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Susan Green

Who Gets Gravy of Price Support?

Food-Surplus Problem Looms Again

(18 October 1948)

From Labor Action, Vol. 12 No. 42, 18 October 1948, pp. 1 & 2.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

A few weeks ago some Republican enthusiasts thought they had found the answer to President Truman’s electioneering claim that the Republicans are responsible for skyrocketing prices because they opposed price control – also, by the way, opposed by many Democrats. These Deweyites said that the Democrats brought about inflation because it was they who started the program of government support of farm prices. This gave the Democrats a welcome weapon. They accused the Dewey camp of planning to end the government support program and thus to betray the farmer. It didn’t take the Republicans long to see that they had let go a boomerang. Dewey had to make it clear that he loved the farmers as much as Truman does, and that he wouldn’t think of ending government price support.

So the subject has been dropped as a campaign issue. Everyone is for the farmer during the campaign, as everyone is for everyone else during the campaign; and, of course, no one opposes the government support program. The reasons for this unanimity are obvious. Everyone wants the farmers’ votes; and no one wants to be responsible for making a change in policy and later be blamed by political opponents for deflation when it comes. The only group wanting an end of government support of farm prices are the speculators who thrive on wild price fluctuations.

While government support of farm prices has thus ceased to be front-page campaign material, actually it is becoming an important factor in the economy. Predictions are that in the coming year the government will pay out or loan several billions of dollars and will become the owner or potential owner of huge stocks of farm crops. This will happen because the biggest crop in history, now being harvested in this country, and the agricultural recovery in Europe and elsewhere, are already forcing farm prices down, and the government will be called upon to make good its guarantee to peg those prices at legal levels.

Parity and Support

When prices on the open market fall below parity, the government can step in to do one of two things. It can either buy crops or other farm products outright at 90 per cent of parity (for cotton it is 92% per cent due to the efforts of the powerful lobby); or it can extend a loan to the farmer amounting to 90 per cent of parity, so that the farmer may store his crop and continue operations. However, the farmer can turn the crop over to the government to cancel out the loan. This is how government support works.

A word about parity – what is this thing called parity? A period is taken as basic in which there was a balance between farm and industrial prices. Parity prices attempt to keep this balance throughout periods of rising or falling general cost levels. In the Department of Agriculture there is a list of parity prices of commodities covered by the government support program, which parity prices are supposed to represent a fair relation between farm prices and the prices of what the farmers need to run their farms and to live.

Disparity between agricultural prices and industrial prices has constituted a problem in almost every country, more or less acute at different times. It will be recalled that the difficulty of “closing the scissors” in the early years after the Russian Revolution led to bitter controversy. Stalin, of course, “solved” the problem by terror, violence, exile and annihilation. Today in European countries where inflation is acute, farmers hoard their products rather than sell because they could not buy equivalent value for the money they would receive.

In this country the 1929 crisis affected farm prices more quickly than others. The Roosevelt recovery program made an effort to put a floor under the prices of agricultural products, of which there were great surpluses because hungry people could not buy. When World War II loomed on the horizon and the government foresaw the need for stupendous amounts of agricultural products, it guaranteed prices to farmers to get them to embark on all-out production, just as it guaranteed, in one way or another, profits to the industrialists. After the war the support program remained to encourage continued high production to meet postwar needs – to say nothing of the powerful farm lobbies on the spot to look after their own interests.

Since the war, prices have soared far above parity and the government has not had much occasion to step in. Its price support has been given for such purposes as to encourage the production of eggs in the Midwest and flaxseed for the extraction of linseed oil used by industry. The notorious support of wool and potato prices is the largest item.

From now on, however, the story will be different. The relation of supply and demand has changed, and wholesale prices reflect the change. Already there are declines below parity. The prospect for next year is for tremendous government involvement. Some estimates are for an expenditure of a billion and a half dollars for grains alone. Then there are cotton and other crops. The government is expected to acquire, over and above what it usually buys for its needs in the open market, a stupendous stock of 300,000,000 bushels of wheat, 350,000,000 bushels of corn, 4,000,000 bales of cotton, etc.

Who benefits most from this enormous government expenditure? As with all such programs of the capitalist government, the big fellow gets the cream. An illustration can be given from the government support of potatoes. It seems that the cost to the farmer to grow and harvest an acre in potatoes varies from $150 to $300. The cost to the big farmer is naturally at the lower figure since large-scale production reduces costs. Government support is in the neighborhood of $243, which still gives the large grower a profit of $93 but the small grower a possible loss of $57.

Then again, huge surpluses in government hands encourage deals. Still illustrating with potatoes, when the government was paying $1.55 for a bushel of potatoes under its support program, it was selling them to a processor of potato flour at 9 cents a bushel, after itself paying freight to the processor at 40 cents a bushel. That processor certainly got a bargain.

Mainly, however, when the surpluses mount, government support becomes a program of outright destruction of valuable food, much needed food. This has been true from the inception of the program. From May 1933 to February 1934, the government bought up 6,136,717 pigs and lightweight hogs and 222,149 farrowing sows whose litters of baby pigs might have amounted to another million. With the approval of Henry Wallace, then Secretary of Agriculture, some of these pigs were processed into inedible greases and fertilizer, and the great residue was dumped or burned. At that time people in this country were on starvation diets. This outrage is well known.

Two years ago, when starvation stalked Europe, millions of bushels of potatoes acquired by the government under its support program, were allowed to rot in the ground or were spoiled by pouring kerosene over them, thus also wasting the kerosene. The Department of Agriculture explained:

“Generally speaking, dumping would be the most economical disposition of surplus potatoes from a dollar and cents standpoint since the cost of sacking, grading, loading and freight would not be incurred.”

What will become of the mountain of surpluses the government is now expected to acquire? “From a dollar and cents standpoint” some of it will doubtless be destroyed, especially where the cost of picking, packing, shipping and storage is too much. What is not destroyed outright, of the government-acquired crops, will go into the reserve stockpile to serve the larger destructiveness of World War III.

There are many families in this most prosperous country which do not have enough to eat. This program of destruction does not help them. There are many families which can buy food at current prices only by foregoing other needs and desires. Government support of prices that may keep up inflation does not help them. On the other hand, the small farmer will not get much support from this program either. And as a matter of fact the whole agricultural industry remains in a precarious position. If supplies far outrun demand, will government support be able to hold back a. price collapse, especially with the unstabilizing influence of large government reserves?

Burning little pigs and pouring kerosene on potatoes cannot establish a stable and sound price structure. This acute and chronic problem can be tackled basically only by changing the motivation of production. That motivation must no longer be for sale and for profits through sale, but for human beings, to satisfy their needs.

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