Farm Subsidies: A Necessary Evil? Essay, Research Paper

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 machinery they need to compete with larger farms (Long 85). Many

see this tendency towards consolidation and mechanization of farms to be harmful to the

United States in the long run, and they see subsidies as a way of achieving a social

desire to preserve the family farm. “If the family farm represents anything, it’s a very

intimate and fundamental relationship between people and resources (MacFadyen 138).” Fewer

farms mean fewer jobs and a higher concentration of wealth. Ten 30,000-acre farms may

produce as much food as a hundred 3000-acre farms, but the former supports machinery;

the latter, community (MacFadyen 138). Farm subsidies are designed to prevent the

extinction of the small farmer.

Despite the social benefits, subsidies have many problems. The subsidy system

is often wasteful; the government finances irrigation systems in the California Imperial

Valley, and then pays farmers not to grow crops on it (Solkoff 27). Some benefits hurt

the small farmer. Marketing orders and tax breaks hurt small operators by giving more

money to bigger farms. Big farms can then overproduce and undersell using advanced

machinery, driving lesser farms out of business (Fox 28). Subsidies also allow foreign

markets to become competitive by artificially raising market prices (Long 91). Artificially

raising market prices create a surplus that would normally be solved by the free market

system. In a theoretical free market, overproduction would drive excess farms out of

business, until equilibrium would establish itself for both price and quantity of farm

products. Subsidies allow inefficient farms to continue to exist, which creates an

inefficient economic system. Subsidies also increase the cost of other consumer products,

while also increasing taxes to pay for them. Perhaps most importantly, subsidies do not

fulfill their social role. “About 112,000 large farms– equivalent to the number of farms in

Minnesota alone– produce half the nation’s food and fiber (Long 82).” The many

government subsidy policies do not preserve the family farm, and the number of small

farms has almost continuously been on the decline. Subsidies are impractical in the

economic and the social aspects.

Despite perceived benefits, farm subsidies are an inefficient and dysfunctional

part of our economic system. Their goal, nonetheless, is noble. Writers like John Steinbeck

made people aware of the plight of the small farmer, and subsidies were the only solution

he government could think of. If there is some way to prevent the decline of small farms

that does not carry the many subsidy problems, the agricultural policy would undoubtedly

change. Perhaps the same anti-trust laws that prevented the monopolizing of industry

could be used to prevent the consolidation of farms. Until some other system is developed

that can deal with the problems of the farmer, subsidies will continue to be used.

Blanpied, Nancy. Farm Policy. Congressional Quarterly: Washington D.C., 1984.

Fox, Michael. Agricide. Schoken Books: New York, 1986.

Long, Robert Emmet. The Farm Crisis. Wilson Co.: New York, 1987.

MacFadyen, J. Tevere. Gaining Ground. Holt, Reinhart, and Winston: New York, 1966.

Reische, Diana. U.S. Agricultural Policy. Wilson Co.: New York, 1966.

Solkoff, Joel. The Politics of Food. Sierra Club Books: San Francisco, 1985.