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Full text of "Post-war economic policy and planning. Joint hearings before the special committees on post-war economic policy and planning, Congress of the United States, Seventy-eighth Congress, second session, pursuant to S. Res. 102 and H. Res. 408, resolutions creating special committees on post-war economic policy and planning"

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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 




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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 








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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 








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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 
40 

ao 

100 
80 
60 
40 
20 

Moex 

M8ER 
100 

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QUANTITY OF IMPORTS 


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WORLD EXPORTS AND UNITED STATES EXPORTS. 
VALUE AND QUANTITY. 1929-38 

(1929=100) 









VALUE OF EXPORTS 








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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 '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 



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 . . 





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.