Agriculture Subsidies and Monopoly

Charles R. Eckert

[A speech delivered in the U.S. House of Representatives, 21 December 1937]

Mr. Speaker, agriculture is in distress. Many farmers are crying for help. In desperation they are appealing to the Federal Government for relief. In that respect the farmers are keeping step with industry, commerce, finance; with wage workers and unemployed. Hardly a group, whether engaged in business or workers in industry, remains that is not casting eager eyes in the direction of the Federal Government, seeking aid and help. And so the farmers of America are not only keeping up with the custom and practice of the times, but in certain aspects have much to offer in justification. The American farmer has been in distress and suffering the pangs of unrequited toil for many decades. The millions of American citizens whose livelihood is dependent upon tilling the soil are being sorely tried. Their homes and their farms are constantly passing out of their hands, so that the roll of the tenant farmer is growing larger and larger with the years. In consequence there has been an acute American farm problem for more than 50 years.

During those years political parties vied with each other in fulsome platform promises. The declarations of the party platforms always turned out to be empty and elusive. Of course, the game of deception could not continue indefinitely, and so the time arrived when the farmers were no longer contented with empty mouthings and vain promises. The Democratic Party in 1932, by solemn declaration, assured the farmers of America that, if entrusted with power, action in their behalf would be taken. After assuming control of the Federal Government in 1933, the party immediately undertook to honor its plighted word, and steadfastly continued to translate its platform promises into law.

Contrary to common report that the farm legislation is emanating from certain self-seeking individuals high in the councils of the administration, whose sole aim is the establishment of a totalitarian state and the consequent loss of our cherished liberties, the farm program occupied a prominent place on the agenda of the special session of Congress in response to insistent appeals from the farmers themselves. The administration would be quite happy and the Congress relieved of a vexing and perplexing problem if farm legislation could be consigned to the limbo of forgotten things.

But there is no such good luck in store for the Congress and the President. The farmers are demanding legislation on the subject of agriculture. While the farmer has ample precedent for his present course, might it not be profitable to inquire as to the reasons why such economic distress?

There was. a time in the life of the American Republic when the American farmer was the envy of the world. He occupied a place in the national economy that was everywhere recognized as the strength of the Federal Union. His station in life fostered and developed sterling manhood and true citizenship. He was sturdy and strong; vigorous and wholesome; independent and self-reliant. He represented the bold peasantry of which Goldsmith wrote:

Ill fares the land, to hastening ills a prey,
Where wealth accumulates, and men decay:
Princes and lords may flourish, or may fade;
A breath can make them, as a breath has made;
But a bold peasantry, their country's pride,
When once destroy'd, can never be supplied.

No longer does he occupy this high estate. In common with his fellow toilers in mill and mine and marts of trade, he is the victim of economic forces and conditions over which he has no control, and so day by day and year by year his place in the national economy is becoming more and more precarious.

Agriculture is our basic industry. It is the most essential of all human endeavor. All other activities are dependent upon the tilling of the soil. Food and clothing are primary necessities. Both are firsthand products of the soil. The place of agriculture in the national economy is vital to national well-being. No people can survive, let alone grow great, without healthy and profitable agriculture. And yet we find this industry, in spite of its importance in our national life, helpless and prostrate. Why?

A little journey to the field of elementary political economy might shed light on the perplexing and baffling problem. Political economy is the science of the production and distribution of wealth. As we stand puzzled and confused before this baffling problem, one thing at least is clear: The farmer - the dirt farmer - does not present any unemployment problem. He always has work to do. And this brings us to the very brink of the problem of production, for all productive effort involves work.

The farmer is a producer of wealth. The products of the farm are brought into existence by the application of labor to land. Wealth of every kind is created in the same way. There is no other method known to man by which wealth can be created. The farmer is the pioneer in the field of production. He is a living example of the process of bringing wealth into existence. In the cultivation of the crops of the field all the factors in production are employed. These in terms of political economy are:

LAND, LABOR, CAPITAL

Land is defined as "the natural universe outside of man and his products." The term "land" necessarily includes not merely the surface of the earth as distinguished from the water and the air but the whole material universe outside of man himself. The term "land" embraces, in short, all natural materials, forces, and opportunities.

Labor is defined as "all human exertion directed toward the production of wealth."

Capital is defined as "wealth used in the production of more wealth."

The result obtained from the application of labor with the aid of capital - tools - to land is wealth. Wealth therefore is "all material things produced by human labor having exchange value."

The process of production or the creation of wealth is quite simple. The farmer furnishes many striking examples. In his activities he runs the entire gamut of production. He is a first-hand user of land. The very nature of his labor impels him to contact the soil. He is a user of tools - capital. And so the farmer in action employs all the factors of production - to wit, land, labor, capital - more distinctly than many other producers of wealth. Let not this fact, however, obscure the simple truth, that in all production - no matter how intricate and complex - the three factors of production are employed.

Now, since the process of production has been analyzed, let us examine the problem of distribution. This is important. For it availeth the worker little unless the factors involved in production receive their just share of the product. In the unjust distribution of wealth there lurks the germ of economic and social disintegration. The farmer's troubles cannot be discerned, nor proper remedies proposed, without a clear understanding of the laws of distribution. The farmer's miseries are not due to his inability or unwillingness to produce. He, in conjunction with generous Nature, produces in abundance, but somehow and somewhere in the course of the processes of distribution of the things his labor brings into being there passes out of his possession a major portion without due recompense. It is this fact that is accountable for his troubles.

And so let us examine the laws of distribution. It has already been noted that the factors in production are land, labor, and capital. The sum total of all production is primarily divided among these three factors - the portion allotted to land as rent, the portion allowed to labor as wages, and the portion allotted to capital as interest.

It is clear, therefore, that the amount which the farmer will receive for his labor and capital will depend upon the amount the factor land is able to extract. If land is plentiful and cheap, rent will be low. On the other hand, if land is scarce and dear, land will be high. These phenomena are illustrated in the history of our own country, the former by the settlement of our western frontier and the latter during the World War, when the cry went up over the land that we would win the war with wheat. Homesteads and fairly sizeable farms could be had during the settlement of the West for the asking, and consequently the item of rent was absent. But after all free land was home-steaded or monopolized, then arose the item of rent, and henceforth it played a decisive part in the fortunes of the farmer. The experience of the farmers during the World War is a case in point. The prosperity of the farmer depends in large measure upon the terms for which land may be had.

By way of illustrating the laws of distribution, let us suppose that A is the owner of 100 acres of virgin wheatland, worth, in its virgin state, $100 per acre. B, a farmer, rents the land from A for $600 per year. B has no capital and so borrows from C, let us say, $5,000 at 6 percent interest. With the capital thus borrowed B obtains the necessary tools, seed, fertilizer to plant the 100 acres and erect such buildings as are necessary for the protection of himself and family. Thus equipped, B plants the 100 acres of land in wheat. In due course he harvests his crop and finds that his labor was rewarded with 2,500 bushels of wheat. He converts his wheat into cash by selling it at $1 per bushel, so that the total income for his year's labor - assuming that the production of 2,500 bushels of wheat requires the labor of one man 300 days, involving 2,400 man-hours of human labor - is $2,500. Now, the distribution of the $2,500 would, by virtue of the operation of the laws of distribution, appear somewhat in this fashion:

Rent paid to A	$600
Interest to C	$300
Cost of seed	$150
Cost of fertilizer	$300
Cost of threshing	$125
Cost of transportation	$125
Taxes	$100
Total	$1,700

It will be observed that B has remaining for his year's labor $800 as wages with which to support himself and family and amortize the $5,000 debt within the lifetime of his farm equipment and buildings.

The figures in the illustration, of course, are arbitrary and are not intended to represent an exact picture of wheat husbandry. It does, however, show the operation of the natural laws of distribution. It must be noted that as one or the other factors employed in production exacts a larger or smaller portion of the total product, the others will rise or fall, thus affecting the amount that the farmer will receive as wages. If rent rises, interest and wages will fall; conversely, if rent falls, interest and wages will rise.

Inasmuch as the farmer is never out of employment and since all wealth is the creation of labor applied to land, and as the farmer produces a large portion of the wealth of the Nation, as evidenced by the sum total of all the agricultural products, and again inasmuch as the total production of the farmers represents the farmers' wages, less, of course, the amount paid for the use of capital as interest and the use of land as rent, does it not seem passing strange that his lot should be so hard and his income so low?

It is plain that his troubles are not due to lack of work nor of production. His labors are fully rewarded with the products of the field. Nature responds freely and generously to his toil. Then why his unhappy plight? Since it is not due to his indolence nor the niggardliness of Nature, the explanation must be sought elsewhere.

Since his wages are low and the total sum of the products of his labor are distributed to the three factors in production to wit, land labor, capital, it would seem that the demand of either land or capital, or both are responsible for the low income of the farmer. Capital, however, being the tools used in the productive process, is powerless to exact more than a fair share of the product. Capital is subject to the Law of supply and demand. In periods of economic sluggish activity, interest is low; in periods of active activity, interest is normal. Therefore the trouble is not due to excessive interest. And since wages are low and interest not excessive, it follows that the exactions of landholders are responsible for much of the farmer's troubles. That the major woes and worries of the farmers are due to the latter cause becomes clear upon critical analysis of the problem.

The social phenomenon of the increase of land values with advancing civilization must be taken into consideration when seeking the cause of the woes and worries of the farmer. This phenomenon is outstanding in every civilized country. It follows the wake of progress as unerringly as do the colors of the prism in the wake of the shining sun. It is a law of Nature as immutable and changeless as the law of gravity. The greatest and mightiest stand helpless and powerless to stop or impair its march with progress. Therefore the effects of this social phenomenon upon the fortunes of the farmers are of paramount importance in the consideration of the farm problem.

In periods of prosperity land values rise. During the hectic days of the World War, when the cry went out over the land that wheat would win the war and the price of wheat was soaring, wheat land and other lands likewise increased in value.

The rise in agricultural lands kept pace with the demand and price of wheat and other agricultural products. It was not uncommon during those hectic days to see agricultural land sell for as much as $500 per acre. And as the selling price of agricultural land kept pace with the price of wheat and other farm products, the landowner was eagerly anticipating his full share of the high price of farm products. Just as farm prices increased, he demanded higher and higher rent for the use of his land. This is the universal practice of the landowner. It will continue to be his practice as long as he will be permitted to collect the profits arising from land values. This is true no matter whether the farmer happens to be landowner, laborer, and capitalist all in one or as tenant or mortgagor. The ultimate effect on the fortunes of the farming fraternity will be exactly the same. The result is exploitation of the farmer as a worker. In view of the fact that there is no escape from the relentless working of the law of rent, does not the fundamental cause of the farmer's troubles become clear? In view of this stubborn fact, surely prudence would dictate a change in our land policy.

The farmer is weighted down with excessive and burdensome taxes. He pays a tax on his capital investment; he is taxed on everything he buys; he finds himself a victim of a vicious tariff system; and in addition to the endless list of taxes, both direct and indirect, he is the victim of excessive freight rates on the things he ships to market and on the things he has to buy. But this is not all. He finds himself the victim of trusts and combines and patent monopolies in addition to the perpetual exactions of the landowner. What is the trouble with the farmer? He is the victim of monopoly exactions. And while he remains the victim of monopoly, no planning - whether it be crop control, soil conservation, subsidies, or whatnot - will permanently solve the farm problem. As long as the farmer remains the victim of the ruthless and relentless exactions of monopoly his woes and his worries will continue. Obviously the remedy for the farmer's troubles is to abolish the monopoly privileges now in private hands.

We are told farming is a way of life. Yes. But first of all it is the way of 20,000,000 American citizens by which they gain their livelihood. It is all very well to sound the praises of agriculture as a way that leads to noble virtues and high spiritual attainments. But before this noble enterprise can be touted in such strains the exploitation of which the farmer is now a victim must be abolished, to the end that his material wants may be gratified short of utter physical exhaustion and spiritual bankruptcy.

The farmer must be freed from the many monopolistic exactions from which he suffers. First and foremost of these is land monopoly. Land monopoly can be easily abolished by the simple device of collecting for public revenue the economic rent in lieu of the many burdensome and depression-breeding taxes that now rest not only upon the farmers alone but upon industry and business generally. Such a policy would clear the way for the repeal of all taxes upon production. And with production freed and released from present-day monopoly and tax exactions industry would receive a mighty impetus. Production in all lines would expand, and with the expansion of industry there would arise an effective demand for labor. Consequently wages would increase, employment would be steady, and the purchasing power of factory workers would rise. With the purchasing power of the wage earners increased, trade and commerce would experience new life and vigor and, in turn, the demand for the products of the farmer would increase.

It is contended by students of the farm problem that if the American people had adequate steady buying power the farm problem would be solved. And in support of this contention they cite the statement of the Department of Agriculture to the effect that if the American people were possessed of adequate purchasing power there would be a market for 40 percent more poultry, 40 percent more dairy cattle, 100 percent more acreage devoted to fruit, almost twice as much devoted to truck crops, 50,000,000 more acres of harvested food crops, and 40,000,000 more acres of feed grains.

This is not an idle dream. Everyone knows that there are millions of American families who are deprived of proper living conditions due to their low purchasing power. With this condition corrected by means of a proper and just system of distribution, the farmer's problem would be solved. Then there would be no need for aid or assistance at the hands of the Government other than such help and counsel as are now available through the Agriculture Department, State experiment stations, and local farm agents. In addition, the farmer can improve his economic status by the establishment of voluntary devices such as cooperative associations, better farm management, and modern business methods, and availing himself of the advantages that science and invention have given to the world.

But first of all he must be freed from the many monopolistic exactions and unjust tax burdens from which he now suffers.