There Is No Reason Why Farming Should Be Exempt from Market Forces
MAY 01, 2002 by SCOTT MCPHERSON
Democrats love capitalism,” charged U.S. Senator Phil Gramm of Texas during last year’s debate over tax cuts, “but they hate capitalists.”1 It is fair to say that Gramm’s analysis is on target—if only he would admit the corresponding truth in his criticism: that Republicans love capitalists but hate capitalism—particularly when it comes to their farming constituencies.
In what will surely be the biggest non-debate of many election-year “battles,” Senate Republicans like Kansas’s Pat Roberts are promoting more and more subsidies to farmers as crop prices fall. Prices for wheat, corn, cotton, and soybeans all plummeted in the late ’90s, and have yet to recover. In response, Congress has approved four bailouts for the farm industry since 1998, to the tune of $28 billion.
Now, as several farm-state senators face re-election in what pundits are predicting to be close races, the government gravy train is once again at full speed. Currently Congress is working on an expansion of farm subsidy programs that would have the government making direct payments to farmers when prices are down. If this legislation fails to pass, however, “Congress will provide another round of supplemental assistance for farmers,” the Associated Press reported.
Though Republicans love to wax eloquent about the independent, virtuous, struggling businessman who pulls himself up by his bootstraps to build a dignified life on the products of his own toil, their professed love of free enterprise seems to ultimately depend on farmers’ being immune from the process. What this amounts to is a love of the symbolic capitalist, accompanied by an unhealthy misunderstanding of what capitalism really means.
There is no reason why farming should be exempt from market forces and require the constant largess it now receives from the taxpayer. The most popular argument against ending farm assistance is that it will reduce the number of farms and create a situation like that of the breakfast cereal industry, which is dominated by a few large conglomerates. Looked at from any economic perspective, however, this is purely a red herring.
First, politicians’ claims that subsidies are “necessary” to “protect” small farms from massive corporate takeover are largely exaggerated. E. C. Pasour, Jr., professor of agriculture and resource economics at North Carolina State University, writes that “two-thirds of government payments go to the wealthiest 15 percent of U.S. farmers.”2 This fact clearly discredits the teary-eyed sentimentalities of many subsidy supporters.
Second, if most farms in America were in fact to fall under the ownership of a few big companies, it is erroneous to think this would hurt consumers and farmers. For example, while technological developments in the textile industry in the early nineteenth century did cause short-term worker displacement, by the end of the century mills were actually employing more people than had previously worked in that field. This is due to the economic law of capital accumulation—businesses that are allowed to make large profits tend to reinvest their proceeds, fueling expansions that require more workers. Those farmers who cannot find work in the new environment will most likely be employed in those industries that boom with a fresh influx of funds, freed up from the wasteful spending that previously went to agriculture.
Consumer, Have No Fear
Nor would consumers have anything to fear from such a development. The decline of mom-and-pop stores has yet to bring about the huge price hikes that many anticipated; it was precisely because large chain stores and supermarkets were charging less that they won the smaller stores’ customers to begin with. The only thing that increased was the quantity and selection of goods on the shelves. If the farm industry were allowed to so effectively weed out its least productive, least efficient, and least profitable members, food prices would fall even more.
Like any other endeavor, farming will have both winners and losers. The role of the winner is to demonstrate the profitability of wise thinking and careful investment; his success means more people get more goods. Democrats seem to despise the one among many who succeeds and grows rich. On the other hand, Republicans want all farmers to be icons of capitalistic achievement, at the expense of the free market they claim to support.
Scott McPherson is a freelance writer in Fairfax, Virginia.
- Michael Graczyk, “Gramm brings Bush tax cut campaign to home turf,” Associated Press report in the Abilene Reporter-News, February 17, 2001.
- See “Government should support agriculture—the backbone of America,” in Mark Spangler, ed., Clichés of Politics (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1996), p. 218, also posted on www.cliches.org.