Freeman

ARTICLE

Farming Is a Business

AUGUST 01, 1986 by CLARENCE B. CARSON

The rules of economy apply to farming as much as they do to any other business.

The plight of service station operators does not appear to ever have caught the public fancy. Not once in all my years as a diligent TV watcher can I recall having seen a special on the subject, or even a segment on the evening news about the disappearance of the family-operated service station. The television cameras have not focused on any sheriff’s bankruptcy sale of some service stations, with the sheriff surrounded by a bunch of surly service station operators protesting the sale. No legislatures or courts have declared a moratorium on foreclosures on service stations, to my knowledge. There are no Federal Service Station Banks to provide easy credit to go into the service station business. And, in all my years of perusing textbooks on American history, I have never encountered even a sentence about “The Service Station Problem,” much less a paragraph or a whole section of a chapter.

By contrast—and what makes the above so remarkable—I have seen reams of material over the years dealing with “The Farm Problem.” No presidential administration since that of Rutherford B. Hayes, at the latest, has managed to get by without some sort of “Farm Crisis.” Every sort of scheme, crackpot or otherwise, to deal with the farm problem has had its advocates, and many a bill has made its way through state legislatures and Congress that was supposed to address the problems of farmers. For more than a hundred years now those who claimed to speak for farmers have proclaimed the responsibility of government to help farmers, and for nearly as long governments have been passing legislation of one sort or another that was supposed to do just that. Inflation—back in the days when everyone understood that meant an increase in the money supply—was once considered to be the panacea for farm problems. Then it was regulation of rail rates, government-sponsored loan programs to provide easy credit, government-sponsored cooperative storage and crop loan facilities, parity payments, subsidies, and so on. No history book worthy of the name is minus sections planted here and there through the accounts of the last hundred years detailing the plight of the farmers. And, according to spokesmen for farmers, the problem is apparently as urgent today as ever, what with declining foreign markets, drops in the prices of farm lands, and widespread farm foreclosures.

It is not my point, of course, that farmers have not had and do not have problems. As far back as my information goes, farmers have always had problems of one sort or another. They have ever been hampered in their enterprise by droughts, floods, plagues, disease, fat years when prices fell and lean years when prices might rise but they produced much less. Farmers have been going into debt ever since merchants, factors, or bankers could be found to extend credit, many of them going deeper in debt from year to year in the vain hope that bumper crops could be sold at high prices to rescue them. Anyone who doubts this should study the accounts of American farmers and planters in our own colonial history. There have been many changes in technology and farming methods over the years, but the sort of financial problems encountered by commercial farmers have not changed much.

My point, rather, is that it is not all that clear that farmers differ that much in having problems from the rest of us who are exposed to the exigencies of the market—which is to say all of us, to greater or lesser extent. Even government workers sometimes lose their jobs, and politicians do not always get re-elected. But I started out to contrast farmers with service station operators, so allow me to stick with that for a bit. The woes of service stations over the years must often have been as great as those of farmers. True, many have left farming for other fields, especially over the past fifty years. But the number of service stations that have gone out of business during the same period must be very large, in view of the many abandoned businesses which dot the countryside. Service stations that remain in business also change hands or come under new management from time to time. One of the plaints about farming is that the family farm is disappearing, but service stations may also be operated by families. Whether service station operators are as prone to bankruptcy as farmers, I have no information, but undoubtedly many service station operators do not make a go of the business for one reason or another.

Farming as a Business

The central point I wish to make, however, is that farming is a business. In this crucial respect, it is like a host of other businesses. It has been contrasted with operating a service station not because farming is essentially different but because a great deal of political attention and a large number of political programs have been enacted that were supposed to aid farmers. By contrast, very little notice has been paid to service stations, and except for an occasional piece of legislation dealing with the treatment of independents by suppliers, service stations have rarely been singled out except for restrictive legislation. There are many other businesses for which there are no specific government aid programs: toymakers, for example, candy manufacturers, makers of cereals, and so on. Some businesses have been the objects of government programs which were supposed to aid them, of course, but none so massively, I think, nor over so long a period of time. Certainly businesses, in general, have not usually enjoyed public sympathy in this century; they have much more often been the subject of punitive regulation. Moreover, public opposition to and criticism of aiding other businesses has usually been vigorous.

Thus, it is important to emphasize that farming is a business. This is important for two reasons. First, it brings it into the correct framework for considering the appropriateness of providing aid. Second, it helps to cut away the alleged differences from other businesses. Farming for the market is a business. It is a business in that farmers use land, labor, and capital for the produce of goods to be sold. Such farming is done in the hope and expectation of profit as are all other businesses. Farmers usually seek to use as little of the scarce elements of production as possible to produce the most of the goods that are wanted (as indicated by price in the market). They seek the widest market for their produce, and thus the highest prices available. Successful farmers keep careful accounts and plan their investments of time and capital so as to maximize their income. Theirs is in no sense more of a charitable undertaking than is operating a service station or providing hundreds of other goods or services. This is not to deny that there are public benefits from farming, but these do not appear to differ from those that attend hundreds of other enterprises.


 

      The American farmer is in a situation today that can be solved. The solution is not one of governmental policies that create short-term “fixes” for the farmer. The best method to let the farmer prosper is the same solution that would let the other parts of the economy prosper. Government must remove the burdens placed upon the individual. The individual must be allowed to compete on an equal basis to become competitive with his peers.

Edgar Terry, a fourth-generation
farmer in Ventura, California


“The Family Farm”

Probably, a goodly amount of the public sympathy for farmers arises from memories that extend backward into an era when farming was often not so business-like as it has now become. The “family farm” may call up visions of small farms on which growing produce for the market was only an aspect of the undertaking. Such farms often kept a variety of animals—cows, horses, chickens, hogs, perhaps sheep or goats, geese, ducks—for family or farm use. Fruit trees would often provide fruit in season, and a variety of nuts might be produced. All sorts of crops might be grown, some for animal consumption, some for the family, and only one or a few for sale in the market. Such farms would frequently have surpluses of fruits and vegetables to be shared in season with neighbors and relatives. According to lore, and sometimes in fact, these farms were refuges for children who lived in cities and towns, to which they would be sent during summer vacation to spend some time on a farm with relatives, perhaps learning something of ancient virtues and values.

Such farms have mainly gone with the wind, so to speak nowadays. Most farming for the market, whether on family farms or on company or corporation farms, is more or less highly specialized. Many farms today have no farm animals at all. The old-fashioned barn has often been dispensed with entirely. Vegetable gardens are probably no more common on large farms than they are in the suburbs. Machinery has long since replaced most animals for motive power on the farms, and the machinery has become much larger and usually much more highly specialized in function than it used to be. A family farm is distinguished from others, if at all, by the fact that most of the work is done by a single family and that the family lives on the land. Even when there is some diversity in the produce, it is still done on a commercial scale usually. In sum, farming for the market has become commercialized.

The great change in farming generally may have less bearing than might be supposed on government programs for farmers, except for its nostalgic role in promoting taxpayer support to “save the family farm.” Actually, most government programs enacted over many years have been devised to affect farming for the market. Almost none of the programs has either sought or been devised to reward or restrict farm production for the family. True, some of the New Deal programs did try to encourage diversification on farms, but to the extent that they succeeded (by restricting the land planted to crops grown for the market), they usually resulted in driving people from the farms. Some loan programs, notably the Farmer’s Home Administration, have enabled some people to buy houses on small plots of land, but these are rarely used for any significant farming.

Altering the Market

In any case, most of the agitation for government programs and most of the actual programs have been aimed at altering the market in some way. One of the earliest interventions was an attempt to control freight rates and the prices charged for the storage of grain. These were supposed to help farmers who shipped their goods to market or stored them in the anticipation of higher prices. Currency inflation was aimed almost exclusively at raising farm prices or providing cheaper and easier credit. Parity programs were exclusively market oriented. The same could be said for assorted price support or subsidy programs. The huge government supported loan and insurance programs have been mainly used by farmers to purchase more land, insure commercial crops, or purchase farm machinery needed for large operations. In sum, government programs have usually been for those farming for the market, not for those mainly producing food for the family on family farms.

To say that farming is a business is in no sense to downgrade its importance or to adversely criticize it. Nor do I mean to suggest that because farmers are businessmen, they are not entitled to a full measure of sympathy and understanding for the risks that they take and the benefit they provide for all of us. Farming is certainly a risky business, dependent as it is upon the elements, domestic prices, and changes in foreign markets. More risky than running a service station (or, for that matter, any number of other businesses)? That is by no means clear. Service stations have risks, some of which are different from those of farmers. For example, they are much more apt to be robbed, and location is very important. Beyond these things they are subject to all sorts of exigencies, and work always with highly explosive materials.

But to suggest that farmers deserve our understanding and appreciation should not he taken to mean that government should intervene either on their behalf or to restrict them. Farming is a business, and there is an abundance of evidence which suggests that not only is government intervention often harmful to consumers (that is, all of us) but also to those engaged in the particular businesses aimed at by the intervention. That farm programs over the years have benefited farmers is hardly self-evident. Undoubtedly, some farmers have benefited from some farm programs. There may even have been instances when farms generally have benefited, temporarily, from some particular programs. But that farmers generally have benefited in the long run from government programs could hardly be maintained (leaving out of consideration the cost to the rest of the population).

A Faulty Premise

Farm programs are based on a faulty premise. They are generally premised on the notion that farmers engaged primarily in producing similar sorts of goods constitute a class with common interests. This might be so if they were producing almost exclusively for their own families. But to the extent that they are producing for the market, i.e., to the extent that farming is a business, their interests crucially diverge. A farmer is in competition with all other farmers producing the same type of goods when they enter the market. Wheat farmers are in competition with one another, as are cotton farmers, cattle growers, sugar producers, chicken farmers, and so on through the whole gamut of agricultural production. Each farmer, so far as he is seeking a profit in the market, seeks to produce and sell as much as he can for the highest price at the lowest cost to himself.

Any government program premised on the notion that those farmers producing some one or combination of goods constitute a class with common interests is profoundly uneconomic. In order to work, it requires that each individual farmer act contrary to his own individual interest, that he regularly behave uneconomically. Undoubtedly, such behavior can sometimes be induced by large enough subsidies from taxpayers generally, but the program will nonetheless be a prescription for disaster. In any case, most farm programs range somewhere between subsidizing less than enough to induce uneconomic behavior and trying to alter market conditions sufficiently to keep farmers off the backs of politicians for a season. If farmers were paid enough from government revenues to induce them to behave uneconomically as a rule, the result would be starvation and bankruptcy for citizens generally. That is, farmers would cease to produce those goods that are most wanted in sufficient supply to feed us. On the other hand, government intervention in the market to increase farm income by higher production tends to produce a glut of goods at the subsidized prices.

Most commonly, over the years, government intervention has been concerned with price manipulation: to raise the price of farm products, to raise the price, i.e., wages, of farm workers, to lower the price of shipping, storage, and farm machinery (by encouraging cooperatives), and to lower the price of money, i.e., interest. These attempts at price manipulation have sometimes been accompanied by restrictions on land planted to particular crops, on amounts farmers could sell of a crop in the market, on numbers of cows, for example, that a dairy farmer could have in production, and so on. Raising the prices of farm goods tends to encourage farmers to produce more and to draw others into growing those crops. Raising the price of farm labor tends to encourage the greater use of machinery, as does a reduction in interest rates. Restriction of acreage tends to shift farmers to efforts to produce more on less acreage, and so on. Government intervention tends to produce an ever normal “Farm Problem.”

In fact, production for the market is a business. This is true whether the good produced is wheat or widgets. The rules of economy apply to farmers as much as they do to service station operators. We create the “Farm Problem” by lumping farmers together unnaturally and perpetuate it by government intervention. The solution lies in treating farming as a business and allowing those who can do it effectively to do so without interference.

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August 1986

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