Farm Subsidies 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 ripled,

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.