Subsidies Are Payments, Economic Concessions, Or Privileges
given by the government to favor businesses or consumers. In the
1930s, subsidies were designed to favor agriculture. John Steinbeck
expressed his dislike of the farm subsidy system of the United States
in his book, The Grapes of Wrath. In that book, the government gave
money to farms so that they would grow and sell a certain amount of
crops. As a result, Steinbeck argued, many people starved
unnecessarily. Steinbeck examined farm subsidies from a personal
level, showing how they hurt the common man. Subsidies have a variety
of other problems, both on the micro and macro level, that should not
be ignored. Despite their benefits, farm subsidies are an inefficient
and dysfunctional part of our economic system.
The problems of the American farmer arose in the 1920s, and
various methods were introduced to help solve them. The United States
still disagrees on how to solve the continuing problem of agricultural
overproduction. In 1916, the number of people living on farms was at
its maximum at 32,530,000. Most of these farms were relatively small
(Reische 51). Technological advances in the 1920’s brought a variety
of effects. The use of machinery increased productivity while reducing
the need for as many farm laborers. The industrial boom of the 1920s
drew many workers off the farm and into the cities. Machinery, while
increasing productivity, was very expensive. Demand for food, though,
stayed relatively constant (Long 85). As a result of this, food prices
went down. The small farmer was no longer able to compete, lacking the
capital to buy productive machinery. Small farms lost their
practicality, and many farmers were forced to consolidate to compete.
Fewer, larger farms resulted (Reische 51). During the Depression,
unemployment grew while income shrank. “An extended drought had
aggravated the farm problem during the 1930s (Reische 52).” Congress,
to counter this, passed price support legislation to assure a profit
to the farmers. The Soil Conservation and Domestic Allotment Act of
1936 allowed the government to limit acreage use for certain
soil-depleting crops. The Agricultural Marketing Agreement Act of 1937
allowed the government to set the minimum price and amount sold of a
good at the market. The Agricultural Adjustment Act of 1938, farmers
were given price supports for not growing crops. These allowed farmers
to mechanize, which was necessary because of the scarcity of farm
labor during World War II (Reische 52). During World War II, demand
for food increased, and farmers enjoyed a period of general prosperity
(Reische 52). In 1965, the government reduced surplus by getting
farmers to set aside land for soil conservation (Blanpied 121). The
Agricultural Act of 1970 gave direct payments to farmers to set
aside some of their land (Patterson 129). The 1973 farm bill lowered
aid to farmers by lowering the target income for price supports. The
1970s were good years for farmers. Wheat and corn prices tripled, land
prices doubled, and farm exports outstripped imports by twenty-four
billion dollars (Long 88). Under the Carter administration, farm
support was minimized. Competition from foreign markets, like
Argentina, lowered prices and incomes (Long 88). Ronald Reagan wanted
to wean the farm community from government support. Later on in his
administration, though, he started the Payments In Kind policy, in
which the government paid farmers not to grow major crops. Despite
these various efforts, farms continue to deal with the problems that
rose in the 1920s.
Farm subsidies seem to have benefits for the small farmer.
“Each year since 1947, there has been a net out-migration of farm
people (Reische 53).” American farm production has tripled since 1910
while employment has fallen eighty percent (Long 82). Small family
farms have the lowest total family incomes (Long 83). Farming is
following a trend from many small farms to a few large farms.
Competition among farmers has increased supply faster than demand. New
seed varieties, better pest control, productive machinery, public
investments in irrigation and transportation, and better management
will increase farm output. The resulting oversupply of farm products,
which creates a low profit margin, drives smaller farms out of
business. Smaller farms lack the capital and income to buy the
machinery they need to compete with larger farms (Long 85). Many
see this tendency towards consolidation and mechanization of farms to
be harmful to the United States in the long run, and they see
subsidies as a way of achieving a social desire to preserve the family
farm. “If the family farm represents anything, it’s a very intimate
and fundamental relationship between people and resources (MacFadyen
138).” Fewer farms mean fewer jobs and a higher concentration of
wealth. Ten 30,000-acre farms may produce as much food as a hundred
3000-acre farms, but the former supports machinery; the latter,
community (MacFadyen 138). Farm subsidies are designed to prevent the
extinction of the small farmer. Despite the social benefits, subsidies
have many problems. The subsidy system is often wasteful; the
government finances irrigation systems in the California Imperial
Valley, and then pays farmers not to grow crops on it (Solkoff 27).
Some benefits hurt the small farmer. Marketing orders and tax breaks
hurt small operators by giving more money to bigger farms. Big farms
can then overproduce and undersell using advanced machinery, driving
lesser farms out of business (Fox 28). Subsidies also allow foreign
markets to become competitive by artificially raising market prices
(Long 91). Artificially raising market prices create a surplus that
would normally be solved by the free market system. In a theoretical
free market, overproduction would drive excess farms out of business,
until equilibrium would establish itself for both price and quantity
of farm products. Subsidies allow inefficient farms to continue to
exist, which creates an inefficient economic system. Subsidies also
increase the cost of other consumer products, while also increasing
taxes to pay for them. Perhaps most importantly, subsidies do not
fulfill their social role. “About 112,000 large farms– equivalent to
the number of farms in Minnesota alone– produce half the nation’s
food and fiber (Long 82).” The many government subsidy policies do not
preserve the family farm, and the number of small farms has almost
continuously been on the decline. Subsidies are impractical in the
economic and the social aspects.Despite perceived benefits, farm
subsidies are an inefficient and dysfunctional part of our economic
system. Their goal, nonetheless, is noble. Writers like John Steinbeck
made people aware of the plight of the small farmer, and subsidies
were the only solution he government could think of. If there is some
way to prevent the decline of small farms that does not carry the many
subsidy problems, the agricultural policy would undoubtedly change.
Perhaps the same anti-trust laws that prevented the monopolizing of
industry could be used to prevent the consolidation of farms. Until
some other system is developed that can deal with the problems of the
farmer, subsidies will continue to be used.
—
Works Cited
Blanpied, Nancy. Farm Policy. Congressional Quarterly: Washington
D.C., 1984.
Fox, Michael. Agricide. Schoken Books: New York, 1986.
Long, Robert Emmet. The Farm Crisis. Wilson Co.: New York, 1987.
MacFadyen, J. Tevere. Gaining Ground. Holt, Reinhart, and Winston: New
York, 1966.
Reische, Diana. U.S. Agricultural Policy. Wilson Co.: New York, 1966.
Solkoff, Joel. The Politics of Food. Sierra Club Books: San Francisco,
1985.
