shorter
working day. i • , i
In our opinion, therefore, the chief result of technological changes
in farm equipment will be to make the position of these millions of
one-family farms more secure, to unprove their ability to compete
1592 POST-WAR ECONOMIC POLICY AND PLANNING
with larger farms — in short, to make most American farms more
efficient businesses and better places to live.
Mr. Arthur. We have had testimony before our committee to the
effect that in American agriculture it is important to distinguish be-
tween the commercial farmers and the more than half of the farmers
who operate essentially self-contained units, or so-called subsistence
farms. I am wondering whether you can give us a few comments as
to the impact of greater mechanization upon that type of operation?
Will it bring the better or somewhat larger units of those now self-
sufficient farms into the commercial farm category, and in that way,
thinking only of the commercial farms now, enlarge the group of com-
mercial farms and in effect reduce the average size of farms in com-
mercial farming by bringing more of the small farms into that cate-
gory? I just wanted your observations on that point, because I think
it is one of the important things we have to face.
Mr. McCoRMiCK. Isn't that question rather parallel to what the
Representative from Kansas was aksing? You know American
agriculture is such a large, tremendous, vast enterprise, and there
are so many different individual circumstances that any flat state-
ment, I think, one could not accept as of any kind of value. I don't
doubt that in certain places large farms are going to get larger. I
think that will happen in certain places. I don't doubt that as our
Representative from Kansas has suggested, some of the smaller farms
may grow somewhat. I think that would be natural. If a man found
he could handle 20 or 40 acres more and make a little bit more money
on it, I think that farm might grow.
I think, on the other hand, that we are going to find that with
• better farming methods, with soil conservation, with better planning,
with rotation, with better fertilization, greater diversification, and
with smaller, better, and less expensive farm equipment, the smaller
farm is going to become profitable again. So I think that tendency
is just as strong as any other tendency. I think what you are going
to see is a natural development of our farm economy. But what I
think important is that whether a family is operating 20 or 5 or 50
acres or 200 acres, it is a family operation, that that is the economic
and the social unit.
Now, the part that we play in that is to try to provide adequate
equipment to farm the different sizes of farms. 1 certainly wouldn't
be bold enough to venture a prediction as to the whole picture, except
to say to you that I can see no reason against, and man}'^ reasons for,
a continuance and a strengthening of the family-sized farm. I feel
that very definitely.
The Chairman. Let me get this point. Your idea in theory is that
by this mechanization of farm operations and providing machines that
will operate on a small unit as well as a large one, the whole thing just
resolves itself down to what is an economical operation,
Mr. McCoRMicK. Exactly.
The Chairman. And the family sized farm will be economical?
Mr. McCoRMiCK. That is the point I want to get to.
In Congressman Hope's western Kansas, maybe two sections, or a
section and a half, or a section, is an economically sized farm. In
eastern Kansas, it will be different, in Missouri a little different, in
Illinois a different size, in certain parts of Mississippi a dlfi'erent size.
To me, the question of exact acreage is not as important as the goal
POST-WAR ECONOMIC POLICY AND PLANNING 1593
that you are going toward, which I think should be the family sized
farm.
Now, there may be a place for the large, let's say commercial, type
of farm. I saw a moving picture the other evening of growing vege-
tables some place m New Jersey. Maybe that is good for consumers.
Maybe that produces good vegetables economically, and maybe it
provides jobs. I saw hundreds of workers in the factory, you prob-
ably know more about that than I do. Maybe that is all right for
there. I don't think you are going to see a lot of that. I tliink that
is the exception, not the rule, by a long shot.
I believe our experience — and I have gentlemen with me that could
correct me if I am wrong in this statement— is a great tendency all
over the country, not in the direction of commercial farming, but in
the direction of individual farming. I believe that that is the trend
in this country, and I think it is a healthy trend.
Mr. VooRHis. I can say that any contribution your company can
make in its research and development to reduce the cost of its farm
machinery and to adapt it to the famdy sized farm will, in my judg-
ment, be a tremendous contribution not only economically but also
socially to the United States. Whatever the arguments in favor of
large commercial farms from a purely economic point of view, from
a social and, shall I say, poUtical point of view in its broadest sense,
that is not what we want..
Mr. McCoRMicK. Definitely. I am most heartily in favor of that.
The Chairman. Any further questions?
Mr. McCormick, I want to express the appreciation of the com-
mittee for your coming here today and giving your time and this very
informative statement on this big problem that we are trying to do
somethinfr about.
Mr. INIcCoRMiCK. We are deeply appieciative of the opportunity,
Ml-. Chairman. I am glad to have been able to be with you today.
Mr. MuROOCK. Mr. Chairman, may I say, too, that I hope that
some of those who have come with you will elaborate a little further
on this matter of chemura-y and the part it will play.
Mr. IvIcCoRMiCK. Would you like to hear it now, Mr. Murdock?
We have with us Air. Yerkes, who is very closely connected with the
Chemurgic Foundation, and would be glad to answer any questions.
Mr. Murdock. That may break into the plan this morning. I
further wanted to say that Mr. McCormick mentions having taken
or used four cotton-picker machines in or around Phoenix. That is
another case of your mighty good judgment, Air. McCormick.
The Chairman. Mr. Yerkes, if you would like to make a few obser-
vations, we would be glad to hear you. We are trying to finish
today, but we will give you an opportunity to present anything you
think is pertinent to this discussion on tliis subject.
TESTIMONY OF ARNOLD P. YERKES, SUPERVISOR OF FARM
PRACTICE RESEARCH, INTERNATIONAL HARVESTER CO.
Mr. Yerkes. The chemurgic movement has been under way just
about 10 years. It was originally sponsored by the Chemical Founda-
tion. They put up the money at first, and Mr. Francis Garvan was
the first president of the National Farm Chemurgic Council. On his
death, about 1938, Mr. Wheeler McMillen, now editor of the Farm
1594 POST-WAR ECONOMIC POLICY AND PLANNING
Journal, became president. During the 10 years there have been
very active efforts made to increase the use of farm products for indus-
trial purposes to act as a balance wheel on farm-crop prices, so that
the part of the crops that were not needed for food or feed could be
used for industrial purposes, and also to switch a good-sized acreage
from food and feed crops into industrial uses.
Of course, there is nothing new about that, because cotton has
always been what you might call a chemurgic crop. That was pri-
marily a fiber crop used for industry, although the seed itself had
quite a large market for feed, and in recent months it is beginning to
be used quite a little as food, because they have found the cottonseed
meal contains a very fine protein.
Of the chemurgic crops that have really made a record, I might say
the soybean probably stands at the top of the list. While that was
first grown principally as hay, we soon found it had an oil that was
very valuable for industrial uses. It could take the place of a great
many imported oils, and the acreage has grown until we now have a
very large acreage through the Corn Belt devoted to the soybean,
which is probably 90 percent a chemurgic crop, 1 think today, count-
ing the products that the mills turn out, both from meal and oil, and,
of course, the farmer is still getting quite a httle feed value out of it.
The leaders of the chemurgic movement have felt that the American
farmer, if given the opportunity, could produce a great many of the
crops that we have been importing into this country in very large
quantity in years gone by, such as vegetable oils for soaps, varnishes,
linoleum, and so forth, and that they could also produce starch, which
has been imported from the East Indies and other parts of the world.
The sweetpotato in the South is looked upon by a great many of
the leaders of southern agriculture as a wonderful possibility for a
new crop down there which would use up some of the acreage that
should be diverted from cotton, and it would give the South what they
have always needed and never been able to produce economically, a
good carbohydrate feed, because tlieir corn crops have never yielded
well. The soybean has never been developed to the point where it
gave satisfactory yields, but the sweetpotato is really a southern crop
and has a good value as a feed. It produces starches that will compete
directly — by that I mean they are the same types of starches — as we
have been getting from tapioca and sago, the principal imported
starches.
We have, of course, been making a lot of competitive starches from
corn, but the sweetpotato has a big advantage that factories can
produce in hours from the sweetpotatoes quantities of starch that
will take days or even weeks to produce from corn.
The Chairman. I am sure you are familiar with that new develop-
ment in Iowa, that starch corn.
Mr. Yerkes. I was just going to mention that. The waxy corn is
almost a perfect substitute for the tapioca as a food starch, although
the sweetpotato will also give you a substitute for a tapioca starch.
The Chairman. Are you familiar with this new milo or maize?
Mr. Yerkes. Not particularly. I have heard about it and read
about it. The whole Southwest has great possibilities in switching
to some of those sorghums and different types of seeds that are drought
resistant, that wait for rain and give much better yields than corn or
soybeans.
POST-WAR ECONOMIC POLICY AND PLANNING 1595
Mr. CoLMER. While we are putting in plugs for various sections,
I take it you are familiar with the starch plant in Mississippi that the
Government has been operating.
Mr. Yerkes. Yes; at Laurel.
Mr. CoLMER. It is in the experimental stages, down in my con-
gressional district. They have made considerable progress and, as a
result of the experimentation there, the American Sugar Refining
people, I believe, are putting in quite a plant down in Florida just
above Miami
Mr. Yerkes. Yes; they are beginning to harvest tremendous ton-
nages of sweetpotatoes, far larger than any ever obtained in Missis-
sippi, or any of the other States, as far as that goes. It seems to be a
natural development down there. The sweetpotato gives unusually
high yields and it has this advantage: you can leave them in the
ground for storage and run your plant about 8 months in the year,
while in most sections, where we have gone into sweetpotatoes in the
past, they have to come out of the ground before frost or freezing,
and the storage is a big problem. So, as a result, they have only
been able to run theu- plants for perhaps 3 or 4 months without quite
a storage problem.
Mr. CoLMER. Incidentally, do you think that is a worth-while
program?
Mr. Yerkes. I don't think there can be any question, in view of
what the results have been so far. There is no question but this
movement has diverted hundreds of thousands of acres from the old
standard crops which the American farmer used to grow\
Mr. Colmer. And they are producing a product which we have
been importing.
Mr. Yerkes. Not only have they been importing, but they have
been producing some of the critical crops we needed for the national
defense. Some of us think we could have just as well been producing
rubber and certainly all the oils for the Navy. The Navy, of course,
has always insisted that tung oil was the best oil that they knew of.
We were not producing much in this country, although there is quite
an acreage down South that is suitable for it. We have just scratched
the surface there in planting tung.
Mr. Colmer. Again plugging, the largest acreage of tung oil in the
country is in my congressional district, and they are making progress
with that. We have had a fight every j^ear to keep this experiment
going on. I just had a letter a few days ago from Marvin Jones
advising me that we were going to have to make other arrangements
for next year to keep that experiment station going. So I was par-
ticularly interested, aside from my local pride, in getting your views
on that question.
Mr. Yerkes. Tung oil still has great possibilities here.
Mr. Colmer. I had reference in that particular instance to starch
experimentation.
The Chairman. I might call attention to the guayule and dandelion
which we have learned, through experimentation, can produce natural
rubber of a better quality than we get from the rubber plant.
Mr. Yerkes. From South America and the West Indies. It -could
be grown in very large quantities in the Southwest with machinery,
and it might have deserved a little protection. At any rate, we could
1596 POST-WAR ECONOMIC POLICY AND PLANNING
have been entirely independent of imported natural rubber, because
we know we can produce it.
There are other plants that have produced even more favorably
than guayula. There is a shrub growing over the line from Texas
that they could produce in Texas and the Southwest that is a far
better rubber producer than guayule, and they have found a slirub
which is quite superior to tung, which up to now has been considered
the very best grade of drying oil. This new shrub has a very high
yield and gives excellent quality.
Of course, the chemurgists feel the American farmer should be
given a chance to enjoy whatever of the American markets he is com-
petent to serve, and that from a national standpoint we are a lot
safer when we can be raising these critical defense materials, like tung
oil and rubber, and a great many of the others, rather than to try to
build up stock piles to carry along here in peacetime, and then when
the emergency comes, the stock piles, lots of times, are inadequate, or
there has been some spoilage, while if the American farmer is ac-
quainted with the production of those crops, he can expand them
very rapidly and it makes us entirely independent of these outside
sources that we now know can be easily cut off.
Mr. MuRDOcK. What about safflower oil?
Mr. Yerkes. That has received a great deal of attention from
the chemists and oil people and oil users, particularly.
Mr. MuRDOCK. Does it have a favorable report?
Mr. Yerkes. Quite favorable, although it was not equal to flax in
quahty or yield in some sections. There has been some difficulty in
harvesting. It grows w^ell in several parts of the country but we don't
know very much about harvesting it with the combine. Of course,
there has not been enough grown in tliis country to get much experi-
ence with it.
The Chairman. That will be the job of the McCormick people, and
others.
Mr. Yerkes. Just as soon as there is indication that it will be
grown in quantities,
Mr. Hope. Eight at that point, I would like to ask a question.
The limiting factor in development of a lot of these crops you have
mentioned has been the question of cost, has it not? That is, in
getting the production cost down to where we would compete with the
products which are already in use.
Mr. Yerkes. That is true. If we have to raise them with the same
methods, with our standards of wages, we could not compete without
tariff protection, but when we can grow them with machinery in com-
petition with the labor in the East Indies and Asia, we have done
very well on a competitive basis, and usually get a much better
product.
Take the tung oil that we produce in this country — we produce a
much higher grade of tung oil; it is cleaner down South. It has not
been contaminated with dirt, and perhaps a little deliberate contamina-
tion, so that the paint and enamel people prefer the domestic tung oil
on account of the higher grade.
We have had a number of cases in the past, where we have shown
that we can produce crops at a profit to the American farmer, with
machinery that formerly were imported from areas where they have
very cheap labor.
POST-WAR ECONOMIC POLICY AND PLANNING 1597
Take rice: At one time before we started using mechanical equip-
ment in the production of rice, we imported practically all of it,
because the American farmer just couldn't make any money at it.
But then we started using modern equipment to raise rice that we had
been importing for years. We have been importing large quantities
of rice from Asia and the parts of the world that used to ship it to us-
used labor with about one-tenth the rate of pay that our farmers pay.
Mr. Hope. Then 1 take it you feel pretty optimistic about the
chance for getting production costs down on most of these products
to a competitive basis, do you?
Mr. Yepkfs. In a great many cases, definitely, yes. There are
some of these plants, like ramie, for instance, which produces the
finest fiber anybody knows about as a natural fiber, and perhaps
better even than any of the synthetics, but it is a shi-ub that grows in,
clusters and should be harvested several times a year. So far as I
know, no one has ever tried to develop a machine that will harvest
that. It probably can be done. If it could be done, then we could
undoubtedly get ramie down to where it would be a competitive prod-
uct, because it is so marvelous; eight times as strong as cotton; and
far stronger than any other fiber we know about. It makes a cloth
that is almost impossible to wear out, so it should be available to
people who have uses for it, but it probably won't be available m any
large quantities until the mechanical equipment is developed for its
harvesting, particularly. We can plant it pretty well with machines
and the cultivation would be done by standard cultivatmg equipment;
but the harvestmg is one problem right now which has not been
solved. But if there was encouragement to American farmers to grow
that, and a great many other crops, the engineers in the equipment
industry certainly can produce the equipment to perform these opera-
tions, I believe, because most of them look much simpler to a lay-
man then developmg a cotton picker.
Mr. Hope. When we are thinking about this question of chemurgy,
synthetics, and that sort of thing, we have to take into consideration
always that the development of some of these things is probably going
to interfere seriously with existing crops. I am thkiking of rayon and
cotton now.
Mr. Yerkes. As I said in the beginning, this is a big subject that
you cannot very well cover here in just a short discussion. As the
chemurgic advocates see it, there are going to be ceitain jobs for
these different fibers. Nearly every one wiU fill one particular pur-
pose better than any of the others.
Now, up until rather recently there was no effort made to produce
cotton that was especially fitted, we will say, for automobile tires.
One of the boards of governors of the Chemurgic Council, Mr. D.
Howard Doane, who is head of the Doane Agricultural Service, at his
own expense started breeding cotton. He went to the tu'e people and
asked what they wanted in the way of cotton for tires, asked for
specifications. They actually did not know. They had just been
sampling cotton and picking out cotton that worked pretty well, but
they couldn't tell him just what they needed.
After liis inquiiy they got busy, and then they did lay down speci-
fications.
He started breeding cotton to meet their specifications; and he met
them and got quite a premium for his cotton.
1598 , POST-WAR ECONOMIC POLICY AND PLANNING
Now, I do not think there is much doubt but what cotton can be
developed for a great many special purposes like that. Perhaps we
will see the time when one section of the country will have the farmers
raising one variety of cotton that is particularly adapted for, perhaps,
tires; if tliey can hold theh" own in tires or this, that, or the other
purpose, and farmers in another section will raise a different variety of
cotton that has been bred up for some other particular purpose. They
will get a premium for such cottons, because they are ideal and the
growers will be entitled to a little premium, because they have gone
to the expense of keeping this variety of cotton pure for this particular
job. That may not be done, but it looks logical. Perhaps ramie will
fit some other particular pm-pose.
I am rather inclined to believe that some of these farmers, who are
on small acreages that have been mentioned here, who may not be able
to use the cotton picker to advantage, might he able to switch to some
of these special varieties of cotton that are developed and which are not
going to be used in large quantities, and by hand picking and getting
the highest possible quality of the type of cotton that is especially
valuable for some use, may be able to hold their own under those
conditions.
I think there are other similar cases which could be mentioned with
other crops, like the starch plants. I think some sweetpotatoes will be
able to produce a better variety of starch than others. We will have
farmers in one part of the country where the soil is right to, say, pro-
duce for mucilage; and another group over here where conditions may
be different who will be producing sweetpotatoes where the starch
will compete with tapioca, and even for feed.
Mr. CoLMER. On tliis ramie, is that being produced commer-
cially? ^ '
Mr. Yerkes. I would not say commercially. There arc a few
people in Florida raising small quantities of it. There is so^n.e in the
Southwest on experiment stations. There is seme growing here and
there.
Mr. CoLMER. Was it produced com.mercially any place?
Mr. Yp:rkes. Well, India and China and Egypt have always gi'owu
some. It is known as China grass, and the ladies who are interested
in fine linens know the China grass fabrics. As I said, they are very,
very durable. You can hardly wear them out, even under hard serv-
ice. There was always some of that on the market. It has been
produced entirely by hand, and the fiber is taken out by hand; so it
sells at a pretty high price, but it makes a very fine piece of material.
The Chairman. If the Chinese find out how to produce that in
great quantities, they might be a very strong competitor.
Mr. Yerkes. They have raised it for centuries. In fact, the clothes
that were found on a great many of the Egyptian mummies, especially
those of the royalty, were made of ramie.
Mr. MuRDOCK. King Tut had one.
Mr. Yerkes. It lasted in those tombs down to today, and it is
still in a pretty good state of preservation.
The Chairman, I want to state that we greatly appreciate your
statement. I am sm-e you could talk to us here for hours on this
interesting subject.
Mr. Yerkes. I could.
Mr. MuRDOCK. Mr. Chairman, if the gentleman would care to
extend his remarks for our record, I think it would be fine. I think
POST-WAR ECONOMIC POLICY AND PLANNING 1599
Mr. McCormick and you, Mr. Yerkes, have touched on a mighty vital
matter. You speak of a balance. As a safety valve, we have got to
turn to industrial uses, or we are going to have a surplus of food for
human and animal consumption; that will bring about the same
difficulties we have had formerly.
Mr. Yerkes. Might I suggest that perhaps Mr. McMillan, who is
president of the National Farm Chemurgic Council, can give you some
information on it.
The Chairman. Is he here today?
Mr. Yerkes. No. His headquarters are in Philadelphia.
The Chairman. Maybe we can hear him later.
Mr. Yerkes. He would be able to give you some valuable infor-
mation. *
The Chairman. We certainly do appreciate your appearance,
along with Mr. McCormick.
Now, Mr. Hull is here, representing the Indiana Farm. Bureau
Cooperative. We would be glad to hear from you, Mr. Hull.
TESTIMONY OF I. H. HULL, MANAGER OF THE INDIANA FARM
BUREAU COOPERATIVE ASSOCIATION
Mr. Hull. To begin with, I want to agree with about everything
that has been said here today, especially the reference to the need for
the family -sized farm, and I hope to give our feeling as to one of the
ways that we can perpetuate that family-sized farm.
The problem, as we see it in our organization work with the co-
operative of agriculture, has been pretty largely built up by the fact
that agriculture could not follow the same trend that industry did
during the period of the industrial revolution. I mean by that, that
the International Harvester Co. or the old Studebaker Wagon Co.
could organize, bringing together all of the local blacksmiths that used
to make wagons, and they would have a three-department set-up, a
purchasing department, a production department, and a sales depart-
ment, and all in the one corporation, without any business transactions
between those different departments.
The farmer could not do that, and still retain his 6,000,000 units,
the family-sized farm, so, as a substitute, the closest he could come
to it was to create. the device of his cooperative, continuing to produce
as an individual, and combining his purchasing power in his own pur-
chasing department, a part of his business, through the cooperative
organization, and then set up a sales organization to dispose of his
product after it was produced.
Of course, that brought about several problems. It was not very
long until people recognized, as soon as the industrial revolution be-
gan, that a lot of people who formerly worked on the farm or in these
local communities would have to migrate to the industrial centers to
build up the large city where production could be carried on in large
and more economical units.
That began immediately to impose quite a little burden on tjie farm,
and later we learned it was more serious than we had originally
expected.
The farm had to contribute a great many of the youth that had
been reared and educated in the rural community to the industrial
centers, and those children, those farm people that migrated to town,
took with them the inheritance that they had gained from their
1600 POST-WAR ECONOMIC POLICY AND PLANNING
fathers. It was not very long until the more prosperous farmers
themselves, as they began to approach old age, would decide they
wanted to move to town, and they would take a good share of the
wealth of that local community to the city with them.
That thing became more important when a few years ago we began
to recognize that the population in the cities is not self-sustaining..
In other words, the figures they gave us — I think it was in 1935 —
were that 10 parents on the farm had 14 children, the second genera-
tion would have 20, and the third generation 28. The 10 parents in
the cities, in the larger urban cities, reared 7 children, the second
generation had 5, and the thu'd generation 3; 28, on the one hand,
and 3, on the other.
Of course, it did not work out that way, beca-use the surplus on the
farm continuously migrated to the town, but the burden on that rural
community is the point I am trying to develop here, of rearing and
educating and training in each generation, a large portion of a per-
sonnel to man our industrial centers, and carry on that industrial
program.
I am not going to make very much foreign reference here, but I
have an idea that I have been following through in the last 10 years
that I got from a visit I had in Denmark in 1934.
I was talking with the manager of the Copenhagen Cooperative.
He had just been telling me that their tenancy trend had gone from
where it had been, up around 45 percent, back in the beginning of the
century, until in 1934 it was less than 8 percent, while in this country,
as you men know, the trend had gone exactly the opposite. I think
the figure they give us is about 25 percent in 1880, and that has gone
up to about 45 percent in 1935.
I asked him what, in his opinion, were the reasons for that change,
for their getting away from that trend toward tenancy. He gave four
things as the reason. Being the manager of a cooperative I expected
him to emphasize that thing, and he mentioned it, but he did not say
that it was even the primary reason by itself. It was important as
connected with the other things that he mentioned.
He mentioned the fact that they had given cheap money to the
purclirasers of farms so they could buy farms and not have a high rate
of interest. But he said, "Both of those things together, the extra
saving from cooperatives, and the cheap money would not result in
keeping or stopping the tenancy development." He said he knew the
situation in Iowa, where the most prosperous community was the
place where they w^ere getting some of the largest tenancy problems.
The farmer would move off as soon as he made enough money. He
said, "The other two things we have done, are the rural electrification
which has made farm life more livable and made it possible for farmers
to develop a lot of these little neighborhood cooperatives to help them-
selves, and then the folk school, which deliberately went about the job
of making farm community hfc more livable and more happy for the
people."
He said, "I am looking forward to the time when I can move out of
Copenhagen into one of these little rural communities and spend my
old age in that atmosphere."
He just reversed the trend we have here.
We came back home, and we have already started several of our
programs of action.
POST-WAR ECONOMIC POLICY AND PLANNING 1601
We have undertaken already to develop a lot of sentiment and a lot
of practical programs for community development, by which we could,
to a certain extent, decentralize some of these things that can be
decentralized. We realize that a factory, like the International
Harvester Co., wUl always be pretty largely a centralized program,
but a lot of the service that goes with that can be decentraUzed, and
we are even thinking that we can develop a program in a lot of our
communities, and we are domg it, where they will assemble that
machinery during the winter months and set it up. We have service
programs out in the neighborhood that belong to those people in the
community, and that is already working out very nicely.
Mr. VooRHis. What do you mean by a service program, Mr. Hull?
Do you mean servicing machinery?
Mr. Hull. That is right. We are employing good mechanics and
giving them special training. We have neighborhood men who can
weld castings and rebore cylinders.
Mr. VooRHis. When you say "We" you mean the Indiana Farm
Bureau Cooperative?
Mr. Hull. Yes; we have a central plant where we do the more
intricate job, and then we get the local community to do as much as
possible of it right in the neighborhood.
Mr. Hope. Is that an arrangement whereby you employ someone
exclusively to do that servicmg, or do you use local people to devote
part of their time to other work?
Mr. Hull. No. We aie getting a number of our communities
where they have a local crew of specialists.
Mr. Hope. That is what I mean. They devote their full time to
that type of activity.
Mr. Hull. That is right, and they are developing other types of
community activities. We have just been talking about this chemurgy
of the soybean. We, in Indiana, have spent the last 10 years develop-
ing a community soybean oil extractor. We first followed out the
idea Mr. Ford began of trying to use hexane. That was dangerous,
and we are now using trichlorethylene to avoid the danger of explosion.
We have it working. Wherever we have the combination in a coni-
munity of a feeding community and a bean-producing community,
instead of shipping those beans out to some central separator, we do
that right in the county seat where they are raised. The farmer hauls
these beans in, and takes the meal back home and feeds it to the hogs.
I was very much interested in this tractor discussion. In some
places our local community cooperatives are getting large-sized
tractors, and in some places we are getting little cooperatives of three
or four men, that buy one tractor.
Here is the economics of that thing. We are for the family-sized
farm, but little farms must work together. Supposing' you got one
community where three men buy one-plow tractors, and another com-
munity where three men buy one three-plow tractor. In labor alone
during the first 40 months of operation the fellow that has the big
tractor will save $6,000. In other words, that one tractor is worth
$6,000 more than the three little ones. Three small tractors require
2 more operators than the one large tractor.
For that 40 months, 2 men's labor at $75 a month apiece, is $150
a month, times 40 months, and you have a $6,000 difi'erence. That is
pretty important from the standpomt of economy, and just one of the
1602 POST-WAR ECONOMIC POLICY AND PLANNING
things you can do by grouping people together in little cooperatives
They have to have the rules pretty well worked out, and there are a
lot of problems to that, but it can be done.
Then there is one other phase of this thing, this development of the
local community.
Mr. VooRHis. Mr. Hull, let me interrupt you just a second. In
this soybean development, for example, the processing of soybeans
who owns those plants? Do they belong to the State Indiana Farni
Bureau Cooperative Association, or do they belong to a local coop-
erative of the local farmers m that country?
Mr. Hull. In that particular case, they belong to the Indiana
Farm Bureau Cooperative Association, but they are operated by a
local group on a little contract we make. The plan for centralizing in
our State office was worked out by our local groups. It is so that the
oil and the surplus meal can be merchandised in an orderly way and
so that the local communities won't all come into competition with
each other bidding for some outside market.
Mr. VooRHis. I see. And how about the machine tractor servic-
ing, and thmgs like that? Who operates that?
Mr. Hull. The Indiana Farm Bureau Cooperative Association
along with some other groups own the Ohio Blackhawk factory at
Bellevue, Ohio, and we own our own tractor factory at Shelbyville,
Ind., but the local service is owned and operated by the local county
coopeTative. So in that way we furnish them with their own line of
machinery.
Now it is pretty important that as much industry as practicable be
decentralized and brought right out to that community. We should
bring as many boys back there to carry on those services as we can.
We have a long list of services that we could discuss here but I do not
think that is necessary. Then for those things that cannot well be
decentralized and brought to the community, we are pretty interested
in following through, as far as we can, a decentralized ownership.
This farm machinery is one. The one we have developed perhaps
further than any other in Indiana has been our petroleum service.
Now that worked out something like tliis: By the operation of that
service on a cooperative basis they have taken over now and integrated,
as all producing industry integrates, in a vertical way back into the
production of the things they need. They have integrated to the
place where now the farmers of Indiana own their own local service
plants and their own trucks, they own their transport system, both
the trucks that haul from the refinery, and the barge and tow boat on
the Ohio River, they own their own refinery which they built new 4
years ago ; they own their own oil wells and their own pipe line, so that
now, as they operate their own petroleum business that they paid for
out of the savings that they have been able to effect, as that operates
now, the savings from that local cooperative come back to the farmer
himself, the savings from the transportation system come back to him,
the savings from the refinery all come back and belong to the individual
that bought the end product, the savings from the pipe line and the
oil wells all come back, to that purchaser. Every dollar of that profit
in the whole industry at every step of the industry that it saved any-
where along the line comes back to the fellow that buys the end
product.
POST-WAR ECONOMIC POLICY AND PLANNING 1603
Now that thing has become so tremendously lucrative, figured in
terms of capital investment, that at a time like this it amounts to
around 100 percent on the invested dollars annually. But that is
not the important thing. The important thing is that we are getting
pretty strong in our conviction that an economic system, whether it
is post-war or any other time, to be on a sound basis must keep the
purchasing power of the market alive, and, incidentally, we are very
much interested in the post-war buying power of labor and our market
for farm products. We are very much interested in that.
Compare what is being done here with the fellow across the street
who operates a chain industry where the earnings from that local
operation, are siphoned off, to go to som.e nonresident investors. The
earnings from the transportation and the refinery and the oil wells,
instead of staying there to build the wealth of that local community
all leave it and the money spent for the product goes to some metro-
politan bank never to return to the rural community.
In the very preservation of this family -sized farm it will require the
development of as many local services as the farmer can bring to
himself; it should bring about the development and preservation of
the local community., as well as the family-sized farm, and that can
be done by bringing back as many of these services as we can.
All over Indiana right now they are out trying to put in locker
plants. It is one way to get rid of the seasonal surpluses, to use more
of the product in those communtites. The locker will be a place to
put the surpluses when the market is glutted like it was this fall for a
while.
Then we want to develop central cooperatives that will be owned
and controlled locally, bringing back to our rural communities savings
on the business that they create with their purchases.
Mr. VooRHis. Mr. Hull, I want to just go back a minute — first of
afl, explain to the committee what you mean by savings.
Mr. Hull. A cooperative doesn't have profits. Savings is the
difference between the price of an article and the cost of producing and
distributing it.
Mr. VooRHis. It is the difference between the cost and the market
price?
Mr. Hull. The cost and the market price, yes.
Mr. VooRHis. Now, you said that the return to the Indiana farmer
from the operation of his integrated petroleum production distribution
and servicing system was 100 percent annually of the invested dollar.
Mr. Hull. Just about.
Mr, VooRHis. Explain a little bit more what you mean by that.
Mr. Hull. Well, I mean by that, money that he has invested in
these oil wells, his pipe line, his refinery, and his whole transportation
system is just about equal to the annual net savings that come back to
him from the operation of that system.
Mr. VooRHis. In other words, the original capital cost to the
Indiana farmers of their refinery, their pipe lines, their trucks, their
barge line, their local filling stations, and everything else, is no more
than the difference between what it actually costs them annually to
serve themselves with petroleum products and what they would have
to pay if thev had to pay the going market price for those products?
Mr. Hull. Yes; and that is not all of it. The fact that they have
been in business has reduced the distribution cost from a local bulk
plant out to the farm from 7 cents to about 3K cents a gallon.
1604 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. VooRHis. Do you mean by that that it has reduced it from 7
•cents to V.i cents a gallon, no matter who performs the service?
Mr. Hull. That is right.
Mr. VooRHis. In other words, the operation of this co-op has
benefited not only the members of the co-op but it has benefited all
farmers in that distribution area, regardless of whether they are mem-
bers of the co-op or whether they buy their petroleum products from
a co-op, or whether they buy them from a commercial handler?
Mr. Hull. That is right, and that is a much larger item than the
remaining item of savings.
Mr. VooRHis. It has reduced the distribution costs from where to
where, by how much? Just repeat that.
Mr. Hull. Repeat what?
Mr. VooRHis. What you said about the reduction of distribution
costs.
Mr. Hull. Our operations reduced handling margins from 7 cents
a gallon from the local bulk plant out to the farm, until now it is right
at V/2 cents, about cut in two, since we have been in operation. We
cannot say that we are responsible for all of that, of course, but it
came pretty soon after we began paying some large patronage
dividends.
Mr. MuRDOcK. That is a new kind of yardstick, isn't it?
Mr. Hull. Well, it ought to be a sound yardstick. A group of
people setting up in busmess just to help themselves. We feel we
can go a long way toward bringing about a solution to the farm prob-
lem if we carry on more and more of these services ourselves.
Mr. Hope. Let me ask you this question: The yardstick which you
customarily use in making your charge for services is the usual or
customary price or charge that others doing a similar service charge,
is that right?
Mr. Hull. We aim to price everything we sell at the other fellow's
price as near as we can get at it; yes.
Mr. Hope. Of course, if you wanted to pay a smaller patronage
dividend you could cut it down to less initially.
Mr. Hull. That is done sometimes, but we don't care to do that.
It upsets business. We don't like to do it unless there is some special
reason for it.
Mr. Hope. Of course, if they start taxing patronage dividends,
you might have to do that.
Mr. Hull. We may have to.
Mr. VooRHis. Isn't that what you would do, and wouldn't the
people who try to get the patronage dividend taxed be sorry if that
happened?
Mr. Hull. There wouldn't be anything else to do. We would be
under an immediate mandate from our members, because they feel
there has never been any corporate earnings — there is no industrj^ in
the world that pays an income tax between its purchasing department
and its production department. Now, we do pay our State tax,
and in many States they have the sales tax. We are charged that,
and we are the only industry, the only productive industry that pays
a sales tax between our own purchasing department, that is part of
our business, and the production department, and then we pay it
again between our production department and our sale department,
when we market through one of your cooperative marketing
organizations.
POST-WAR ECONOMIC POLICY AND PLANNING 1605
Mr Hope. Just what taxes are you exempt from, if you come right
down to the question of tax exemption? What are you exempt from?
Mr. Hull. As the thmg stands today?
Mr. Hope. Yes. ^ r ^u
Mr Hull. Well, we are permitted a small amount of these savings
that we can set up m reserves that would otherwise be taxable, and
there is this limited dividend paid on capital stock, we don t have to
pay on as things stand today, but those things are so small.
Mr. Hope. You are talking about Federal taxes now?
Mr. Hull. Yes. . , , . *.
Mr. Hope. You don't pay a capital stock tax; you are exempt
from that? • i . i j.
Mr. Hull. That is right, the capital stock tax. ,. .,
Mr Hope. Which, of course, is a very small item ordinarily.
Mr Hull. Very small. We are not particularly excited about that.
The only thing we want to make sure is that this patronage dividend,
when paid out, never did belong to the corporation, and it should not
be taxed. Now, we don't care about these other things. We don t
want anything that other industry does not hav^
Mr. Hope. Let us get down to State taxes. What State taxes are
■^^MrHuLL.^None. We pay the gross income tax that nobody else
pays on transfer from production department to sales department, and
from purchasing department to production department.
Mrf VooRHis. Why is that? Why do you have to pay that when
nobody else does? . . , . _
Mr Hull. Because of the device of separate corporations for buying
and selling. The fact of having this family-sized farm the farmer has
to have his own purchasing department in a separate corporation and
go through the form of a sale, moving his own goods from his purchas-
mg department to his production department. Other factories and
industries have all transactions in one corporation, and they ]ust trans-
fer from the purchasing department to theu- production department.
Mr. Hope. Let me see if I can get this straight. Just to sum it up,
you are exempt from no State tax?
Mr. Hull. That is right. , , , j . -u •
Mr Hope. And because of your method of doing business, you
really pay an extra State tax there that a private corporation or mdi-
viduval probably would not pay.
Mr. VooRHis. That is, an integrated oil company wouldn t payf
Mr. Hull. That is right. j „^f
Mr Hope. Then, as far as Federal taxes are concerned, you do not
pay a capital stock tax, which a corporation would have to pay, and
you are allowed a lunited reserve, which is free from taxation £"
Mr. Hull. That is right. i,„4. fi,«
Mr. Hope. And the amount of that reserve depends on what tne
Bureau of Internal Revenue decides is a reaonable reserve?
Mr. Hull. That is right. , ., • „«i.i«
Mr. Hope. And if you carry more than they decide is reasonable,
you pay taxes on it?
Mr. Hull. That is right. . , •
Mr. Hope. Do you do nonmember business, business witn non-
members?
99579-
1606 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Hull. Yes, a little. Of course, we are not permitted to do
more than 15 percent of nonmember or nonproducer business. About
all that we do of nonmember business is in such things as the by-
products of the refinery, such as heavy oils that our people don't use.
We sell those to the steel industry.
Mr. Hope. Do they have to pay taxes on nonmember busmess that
they do?
Mr. Hull. They have to treat nonmembers the same as members.
As long as they are exempt, they don't pay taxes on them, but they
make the same distribution to them.
Mr. Hope. They have to give them the same patronage dividends
as they do the members?
Mr. Hull. That is right.
Mr. VooRHis. Did you have anything else you wanted to present?
Mr. Hull. Not particularly.
Mr. Hope. Let me ask one more question. You spoke mainly of
the service end of your business. Do you carry on marketing opera-
tions for your membership, that is, the sale of their products?
Mr. Hull. We have brought into existence a number of marketing
organizations. Mr. Palmer, the president of the Indiana Grain Coop-
erative, is here. They market a good share of the wheat and grain
raised in Indiana.
Mr. Hope. But you folks don't do that. Your organization does
not include marketing?
Mr. Hull. Not our corporation, no; but we helped all we could to
start marketing organizations.
Mr. VooRHis. Don't you produce baby chicks and sell them to the
farmer?
Mr. Hull. What is that?
Mr. VooRHis. Don't you produce baby chicks and sell them to the
farmer?
Mr. Hull. Well, we operate that as a purchasing operation, really.
We set it up and it is controlled by the buyers of the chicks and not
sellers of the eggs.
Mr. VooRHis. Do you mean it is owned by the farmers who have
occasion to buy the chicks; is that right?
Mr. Hull. That is right. As a matter of fact, it is owned by our
own set-up, by the cooperative association set-up.
Mr. VooRHis. In other words, it is a hatchery that is owned by
the people who buy the chicks?
Mr. Hull. That is right, and because of that — we have been able
to reduce the loss from pullorum diseases. Purdue University formerly
reported 25 percent. Now, it is less than 3. At the same time the
egg production has been greatly mcreased by means of the breeding
farms that we operate;
The Chairman. That is all you ^dsh to state?
Mr. Hull. Yes, sir.
The Chairman. We appreciate your coming here and hearing your
side of this very important program.
Mr. Hull. I don't think there is a great deal in our program that
we would have to ask of Congress but we think the cooperatives ought
to be permitted to go ahead without being hampered in any manner,
shape, or form. We think they have a place and that there are
certain things that people can do for themselves that should be done
that way instead of asking somebody else to help them.
POST-WAR ECONOMIC POLICY AND PLANNING 1607
There might be a need for some educational work ; for instance this
community social development and education regarding the coopera-
tives should be made a p9,rt of our extension program. Aside from
that, there is very little the Congress can do.
The Chairman. Thank you, Mr. Hull. Dr. Davis, would you
like to make a statement to the committee? We will hear you at
this time.
TESTIMONY OF HORACE B. DAVIS, UNITED FARM EQUIPMENT
AND METAL WORKERS OF AMERICA, CONGRESS OF INDUSTRIAL
ORGANIZATIONS
Mr. Davis. I am asking permission on behalf of the president of
the union, Mr. Grant Oakes, to file a statement with the committee
setting forth the position of the union on the problems that you have
before you.
The Chairman. Without objection, you may file that with the
committee.
(Statement referred to is as follows:)
Memorandum by Grant W. Oakes, President, United Farm Equipment and
Metal Workers op America, Congress of Industrial Organizations
Stability in farming can only be secured in the long run if there is stabiHty of
Government policy toward farming.
Government policies in the past 14 years have been dominated by the problems
of crisis and depression. We need to make a complete revolution in our thinking
on this subject and plan for prosperity and abundance quite deliberately. This
means that instead of thinking in terms of restricting crops to demand and main-
taining prices, we should plan to increase the output of basic agricultural commod-
ities, and of all other beneficial commodities as well. In place of parity prices,
we should concern ourselves with nutritional needs; in place of surpluses (which
never really existed in any absolute sense) we should concern ourselves with short-
ages of needed commodities, and how to meet them. In place of protective
tariffs, we should plan for larger imports and larger exports than ever before.
POLICIES TO be followed IN AGRICULTURE
Of the 6,000,000 farms in this country today, perhaps 3,000,000 do not contrib-
ute their share to the production and welfare of the Nation. These are the
farms which produce crops valued at less than $750 per year; they are also the
farms that produce the largest families of undernourished and underprivileged
children.
We propose, by the application of modern science, to lift these 3,000,000 sub-
marginal farm families up to American standards of living, either on improved
farms with adequate equipment or in the expanded employment which our pro-
gram contemplates in cities. ,
Mr. H. H. Bennett, Chief of the Soil Conservation Service, estimates that the
cropland area can be increased 100,000,000 acr.es, or 25 percent, by reclamation,
irrigation, and conservation. A sweeping program of public works to bring into
production a good part of this 100,000,000 acres would seem to be a necessary
means to the Government's announced policy of settling a million returning
veterans on the land.
Many farmers are now trying unsuccessfully to make a living on land which
should be returned to pasture, or even woodland. The Farm Security Adminis-
tration should be much expanded and charged with the duty, for which excellent
precedent exists in its own work, of resettling these farmers on new land.
Many farms are submarginai because they are too small, or because they are
underequipped, or understocked, to receive the most efficient use of their labor.
The farmers do not have the necessary capital, or in many cases the necessary
knowledge, to carry out the necessary expansion.
1608 POST-WAR ECONOMIC POLICY AND PLANNING
Credit facilities need to be made available for improvement of farm facilities,
including the purchase of some machinery and the introduction of new methods
of farming, by some one or more of the following methods:
1. Relaxing the somewhat overconservative policy of many banks on machinery,
feed, and livestock loans. The Farm Credit Administration and the Federal
Reserve banks could give a lead in this respect.
2. Making loan arrangements with due regard to the farmer's desire to con-
serve his equity in the farm. Many a farmer is unwilling to undertake new obU-
gations, even when these are clearly indicated, because he fears an over-all increase
in his liabilities which would threaten his own equity.
3. Directing the flow of capital toward these areas where an over-all shortage
of capital in agriculture now exists. In this connection, we wish to call your atten-
tion to the Canadian Act of August 15, 1944, by which the Government under-
writes bank losses sustained as a result of farm improvement loans, up to the
amount of $3,000. Interest rates to farmers are limited to 5 percent under the
act (8 George VI, ch. 41), which is expected to become effective within the next
few weeks. ■ . . x x- , ^ x, ,
The Government has an excellent opportunity, at present, to stimulate the long
overdue shift in production in the Southern States, now so largely devoted to
cotton. In this connection we wish to emphasize that Government payments
to landowners in the South have largely been wasted in the past, in that they
went chiefly to the large landowners who needed them least, and did nothing to
correct the waste of human material in the family of the undernourished, ineflB-
cient sharecropper.
In the approaching mechanization of the cotton fields, special encouragement
should be given to voluntary cooperatives of small producers, who would other-
wise be unable to purchase a complete set of equipment. The Government should
maintain a special service for the particular purpose of rescuing the southern
sharecroppers from their present degraded condition, through instructing them
in the use of proper methods of farming, and through helping them to organize
their own associations for cooperative production. _
In some sections of the country, there are farms which are too large for efficient
one-family operation, but could be run efficiently if they were broken up into
smaller units. Government policy should be to equalize opportunity among
farmers by making available to all the knowledge of modern methods, which
cooperative farms are now in a position to introduce but which are beyond the
scope of the small farmer. The excellent work which has been done by the
Tennessee Valley Authority and many State agricultural colleges, in developing
models of farm machines especially adapted for the use of small farms, should be
continued and extended. , . . ^ j j * t •
Finally the universal establishment of a national minimum standard of hving
should be made to include farmers, the same as city workers. Farmers should
come under the social insurance provisions of an expanded Social Security Act
(the Wagner-Murray-Dingell bill), and should receive a guaranteed minimum
annual income, the equal of that paid in the cities. This policy necessarily
involves the maintenance of a minimum standard of production on the farms,
through elimination of substandard and submarginal units.
The problem of stabilizing farm income is usually approached from the angle
of increasing money receipts by farmers, but it is often overlooked that farm
machinery, a major item of expense, has been so inflexible in price that farmers
real income fell, even more than their money income, in the depression. _
In 1932, when farmers' gross income was 65 percent of 1910-14, the index for
equipment and supplies stood at 107, and of farm machinery at 142.
Manufacturing cost of farm machinery was reduced m the period between the
First and Second World Wars, but the slack was taken up by increased marketing
costs, so that the retail price of farm equipment was actually 7 percent higher in
1942'thanin 1926. , , . •, ..^ ^..^^ r
Lower prices of farm equipment could be combined with higher wages for
farm equipment workers if the plants operated more steadily. Profits of the farm
equipment companies have been extremely high in the so-called good years, like
1937. If every year were a good year, there would be no excuse for not reducing
^^ The real key to the problem of stabilizing farm income is, of course, the sta-
bilization of the market for farm products. It is our understanding that the sub-
committee does not wish to go into the problem of securing full employment in
the cities. We merely call attention, in passing, to a recent graph prepared by
POST-WAR ECONOMIC POLICY AND PLANNING 1609
the Bureau of Agricultural Economics, showing an almost perfect inverse corre-
lation between farm income and unemployment. Almost invariably, when unem-
ployment increases, farm income drops; when unemployment drops, farm income
increases. '., , . , ,i.ij.
We believe that a farm equipment mdustry plannmg board should be set up
to synchronize farm-implement production with agricultural needs, both season-
ally and over a long period. On this planning board should be represented
industry, labor, agriculture, and Government. , , , .^
Stabilization of the foreign market for farm products can only take place if
mutual trust between nations and a wide extension of democracy abroad make
wars and revolutions unlikely, if not impossible. This goal can only be achieved
if imperialism and the colonial system are superseded. A policy of narrow
nationalism could strangle trade, as it was strangled in the 1930's. A policy of
aggressive imperialist expansion could build up enmities abroad, and slam shut
the door to much-needed foreign markets. , ,.,
In very brief summary, the policies which we advocate as essential to a healthy
expansion of foreign trade are as follows: . , , ■> ^ /
1 No dumping: Two-price policies for American agricultural products (one
price for the home market and one price for the foreign market) are all forms
of dumping, and must be abandoned.
2 Loans abroad must be made only for productive purposes, ihe sad experi-
ences of the 1920's, when hundreds of millions of dollars were squandered m
dynastic wars, graft, and useless enterprises of various sorts, must not again be
allowed to disrupt international economic life. , , j j
3 Import duties on goods coming into the United States must be reduced and
kept low. We cannot sell abroad unless we are prepared to also buy in foreign
4. We must encourage democratic regimes abroad. Only governments which
rest on a broad base of popular acceptance and participation have the stability
necessary to an assured market, in the long run. The fallacy of encouraging
unpopular oligarchies because they give a superficial appearance of order and
stability, has been definitely shown in the present international holocaust.
Finally, we wish to emphasize that a firm guiding hand will be necessary to
prevent future depressions. A progressive tax policy, bearing most heavily on
those best able to pay, can do much to insure that savings are fully utilized for
further production, and that wealth does not pile up idle in the wrong hands.
We recommend to the committee's attention especially, a drastic increase in the
taxation of inheritances, a form of taxation which is universally approved by
economists, but has received far too little application in our country.
Mr. Davis. If you wish, I can give you the broad outUne of our
approach to the thing at this time.
The Chairman. You understand, we are here dealing with post-war
problems of agriculture. The Post- War Economic Planning Com-
mittee as set up in the House of Representatives, the committee of
which Mr. Colmer is the chairman, has set up a number of subcom-
mittees. I am not so sure but what there is one on labor but I think
there is. This subcommittee deals solely With the problem of agri-
culture and, of course, as your program is related to the problem of
agriculture, we want to hear from you.
Mr. Davis. As I understand it, one of the main problems you have
before you is how to stabilize farm income. Now, of course, one of
the main component parts of the farmer's income in terms of real
income is what his dollars can buy. That was especially noticeable
in the depression. Congressman Voorhis quoted the figures. The
farmer had to buy things whose prices stayed up while farm income
was going down. I want to break that down and point out that the
item that farmers had to buy that stayed up the highest, is still the
highest in terms of 1910-14 prices, and that is farm machinery.
In spite of the mechanical improvements that have been made since
the First World War, the general level of prices of farm machinery to
1610 POST-WAR ECONOMIC POLICY AND PLANNING
the farmer as calculated by the Bureau of Agricultural Economics is
7 percent above 1926. That is the figure as of 1942.
Mr. Hope. Isn't it rather hard to get any comparable figures in that
field, though, in view of the fact there have been so many new types
of machinery developed? Do you know the basis they used ui making
the comparison?
Mr. Davis. Speaking broadly, if they make comparisons at all,
they have to compare things that are similar and, since as you say,
there has been a qualitative change, there are things that they cannot
directly compare. That is true. At the same time, by recourse to
certain other figures, we thmk we have shown in a pamphlet which
has already been filed with your committee that the price of farm
machinery to the farmer could be reduced without any reduction in
the wages of farm machinery workers. If the farm machinery fac-
tories operated more steadily year in and year out, for the very simple
and obvious economic reason that steady operation cuts down the
amount of overhead chargeable to each unit of farm machinery.
The Chairman. Just a question there. Do j^ou think that they
could profitably operate steadily unless there was a demand for the
product?
Mr. Davis. Our whole progi-am is predicated on the idea that if
there were steady production in the cities to balance steady produc-
tion which already takes place on the farm, that it would not only be
to the great advantage of the city workers, but it would also reduce
costs to the farmers as well as guaranteeing their market.
Now, I am just emphasizing that particular pomt of a reduction of
cost to the farmers because the other point, as I understand it, is more
or less outside of the purview of your subcommittee.
Mr. Hope. Let me ask you this. \\Tiat effect would that have
upon employment? Would that mean a smaller number of employees
over a year around or a smaller average number over a year-around
period as contrasted now with a peak at some seasons and little or no
employment in others, or do you think it would mean over-all employ-
ment all the way through? In other words, how much more over-all
employment would there be under a set-up such as you are describing?
Mr. Davis. Well, our program addresses itself to the problem of
how the people that are now in the industry plus the returning
servicemen who will go into industry, minus a certain leakage out of
the industry — old people and women, who have been drawn in it for
patriotic reasons— can be kept employed steadily year in and year
out. We believe that we have shown that it is possible for them all
to have full employment if farm income is stabilized at a high level.
Mr. VooRHis. In other words, you have a direct interest in this
stabilization of farm income at a high level?
Mr. Davis. Most decidedly.
The Chairman. In other words, if the farmer has the purchasing
power to buy the products which the laboring man here in Chicago
and St. Louis and other cities produce, the farmer must have an
adequate income to have that purchasing power. It moves in kind
of a circle, doesn't it?
Mr. Davis. You can show that in a form of graph. As a matter
of fact, those graphs have been prepared and in our testimony we cite
chapter and verse on that. The Government has them. It shows
when unemployment goes up in the city, farm income goes down in
POST-WAR ECONOMIC POLICY AND PLANNING 1611
direct proportion. There is a nearly perfect inverse correlation; and
correspondingly, when farm income goes down, the sales of agri-
cultural implements go down and that means less employment for
our workers.
Mr. Hope. The question bothering me there, which is the effect?
We have that coincidence of figures there, which everybody knows
exists, and which can be easily shown, but which is the cause and which
is the effect?
Mr. Davis. If you want to know how to break that vicious circle,
I think the answer is plain. We should abandon the negative
approach to farm production. That is, our whole emphasis should
be on maintaining farm production at a high level with no more
restriction of crops and no more price supporting plus limitation of
production.
Let the farmer go on producing as he always has wanted to and as
he usually does anyway in the absence of some Government-sponsored
program, and let the city worker do the same thing which he has
always wanted to do and has only been prevented from doing by the
bad operation of our economic system.
In other words, the place to break the vicious cu-cle is by guaran-
teeing employment to the city worker. If that is done, the farmer
market will be guaranteed, or at least that part of it that is sold domes-
tically, and the very important farm market wiU also be guaranteed
to industry.
Mr. VooRHis. I don't believe that the fall in farm income or fall
in city employment is either one of them the cause of the other. I
think both of them are the result of forces further back in the economic
system which could largely be traced to some of the centers of iSnancial
power in this country.
Mr! Davis. Well, we can't settle that in 10 minutes.
Mr. VooRHis. That is a comment, not a question.
Mr. Davis. However, we can discuss means of overcoming that
difficulty, and your committee has got to help solve that because it
has to be solved. We are not going to stand for another depression
hke the one in 1930. We in the C. 1. O. are determined that that shall
not happen.
Mr. CoLMER. How would you guarantee the perpetual continuous
employment of the urban worker?
Mr. Davis. W^e have a rather extensive program on that. Of
course, that takes us out of the immediate purview of the Farm
Equipment Workers Union, as such, and into the broader program
of the C. I. O., which is probably famihar to you, and, if it is not, then
you should certainly have it explained. We contemplate a big pro-
gram of Government public works to be synchronized with advancing
periods of unemployment. We agree in that respect with the Farmers
Union approach. I believe you have heard about their proposition
that when investment in new plants fall below a certain figure, I believe
40 billion, the Government is to step in and take up the slack. This
is an intelligent approach and deserves to be further explored.
We are also tackling it on the level of collective bargaining in trying
to get it written into our collective contracts that the employers will
guarantee an annual wage. Actually the present is a very auspicious
time to start such a plan because the steel industry, in which that was
1612 POST-WAR ECONOMIC POLICY AND PLANNING
proposed, has enough profits now to guarantee that annual wage on
a 40-week basis for at least a year and a half after the war.
Mr. VooRHis. Is one of the purposes of that to try to level out or
even out employment? In other words, do you have in the back of
your head the idea that if annual wages were guaranteed, that then it
would be directly to the employer's interest and he might almost have
to do it in self-defense, to level out his employment through the years?
Is that part of the purpose?
Mr. Davis. That is part of the purpose. You have different kinds
of unemployment. We take the position that none of them are
socially tolerable and, while depression unemployment — cyclical unem-
ployment— is the most disastrous, seasonal unemployment is a big
problem in the farm-machinery industry.
I want to call your attention to the last issue of the Farm Implement
News, the trade journal, in which the editor indicates that the manu-
facturers should not have to carry the whole burden of storing these
bulky agricultural machines until such time as the farmers get ready
to buy them and he indicates a growing belief in the industry that
there is going to be a certain amount of social pressure from labor and
from the Government, to even out production the year around. If
that means moving the equipment into the hands of the dealers at an
earlier time and letting them find storage space for it, that is all in the
public interest.
Mr. CoLMER. Before we leave that, I would Hke to ask you this
question: I know we are getting into deep water, but I would like
to go back to the guaranteed wage. That is highly desirable and
everybody would like to see that. The Members of Congress would
nice to have some guaranteed wage, particularly of their wage.
Mr. Davis. We would be delighted to guarantee it to certain
Congressmen if we could.
Mr. CoLMER. I am quite certain that that is true, but what I was
trying to get at is this: Could you stop there? Would you guarantee
to the employer a certain income?
Mr, Davis. Well, of course, when you tackle it from that angle, it
involves the Government coming into the picture.
Mr, CoLMER. That is right.
Mr. Davis. There have been certain proposals made, not by the
C. I. O. at the moment
Mr. CoLMER. Pardon me, you did not mean that the Government
should step in on the annual wage, but rather a collective bargaining
proposition?
Mr. Davis. Well, as I say, the first place that that program was
raised was in the proposals of the United Steel Workers of America to
the steel employees, which is now before the War Labor Board.
Until we fully explore that prospect, we have not gone into detail
as to just what the Government might be expected to do.
Mr. CoLMER. But, assuming that the Government were expected
to step in and guarantee that, then my question would be pertinent,
wouldn't it, as to whether or not the Government would guarantee
the employer?
Mr. Davis. That is right.
Mr. CoLMER. And if that happened, then the other thing it seems
to me, would have to happen. Following that out from a practical
standpoint, isn't there a limit to which the Government can go?
POST-WAR ECONOMIC POLICY AND PLANNING 1613
For instance, the economist tells us that we are going to be faced
with a national debt of approximately $300,000,000,000 when the
war is over. , ^ , ^ i ^
Now, I think there is a bottom to the Government meal barrel as
well as' there is in the individual. I am wondering, as desirable as
these things may be, how far can we go without straining or even
destroying the financial stability of the Government, and, of course,
with the final loss of our present system of Government?
Mr. Davis. I would just like to point out a few things in that
connection.
Mr. CoLMER. That is what I asked you. i i i. •
Mr. Davis. Mr. Colmer raises a question that everybody has m
mind. The thing that is going to preserve the financial stability of
the Government is preserving the prosperity of the Nation, because
that incresaes the potential taxable income and wealth of the country.
It has been calculated that there was enough money, shall we say,
lost through failure of production in the depression years of the
thirties to pay for the war as far as it has gone. Something like
$240,000,000,000. ^ ^ , , j ,aon
Mr. VooRHis. About that, that is if you figure the loss under 1929
production.
Mr. Davis. "Well, production should have gone up smce 1929.
Mr! VoORHis. I know, but even if you figure the loss on 1929.
Mr. Davis. That is right. The other point is that the Govern-
ment would not have to make up the whole difference between, say
1929 production and 1932 production, because most of this production
follows automatically when you take up the difference between what
production is at the peak and what it is, say, in the first year of the
depression. The system tends to right itself and go ahead.
The Chairman. Do you think that the ideal course is to have
private enterprise carry on this program in our country?
Mr. Davis. We accept that idea.
The Chairman. And you agree with men like Eric Johnston, of the
United States Chamber of Commerce, who appeared before our com-
mittee and testified that public works are Government operations and
they should only be resorted to in case of the failure of private enter-
prise to meet the needs of a nation? Do you agree with that?
Mr. Davis. Of course, it is axiomatic that if private enterprise
furnishes the jobs, then the Government has no problem.
Mr. Colmer. But you also agree that there is a limit to which even
Government can go in furnishing jobs under our present Government?
Mr. Davis. We thinly the Government should start off with the
perspective of maintaining full employment. If instead of taking
off taxes, after the war, and getting down to a rock bottom level, the
taxes remained heavy on the people who can really afford it, we would
solve two problems at the same tune; one, the problem of paying off
the national debt while -at the same time paying the expenses of the
Government; and two, the problem of eliminating the accumulation of
idle wealth where it is not doing anybody any good, and which is one
of the big causes of the depressions that we have had in the past, as
Congressman Voorhis has very briefly indicated.
We think that this whole question cannot be discussed apart from
where the Government is going to get its money. If it keeps on
getting its money from taxes on consumption, on people with mcomes
1614 POST-WAR ECONOMIC POLICY AND PLANNING
of less than $1,500, it is going to limit the market for industry and
agriculture. -^
Mr. VooRHis This may be a mean question, but I don't think so
Uo you thmk there is a place for a reexamination of the relationship
between personal income taxes on the one hand and corporation taxes
on the other, with a view toward trying to fix corporation taxes so
mat tiiey would encourage further business expansion?
Mr. Davis. Yes.
Mr. VooRHis. In other words, do you think it is a sound theory that
corporation taxes are necessarily taxes that fall upon rich people or
IS It a sounder theory to say that if you want to have the taxes faU
according to the abihty to pay, that the personal income tax is a
sounder method to use?
^ Mr. Davis. Our position is that broadly speaking the personal
mcome tax is the ideal form of tax— that and mheritance taxation,
which is largely neglected .
Mr. VooRHis. Rather than corporation?
Mr Davis. But at the same time we don't necessarily believe in
repealing corporation income taxes.
Mr. VooRHis. I am not talking about repealing them
Mr. Davis The Committee for Economic Development does, but
we don t. We believe there ought to be corporation income taxes
Mr VooRHis. No, I don't think they recommended theh- outrignt
repeal, but they recommended a flat tax of, I forget how much but it is
a low tax. I don't agree with thek position because I think that smaU
business should be totally exempt and the principle of excess profit is
sound, but not at war levels. I don't believe they recommend the
repeal However, there are a good many people who have sort of an
instinctive leelmg that if you raise taxes by taxuig corporations that
It somehow or other is lifting the tax burden from the people and dis-
tributing the taxes in accordance with the ability to pay.
I have come more and more to question the soundness of that point
ot view and believe that the way to distribute taxes is according to
ability to pay by personal income tax and by inheritance tax rather
tban corporation tax, which may fall in accordance to abihty to pay or
not fall that way. We don't know.
Mr. Hope. To the extent that they are passed on, that is the thing
Mr. Davis. I don't know according to what economic theory it is
tbat corporation income taxes are passed along. However, insofar as
they were (and m the case of public utilities, you might make an
argument to that- effect) there would be an argument for collecting
by means of personal income taxes, but I am not at all impressed by
the argument that bases itself on double taxation in that connection
ihere is nothing new about dpuble taxation. The consumer is used
to it. He IS taxed at least twice on every article that pays a tariff
duty and a sales tax and there may be any number of taxes added
along the line.
A big question in connection with Congressman Voorhis' point
would seem to be whether in collecting the money for the Government
from those able to pay, you can also accomplish some other socially
desirable aims.
The Chairman. What do you think about this?
Mr. Davis. If you collect a corporation income tax from a cor-
poration that IS new and just starting in, that maybe needs a little
POST-WAR ECONOMIC POLICY AND PLANNING 1615
capital to put back into the business to become a serious competitor to
some monopolistic concern, I can see a strong argument for making
some concession to that business.
There is an argument for taxing partnerships on the same basis as
corporations so as not to discriminate against the corporate form.
Mr. Hope. Or individuals.
Mr. Davis. There is an argument for taxing idle surpluses of cor-
porations, especially when that gets them into useful construction
and thus maintains a sagging investment level. All of these highly
desirable things could be attained quite aside from the question of
what was the best and fairest tax for getting money into the Govern-
ment Treasury.
Mr. Hope. The question of double taxation is important. If you
have no competition, the corporation taxes might not be passed on,
but if you do have competition, then those taxes will have to be
passed on.
Mr. Davis. Well, a tax on a corporation income does not get passed
on, even if it is in competition.
Mr. Hope. It is a business expense; isn't it?
Mr. Davis. No; technically it is a tax on what is left after the
expenses.
Mr. Hope. I know, but it is a business expense. You cannot pay
any dividends to the stocldiolder until after you take out your taxes.
Mr. Davis. What is paid in taxes is that much less for the stock-
holders, but it does not follow that the business can increase its prices
by adding to its price the tax that it pays.
Mr. Hope. I am not talking of the economic theory of it, but as a
matter of actual practice, isn't that what does happen generally?
Mr. Davis. Well, you take the case of two businesses, one making
a profit and the other not making a profit. The one that makes a
profit, we will say, pays taxes, and the one that is not making a profit
does not pay any tax. WTiy should the one that makes the profit raise
its prices as a result of the paying of that tax? As a matter of fact,
it would more likely be the other fellow who would raise his prices.
Mr. Hope. The other fellow might have to raise his price.
Mr. Davis. Not because of the tax, because he is not paying any
tax.
Mr. Hope. Well, if you are talking about an excess-profit tax, that
would undoubtedly be true.
Mr. Davis. The same line of reasoning applies to any kind of a tax
on profits or corporation income as such.
The Chairman. T\Tiat about the simple corporation tax?
Mr. Davis. The corporation tax is different again. That is not a
tax on profits.
The Chairman. One further question. You have heard some of
these statements here. Some gentleman advocated that the only
salvation for this country was the national sales tax.
Mr. Davis. That would be, in my opinion, the most disastrous
measure that could be taken.
The Chairman. You heard the comment of one of these gentlemen,
didn't you?
Mr. Davis. I was not here for that discussion.
Mr. Hope. I believe that was Mr. Brandt.
Mr. Davis. I can tell you briefly why I think that is an extremely
bad idea.
1616 POST-WAR ECONOMIC POLICY AND PLANNING
One of the big difRculties that we faced in the past and one of the
reasons why we have had depressions has been the failure of purchasing
power at a certain point, the disappearance of markets.
Now, the people who spend most of their income on necessities of
life and sometimes more income than they have got, are the people
at the bottom of the income scale. The proportion of savings in-
creases as you go up in the income scale. That is all A, B, C. Now,
should not public pohcy be devoted to collecting the money from those
who have the most savings, and leaving the people who spend most
of their money to increase the market?
When you levy a sales tax on the man whose income is $1,000 a
year, all told, for the whole family, you are taking that much money
out of consumption, and you are limiting markets in that amount.
If you tax the rich man on his profits, you are taking that, not out
of consumption, but out of savings. Depressions occur only when
consumption fails and savings become redundant.
Mr. Hope. Well, of course, the main argument for a sales tax is
that it is the easiest to get. That is the real argument; isn't it?
Mr. Davis. That is the only argument that I have ever heard in
favor of a sales tax that struck me as having any validity whatsoever,
but there are other taxes that are perfectly simple to collect which can
also bring in plenty of money. One reason why the income tax does
not bring in as much as it should is that there are so many loopholes
in it. The Treasury has suggested means year after year and you
gentlemen year after year tm-n do>vn the suggestions in committee or
on the floor and so the income tax does not bring in what it should.
The Chairman. Our time is slipping by. Have you any further
statement that you would like to present at this time?
Mr. Davis. I want to consult the schedule of the committee on
that. There is a good deal further I could say on the subject of
foreign trade. I think perhaps I might take a few minutes of your
time to indicate briefly our position on that.
The Chairman. We have a separate committee on foreign trade.
Mr, Davis. Well, I am thinking now, particularly, of foreign trade
in farm products.
The Chairman. We will give you 2 or 3 minutes on that.
Mr. Davis. The theory of establishing a two-price system, one for
domestic markets and one for the foreign markets, is dumping what-
ever way you look at it, and it invites reprisals. I don't think that
that should be incorporated in our permanent policy, whatever might
be said for it as an emergency measure.
We want to encourage foreign countries to allow our products in
and we also should be prepared to accept products from foreign coun-
tries. We go along with Mr. O'Neal of the Farm Bureau Federation
on that line of reasoning.
The Chairman. Unless you have some further comment, we will
proceed. I want to thank you for your attendance here and we will
he glad to file the statement.
Mr. Davis. Thank you. We will send it to you.
The Chairman. Dr. Galbraith, we thought you would not be here.
Mr. Galbraith. I would like to apologize. My train was 4 hours
late this morning; it was delaj'^ed somewhere out in your territory,
Mr. Hope.
The Chairman. Do you have a prepared statement?
Mr. Galbraith. Yes; I do.
POST-WAR ECONOMIC POLICY AND PLANNING 1617
TESTIMONY OF J. K. GAIBRAITH, FORTUNE MAGAZINE, NEW
YORK CITY, N. Y.
Mr. Galbraith. I am here at the invitation of your chairman. So
far as I am aware, I am not a spokesman of any particular pubHc or
private group; I am here as an individual.
The subject of these hearings, as the chairman has informed me, is
the stabilization of farm income; it is something that has occupied the
attention of Congress fairly continuously for the last 30 years, and I
should think there is a fair chance that it will be a subject of debate
and action for another 30 years. There is certainly a strong likeli-
hood that it will be a major issue immediately after our two wars, the
west and the east, come to an end.
I understand that your committee is looking at the more general
aspect of stabilization of farm income; that you are taking a longer
range view of the problem. That is the logical place to begin, although
it is perhaps well to observe that the conflict between long-range
objectives and short-range action has been one of our fairly constant
problems in farm legislation. We have never lacked people who could
think clearly and ably about the long-run objectives; I should submit
that there is a fair degree of agreement as to what the long-range
objectives of the agricultural policies are. We want a family-size
agriculture; an opportunity for the man on the land to become an
owner, and Government assistance to that end if necessary ; conserva-
tion of our soil resources; and„ perhaps the most important of all,
independence and economic security for the farm operator and his
famiJy.
However, while we have agreed on these long-run objectives, the
practical process of passing farm legislation has often been one of
improvisation and compromise — the kind of action which, while it
settles today's headaches, leaves a hang-over tomorrow.
Immediate crisis action to help cotton producers has at times de-
layed the development and diversification of southern agriculture.
It may do so again. As we come out of the war we will be face to
face with another consequence of crisis action, which cannot easily
be squared away with the long-run objective of farm policy. I refer
to the price guaranties on crops for which there have been wartime
needs, and which guaranties will run on after the war. The policy is
not one that I would criticize. In wartimes it is wise to do what it
takes and not count the eventual costs. Farmers needed to be told
that if they increased production they would not be left midstream
with half -grown crops and half -finished livestock for which markets
have disappeared. Yet, it is a fact that for some crops wartime pro-
duction will be far in excess of the peacetime needs.
In order to keep its promise to the farmers the Government after
the war will find itself buying substantial quantities of food and fiber.
It has had to do this before, but I doubt if it has ever had to do it in
the past on quite the scale that will be necessary in the future. These
accumulated stocks are going to be one of the serious barriers in
getting agTiculture back on a sustaining basis. But I should like to
get back to the main topic. Assuming that our farm policy in both
the long run and short run is to stabilize agricultural income at a
high level — provide economic security for farmers — what does it
take? Or, to put the question another way, in the 30 years of legislat-
1618 POST-WAR ECONOMIC POLICY AND PLANNING
ing on farm policy, what lessons have been learned about stabilizing
farm income?
The first lesson seems to me very clear. A high and stable farm
income requires first of all a high and stable national income. During
the 1920's the United States as a whole was fairly prosperous and the
farmers were not. That was the decade of the McNary-Copeland
bill, twice passed and twice vetoed, and of the Smoot-Hawley Tariff
Act which started out to be a farm measure, and of the Federal Farm
Board. The national income in 1929 was the highest that it has ever
been — higher than during the 1930's and yet it was in 1929 that the
Federal Farm Board was established.
With industry relatively prosperous and industrial employment
relatively high and agriculture, comparatively speaking, depressed, it
was easy for people to decide that there was not too much connection
between the two. A high national income, they concluded, is not
enough to insure a high farm income. Perhaps they were right but
they have since learned that a high national income is necessary
before farm income can be even tolerably high.
Let me review briefly the figures. In 1929 — all of these figures are
in current prices — the national income estimated by the Department
of Commerce was about $83,000,000,000. The Department of Agri-
culture estimated farm income at 8.4 billion or approximately one-
tenth of the total. I draw your " attention to the fraction there.
The farm income in 1929 was about one-tenth of the national income.
In 1932 the national income had dropped to just under 40 billion —
from 83 to 40 billion, and farm income had dropped to 3.2 bilhon or
considerably less than one-tenth of the total.
To put it another way, although farmers were not satisfied with
their income in 1929 when national income was relatively high, the
decline in national income hit the farmers harder than it hit the
community as a whole. It left them with a much smaller share of
the much smaller total income.
Now, just the reverse has happened on the upswing. In 1937 — to
pick out an average year of the thirties, or a little better than average
year of the thirties — the national income had climbed back to 71.5
billion.
Mr. VooRHis. In 1937?
Mr. Galbraith. Yes; farm income had risen to 6.9 billion or was
again just under one-tenth.
Mr. VooRHis. What was the national income?
Mr. Galbraith. The national income was 71.5 and the farm in-
come was 6.9 billion.
In other words, as the national income went back up again farm
income again climbed more rapidly.
Now, to come down to date we find the same principle holding true.
In 1943 the national income was 148 billion while farm income in 1943
was 15 billion, or slightly more than one-tenth of the national income.
As compared with 1940, the national income had about doubled and
farm income had about tripled.
Perhaps I am stressing the obvious, but the obvious often contains
the truth for which men search the obscure. The farm income in the
United States in the last 20 years has moved up and down with na-
tional income. In spite of Government action of any sort the relation
between the two has been very close.
POST-WAR ECONOMIC POLICY AND PLANNING 1619
Mr. Hope. It has not moved at the same rate, however; isn't that
correct?
Mr. Galbraith. Yes. Farm income has dropped more on the dovsm-
swing and gained more on the upswing, and that leads me to empha-
size this point: Without going back over the figures, the objective
reading of our experience of the last 20 years indicates that first re-
quirement of a high and stable farm income is a high and stable
national income.
The Chairman. I might say this: Men like Mr. Baruch and Mr.
Hancock and other industrialists like Mr. Wilson, of General Motors,
and Mr. Johnson, and others, have all emphasized the importance of
keeping up the national income. They said that is a necessity.
Mr. Galbraith. I think very wisely so, too.
Mr. CoLMER. May I interrupt and also state that this committee,
the full Committee of the House on Post-War Economic Policy and
Planning, has emphasized that, also, and I think we all agreed upon
that.
Mr. Galbraith. I would like to spend a minute on some of the
aspects of this relationship. During the depression one used to hear
it said that the problem of farm surpluses was especially stubborn be-
cause people had been born with only one stomach. I am sure we all
heard that repeated time and time again. They said that people can
eat only so much and no more and the rest of the surplus might just
as well be dumped into the ocean. The war has shown us that this
apparently simple straight-forward logic was faulty. Let us take the
production of the pre-war years, that is, from 1935 to 1939, as 100
percent.
Mr. VooRHis. Which years?
Mr. GAlbraith. 1935 to 1939. Farm production in 1944 stood
at 144, or 44 percent above the average pre-war level. That is the
physical volume of farm production. As compared with the same
base years the production of meat and other products were up, such
as grains being up 56 percent and oil-bearing seeds, notably soybeans,
165 percent.
Now, some of this increase was to replace crops that we imported
before. A relatively small quantity has been exported on lend-lease.
Mr. Stettinius has repeatedly emphasized the relative small fraction
that has gone into lend-lease. The overwhelming fact is that much
of the increase of 44 percent has gone into the domestic market. It
has gone into the domestic market because when purchasing power
barri'ers are lifted, people eat a great deal more.
We have some 11,000,000 people in the armed forces, men and
women, who have no purchasing power barrier at all for their food
consumption; in general, the industrial population is fully employed
at good wages and it has no barriers to satisfying its appetite. One
of the phenominal lessons of the war is that when the market for
agricultural commodities
Mr. Hope. Just a moment. You would not want to carry that too
far, would you? That is, it is still a good deal less elastic than the
demand for industrial commodities, isn't it?
Mr. Galbraith. I think from a reading of the figures of the last
couple of years, Mr. Congressman, that is questionable.
Mr. Hope. Right on that point. The Department of Agriculture
figures indicate that the domestic consumption per capita increased
1620 POST-WAR ECONOMIC POLICY AND PLANNING
only 7 percent on farm products. I am not questioning your figures,
but those are economics and they say that it increased only 7 percent.
I am referring, of course, to civilian consumption during the last war
period.
Mr. Galbraith. That is a very interesting figure to analyze.
Notice it is one for civilians. And that 7 percent is the average over-all
increase. When you take out of your 100 percent the number of
people in the United States who were eating all they wanted to before
and for whom there were no barriers before, you pyramid that per-
centage for some people up to 14, 15, 18, or 20 percent, or even 50
percent — all people who were not able to satisfy their appetites before,
who were on stringent rations in the 1930's and who now are able to
satisfy their appetites.
Mr. Hope. That is true. I am not arguing about that, but I say
there is a limit and a definite limit to what you can consume. I still
do not think that your farm market is as elastic as refrigerators or
automobiles, for example.
Mr. VooRHis. Isn't this true, that the market for agricultural
commodities, taken as a whole, is even more elastic than the agricul-
tmal values that may be demanded for any individual agricultural
commodity?
Mr. Galbraith. I think that is also a very important point to
emphasize.
Mr. VooRHis. You are talking about all agricultural products and
you are not talking about any one or two?
Mr. Galbraith. And the budget itself is a highly flexible thing.
Mr. VooRHis. About what percentage did lend-lease take, actually?
Mr. Galbraith. The aggregate volume is relatively small. If we
assume that flexibility as the reason why agricultural consumption,
or the consumption of agricultural products responds so well to high
national income, then it seems to me that we are safe in projecting
this past relationship into the future and saying that if the national
income is high in general, we have a good chance of stable farm
income, because people will spend a large share of it for agricultural
commodities for food and fiber.
Mr. Hope. I don't want you to think that I disagree with you on
that point, from what I said a while ago. I thought perhaps you were
putting too much emphasis on it.
Mr. Galbraith. It is a question of emphasis, Mr. Hope. There is
always the possibility that one makes a good point with more emphasis
than is proper.
Now, what about our prospects for a stable national income?
That would take me somewhat off the chain of this testimony, but I
would like to have the permission of the committee to say a word
about that.
I would like to submit that a high national income in the United
States after the war is not assured by any means. We cannot have a
high national income in the United States merely by promising that
there will be 60,000,000 jobs nor merely by saying that private enter-
prise will take care of it; nor by tallying up the amount of money
people have in War bonds and bank accounts, and saying it will be
spent.
Our experience of the last 20 years is that it is hard to have a high
national income, and it will take the hard concerted action both of
POST-WAR ECONOMIC POLICY AND PLANNING 1621
public and private groups to get a high national income and sustain
it after the war. We are being much too cavaher if we assume it
I should like also to suggest it will be much too late, when the big
cut-backs come, to start action then. We must be prepared; we must
be prepared this time in advance. I do not need to cite the important
urban impact of the low national income and the high unemployment,
but again I emphasize its vital relation to our agriculture.
Now, I should like to suggest this
The Chairman. In other words, we cannot afford to get into a
depression before we start doing something about it?
Mr. Galbraith. That is precisely true. , , . „ . , ^
Mr VooRHis. About these bonds that everybody is talkmg about
and the huge backlog of savings. What will be purchased with that
backlog of savings if they believe that a depression and a period of un-
employment is ahead of us? . ^ ^ • .
Mr Galbraith. That seems to me to be a very important point,
Mr Voorhis In the people of the United States is a strong Puritan-
ical strain I don't happen to belong to that, but I belong to only a
slightly more liberal one; I am Scottish. We are a nation of savers.
We know the difference between capital and income, and these War
bonds, for a great many of our people are capital. They are a token
of security which they are going to hold onto.
Now I hear people say that when the end of the war comes every-
body is going to cash in these bonds. However, I do not hear any of
my friends saying that, and I know people who are not Scotch, too.
I might not prefer to associate with them, but I do know some.
The Chairman. Now, isn't it a fact that a lot of them are being
cashed in right now? . i . ^u ^ • i 4-- i
Mr Galbraith. We have a turn-over m them, but that is relatively
smaU I think that is an aspect of the pressure of the bond sales and
the desire to conform, which carried some people beyond what they
can actually afford, and they have to cash some of their bonds m.
Mr Voorhis. There are a lot of people who talk about the backlog
of savings in terms of total national debt, but as a matter of fact, only
about 37.5 percent of the present national debt is held by mdividuals
and nonfinancial corporations combined. . • , ^ n
Mr Galbraith. That is a very important figure, incidentally.
Mr Voorhis. And, furthermore, of that 37.5 percent, it is question-
able how much of it belongs to the people with incomes of less than,
say, $4,000, and that would be the important group.
Mr. Galbraith. And it has been a fairly regular experience in our
bond sales for the corporation quotas to be oversold and the individ-
ual quotas to be undersold. That has been a fairly standard phe-
nomenon. , , , , , ii 1 1 J
Mr. Voorhis. The great bulk of this debt belongs to the banks and
to the insurance companies, and so forth.
Mr. Galbraith. Now, hurrying along on this, 1 would like to say
that I think it is necessary to accept all things m moderation, ihe
high national income, the high purchasing power, and so forth, will
not solve all of the problems of the farmers. We are m for some sour
spots after the war. I think we can perhaps focus now on where those
sour spots will be. Those sour spots will be the crops that have been
expanded to replace erstwhile imports. Oil seeds, for example, will
99579 — 45— pt. 5 26
1622 POST-WAR ECONOMIC POLICY AND PLANNING
certainly be one where we will be left after the war with more than
we can hope to consume at a high national income.
f I would also submit that we are in for trouble on our erstwhile ex-
ports. I am inclined to think that if we are realistic we will have to
conclude that our agricultural exports will continue to dechne; that
our exports of cotton, tobacco, and so forth, after the war will continue
their past trend downward. That is not necessarily a defeatist posi-
tion; perhaps the United States might better export automobiles and
machine tools and industrial machinery than cotton. It may be that
our advantage over Brazil or over Egypt, or over India is greater in
our machine exports than it is in our cotton and tobacco exports
Anyhow, it would be reasonable to expect a continued decline in those
great export commodities. If that is true, we have two groups of
commodities, those that we have imported in large quantity or we
used to import in large quantity and that we have replaced in our
domestic production, and those we were once exporting in large quan-
tities, where we are in for a certain amount of trouble.
I I think that it might be wise to make the same forecast for some of
our specialty crops where we have great increases, that is, some of the
canmng crops where we have had great increases for the use of the
armed forces specifically. So the old decision will be before the
Congress after the war as to whether we should let low prices put the
farmer out of the production of those crops and force him to convert
to production of those crops that are more needed, or whether prices
will be stabihzed and adjustment made by something along the line
of the A. A. A. The adjustment, in other words, would be made by
Government edict, or if you will, by Government planning.
The Chairman. And Government-controlled?
Mr. Galbraith. Whether we will reestabUsh marketing quotas and
acreage quotas, I don't know.
The Chairman. 'Pardon me, but are you going to give your views
on that question?
Mr. Galbraith. I am going to comment on that for a moment;
yes. There is a little doubt in my mind as to how the Congress will
decide. ^ I think it is quite an academic question. I think Congress
will decide to keep the prices of these commodities stable at moderate
level and that the adjustments will be brought about by crop control,
by marketing quotas, or the other devices used in the 1930's. The
reason is that to let tobacco prices and cotton prices fall, and soybean
prices collapse, is a greater punishment to the farmer than the Con-
gress has in the past 15 years been wiUing to inflict. The last time it
was tried was by Mr. Hoover. It had a bhghting effect on the for-
tunes of a great pohtical party. I do not think that that risk will ever
be run again.
I am not sure this is a bad solution. I am not sure but what it is
not the best. Perhaps there is a more civilized way of readjusting
agriculture than through bankrupting a substantial number of farmers
and ruining their hves. That is my own judgment.
The Chairman. Are you referring to the operations of the A. A. A.?
Mr. Galbraith. I am referring to allowing prices to take their
normal course. I think there is a better way of doing it than that.
There are some dangers. I should be afraid of one thing in par-
ticular. I should be afraid that Congress during this period of
adjustment would keep prices of the commodities that are being
POST-WAR ECONOMIC POLICY AND PLANNING 1623
adjusted, too high. I would be afraid of the strong political pressure
to keep cotton prices in particular too high or at a level which would
work against getting cotton acreage brought back into line with the
long-run diminution in cotton demand.
I should be afraid that that process might accelerate the diminution
of demand by providing an umbrella under which cheap synthetics
can come into increased use and it is pretty hard to tell a farmer who
is getting 20 cents a pound that he should reduce his acreage. Too
high a price will work against the long run process of adjustment and
readjustment.
The Chairman. Do you think that the competition which might
arise between cotton and synthetics, if we maintain a parity price
for cotton by pegging the price of cotton, might operate against the
industry itself?
Mr. Galbraith. That is right, assuming two things. I am taking
cotton merely as an example. Let us assume that we are on a long
run declining demand for cotton, particularly overseas demand.
For that reason we will want quotas over the period of years to reduce
the output of cotton and increase the production of competing crops
throughout the South. However, we can defeat that in two ways:
First, by keeping the price of cotton too high during that period and
so providing the umbrella under which rayon and other synthetics
will move, and making it harder for a farmer to tell another farmer
to grow less cotton and more competing crops if cotton is too profitable.
The Chairman. Would you care to express an opinion as to what
the position of the synthetics may be after this war is over?
Mr. Galbraith. I would like to come to that in a moment. I
want to explain my position carefully. If demand is slipping, I do
not think the way to correct that is to let cotton prices go as they did
in 1930 or 1932. That is too much of a punishment for any group
of people.
The Chairman. That means depression.
Mr. Galbraith. That means depression and I am advocating here
a policy of moderation or a policy of trying to hit down the middle.
Now, on the question of synthetics, that is a forecast which is
difficult for anybody to make, but one generalization that we can make
is this: During a period of war technology tends to be stepped up all
along the line. It tends articularly to be stepped up in the field of
chemistry and it is back into chemistry that the synthetics or syn-
thetic fibers head. The improvements have certainly been tremen-
dous. There is a very strong probability that during the war those
have become better and cheaper at a more rapid rate than during any
comparable peacetime period. I have seen some new synthetics that
are being marketed in limited quantities, or are reserved for the
armed forces,- which are marvelous. Most of them will tend to move
in the area historically occupied by cotton.
Some of them are expensive, but if cotton gets too expensive they
have a chance and I hope that cotton, which is a good fiber, does not
price itself too far out of the market after the war.
Mr, Voorhis. I think you are very sound. However, I want to
bring up something that I heard mentioned a good many times which
is that a small percentage of the actual cost of a piece of finished cotton
is actually represented in the price of the raw cotton. What do you
have to say about that?
1624 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Galbraith. That is true, Congressman, of any cost that you
pick out. The trade-union makes the same point about labor cost.
The wheat grower, for example, would cite exactly the same observa-
tion with reference to wheat in a loaf of bread, and the process of
competition between commodities as a competition which takes place
on a relatively fine margin. So even though the cotton or the rayon
in a shirt is a small part of the total, you have narrowed margins there
and considerable opportunity for pricing one out and the other in by
small differentials.
The Chairman. Have you anything else that you would like to
say?
Mr. Galbraith. I am finished.
The Chairman, You have expressed some very thought-provoking
statements here today and I am sure that the things you have said
are going through our minds and I would like to have some elaboration
on some of those things.
Mr. Galbraith. I shall be delighted and honored to submit it.
Mr. MuRDOCK. I would like to ask you a question. This refers to
something that was said by another witness earlier. He said that we
must look to private enterprise to take care of the situation in the
post-war period. I think there is pretty general agreement on that.
However, on the other side, it is said that there must not be any
public employment as a safeguard here, but only private employment
for jobs. I wonder if we have not heard so much eulogy of private
enterprise and so much condemnation of other things that we are
leaning over too far? You would not say that we must absolutely
shun public works?
Mr. Galbraith. I should certainly not say that. I think I am a
fairly unemotional individual and I think many of the people who talk
about private or public employment are not. I see no reason why
private policy and public policy cannot become a complement of each
other. Certainly, after the war, public and private enterprise are
going to provide, as they have always done, the vast majority of the
jobs. I see no reason, however, why reasonable men cannot effect a
complementary relationship between private and public employment
as they have done during the war, and which in total will be better
than either operating alone.
The Chairman. That is the principle announced by a member that
appeared before this committee, Mr. Johnston of the United States
Chamber of Commerce. He said public employment does and should
have a place in our national economy.
Mr. Galbraith. That is a very forward-looking position.
The Chairman. We thank you very much, Mr. Galbraith, and we
are only sorry that the time is fleeting. We are trying to wind up
today and I am sorry that your train was late.
Now, we have with us Mr. D arrow, who wishes to make some
statements.
TESTIMONY OF PAUL DAEROW, CHICAGO, ILL.
Mr. Darrow. The time is so late that I do not like to take any
more of your time in making a statement. However, there are a
few things that have come up that I would appreciate commenting on.
The Chairman, Yes; we would like to hear from you.
POST-WAR ECONOMIC POLICY AND PLANNING 1625
Mr. Darrow. Mr. Davis called attention to the fact that the de-
pressioA of the early thirties cost the country several hundred million
dollars in production.
Mr. MuRDOCK. You mean several hundred billion dollars, don't
you?
Mr. Darrow. I thought he said several hundred million dollars.
I would limit it to million dollars, but whatever the figure was, I want
to call the attention of the committee to the fact that the lack of pur-
chasing power was the reason that this production was lost. It was
not the lack of the desire of the people to consume, but their lack of
purchasing power.
Therefore, any attempt to solve the problem must come through
increasing purchasing power to those who lack it.
That is also the case with manufactured goods — not only farm
goods. So, the statement that I think I will submit to the committee
will be based largely on an attempt to increase purchasing power by
those who lack it. (See exhibit 4, p. 1699.)
I would like to comment on the question of public works. I don't
believe in public works in general. There are certain things that
everyone would concede are proper works for the Government to
undertake, but a general public works program is made solely for
the purpose of furnishing consumptive power to individuals who lack
it at that time.
It should not be made with a view to furnishing them with work
because work in itself is of no great consequence. We loiow many,
many people, particularly in the warmer climates, where work is not
the ultimate object. The ultimate object is enjo3mient and happiness.
Work in itself is of no value. We have been brought up in a debtor
nation where in order to pay our debts, everybody has to work. In
a creditor nation, it is not so necessary for people to work, or at least
so many of. them. The only people that we are interested in furnish-
ing jobs to are the poor. We don't try to furnish jobs to the rich.
We think if a man has sufficient income to live on that it is permissible
or perfectly all right to do nothing and enjoy himself. Please remem-
ber until we try to get rich people to work as well as poor people we
recognize the fact that work is not the prime requirement. So I say
to you that public works engaged in for the sole purpose of furnishing
jobs is not a proper activity of government.
I want to comment too on the question of high income in order to
get some to the farmer. That is a pretty clumsy, unintelligent way
of helping any group, to say, if our income is 100 billion a year, the
farmers will get so much. We must raise it to 150 billion in order to
get more to the farmers. The matter of how much should be the
public income of the country is 'not, I think, a proper subject for
Congress to worry about. The thing that Congress should worry
about is getting consumptive power into the hands of those who lack
it and then the distribution or the division of income will naturally
go to the people who are producing and who should get it.
If the farmer has too small an income, it is probably because there
is not sufficient demand for his produce. If you can increase that
demand or double or triple it, the farmer would get more income.
It is after 1 o'clock now and I know you were planning on getting
away at 1 o'clock, but I do appreciate your giving me this opportunity
to say these few words to you and to have this brief chat with you.
1626 POST-WAR ECONOMIC POLICY AND PLANNING
The Chairman. "We certainly appreciate your appearance here
today and I want to thank you for coming.
I also want to take this occasion of expressing to the reporting
service our appreciation for the very fine job that it has done. Thank
you very much.
Now I also want to express our appreciation for all who have at-
tended these hearings and for their contributions. It is a matter in
which the people of the country are vitally interested. We are their
public servants and we are giving our time trying to find out something
that we can carry back and recommend to the Congress to help solve
some of these problems that we all say must be solved.
The hearing will be closed.
(Thereupon, at 1:15 p. m., the hearing was adjourned subject to
caU.)
POST-WAK ECONOMIC POLICY AND PLANNING
WEDNESDAY, APRIL 25, 1945
House of Representatives,
Subcommittee op the Special Committee on
Postwar Economic Policy and Planning,
Washington, D. C.
The subcommittee met, pursuant to notice, at 2 p. m., in room 1012^
New House Office Building, Hon. Orville Zimmerman presiding.
Present: Representatives Zimmerman (presiding), Voorhis, Hope,
and Simpson.
Also present: M. B. Folsom, staff director, and H. B. Arthur, con-
sultant.
Mr. Zimmerman. The committee will come to order.
Sometime ago Dr. Schultz of Chicago University, appeared before
our subcommittee in Chicago and discussed with us some of the very-
important things which he thought should be considered in our work
in trying to evolve a postwar agricultural program that would be help-
ful to the Nation in the years to come. Due to lack of time. Dr.
Schultz was unable to finish discussion of the outline he presented at
that hearing. We have asked him here today to complete his testi-
mony. We will now hear from Dr. Schultz of Chicago University.
Dr. Schultz, will you give us a little something of your background,
your connections, and the work you have done,
STATEMENT OF DR, THEODORE W. SCHULTZ, CHICAGO UNIVERSITY
Dr. Schultz. My name is Theodore W. Schultz, professor of
agricultural economics, University of Chicago. I was for 13 years a
member of the staff at Iowa State College, the head of the department
of economics and sociology there before joining the faculty of the
University of Chicago,
Mr, Chairman, I would propose that with your permission we pro-
ceed in the same manner as we did at Chicago, if that is agreeable to
you and meets with your wishes.
Mr. Zimmerm.^n. Would you rather make your statement and then
we might ask questions?
Dr. Schultz. At that time, as you recall, I was very happy in
having you present questions as I proceeded.
Mr. Zimmerman. Very well, then if it will not interfere with the
statement you have in mind, the members will be at liberty to ask
questions when they care to.
Dr. Schultz. On December 15, 1944, I gave each member of the
committee an outline (see p. 1341) suggesting four major problems con-
sistent with the instructions you sent to the witnesses and I addressed
myself to the problem of the instability of income from farming,
1627
1628 POST-WAR ECONOMIC POLICY AND PLANNING
and pointed out how the instability is so very great, much greater than
in other major sectors of the economy, and outlined the causes,
stressing particularly business fluctuations. I then went on to
discuss some of the principles that might well guide policy when you
tackle the problem of instability of income from farming.
Today I should like to take the problem of underemployment in
agriculture. It might also be called the low economic productivity
of farm people.
What I want to say may be focused by two questions:
(1) Why have the earnings of most farm people been so exceedingly
low over the years?
(2) How may farm people come to earn for themselves in the
postwar a much higher per capita income than they did before the
war?
These two questions are foremost in my mind as I make my com-
ments. I shall not discuss the transition or the immediate food
emergencies that are part of the war situation. My task is to ex-
amine first the causes and, second, the remedies for this problem of
low economic productivity per person, measured in terms of what
farm people earn.
I shall spend but a moment on a comparison of earnings. It might
suffice simply to say that before the war started the 1940 census came
up with the fact that half of the farmers in the United States earned,
in terms of products which they used and sold, $625 or less.
That is one figure that is very significant in this context.
I shall not distinguish between farm laborers and farm operators,
people who are hired or people who are self-employed. Three-quarters
of the people in agriculture are self-employed.
Mr. Zimmerman. Pardon me, Dr. Schultz, at this point. This
figure of $625 includes those who are employed and those who are
self-employed on half of the farms of the United States; is that right?
Dr. Schultz. Yes, it means half the farms, as listed in the census,
the total number being about 6,000,000 farms, which would mean
about 3,000,000, if you want to use round figures, tliat produced prod-
ucts which they sold or used in theu- own households which had a value
of $625 or less.
Mr. VooRHis. Those are farms, not people.
Dr. Schultz. Farms; that is right.
To really acquire perspective on this low economic productivity as
an historical process, it is necessary to consider the unequal growth of
supply and demand for farm products. To do this let me outline
three types of developments.
Type I. — We have had situations historically in which it appeared
at least that the supply of food and the demand for food were grow-
ing at about the same rate. Let us dismiss that type I situation by
simply saying that when that occurs no problem arises either on the
food side, certainly the supply of food does not decrease per capita,
and there is no farm problem in the sense that it becomes necessary to
transfer resources out of agriculture. Agricultural surpluses do not
appear.
Type II. This situation occurs where the demand increases more
rapidly over time, than the supply- — an unequal rate of growth in the
two — with the demand forging ahead. That is the Malthusian thesis
on which we have a rich literature. This formulation is deeply
POST-WAR ECONOMIC POLICY AND PLANNING 1629
imbedded in the thinking of western peoples. As it was originally
put by Mr. Mai thus 150 years ago, the focuses were upon over-
population, shortages of land, diminishing returns in agriculture, and
the specter of not enough food.
Type II certainly does not describe developments in most western
countries. It would describe the food problem, however, of half of
the peoples of the world — and perhaps over half; certainly of India
and of China. Under that formulation there is constantly the tendency
for the demands for food, for farm products, to push ahead of the
supply. This tendency is certainly characteristic of most of the
backward parts of the world, backward in terms of agricultural
technics.
Mr. VooKHis. Could you answer a question at that point? Do you
mean you tlimk that even though there were substantial advances in
agricultural techniques in China and India, the populations would still
tend to outrun the supply of food?
Dr. ScHULTz. My answer to your question would be yes.
Mr. VooRHis. In other words, there would be a true Malthusian
situation in China and India even though you could substantially
increase the productivity per man-hour.
Dr. ScHULTZ. Yes. Now I might introduce here the classification
of populations as given by Dr. Frank Notestein; namely, class I —
Incipient Decline — which simply means both the death and birth
rate have come down, and the birth rate is about to cross and drop
below the death rate. The United States falls in this class and so do
the countries of western Europe.
Class II — Transitional Growth. Here we have populations in
which the death rate has fallen considerably and the birth rate is
falling but they stdl are some distance apart. Russia is a perfect
example of that; its population figures have been increasmg very
rapidly.
Then class III is what Dr. Notestein calls the High Potential
Growth, where both death rates and birth rates are very high but in
equilibrium. The first thmg that happens when such a population
is affected by modern knowledge, sanitation, industrialization, and
so on, the death rate drops and then you have an explosion for the
population sky rockets.
Mr, Zimmerman. Pardon me just at that point.
Do you have any figures or statistics on the probabilities of our
population, that is, the relation of deaths to bii'ths?
Dr. ScHULTZ. In this country?
Mr, Zimmerman, Yes.
Dr. ScHULTZ. I will introduce certain figures in a moment about
America.
Type III. To return now to the changes occurring in the supply and
demand of farm products there is the development of an unequal
growth of the supply and demand for farm products with the supply
ahead — where the supply is growing more rapidly than the demand.
It is my thesis this afternoon that this is the type of development that
characterizes western countries — ^Canada, Australia, most of western
Europe, and the United States.
Mr. Hope. May I ask you a question right there?
Wliat has the effect of the industrialization of the backward nations —
I am speaking about the orientals, particularly — had on their birth
1630 POST-WAR ECONOMIC POLICY AND PLANNING
rate? Japan, for instance. Did the industrialization of Japan result
in a decline in the birth rate there, or has that kept relatively the same?
Dr. ScHULTZ. There is an unpublished study at Princeton that sug-
gests that the birth and death rates in Japan at the time the war
started were behaving very much like those in Great Britain at about
1890; the curves were all bending in the same way. The industrial
impact on births and deaths in Japan was similar to the industrializa-
tion that was in process in Great Britain about 50 years earlier.
Mr. Hope. Would that justify us in thinking as the world becomes
more greatly industrialized, as I think the tendency is everywhere,
that we are going to run into that same situation? In other words,
in areas in the oriental countries where the great increases in popula-
tion have taken place in the last 100 years, wJiat is the effect going to
be if they industrialize, assuming that- does take place as it did in
Japan and will certainly. take place to some extent?
Dr. ScHULTZ. Students are agreed that the industrialization itself
will have an impact on the Orient similar to that which it has had in.
western countries: it expresses itself in raising standards of livmg, in
raising wants, in raising the ideas and notions of maintaining a family
at a better level of living and this leading to smaller families. Most
students, however, are apprehensive that the long period of time that
it takes — it seems to take decades — will result in a population not
only twice (as they have increased in western countries), but three
and four times as large and that is an explosion, Notestein's High
Potential Growth has in that term implied this very thing. The big
question is: Can that transition be made more quickly, could it be
made in two decades, that is, bring both the death rate and birth
rate down that quickly to levels consistent with a mature industrial-
urban society?
Industrialization itself moves toward that end, but very, very,
slowly; it does take many decades. Because it takes so many decades,
there does occur this very large increase in absolute numbers.
May I return now to my main analysis.
Mr. Hope. I did not mtend to divert you too much from that.
Dr. ScHULTz. You did not.
Type III (unique rates of growth of the supply and the demand
for farm products with supply out ahead). What are the forces back
of the demand and supply of farm products, pushing the supply ahead,
increasing it at a more rapid rate broadly conceived, than the demand?
To anticipate my main conclusion at this pomt: to attain an equi-
librium, it is necessary to transfer resources out of agriculture.
First, take the growth of the demand. Plainly the population
growth is slackening. It is definitely dropping in terms of the rate of
growth. Back during the decade of 1870-80 we had an increase of
26 percent. In the decade just before the war the population of the
United States increased only 7.5 percent.
For the decade 1950-60 Whelpton Thompson puts the growth at
5.4 percent. Accordingly, not much more additional demand for
larm products will originate from a further increase in numbers of
people in the market orbit of the American farmer.
In Europe the rate of increase in population in prospect is even
less. For all of Europe, outside of Russia, the projected increase in
population for 1950-60 is 1.5 percent.
Mr. VooRHis. How about Germany?
POST-WAR ECONOMIC POLICY AND PLANNING 1631
Dr. ScHULTz. The rate of population increase is falling also.
Mr. VooRHis. Germany's population has not dropped absolutely
in recent years.
Dr. ScHULTz. No. .
Now, the point that I want to make is that the rate of growth is
slackenmg and it is true as we look ahead, say to the first full decade
after the war — we need not go further in the future here. It may well
be after another decade something may occur that will change these
rates of growth. People may become very concerned about popula-
tion, as such. I would not be surprised if they did. Sweden is
already much concerned about this problem.
Mr. Hope. This is a little off the subject, but do you have any
figures showing the increase in the birth rate in Germany, if there
was one during the Hitler period preceding the war when there was a.
definite effort on the part of the state to increase the birth rate? Did
that really accomplish anything?
Dr. ScHULTz. I have no figures. However, I have in mind a
statement of Dr. Notestein, who is the scholar I referred to earlier, in
which he said that there is rather convincing evidence that most of
the increases that came in the late thirties may be explained by the
prosperity, people having a higher income, people marrying younger,
something similar to what we picked up m the last 3 years. We also
have had a sharp increase in births partly ascribable to better incomes
and propserity,
Mr. Hope. I wondered if there was any evidence anywhere that an
effort on the part of the Government
Dr. ScHULTZ. Did actually increase the birth rate?
Mr. Hope, Yes.
Dr. ScHULTZ. It was probably smaller than the crude figures would
suggest; that is certainly one way of putting it.
Now, on the demand side, Mr. Chairman, the second thing that
needs to be seen and stressed is that as people become richer they
favor other things to farm products in their expenditures. We neasure
this expenditure by means of the income elasticity of a product and
we say when people spend proportionally little of their added income
for a product it has a low-income elasticity and when they spend
proportionally much for a product it has a high-income elasticity.
This happens to be crucial because as we become richer, as we attain
higher incomes, as the American people, allocate their expenditure for
the things they want they turn more to goods and services other than
farm products.
Wchave picked up 40 percent in real income per head during the
war. This is a conservative estimate. Let us suppose that we held
this gain during the postwar. Does that mean that consumers would
spend 40 percent more money in free and open markets at prewar
relative prices for farm products? The answer is emphatically
"No." The income elasticity of farm products is much lower than
we have commonly supposed it to be. It is not even 0.5 which would
mean, if we had a 40-percent increase in incomes per capita, people
would spend 20 percent more on food. I have spent a good deal of
my time during the last year on trying to ascertain the income elas-
ticity of farm products and my best guess is that the income elasticity
of farm products, is about 0.25. That would mean with a 40 percent
increase in income per head it would result in a 10 percent increase
1632 POST-WAR ECONOMIC POLICY AND PLANNING
in demand. Accordingly, if we hold the incomes we now have attained
it will not create nearly as much additional demand for farm products
as is commonly supposed. This 10 percent increase, a population
increase, which has been 6 percent, would mean a 16 percent increase
in the demand for farm products.
Mr. Hope. You are, of course, referring to dollar value now; is
that correct? Are you referring to additional prices of farm products,
consumed?
Dr. ScHULTZ. At the same relative prices, that is what I am really
saying. If the food can be bought at the same relative prices as in
1939.
Mr. Hope. There would be 10 percent more food consumed.
Dr. ScHULTZ, Yes; 10 percent on account of added income and 6
percent because of population increases, so the effective demand at
the same relative prices as in 1939 would have increased 16 percent.
Meanwhile agricultural production has increased about 25 percent.
We must face the fact that consumers, as they acquire higher incomes,
want proportionately more goods and services not produced by
agriculture.
Mr. Zimmerman. Shall we say this, the higher the standard of living
the less demand for agricultural products proportionately?
Dr. ScHULTZ. Yes; if you say proportionately as you have.
Mr. Hope. A smaller percentage of the income is spent for food as
you go up.
Dr. ScHULTZ. That is right. •
This has still another aspect. People want more services attached
to food as they become richer. Actually of the money spent at retail,
less and less of it gets back to the point where the farmer sells, because
again, as consumers become richer and have a higher standard of
living they want more nonfarm services incorporated. That holds
both for clothing and food.
Mr. VooRHis. May I interrupt you at this point?
If you do not want the question right now you tell me, and throw
it out.
It is something that has been on my mind, one I have thought a
lot about. It is on this very point.
To what extent can the income of farm people be protected under
these circumstances by having those farm people through cooperatives
do some of those services themselves? I mean, wi'ap their own prod-
ucts in the fancier packages instead of having them done by somebody
else? Do you see what I mean?
Dr. ScHULTZ. I see what you mean.
Mr. VooRHis. Is the demand for additional services connected with
food products growing, and to what extent?
Air. Zimmerman. Pardon me, Mr. Voorhis. I think you meant to
say that the demand for products other than food products.
Mr. Voorhis. He did at first.
Dr. ScHULTZ. These services are added and they have a higher
income elasticity than do farm products generally, and I should answer
this way. In principle, Tvlr. Voorhis, measures which will help farm
people produce these services will enlarge the demand for agricultural
resources, whether it is done through a cooperative or by them as
private entrepreneurs, or in some other organizational framework.
POST-WAR ECONOMIC POLICY AND PLANNING 1633
You are saying in substance that this demand for nonagricultural
services attached to food may well be produced by farm people, per-
haps through a cooperative, perhaps through other firms, other devices.
There is a good deal to be said for doing some of this extra produc-
tion on the two coasts. Less, however, is possible in the middle
country, for on a 240-acre farm m Iowa, the farmer, even through a
cooperative can add very little except perhaps to some dairy products.
Whereas, if you get into vegetable production, the sorting, grading,
freezing, and packing of vegetables has been carried on right on the
farm and it has created additional claims for resources including the
labor of farm people.
I want to say a word also regarding the effects of nutrition on
demand. You will have Dr. J. S. Davis tomorrow and his work has
taken him much further into this subject than has mine. What I
say is very tentative.
We have become a rather rich people and our production certainly
in peacetime is going to be so abundant that we can well afford as a
people to see to it that diets are adequate for all. Adequate diets for
all persons can be made a goal in its own right and shoilld stand, in
my judgment, as a policy goal in addition to and on its own footing
separate from the problems of agriculture.
Now what I want to say is this, that nutrition as knowledge, as new
knowledge, and as a movement, is not going to add much additional
demand for farm products in the aggregate. That is not to say it is
not important to obtain adequate nutrition for everyone or that
closing the gap so no person has an inadequate diet will not add to
the demand.
Our nutrition as knowledge which is becoming increasingly important
is a new kind of technique, a new kind of technological laiowledge
and as such it is teaching us how to get more utility out of food ; and
how to get the same amount of food with less effort in terms of agri-
cultural land, labor, and other kinds of capital resources that are used
to produce the food. If you spread this advance in knowledge over
10 to 20 years, all this research that is going on in nutrition will show
us ways and means of becoming more efficient in the use of food.
This new knowledge over time, will teach us how to live more cheaply
in terms of the amount of land, labor, and capital it takes to produce
the food people require.
Mr. Zimmerman. You mean right there to say that it will take
less food?
Dr. ScHULTZ. Yes; less food in the sense that ultimate resources
costs will be less.
Mr. VooRHis. Do you mean that?
Dr. ScHULTZ. Yes.
Mr. VooRHis. I find that hard to believe.
Dr. ScHULTz. I have probably not phrased it in a way so that
I have put it in an absolutely accurate setting. Let me repeat,
perhaps by analogy.,
The advances in farm technology on the production side, the
tractor, winter cover crops, hybrid seed, a thousand and one things
are showing us how we can produce the same amount of food, farm
products, with less and less resources and human effort.
Mr. VooRHis. That is as to production.
1634 POST-WAR ECONOMIC POLICY AND PLANNING
Dr. ScHULTz. Yes.
Let me say in the same way in consumption of food the nutritionist
as a result of the findings coming from his laboratory, is teaching us
how we can feed ourselves at less and less cost as a people, less cost in
terms of the amount of labor, land, and capital it takes.
Mr. VooRHis. Do you mean with an absolutely less amount of
food than the average of what people consumed in the United States^
let us say in 1939?
Dr. ScHULTZ. No.
Mr. VooRHis. You do not mean if the population of the United
States were adequately nourished we would consume less food?
Dr. ScHULTz. No; it would take quite a bit more, of course.
Air. VooKHis. Your point is it would t^ke less human and natural
resources to produce that amount?
Dr. ScHULTZ. That is right.
Mr. VooRHis. Rather than the total amount of food consumed
would be less?
Dr. ScHULTZ. We are, of course, still far from adequate diets for
all. It would take larger amounts of additional food to get adequate
diets for all people in our society.
I am trying to separate here the impacts of new knowledge about
food as it makes food more efficient.
Mr. Hope. Now, let's see if I get what you mean. Assuming
every one was adequately nourished today, you think that the advances
in nutrition in the next 20 years would make it possible to give the
same number of people the same adequate nourishment with less
food?
Dr. ScHULTZ. That is right, and I would like to say with less
effort, land, labor, and capital.
Mr. Simpson. Do you mean to say it would help to make a utility
steak tasty?
Dr. ScHULTZ. You make that a difficult question.
The little tricks we learn in using one protein for another, one
fat for another, and so on, are all part and parcel of this advance.
Mr. Hope. We all know a lot can be done in the field of nutrition,
but to what extent will peoples' tastes and preferences in the line of
food tend to resist that or counterbalance that?
Dr. ScHULTz. Now, the second force in nutrition is what will
contribute to our value, our beliefs about food and our tastes.
Well, the whole cultural make-up of our people drives in the direc-
tion of more expensive diets as we become richer. Will new knowledge
about nutrition alter that? Well, I do not know. My guess is that
it may do so.
Mr. VooRHis. May I ask one question there?
Isn't there a counterbalancing factor at work there to some extent
in this way? That is, as there is advancement in nutrition, both from
the point of view of knowledge and the point of view of actual prac-
tice and consumption m the country, isn't there a tendency, one, for
an increased demand for farm products which are at present produced
in short supply for even our domestic market and isn't there likely to
be a demand for farm products which will bring a better return to the
farmer who produces them than some of the things they have pro-
duced before?
POST-WAR ECONOMIC POLICY AND PLANNING 1635
Dr. ScHULTz. I think the answer to the first is an easy "Yes." The
second I would not know, I would simply restate my judgment as
Congressman Hope did.
Supposing we all had an adequate nutritional diet as a people,
which we certainly do not have. The new knowledge we get from
nutrition, let us say during the next 5, 10, or 15 years, will show us
how we can have the same adequate diet at less cost in terms of human
effort and land, and so on. That is the point I am trying to make.
Mr. Arthur. Dr. Schultz, may I interrupt you? Aren't you de-
fining 'the adequacy rather in chemical terms. Perhaps I am using
the word "chemical" in a rather incorrect sense, but if adequacy were
defined in a broad way to mean a satisfaction of taste for luxuries
and special dishes it might encompass this rising cultural demand as
well as the nutritional demand, as you stated.
Dr. Schultz. Yes; that again focuses the two factors as you put it
and you can Imk them as you are domg. I have a feelmg it is well to
separate them to the extent that we can and then when you do link
them together you do get this other effect.
Briefly let me summarize at this point. First, the population
growth has in it certain characteristics ; its rate of growth is slackenmg.
If we are fortunate enough to maintain the high income that we have
attained from full employment there will be some added demand
coming to agriculture as a consequence, but it will not be proportional
to the increase m income, it will be far less because the income elastic-
ity of farm products is very low.
On nutrition we have a big gap to pick up. Mr. Voorhis has
called attention to that. Yet, knowledge about nutrition does not
m itself generate new demands. Tastes for more expensive foods
may come with liigher income. New nutritional knowledge, however,
is very akin to the new knowledge in agricultural production. It is
showing us how to get more done and more accomplished with less
effort.
Mr. Hope. Wouldn't a good illustration of the point you made
just a moment ago as to the part taste and habit play even as against
all the information you might disseminate on nutrition, be shown by
the taste of people for white bread. Now, for years the nutritionists
have been talking about the harm of eating white bread and the
advisability of eating the whole wheat bread and that sort of thing.
But nobody really pays much attention to it. Finally that was
gotten around by enriching the white bread. People still take white
bread but it is enriched. I do not know whether nutritionists would
consider they had accomplished all they had set out to do. But you
certainly came near to it and you circumvented the taste of the
people.
Now, I wonder if there are other possibilities along that line in the
next 20 years, let us say.
Dr. Schultz. I would prefer not to open that subject.
Mr. Hope. I realize that.
Dr. Schultz. I am not an authority on this subject. I am merely
trying to put you on guard in a sense as to the aggregate effect of
nutrition on the demand for food.
I do want to say a word or two on the supply side. Why is our
supply of farm products growing so rapidly? I feel that we are in
an era which is just really starting. New technologies being adopted
1636 POST-WAR ECONOMIC POLICY AND PLANNING
in agriculture, if we look at the world, are really found in only a few
advanced areas, like western Canada, the Corn Belt, the Plains
States, and in a few other types of farming in the United States.
Advances in farm technology are just beginning to make themselves
felt in a few parts of the world.
Suppose we ask this question: Can Russia produce enough food
for an increase in its population of say 50 percent in the first 25 years
after the war, which seems to be in the making? If in addition
Russia had a 30-percent increase in per capita incomes and the
income elasticity for food probably as high as 1.0 that would mean
Russia would require 80 percent more food to satisfy that increased
demand. Can Russia and her resources do it? If you think in
terms of the Malthusian period as to agriculture it would appear
impossible for agriculture of any large nation to expand 80 percent
in the course of 25 years. I certainly am not a prophet, but I submit
that the advances in agricultural technics are such that Russia or
any major country may experience a dramatic development in its
agricultural production of this magnitude.
Let us look at the United States. We are in a stage in our history
where very rapid technological advances are in process; they are
primarily labor saving, thus reducing the amount of labor that is
needed in agricultural production.
Mr. Zimmerman. It makes it cheaper to produce the crop.
Dr. ScHULTz. It also cheapens the economic returns to human
factors in agriculture in the first instance.
This development has been associated largely with tractors, and
hybrid seed, but these are merely two, and there are many others,
I spent 3 months in the South this winter trying to understand the
deep South, particularly the lower half of Alabama. I am amazed
at what winter cover crops are doing. In the Tennessee Valley there
are counties where 70 percent of the cropland is now in winter crops
although it was only 20 percent a few years ago. The effect of that
on the output is just astonishing as hybrid seed corn in the Middle
States.
This progress in technology on our farms is very excellent for society.
It is an accomplishment we should be proud of as a people. But; it
does mean, on the supply side, that we are learning new practices
and new technics which give us the same, or more, output of farm
products with less capital, less land, and less labor. They are prin-
cipally labor saving in their effect.
Mr. VooRHis. Did you say less capital?
Dr. ScHULTz. I did but I must change it. While in the long run
that is what it will probably mean, hi the next 10 years it will actually
mean more capital.
Mr. Zimmerman. Would you include in that program soil conser-
vation too?
Dr. ScHULTz. Yes, indeed, and it is very important.
Now, on the supply side you have one factor in production that is
on the increase and that is the peculiar turn of our population pattern —
the high natural increase of farm people. The number of young men
that are becoming of age and coming into the labor force in agricul-
ture is very large. In the first decade after the war it will be twice
to three times the number that will be retiring or growing old having
reached a retirement age. This is simply saying that the natural
increase is high.
POST-WAR ECONOMIC POLICY AND PLANNING 1637
These forces reshaping the supply and demand for farm products
can be gotten out of proportion. In any 1 , 2, or 3 years, no one force
should be weighted too heavily. To understand a decade or two
in the making, however, these forces are of prunary consideration.
The history on what the unequal growth of supply and demand of
farm products has done to the supply of our labor force m agriculture
is quite conclusive. It has simply meant as time goes on a decreasing
proportion of the total labor force is required in agriculture.
Since the turn of the century, since 1900, the proportion ol the
labor of Canada engaged in agriculture has dropped from 40 to 22
percent in 1943. In Sweden it has gone down from 50 to 32 percent
durino- 40 years, 1900 to 1940. In Australia it has dropped from 33
to 20 percent: Switzerland from 32 to 21 percent; and the same thing
has been happening in France, Germany, Great Britain, In Japan
the percent of the labor force in agriculture has dropped very rapidly
during this period. In the United States this figure declined from
37 percent in 1900 to 20 percent in 1940, and then to 15 percent m
1944.
Leaving aside what has happened during the war the shift of people
out of agriculture by and large has come too slow and too late.
Accordingly people have been crowded into agriculture and the per
capita income has been low as a result, especially in the South. It is
not nearly so true of the Corn Belt. Corn Belt farm families have
been able for various reasons, because of the location of industry,
because of the wealth of the parents who have been able to help
their daughters and sons to keep the excess supply of persons on
farms down. For a large part of the South the migration has not
happened nearly as rapidly. ., . i ,^ .i,- i
Mr VooRHis. More or less as a footnote to that, don t you think
that equalization of educational opportunity for rural people is
important in this connection? ,
Dr ScHULTZ. Yes; and it has a very high priority.
When you tackle this kind of problem over a long stretch, and i
certainly do not feel I have the insight and competency to suggest
what is adequate, and yet if you will permit me I will just mention
a few measures in policy. -n xi ^ ^t.
To redress this lack of balance, to make it possible that the per
capita income earned by farm people might be higher I list several
1 °We should be very careful that we do not become parties to a
"Back to the Land Movement" after the war. By that I do not
mean farmers' sons who come out of the armed service who want to
farm and whose folks can start them at farmmg, shouldn t farm;
it does not mean that at all. But it does mean avoiding a program
of resettlement of the kind that several States undertook alter the
other war. Also we need to avoid the kind of thing that is happening
around some of our cities right now. . I am told that around Detroit
and to a lesser extent around Chicago some labormg people are being
mduced to buy parcels of land with a notion that m the transition
period of unemployment they can actually farm and become a part
of the farming population. There are many short-sighted features
ui subsistence farming thus conceived.
2 Subsistence farmmg is certamly not an answer to this general
problem of an excess supply of labor m agriculture. Subsistence
99579 — 45 — ^pt. 5 27
1638 POST-WAR ECONOMIC POLICY AND PLANNING
farming at best is a relief proposition when our industrial-urban
society fails to perform and it is not an answer to the farm problem
that I have presented.
Mr. Hope. Right at that point, if 'we should achieve a certain
decentralization of industry so that it would move out into the rural
areas, to what extent would that be a solution of the problem? I
am thinking of the program Henry Ford has taken some interest in
of having people work in the factory half a day and work on the farm
the other half. Is that any solution of the problem?
Dr. ScHULTZ. In this country we will develop a class of workers,
whose number will become larger, who will earn a part, even a large
part, of their real income in wages in a city and who will still engage in
some farming.
Mr. Hope. That is true to some extent, isn't it, of the 3,000,000
farms you mentioned in the beginning; that is, some of those people
supplement their income?
Dr. ScHULTz. Yes.
Mr. Zimmerman. I would like to say this off the record.
(Discussion off the record.)
Mr. Hope. You are speaking not so much of the possibility of
people combining farming and factory employment but the oppor-
tunity that is given to the farm boy to get off the farm.
Dr. ScHULTZ. That is right.
Mr. Hope. And get into industry.
Dr. ScHULTz. Yes; but there is room for the other too. There is
another category there. You see it around many textile towns and
it makes a lot of sense where the family does supplement its income
with a cow and some agricultural effort which gives them a decidedly
higher standard of living.
Mr. Zimmerman. As Mr. Hope suggested, if we are going to decen-
tralize industry and carry industry to the South where there are many
people who are not going to engage in agriculture and have to find some
other employment, those people have got to look to industry for their
source of living primarily, haven't they?
Dr. ScHULTz. That is right.
Mr. Zimmerman. It is going to be really an industrialized section?
Dr. ScHULTz. Let us use the word industry in a broad sense, it
means all services as well as industry — the whole gamut of services
through light industries to heavy industries. The services are in
many ways the section which has the largest potential demand as we
get richer.
Mr. Hope. Going back to this rate of decline in the proportion of
labor force employed in agriculture, I believe you said it declined from
37 percent in 1900 to 15 percent and a decline from 30 to 15 percent
has taken place since the war began, during the war. Now, was that
so rapid that there will be a little rebound on that, do you think?
Dr. ScHULTz. Yes; and it will rebound in the areas where the
overpopulation is most serious. The rebound, let us say again in
Iowa, will not take place to any significant extent. The rebound in
Alabama will be very serious. For instance, from the shipyards in
Mobile, when they close, where will workers go? In the main they
have industries that are simply not compatible with a peace time
economy — and that makes the problem serious.
When you look at the postwar period the thing that is significant
here in the transition period. You have a farm price decline ahead and
POST-WAR ECONOMIC POLICY AND PLANNING 1639
a per capita decline in farm income further accentuated by larger
numbers who have left farming who will temporarily at least go back
to it. This all makes the problem from the point of view of the longer
pull more difficult.
On the positive side what is needed most is the expansion of industry
and the services of the country. The remedy for the underemploy-
ment in agriculture lies in this sphere in a very fundamental sense.
We ought to face up to the need for a labor outlook and govern-
mental machinery to help this labor supply find itself. We have
invested much money and have done a very excellent job in what we
call the agricultural outlook ever since 1923. It has a great deal of
meaning and significance to many thousands of farmers. But when
a man or woman, a boy or a girl, comes to a point where they want to
enter the labor force, they are isolated ; they have no knowledge as to
what labor force is needed in what services. How can one get that
information and kind of knowledge to them so they can make decisions
and commitments as to their future services?
Mr. Zimmerman. That puts it squarely back to the problem of
education; doesn't it?
Dr. ScHULTZ. Education in the longer pull. But what I am stress-
ing is more current and immediate. At least once a year we ought
to pool all the kno\Vledge we have about labor needs for 1, 2, 3, and 5
years ahead and get this information out to e\^ery farm so that
these young people can make their plans when they reach the
point of taking a job elsewhere. With this Labor Outlook they will ,
know better where they can go rather than depend upon gossip or a
word from a relative who has become established elsewhere.
Very important here and very high on the list, of course, is what
Mr. Voorhis has mentioned — investments in human agents, public
investments in people of a kind that increase their productivity and
their mobility. Education stands very high but health does, too,
nutrition, and its effects on health.
Mr. Zimmerman. Is that a national problem or State problem or
where would you think it fits in as a responsibility?
Dr. ScHULTZ. You cannot separate the responsibility. It is Na-
tional, State, and local. They are complementary and you have to
find where in national policy it fits, biU the job has to be done.
Again the lack is greatest in the area with the greatest burden, the
cotton area in contrast to the Corn Belt. In all sections, however, it
is of interest both nationally and locally.
Mr. Hope. Right at that point I would like to say this: You had
an item here on this outline tlijat you have not discussed. That is
No. 5, under "D," "Does more leisure on farms offer some assist-
ance?"
I would like to have your comments on that.
Dr. ScHULTZ. The observation I would make on that is this: This
labor-saving technology that is coming and has come to many farm
people comes in the form in which the farmer has the choice of either
enlarging his operations — using it for that purpose to take on more
land — or to use it for somwhat more free time, work a little less.
I have a small Iowa farm. The family on that farm has farmed
very well and thus during the war has enjoyed, as I have, a fairly high
incomfe, and I asked Mr. Homer Evans recently what he was going
to do with his wartime savings. He said he was going to buy a com-
plete new set of machinery, a new tractor, a corn picker, and so on.
1640 POST-WAR ECONOMIC POLICY AND PLANNING
He says — "By golly, we are going to work less, 3 hours less a day."
He would have to reduce the number of hours anyway to have some
decent life in view of the extra hours he and his family have been
working the last few years. He is going to make that choice, at
least that is what he and his family have in mind at present.
The import of what I am saying is this: That we ought to help
farm people acquire an awareness of the unportance of that choice.
Wlien they reach a point, as many farmers have currently, when they
are not pressed by debt commitments and have better incomes, they
can choose to follow a more leisurely pattern using some of these
labor-saving devices. Many of them will rate that low and will press
for a larger enterprise and will not thus use the technology for leisure.
Now, the choice has to be free in the last analysis and |:here is where
education, has an important role to play.
Unfortunately, Congressman Hope, in agriculture, because of the
very nature of the competitive organization of agriculture, it tends to
give farmers too little leisure, whereas in other parts of our economy
some workers get too much leisure, people who would rather work
another hour or two, and have the extra income.
Mr. Hope. I take it from what you say you do not think that is
to be any considerable factor then in this problem of oversupply of
labor that we hav^ on the farm.
Dr. ScHULTz. It will not absorb much of this oversupply. In the
long pull it would absorb a good deal, but in any 5-year period, no, be-
cause peoples' values with regard to leisure do not change rapidly.
This change comes slowly as farmers reconsider their own positions
with respect to their rising income.
Mr. Hope. But the farmer you speak of who says he is going to
work 3 hours less a day, I presume is fairly typical, isn't he?
Dr. ScHULTz. He has worked 2 hom's more during the war period
than he would normally and so he is cutting back that plus another
hour at the most.
Mr. Hope. He feels that way naturally now. But if he cut off the
extra 2 hours he has been working and goes back to his normal working
hours, he might be satisfied with that.
Mr. VooRHiS: Is not the answer that he will do it as long as he can
make a fairly decent income, but as soon as you get a price decline,
won't you get a vicious circle where they will all start working as long
as they can possibly stand it in order to try to produce?
Dr. ScHULTz. It is not the decline itself, Mr. Voorhis, it is the fact
that farm prices become very uncertain. If he is confronted by an
economic horizon that is clouded and uncertain, then he begins to hedge,
tries to accumulate assets and capital which he would consider unneces-
sary if he felt the outlook was more certain.
Mr. Zimmerman. Don't you think if a man decides he is not getting
enough income off that farm by working less hours, he will double the
hours in order to make a little more money to buy a little larger tract
of land so he can have more hogs and more corn and get a greater in-
come and so on?
Dr. ScHULTZ. We get a peculiar twist in agriculture. When farm
prices become very high you get more production effort and also when
farm prices drop sharply.
To economize on your time, what is important in what I have said
is simply that as we look ahead it is necessary to understand the forces
POST-WAR ECONOMIC POLICY AND PLANNING 1641
t^at are reshaping the supply and demand for farm products. The
effects of these forces are ' fundamental and primary; over a 20-year
period they dominate the agricultural situation. In them we find the
causes for the low economic productivity of farm people.
To bring about an improvement in this situation we must pave the
way for a redistribution of labor force. This approach is necessary
if the per capita income in agriculture is to be redressed more favorably
to farm people.
Thus to put this point more bluntly, it may mean that in addition to
the 5 million persons (net) that have left agriculture during this war
there are today another five to seven million farm people, largely in
the agricultural south — who burden greatly the per-capita income of
that agriculture; who are the excess supply of labor in agriculture, and
who must find jobs in other parts of our economy.
Mr. Zimmerman. Unless we make this shift of farm labor to indus-
trial centers, and reheve the excess labor that exists in a lot of these
southern communities you have been talking about, farm income is
going to be low regardless of the price they receive for the commodi-
ties; isn't that the fact?
Dr. ScHULTZ. Yes; you cannot get at that problem by prices. You
may destroy the demand if you attack it by prices. Price stabihty
and income stability caused by business fluctuation should be cor-
rected, but it is really not possible to bring incomes of any adequacy
to the Piedmont by merely raising prices even with 40 cents for
cotton.
Mr. Zimmerman. Are there any further questions of Dr. Schultz?
Mr. Arthur. May I ask Dr. Schultz a question?
I would like to have your views with respect to what kind of
program should be adopted for the transition to other productive
activities of farmers who are on the low-income-producing farms.
The question comes up in connection with proposals to force their
relocation as against providing the opportunities and leaving it op-
tional with them.
Dr. Schultz. The choice is simple. The approach must be one
permitting free choice and none other. The opportunities are large
if we attain the first essential and that is a high level of employment
and production in our economy. If this country operates in any
other environment it will be terribly hard to even begin. Again, let
me refer to the Piedmont. The war has drawn many farm people
out of it. You can go north from Auburn, Ala., and within 20 miles
find scores of farm homes standing empty and the land not in culti-
vation. It is not expensive land, ranging from $5 to $15 an acre.
There is need in that area for a farm-enlargement program right
now. The 80-acre farms are as obsolete as can be. The family that
wants to stay in agriculture 'must acquire a 240-acre farm or larger
and to do that some real help is required.
Those of you who have come up against the credit issue know that
both the public and private credit available is wholly inadequate and
does not serve this kind of an adjustment.
I am convinced that a person might take capital out of the Corn
Belt, for instance take the capital out of my farm and invest it in the
Piedmont and earn a higher rate of return on the capital.
Mr. Simpson. You mean because of the cheaper price of acres you
can do that?
1642 POST-WAR ECONOMIC POLICY AND PLANNING
Dr. ScHULTz. No; because in that area they are "starved" for
capital more than any other section I have ever seen in agriculture.
Mr. Simpson. Why do you think you can make more money down
there in the same type of investment in agriculture than you can in
Iowa?
Dr. ScHULTz. Because capital is at a premium. It will earn a
higher rate at the present time.
The banks and public agencies are tuned to a very obsolete agri-
culture. I can go into detail as to what is called for but since it is a
bit afield I will not unless you want me to do so. But this aside on
your question: Once the oversupply of labor is no longer an obstacle —
in some areas the war has drawn out large numbers — then it is nec-
essary to face up to the fact that credit institutions public and private,
although they are prepared to advance credit for lands, small amounts
for building and perhaps a little for machinery, they are not prepared
to supply the kind of credit needed most in the Piedmont, for example.
They need something else. But that is another subject.
Mr. Zimmerman. Off the record.
(Discussion oft' the record.)
Mr. Zimmerman. The problem in areas where there is submarginal
land is that you have to enlarge the economic unit, make it big enough
to sustain a family.
Dr. ScHULTz. That is right.
Mr. Zimmerman. It is just as it is, I believe, in Mr. Hope's territory.
It requires more acres to sustain a cow during the summer than it
does clown in Mississippi where it rains and grass- grows very luxu-
riantly. It takes more acres there to have a profitable herd of cattle.
You have to have more acres to support a herd in order to support a
family. That is what you are trying to say as to one of the problems
down there. When you have a man on a small unit it will not sup-
port a family and you have an undesirable situation.
Dr. ScHULTz. I would like to say this off the record.
Mr. Zimmerman. Oft' the record.
(Discussion off the record.)
Mr. Zimmerman. If there are no further questions we will adjourn
this meeting. I believe Dr. Davis is to appear tomorrow afternoon
at 2 o'clock. Dr. Schultz, on behalf of the subcommittee I want to
express to you our sincere appreciation for your coming here today
and giving us this very informative statement which I am sure will
be very helpful to this committee.
(Whereupon, at 4:30 p. m., the hearing was adjourned to the fol-
lowing day at 2 p. m.)
POST-WAE ECONOMIC POLICY AND PLANNING
THURSDAY, APRIL 26, 1945
Hou^E OF Representatives,
Subcommittee of the Special Committee on
Post- War Economic Policy and Planning,
Washington, D. C.
The subcommittee met, pursuant to adjournment, at 2 p. m., in
House Ways and Means Committee room, United States Capitol,
Hon. Orville Zimmerman, presiding.
Present: Representatives Zimmerman (presiding), Voorhis, Hope,
Murdock, and Simpson.
Also present: AI. B. Folsom, staff director, and H. B. Ai-thur,
consultant.
Mr. Zimmerman. The committee will come to order.
Mr. Davis, I believe you are ready to proceed to give us a statement
on some of our agricultural problems. I recall very pleasantly the
informal appearance you made before us and we were very much
impressed with your statement and thought we would like to have
you make a formal statement that might be made a matter of record
for the study of this committee.
Give us a little of your background.
•STATEMENT OF JOSEPH S. DAVIS
Mr. Davis. My name is Joseph S. Davis. I grew up in rural
Pennsylvania. I studied at Harvard and was for several years in the
Department of Economics at Harvard University.
In 1921 I was appointed one of three directors of a new food-
research institute that was established at Stanford University. I
have been a director — in 1937-42 sole director — of that institute for
the past 24 years. We have there concentrated on national and world
problems of food and agriculture with special reference to policy.
In the last few years some of my colleagues and I have been studying
especially experience under international commodity agreements and
the possibilities of such agreements for good and for evil.
Is that sufficient background?
Mr. Zimmerman. I think it is all right. You may now proceed
in your own way. If you would prefer we will not ask questions until
you conclude, or if you prefer, we will have it open for our questions.
Mr. Davis. I shall be happy to be interrupted at any time, Mr.
Chairman.
Air. Zimmerman. Very well.
Mr. Davis. I listened yesterday to Dr. Schultz' important state-
ment with great interest and substantial approval. Economists, of
course, can always differ among themselves, but I don't think I need
1643
1644 POST-WAR ECONOMIC POLICY AND PLANNING
take any time to go into such minor differences as I have with the
positions he expressed.
I should Hke rather to address myself to some other phases of farm
pi'oblems and policies, and in particular to the relationship between
our foreign-trade policy and domestic agricultural policies. But first
I should like to make a few rather broad preliminary statements.
Despite the great prosperity that American farmers have enjoyed
in this World War and the previous one, I am sure that we and they
will agree that durable world peace is profoundly to be desired. Just
now our hopes are centering in the Security Conference that opened
yesterday in San Francisco. But I think we realize that the best
efforts to check aggressions and to enforce peace will be futile unless
national economic policies can be brought increasingly into harmony,
and unless sources of grievance between nations can be effectually
dealt with.
We have been prone to consider domestic agricultural policies,
among others, as simply our own affair. But I think we must begin
to recognize that their consequences are far reaching, that they are
the concern of other nations, and that the domestic agricultural
policies of other nations are, in a real sense, some concern of ours.
I share the view, now generally accepted, that maintenance of high-
level employment in the American economy as a whole is of funda-
mental importance from every standpoint, including that of American
agriculture and that of world peace. It is on the success of policies
to maintain employment and to moderate the swings of business that
I think we must mainly depend for lessening the instability of income
in agriculture, with which you are necessarily concerned.
But there is great danger at present in setting our sights too high
in respect of numbers of jobs, in respect of the size of the national
income, in respect of the size of agricultural income, and in respect of
the attainable degree of stability in business and agriculture. If we
shoot too high we can miss the goal as badly as if we shoot too low.
We are overemployed now, in wartime, as compared with peacetime
conditions. Many prices and many incomes are abnormally inflated.
The boom in farm-land values is dangerous, and attempts to stabilize
on such distorted wartime levels makes for collapse rather than for
stability. It is orderly readjustment that is imperatively needed in
the transition from where we are to the level that can be called normal
in peace.
Mr. Zimmerman. Pardon me at that point. You say you think
we are now in the midst of inflation and you designated the price of
farm land as one example. Do you think that the price of agricultural
products reflects inflation, present prices, prices obtained during this
war?
Mr. Davis. Yes; but, I didn't approach it in quite the way your
question implies. We have deliberately pushed up the prices of many
farm products out of relationship with prices of various other products,
many of which we have deliberately kept down. It is that distortion
of relationships that is, I think, in large part responsible for the rise
in land values. It rests on the assumption that a considerable part of
this price level of farm products can be retained in peacetime. The
inflationary forces have found various outlets, but I was referring
rather to specific aspects than to the more general ones.
POST-WAR ECONOMIC POLICY AND PLANNING 1645
Mr. Zimmerman. I wonder too if you thought about the relationship
of a desire on the part of a lot of wealthy people, people who have made
a lot of money out of war contracts and don't know what to do with it,
who have gone out and sought land as a kind of place to abide, maybe,
in case the worse comes to the worst sometime in the future. Has that
had much to do with this inflation of land prices?
Mr. Davis. Undoubtedly that has been part of the demand for
land, but only a part and not in my opmion a major part.
Mr. Zimmerman. You still adhere to the belief that the major part
of our inflation, so far as land values are concerned, comes from the
price of the farm commodities?
Mr. Davis. Fundamentally, I think that is the most important
factor.
Mr. Zimmerman. Very well.
;Mr. Hope. Right at that point, ^Ir. Davis, you made a statement,
if I heard you correctly, that we had deliberately boosted the price of
some farm commodities. That wasn't my impression. There may
be one or two commodities where the floor has raised the price higher
than would be the case otherwise, but there are only a very few of
those cases I can think of. In other words, our regulations in farm
commodities have been almost altogether along the line of ceilings.
I can't think of anything right now excepting hogs where for any
considerable period of time— and eggs during a flush period — the price
went below the floor or the fixed price.
That is not an important matter right now perhaps, but I was
leading — although I would, hke to have you comment on it, if you
care to — ^to the legislation which has been enacted settmg floors at
least 90 percent of parity on a large number of commodities during
the emergency.
I wonder if you are going to comment on that legislation as you go
along, as to its effect, whether you think it is something that should be
maintained or modified, or done away with.
Mr. Davis. I shall come back to it briefly toward the end. But I
would like to answer your question now.
The successive laws which have raised the percentage of parity
determining the loan rates on various products, cotton, corn, wheat,
and so forth, have been responsible for raising prices of those products
above what the market would have requhed.
Mr. Hope. You are speaking of the prewar period, are you?
Mr. Davis. To some extent before the European war, but to a
greater extent by changes in legislation subsequently. We wouldn't
have had 22-cent cotton or wheat at over $1.40 a bushel on the farm
if it hadn't been for such legislation.
Air. Hope. I agree with you up to a certain period, that is, before
the beginning of the European war, and sometime after, the price of
wheat and cotton was determined by the loan rates, but during the
past 2 years, hasn't it been true that both wheat and cotton, particu-
larly wheat, has been above the loan rates durmg most of the year and
it has been hitting the ceilmg most of the tune during the last two
marketmg seasons?
Mr. Davis. Yes; but durmg that period there have been other
measures, some of them raising loan rates, and including purchases
by the Commodity Credit Corporation m the market, designed to
1646 POST-WAR ECONOMIC POLICY AND PLANNING
support or raise prices. Public measures have brought it about that,
in the year when we harvested the largest wheat crop in our history^
when we had a considerable carry-over althought not as large as the
year before, wheat prices have been pushed up to scarcity levels.
Mr. Hope. They would have gone higher, would they not, if it
hadn't been for the ceiling?
Mr. Davis. Well, if we had had the other measures operating as
they did, and no ceiling, undoubtedly wheat prices could have gone
higher. If we had had none of these supporting measures, I doubt
very much whether wheat prices would have gone to the ceiling.
Mr. Hope. Wlien the demand for grain alcohol was as great as it
was, had there been no ceiling at all on the price of grain, might not
those prices have gone up to the ceiling without any Government
purchases at all?
Mr. Davis. There may well have been periods in the past 2 years,
when, in the absence of ceilings, the prices would have been higher,
but, by and large, the price-raising influences of Government measures
have been greater over that period, as a whole, than the price-restrict-
ing influence of the ceiling.
Mr. Hope. You are speaking about certain commodities; you are
not speaking about the whole field of agricultural commodities,
are you?
Mr. Davis. When this is true of comjnodities as basic in our
agriculture as cotton, wheat, and corn, it has meant that the prices
of products competing for the land had to be set high in order to
pull land into these other crops, soybeans and peanuts, for example,
in competition with the production of cotton, wheat and corn. In
other words, the whole level of our agricultural prices has been pushed
up by the policy that we have pursued.
Mr. Hope. Well, if we had those ceilings on livestock prices during
the last 3 years, don't you think that the price of grains — leave out
cotton — would have gone higher than it has without any Government
interference in the picture at all?
Mr. Davis. The livestock situation is more complicated and has
changed more in that period. I am afraid I can't reconstruct what
would have been the probable situation under a somewhat different
assumption.
The first move to which you referred a while ago, of setting a
support price for hogs of $13.75 — wasn't that the price?
Mr. Hope. I think it was at one time. It has gone up and down.
Mr. Davis. That so stimulated the production of hogs that, to-
gether with the influences aft'ecting the number of cattle, we had an
impossibly large demand on our feed supply. I mean there was an
effort to expand our meat base to which the responses of farmers
were so extreme that it put us into difficulties in regard to feed sup- .
plies, as I am sure you know. And that situation did create, in turn,
a very heavy demand for feed supplies which involved not only using
domestic wheat heavily for feed, but the importation of wheat and
other feeds from Canada.
Mr. Hope. I don't want to take any definite date because I do
not have any figures for definite dates. But, say for the last 3 years
my recollection is that the price of all meat animals was crowding
the ceiling most of the time, and while there may have been a few
weeks during that time when the price support on hogs, we will say.
POST-WAR ECONOMIC POLICY AND PLANNING 1647
was keeping the price up most of the time, the price of hogs was
above the support price and was not dependent upon that price.
There were only a few short brief periods cluring that time when hog
prices had to be supported, just the same as egg prices had to be
supported a year ago when favorable weather brought about a pro-
duction that no one anticipated.
I realize that there are so many ifs and ands in this that it is pretty
difficult for anybody to say what would have happened if we hadn't
done certain things, but I can't quite agree with your statement that
the Government policies dm-ing the past 2 or 3 years have' been de-
liberately designed to increase agricultural prices. It seems to me the
over-all policy has been to hold them down and if it hadn't been for
the ceiling we would have had farm prices higher than they have been.
I will be glad to have any further comments on it that you want to
make. I don't know that that is particularly pertinent here.
Mr. Davis. It is rather fundamental to the position I hold. I am
sure that if we had chosen otherwise it would not have been essential,
in managing our food and agriculture during the war, that farm prices
should have more than doubled since the beginning of the wap.
Mr. Hope. According to my viewpoint they were abnormal before
the war. I imagine you differ with that.
Mr. Davis. In 1939, at the beginning of the war, they were some-
what below, I think, what you can consider the long-time normal. I
do not think -they could be called in 1939 extremely low, as they cer-
tainly were m 1933. They were moderately bel&w, and they might
well have gone moderately abov6, a peacetime level.
Mr. Zimmerman. Pardon me for interrupting. I am sure you will
recall that during World War I, I believe they did finally try to put a
ceiling on wheat. I believe it was $2.25 a bushel. Cotton got to 25
or 30 cents a pound. Corn — I have forgotten the figure on that — like-
wise went up. We had no legislative action to depress these prices
for quite a while. Wouldn't that same thing have happened if we
hadn't had the legislation preventing the rapid rise in farm prices?
Mr. Davis. It happened in W^orld War I that. there was a shortage
of wheat, of cereals as a whole, and of cotton, I believe, as well, and
the heights to which prices rose were a result of heavy drains on our
limited surpluses for export urgently needed overseas, in response to
that shortage.
In this war there has been no world shortage of either wheat or
cotton. Both have been in abundant supply. They haven't been
where they were needed at the time they were needed, but we still
have a carry-over of cotton equal to an average crop and we have a
carry-over of wheat larger than in almost any year previous to this
war. That difference is fundamental.
There has been no inherent basis for skyrocketing of wheat or cot-
ton prices during this war as there was in reality during the last war.
Mr. FoLsoM. You also had a much higher price level in general
durmg the last war.
Mr. Hope. What, in your opmion, would have been the effect' on
agricultural prices generally if we had had no floors or no ceilmgs on
agricultural prices during the war?
Mr. Davis. Well, I don't know that that policy was really feasible,
economically or politically, but if we had had what I would have
considered much more reasonable — a floor substantially below the
1648 POST-WAR ECONOMIC POLICY AND PLANNING
floors that have been imposed and a ceiling somewhat higher than
the ceilings that have been applied, we should have had room for
response to economic conditions rather than the recurrent difficulties
with the flow of supplies which have occurred in corn, at times in
wheat, and in various other products. I think that would have been
wiser, but I don't think you want me to talk about wartime policy,
do you?
Mr. Hope. No. I think maybe we have gone as far as we need
to go into that, because we are talking about postwar, of course.
Mr. Arthur. May I ask one question, Mr. Chairman?
Mr. Zimmerman. Yes.
Air. Arthur. The ceiling structure on agricultural products as it
exists now does represent, in your opinion, a disproportionately
higher level for agriculture as against the total commodity structure,
defined by ceiling, as compared with a normal peacetime relationship?
Is that one of the points you wanted to make?
Mr. Davis. Yes. Both the support levels and the ceiling levels
are, in my opinion, out of line upward, considering the relationship
of agricultural prices that we may expect to obtain over a period of
years.
Mr. Voorhis. Do you mean in answering Mr. Arthur's question
that you think that the present general level of agricultural prices
relative to other products is out of line with what they normally
have been, or do you mean they are higher than they ought to be in
equity to other prices? If you mean the latter, I wouldn't agree.
Mr. Davis. I mean higher than they can be successfully main-
tained without creating new problems, new distortions, that will be
worse than the older. They are economically out of line upward.
Mr. Hope. Of course, on this question of floors, they may have
been placed at the wrong point, I don't know anything about that.
I have no opinion I want to express on that. Of course, the purpose
in establishing all the floors was to get a certain amount of production.
We did get a pretty good level of agricultural production, and I
believe you will agree that we did succeed in doing that.
Mr. Davis. Absolutely.
■ Mr. Hope. Now, it may have tlirown prices out of line both as to
the floors and ceilings, compared with other products, but in relation '
to other types of war production you wouldn't say that agricultural
prices have been out of line, would you?
Mr. Davis. I am sure that as great a volume of production could
have been attained without carrying prices of agricultural products
so high. In other words, to the extent that premiums had to be
offered to induce shifts into soybeans, peanuts, and various other
crops, it was essential to raise their prices; to the extent that it was
necessary to compensate for higher cost of labor, longer working
hours, difficulties with machinery, and so on, increase of prices was
necessary; but the basic legislation affecting the setting of prices of
these basic crops which did not need to be increased in production,
cotton, corn, and wheat, for example, or the production of which
would have been increased without such extreme stimulus, raised
the whole level.
Now, even if it were correct — I believe it not to be correct- — to say
that all this advance in prices was necessary to bring forth the
amount of production, as a whole, that we have had I would still say
POST-WAR ECONOMIC POLICY AND PLANNING 1649
that after the war, not needing any such volume of production as
we need during the war, we cannot afford to maintain prices at that
level in relation to the levels of other coarmodities.
Mr. Hope. That is getting into the question I was leading up to.
That is the legislation we now have on the statute books fixing floors
on a large number of commodities at 90 percent parity for 2 years
following the war.
Mr. Davis. At this point I would like merely to say that we find
the greatest price collapses in various commodities to have usually
followed large-scale price-supporting measures, usually involving
heavv accumulation of stocks.
This happened after the Farm Board's accumulation of wheat,
supplemented by the Canadian stabilization purchases in Canada.
It happened in Brazil when they finally, late in 1937, gave up theu-
coffee stabilization policy. It happened with cotton in the same
period as the Farm Board's experience with wheat. It happened
with rubber, in a little different sense, in the late 1920's.
That is a danger. Attempts to stabilize on a level that cannot be
safely maintained may lead to a price collapse, deferred but not
prevented, and may interfere with the stabilization of the economy
which we strongly believe in. I believe that the agricultural situation
is in a dangerous position from that standpoint.
Mr. Hope. In the course of your remarks are you going to discuss
the matter of price stabilization at all, or discuss any levels at which
you think prices of farm commodities should be stabihzed? Do you
intend to go into that?
Mr. Davis. As a matter of postwar policy, I shall come to some
expression of views on it.
At this point I want to add merely that chronic surpluses of farm
products are not to be feared except as a consequence of vigorous
national measures ill-coordinated with one another. I see no pros-
pect of avoiding clu-onic surpluses if the nations follow such various
policies, and I hope that some other types of international economic
relations can be established.
Mr. Hope. Are you going into the international wheat agreement
during the course of your statement?
Mr. Davis. I hadn't planned to go into that. I want now to get
into the question of foreign-trade policy.
Mr. Hope. If we get tlu-ough in time I would like to have your views
on the international wheat agreement or any agreements of that type,
but perhaps I had better not suggest that now, Mr. Chairman.
Mr. Davis. I would rather not go into that matter at this moment.
I want to say that the United States, and American farmers in par-
ticular, have a great deal to gain from rising levels of consumption and
living, wliich I prefer to say rather than rising "standards." It is a
matter of levels.
I think that raising levels of consumption and living should be
regarded as the over-all objective of national and international policy.
I don't suppose many of you would disagree. International policies
of nations that will contribute to that central objective are of far
greater importance to our welfare than we have generally realized
heretofore.
If we are safely to improve our consumption level and plane of
living, as we earnestly desire, it must be a part of a world-wide move-
ment in which we are doing our share. Prosperity and depression are
1650 POST-WAR ECONOMIC POLICY AND PLANNING
both contagious, and increasing disparities between levels of living,
within a nation or among nations, are highly dangerous. They lead
to revolutions; they lead to wars.
World peace and prosperity and rising levels of living depend very
heavily on freer international trade, with the flow of commodities and
services proceeding under the influence of economic forces and not
determined by administrative decisions under rigid legislation or
agreements. -An impoverished world urgently needs to take the
fullest advantage of the international division of labor, whereby each
region contributes according to its best ability to produce.
In a world of freer trade — I mean freer than we had in the decade
before the present war — the opportunities for world-wide expansion of
consumption of farm products are far greater than they could be under
a system of tight national and international control. I believe they
are much greater than Dr. Schultz'. discussion yesterday would lead
you to infer. When he spoke of the limitations imposed by decline
in population growth he was referring primarily to western Europe,
which is only part of the world from the standpoint of potential
advance in the plane of living, and he brought out that the population
increase elsewhere is likely to be far greater.
In the great depression of the 1930's in the subsequent stage of
preparation for war, and again in the war itself, we have seen increas-
ing obstructions to international trade.
Mr. Hope. Could I interrupt you right there? Going back to that
point you mentioned as potential consumption in other areas than
western Europe, to what extent will that potential consumption be
met by increased production of agricultural products in those areas?
Won't we normally have some increase in the agricultural production
in those particular areas also?
Mr. Davis. Undoubtedly.
■ Mr. Hope. You don't think that would equal the potential increase
in consumption?
Mr. Davis. The world's potentialities for increase in consumption
are likely in many areas to press on the world potentialities for in-
crease in production. One tends to lead to the other.
Mr. Hope. But you think for a good many years ahead a rising
standard of living in the world will result in a greater demand for
food than the increase which might come about in those countries
which secure that rising standard of living; that is, in China or India
you think the demand for food will be greater then they could supply
even if they greatly increase their efficiency of agriculture?
Mr. Davis. There can be exchange of foodstuffs between United
States and China. There has been and there can be again. If the
purchasing power of China is in some way enhanced so that they can
buy some things from us, some foodstuffs are among the things they
would take. For example, we, Australia, and Canada can supply
wheat to their port cities, their coastal region, cheaper than it can be
supplied from central China.
Mr. Zimmerman. Am I wrong in that this country, where we have
high wages, we produce rice and ship it to China and have done it for
several years?
Mr. Davis. That is exceptional, but not at all impossible.
Mr. Zimmerman. Do you know whether that is a true statement?
I heard it made.
POST-WAR ECONOMIC POLICY AND PLANNING 1651
Mr. Davis. We have even shipped it to Japan, but that was
exceptional. It is not customary for us to be able to compete in the
Orient with the rice of southeastern Asia, but there have been times
when we succeeded m doing so.
What counts, as you know, in international trade, is not the relative
wages in the two countries, but the per unit cost of the product laid
down at the particular point, and that unit cost may be lower on the
part of our exports if we are sufficiently skilled in the production, as
we are in automobiles, as we are in many other products.
I was in the midst of saying that during the war, as well as before,
there have been in this country many obstructions to trade and
increasing reliance on administrative controls and increasing restric-
tions on indivudial enterprise.
No one, I think, expects an immediate cutting off of that whole
system of controls as soon as VE-day is proclaimed. But we are
facing, and have been for a year or more — in the Government, as well
as among the people — a decision whether we are going to convert
this wartime system of controls into a tight peacetime system, differing
in details, or whether we are going to abolish these controls by degrees
in favor of greater freedom of trade than we had before the war.
Now, it is my mature conviction that the hope of the United States
of America and the world lies in freer trade and not in tighter controls,
national and international. One control breeds another, and the
system tends to grow, if not to the point of serfdom as Professor
Hayek recently argued in his book The Road to Serfdom, certainly to
a degree menacing individual enterprise, efficiency, and personal
freedom besides.
Mr. Zimmerman. Do you mind elaborating a Uttle bit on what you
mean by controls at tliis point, what you have in mind when you make
that statement?
Mr. Davis. Our War Production Board, War Food Administration,
Office of Price Administration, and Foreign Economic Administration
are' all operating control systems, saying what shall and shall not be
allowed.
Mr. Zimmerman. Of course those are war measures.
Mr. Davis. I am not arguing that they shouldn't be here in war-
time. I am saying that there are many who say they should merely
be converted into a peacetime system.
Mr. Zimmerman. In setting up most of these controls the law
provides for automatic termination. Isn't that right, Mr. Hope?
Mr. Hope. We have got to extend the Office of Price Administra-
tion by July 1 or they will be out entirely.
Mr. Zimmerman. As far as I know every one of them have a very
definite time of termination. Congress, I think, very definitely had
in mind that they didn't want to continue them any longer than
necessary when these acts were placed on the statute books.
Mr. Davis. I am glad to see that evidence and I don't want to flog
a dead horse. I am simply saying that in spite of such disposition on
the part of Congress there is still a group of people who favor convert-
ing, under camouflage or otherwise, these controls into peacetime
controls. , . , , t e
Mr. Zimmerman. Do you have tariffs in mmd when you speak oi
controls?
1652 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Davis. Not in this far-reaching sense. They are a mild form
of control and are part of the system, but the simplest and in many
ways the least objectionable part.
Mr. Zimmerman. I would like to get this and then I will quit. If
we are correct in saying we think when the war is over that these
controls, such as the Office of Price Administration and the War Food
Administration and the War Production Board, are terminated then
what controls would we have to deal with in a post-war economy
for agriculture? What are some of the other things you think we
ought to give our attention to that might seriously interfere with
the well-being of our agriculture?
Mr. Davis. Maybe I am jumping a little too far ahead. I wish
you would wait with that question a little while, if you will.
Mr. Zimmerman. All right, sir.
Mr. Davis. Well, Secretary Hull has been a leading spokesman for
the view that we need freer trade rather than tighter controls, and
State Department officials before and since Secretary Hull's resigna-
tion have forcefully expressed the same view. It is even embodied
in some international understandings, such as the mutual-aid agree-
ments. It was supported in detail at the International Business
Conference in Rye, N. Y., last fall. In liis last annual message to
Congress, President Roosevelt said:
We support the greatest possible freedom of trade and commerce.
We Americans have always believed in freedom of opportunity, and equality
of opportunity remains one of the principal objectives of our national life. What
we believe in for individuals, we believe in also for nations. We are opposed to
restrictions, whether by public act or private arrangement, which distort and
impair commerce, transit, and trade.
We have house cleaning of our own to do in this regard. But it is our hope,
not only in the interest of our own prosperitj^ but in the interest of the prosperity
of the world, that trade and commerce and access to materials and markets may
be freer after this war than ever before in the history of the world.
I believe in that doctrine and I think President Roosevelt expressed
the dominant view in the administration, and I hope in Congress.
The difficulty comes, however, in translating such broad principles
into practice, and I want to come shortly to some of those problems.
Meanwhile I should like to interpose this observation.
The United States is going to emerge from this war extremely
strong, both absolutely and relatively. We can, if we will, solve our
national problems in ways that help rather than hurt other peoples.
And if we succumb to temptations to raise our tariff's, to restrict im-
ports by quotas, to dump our exports with the aid of subsidies, open
or disguised, we shall hurt other nations that urgently need our help.
Moreover, our example is powerful. If in our strength we resort
to such tactics we shall cut the pattern that others in their weakness
will follow. If, on the other hand, we can translate the principles that
President Roosevelt has expressed into sound practice, we can power-
fully influence world policies toward freer trade, greater abundance,
and fruitful international friendship.
And that means, as t see it, that we must be prepared to import
liberally the commodities and services that other peoples can provide
more cheaply than we can, in order to give them purchasing power
for the\products that we can produce more cheaply than they can.
This can do more than anything else to promote the recovery of
broken national economies, toward providing the basis for sound
POST-WAR ECONOMIC POLICY AND PLANNING 1653
reconstruction loans that they need, and toward preventing inter-
national frictions that would sow the seeds of future wars.
Mr. Zimmerman. Let me ask a question at that point. That is a
rather broad, positive statement of principle. You mean to say that
a nation that can produce wheat cheaper than we can produce it in
this country should be permitted to ship that wheat into this coun-
try in competition with our wheat farmers?
'Mr. Davis. Well, I was going to touch upon wheat shortly in
another connection.
Mr. Zimmerman. I -want to ask about three questions. I ask
the same question about cotton. Do you think if the people of
Brazil can produce cotton cheaper than we can produce it in America
that they should be permitted to send that to us in competition with
our southern cotton. And likewise Argentina, if they produce corn
cheaper, should they compete with the Corn Belt?
Mr. Davis. Do you really want me to answer it?
Mr. Zimmerman. Yes. • i i
Mr. Davis. My answer is yes, but. And I want to go on with the
"but."
Mr. Zimmerman. All right.
Mr. Davis. The world absorbs— I mean the world that buys
wheat, cotton, and corn, will take — more wheat, cotton, and corn than
those countries which you mentioned can produce to ship. There is,
therefore, a demand beyond that which the lowest-cost producers can
supply. There is no question of Argentina being able in ordinary
times" to ship corn into our Corn Belt, there is no question of Brazil
being able to ship cotton into New York, and so on with wheat, because
the low-cost supphes are absorbed in other countries, whereas we
have a surplus of all three, which, in different measure, in different
years, we ship out in competition with these exporting countries.
Now there are local situations that do justify, in my opinion, our
importing some of the very products that we export. On our Pacific
coast, for instance, it is highly logical, highly advantageous to our
agriculture that we should import Argentine corn frequently, not
every year, rather than have corn shipped from the Corn Belt across
the mountains to the Pacific coast. It is in the interest of CaUforma
and Wasliington and Oregon; and I think it has been outrageous,
when on occasions our Government agencies have, in effect, sand-
bagged certain import transactions of this sort.
These are the regional factors, in other words, of transportation
cost, that would, on occasion, make it highly desirable that we import
at some point from abroad while we export from other points.
Mr. Zimmerman. Let's pursue that. Would that have a depressing
effect on the price, we will say, of these American commodities, wheat,
corn, and cotton, if we were to stimulate the flow of the products into
our country? Would that depress our farm prices here?
Mr. Davis. So far as the Argentine corn to the Pacific coast is
concerned, it would ordinarily mean nothing more than we would
export more corn from our eastern seaboard and the Gulf than we
otherwise would, and take in some from Argentina on our west coast.
If, however, and this is the point I' am coming to shortly, our price
policies are such as to prevent our exporting any corn to speak of, then
the importation of Argentine corn is an influence tending to reduce our
excessive prices of corn.
99579— 45— pt. 5 28
1654 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Zimmerman. Then, it seems to me, we are faced with this
question: If we let these things come in having a surphis at home
which we have to get rid of or suffer a depression in price, farm labor,
and on down the line — in other words, the purchasing power of Ameri-
can agriculture will be lower — how are we going to sell our surplus that
is produced at a higher cost than other countries? Who is going to
buy it? That is what I am interested in knowing.
Mr. Davis. You say produced at higher cost?
Mr. Zimmerman. We have been talking about the high standards
of living in this country, you know. We do pay higher wages for
agriculture than other countries. I think it is generally conceded that
it costs more than it does in other countries. If that is true, to whom
are we going to sell this surplus we have in cotton, wheat, and corn?
Who is going to buy it?
Mr. Davis. If we choose to set the price of cotton at 30 cents, let
us say
Mr. Zimmerman (interposing). Let's not get it any higher than
parity.
Mr. Davis. All right, 22 cents, if you like.
Mr. Zimmerman. Let's put it at 19.
Mr. Davis. Nineteen. If we set the price at 19 cents, there will be
people raising cotton who will lose money, but still produce some
cotton, and there will be others who will just get by, and there will be
others who are producing at 10 cents or less. Now, you say, ''We
can't produce it at 19 cents." That "we" is made up of a great many
different people. I think there is a consensus among those who know
about the situation today, that if controls over acreage of cotton were
taken off, and if the restrictions on machinery were no longer enforced,
we could turn out probably more than the cotton crops of the last 2 or 3
years at under 10 cents a pound.
I don't think there is a shadow of doubt that the United States can
produce substantial cotton for export for the world, no matter what
the wages of agricultural labor
Mr. Zimmerman (interposing). That statement is made on the
theory that you believe the post-war world agriculture is going to
face new inventions of machinery and new methods of production
that we don't know anything about now?
Mr. Davis. On the contrary. They are here and demonstrated.
Mr. Zimmerman. But not in practice as yet.
Mr. Davis. In practice; though not yet on any large scale.
Mr. Zimmerman. That is what I mean.
Mr. Davis. Not on any large scale, for various reasons.
Mr. Zimmerman. You think the things will come into practical
being and operation in the post-war period? Your statement about
what we can produce and export is on the theory that these new
methods will be in existence and in operation; is that right?
Mr. Davis. That is true. But, if those were not in operation, if
that prospect were not in the offing, I would still say that the United
States can produce cotton more cheaply than it can be produced,
quaUty for quality, in quantities of surplus, in any other part of
the world.
Now I don't mean to say more cheaply than the poorest grade of
cotton in the poorest sections of India, but that cotton is much
poorer in quality.
POST-WAR ECONOMIC POLICY AND PLANNING 1655
Mr. ZiMMERMAisr. I think this is a very important question we are
discussing, in view of coming events.
Now we will take the great State of Kansas, from which my friend,
Mr. Hope, comes. A great wheat-producing State. I have heard
they have the latest, and have been employing in recent years the
latest, methods of producing wheat. Yet, I tliink it is admitted that
the price of labor and cost of farm machinery is such I don't know
how they could ever produce it any cheaper than they are today. Do
you, Mr. Hope?
Mr. Hope. Well, the cost has been going down some, but I don't
look for it to be produced materially below what it is today.
Mr. Zimmerman. In other words, the foreign countries that pro-
duce wheat have cheaper labor, cheaper land. How are we going to
compete with these fellows?
Mr. Davis. I haven't any doubt that if we had no restrictions on
production, no stimulus, no support price
Mr. Zimmerman (interposing). We hope that will be true after the
war.
Mr. Davis. If we didn't have any of those in ordinary peace
years, western Kansas and eastern Washington, among other places,
would be exporting wheat at a profit. Now I do not mean to say
that they are the lowest-cost producers in the world. Argentina
and parts of Australia, and probably some other places, can, on the
average, produce wheat at a lower cost. But I mean that the im-
porting world, buying at normal levels of consumption at moderate
prices or what would now be considered low prices, will absorb enough
wheat so that Kansas, eastern Washington, and some other parts of
this country, would be having a part of that business.
Mr. Arthur. Mr. Davis, are you presuming in tliis connection
that there would be a relaxation of the artificial support to wheat
growers, particularly in western Europe, which would provide a
greater market for total exportable wheat? Or would you say this is
true without such change, and any relaxation would even more
greatly emphasize
Mr. Davis (interposing). The latter; that is to say, it is true even
on the restricted import business that we had shortly before the war,
but to the extent that we can induce western Europe to take some of
this nutritional knowledge seriously, and to expand the production
and consumption of milk, eggs, and vegetables, and so on, and to
import more of their primary foodstuffs, such as wheat — and this is in
line with British thinking for Britain for the long pull after the transi-
tion period; it is in line with the thinking of other people in western
Europe — there will be a larger market if those revised policies are
adopted.
If in any of the international wheat agreements we can find ways
to say, ''Here, we won't hold you up for a high price, we will sell you
at a reasonable price, if you will start your post-war agricultural
policy on these broad lines," there is a chance of having some influence
on them.
Mr. Hope. If you are going to have international agreements,
doesn't that imply you are going to have these controls that you say
we should not have?
Mr. Davis. There is a curious notion — I don't know where it
started— that the only kind of international agreements worth calling
1656 POST-WAR ECONOMIC POLICY AND PLANNING
such must be restrictive. If that is the kind of agreement you mean
when you say "international commodity agreement" I am opposed
to them. I think they are bad for this country and bad for the world.
But there are other kinds which I haven't time to go into this after-
noon.
Mr. Hope. Then you would say that the present international wheat
agreement is a restrictive agreement?
Mr. Davis. It is what is called a draft convention and not in force.
It is a highly restrictive agreement; yes.
Mr. Hope. It is the kind you regard undesirable; is that correct?
Mr. Davis. Yes. We have oidy had in effect an interim agreement
that thus far has amounted to practically nothing.
Mr. Hope. Your idea of the proper kind of international agreement
would be the kind in wliicli the importing nations were also par-
ticipants.
Mr. Davis. Yes; and which the emphasis was put on the utilization
of surplus instead of holding it back, on the freeing of the flow, and
on the avoidance of high-cost production, extremely high-cost pro-
duction, in the importing nations or in an exporting nation like the
United States. We have no more justification for keeping 20-cent
cotton growers in operation than Germany had in keeping $2 wheat
growers in operation.
Mr. Hope. Even in that kind of agreement you would still have to
have some Government controls, wouldn't you? Wouldn't we have
to assure the importing countries that there would be a supply of wheat
available if they agreed that their importations would amount to
certain quantities, which, I assume, would be part of any agreement?
Mr. Davis. I believe it entirely possible to have such a joint agree-
ment on the part of exporting nations, but it could not be of the kind
that would get a particular country in extreme difficulties when it
had a drought, such as Australia has experienced in the past season.
I tpeari the thing would be feasible jointly and wouldn't be feasible
one by one for the exporting countries. Do you see?
Mr. Hope. Yes.
Mr. Zimmerman. Will you do this: Will you prepare for the record
a terse, concise statement of what you regard as a nonrestrictive
international agreement?
Mr. Davis. How much time will you give me? I am taking a
train this afternoon.
Mr. Zimmerman. We will give you all. the time you want.
Mr. Arthur. That can be sent to the committee, Mr. Davis.
(See exhibit 5, p. 1703.)
Mr. Zimmerman. Off the record.
(Discussion held off the record.)
Mr. Hope. I would like to ask Mr. Davis also when he has to leave
here because this is very interesting and I would like to continue here
for some time, but if you have to catch a train I am not going to ask
some questions I might otherwise.
Mr. Davis. My train leaves at 5:20 and I should be away from here
not later than 4:00.
Mr. Hope. We have been talking about com, cotton, and wheat.
What would you say about beef?
Mr. Davis. Well, I am afraid you are going to have me asking if
I might have the privilege of sending in some other supplementary
statements.
POST-WAR ECONOMIC POLICY AND PLANNING 1657
Mr. Zimmerman. That will be all right.
Mr. Davis. I am franiv to say that on beef I haven't a ready
answer, but I will be glad to send m a little statement on it that you
might find helpful, but I can't do it all offhand.
Mr. Zimmerman. You may at this point in the record send it in
and it will be put in with your statement. (See also exhibit 5, p. 1703.)
Mr. Davis. As a matter of fact, beef and butter and a few other
things are snaggy commodity problems in this connection. It seems
to me that among the commodities we should import liberally are some
agricultural products, including not only those that we can't produce
practicaUy, like bananas, coffee, tea and spices, and natural rubber,
but also some that we can and do and will produce, but at high cost,
and those include wool, sugar, linseed, and some other vegetable
oil seeds and nuts. We should import the latter products more lib-
erally, with less obstruction to imports, than heretofore. Our tariffs
and other import restrictions on these products should be revised
downward rather than upward.
Mr. Hope. You wouldn't remove them entirely, would you? On
fats and oils, tropical oils, what would you say on that?
Mr. Davis. The transitional policy of converting from where we
are, at the height of war controls, to a normal peacetime period, I am
not trying to discuss, and I am not prepared to say that even in peace-
time we should eliminate completely the tariff on wool and on vegetable
oilseeds.
But I am convinced that the drift of our present policy is toward
reducing the purchasing power of other countries for products that
we can advantageously produce. In some respects it is toward
reducing the consumption of agricultural products. We are seeing in
the case of synthetic fibers the mvasion of the market for agricultural
products by "industrial products, and the higher the price of wool and
cotton, and the longer the prices of wool and cotton are kept out of
line, the greater is the entrenchment of and expansion of the com-
petitive fibers that are cutting the ground from under wool and cotton.
Now there is room for substantial expansion in the consumption of
all textile fibers. Our policies of holding up prices of cotton and wool
have speeded the expansion of synthetics, have rendered difficult the
recapture of part of that market by the natural fibers, and are endan-
gering the sale of the output of products of the present sheep flocks.
The United States is a relatively small consumer of wool among the
advanced nations of the world. And while the price of wool is in no
sense the principal factor in the price of clothing it is an important
factor in the competition of fibers for inclusion in clothing, and we are
tending to restrict its use by this method. And in the case of wool,
as in the case of cotton, we will certainly be producing some wool even
if we have no tariff on it. It would find its place. The relation
between wool and lambs and so on would determine the point at which
it would be maintained. But disregarding any possible substitute for
a support price in connection with the readjustment to a lower tariff
basis, we shall not see our wool industry wiped out, no matter what
we do. We shall find it at a different level in our agriculture, whether
the protection is extremely high or negligible or somewhere in between.
\ Mr. Zimmerman. Of course, I can understand with wool because
we are an importer of wool. We don't produce enough for our home
1658 POST-WAR ECONOMIC POLICY AND PLANNING
consumption. We have always been an importer of wool. Isn't
that right?
Mr. Davis. Yes.
Mr. Zimmerman. But, you take cotton, that is the opposite. We
must be an exporter of cotton if the cotton section of the country is to
prosper. You speak of fats and oils. We have recently witnessed a
great development of the soybean in our country, a new crop, one of
the greatest oil-producing plants in the world, likewise peanut oil.
After this war we are going to have people who want to grow soybeans
and peanuts to produce oil to supplement the cottonseed oil we have
been making for a long time, and other oils. So, when crops of oils
come in here what chances are these farmers going to have to sell
soybeans for crushing purposes?
Mr. Davis. Soybeans and peanuts for oil have their place in our
economy. Just what place it is going to be is going to depend on
many things, including the tariffs on foreign vegetable oils. But the
question is: Can we really put our agriculture on a satisfactory self-
sustaining basis if we prop this, that, and the other industry, at a level
which is vulnerable to economic forces and to changes in the political
wind? /
]VIr. Hope. Wliat effect do you think it would have on the volume of
agricultural production if we should adopt substantially the program
that you have suggested?
Mr. Davis. I think it is highly probable if this were part of a policy
we were pursuing, and, so to speak, leading the world in — not just
adopting it as a temporary experiment of our own, but as one in which
we are going to take the lead — I feel reasonably confident that our
leadership would insure the enlarged consumption and the enlarged
markets that would warrant a higher production by considerable
margin than we can otherwise dispose of under restrictive policies.
Mr. Hope. Wliat effect would it have on agricultural income over a
period of years?
Mr. Davis. As I see it, we have to face a contraction of agricultural
income, whatever policy is adopted. We cannot maintain that
income at wartime levels.
Mr. Zimmerman. I would like to mterrupt you right there. The
purchasing power of the American farmer is a pretty good index as to
the condition of industry in our country. In other words, when the
farmer is prosperous, has a high income, he is the greatest purchaser of
other materials that are manufactured in our country of any group in
the country. Now if you cut this income down, what is the effect
going to be? Are you going to cut down the tariffs of manufactured
articles to let them come down?
Mr. Davis. I am sorry I didn't emphasize that. It seems to me
imperative in our interest that we should find out what products other
countries can send us that we can consume to advantage, and en-
courage their importation as a means of building up the purchasing
power of other nations.
Mr. Zimmerman. Apply to industry as well as to agriculture?
Mr. Davis. Yes.
Mr. Zimmerman. If a farmer has to sell his product on a market
that is fixed — we will say cotton and wheat are fixed at Liverpool.
Mr. Davis. It used to be, but it is not true now, and has not been
for a long time.
POST-WAR ECONOMIC POLICY AND PLANNING 1659
Mr. Zimmerman. Wherever it is. The export price almost controls
the domestic price, doesn't it?
Mr, Davis. As I say, it used to be so.
Mr. Zimmerman. Won't it always have to be that, more or less?
Mr. Davjs. The world market has disintegrated in the last 10 years,
even before the war.
Mr. Hope. If we get back into a system of unrestricted world
trade, wouldn't you again have world markets and wouldn't the price
be fixed, the world price, at some particular point; like Liverpool?
Mr. Davis. In the sense that that is a focal point where the forces of
supply and demand meet.
Mr. Hope. World prices have disintegrated in the last few years
because w^e have had all these restrictions and wars. If we removed
them, there would be a world price which, in an exporting country,
would be very largely the domestic price.
Mr. Davis. I want to warn against a misinterpretation there. It
used to be said, as the chairman indicated, that the price of wheat was
fixed in Liverpool.
Mr. Zimmerman. We used to say that about our wheat and cotton.
Mr. Davis. Our own institute made a study of the price relation-
ships in Chicago, Winnipeg, and Liverpool in connection with wheat.
Tliis brought out quite clearly that so far as leadership in price change
is concerned, all three at different tirnes took the leadership. There
is no unique sense in wiiich it can be said that Liverpool fixed the price.
That is where the barometer hung that was most nearly reliable, but
it was a barometer of the world situation rather than dependent upon
the action of people in Liverpool.
Mr. Zimmerman. That is right.
This committee has had before it a great many economists and
businessmen, and they all say that at the end of this war and the
beginning of the post-war era we are going to face a public debt of
something like $300,000,000,000 approximately. They say that in
order to pay the interest on the national debt, to liquidate that
national debt and carry on the cost of government we have to main-
tain a high national income with substantially full employment of
labor, full production of agriculture and a full production of industry.
It is a thing that we have just got to face.
Now, if the income of our cotton farmers is reduced from 19 cents
a pound to 10 cents a pound and wheat farmers goes down, and cattle
and hog producers fell to a lower level, do you think there is any
danger of getting our national income down to a point where it might
work very disastrously to the economy of our country?
Mr. Davis. I think it is important' that such reductions in income
be compensated by increases in income m other directions.
So far as employment is concerned, I would like to see a lot of the
boys and a lot of the women who prefer to be at home displaced by
returned veterans. I mean there is a lot of need for displacement
and replacement and rearrangement.
Mr. Zimmerman. We are talking about a time when the boys, we
hope, will all be home and that readjustment w^ll have taken place,
and the people are back at their own normal way of doing things.
It seems to me your argument drives us to this conclusion. If I am
incorrect, I want to know it. I am just trying to get soine light.
It seems to me that your argument brings us to the conclusion that
1660 POST-WAR ECONOMIC POLICY AND PLANNING
this unrestricted foreign trade must result in an expansion of agri-
culture and other business to the point where we will have a national
income sufficient to meet the needs of this Nation which we know
we are going to have to face. Is that your philosophy?
Mr. Davis. Oh, yes. I don't differ with you there.
Mr. Zimmerman. Your philosophy is, and your view is, that if we
remove the trade barriers and these restrictions that in the long pull,
the long-range program which we are talking about, and working
toward, in this increase in world trade we will get enough of that
trade to hold and maintain our national income to a point where we
can meet these requirements.
Mr. Davis. Yes.
Mr. Arthur. Mr. Zimmerman, may I ask a couple of questions?
Mr. Zimmerman. Yes.
Mr. Arthur. It is your conviction, Mr. Davis, that while we will
have a decline in agricultural income, totally, we need not have a
decline in the per capita income of farmers to the extent, the same
extent possibly, if we rearrange our agriculture to produce more effi-
ciently?
Mr. Davis. Well, it is very difficult to answer such questions
briefly. I do feel that the per capita incomes in agriculture in the
last year or two have been all out of proportion to what the farmers
themselves would have regarded 5 years ago as reasonably to be
hoped for, and far beyond what those same farmers would now say
they have any chance of keeping after the war.
Now, Dr. Schultz brought out that the farm population has shrunk
from 20 percent of the working population to 15 percent during the
war. Isn't that right?
Mr. Zimmerman. 32 to 15, I believe it was.
Mr. Hope. From 20 to 15 since 1940.
Mr. Zimmerman. That is right.
Mr. Davis. At the same time the net income of the farm operator
has doubled and on the average from 1935 to 1939, as I think you
realize, the figures of the Department of Agriculture show that farm
income, net farm income, was at the income parity levels that had
been set in the Agricultural Adjustment Act of 1938 and in the last
year or two, 1943 and 1944, farm income in relation to the income
parity standard has been 40 to 50 percent above parity.
Mr. Zimmerman. Let's get that straightened out. Wasn't he
talking about farms?
Mr. Davis. No, not farms. I think people on farms is what he
meant.
, Mr. Arthur. I believe it was the proportion of our total labor
force that was farmers.
' Mr. Davis. In other words, in my opinion, we shall have, whatever
we do, unless there is a rampant inflation of the price level, a reduction
in agricultural income that the farmers expect, can stand, and know
is essential.
Mr. Zimmerman. Here is the statement: "Half of the United States
farms in 1939 produced (for sale and household use) $625 or less."
Mr. Hope. I think he got that figure from the census, and it would
pretty nearly have to be farms.
Mr. Davis. There are Department of Agriculture estimates on this
point that I thought he was drawing upon for liis 20 and 15 percent.
POST-WAR ECONOMIC POLICY AND PLANNING 1661
Mr. Hope. I think Mr. Voorhis asked him that particular question,
whether it was farmers or farms, and it is my recollection he replied
that it was farms.
Mr. Zimmerman. I believe that is correct.
Mr. Davis. Tliis $625 figure, you are quite right about that, that is
farms.
Mr. Hope. I thought that was what you were talking about.
Mr. Davis. No; this is another matter.
Mr. Hope. I thought it was the figure you were talldng about.
Mr. Arthur. May I ask one further question?
Mr. Zimmerman. Yes.
Mr. Arthur. Your conclusion also carries this implication, that
with the greater freeing of trade we would employ our agricultural
resources as fully as, or more fully, than we have in the present war
period ; we would not, in other words, have to allow our lands to go
idle; we might have to use it more eflaciently, but the land itself,
which may now be marginal, might come even above the margin as a
result of better technology and, better utilization. I saw that from
your statement when voii say there is a sufficient demand in the
world for the utilization of all the agricultural resources that we
Mr. Davis. I am not sure I used the words "sufficient demand."
There is need and opportunity, and the sort of policies I am urging
can translate the need and opportunity into demand. The demand
isn't there with such restrictive measures, with such tight controls,
as we have tended to have.
Mr. Zimmerman. You heard Dr. Schultz, I am sure, yesterday
afternoon?
Mr. Davis. Yes.
Mr. Zimmerman. You agree with his conclusion that in the post-
war period, with the mechanized farming that is going to take place,
a large segment of our people in certain sections is going to be dis-
lodged; we are going to have a great social shift from one section to
another, got to bring in new industries in certain sections. Do you
agree with that theory? ^
Mr. Davis. I agree with that as I understand it. I wouldn t
phrase it just as you did. That is, it seems to me there is no hope
of improving the plane of living of this agriculturally overpopulated
belt by agricultural policies., We must create a suction, so to speak,
that will pull them into opportunities for making a better living and,
in addition, permit those who remain to carry on agriculture better
than they can now.
Mr. Zimmerman. He used this illustration, as you recall. Down
in one of the Southern States an 80-acre farm is an economic failure
and the farm of the future will be the combmation of a sufficient
number of these 80-acre units, or smaller units, to make a family-
sized sustaining farm. That, of course, means the people who were
formerly dependent upon these smaller units are going to have to do
something else if they are going to be successful as farmers.
Now, if that is-a picture of the agriculture of the future, we have
some serious problems in some sections, and particularly in the
South where we depend upon cotton for a livelihood.
Mr. Davis. That is true.
Mr. Hope. I would like to ask a question, Mr. Chau-man, if I may.
1662 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Zimmerman. Yes.
Mr. Hope. The program you have outlined here would mean getting
back to simply a competitive basis, so far as agriculture is concerned,
as contrasted with an artificial basis, which is really predicated on an
attempt to get away from the competition that we have had in the
last few years.
Now, of course agriculture hasn't been the only industry that has
been trying to get away from competition. We have seen that same
tendency perhaps used to a greater extent in business and in labor and
they have been more successful I believe, in getting away from it
than agriculture has been.
Now, do you think that agriculture can't operate as you have sug-
gested on purely competitive basis unless we have the same competi-
tion in every field clear across the board?
Mr. Davis. There is necessarily a struggle to maintain competition.
It doesn't maintain itself in the modern world. But I would turn
the statement the other way around. If agriculture says, "We have
got to be under the thumb of the State, wards of the State, dippers
into the Public Treasury, because otherwise we can't stand while
there is combination in labor and combination in business," then
they have given up the fight, and God help America.
I am quite sure that agriculture is needed in support of the main-
tenance of free and fair competition in business and in labor, and that
the rest of us can't afford to have agriculture lying down on that job.
Mr. Hope. That is a pretty heavy load on agriculture.
Mr. Davis. You have supporters in some groups that do not belong
to any one of these three.
Mr. Hope. That is true, but after all agriculture comprises less
than a fourth of your population.
Mr. Davis. Organized labor also comprises less than a fourth, I
think you wdl find.
Mr. Hope. That is true, but organized labor has now reached a
position in this country from which they are not going to retreat if
they can help it, very naturally, where they have to a very large
extent, ehminated competition in labor. Maybe the story will be
different after the war when you have unemployment. Organized
labor came through the depression without suffering any marked
reduction in wages. They had unemployment. They did keep up
the wage standards because they were so organized and had the pro-
tection of laws to an extent that they could still eliminate competition.
Now, are we going to expect agriculture to operate on a competitive
basis, much as it may be desirable from a national standpoint, as
long as you have other segments of the population whose activities
directly affect agriculture operating in just the opposite way? Labor,
of course, is only one element which has succeeded to some extent in
eliminating competition. You have got many business enterprises
where the same situation exists.
Aren't we getting the cart before the horse here when you say
agriculture has to take the lead in the thing?
Mr. Davis. I don't know that I said that. I said if agriculture
gives up this fight for what is essential — freedom of individual enter-
prise, cooperation but not coercion, not compulsory cooperation, so
to speak — if agriculture gives up that fight it will tremendously
stimulate the restrictive types of combination in business and labor.
POST-WAR ECONOMIC POLICY AND PLANNING 1663
I think farmers tend to lose by adopting such a defeatist attitude and
getting on the wrong bandwagon.
Mr. Hope. I think they are certainly at disadvantage when it
comes to trying to set up a system of restrictive competition as com-
pared with other elements in the population. Labor can certainly
set up a system that will work a lot better than anything farmers can
do along that line, and certainly business has been niore successful
than farmers have been or can be, in my judgment.
But, nevertheless, I hardly see how you can expect farmers to
eventually stay with the competitive system if other elements of the
population have been able to work out some plan where they have
already, to some extent, eliminated competition.
Mr. Davis. I don't believe that is predominantly true in the
business world.
Mr. Zimmerman. Pardon me right at that point. For exa.mple,
the automobile industry decides how many automobiles they are
going to sell in this country and likewise abroad. They get together
and figure it out. They go so far as to say that this automobile will
sell for this price.
Agriculture can never be in position to do anything like that.
Mr. Davis. I am glad you brought that up, Mr. Chairman, because
it leads me to say something about automobiles.
Mr. Zimmerman. I used that as an example.
Mr. Davis. My first automobile I bought in 1921, and I have had
three cars that lasted 7 years each and now I am on the fourth. I
didn't pay as much for the second as I did for the first, and I didn't
pay as much for the third as I did the second. I didn't pay as much
for the fourth as I did the third, and each time I got a far better car.
"Where in agriculture can I fuid an equivalent? There have been reduc-
tions in the cost of growing wheat through the application of new tech-
nology, but the parity price formerly set has been changed upward.
Mr. Zimmerman. What does parity mean?
Mr. Davis. If competition means anything it means that the units
producing products are in such relation with each other that they tend
to improve their products and lower their price over a period of time
,or reduce its cost and thereby its price.
Now the automobile companies have been relatively few in number,
and as of any particular year they may have their understandings
about price, but over the period of 24 or 25 years that I have known
of them they have certainly done a remarkable job of competing and
giving the consumer the benefit of the competition.
I don't think the automobile industry is at all a great example of
the failure of competition, but rather of its success.
Mr. Zimmerman. Now, the trouble is this: Of course, the farmer
for many years went along selling his products for less tha'n the cost
of production. In other words, he was going in debt and going broke.
He went through the depression. He had to take it in stride. When
you talk about parity, parity prices mean fair prices in relation to
what the farmer has to buy and what he has to pay for labor and
placing the price of agricultural commodities on equal footing with
what a man gets for his services and for his manufactured products.
Mr. Davis. That was the intent, but that is not the effect.
Mr. Zimmerman. That is a question I would have to argue with
you about.
1664 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Davis. I wish we had the time.
Mr. Zimmerman. I would hke to argue it.
The point is that we have been proceeding on the theory in this
country for many years that the farmer shoukl take less than anybody
else for his products; he has been the underdog and they have wanted
him to get up on an equal footing with industry and labor. But the
very minute he gets up there they begin to complain about high prices.
In other words, if a man has to go out and buy a pair of shoes he has
got to go out and sell a bushel of wheat.
Mr. Arthur. May I interject one question right there?
Mr. ZixMMERMAN. Yes.
Mr. Arthur. I think I can state very briefly one of the things that
Dr. Davis has in mind. If the farmer instead of having 1 bushel of
wheat now has 2 bushels of wheat and exchanges it for a pair of shoes
that wear half again as long, the parity price per unit of those things
doesn't tell the whole story.
Mr. Zimmerman. I am going to agree with you on that. If the
cost of production comes down so that that bushel of wheat will buy
in the same relationship, that is all right. That is the thing we have
got to keep in mind.
Mr. Davis. I wish I could go into that parity matter, for it is one
of the basic things, but I haven't succeeded in finishing what I started
to say.
Mr. Zimmerman. I will let you go ahead and finish your statement.
Mr. Davis. Well, I think I have said enough to bring out that we
should and can earn our share in the world export trade by American
efficiency, quality, and fair competition with other nations, not by
bargaining, nor by export subsidies at public expense, nor by domina-
tion with our overwhelming economic power. If other countries
undertook to export to us by that means we should be quick to resent
them as hold-ups and as dictation, and I think we can and should
set an example of another sort.
I think it is highly probable that on the basis of fair competition
we can export a good deal more of certain agricultural products, not-
ably cotton and wheat, as part of a world system of freer trade, than
we can possibly export under a controlled system with export subsidies
and international agreements. The normalization of American agri-
culture after the war depends on our changing policies in that direction.
The biggest barriers to the export of our farm products are not
foreign tariffs. They are not import quotas, in the past or in prospect.
They are price-raising measures in the United States which stop
exports before they can start. If we wish to say we will limit our
exports by raising the prices here, and we will limit our exports because
our farmers have to do something, even if they can't do it as well as
other countries can, that is one kind of policy. It will bring one kind
of agriculture, which I don't think is the kind of agriculture that is
on a sound, satisfactory, self-sustaining basis.
Our price-support policies have been and are seriously cutting down
the market for our farm products, at home and abroad, at home par-
ticularly for cotton and wool, and tending to interfere with their normal
consumption at home.
The most important changes needed in agriculture's policies here
and abroad include the abandonment of price supports and production
controls, allowing prices to play their normal part in influencing both
POST-WAR ECONOMIC POLICY AND PLANNING 1665
consumption and production. That change can be made by degrees.
As Justice Byrnes suggested in his recent report, it can be accompanied
by measures to temper any damage to farmers, many of whom have
ah-eady acquired a cushion of savings against the change.
The methods of providing payments and other cushions necessary
to accompany the reconversion is a technical matter that I am sure
could be worked out if a commitment were made to work toward a
policy of letting prices alone. I am sure that the transition would
require some such attention. I beheve that the commitment already
made to support prices at 90 percent of parity, for 2 years after the
proclamation of the end of hostilities, is a commitment that should
be altered, but that alteration, in justice, requires some supplement
and not a mere withdrawal of the commitment.
I am sure you will not misunderstand me there. Working toward
allowing prices to operate is one of the important changes that must
be made if we are to have normal internal markets and normal inter-
national trade. , . i, i i i -i •
Now, I believe, further, that farmers basically would endorse this
doctrine. It is my impression that farmers prize their freedom and
independence. They instinctively object to regimentation and con-
trols. They don't like being wards of the Government. They don'^t
hke being beneficiaries of one kind of hand-out or another. I don't
think they like to be told what not to produce. They like to produce
and they feel that it is wrong to be paid for not producing or for doing
what they otherwise would do. They realize that many wartinie
prices are excessive and must fall, and that they cannot expect in
peacetime a continuation of war-expanded income. They are con-
tent, and will be content, with a lower level than this exceptional war
period has given them. ^i e\\
They mistrust subsidies. They shudder at the growth ot the
public^debt in peace and in war, which has been due, m part, to the
numerous subsidies that have been handed out. They suspect favors
to any class— business, labor, or farmers. i- i .
In my judgment our own farmers will welcome a substantial change
in agricultural pohcies and programs in the general interest of our
Nation that will put American agriculture on a self -sustaining basis
instead of in an artificially propped-up situation, vulnerable to changes
in politics and business. . • i • j
Thev want to earn their way. They want help and certam kinds
of guidance, but they don't want to be put in this pecuharly artihcial
position.
That is all, Mr. Chairman, that I have to say.
Mr. MuRDOCK. May I ask the doctor a few questions?
Mr. Davis. I have to catch a train at 5:20.
Mr. Chairman. If they are short, go ahead.
Mr MuRDOCK. You must leave at what time, Doctor?
Mr. Davis. I have to get back to the Cosmos Club and get my
bag and catch the 5:20 train. . .
Mr. MuRDOCK. Do you beheve that American agriculture can
produce in peacetime more than our consumer demand of food and
fiber, so that there is apt to be an accumulation of surplus which has
formerly harassed the farmers? ,
Mr. Davis. Yes. , . t • i t - j u
Mr MuRDOCK. The American farmer is an individualist and lie
possesses aU the quaUties that you pictured there a moment ago but
1666 POST-WAR ECONOMIC POLICY AND PLANNING
it is pretty hard for him to cooperate. There are about 6,000,000 of
them and they go ahead and produce under a system of enterprise
as best they can.
Now, aren't they apt to be the victims of monopoly some place
along the line, since they cannot control their own production?
Mr. Davis. There is always a danger, but the proved instances
have been of insignificant consequence, in my opinion.
Mr. MuRDOCK. What I am looking for is something that will take
care of the surplus which I am sure is bound to come as soon as a
hungry world has been satisfied shortly after the coming of peace.
Mr. Davis. There is no possibility, in my opinion, of thoroughly
satisfying the hunger of a hungry world. There is a possibility of
not meeting the most urgent need within a year or two, but beyond
that the possibilities of expansion without satiation are large and not
small. But they require this interchange of goods and services, and
it will not occur tlu'ough Santa Claus operations or anything of that
sort.
Mr. MuRDOCK. Thank you very kindly. I don't want to detain
you.
Mr. Zimmerman. I want to express the appreciation of the com-
mittee for your coming here and giving us this very informative and
interesting talk.
Mr. Davis. Thank you, Mr. Chairman.
Mr. Zimmerman. The hearing will be adjourned.
(Whereupon, at 4:05 p. m., the hearing was adjourned.)
POST-WAR ECONOMIC POLICY AND PLANNING
THURSDAY, MAY 24, 1945
House of Representatives,
Agricultural Subcommittee of the Special
Committee on Post-war Economic Policy and Planning,
Washington, D. C.
The subcommittee met, pursuant to notice, at 10:30 a. m., in
room 326, Old House Office Building, Hon. Orville Zimmerman
(chairman) presiding.
Present: Representatives Zimmerman (chairman), Simpson, and
Hope.
Also present: M. B. Folsom, staff director; Dr. Theodore \Y.
Schultz, consultant.
Mr. Zimmerman. The committee will please come to order.
Mr. Murdock will try to be here later, and Mr. Voorhis is out of
the city.
We have with us this morning Dr. Edwin G. Nourse, vice president
of the Brookings Institution.
Dr. Nourse, will you please state your name, your residence, and
your background?
STATEMENT OF EDWIN G. NOURSE, VICE PRESIDENT, THE
BROOKINGS INSTITUTION
Mr. Nourse. My name is Edwin G. Nourse, and I have been here
in Washington for the past 25 years in connection with the Brookings
Institution, and before that I had been a teacher of agricultural
economics in a number of midwestern institutions, such as the Uni-
versity of South Dakota, the University ,of Arkansas, Iowa State
College, where I was head of the department, before I came here in
1922.
Mr. Zimmerman. Do 3^ou have a prepared statement that you
would like to make?
Mr. Nourse. YeS; I have a drafted statement here, because there
is a general point of view which I want to put forth and I thought
I could perhaps do it better and lay a better foundation for comment
and discussion with this background.
Mr. Zimmerman. You would then prefer to make your statement
and then submit yourself to the questions of the committee?
Mr. Nourse. If that is agreeable, sir.
Air. Zimmerman. It will be agreeable, I think.
Mr. Hope. Yes.
Mr. Simpson. Yes.
1667
1668 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Zimmerman. Then you may proceed.
Mr. NouRSE. I want to say that I was very glad to accept Mr.
Arthur's suggestion that I appear here before the committee. I
attach great importance to the work that this committee, of which
you are a subcommittee, is undertaking in the exploration of post-war
economic planning and policy.
As I see it, what you are really considering is how, in the period
after the war, we can most fruitfully take up again the perennial
problem of how citizens and their Government can adjust the working
parts of our national economic machine so as to attain the highest
level of steadily operating efficiency.
Obviously, in any such national economy, the agricultural industry
is an important, indeed indispensable, part. However, it does not
stand alone, and no solution of its problems can be worked out sep-
arately and then written into a general economic program.
I think there is danger in a type of economic thinking which has
been manifest in the United States during the last 20 years or so.
This starts from the premise that agriculture is our basic industry,
and thereupon argues that public and private agencies must first
find ways of making it prosperous, since only then can the rest of
the economy prosper.
In contrast to this view— which has been called agricultural funda-
mentalism— I suggest that there is no way of really providing for
the success of post-war American agriculture except as an inter-
dependent part of an integrated industrialized economy.
Insofar as prior importance is to be given to any part of this inter-
related system, it would be more true or more helpful to say that
we must look to the assuring of industrial progress to provide general
business conditions within which agriculture can prosper than to say
that agricultural success and well-being constitute a cause or a.
necessary antecedent to general prosperity and economic stability in
the industrial age in which we live.
I suspect that the primary reason that moved Mr. Arthur to invite
me to appear at this juncture in the dehberations of your committee
was that he thought of me not merely as an agricultural economist,
but as something more than a mere trade-union agricultural econo-
mist. •
It is true that I was one of the pioneers who helped to develop
agricultural economics as- a recognized professional discipline. I did
not, however, approach the field from the side of production eco-
nomics, which was the child of farm management, which in turn
was the child of agronomy.
Instead, I approached it from the side of agricultural marketing
and cooperative organization, with my emphasis primarily on prices
of farm products. This approach inevitably entailed analysis of the
whole price-making process, with as much emphasis on the factors
that strengthen or impair the demand for farm products as it did on
the questions of technique, organization, and cost that condition the
supply side of the farm-price equation.
Following this price problem even after it jumped over the farmer's
fence, I became involved in broad studies of America's capacity to
produce and to consume, the relation of income and its distribution to
the maintenance of economic progress, and finally to the broad prin-
ciples of price making in a democracy.
POST-WAR ECONOMIC POLICY AND PLANNING 1669
Mr. Arthur suggested to me that your committee might be interested
in a streamHned statement of the price philosophy to which these
studies have led me and of its application to the problem of what
agriculture can do for itself after the war and what Government should
prepare to do for it as part of our postwar economic policy and
planning. , . ^ , • i
I have had the temerity to put my analysis and conclusions under
the label "low price policy." This is perhaps giving the dogma a bad
name. It is so easy for businessmen and farmers and workers to
assume that, of course, high prices and high wages are the natural
accompaniments, indeed the cause of prosperity.
In fact, however, high prices reflect conditions of scarcity, of in-
efficiency, and of high cost, whereas we live in an age of technological
progress*^, popular education toward efficiency, and potential abun-
dance. Trymg to link fuh realization of these high productive powers
with rising or maintained prices is a contradiction in terms.
The bare bones of the low-price argument may be stated very
briefly and in terms of the familiar elements that have been taken as
making up "the American way of life" — freedom of individual enter-
prise, profit-seekmg capitalism, and active but orderly competition.
Now, if workers are free to apply their industry and their ingenuity
whenever and wherever they see the best opportunity to enlarge their
returns, and if everyone is free to save and invest his capital wherever
he thinks it will lower cost or enlarge product, and where each worker
and capitalist is in honorable competition with his fellows, we have set
the conditions for maximum technological progress or productive
efficiency. This means an ever-increasing volume of product and a
proportionate rise in real incomes; that is, ever more goods and
services enjoyed by consumers as a whole.
There is no inherent reason why this situation of rising productivity
should mean higher cash incomes either in the form of higher rates of
profit or liigher rates of wages. Naturally, there would be a greater
aggregate of wages, salaries, rents, interest, and profits because re-
sources—labor and property— would be fully employed. But as for
the individual, if he had the same cash income at lower prices, this
is just as real a gain as a larger income with which to buy more goods
at the same or higher prices.
Gain in real income through lower prices we have had in some meas-
ure ever since the dawn of the industrial revolution. Barring some
clouding of the record because of the techniques of our money system,
the last 200 years of relatively free business enterprise and marked
technological progress have resulted in great increase in the volume
of goods and services, substantial fall in prices, and increase of real
income to a great part of our population, though in very unequal
degree.
In this sense, a majority of businessmen, probably, give lip service
to the principle of low-price policy. They point with pride— rather
too much pride — to the record of price reductions, quality improve-
ment, and increase in per capita volume of consumers' goods. But
tliis is a sort of "kiss of death."
To say that they have already been following a low-price policy
implies that what they have been doing has been enough, that no
change in practice is needed. The vital issue now is whether they,
in fact, accept or are willing in the post-war period to accept with full
99579 — 45 — pt. 5 29
1670 POST-WAR ECONOMIC POLICY AND PLANNING
understanding and without equivocation the principle of price reduc-
tion, not merely in lagging response to technological progress but as a
means of bringing it about in connection with full use of resources. .
Businessmen are much disposed to say: "Certainly, we lower prices
as far as we can with improvements in productive efficiency." This,
of course, simply shifts the question to interpretation of the phrase
**as far as we can" and involves an infinite controversy of fact and
interpretation, of accounting practice, investment policy, distribution
of techniques, and velocities of money flows which cannot even be
touched on here.
The simple underlying point, however, is that whenever our economy
shows substantial amounts of hoarded funds, low utilization of plant
capacity; and great numbers of unemployed, this is prima facie evidence
that prices somewhere in the system are being held so high as to choke
ofl" transactions and thus the use of our productive resources. Either
the producer, the worker, or the capitalist is "pricing himself out of a
market." He has become convinced that by maintaining prices at
the expense of volume, he can advantage liimself or his particular
group.
This is probably in most cases true in the short run, and in a few
cases may be true even in the long run. But the individual or group
gain is always secured at the expense of others, and in most cases
such profiting at the expenge of others eventually comes back as a
loss on the individual or group that employed this method.
Here there is one broad principle of economic life which needs to
be borne in mind; namely, that if everybody "lets himself go," in
terms of productive eft'ort and lets the volume of product that results
find its own equilibrium price in the market, these prices cannot
possibly fall too low since they strike the basic equilibrium level at
which all product is taken from the market.
There will, of course, still remain the ever-present problem of with-
drawing effort from the least remunerative point and redirecting it
toward one where demand is relatively more keen. But this constant
readjustment is the essential and distinctive function of the business-
man. Production restriction, on the other hand, is a perverted activity
of management.
And yet it is precisely these restrictive activities that have remained
a persistent factor of business policy and the basic pattern of a major
part of our so-called economic legislation. Whenever there was a
maladjustment in price relations, there has been an increasing tendency
to run to Government to get a short-cut remedy in the nature of
special support to the disadvantaged group, either through an in-
stitutional change or an outright subsidy.
We seem to have become increasingly unwilling to follow our own
professed belief in private enterprise and free bargaining to effect the
fundamentally sound adjustments in price relations which would
bring about a self-sustaining adjustment of the system.
The restrictive tendency was exemplified first by organizers from
the capitalist side, who got legislation enacted which enabled
them to build up gigantic trusts, corporations, and holding companies
and to define property rights in intangible as well as tangible property
in such ways that they could control substantial blocks of small savers,
of workers, and of consumers to the short-run advantage of a privileged
class limited in numbers.
POST-WAR ECONOMIC POLICY AND PLANNING 1671
Following in their tracks, unions sought likewise to build up strong
private governments within the labor field, and, instead of waiting to
win new members and solidify consent among the governed, sought
special legislation which would give them a short-cut toward economic
power of the class or, more particularly, of special groups within that
class.
Finally, and following in the footsteps of both labor and capital,
agriculture has recently sought in a similar way to jump over the
intervening steps of voluntary organizational growth and has invoked
Government support for special measures designed to assure them a
more favorable place in the general scheme of market relationships.
In all this I see a definite and dangerous departure from the sound
American tradition that economic relationships should be worked out
by free bargaining in an open market. We have substituted the
principle of power devices sanctioned by Government in response
to the competing and logrolling pressures of interest groups.
It seems to me fatal to the success of economic adjustment to remove
the settlement of economic issues from the atmosphere and procedures
of market bargainings — much of it collective bargaining — to the
medium and the devices of political determination.
Not even the power of an omnipotent state can make every con-
testant in the race win over every other racer. And since most of
the devices by which each group seeks to get a differential advantage
involve restraints upon production, the ultimate effect is one of net
general loss. Elsewhere I have described this procedure as a "donkey
race"; and it is obvious that no new records of speed, strength, or
endurance have ever been hung up in a donkey race.
I was working actively with farmers during the years in which the
present pattern of federally supported agrarianism was worked out.
I well recall the coming of slogans such as "Give the farmer a fair
share of the national income," "Tariff protection on what we sell
as well as what we buy," "Fix the price of our product as other people
do," and, finally, the "parity" formula and various devices for upping
it.
I well recall the way in which organized agriculture turned from
the slow but scientific methods of economic adjustment which had
grown up under our agricultural college, experiment station, and ex-
tension system and took the page of militant unionism from labor's
book and monopolistic pricing from the book of corporate manage-
ment, with lobbying and logrolling as the techniques for getting
Federal support for these programs.
I would be the last one to say that the farmer has had no grievances
or that he has derived no relief from some of the measures that have
resulted from this line of attack. It would be an impossible research
task to evaluate just what the short-run and direct gains have been
and what are the longrun conceivable repercussions and the price that
he has paid in the form of concessions granted to the other interest
groups.
Agrarians themselves admit that they have been egregiously out-
traded at many junctures in the legislative battle, and more thought-
ful members realize that they can't win by participating in a scheme
of competitive restraint of trade or by all-around hiflationary tinkering.
As a practical matter, I am disposed to suggest that farmers now
have enough special legislation and political influence in their hands
1672 POST-WAR ECONOMIC POLICY AND PLANNING
SO that they could well afford — with this as trading stock — to start
a constructive campaign designed to do away with the most restrictive
types of special privilege enjoyed by other groups.
They could well afford to exchange the slight and local gains they
make from protective tariffs for the more general and enduring gains
they would get from the moderation of industrial protection.
They could well afford to cease making a mockery of the parity
idea by making it a synonym for any sort of price-pegging, and start
a forthright attack on various price-maintenance laws and industrial
subsidies by which they are burdened.
I recall some years ago talking somewhat along this line to a
Farmers' Week audience and Radio Town Meeting at the University
of Ohio. As we left the platform, Mordecai Ezekiel, who had been
the other speaker, turned to me and said, "I hadn't realized how much
of an advocate of laissez faire you are."
I protested then and want to protest most strongly now that what
I am talking is not laissez faire at all but simply a common-sense rec-
ognition that piling up mutually offsetting privileges and restraints
makes Government a burdensome complication of economic life rather
than a facilitator or stimulus of economic activity. I am for the latter
kind of Government aid.
Within my time Government has developed or expanded four dis-
tinctive types of service to farmers or to the agricultural industry and
thus has enlarged the productive capacity or enhanced the efficiency
of this major sector and thus our economy as a whole. ,
The first of these areas of sound Government action has been within
the field of farm management and market organization. Here the
approach is that of research, popular education, and a voluntary ad-
visory relationship. These developments have recognized the natu-
rally small-scale character of agricultural industry and have brought
the advantages of well-organized research on both technical and com-
mercial problems within the farmer's reach, without subjectmg him
to direction or control.
It has embraced a large number of positive actions by Government
to give agricultural producers a free, open, and honest market with
Government-defined grades, standard containers, official inspection,
equitable market practices, and prompt and authoritative market
news.
This work has already been so fully and so ably developed that it
would not seem to present any spectacular possibilities of great ex-
pansion by the Federal Government after the war. But it should
certainly be perfected as to its details, adequately supported and ex-
panded in some neglected areas, and kept to the highest standard of
efficiency.
The second field of development is that in the field of cooperative
organization. While the Government has done much toward raising
the efficiency of the operation on the individual farm and removing
abuses from the market in which the individual farmer sells, it is also
important to make available a form of business association outside
his own gate through which groups of individual farmers may inte-
grate the performance of certain functions which call for a larger unit
of operation.
The growth of selling and purchasing operations by farmer groups
in recent years has put these organizations in the class of "big busi-
POST-WAR ECONOMIC POLICY AND PLANNING 1673
ness," has developed distinctive efficiencies in the interest of both con-
sumer and producer, and served as a yardstick for measuring and im-
proving the performance of commercial agencies. To a small extent,
it has facilitated various production operations, such as livestock
breeding and orchard operation.
Here again there is no prospect of spectacular change after the war,
but several controversial problems in the operation of cooperative
associations and the relationship of Government to them need to be
given attention.
The third general area of useful expansion in Government service to
agriculture dates from 1913 and covers the several branches of financial
service now embraced in the Farm Credit Administration.
These have removed disabilities from which the agricultural indus-
try suffered in the financing of its operations. They have raised the
standard of credit service and farm operation and have complemented
rather than restricted the operations of private credit agencies.
Here, too, it would seem that the completion and perfecting of this
work in rural financing is to be expected rather than any spectacular
change or expansion of Government activity. Possibly some expan-
sion of Government insurance in agriculture may prove both feasible
and desirable.
Mr. Zimmerman. Wliat was that?
Mr. NouRSE. I said, "Possibly some enlargement of Government
insurance in the field of agriculture may prove both feasible and
desirable." From the experimental work that has been done, there
are areas in which expansion has been suggested.
Now, the fourth field of governmental activity which seems to me to
have justified itself and to call for permanent inclusion within the
functions of Government in its relation to the agricultural industry is
that of surplus disposal. This was primarily a development of the
last 12 years, experimented with and put through the demonstration
stage under the Agricultural Adjustment Administration. The bio-
logfc character of the agricultural industry exposes it to unpredictable
and drastic changes in'the rate of production, outside the abilities of
the most capable farmers to control. Since many of these products
are perishable and cater to markets of relatively inelastic demand,
leaving the situation to the play of ordinary market forces entails both
flagrant waste of valuable and often costly products and such demorali-
zation of market prices as results in mcome losses which are dispro-
portionate to the financial resources of the vast majority of producers of
these products. i -t •
This situation seems to impose a coordination and stabilization
function upon the Government at the same time that it presents an
opportunity not merely of salvaging waste product but of utilizing it
to the improvement of the physical welfare of the economically weaker
part of the population.
The newer knowledge of nutrition and wider social realization of
the importance of maintaining minimum standards of health gives
added importance to thus administering seasonal surpluses of horti-
cultural and livestock products. These are the ones most subject to
unpredictable fluctuations in supply.
It seems reasonable to think that the Federal Government can
combine practical ways of diverting ujidue price-depressing surpluses
1674 POST-WAR ECONOMIC POLICY AND PLANNING
of specialty crops to gratuitous or low-priced distribution in areas of
the population where they will do most to raise health and bodily
efficiency. This work should be undertaken on a practical and tough-
minded basis of agricultural stabilization, not as a sentimental pro-
gram of free feeding or as a special privilege to certain agricultural
groups.
How far the usefulness of this device can be extended into staple
products or to deal with surpluses beyond the limit of a single growing
season has not yet been demonstrated in practice. This whole field,
however, should be one of vigorous but practical exploration in the
postwar period.
As I see it, the prime problem of postwar economic adjustment is
to secure high-level activity on a self-sustaining basis in the industrial
sector of the economy. Such activity will produce the maximum
absorptive market for farm products and the readiest absorption of
surplus labor from the farm.
Under such conditions, the well-proven devices of agricultural
research and advisory guidance, voluntary cooperative associations,
and Government coordination of the financing function, together
with sound development of the newer devices of surplus disposal, will
provide most effectively for the economic health of agriculture.
But if we fail to have adequate industrial leadership and sound
complementary Government action in the industrial area, no amount
of agrarian piUs and poultices will avail much.
Thus, you will see that my strategy for an agricultural program
would be something of a return— as I have said to Mr. Goss, national
master of the Grange — to the earlier antimonopoly or procompetition
campaign on which the Grange operated in its early days. This led,
as you will recall, to the establishment of the Interstate Commerce
Com7nission and the enactment of quite a number of measures over
the years, which were directed not specifically at special aid to agri-
culture but to improving the situation of the national economy as
a whole.
That, sir, is the general statement which I have prepared.
Mr. Zimmerman. Mr. Nourse, if I followed you correctly, you
agree somewhat in the doctrine of old Adam Smith — the man who
would govern the price of farm commodities must follow the law of
supply and demand — you feel that should be done freely and un-
restrictedly; is that the thesis?
Mr. Nourse. It is definitely a thesis that a truly competitive
world is the most productive world. It proposes an attack upon
restraints of the competitive market, rather than building up off-
setting artificial stimuli in some way to support prices.
Mr. Zimmerman. Well, now, let me ask you this:
When a man gets very iU, disease is about to take him over the
brink, sometimes the doctor gives him ''a shot", as we call it, to hold
him a little while until he can get better or recuperate to a point where
he can make the grade.
Now, you, of course, inveighed against subsidies and the payment to
farmers to boost the price. Of course, you think that is wrong, as a
long-time program but do you think it might serve, at this time, some
useful purpose?
Mr. Nourse. Yes ; I think that the physician does have to have some
morphine and alcohol and adrenalin, and various things to serve as a
POST-WAR ECONOMIC POLICY AND PLANNING. 1675
shot in the arm. But the reputable doctor doesn't limit his medicine
to that sort of treatment.
Mr. Zimmerman. Then you don't disapprove the program that we
have followed since the days of the depression, to try to break up
things and bring up the price of farm products to where the farmer
could really get along with his economy?
Mr. NouRSE. Well, I don't disapprove, in principle, the idea that
certain relief measures have to be taken in an emergency of that sort.
Nor do I say, on the other hand, that I approve in toto all the mea-
sures that were taken and the way they were carried out, or in con-
tinuing to rely upon them.
Mr. Zimmerman. I would agree that we should not rely on that
wholly, but whether or not we have made some serious mistakes in
administermg these shots — do you think that might be a question
open for a good deal of consideration?
Mr. NouRSE. Wey, I think the line which was taken in the emer-
gency, the Agricultural Adjustment Act, at the beginning of the
depression, loses its justification when it goes on to the support of a
cotton price permanently, or without any known end, above 20 cents,
when we know that we"^can produce the cotton supply far below 10
cents. That is the abuse of a principle which had been very good,
perliaps, as a relief measure in an emergency.
Mr. Zimmerman. In other words, you are not condemning what
we have done under an emergency situation, but it is your position
tliat we shall have to be a little careful about the way we use the
different drugs; that you should try to get the patient to the point
where he won't need them.
Mr. N CURSE. Yes.
Mr. Zimmerman. I wanted to get your thought there.
Mr. NouRSE. And I think there is a danger there, of a spread of the
same sort of treatment from the extreme situation to many others;
that is, there is a tendency for others to say, "You dealt with cotton
tliis way; you should give an equal amount of special support to
wool;" and if you gave it to cotton and wool, then they would want
it for corn or wheat, or whatever else you may have.
You recall the theory of the original five strategic commodities
under Agricultural Adjustment Agency, and how if they were helped,
tlie whole farm market would be stabilized.
But it went on and on into other commodities, until most of them
were included in the parity program,
Mr. Hope. These drugs that you are talking about are habit-
forming, are they not?
Mr. NouRSE. Yes.
Mr. Zimmerman. You laid down here the four fundamental proposi-
tions that you have offered, and the first is helping in farm management
and research problems. Of course, that has been going on, and your
idea is that program should be implemented in every possible way
and we should continue to do what we are doing -and what is bemg
carried out by our land-grant colleges, agricultural schools, and our
Extension Services, and so forth. You approve of the extension
services?
Mr. NouRSE. Yes.
Mr. Zimmerman. You supported that, and are you m favor of the
bill which was recently passed?
1676 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. NouRSE. Well, I don't know that I am familiar enough with all
the details to make a blanket approval of it.
Mr. Zimmerman. It was appropriating additional money to carry
on that work.
Now, the second proposition was that you praised cooperatives as
a means of enabling the individual farmers to work in groups and with
large organizations to promote the sale and disposition of the com-
modities.
Then, the third was
Mr. NouRSE (interposing). Just a word on that. Of course, in
that case, too, I said there are some problems as to how the cooperative
associations should be used. I think it is desirable that Government
should make available to the farmers this type of organization for their
commercial operations, that it should furnish assistance in putting the
operations on the basis of high efficiency. But also, the occasion may
arise when it might be necessary to use restramt, to eliminate abuse
from that type of institution. We have had illustrations of use of
cooperative organizations as restrictive, militant, price-boosting
agencies for particular agricultural groups, just as much as the corpo-
rations have been used for some of the restraints seen in the mdustrial
field.
Now, that is partly a matter that would be up to the Federal Trade
Commission, the Department of Justice, and other agencies. But it
seems to me that Government — that is, the agricultural part of the
Government — through the passing of various pieces of legislation
which tend to promote the cooperative form of organization, should
also recognize the possible abuse of those powers and see that the
proper curbs are applied.
Mr. Zimmerman. Yes. Well, of course, the financing of the
American farmer through the Farm Credit Administration — the
House Committee on Agriculture is undertaking a study of that whole
field with a view toward coordinating the program and making it more
effective and helpful to more farmers — I thmk you can recognize the
benefits of that.
Your fourth point was the disposition of surpluses.
Mr. NouRSE. Yes.
Mr. Zimmerman. I take it that you approve the school-lunch
program as a part of that, or do you?
Mr. NouRSE. I do.
]Mr. Zimmerman. And some plan like the stamp plan — did you
approve of that?
Mr. NouRSE. I think that was a very interesting experimentation
in this field, and that is why I said that is one of the newer things
that has been through the demonstration stage and we can see that
it has very considerable possibilities of usefulness. We also see
difficulties. The amount of produce that can be distributed in that
way may be disproportionate to the school-lunch method of disposal.
It seems to me that that is perhaps the greatest unsolved problem
there, not as to the desirability of the principle but how we can carry
it out in a size proportionate to the surplus problems as they appear.
Mr. Zimmerman. Now, I come from a cotton section down in
Missouri where we rely upon cotton as our cash crop, primarily.
We cannot eat cotton, you know.
Mr. Nourse. That is right.
POST-WAR ECONOMIC POLICY AND PLANNING 1677
Mr, Zimmerman. And you put that under a stamp plan and scatter
it around among the leading people— but it has got to be processed
and disposed of. That presents a little more difficult problem, does
it not? , ^ ^.
Mr. N CURSE. It does. I do not see at the present time any
possible practicable development of a surplus disposal program m
cotton that would cure the trouble you have there, with the surplus
you have. Something else would have to be used there.
Mr. Zimmerman. Now, where cotton in the South presents one
problem — as I get your thought — the idea is that we must maintain
some control of the amount of cotton that we produce. What do
you think about that?
Mr. NouRSE. Well, as a general matter, the control ot acreage or
the control of specific farm operations seems to be something which
should be resorted to only on an emergency basis.
Mr. Zimmerman. I know, but I have observed the operations ot a
cotton program for a long time. When the surpluses reached a
certain point, then you have disaster in price; you disrupt the econoniy
in our whole section of the country. So it seems to me that we should
look at this cotton question a little bit differently from ordinary
commodities like corn, where you can feed that to your livestock and
make lard or something else out of it. . .
Mr. Nourse. I suggest the reason the cotton problem is m the
condition it is in at the present time is because the measures which
have been taken for the last dozen years have not moved toward
facing the price realities of that situation but have been trying to
approach it in terms of price support. . .
Mr Zimmerman. But you do remember in 1937 when restrictions
were lifted, we produced 19,000,000 bales of cotton in our country,
almost twice what we ordinarily produced. That created a terrible
situation, and that can happen, because we have the soil, and our
men can produce it. When this gets out of line, then, of course, the
cotton farmer's economy is ready for disaster.
Mr. Nourse. Well, you can't get out of a bad situation and mto a
good one miless somebody somewhere gets hurt in the process, and if
you are not willing to face that in a period such as we have had, it
seems to me to give us an unpromising prospect of being able to face
it at any time. . , ,. , i-n- x 1 1
Mr. Zimmerman. That does seem to be a httle different problem.
Mr. Nourse. Because we have gone on up in price and increasing
surplus accumulations during the period of active war demand, when
we should have been taking measures to absorb the surplus and to
avoid the situation we are now getting into.
Dr. ScHULTz. Mr. Chairman, may I interpose a question here.^
Mr. Zimmerman. Certainly.
Dr. ScHULTz. It would be well to point out that withm the last 3
years, after the A. A. A. dropped its acreage restrictions on cotton,
even with the price at 20 cents, the acreage of cotton has been slmnk-
ing about 2,000,000 acres a year. Wliere it was 24,000,000 it went
down to 22,000,000 and then to 20,000,000 in 1944 with every mdica-
tion that it is going down again in 1945.
Now, the inference is that if we have a prosperous economy and
draw enough labor out of that field so that labor in the cotton economy
has other job opportunities, the cotton acreage will not be too large.
1678 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Zimmerman. You understand, of course, Dr. Schultz, that in
the last few years since the war, we know that two things have brought
down cotton acreage, and one is the lack of manpower.
Dr. ScHULTz. That is right.
Mr. Zimmerman. And the second is the lack of farm machinery.
Dr. ScHULTz. That is right.
Mr. Zimmerman. In other words, those boys just could not oper-
ate the acreage that was available. Now, that was the result of the
wartime condition. I think, that you have made a good suggestion,
a very interesting one, in that if there were sufficient industry to draw
on this manpower in the South, that might bring the production of
cotton down to a level that would be in line with our needs. I think
that is a very fine suggestion.
Dr. ScHULTZ. The war period pros^ides a clue.
Mr. Zimmerman. It gives a clue to what may be done if certain
things happen, such as the establishment of additional industrial
enterprises in the South, or at least some means taken to educate our
Southern people to go where industries exist and wdiere you can get
jobs and support people. I thank you for that.
One further question — I don't want to monopolize all of the time
here — you spoke about agriculture, how it started out and how it was
the last segment of our economy to undertake to do anything to
help itself. Wasn't that about it?
Mr. NouRSE. I am not sure quite what you mean, 'Ho help itself."
Mr. Zimmerman. I mean agriculture, in the early history of our
country, just went along by its own momentum and did not hav^e any
Gov^ernment support or help or organized assistance, like industry.
They went out and said, "We must has^e protected markets," and
they put in tariffs, and then later on the labor unions came into being
and they started fixing prices in their organization, boosting things,
and, as I say, agriculture is the last segment, the last section of the
economy to take any protective measures in its own behalf, don't you
think?
Mr. Nourse. Yes.
Mr. Zimmerman. And wasn't it rather driven to that extremity, on
account of — I'll say — industry and labor?
Mr. Nourse. I think I made that statement here, that the capital-
ist industrial interests led off in this type of protective organization,
and then labor unions came along with their type of organization, and
finally the farmer in pretty much the same situation was driven into it.
Now, my second proposition was that, having built up a number of
protective devices which complete a system of offsetting controls
and supports and restrictions throughout the economy, I think it is
time now for them — using as trading stock their own protective
measures — to make the attack in the other direction; in other words,
getting a free, competitive situation in the other sector.
Mr. Zimmerman. I am wondering whether the four fundamentals
that you have here — the things that you think should be done for
agriculture — are enough under our existing economic conditions in
this country, in view of the industrial organization and labor organiza-
tion. Do you think agriculture will be able to compete with them
and stand up and go along?
Mr. Nourse. I think my answer to that, Mr. Zimmerman, would
be something like this:
POST-WAR ECONOMIC POLICY AND PLANNING 1679
No; they are not enough, but more would not be enough either.
More of this sort of restriction woukl make a bad situation worse
rather than getting a fundamental cure of the situation.
Mr. Zimmerman. You are not going to leave them in this position,
are you?
Mr. NouRSE. Well, if I were a person who was being reelected by
the votes of his constituents my answer to that woukl have to be
''No." That is, you have got to have a positive program, a positive
agricultural program.
It seems to me, however, that it is unfortunate and self-defeating
and bound to be disappointing in the end, if you attempt to deal with
the agricultural problem by more protective and restrictive measures
applied to agriculture, or by artificial steps which may have the inter-
ests of some industries at heart, but — — •
Mr. Zimmerman (interposing). You think we could go back and
work on this tariff question a little?
Mr. NouRSE. Yes; that would be one way.
Mr. Zimmerman. That is a hard spot, or would you suggest-^- — ■
Mr. NouRSE. Although, as a matter of fact I am not a doctrinaire
free trader in the sense that I think that it is a major issue. You have
a big enough economic area, primarily a free-trade area \Vithin the
United States, and I think the rate of relative importance of domestic
adjustm'ent is above that of international trade; I place it higher than
many economists do.
Of course, I put the problem of international trade in the position of
secondary importance, not ignoring it, also not thinking that that is the
key to the question.
Air. Zimmerman. Don't you think organized labor has gotten a
little out of bounds, as far as agriculture is concerned?
Mr. NouRSB. Yes; I would say that its special support and use of a
monopolistic position is probably the most aggravated on the part of
any of the three classes, at the moment.
Mr. Zimmerman. So they are operating along that line, as well as
operating in agriculture. You do think that should have a thought,
though, do you not?
Mr. NouRSE. In your post-war planning, the labor issue has to
bulk very large and that, you could very properly say, is part of our
positive program for dealing with agriculture's problem, since we are
dealing with industrial conditions that make the agricultural market.
Mr. Zimmerman. That is all I wanted to know at the moment.
Mr. Hope, have you any questions?
Mr. Hope. Yes; I have a few questions here.
I, to a certain degree, agree with what you have said, at least
theoretically; but, of course, the problem we have here, as Members
of Congress, is to find out how to tackle this subject that is right here
with us now, that is, we have got that problem right here on our door-
step with us, as soon as the war is over, and we have got this 90 percent
parity guaranty for commodities without any limit on quantity,
that we are going to pay that guaranteed price on — just a lot of those
problems that are going to confront us, and the question is, What
can you do to work out the thing in a practical way without too much
disruption?
I would like, before we get into the general subject, to know:.
What is your viewpoint on support prices? Do you think support
1680 » POST-WAR ECONOMIC POLICY AND PLANNING
prices would have any place at all in the picture; that is, I am not
talking about a support price that might be high enough to fix prices,
but do you think there is any merit in a support price at the level which
would save the farmer from disaster, perhaps, but not for the purpose
of fixing a price, which, of course, has been the sole policy for support
prices in recent years?
Mr. NouRSE. I expect that as a Congressman I would vote for
support prices, in certain short-run emergency situations. It has to
be recognized, however, that it is a type of measure which is loaded with
dynamite. It presents two very unpleasant alternatives — either a
break-down because of the lack of control, unless you have most
favorable circumstances, or else, in order to make it effective, you
have to go to the control of production. I don't think either of those
is a long-run solution, or would be economically satisfactory.
Take, for instance, after the other war, we had our wheat guaranty.
Well, we had favorable circumstances then, and it was not called upon
to any extent. Now if the next few years are such that a guaranty
which does have a stabilizing effect on agriculture doesn't impose a
heavy burden on the economy, then you will be out of that period
successfully as a political matter. If, however, surplus conditions
go on and continue — that is, beyond the transition period — price sup-
port proves a dangerous policy.
Mr. Hope. What is your opinion of the present price-support
program? Do you think that prices are going to stay up naturally
after the war period to a point where this present support- price pro-
gram will not be needed, or we won't have to call on it, or do you think
the general level of prices is going to be such that it will be called into
play?
Mr. NouRSE. Well, of course, as an economist, I don't like to do
crystal gazing. But it does seem to me that the best guess we would
have, and it is strictly a guess, is th^-t conditions are going to be
relatively favorable. That is my guess, and, as I say, I label it a
guess — that the transition difficulties are not going to be very severe;
getting into a period of several years of post-war prosperity is going to
be relatively easy.
Beyond that point I am extremely apprehensive, because I think
we are going to take the easy course in that period and simply lay the
way for terrible difficulties after a period of years — 5, 6, 7, or even 8,
or what have you.
Mr. Hope. You say we will take the easy com-se, not do anything —
let things slide?
Mr. NouRSE. No, I meant that business in general would take the
easy course. You have accumulated savings now, and shortages on
the supply side, so that you have a relative ely easy situation. Going
back to what I said about industrial policy, if businessmen do not
make the price adjustments on that side, make price adjustments
which are sound even when not forced upon them by competition,
then they will be living in a fool's paradise in the prosperous period,
and looking for trouble in an inevitable depression situation.
Mr. Hope. The whole trouble all the way through is that the whole
world today seems to be bent on getting away from competition of any
kind, isn't that the whole trouble? It is a trend of mind. How do
we change that?
POST-WAR ECONOMIC POLICY AND PLANNING 1681
Mr. NouRSE. Well, I can make one answer which is rather easy,
and one which is rather difficult. The easy answer is to say that
you can't improve it by helping the farmer also to get into a non-
competitive situation. If you follow that line, your entire economy
will be in a noncompetitive situation, and this means that you will
have to have universal direction, which, I thmk, creates an impossible
situation for government.
I tried in the last paragraph of my statement to say, in very gen-
eral terms, what my philosophy was on that point. I think that it
is higldy important that Government policy shall not continue to
buikf up more noncompetitive situations and that we do remove
noncompetitive opportunities which have been created in the past
and do that in this period ahead, which is a relatively easy one.
The time to mend your roof is in fair weather, and that is why
I think it is highly important that that work be done on our economy
as a whole, agriculture, industry and labor, within the years favorable
for adjustment that lie just ahead.
Now, as to the hard answer. I don't think that it is possible to
meet this situation and get a genuinely competitive economy by
means of a wholesome price structure simply by measures that stem
from government, either legislation or the operation of the Federal
Trade Commission or the Department of Commerce and others. In
a modern industrial situation you do have schemes, units, nuclei of
organizations within which perfectly legal, perfectly legitimate non-
competitive practice can be followed. Thus, sound business practice
has to be based on a profound understandmg of fundamental economic
principles.
In talking to various groups in the business world, expoundmg
this geneiaf price philosophy, I have told them that what it really
means is that, within the area in which business is protected, by virtue
of the scheme of organization, from the necessity of following competi-
tive practice, executives must see the wisdom or economic necessity
for the long-run health of the economy to follow truly competitive
practice. Of course, the trend in recent years has been away from
or around the logic of that doctrine. Wliat is necessary now is to
promote an educational approach on the part of industry. There,
I think, you have one-half of the program of postwar adjustment,
' complementary to the part to be played by government.
Mr. Hope. Well, isn't it almost altogether an educational pro-
gram? People generally seem to have gotten the idea — I don't care
whether they are farmers, laborers, or businessmen, whatever they
are, they have gotten the idea that they can make more money by
producing less, that is, individually.
They have apparently paid no attention to the general picture,
but are thinking about their own individual situation. I don't know
where that type of philosophy got such a start, but it seems to have
permeated everything.
Mr. N CURSE. It is very widespread.
Mr. Hope. What would have to be done to reverse that trend?
Mr. N CURSE. Of course, again my easy answer would be — the
first thing to do, if you are going to reverse your trend, you have got
to stop going in the opposite direction. That would be my counsel
in an agricultural program. To do the thing which would move in the
direction of less competitive and more restrictive things for agri-
culture is simply contributing to a bad situation.
1682 POST-WAR ECONOMIC POLICY AND PLANNING
Now, merely stopping that, as you suggested, is a very negative
sort of recommendation.
Dr. ScHULTZ. May I interrupt there, Mr. Hope?
Mr. Hope. Yes.
Dr. ScHULTZ. You may have noticed that in agriculture when
farmers have opportunities to expand as they have had during the
last 5 years, there has been a lessening of this restrictionist attitude.
I am very much impressed with the fact that farmers were willing
to "permit" the importation of 150,000,000 bushels of grain from
Canada last year free of duty. Resources in agriculture have been
shifted. If you look underneath at labor in agriculture, say in cotton,
many workers have shifted to other occupations. In the case of
sugar beets, they have shifted very rapidly in this period to other
things, whereas the relative payments to mills and farmers of sugar
beets have gone up as much as competing crops. A shift from wool
and sheep to cattle and hogs has also occurred.
Within the last 5 years literally millions of farmers have had the
opportunity of employing their energy in other occupations and this
we have not had the old attitude of ''restriction." Do you conciu'
in that?
Mr. NouRSE. I think that is true partly because of the nature of
industry, and partly because of the educational progress made over
a period of many years. You take the general atmosphere of the
sort of farmers' meetings that you get in agricultural areas, it is quite
different and much more responsive than you get in a labor audience,
or an employers' audience.
Mr. Zimmerman. May I ask a question there?
Mr. Hope. Go right ahead.
Mr. Zimmerman. We are speaking of what industry has done, and
we know, for a certainty, that in certain areas it will do a certain
thing, and in another area it will do something else, and the same
applies to agriculture, and in that way they have gotten away from
competition.
Not so much, however, in agriculture. Take automobiles, for
instance: they get together and decide how many they are going to
make this year, how many they are going to make for the East and
for the W^est and for shipment abroad, and I don't want to criticize
them for that, but here comes the farmer — for example, you gentle-
men pretty well know that in the last year or two we have given great
encouragement to the production of peanuts, for peanut oil.
Peanut oil is almost a new industry in this country. Now, the
farmer doesn't have any way of sitting down with soybeans, cotton-
seed, and these other things, and figuring out how many bushels of
peanuts he should produce, or how many bushels of soybeans and of
this and that, they just can't do it, it just isn't possible for agriculture,
which is made up of individuals, independents, it doesn't seem that
that can be done.
Mr. Nourse. I think that under your agricultural extension service,
you have taken an important step toward getting a general perspective
of the relative opportunities of production in different lines. But
farmers are all working as individual small-scale operators. They
always work on the basis of fully using their resources. But these other
people work on the basis of seeking maximum profits. They peg a
price by partial nonutilization of resources — nonemployment of labor
POST-WAR ECONOMIC POLICY AND PLANNING 1683
and, in part, by scaling down the use of theii' plant, so you have an
essentially different situation.
Mr. Zimmerman. That is the point I wanted to bring out. The
thing you say that develops in industry just can't develop in
agriculture.
Mr. NouRSE. Not to the same extent.
Mr. Zimmerman. I want to thank you for allowing me to speak,
Mr. Hope. I hope I didn't throw you too far off of your line of
thought.
Mr. Hope. That is all right. Of course, that is one of the big
differences.
Mr. NouRSE. Unless government comes in with a production ad-
justment program.
Mr. Hope. I think we have all noticed during this last 5-year
period the thmg that Dr. Schultz mentioned, that the farmers are still
individual and still believe in competition. They still have demon-
strated in the last 5 years that they can't make adjustments easily,
and I think if you take a close look at it, it goes back more than 5
years ago.
Mr. NouRSE. They will make the adjustment if someone will take
the surplus later and absorb the problem.
Mr. Hope. Yes; but what would their attitude be the next time we
run into a depression. I don't know whether they would come back
in desperation to the same thought that they had the last decade before
the war, that we have to do that sort of thing.
Now, look at it from a practical standpoint, and by that I mean the
standpoint of what you can do in a country where the people them-
selves decide their policies; I just wondered how much influence the
agricultural part of the population can have on these policie_s, because
it is constantly becoming a smaller portion of the population. You
mentioned the Grange antimonopoly program, which was eft'ective
and brought about results, but that was back at a time when the pro-
portion of your population which lived on farms and m rural com-
munities was much larger than it is at the present time.
Mr. NouRSE. That is true.
Mr. Hope. It was greater than today, and they had more influence
then.
Mr. NouRSE. On the other hand, if you have a certain amount of
influence to wield, will you wield it toward piling up controls which
make the situation worse, or will you wield it in the direction of
trying to add your strength to other influences which move in the
direction of tearing down the restraints in other parts of the economy.
This is, particularly important now. If you were faced today by an
emergency period ahead, then you would have to think in terms of
emergency relief measures. But I am thinking in terms of 5 or 6 or
7 years' span in which conditions will be relatively favorable.
Mr. Hope. You think that is a golden opportunity?
Mr. NouRSE. You have to prepare for the avoidance of that
depression time, rather than talk about emergency measures now.
Mr. Hope. You think that this is reafly an opportunity in the next
few years we may not have again, or would you go that far?
Mr. NouRSE. Wefl, I don't know what wifl happen after that, if
we do get into that situation. I thinlv it wifl be pretty tragic.
1684 POST-WAR ECONOMIC POLICY AND PLANNING
Mt. Hope. It seems to me it is rather apparent that the farmers'
organizations which have advocated a restrictionist program, if you
want to call it that, or have advocated an agricultural policy following
that of industry and labor,, have taken that position somewhat as a
last resort. That is, they have seen industry and labor put them-
selves into a position where they have very largely eliminated com-
petition, leaving agriculture as the only competitive industry we have.
They have figured that is putting agriculture at a disadvantage, which
it undoubtedly has done and it very naturally seems to them that the
thing to do is to go forward and meet industry and labor on their own
grounds.
Mr. NouRSE. Naturally. And I have seen the steps by which it
progressed. I remember sitting in at meetings of the National
Agricultural Conference during President Harding's administration.
Samuel Gompers got the floor to protest against the Adamson Act
and went on outlining the militant policy which labor followed and
which he said should be followed by farmers. In conclusion, he said,
"My counsel to your farmers is that you go out and do likewise."
I remember how farm speakers echoed that ''go and do likewise,"
and urged organized agriculture to "fight fire with fire."
Mr. Hope. Of course, that is it, and that brings up a practical
legislative question. It is so much easier to attack a problem by
being for something than it is by being against.
Mr. NouRSE. Yes.
Mr. Hope. Now, in the case of most of the agricultural programs,
the labor organizations have supported those programs because they
come to them and more or less say, "Agriculture, you support our
program." There hasn't been too much reciprocity there, either;
but nevertheless the attitude of the labor organizations has been "We
will go along on a farm program, and we believe that you should follow
the same course that we are following and that business is following."
Well, that, of course, has made it much easier for anyone who was
trying to work out some solution -for the disadvantage that agriculture .
was in, to say, "Maybe that is the way to go," because if they were
to attack it from the other angle and say, "Well, our trouble is
monopoly," or "It is restrictions on production by labor; let's fight
that," then you are going right against the stream.
Mr. Nourse. Yes.
Mr. Hope. And I know that you are aware of that problem. '
Still I think we must simply consider a practical angle of it when we
talk about changing the policy. I don't think we can expect agri-
culture to get very far, and I know you don't either, unless we could
get support from industry and labor, and the whole thing that bothers
me is whether agriculture can let go of what it has unless there is
some assurance that in the end everybody will get back into a more
competitive position.
Mr. Nourse. Sure.
Mr. Hope. That is the whole problem, from a practical stand-
point— where to let go, I think.
Mr. Nourse. And it is very difficult to show just how slight the
advantage may be, if you do have an absolute advantage perhaps
even with an offset or a relative loss on that — it is very hard to show
the different course that could have been followed perhaps more
successfully.
POST-WAR ECONOMIC POLICY AND PLANNING 1685
Dr. ScHULTZ. May I ask this question:
Suppose we take a more pessimistic assumption than Mr. Nourse
has taken with reference to the postwar, namely this:
That wheat and cotton, fats and oils, will be in pretty serious
straits long before 5 years are out. On the presumption that a
great deal of the labor now in industry in the South will have to go
back to the farm and will have to be used in the production of cotton,
add mechanization, and it seems to me that this points rather clearly
to a supply which is completely out of Hne with the demand in prospect
at the support price levels.
Now, if before the two-year commitment in farm price supports
expires, the demand falls sharply, what should Congress do?
Mr. Nourse. I didn't mean to say that there would not be a sur-
plus situation develop. I meant to say that I thought the situation
of the industrial market, that is, everything outside of agriculture,
would be relatively favorable in that period.
Now, my answer to your question would be that, with a guarantee
of 2 or 3 years beyond the war, you could tend to give an artificial
support to lines of production which are in the redundant situation.
You do get over this period of adjustment with the subsidy, but it
will tend to support agriculture on the basis of production which is
not indicated for the future.
Now,' if at the end of that time you are not ready to face the funda-
mental problem and get down to a self-sustaining basis, then you are
facing real trouble. Suppose you kept on as you have been going in
cotton, instead of facing the situation, taking the surplus and going
on and accumulating more surplus without facing the necessity of
there ever being an adjustment. Now, if you transfer that to several
of the major industries, then you see you are driving for trouble.
Dr. ScHULTz. You are, in substance, saying that there is no escape
of a prolonged deflation in agriculture?
Mr. Nourse. Well, for those branches of agriculture which are
redundant in terms of the fully employed peacetime industry, yes.
That is why I say the need of absorbing surplus labor must be recog-
nized, even with mechanization. If you do not recognize it, then
you will have a bad situation.
Dr. ScHULTZ. I wanted to focus that point, it is important. Mr.
Hope, as a Congressman, will be confronted with all the substances of
inflation in agricultural areas sometime before the 5 years is out,
and then a direct course of action will be necessary.
Mr. Nourse. They will be right up against difficulties as soon as
their present guaranties have to be reconsidered.
Mr. Hope. I am glad you brought that out, Dr. Schultz, because
it is a real problem, there is no question about it, and one that is
bound to be brought out as soon as these guaranties are off, maybe
before. I would like to ask this final question just because this is a
practical problem: suppose we assume that there is no chance of
changing the situation as far as industry and labor are concerned,
that they are going to go ahead with the monopolistic practices,
would your answer still be that agriculture would be better off if it
stayed on a competitive basis, or do you think that agriculture would
better itself by going as far as it could in fofiowing the monopolistic
practices?
99579 — 45 — pt. 5 30
1686 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. NouRSE. Well", I find that an extremely difficult question to
answer because it seems to me that about all you say is — would it be
better to accelerate a process of general disaster, because we would do
a little better for ourselves for a year or two before the general break
canie, on the assumption that even with a different practice, you could
not materially change the situation. I tliink it is a sort of defeatist
hypothesis, putting it as you put it
Mr. Hope. It is, but I am bothered about it very much.
Mr. NouRSE. But it is the same argument that I get from every
side — "Well, what is the use for us to try to do anything, because
labor is going to follow the same course they have been following;
industry, its own course; and now agriculture."
It is the same sort of danger that appears in our political life. The
individual citizen often gets discouraged and says: "What is the use
in trying to go against the stream? I'll do as others do; I'll climb on
the band wagon." Or he may fail to vote at all because one vote
cannot change the outcome.
Mr. Hope. As I understand you, your position is that everybody,
as a nation, has been following the wrong policy for a long time, and
it is everybody's responsibility to get back on the right track. As
far as the responsibility for our present position is concerned, agricul-
ture has less to answer for than anybody else, and probably has less
power to change the situation?
Mr. NouRSE. That is partly true, too.
Mr. Hope. But you think it w^ill be a mistake for agriculture to
decide, "Well, it's no use fighting any longer; we will just go along
with the current trend." Do you think that will be a mistake? I
know you do.
Mr. NouRSE. I think the results are bound to be disappointing in
the long run. It is an economic mistake, whether it is* a political mis-
take or not — ^I mean for the head of a farmers' organization, which
has somewhat the same problem as a legislator — I don't see any pros-
pect that any one of them is willing to become the leader of that kind
of a crusade.
Mr. Hope. That is the difficulty, I mean in any program of this
kind. It is the tangible versus the intangible that you have to
contend with.
Mr. NouRSE. You have the same things in other sectors here where
you perhaps had a progressive organization that came up and their
leaders went a certain distance into the matter. Then they stopped
and had an argument among their leadership and they decided they
were going too far.
Here perhaps you have the Chamber of Commerce of the United
States taking a certain amount of leadership, wiiich I don't think the
organization itself will fully follow the chairman in; they have gone
to the extent of getting a labor-management charter in which the
labor unions have participated and signed, and I hear over the grape-
vine that they are afraid they have put their necks out further than
they intended.
There are groups of leadership in each of these factions where, if
we could get a mutual understanding and a real getting together
among the leaders of the three groups on national policy, then I thmk
we would make great headway.
POST-WAR ECONOMIC POLICY AND PLANNING 1687
Now, whether we could get those, I am saying what seems to me to
be the outhne of a soimd economic pohcy — whether as a practical
matter you could get the interested parties to accept it or not, I
can't be so optiinistic on that score, although there are progressives
and reactionaries in each of the groups.
Mr. Hope. I realize that is true.
Mr. NouRSE. But you will certainly never know how far you can
go towards success until you try.
Mr. Zimmerman. I will be glad to hear some questions from Mr.
Folsom.
Mr. Folsom. I have no questions along that line, Mr. Chairman.
Mr. Zimmerman. Have you any further questions you would like
to put to the witness, Dr. Schultz?
Dr. Schultz. No; thank you.
Mr. Simpson. Mr. Nourse, I don't know whether this is germane
or not, but I would like to know if you have given any thought to
farm labor? After the other war, and up until this war started, a
farmer was getting monthly labor at $30 to $50 a month. Now it is
$100 a month. Do you think we would ever see the day when farm
labor will go back to' $50 a month? What do you think?
Mr. Nourse. No, I do not think so; any more than you will find
domestic help working for $5 a week, even here in Washington.
Mr. Simpson. What is the answer as it affects production?
Mr. Nourse. Well, I don't believe that that would affect a material
change in the volume of production. I don't think that the cash
labor item is a big enough factor in our total production to be a
decisive weight one way or another. However, I have not analyzed
the figures on that fully, so I will not be too positive on that.
Mr. Simpson. If a farmer is working 160 or 200 acres, he will
perhaps employ, say, two monthly farm laborers, or helpers, and
furnish them with a home, as they do, and these same people today
can go into defense plants and make much more money, with the
result that this same farmer has had to go in certain localities as high
as $75 to $100 for that same farm help.
Now, what I wondered was, what will happen if there is a lower
trend in agricultural prices and a farmer cannot pay this price help?
Where is he going to get it and what will happen?
Mr. Nourse. I can't see through the later repercussions of that.
I think that the immediate effect would be higher prices, and, of
course, higher priced labor would call for mechanization in agricul-
ture, which is possible, because of the better cash position of the
farmer at this time. The way you meet the thing now simply creates
more of a labor surplus problem or product surplus problem further on.
Mr. Simpson. These farmers are already highly mechanized now,
with the same type help.
Mr. Nourse. You are getting further labor economies
' Dr. Schultz. Just at that point: You take again a period of 2
years from now, the opposite side of the shield will be turned, and
that is, we will be concerned about too many people returning to
agriculture.
Mr. Nourse. That would be more in the way of a family wage,
rather than labor.
Dr. Schultz. In both senses. Of course, you have the armed
services, and while it is true that some of them will not choose to
return to farms, there will be a large group who will.
1688 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Simpson. They won't want to go back for $40 a month.
Dr. ScHULTZ. But they will for $100. Then you have many
millions of farm people who have left and taken industrial jobs, many
of them will be trekking back during the transition, who become
unemployed so that I should expect that even in middle Illinois and
Iowa, out in the corn country, the trek back will run percentagewise
up to 8 or 10 percent. There will also be further mechanization on
many farms reducing the number of workers required.
Mr. Zimmerman. I think that Mr. Simpson raised a very vital
question, so far as the average farmer is concerned. We are going to
pay high taxes for a good while yet and the cost of farm machinery
is not going down, because that is so arranged that it stays up. Now,
all the money that the farmer gets is from the commodity he raises.
That is what he pays everything out of, taxes, living expenses, the
schooling of his children and for his hired help, and I feel that that is
a factor.
Mr. Simpson. You can get that hired help if you compete with the
price of the munitions plant in your area, like out in my section where
the Western Cartridge Co. in East Alton, 111., has practically drained
the $50 and $60 a month farm hands from the fields.
They thought that was a wonderful salary, and moved into this
industrial area and went to w^ork on this shift, perhaps from 8 to 4, •
and then from 4 to 12, and then they started to hitting the midnight
shift and they decided that the farm was better in the daytime, and
a lot of them wanted to go back and they could not.
I think if there was an educational program for the farmer, it would
equip him so that he would know how to meet this situation. I think
he could meet it if he made up his mind, in a wage competition matter,
you might say; I know the farmer could pay the present prices in our
locality — of course, I can't answer for yours — at any rate, he could
with the good crops that have been gathered within the last 7 years,
I think that they could compete with the $100 to $125 monthly
rate if they wanted to, but it is sure coming if you get farm prices
back to where they were in 1934 or '35.
Mr. FoLSOM. I would like to ask a question there, if I might. What
sir, do you think as to the feasibility of bringing farm labor into the
okl-age insurance plan, or Social Security?
Mr. NouRSE. I have never qualified as an expert on social insur-
ance. I think it probably will be tried out, though.
Mr. FoLsoivr. Do you think it is something to be desired?
Dr,. ScHULTz. I might say that Dr. M. R. Benedict of the University
of California is just completing a study regarding old-age insurance
and survivor benefits. There might be a rather simple way of extend-
ing Social Security benefits by categorizing farm people and their
incomes.
Mr. Zimmerman. I believe our time is about up, gentlemen, and it
is important that we get over to the House.
I want to express the appreciation of our committee for your
appearance here, Doctor. You have been very informative and
helpful to us and it has been a pleasure to have met you.
Mr. NouRSE. It has been a pleasure to have met with you, sir.
Mr. Zimmerman. We now stand adjourned, subject to call.
(Whereupon, at 12 o'clock noon, the subcommittee adjourned,
subject to the call of the Chair.)
(The following was submitted for the record:)
POST-WAR ECONOMIC POLICY AND PLANNING 1689
Exhibit 1
REPORT OF THE NEW YORK STATE EMERGENCY FOOD COMMIS-
SION, OCTOBER 16, 1944
(Submitted by William I. Myers, dean, College of Agriculture, Cornell
University)
Food and Farming — A Post- War Program for New York
SUMMARY AND RECOMMENDATIONS
If everyone in the United States had a good diet, our national health and vigor
would be greatly improved and the problem of maintaining a prosperous agricul-
ture would be largely solved. A good diet for everyone would necessitate a large
increase in the production of the protective foods— dairy products, meats, eggs,
fruits, and vegetables. A substantial increase in the per capita consumption of
these foods would both improve our health and make fuller use of our farm plant.
In working toward the twin goals of a prosperous agriculture and a good diet
for all, many problems must be faced. Farm incomes must be such as to enable
efficient farm operators to pav operating expenses, maintain their farms, and
provide a good living for themselves and their families. Consumers must have
enough money to buv the food they need, which means they must have jobs. In
addition, education in what constitutes a good diet is called for, and for those who
are hopelessly handicapped with respect to income, some form of aid is necessary
for them to get the amounts of protective foods required for good health.
In 1936 approximately two-thirds of the Nation's families had incomes of less
than $30 a week. There were 10,000,000 unemployed, and 15 percent of all
families were on relief some time during the year. Under such circumstances not
only is national health endangered, but a prosperous agriculture is impossible.
Studies of food consumption at different income levels in 1941 indicate that
families with incomes of less than $30 per week consumed 9 percent less milk, 17
percent less eggs, 20 percent less meat, 34 percent less fresh fruit, and 9 percent less
fresh vegetables than the amount required for a reasonably good diet. This extra
production at fair market prices would have materially improved farm income,
which in turn would have enabled farmers to buy more of the products of business
and industry.
NEW YORK state's FOOD AND FARM PROBLEM
Fifteen percent of the total urban population of the United States lives in New
York State. This large urban population depends upon New York's agriculture
for nearly all of its fluid milk and cream, three-fourths of its fresh vegetables, and
two-fifths of its fresh eggs and fresh fruit. Since these are the foods required in
generous quantities to provide a good diet, the stake of New York's consumers m
the agriculture of the State is evident. Likewise, New York farmers have an
important stake in the welfare of New York consumers, since to the extent con-
sumers have jobs and full pay envelopes there is an active demand for the products
of New York farms. To assure a continuing and ample food supply, it is essential
that farm prices and incomes be such as to provide a fair return to agriculture.
Here, then, is a problem in which all groups in the State have an interest — to
find ways and means for everyone in the State to have a good diet and to maintain
New York's agriculture on a prosperous basis.
A NEW YORK STATE PROGRAM
During the 2 years of its existence, the work of the New York State Emergency
Food Commission has given its members an opportunity to acquaint themselves
at first hand with almost every phase of New York's food and farm problem. The
commission's work was to assist producers, processors, distributors, and trans-
portation services in meeting the many emergency problems growing out of the
war, so that New York State's large population would be assured at all times of
an adequate food supply. A further task was to assist consumers in making the
best possible use of available food supplies by providing them with information
on how to meet wartime nutritional problems.
During the course of its work, the commission has had impressed upon it the
interdependence of various segments of New York State's economy— the depend-
ence of New York consumers upon New York farmers for adequate supplies of
food; the dependence of farmers on consumers for a market for their products;
1690 POST-WAR ECONOMIC POLICY AND PLANNING
and the dependence of both upon business and industry to provide jobs at good
wages for the large nonfarm population. Farmers in turn provide an important
market for the products of business and industry.
This interdependence is frequently overlooked by farmers, workers, and busi-
nessmen who tend to think in terms of their own immediate problems and inter-
ests. If, however, the State and Nation are going to accomplish the difficult
task of reconversion at the end of the war and raise the American standard of
living to the levels that our all-out war effort has demonstrated to be possible, we
must not forget that each group is dependent upon the others. While various
groups and industries have different problems, and while such problems must be
dealt with individually, they must be handled in such a wav that all parts of the
economy move forward together and not one at the expense of another.
Looking forward to the post-war period, the food commission believes that the
State of New York should set up certain long-time objectives and work toward
them, including the objective of making it possible for everyone to have a good
diet and of placing its food-producing, processing, transportation, and distribu-
tion industries on an economically sound basis.
After careful study and consideration of the many problems involved, the com-
mission recommends the following program which it believes will enable the
people of the State to make real progress toward this objective.
1. Bring all the resources of the State to bear upon the basic problem of maintain-
ing employment and income for the people of the State. — To the extent that business
and industrial activity is maintained at a high level, there are jobs and full pay
envelopes to purchase the food necessary for a good diet. To the extent con-
sumers purchase a good diet at fair prices. New York agriculture prospers.
Such problems as prices, employment, and incomes present questions that for
the most part must be dealt with on a national basis. In any event, they are
outside the scope of the food commission's activities. They are so important,
however, to the food and farm situation in New York that it would be unrealistic
to ignore them. Furthermore, the food commission believes that the State of
New York, through the department of commerce and other State agencies, should
continue to do everything possible to create conditions within the State that
will contribute to the solution of the problem of maintaining full emplovment
and a high level of industrial and business activity.
2. Increase efficiency and reduce production costs on New York farms by con-
tinuing to actively support research, extension, and other programs to assist farmers
in reaching these objectives. — Between 1870 and 1900, farm production per worker
in New York increased by 25 percent. It about doubled between 1900 and 1940.
This remarkable increase resulted from improved varieties of crops, improved
cultural practices, improved control of insects and diseases, improved breeding of
farm animals, improved feeding and management practices, and great improve-
ment in farm machinery. It is important to both the producers and consumers
of the State that we continue to increase the efficiency of farm production as a
means of increasing net farm incomes and reducing costs to the consumer. There-
fore, the State must continue to support research, extension, and other prograzns
to help farmers improve their operations.
No need of agriculture is greater than the development of low-cost many-
purpose machinery adapted to the family size farm — particularly machinery
which will reduce peak loads during haying and harvest. Machinery manu-
facturers should be stimulated to actively pursue this objective. Experiments
with new types of haying equipment are progressing in New York State. The
possibility of developing new and improved machinery for other important farm
operations should also be investigated.
Better livestock is important. Much progress has been made in breeding
poultry, not only for increased production, but for longer productive life. New
York farmers have made great advances in artificial breeding of cattle. In 1944
the State's resources were put behind this program, and a central bull farm and
laboratories are now being built. These facilities provide the opportunity and
impose the responsibility for rapidly increasing both the average annual pro-
duction and the productive life of New York dairy cows.
These breeding programs need to be supplemented by increased research on
the causes of disease, sterility, and other factors which make for short productive
life, including the nutritional aspects involved. Cows in New York herds are
retained in production for an average of less than 5 years after they first freshen.
Large numbers have to be discarded because of failure to breed, udder troubles,
and other causes before the time they have even reached the age of maximum
production. They represent a heavy loss. Similarly, one-quarter of New
POST-WAR ECONOMIC POLICY AND PLANNING 1691
York's laying hens die before they have been laying eggs for 1 year. Obviously
this adds to the cost of eggs.
3. Get top-quality foods to the consumer more cheaply and conveniently. ^New
developments in processing and handling food, including the expansion of quick
freezing, are certain in the post-war period. These will have an important
influence, particularly on the fruit and vegetable industries of New York State.
Much needs to be learned about the best varieties of fruits and vegetables for
freezing and the best stage of maturity for harvesting. Information is also
needed on processing, distributing, and merchandising frozen products in view of
improvements for home storage. It is important that New York's great fruit
and vegetable industries not merely keep abreast of developments in food proc-
essing and distribution but that they set the pace. Attention must be given to
both nutritive values and palatability. New York should maintain its present
position in the industry, and it is important that growers, processors, trans-
portation agencies, distributors, and research and regulatory agencies of the
State cooperate to this end.
Up-state regional markets have demonstrated their value in the prompt and
efficient distribution of perishable farm produce. The New York metropolitan
area is still in desperate need of up-to-date facilities that will provide for the
efficient handUng of perishable products from New York State and other nearby
areas, as well as from more distant points. This is a project for immediate post-
war attention.
4. Continue to recogn,ize the place of farmer-owned and controlled cooperatives
in New York agriculture.
Although the family farm is an efficient production unit, the individual farmer
operates under a handicap in both buying and selling because of the small volume
of his business. Cooperatives have made important contributions to the pros-
perity and efficiency of New York agriculture by making possible the economies
of large-scale business.
5. Continue on a permanent basis the State's wartime program to provide con-
sumers, both urban and rural, with better information on how to use available foods to
obtain a good diet and provide for research and the training of workers in human
nutrition. — Rapid discoveries about food values and body needs have run ahead
of most people's knowledge. Special facilities for spreading this information are
the only way it can reach housewives who are trying to feed their families in the
best possible way. The wartime program of the food commission has had sub-
stantial success in this direction and has met enthusiastic response.
Research should be expanded to speed up the accumulation of the basic scientific
knowledge that is still needed to make a post-war food and nutrition program
most effective.
6. Assure the availability, especially for children, of the amounts of milk and other
protective foods needed to provide good growth and health. — Thousands of New York
children have not received the amounts of milk and other protective foods'they
need. Rejections of young men and women by the armed services as unfit for
militarv dutv provide evidence on this point.
Considerable experience was obtained in the 1930's with school lunches, penny
milk, and a food-stamp plan. These and other approaches to the problem of
public aid for better nutrition should be carefully studied as a basis for developing
a practical program.
7. Provide the advantages of modern health, educational and recreational facilities,
good roads, and electric service in areas suited to farming and rural residential use —
Resume State purchase and reforestation of land not suited to either of these uses.-^
About two-thirds of up-state New York, outside the Adirondack and Catskill
parks, is suited to farming. One-third is not suited to farming under any fore-
seeable conditions, although areas located close to employment opportunities may
be used for residential purposes.
It is important that schools, roads, electricity, health, and recreational facilities
be made available i-n all productive areas, as well as in areas suited to rural resi-
dential use. It is equally important that nonagricultural land be reforested or
developed for recreation fn order to put it to productive use and save people the
calar^itv of trving to farm against hopeless odds.
Since' an inventory of the State's land resources and studies of economic factors
affecting their use is basic to the development of a sound land-use program, it is
recommended that soil surveys and land classification surveys be completed for
each of the State's 55 agricultural counties.
It is also recommended that the State reforestation program provided for in
the constitution under the Hewitt amendment, and abandoned early in the depres-
sion, be resumed. The 1945 conservation department appropriation should
1692 POST-WAR ECONOMIC POLICY AND PLANNING
provide for growing seedling trees in preparation for planting when labor becomes
available.
8. Give strong support to the recently established 'program of, advising and helping
ex-servicemen and war workers who desire to locate in the rural areas of New York
State. — New York has already made an excellent start in setting up facilities to
assist ex-service men and women to get reestablished after the war. At the last
session of the legislature the New York State Veterans' Commission was created.
Representatives of the veterans' commission, together with representatives of the
Extension Service and public and private agencies, are working with the county
agricultural defense committees of the State in establishing an advisory service in
each county for persons returning from the armed services and war industries who
wish to farm or live in the country. The county agent in each county is supply-
ing general information relative to agricultural opportunities. Experienced farm-
ers in each community are advising ex-servicemen who want to buy farms. This
is important, particularly in those parts of the State where there is land unsuited
to farming.
In many instances a major problem will be to help persons seeking advice to
make up their minds as to whether they should farm for a living, operate a part-
time farm, or move to the country at all. Having reached a decision on this im-
portant point, the next problem is to assist them in finding properties suited to
their needs. There are inany kinds of rural properties in New York State. Some
are suited to farming; some are not. Some are suited to rural residential use or
part-time farming; others are not. Mistakes in selecting and financing a farm or
rural home are one of the most frequent causes of failure. Every effort should be
made to help returning servicemen and war workers avoid mistakes.
Under date of May 18, 1945, Dr. Myers made the following
comment:
Steady progress is being made in carrying forward the program in this State
that was outlined for your committee in the statement which I included in your
record. When war demands for food decline, it seems to ine that greatly in-
creased emphasis should be placed on improving the diet of the people of the
United States as a means of promoting their health and as a constructive solution
of the problems of so-called agricultural surpluses.
Exhibit 2
STATEMENT
(By Donald R. Murphy, editor, Wallaces' Farmer and Iowa Homestead)
Any post-war program for agriculture must be based on a dozen factors. Our
experience in the past 15 3'ears has made it clear that there are no one-shot cures
for agricultural ills. Some of us used to think that the McNary-Haugen plan, or
the domestic-allotment plan, or the Agricultural Adjustment Agency, or com-
modity loans or subsidized consuinption or monetary control would by itself do
the work.
We know now that post-war planning for agriculture is like fighting a war.
Infantrj' alone won't win it; artillery alone won't win it; air forces alone won't
win it; naval forces alone won't win it. It takes a dozen units, dovetailed and
cooperating, to win a war or a peace.
So now when I invite the attention of your committee to the need of plans for
subsidized consumption, I am very far from claiming that this alone will take care
of agriculture's future. In fact, farm income is bound to suffer unless we have,
besides subsidized consumption, a reasonable degree of employment, high indus-
trial production, large pay rolls, adjustment of agricultural production to whittle
down on products wanted badly now but not needed in post-war, forward pricing,
tenancy programs, and plenty more.
Since a full report of all possibilities would exceed your time and patience and
my abilities, I am suggesting that one item- — subsidized consumption- — -should
have a place in the post-war program, and am limiting my discussion to this one
point
Your committee does not need to be reminded of the fact that a sizable percent-
age of the Nation's people is habitually undernourished. Even in 1942, under
war incomes, H. R. ToUey, Chief of the Bureau of Agricultural Economics, found
POST-WAR ECONOMIC POLICY AND PLANNING 1693
that 8.5 percent of the families and individuals in the United States had incomes
of less than $500 and 24.6 percent had incomes of less than $1,000. Families
with annual incomes below $500 spent only $77.80 per person on food. Families
with incomes between $500 and $1,000 spent only $104.27 on food. These sums
indicate a dietary deficiency of about 50 percent in these groups.
We have, therefore, even in unusually prosperous times a substantial portion
of the population which is undernourished. National deficiencies in health,
.working power, and the like come from this fact. Our draft figures rub in the
point that many of our people do not eat enough of the protective foods.
From the standpoint of the national welfare, and of long-time national income,
this undernourishment with its consequent effects on poor health and vitality
deserves consideration. But what does this have to do with farm income?
It is a fortunate fact that $200,000,000 — the amount spent for subsidized con-
sumption in 1941 — raises farm income at the same time that it relieves distress
among the undernourished. Estimates on the effect vary. Probably the food-
stamp program adds to farm income 75 percent of the total amount spent; the
school-lunch program may add 100 percent or more of the total to farm income.
It is safe to figure that not less than 50 percent of the total spent for food goes
back to farmers under almost any circumstances. The rise in prices associated
with the additional demand for food might cause an expenditure of a million
dollars in a critical food situation to bring about a rise in price that would return
several millions to farmers.
Fortunately we have had laboratory experience with the food-stamp plan
and the school-lunch plan. Our experience indicates that expansion of the
present school-lunch program would yield large returns in public health and
farm income. We also know that a revival of the food-stamp plan, even if
limited to people certified by local relief agencies, would make a start toward
a program that could be of immense value whenever farm supplies begin to press
heavily on the market again.
The egg situation now in prospect illustrates the advantages of both the school-
lunch and the food-stamp plan. Heavier use of eggs could be directly stimulated,
particularly if food stamps were available for eggs, as the cheapest protein source,
and not available for more scarce commodities.
The food-stamp plan as we knew it in the pre-war period is not extensive enough
for post-war needs, but it offers a start. Your committee may also wish to
consider the advisability of extending issuance of food stamps to those drawing
unemployment insurance. This might tend to equalize unemployment rates
throughout the country. The matter of extending food stamps to those whose
annual incomes fall below a certain point should be considered, but the adminis-
trative difficulties are great and much experimental work should probably be
done by a revived food-stamp agency before permanent legislation takes form.
Subsidized consumption bears also a close relationship to the problem of pro-
duction adjustment after the war. If wheat, cotton, and pork exports shrink,
these farmers will wish to change to new markets. Cotton farmers may wish to
produce more pork and milk; wheat men may shift to cattle and sheep; pork men
may change, more slightly, into dairy products.
But if these changes take place, we shall have heavy volumes of meat and
dairy products to sell on the domestic market. High pay rolls and heavy indus-
trial production will help, but every means of expanding domestic consumption
must be used. Subsidized consumption might bring into the market, as heavy
food buyers, from 25 to 35 percent of the population which is not likely to buy
adequately under ordinary conditions.
What about costs? These depend on the extent of the programs, of course.
So far, we have kept subsidized consumption costs under $300,000,000 a year.
In the long run, these costs should be carefully balanced against the costs of
meeting in other ways the problem of undernourishment and the problem of
farm income. Some very careful economic analysis is required.
Fortunately, the United States does not have to plunge in over its head on
these plans at this time. We still have some months to e.xperiment and expand
before the great needs of the post-war period appear. Expansion of the already
functioning school-lunch program is. possible at once; revival of the food-stamp
plan, with minor improvements, could be handled at once. With these plans
going, careful work could be done to see how they could be expanded profitably
as unemployment makes the problem of undernourishment more acute and as
the drying up of farm exports makes the problem of farm income more critical.
1694 POST-WAR ECONOMIC POLICY AND PLANNING
Exhibit 3 *
(Submitted by Mr. John Brandt)
A PLAN FOR PRICE, SURPLUS, AND PRODUCTION CONTROL FOR
FARM PRODUCTS
Surplus Control
The chart opposite illustrates the operation of a surplus control pool as applied
to a number of major farm crops. The plan as presented in the foregoing chart
recognizes the acre as the productive unit and recognizes the principles of market
control, as demonstrated by the operation of the market-control program on the
part of the Land O'Lakes Creameries during the months of August, September, and
October of 1933. Only, instead of representing an operation on a single com-
modity, it is designed to be effective on all major farm products and establishes
a minimum fixed price for these basic commodities, permitting relative price
levels over and above minimum prices to determine the trend of individual pro-
duction. America is more self-contained than any other nation of the world and,
if a plan of this kind is put into effect, it definitely places itself in a position where
it solves one of the major problems of advanced civilization.
The plan as illustrated -by the foregoing chart has for its purpose the adjustment
of production to effective demand. This adjustment of production would provide
for all consumptive requirements of every kind and nature, not only for the present
but for the possibility of future development within the borders of the United
States. In addition, it provides for a reasonable share of foreign markets that
can be developed under an aggressive and stimulated sales development program
that will promote both individual initiative and governmental assistance in the
development of these markets.
The plan also includes a minimum fixed price as a market quotation for all
major crops which would of necessity require tariff protection or embargo of
such crops to the extent of at least insuring against imports at a price below the
fixed minimum price. It also provides for a compensating tax or assessment
fee on all products that are, without question, substitutes for major crops.
Figure No. 1 on the chart represents the first step in production control, which
is the withdrawal of marginal and submarginal lands, same to be returned to the
public domain through government purchase and remain as government property
until needed at some future date when the requirement for production has in-
creased. The flexibility and seasonal production control will be explained later
as we come to this part of the chart.
Figure No. 2. — The next step is the creation of a Federal surplus commodity
pool directed by a Surplus Control Board financed by a billion dollar Federal
appropriation as a revolving fund to carry on its operations through v\-hich a
minimum price on major farm products will be established. This pool will at all
times stand ia readiness to receive any quantity delivered to it at a. definite fixed
minimum price, the basis of which shall be determined in relatian to 1926 or
pre-war purchasing power parity. The method of replenishing the revolving
fund, the control of expansion or contraction of the surplus pool, and the move-
ment in and out, as well as the method of preventing commercial organizations
from using the surplus pool operation as a convenient carrier of its seasonal sur-
pluses, will follow in the explanation of other figures on the chart.
Figure No. 3 represents the individual farm operation, and the economic
operation of these farms shall not be interfered with from the standpoint of
Federal-planned operation as to the kind and character of its production, the
trend of production to be .governed entirely by relative price levels rather than
through individual control. The recognition of the acre as a productive unit
shall be the controlling factor in the production control program for the individual
farmer.
Figure No. 4- — Production from these farms will pass through existing com-
mercial channels as provided for in figure No. 4. A minimum equalization fee to
be established by the Surplus Control Board, which minimuiii fee shall be an equal
percentage basis on the fixed minimum surplus pool price of all major crops
marketed through these channels. Merely as an illustration, this minimum fee
might be placed at 5 percent of the gross market value. This fee to be collected
at the first point of delivery from the farm and the entire proceeds to become the
replenishment fund of the billion-dollar fund -created for operation of the surplus
commodity pool.
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POST-WAR ECONOMIC POLICY AND PLANNING 1695
Figure No. 5. — The normal merchandising and commercial operations of
cooperatives, processors, wholesalers and jobbers through regular retail channels
illustrates figure No. 5, as shown by the arrow on the black lines leading from
figures Nos. 4 to 5, will not in any way be altered or interfered with, and in order
that these normal commercial operations shall be carried on at price levels above
the fixed minimum price, it shall be provided that at any time any distributor
represented in figure No. 4 so desires, he may transmit any surplus over and
R>^ove his normal merchandising requirements into the Surplus Commodity pool.
Note line designated "Surplus" as the route to follow.
We have now reached the point where production from the farm has supplied
aU normal commercial activities and at wholesale market prices at or above the
fixed minimum price provided for as the products are delivered into the surplus
commodity pool, figure No. 2. The surplus commodity pool has four channels
of withdrawal.
Figure No. 6. — Federal relief, which is a direct surplus pool operation.
Figure No. 7. — New developments, figure No. 7, also direct withdrawal from
the surplus commodity pool.
Figure No. 8. — Sales to foreign markets. Return to domestic consumptive
channels, figure No. 5. In order that there shall be the least possible interference
with general commercial activities and that every stimulant shall be given to
private initiative in the development of foreign markets, figure No. 8, the with-
drawals from the surplus commodity pool shall so far as practical be conducted
through existing commercial channels. There is also every possibility that through
miscalculation as to domestic requirements, farm products originally delivered to
the pool may of necessity need to be withdrawn for sale in the domestic markets.
This withdrawal shall also be carried on through existing commercial channels,
but in order that initial handlers, processors, and merchandisers of farm products
shall be prevented from using the surplus pool as the medium through which
seasonal surpluses will be carried, the plan will provide that all withdrawals from
this pool for home consumption must be made at a price that represents the
minimum fixed price at which the commodity went into the pool, plus carrying
charges, plus 10 percent. Under this provision all handlers of farm products will
without question estimate their domestic requirements and will at all times
carry the seasonal surpluses needed in their merchandising operation during low
production seasons as the withdrawal penalty would be sufficient to discourage
any attempt to force the surplus pool to carry the seasonal surpluses. It is also
conceivable that even under most favorable operating conditions some farm
products would find their way into this surplus pool that were needed, for domestic
consumption and would have to Ije returned from the pool into domestic markets
and the 10 percent profit to the pool would assist in replenishing the revolving
fund.
Foreign rtiarkets. — We have now provided for all home requirements. The
next step is the determination on the part of the surplus control board as to
whether surplus of any of the individual commodities designated as major crops
over and above the requirement for domestic consumption exists. Such determina-
tion to be made upon the combined holdings of the surplus pool and visible sup-
plies in warehouses and on farms, and if in their judgment there is a surplus over
and above domestic requirements, they shall permit withdrawals from the surplus-
pool holdings for sale into foreign markets. In order to develop these markets
so far as possible through existing commercial channels, sales to foreign countries
will be made at- the market price in the country in which the sale is made. If
such a price is lower than the fixed minimum price at which the commodity was
taken into the surplus commodity pool, upon the presentation of documents in
evidence of a bona fide sale at prices that in the judgment of the members of the
surplus control board represent the fair foreign value, commercial organizations
mav withdraw such products for sale in the foreign markets at the price at which
the sale was made, minus transportation costs and a fixed commission to such
commercial organization having made the sale. A reasonable commission is
provided for in order to encourage this activity. If, for any reason, in the judg-
ment of the board there is further necessity for development of foreign markets,
the board may at its discretion make direct sales into such markets. Losses
sustained through sales in foreign markets at prices lower than the minimum
surplus pool commodity price, sales to Federal relief and new developments
shall be made up through equalization fee collected at point of first sale, figure
No. 4. Compensating tax or fee collected on products designated as substitutes
by the control board shall also become part of the surplus pool revolving fund.
1696 POST-WAR ECONOMIC POLICY AND PLANNING
Control of production. — In order to guard against unlimited expansion of
surpluses held by the Surplus Commodity pool, production must necessarily be
controlled through withdrawal of acreage which, under any circumstance, is the
productive unit, so as to provide a proper balance between production and
effective demand. The definition of effective demand being home market to the
full extent of the possibilities of its development, plus a reasonable share of
foreign markets to the extent of its development under a stimulated and aggressive
sales program. Any production beyond these limitations is foolish and will only
result in disaster and the destruction of any minimum price control program
that can be devised. The long-term balanced production program is to be largely
accomplished through the withdrawal of marginal and submarginal lands, figure
Ko. 1. This method will, of course, involve problems of replacement of present
population on this land which are not insurmountable but makes this method
one ot a long-time nature rather than immediately effective, but in the long run
can be carried out to the extent of largely balancing production to effective
demand.
Withdrmval of land. — To meet the immediate emergency and conditions over
which the human race has no control, in seasonal variations in the productivity
of normal farming operations, if and .vhen in the judgment of the Surplus Control
Board the holdings in the surplus pool are in excess of necessary carry-overs so
as to definitely insure consumers against shortage in domestic requirements and
for the supply of fully and completely developed markets, the Surplus Control
Board shall withdraw through voluntary rental on the part of the farmer, either
by renting a percentage of the cultivated land of each farmer or by rental of a
sufficient number ot farms in a community which will equal the amount of with-
drawal requirement. Rentals paid shall be a fair rental value, same to be paid
out of equalization fee funds, and shall bear a direct relationship in percentage
of ^\ithdrawal, as the percentage of expansion of holdings in the Surplus Com-
modity pool over and above the estimated inventory requirements of the surplus
pool shall bear to the entire effective demand. If, for example, according to the
estimates of the Surplus Control Board, there is a possible expansion of 25 percent
in the holdings of the pool, such increases to be based on the average holdings and
not on the individual commodity, it is perfectly conceivable that the surplus pool
may not have any holdings of some particular commodity, and yet the expansion
of the pool would be the full 25 percent in weighted averages, the Board would
require a withdra\^ al in percentage of cultivated land in an amount equal to the
percentage that the 25 percent estimated surplus pool holdings bear to the entire
requirement of effective demand outlets which, for example, might require a
5 percent withdrawal of cultivated lands. Each year prior to the new crop plant-
ing season which should be sometime about September ], because winter wheat
planting starts at that time, the Surplus Control Board through statistics available
from the Department of Agriculture of seasonal carry-over and current production
and estimated consumptive demand, could very easily make a reasonably accurate
estimate of the possible expansion or contraction of the Surplus Commodity pool. '
It is quite possible that under the marginal land withdrawal program and with the
Federal relief and new developments, plus full development of foreign markets,
that after a few years, only under exceptional circumstances following a highly
productive year, would it be necessary to withdraw any of the regular farming
land from cultivation, and at no time would this percentage need to be very large.
Equalization fee. — The equalization fee shall be levied at the first point of sale
or processing and the basic rate shall be ratably applied to every commodity except
if in the judgment of the pool management it shall become necessary to have the
fee higher in the case of certain commodities where the surplus of such commodity
in the pool exceeds the weighted average of the estimated surplus pool holding
requirements. In such cases the equalization fee of such commodities shall be
higher in proportion as the surplus of the commodity bears to the weighted
average of all commodities in the pool.
Additional withdrawal powers. — In order to further protect against a possible
expansion in certain individual commodities that may not r(»act to the full extent
to the differential in price levels, the production of which will cause too great an
expansion in surplus pool holdings, the management shall have the additional
authority to require sectional or regional withdrawals of cultivated lands in excess
of the average percentage. The additional requirement as to percentage of
equalization fee assessed against all major commodities whether contributing to
the surplus pool or not, and the sectional or regional requirement of an additional
percentage of land withdrawal shall always bear a relationship in additional
percentage requirement as does the expansion of the holdings of the individual
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Trend of market during control .
tions by Dairy Marketing Coqior
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Showing irreguldr trend of markei in May. June. July and August.
:l
99579—45— pt. 5 (Face p. 1697)
POST-WAR ECONOMIC POLICY AND PLANNING 1697
commodity bear to the weighted averages of the pool in excess of estimated pool
inventory requirements. ,,.„ •,. ^j- 7-,- r
Explanation of weighted averages and differentials m amount of equalization fee
assessment over and above basic assess?nent and differentials m sectional and regional
land withdrawals.— Inasmuch as the minimum eqiialization fee which is paid at
point of delivery and a definite price at which the major croD products are taken
into the surplus pool are fixed, the weighted average shall be considered m terms
of dollars and cents rather than on a basis of quantities, and whenever m the
iudgment of the Board, the holdings in the surplus pool plus the estimated seasonal
movements into this pool are in excess of the amounts that can be financed from
the estimated income, as provided for from the basic equalization-fee assessment,
thev shall determine which of the major crops in the pool have contributed to the
surplus carry-over in excess of this weighted average. The variation in both
equalization fee and land withdrawal over and above the fixed mmimum shall be
determined on a basis of the excess above this weighted average contributed by
the individual commodity within the pool or available for delivery to the pool.
Explanation of Actual Market Control Operations on Butter
The charts opposite are reproduced for the sole purpose of illustrating the effects
of the operation of a surplus holding pool on the butter market as advocated by
the Land O'Lakes Creameries, such as was put into effect for a period of 11 weeks
by the association in 1933. , , ., . • . i •!„
1 Shows a verv erratic and highlv speculative market, which always prevails
in the butter market even under most favorable conditions. A chart illustrating
the trend of the butter market for anv 3 or 4 months' time since we have known
anything about markets would show the same condition, except that on many
occasions an even more erratic fluctuation would be m evidence.
2 This line shows the possible trend of the market on the middle of August
1933. Butter dealers were generally of the opinion that the market would take
the fiill swing down, as indicated by this line. _ , , .^
3 It was at this point that the Land O'Lakes Creameries started its program
of market control through the operation of a surplus holding pool, and it will be
noted the market took an immediate advance to the point at which tlie, pool
operations were intended to control the price and remained there without a
chanoe with the exception of a 2-day period on the last of September and the first
of October, at which time an attempt was made to bull the market m order to
take awav the control on the part of the pool operation. It was at this point that
the holdings in the pool were used to straighten out the line by reselling from the
pool into commercial channels.
4 to 5. Illustrates the actual control of the market once the operation was fully
in effect. It was during this period that, even with a surplus of 185,000,000
pounds of butter in storage and production still increasing, we had a full demon-
stration of what a holding pool can do to eliminate price declines during a period
of temporary and seasonal surpluses. . , ^^
This pool operation did not in any way interfere with commercial operations
except to eliminate speculation and speculative profits It merely offered a
market outlet for butter at a set price, which governed the entire price level tor
the period in which the pool was in operation. The interesting part of this pool
operation was the development of the fact that, even though surpluses seemed to
exist during the late summer and fall months, there was no carry-over the follow-
ing Mav, which is the new season for butter production. , , , ,. ,
5 Indicates what actually took place with respect to market declines under
the pressure of heavy storage holdings as soon as the Land O Lakes market opera-
tions were discontinued. These operations were discontinued on November 13
1933 Some attempt through Government operation, to maintain the market
was carried on for 2 or 3 weeks and then abandoned entirely.
The market as indicated by the price line on the chart shows that the previous
prediction, as illustrated on the line (fig. 2), actually came true and from that
day on, if we had a chart of price lines, we would find the most erratic market
anyone could conceive of in the operation for the balance of the year of 1933 and
UP to the beginning of the new season of production, which was May 1 m 1934
Since that time the markets have continued their wild and erratic price ranges and
will continue to do so, so long as surpluses, shortages, and influences of speculators
and gamblers are permitted to rule the produce markets of America. . , „„„
What Land O'Lakes did for the butter industry m 1933 for a short period can
be done, with Government assistance, for all major farm crops of America it ttie
1698
POST-WAR ECONOMIC POLICY AND PLANNING
principles of the surplus holding pool, as operated by the Land O'Lakes Creamer-
ies, were put into effect, without in any way interfering with commercial business
operations, except as previously stated it would effectively eliminate speculation
in food products which is to the detriment of both producer and consumer.
30 A.
80 A.
Illlllll
I60A.
50 A.
fimn
320
A.
j
1
8680 A.
Removal of
Acreage
from
Production.
POST-WAR ECONOMIC POLICY AND PLANNING 1699
Explanation of Principles of Production Control Through Withdrawal
OF Acreage From Production of Harvested Crops
The problem of production control is one that lends itself to a wide variation
of ideas as to how it should be accomplished. There is the one broad principle
of withdrawal of marginal lands through acquisition on the part of the Federal
Government, which is generally agreed upon by the public as reasonably sound
but which, of necessity, is a program of long-term operation and can never entirely
solve the seasonal crop fluctuation problem.
Temporary, effective, and speedy methods must be designed for this purpose.
Crop switching can hardly be considered production control, as it may benefit one
crop to the disadvantage of another. Therefore, an economic method, easy of
administration and low in cost, should be designed to withdraw the land from
actual production of harvested crops when production control is needed. Under
the program so far advanced, criticism with some justification has been directed
against the large checks that range from $10,000 to $100,000 paid to individuals
for their participation in crop-control and soil-conservation programs. In some
instances these checks for percentage withdrawal or compliance agreement have
been almost equal to the entire rental value of the farm affected.
The chart on page 1698 is an illustration of a 10-percent withdrawal or com-
pliance program applied to farms ranging from 30 acres to 8,680 acres. From
this chart it is plain to be seen that the small farmer with his complete unit of
operating machinery and with the possibility of no requirement of hiring outside
help would be unwilling to withdraw or follow some governmental set plan unless
the remuneration in the way of benefit payments or acreage rental is sufficiently
high to make it worth his while. In order to get the little farmer to go along with
the plan it becomes necessary to set these benefit payments so high that they are
thrown completely out of line with respect to the large ranch. Intensity of cul-
tivation, diversification of operation, and land values of large farms and ranches
are seldom, if ever, on a par with the small, one-family or one-man-operated farm.
Furthermore, in the matter of soil conservation and weed control there is greater
need and opportunity for effective service of this kind to the large farmer. There-
fore, if production is to be effectively controlled at the lowest possible cost, it
should be accomplished through land withdrawal from actual harvested crops and
on a basis of the lowest bidder for compliance to regulations in the communities
or territories to be affected. In' other words, if the holdings of the surplus pool
were sufficient to insure against the hazards of reasonable possibility of crop
failure in the coming years and it was felt necessary that a 10-percent reduction
in acreage would give the necessary balance, this withdrawal should be made
under specific rules and regulations as to how the land so withdrawn shall be
treated in the way of cultivation, weed control, and soil building, and compliance
benefits awarded to the lowest bidder for actual land retirement from crop pro-
duction in given communities which could well be laid out in township or county
units.
Therefore, instead of the small withdrawal from each farm, as illustrated in
the chart, it would be reasonable to expect that all acreage withdrawal should
come from the larger farm units at a cost that would only be a fraction of the
amount required where each individual farmer, regardless of the size of his
farm, participates. Furthermore, the cost of administration would be much less,
as it would be much easier to measure out a few large tracts of land to be with-
drawn and to supervise compliance than it is to measure up every farm in a com-
munity two or three times each year, as is now in effect, and which still leaves
considerable doubt as to equitable benefit payments, honesty of compliance, and
effectiveness of the program.
Exhibit 4
(Supplementary statement by Paul Darrow)
In the depression of the last decade the farmers were particularly hard hit,
but it should be remembered that this depression of the thirties did not arise
solely from the destruction of war but from the economic disturbance which
necessarily follows a change in the position of a country from a debtor to a creditor.
As a debtor since this country was settled there was an almost insatiable demand
from our creditors for the products of American labor. Practically speaking, a
debtor nation can pay on its indebtedness only with the products of its labor.
1700 POST-WAR ECONOMIC POLICY AND PLANNING
In consequence, exports are made in excess of imports. As a result of the First
World War we became a creditor nation.
The idea of thrift and industry was ingrained in the American people for only
by producing more than we consume could our debts to the world be paid. As
a creditor nation the position is changed. If we collect debts from those who
owe us, these debts can be paid only in the products of their labor. Of course
there will be some payments in gold and property but, generally speaking, balances
in international trade are paid in goods which are the products of human labor.
In addition to a depression which is usually expected following war, we faced
the situation of losing our export markets after 1918 and of being forced to con-
sume large quantities of goods produced by foreign labor. We made the mistake
of raising tariffs in the Hawley-Smoot tariff bill which made it still more difficult
for foreign nations to pay. In order to jump the Hawley-Smoot tariff wall,
foreign currencies were depreciated. Again we made the mistake of depreciating
our own money to compete with the world. These are recent instances of at-
tempts to interfere with economic law. Goods, like people, should be allowed to
move freely across the face of the globe. Interference with this free movement
is one important cause of war. As a creditor nation we must accept foreign
goods for consumption within the United States. Of course, we will export
many things which we can joroduce cheaper than foreign countries.
Many times the statement has been made that foreign trade is of little con-
sequence to the United States because it never amounted to more than 10 percent
of our production. If this is true, our domestic consumption was 90 percent of
our production. The figures are not important. They are u.sed onh' as an
illustration, but if we assume that as a creditor nation we must import 10 percent
it means that we must consume in this country the 10 percent we formerly ex-
ported plus the 10 percent we now import which results in a consumptive necessity
of 110 percent of our pre-war production. That means we must consume almost
one-quarter more than we did formerly. If we do this, we are fulfilling our world
obligation as a consumer. If we fail to do this, we are not fulfilling our world
obligation, and we are making it more difficult for the peoples of foreign countries
to exist — another cause for war.
We attempted to solve this problem by asking for gold in payment of balances.
The foreign holdings of gold were soon exhausted. Foreign nations had confi-
dence in gold, and fear entered their minds as it did ours at the thought of suspend-
irig gold payments. To take gold from people who would prefer to give labor is
another important cause of war.
It is evident the first requirement for this country is not more production but
more consumption. We must consume more than our domestic productiori.
We will have more people out of jobs than ever before if we fulfill this world obli-
gation. The requirement is not more jobs in production. It is either more jobs
that are not productive like a larger Army and Navy or more people in the leisure
group who consume but do not produce. Captain John Smith said in Jamestown,
Va., that those who did not work could not eat. He was expressing the require-
ment of a pioneer debtor group which had been grubstaked by England. They
were forced to work long hours for the bare necessities because labor-saving
devices had not been developed. The philosophy of Benjamin Franklin was
necessary for a debtor nation — work and save; thrift and industry. Until about
1900 it was not considered respectable even for the rich to live without productive
work. The children of the rich were admired and respected if they went to work
in the plant or shop. If they did no work or married into foreign families who
did not work, they were not considered good citizens and were made the butt of
jokes and cartoons. From about 1900 on, as we got closer to a creditor position,
it became respectable for the wealthy to join the lesisure group and today we
further discourage the rich from productive work as a result of the capital gains
tax and burdensome Government controls. The industrially competent are
afraid to enagge in enterprise. If the enterprise results in a loss, it frequently
endangers their wealth; if it results in a profit, most of it goes to the Government.
The innumerable laws to control business, including voluminous reports, wages-
and-hours laws, etc., make it almost impossible for a person in business to operate
and feel sure he is obeying the law.
The extension of the schooling period is another indication of society's need for
consumers and not producers. Again it is only the rich who can go to school until
they are 25 or more. The poor quit school. Again I say it is not more jobs we
need but more consumers. If all domestic production plus imports is consumed
each year, there will be jobs for all but there cannot be jobs for all unless there is a
demand for supplies which do not exist. If this should ever come, we might be
POST-WAR ECONOMIC POLICY AND PLANNING 1701
interested in jobs for the rich as well as the poor, but at present no one thinks of
putting rich people to work. It is only the poor who are encouraged and forced
to go to work. It is of little real importance whether the income of the United
States shall be $100,000,000,000 a year or $200,000,000,000 a year. Only if goods
are consumed can an orderly society be preserved. If too many people have too
large a claim on production and then do not use it, depression follows. Depres-
sions never come when there is a demand for more goods than are in existence.
The farmers should realize this; Congress should realize it, for only by increasing
consumption and forgetting about production can the problem be solved. Pro-
duction will follow if there is an unsatisfied demand for goods.
Until the New World was discovered, Europe produced its own foodstuffs. The
farmers of England, France, and Germany had a demand for all they could pro-
duce. With the development of the New World, European farmers were hit
harder than other groups because foodstuffs from the New World could be sold
at prices lower than their home production. Of course, the farmers of England
did not enjoy the thought that they were going to be forced out of production
nor did the farmers of other countries. They could have established a tariff on
foodstuffs, but since there were more consumers than producers the consumers
believed they should not pay a higher price just to keep English farnaers working.
So economic law operated and a large part of the food of Europe was produced in
the New World.. It is cruel to say that men must accept the verdict of economic
law, but it is foolish to say they should not.
Now another new world has been developed and the farmers of America are
in the same position as were the farmers of Europe a hundred years ago. South
America, Australia, New Zealand can all produce foodstuffs cheaper than we.
■ As a result, we will eat foodstuffs produced outside of the United States and
tariff laws should not prevent it. If it is attempted, it will be one more cause
for war.
The high-cost producer is always eliminated. Of course, the farmers have
some protection. Foreign countries are far away and a long water haul is neces-
sary. With the exception of the people who live on the seaboard a haul by rail-
roads is necessary to get foodstuffs into consumption. All of this will allow the
farmers of the United States a, higher price than the farmers of Argentina or
Australia, but, aside from this, we might say "geographic tariff," the American
farmer must compete with the world. This is nothing new for him. Even under
our tariff system, the farmer always sold his grain in a world market. The price
of wheat at Liverpool governed the price in Chicago, so the farmer will not be
materially worse off by realizing that he cannot be protected. With the two
price systems in existence today he temporarily receives more, but there is no
logic behind a two-price system and our high domestic price and lower export
price will lose the friendship of the world. We thought it unfair competition for
Germany to give a bonus or a bounty on exports of manufactured goods, and it
made Americans angry to be forced to compete with this practice. We have
done the same with foodstuffs and now have the ill will and enmity of the Argen-
tine and other South American countries. We were able to lessen this enmnity
in some countries by making loans and giving lend-lease material, but we have
not been able to buy Argentina's friendship because our injury to Argentina is
greater than our injury to the other countries.
The hope for the American farmer is the American market. It is probable that
the food consumption of the United States could be increased 20 percent or more.
There are probably 30 or 40 percent of the American people who do not consume
as much food as they would like because of insufficient income. There is no way
of proving this or of establishing a percentage, but it is safe to say ff food was free
the consumption would be several times as large. The farmer is entitled to
economic security, but to no greater extent than the city worker or the idle in the
city or in the country. At present the idle consume much less than they would
like to consume. Some of the idle, of course, are rich, but most of them are poor.
There is no possibility of extra consumption among the rich, but there are so
many poor that anything that can be done to increase their consumptive ability
will greatly increase the demand for farm products as well as manufactures.
We should recognize that the poor are dangerous to a society based on private
ownership. Contracts mean little to the poor. Treaties mean little to nations
that are poor. Only the rich believe in the sanctity of treaties and contracts.
There is only one way to solve the problem of unemployment— the problem of
the poor — and assure a stable society. If the fear of want is eliminated, there
would be no need for uneconomic child labor laws, wages and hours laws, union
security, etc. If a man is not forced to work through fear of starvation, he wiU be
99579 — 45— pt. 5 32
1702 POST-WAR ECONOMIC POLICY AND PLANNING
interested in preserving the form of government that furnishes him this economic
security. No man whose stomach is full is a meance to existing goverment.
Since we do not need increased consumption, the simplest solution is to furnish
an unemployment wage or income to those not gainfully employed. This income
can 1)6 large, in which case too many people will be taken out of production, or it
can be so small it will have little effect. We have spent probably $5,000,000,000
a year in the last 10 or more years to solve the problem of the poor by "make-
work" projects and we are still floundering around for a solution. So long as
there is plenty, a person should be assured of a nominal amount which should cover
the reasonable requirements of food, clothing, lodging, and a picture show once a
week. It is impossible to determine exactly what this amount should be, but
certainly a person by committing a crime and going to the penitentiary can get
food, clothing, steam-heated lodging with inside plumbing, and see a football
game in the fall and baseball game in the spring and picture show once a week and
medical service. In Illinois this costs about $25 a month per head.
As an arbitrary figure I would suggest an unemployment wage of $20 a month
for each adult plus $10 a month for each dependent child. On this basis a familv
of four would receive $60 a inonth, but basing it on adults alone $20 a mcnlh
could be given to 20,000,000 people for a cost of $5,000,000,000 a year. This
figure would not be high enough to encourage people of proper jjroduction age to
quit their job. People from 18 to 50 or 60 could not have their wants satisfied
for $20 a month, but to the older people and some of the younger people whose
wants are small this amoynt would probably keep them out of the cutthroat
competition for jobs.
In the last 25 or 30 years there have been two periods when wages were high,
when there was not cutthroat competition for jobs — the two war periods. In the
First World ^^'ar the armed forces took 5,000,000 men out of production and paid
them $30 a month. They consumed more food than ever before. In this war
period we have taken 10 or 15 million people out of production and paid them
$50 a month and again they are good consumersj Unfortunately they are the
people whose wants are large — who would prefer a home and family. We can
do the same thing in peacetime — put those of proper production age into a non-
productive army so big there will be a demand for all of everything that can be
produced. We would have the benefit uilder a peacetime army that the soldiers
would not be taught to kill and hate to the same extent as now, but it would be a
hardship on those whose wants are large and demoralizing to put them in unpro-
ductive occupation simply to solve the problem of unemployment. Sometimes
nations geared up to complete preparedness get in trouble while peaceful solutions
can be found between nations which are not prepared for war. We can produce
this army of unemployed among the rich by our present laws and gradually they
will increase in numbers until the poor are forced to work long hours to support
them or we can allow the poor who through the ages have never had much chance
of enjoyment to have economic security at a reasonable cost. This is the hope
for the farmer and for industry and for a peaceful world.
Any attempt to solve the problem of farmers, workers, or the unemployed —
whether by Congress or others — should be approached in a spirit of fairness, with
no attempt to gain advantage for any group. Only by unselfish, intelligent
approach is there any chance of solution.
Private enterprise cannot furnish jobs for all the poor. Government can
theoretically provide jobs, but fear of possible Government production will
sterilize private initiative, making necessary still more Government work.
Government has no obligation to provide jobs. It does have an obligation to
prevent want among its people.
Destroying the production of a nation or giving it away to foreigners can cause
unlimited demand for goods and services.
The same unlimited demand can be produced by giving away our production
to our own people. Giving away goods is clumsy, expensive, and unsatisfactory.
Too much is given that is not wanted.
Giving money is more economical and allows the recipient to satisfy his own
wants.
Public housing is really a subsidy to workers — an attempt by Government to
make up the deficiency in inconie at public expense. People do not live in poor
houses through preference. They live in so-called substandard dwellings because
of insufficient income.
All subsidies to workers have the effect of lowering wages.
The Government effort to raise prices of grain is an instance of an intelligent
attempt to solve a problem. Laws forbidding sales at less than a fixed price
would have been less effective. Offering to buy all grain at a fixed price resulted
POST-WAR ECONOMIC POLICY AND PLANNING 1703
in no one selling for less. This does not mean the idea was correct. It was
antisocial in its results, because it increased the price and lessened consumption.
It would probably have been more nearly a correct solution to destroy the surplus
and save storage costs and spoiling in the end. This, too, is antisocial. The
proper solution would be to enable those who wish, to consume more food.
Labor is like any other commodity — when there is a surplus, wages go down;
when there is a shortage, wages go up. Laws to provide minimum wages and
maximum hours are not only uneconomic; they are senseless. These laws
interfere with the freedom we talk about and think we are fighting for and inter-
fere with orderly production. ,
The simple solution is for Government to employ in nonproductive leisure, at a
wage that provides for reasonable necessities, all who are not gainfully employed.
If the unemployment wage is high enough, there would be no unemployment —
poor people looking for work. If too high, too many people would leave their
jobs. The unemployment wage should be given to all with no pauper provision.
If some of the rich take advantage, the income tax would get back most of it.
The result— wages to workers higher than if 5,000,000 or 10,000,000 people
were looking for jobs — a greater demand for food and all commodities — economic
security for poor as well as rich — less pressure to solve the unemployment problem
by a peacetime army and less interference with private ownership of property
and less urge for Government interference in production.
Remenjber, the requirement of a creditor nation is consumption in excess of
domestic production.
Exhibit 5
nonrestrictive international commodity agreements
(By J. S. Davis, Food Research Institute, Stanford University, California)
SUMMARY
International economic collaboration is a difficult art in which much more
experience needs to be gained by degrees, in a variety of unstandardized ways.
Some of these concern specific commodities of international importance over which
frictions tend to develop.
International commodity agreements (I. C. A. 's) in the past have mostly been
commodity-control agreements, typically restrictive not merely in their devices
but also in their net effects on production, trade, and consumption. For an ex-
panding world economy after the war, these are unpromising and even dangerous
vmless they can be effectively adapted and kept under supervision by an appro-
.priate international agency.
Various types of I. C. A.'s that would not be restrictive in their net effect might
well be tried out as concrete forms of international collaboration. The following
examples are worthj' of consideration.
(1) Conservation agreements, especially to promote replenishment of marine-
wildlife, resources and their economic exploitation, with a view to enlarging out-
put at reduced costs and eliminating international frictions.
(2) Investigatory agreements, to insure the formulation of genuine solution of
world problems of the commodities, including courageous proposals for alterations
in national policies that have created or aggravated the problems, or .threaten to
do so.
(3) Surplus-disposal agreements, to provide for orderly disposition of excep-
tional commodity surpluses arising from war measures or conditions, past blunders
in national policies, and perhaps some other causes.
(4) Buffer-stock agreements, as experiments in the direction of moderating
fluctuations in production and prices of certain commodities.
(5) Marketing-opportunity agreements, to assure market outlets for commodi-
ties of special importance to liberated and ex-enemy countries.
At best, I. C, A.'s cannot take the place of broader understandings making for
larger and freer international trade, and they can make their best contribution in
conjunction with international organizations that perform such functions.
Almost all international commodity agreements (ICA's) have contained re-
strictive features of various kinds. This is not surprising, for an ICA would
ordinarily not be formulated or adopted unless there were a consciousness of evils
to be corrected; that is, depletion of a natural resource, harmful trade policies,
very depressed or violently fluctuating prices, burdensome stocks.
1704 POST-WAR ECONOMIC POLICY AND PLANNING
The ICA's that are most widely discussed, or put fom^ard as models for others,
have been drawn up to deal with what appears as superabundance, actual or
prospective. These bristle with restrictive devices — export quotas and sometimes
other export restrictions, often related production controls, sometimes formal
regulation of stocks and prescription of minimum and maximum export prices,
and sometimes special import quotas or other import restrictions. In practice,
such ICA's have in no case solved the problem that gave rise to their adoption.
Instead, they have tended to keep it alive and to keep on dealing with it. Unless
substantially ineffective, they have typically tended to favor high-cost at the
expense of low-cost producers and producing countries, to raise the costs of the
actual output, to limit the flow of abundant supplies, and to support prices at
uneconomic levels. Few have achieved, if they have sought, the objective of
stabilizing prices, except in the perverse sense of opportunistic boosting of prices
and resisting their decline. Where successful, in any sense, their net effect has
usually been to restrict production, consumption, and trade without removing
excessive production capacity or reaching a position in which restrictions can be
removed. Whatever the basic intent, the curbing of evils has entailed restriction
of the good.
This is now recognized as bad from the standpoint of the world economy, even
if welcomed by the direct beneficiaries of the I. C. A. concerned. It is coming to be
realized that commodity-control agreements of this kind require adaptations and
supervision if they are to be constructively serviceable, and that other types of
I. C. A.'s deserve consideration for post-war operation.
If an international agency for supersiving I. C. A.'s should be set up, as has come
to seem desirable, this might eventually help to secure modifications of restrictive
I. C. A.'s in the direction of larger and more efficient production and fuller con-
sumption. Expert consideration of this subject hae gone far enough to warrant
early efforts at international agreement on principles that should govern I. C. A.'s,
the objectives which they should be charged with attaining, and the set-up of an
international supervisory agency.
The degree of promise in I. C. A.'s of any type is commonly exaggerated. Failures
have been numerous and more must be expected. Efforts to correct recognized
defects in past I. C. A.'s, as by enlarging the representation and voting power of
'importing countries, may prove unavailing or operate so as to prevent desirable
action. There are insidious temptations to be overambitious and to over-
standardize. Expectations should therefore not be pitched too high or too
roseate hopes held out. International collaboration is a difficult art, in which
nations have as yet had only limited practice. But more experience needs to be
gained, and I. C. A.'s afford reasonable opportunities.
The questions arise: Can nonrestrictive I. C. A.'s be devised? Are there types
that, despite some restrictive features, would not be restrictive in their net effect
but would really promote expansion of production, consumption, and trade? K
few types are suggested below, tentatively called (1) conservation agreements,
(2) investigatory agreements, (3) surplus-disposal agreements, (4) buffer-stock
agreements, and (5) marketing-opportunity agreements.
(1) Conservation agreements. — In the field of marine resources there are two
examples of ICA's under which, by appropriate measures determined upon after
competent scientific investigations, seriously depleted resources have been sub-
stantially replenished, reductions in costs and expansion of output have been
facilitated^ and related sources of international friction have been largely elimi-
nated. Enough experience has accumulated with fur seals and halibut to point
the way to more agreements of this general type, especially with marine resources.
In these two international conservation agreements, restrictions were imposed
with the prime objectives of preventing destructive exploitation and promoting
enlargement of depleted marine resources, and eventually expansion of output
at lower costs; such results have been demonstrably achieved.' Experience under
international whaling agreements has thus far been less conclusive but amply
warrants continued efl'orts to acliieve comparable success in this far more impor-
tant but more complicated fieid.^ It is more difficult because problems of conser-
vation and recurrent surplus are intertwined and because ambitions of new whaling
nations come into conflict with desires of dominant whaling nations to retain
their full share of the exploitation.
1 Jozo Tomasevich, International Agreements on Conservation of Marine Resources, With Special Refer-
ence to tlie North Pacific (Food Research Institute Commodity Policy Studies 1, Stanford University,
California, March 1943).
2 Ibid., pp. 275-288; and Karl Brandt, Whale Oil; An Economic Analysis (Food Research Institute Fats
and Oil Studies 7, Stanford University, California, June 1940), especially pp. 75, 89-105. Early in 1944
new whaling agreement was signed (Pepartment of State Bulletin, U. S, State Department, June 24, 1944,
pp. 692-693), .
POST-WAR ECONOMIC POLICY AND PLANNING 1705
Conservation agreements, or conservation elements in other iCA's, may be
appropriate with respect to commodities other than marine resources.
(2) Investigatory agreements. — There is promise in ICA's which have as primary
functions merelv investigation and recommendation. The first Pacific halibut
and sockeye-salmon agreements were of this type.^ There is urgent need of
resort to it with much more important commodities.
With wheat, cotton, sugar, coffee, beef, petroleum, tin, rubber, and other com-
modities of high international importance, the commodity problems are more
largely economic and political in character, and the corresponding tasks there-
fore much more complex. Consequently, questions of set-up and procedure need
'to be very carefullv considered in advance. (See pp. 10-11.) Experience with
royal commissions "in the British Commonwealth of Nations has pertinence here.
In most of these instances the world commodity problem has been either created
or greatly aggravated by unilateral national policies, in some instances also by
private companies or combinations proceeding with the open or tacit support of
certain national governments. Adverse international consequences have usually
been wholly or largely unintentional but nonetheless serious. There is urgent
need of responsible and thoroughly competent commodity-policy investigations
that would not merelv look for provisional solutions of pressing current problems.
They should also vield a broad-gage and long-run solution of persistent or recur-
rent problems of the commodity, with recommendations for needed modifications
of national policy to facilitate such solutions, as well as proposals for international
machinery to meet the need for continuing and recurrent inquiries and/or regu-
lations.
Several commodity councils, comrhittees, and boards, and mternational ad-
visory committees on wheat (1933-) and cotton (1939-), may seem to have had
this opportunity. None has taken appreciable advantage of it, for various rea-
sons, probably chiefly because their attention has been focused on narrower
objectives, often the drafting or operation of a restrictive ICA. It is unfortunate
that the International Wheat Council, set-up under the interim agreement of
1942, has given little if any emphasis to this kind of work. The same can be said
of the Inter- American Coffee Board, set up in 1941.
The British-American Petroleum Agreement of August 8, 1944, was apparently
designed in part for this purpose but seemed to critics to open the doors to far-
reaching international regulation. It has not vet been approved and is under
revision.* The British-Dutch- American Rubber Study Group (1944-) reflects a
less formal agreement that might easily evolve into one of this type. The special
international study group now being constituted to work on an ICA for cotton
might conceivably be evolved to serve this purpose, but it is not specifically so
instructed.*
What tends to emerge from international commodity conferences is a mere
bridge between incompatible national policies, with limited adjustments to their
inconsistencies. This is not only unsatisfactory but dangerous. What is clearly
to be desired is a revised set of national policies that would be compatible and
coordinated in the direction of more economical production, enlarged consump-
tion, less unstable prices, and freer trade. To contribute toward this important
end, the study agreement might set up an international body of such composi-
tion, and with such instructions and resources that it would be capable of engaging
the best experts for the task and facilitating their most effective work. It is also
important that it should have the courage and prestige to present expert reports
and its own conclusions to the participating nations with such force that they
would be taken seriously.
Cotton is the commodity now most in point. Facts about the world cotton
situation, up to and including the present and near future, are available in volume
greater than ever before; but they are rarely added up and appropriate policy
conclusions are seldom drawn.e There is one basic factor. The United States
has led the world in pursuing a cotton policy that has proved extremely short-
sighted and now threatens serious damage to other countries as well as to the
United States. No solution of the world cotton problem is in sight that does not
call for radical alterations in United States cotton policy, which are already
recognized as important for domestic reasons alone. To attempt to deal with
3 Tomasevich, op. cit., pp. 143-145, 257-262. ,.,„., -.r.o -.no
< Department of State Bulletin, August 13, 1944, pp. 153-156, and January 14, 1945, pp. 102-103.
» Ibid., April 22, 1945, pp. 772-773. ^ . ^ ....... *u
« Ibid The facts set forth bv the International Cotton Advisory Committee at its fourth meetmg, on
April 14, 1945, conspicuously omit one that is highly pertinent— the impending technological revolution m
cotton growing.
i/Ub POST-WAR EC(J^0M1C POLICY AXD PLANNING
the serious consequences of past policies without seeking to bring about a correc-
tion of the policies themselves is to court failure. The appropriate policy for the
longer run needs to be set forth, as well as the policy and measures appropriate to
the transition. If the body responsible for such investigations and recommenda-
tions, and the investigators themselves, are too timid or too restricted to permit
them to grapple with this task, more time will be lost and nothing will be gained.
Our own National Congress should welcome a highly competent international
investigation hampered'by no such timidity or restraint.
Wool affords another pertinent example. Wartime policies and conditions
have led to huge accumulations of wool since 1939, and new artificial fibers offer
increasingly important competition. Important elements of a sound solution of
the difficult post-Avar world wool problem lie in the United States. Wool con-
sumption here is relatively low, considering consimier purchasing power, but the
Ignited States has long been a reluctant importer. Our high-tariff policy, war-
time restrictions on use of imported wool, and their support of domestic prices
at high levels have been heavily influenced by the political power of the wool
growers. Even in their interest, changes in American wool policy are overdue.
No really international investigation of world wool problems has been sufficiently
comprehensive in its purview or sufficiently bold in its approach.
Beef also will present problems of importance to the post-war world. What
is misleadi!igly called an International Beef Conference, though essentially a
British-dominated import-restriction scheme, was in operation in 1937-=39. Its
existence need not interfere with the adoption of an investigatory agreement
concerned with beef. Among other things, the rankling grievance of Argentine
cattle growers over the virtual prohibition of American imports of Argentine
beef should be adequately investigated, under conditions a.ssuring scientific and
impartial study and report. International beef policy, moreover, needs to be
studied in the light of the world beef situation, the overwhelming internatiorial
purchasing power of the United States, and the special relations of the United
Kingdom with Argentina, and British beef-exporting dominions.
Some sueh investigatory agreements might prove sufficient without leading
to ICA's of more specific character. Others, however, might lead to more specific
ICA's of the other types here discussed.
(3) Surplus-disposal aareements. — One special type of ICA would be essentially
concerned with orderlj' liquidation of surplus stocks, such as those held at the
end of the war in Europe or later. Sometime after the end of World War I,
BAWRA (the British- Australian Wool Realisation A.ssociation, Inc.) was set
up for this purpose and discharged its task effectively. Similar agencies might
soon be used to advantage for wool, cotton, and perhaps some other products.
The central objective would be to achieve unified liquidation of surplus stocks
at appropriate prices in such manner as to promote consumption and reconstruc-
tion without needlessly unsettling the processes of trade. Since these are matters
of international cqncern, the principles to be observed merit international ap-
proval. The final accounting should not only be to erstwhile owners of the stock.s
to bo liquidated but to an international agency as well. But the liquidation
itself should not be a governmental or intergovernmental task; it should be
entrusted to a nongovernmental agency under suitable international super\'ision.
In contrast with the draft convention for wheat, which contemplates perpet-
uation of the wheat surplus and "keeping it under control," a surplus-disposal type
of ICA might be used to facilitate disposal of other occasional surpluses. Con-
ceivably, indeed, it might be required that all subsidized exports of the com-
modity be delivered to an international surplus-disposal agency, which would be
free to sell at cut prices for certain uses (e. g., denatured wheat for feed) and in
certain areas (e. g., those accustomed to eat inferior cereals but preferring wheat).
Such an agency, however, should not be an organ of an ICA of the restrictive type,
or used merely to serve the price-raising objectives of the past.
(4) Buffer-stock agreements. — British proposals for nonrestrictive ICA's to
operate buffer stocks of several basic commodities, designed to keep fluctuations
in prices of individual commodities within moderate bounds, have not withstood
the critical scrutiny of American experts. Thev are rightly regarded as overam-
bitious for early application and risky, if not dangerous, in various ways. The
several limited experiments with buffer stocks of tin, before and during the inter-
national tin control scheme, yield warnings rather than clear promise. In the
POST-WAR ECONOMIC POLICY AND PLANNING 1707
near future, tin will be so scarce that no opportunity for constituting a buffer
stock of this metal is in sight.' , , , -^
The idea nevertheless persists that, on a larger scale and under different auspices,
buffer stocks might nevertheless be made to serve the purpose of moderating the
violence of price fluctuations without restricting efficient producers for the sake
of the inefficient and without impeding the operation of expansive forces. VV hile
a buffer-stock scheme could probably be made essentially adaptive rather than
restrictive, it can also be abused for purposes of price-rigging. Experience with
tin demonstrates that producing interests cannot be expected to operate buffer
stocks in the interest of the world at large. For this reason such interests should
not be given exclusive, or even dominant command over their operation.
Not every commodity market is suitable for the application of such a scheme.
To promise genuine success, several other requirements must be reasonably satis-
fied Productive capacity and average world requirements must be in approxi-
mate balance, and buffer-stock operations should not be allowed to disturb this
balance Exporting countries should refrain from subsidizing exports of the
commoditv or its substitutes. Finally, there must be definite agreement on the
ultimate liquidation of accumulated stocks should the scheme be abandoned.
(5) Marketing-opportimitij agreements. — Another desirable typ-e of IC A would
be designed to assure market outlets for specific commodities of sp^icial impor-
tance to countries with weak post-war economies, including liberated and ex-
enemy countries. Wartime shortages and pressures have stimulated other
sources of these products and substitutes for several of them, including natural
rubber, quinine, kapok, hemp, ai\d raw silk. We have to expect post-war
pressures to preserve and/ or expand the war-stimulated sources of supply and
the industries producing the substitute commodities. Yet the restoration of the
economies of liberated and ex-enemy countries is essential to world peace and
prosperity, and this will require the revival of exports of products in which these
countries have great comparative advantages. Even the ex-enemy countries will
urgently need foreign markets for such goods, especially in view of the restrictions
sure to "be imposed^upon them in the interest of reparations and the preservation
of peace. r • ^ * +
Some such agreements might go no further than to assure, for a period ot at
least several years, duty-free and quota-free entry of such commodities, and
severe limitation or complete avoidance of direct and indirect subsidies to com-
peting commodities whether in production or exports. Some agreements might
go further and assure minimum volume purchases, possibly in some instances for
national-defense stock piles. Their importance lies in the fact that the post-war
world economv will need strengthening in its weakest national components, ff
the nations which emerged strong are to maintain a healthy strength.
One example mav be cited. Japan has long been the low-cost producer of
silk, which has met increasingly severe competition from new fibers, notably
nylon. To an extent not vet generally realized it will be important that the
post-war Japanese be given opportunity to make a decent living despite t.he
imposition of necessary restraints on Japan's war-making or other aggressive
potential. It will be in the interest of the people of the world that silk growing
elsewhere be not protected or subsidized, that the advances of competing fibers
be given no special stimuli, and that Japanese silk be assured a welcome as a con-
tinuing member of the family of fibers, holding such place as fair intercommodity
c'oihpetition will permit. A marketing-opportunity I. C. A., containing specific
provisions designed to this end, could contribute toward the normal recovery of
the Japanese economy, the durability of peace, and higher satisfaction of human
wants for goods.
In conclusion, the composition of international commodity agencies under non-
restrictive I. C. A.'s should be quite different from most of those hitherto existing.
Generally, they have represented either the financial interests concerned with the
production of the commodity— as in the cases of tin, rubber, and tea — or depart-
ments of the Government chiefly concerned with national agricultural policy or
"r^'s'lcnoiT Tin under Control CFood Research Institute Commodity Policy Studies 5, Stanford Unj.
versitV Calif , January- 1945), passim. Yates believes that a buffer- stock asreement for tm, to be applied
when conditions permit its initiation, mieht serve the needs of the next few years without more than trans-
sitional resort to restrictive measures such as were characteristic of international tm control in iMii-iy
(P. L. Yates, Commodity Control; A Study of Primary Control, London, 1943, pp. 153-50). Knorr (op. at.,
pp. 289-94) is more skeptical.
1708 POST-WAR ECONOMIC POLICY AND PLANNING
with dependencies. The former have tended to be too single-minded in considering
their own interests. The latter have been too timid in the face of existing national
policies, too restricted by red tape and formalities, and too prone to continue and
reinforce existing Government controls. Even in rare cases, very limited in-
fluence has been accorded industrial consumers of the commodity who have an
important stake in such arrangements. ConsiDicuously frozen out, as a rule,
have been trading interests, which tend to be eager for larger and freer trade;
undependent economists, who are characteristically freest to consider the general
interest; and able persons of unquestioned public spirit without any personal
interest involved. Such groups as these should be strongly represented in the
make-up of administrative bodies under future I. C. A.'s of either restrictive or
nonrestrictive types.
No possible expansion of I. C. A.'s can meet the urgent need for larger and freer
international trade and better coordination of national polices that affect both
trade and the cause of peace. There is much need for a multilateral trade agree-
ment covering many countries and commodities, for the work of such an agency
as the prosposed United Nations Trade Commission,* and for more specialized
agencies such as the proposed food and agriculture organization. Only within
such a framework, conforming to its purposes, and broadly subsidiary to its
organs, can I. C. A.'s and their administrative bodies make their constructive con-
tributions to international collaboration.
8 P. W. BidwelW A Commercial Policy for the United Nations (Committee on International Economic
Policy in cooperation with Carnegie Endowment for International Peace, New York, 1945).
X
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