Economics

Farm Subsidies - A Necessary Evil?

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