Do Farmers Have Legitimate Complaints, and Should Government Help? 1922

“Some Aspects of the Farmers’ Problems” by Bernard M. Baruch as published in the Feb. 2, 1922 issue of The Watauga Democrat (Reprinted from Atlantic Monthly)

The whole rural world is in a ferment of unrest, and there is an unparalleled volume and intensity of determined, if not angry, protest and ominous swarming of occupational conferences, interest groupings, political movements and propaganda. Such a turmoil cannot but arrest our attention. Indeed, it demands our careful study and examination. It is not likely that six million aloof and ruggedly independent men have come together and banded themselves into active unions, societies, farm bureaus, and so forth, for no sufficient cause.

Investigation of the subject conclusively proves that, while there is much overstatement of grievances and misconception of remedies, the farmers are right in complaining of wrongs long endured, and right in holding that it is feasible to relieve their ills with benefit to the rest of the community. This being the case of an industry that contributes, in the raw material form alone, about one-third of the national annual wealth production and is the means of livelihood of about 49 percent of the population, it is obvious that the subject is one of grave concern. Not only do the farmers make up one-half of the nation, but the well-being of the other half depends upon them.

So long as we have nations, a wise political economy will aim at a large degree of national self-sufficiency and self-containment. Roam fell when the food supply was too far removed from the belly. Like her, we shall destroy our own agriculture and extend our sources of food distantly and precariously, if we do not see to it that our farmers are well and fairly paid for their services. The farm gives the nation men as well as food. Cities derive their vitality and are forever renewed from the country, but an impoverished countryside exports intelligence and retains unintelligence. Only the lower grades of mentality and character will remain on, or seek, the farm, unless agriculture is capable of being pursued with contentment and adequate compensation. Hence, to embitter and impoverish the farmer is to dry up and contaminate the vital sources of the nation.

The war showed convincingly how dependent the nation is on the full productivity of farms. Despite herculean efforts, agricultural production kept only a few weeks or months ahead of consumption , and that only by increasing the acreage of certain staple crops at the cost of reducing that of others. We ought not to forget that lesson when we ponder on the farmer’s problems, and there should be no attempt to deal with them as if they were purely selfish demands of a clear-cut group, antagonistic to the rest of the community. Rather should we consider agriculture in the light of broad national policy, just as we consider oil, coal, steel, dyestuffs, and so forth, as sinews of national strength. Our growing population and a higher standard of living demand increasing food supplies, and more wool, cotton, hides, and the rest. With the disappearance of free or cheap fertile land, additional acreage and increased yields can come only from costly effort. This we need not expect from an impoverished or unhappy rural population.

It will not do to take a narrow view of the rural discontent, or to appraise it from the standpoint of yesterday. This is peculiarly an age of flux and change and new deals. Because a thing always has been so no longer means that it is righteous, or always shall be so. More, perhaps, than ever before, there is a widespread feeling that all human relations can be improved by taking thought, and that it is not becoming for the reasoning animal to leave his destiny largely to chance and natural incidence.

Prudent and orderly adjustment of production and distribution in accordance with consumption is recognized as wise management in every business but that of farming. Yet, I venture to say, there is no other industry in which it is so important to the public—to the city dweller—that production should be sure, steady, and increasing, and that distribution should be in proportion to the need. The unorganized farmers naturally act blindly and impulsively and, in consequence, surfeit and dearth, accompanied by disconcerting price-variations, harass the consumer. One year potatoes rot in the fields because of excess production, and there is a scarcity of the things that have been displaced to make way for the expansion of the potato acreage. Next year the punished farmers mass their fields on some other crop, and potatoes enter the class of luxuries, and so on.

Agriculture is the greatest and fundamentally the most important of our American industries. The cities are but the branches of the tree of national life, the roots of which go deeply into the land. We all flourish or decline with the farmer. So, when we of the cities read of the present universal distress of the farmers, of a slump of six billion dollars in the farm value of their crops in a single year, of their inability to meet mortgages or to pay current bills, and how, seeking relief from their ills, they are planning for form pools, inaugurate farmers’ strikes, and demand legislation abolishing grain exchanges, private cattle markets, and the like, we ought not hastily to brand them as economic heretics and highwaymen, and hurl at them the charge of being seekers of special privilege. Rather, we should ask if their trouble is not ours, and see what can be done to improve the situation. Purely from self-interest, if for no higher motive, we should help them. All of us want to get back permanently to “normalcy,” but is it reasonable to help for that condition unless our greatest and most basic industry can be put on a sound and solid permanent foundation? The farmers are not entitled for special privileges; but are they not right in demanding that they be placed on an equal footing with the buyers of their products and with other industries?

Let us, then, consider some of the farmer’s grievances, and see how far they are real. In doing so, we should remember that, while there have been, and still are, instances of purposeful abuse, the subject should not be approached with any general imputation to existing distributive agencies of deliberately intentional oppression, but rather with the conception that the marketing of farm products has not been modernized.

An ancient evil, and a persistent one, is the undergrading of farm products, with the result that what the farmers sell as one quality is resold as of a higher. That this sort of chicanery should persist on any important scale in these days of business integrity would seem almost incredible, but there is so much evidence that it does persist. Even as I write, the newspapers announce the suspension of several firms from the New York Produce Exchange for exporting to Germany as No. 2 wheat a whole shipload of grossly inferior wheat mixed with oats, chaff and the like.

Another evil is that of inaccurate weighing of farm products, which it is charged, is sometimes a matter of dishonest intention and sometimes of protective policy on the part of the local buyer, who fears that he may “weigh out” more than he “weighs in.”

A greater grievance is that at present the field farmer has little or no control over the time and conditions of marketing his products, with the result that he is often under paid for his products and usually overcharged for marketing service. The difference between what the farmer receives and what the consumer pays often exceeds all possibility of justification. To cite a single illustration. Last year, according to figures attested by the railways and the growers, Georgia watermelon-raisers received on the average 7.5 cents for a melon, the railroads got 12.7 cents for carrying it to Baltimore and the consumer paid one dollar, leaving 79.8 cents for the service of marketing and its risks, as against 20.2 cents for growing and transporting. The hard annals of farm-life are replete with such commentaries on the crudeness of present practices.

Nature prescribes that the farmer’s “goods” must be finished within two or three months of the year, while financial and storage limitations generally compel him to sell them at the same time. As a rule, other industries are in a continuous process of finishing goods for the markets. They distribute as they produce, and they can curtail production without too great injury to themselves or the community. But if the farmer restricts his output, it is with disastrous consequences, both to himself and to the community.

The average farmer is busy with production for the major part of the year, and has nothing to sell. The bulk of his output comes on the market at once. Because of lack of storage facilities and of financial support, the farmer cannot carry his goods through the year and dispose of them as they are currently needed. In the great majority of cases, farmers have to entrust storage—in warehouses and elevators—and the financial carrying of their products to others.

Farm products are generally marketed at a time when there is a congestion of both transportation and finance—when cars and money are scarce. The outcome in many instances, is that the farmers not only sell under pressure, and therefore at a disadvantage, but are compelled to take further reductions in net returns, in order to meet the charges for the service of storing, transporting, financing, and ultimate marketing—which charges they claim, are often excessive, bear heavily on both consumer and producer, and are under the control of those performing the services. It is true that they are relieved of the risks of a changing market by selling at once; but they are quite willing to take the unfavorable chance, if the favorable on e also is theirs and they can retain for themselves a part of the service charges that are uniform, in good years and bad, with high prices and low.

While, in the main, the farmer must sell, regardless of market conditions, at the time of the maturity of crops, he cannot suspend production in toto. He must go on producing if he is to go on living, and if the world is to exist. The most he can do is to curtail production a little or alter its form, and that—because he is in the dark as to the probable demand for his goods—may be only to jump from the frying pan into the fire, taking the consumer with him.

Even the dairy farmers, whose output is not seasonal, complain that they find themselves at a disadvantage in the marketing of their productions, especially raw milk, because of the high costs of distribution, which they must ultimately bear.

Now that the farmers are stirring, thinking, and uniting as never before to eradicate these inequalities, they are subjected to stern economic lectures, and are met with the accusation that they are demanding, and are the recipients of special privileges. Let us see what  privileges the government has confirmed on the farmers. Much has been made of Section 6 of the Clayton Anti-Trust Act, which purported to permit them to combine with immunity, under certain conditions. Admitting that, nominally, this exemption was in the nature of special privilege,--though I think it was so in appearance rather than in fact,--we find that the courts have nullified it by judicial interpretation. Why should not the farmers be permitted to accomplish by co-operative methods what other businesses are already doing by co-operation in the form of incorporation? If it is proper for men to form, by fusion of existing corporations or otherwise, a corporation that controls the entire production of a commodity, or a large part of it, why is it not proper for a group of farmers to unite for the marketing of their common products, either in one or in several selling agencies? Why should it be right for a hundred thousand corporate shareholders to direct 25 or 30 or 40 percent of an industry, and wrong for a hundred thousand co-operative farmers to control a no larger proportion of the wheat crop, or cotton, or any other product?

The Department of Agriculture is often spoken as a special concession to the farmers, but in its commercial results, it is of as much benefit to the buyers and consumers of agricultural products as to the producers, or even more. I do not suppose that anyone opposes the benefits that the farmers derive from the educational and research work of the department or the help that it gives them in working out improved cultural methods and practices, in developing better yielding varieties through breeding and selection in introducing new varieties from remote parts of the world and adapting them to our climate and economic condition, and in devising practical measures for the elimination or control of dangerous and destructive animal and plant diseases, insect pests, and the like. All these things manifestly tend to stimulate and enlarge production, and their general beneficial effects are obvious.

It is complained that, whereas the law restricts Federal Reserve banks to three months’ time for commercial paper, the farmer is allowed six months on his notes. This is not a special privilege, but merely such a recognition of business conditions as makes it possible for country banks to do business with country people. The crop farmer has only one turnover a year, while the merchant and manufacturer have many.  Incidentally, I note that the Federal Reserve Board has just authorized the Federal Reserve banks to discount export paper for a period of six months, to conform to the nature of the business.

The Farm Loan banks are pointed to as an instance of special government favor for farmers. Are they not rather the outcome of laudable efforts to equalize rural and urban conditions? And about all the government does there is to help set up an administrative organization and lend a little credit at the start. Eventually the farmers will provide all the capital and carry all the liabilities themselves. It is true that Farm Loan bonds are tax exempt; but so are bonds of municipal light and the traction plants, and new housing is to be exempt from taxation, in New York, for ten years.

On the other hand, the farmer reads of plans for municipal housing projects that run into the billions, of hundreds of millions annually spent on the merchant marine; he reads that the railroads are being favored with increased rates and virtual guaranties of earnings by the government, with the result to him of an increased toll on all that he sells and all that he buys. He hears of many manifestations of governmental concern for particular industries and interests. Rescuing the railways from insolvency is undoubtedly for the benefit of the country as a whole, but what can be of more general benefit than encouragement of ample production of the principal necessaries of life and their even flow from contented producers to satisfied consumers?

While it may be conceded that special governmental aid may be necessary in the general interest, we must all agree that it is difficult to see why agriculture and the production and distribution of farm products are not accorded the same opportunities that are provided for other businesses; especially as the enjoyment by the farmer of such opportunities would appear to be even more contributory to the general good than in the case of other industries. The spirit of American democracy is unalterably opposed, alike to enacted special privilege and to the special privilege of unequal opportunity that arises automatically from the failure to correct glaring economic inequalities. I am opposed to the injection of government into business, but I do believe that it is an essential function of democratic government to equalize opportunity so far as it is within its power to do so, whether by the repeal of archaic statutes or the enactment of modern ones. If the anti-trust laws keep the farmers from endeavoring scientifically to integrate their industry while other industries find a way to meet modern conditions without violating such statutes, then it would seem reasonable to find a way for the farmers to meet them under the same conditions. The law should operate equally in fact. Repairing the economic structure on one side is no injustice to the other side, which is in good repair.

We have traveled a long way from the old conception of government as merely a defensive and policing agency; and regulative, corrective, or equalizing legislation, which apparently is of a special nature, is often of the most general beneficial consequences. Even the First Congress passed a tariff act that avowedly for the protection of manufacturers; but a protective tariff always has been defended as a means of promoting the general good through a particular approach; and the statute books are filled with acts for the benefit of shipping, commerce, and labor.

Now, what is the farmer asking? Without trying to catalogue the remedial measures that have been suggested in his behalf, the principal proposals that bear directly on the improvement of his distributing and marketing relations may be summarized as follows:

First, the storage warehouses for cotton, wool, and tobacco, and elevators for grain, of sufficient capacity to meet the maximum demand on them at the peak of the marketing period. The farmer thinks that either private capital must furnish these facilities, or the state must erect and own the elevators and warehouses.

Second, weighing and grading of agricultural products and certification thereof to be done by impartial and disinterested public inspectors (this is already accomplished to some extent by the federal licensing of weighers and graders), to eliminate underpaying, overcharging, and unfair grading, and to facilitate the utilization of the stored products as the basis of credit.

Third, a certainty of credit sufficient to enable the marketing of products in an orderly manner.

Fourth, the Department of Agriculture should collect, tabulate, summarize, and regularly and frequently publish and distribute to farmers full information from all the markets of the world, so that they shall be as well informed of their selling position as buyers are now of their buying position.

Fifth, freedom to integrate the business of agriculture by means of consolidated agencies, co-ordinating and co-operating in such a way as to put the farmer on an equal footing with the large buyers of his products, and with commercial relations in other industries.