Charles A. Lindbergh Memorial Lecture: Harold Briemyer - Resolved, The Fate of Farming Should Be Determined in the Marketplace

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Harold Breimyer, extension economist emeritus at the University of Missouri, speaking at Charles A. Lindbergh Memorial Lecture Series at St. Cloud State University. The theme of debate was “Resolved: The Fate of Farming Should Be Determined in the Marketplace.” Breimyer argued that agricultural prices are an appropriate subject for public policy.

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(00:00:00) Thank you. I'm glad to be here. I'm honored to be sharing the Lindbergh lecture, but mostly I am respectful to you people for coming out for discussion this morning about a topic that is not (00:00:14) of (00:00:16) To direct bearing to most of you individually but rather has a deep meaning through the roof route or the or the your relationship to the community and to the public at large. We are taught this is really an exercise in democracy self-education and I would argue that this kind of a meeting this morning with much credit to st. Cloud and others who sponsored it is the essence of democracy of being informed on issues. I would even say that this is more of a nature democracy than the mechanics of going to vote on Election Day because uninformed voter is probably worse than not going at all. So I'm I'm most pleased you're here. But ever since I received the invitation from Dan Diane come back I have had to misgivings one is that this build is pro and con that the rather I feared that dr. Gardner and I would talk past each other and there's some explain is going to be that way. But secondly, I'm in the awkwardly ambiguous position. I'm a not pro or con Market as such the market is a wonderful institution and where it fits it should be used and I probably more supportive and dr. Gardner is in some is application agriculture, but the stand I will take is that I objected even deplore applying it where it's not appropriate and it is not the the right institution to apply when we're talking about what the future makeup of Agriculture the place of the family farm now just to illustrate very contemporary yesterday coming up on the plane. I read about the very serious problems with the Farm Credit Administration is in the land Banks the Production credits and so on so forth and Great Danes, very severe danger of going down the tube on the one hand and a market sense my judgment that the that the organization has added to its Troubles by overpricing is loans, which means it has it has disregarded Market forces. Therefore it should be following the market and more. on the other hand if the administration is in danger of going down the tube, it's in danger of losing out because many of its former borrowers are losing out and it's farmer borrows you're in trouble because of things have taken place public and private for not because the farmers are incompetent suddenly, but because of things that have happened as dr. Gardner mentioned far from the individual Farm, which is to say The future of the Cooperative Credit and agriculture is has not been determined in the market. The market idea doesn't fit at all. It's the same as the future of nuclear power in the future control of acid rain and future whether you have a st. Cloud University. It's just a matter of public purpose and the kind of agriculture in the future is a matter of public purpose and not have some applying image of a market and that is essentially my my theme I'm not at harder debater. I'm an educator I'ma try to be a teacher now, I will some differences will be reveal perhaps more in the end the discussion that (00:03:23) follows (00:03:26) And to some extent the difference between dr. Gardner and me is a matter of age. It's partly that he is the newer School Of Agricultural economists agricultural economics. These days is more of an exercise in abstraction. I learned economics when it was more of a social science studies, but you see I grew up in the 1920s and we were told to the market with solve. Our agriculture has problems know the economy's problems all self-regulating that everything will work out fine. And the depression of the 1930s was a great teacher a demonstrating teacher and dr. Gardner. Unfortunately for him is not old enough to have gone through that experience and he would and every young Economist would field somewhat differently if he had if he had gone through that succession of really dangerous hazardous experience under National (00:04:15) scene (00:04:18) because I'm limited on time. I did and I did write up a few I wrote up a small paper and doctor. We'll bring I will put I'm sorry. We'll put copies in the hall after I talk. What I want to say is that in want to make them available earlier because you might try to leave through. But after after we are through, dr. Henry support copies and Hall and you're welcome to them. If you run out we'll let me have your address and I'll be glad to send you one. I think my arguments ready coach up there. A few years ago a friend of mine Roger gray at Stanford University wrote a little piece and what she said that when people talk about public issues. They choose their language carefully the easier either choose / words early use snarl words, if they want to create a good impression that use the / words if they want to use create an and a resistance R antagonism that choose the snarl (00:05:11) words. (00:05:13) Now the market is a per word. It's so much. So that's invoked. Not only where it applies when in mainly cases of what does not apply. I favored open trading markets and Agriculture and fight that go farther than most economists to restore some of those in livestock and so on. I think they're very very applicable. But the more heart the heart of my argument is that the mark of the idea is not applicable to the decisions public decisions as the kind of Agriculture & rural community we're going to have in them we will have or as I put it in my prepared text. The future of Rural America is not to be auctioned to the highest bidder. Now we are in the nation of period of major chains our national Outlook. We're in a concert what some people call a conservative regular Revolution and some people say it's going to be called the Reagan Revolution Robert Reich him some of you read in the magazines these days says we are we are developing a new public philosophy. I caught a revolution of disavowal. It's not that we deny what our social institutions can do where they Farm price supports or progressive income tax or public education or even the traditional Roman Catholic or Protestant church. All these are risk to some (00:06:31) extent. (00:06:34) So we changed our minds as to what we want to do what we're trying to do in our economy and Society whether we want to exercise Social choice about our future. I think this is what how I see the Contemporary climate and I think that's how in it's in that climate that we are addressing the issue the future of agriculture. Now my point number 3. My third point is this in that is it in it is in this setting. That we are trying to apply the idea of a market or market place or per word which really implies that the market the situation will take care of itself does not require guidance our government through the public institutions. It's really a cloak for anti-government propaganda in my judgment a new version of social responsibility. The market will do it. Or a new revived idea of laissez-faire and there to attractions one is the self regulating or is it put in my prepared text quote? Look ma. No hands unquote. It's wonderful to think that things will take care of themselves. And the second is that that the market which is self-balancing supposedly will yield good Equitable outcomes. And here I think is where I (00:07:55) lecture protecting outcome (00:07:59) any Market even a market in farm products, will you an equitable outcome only at the participants are evenly balanced they requires in anything of this nature a unevenness and equity in power among the participants. If the participants and in kind of Market relationships are unbalanced in power Market what the market does then is to actually continue and accentuate the difference. Or to put a little differently. It seems to me in the in the present political climate of less role of the public purpose of our economic Affairs. What it really amounts to is we're letting pre-existing configurations of Perrigo one challenge. It is the preservation of the status quo. AAA protection of the of the power structure that's already in place. Numb point for in my paper. I give it a few selected examples of what I regard as extreme or bizarre applications of the idea of Market one is the market for political influence. Now this Bears on our topic Bruce only rather indirectly, but I think it helps to show the kind of setting in which were addressing our public issues these days. some respects the biggest and most devastating Market is the market for political influence. It's a blue. It's a booming market and the principal institution. These days are packs which now spend millions of dollars on every (00:09:41) election. (00:09:44) Maybe even worse is the merchandising of ideas buying a full-page advertisements in the Wall Street Journal. foundations conservative foundations the Heritage Foundation the Hoover institution the American Enterprise Institute They engaged Scholars as consultants to dress what I call the disavowal philosophies. And but they dress it all up in scholarly language and they're very active in the whole lots of meetings. They've held a lot of meetings on 1985 farm (00:10:18) bill, (00:10:20) but it may or may not be significant than never invited here with Brian Mayer. Because he won't say what they want said. This is a part of merchandising and ideas called a market if you like. Or another example. I just read this the other day those of you who watch TV. I don't I don't have time. But if you watch TV, you can probably catch a political commentary somewhat liberal called a grant skin company. But it's much easier to catch a more conservative group called The McLaughlin group. And the reason is the McLaughlin programs are all financed by Edison Electric (00:10:56) Institute. (00:10:58) The market for merchandising of ideas a real threat. I think to what we all believe in. I don't want to decide the future of the family farm in that kind (00:11:07) of a other mechanism. (00:11:11) I'm a point number five. What's my time? (00:11:17) If (00:11:17) we have any concern for our future of our nation, we will not miss apply the per word of a market to Arrangements of human relationship with a marriage religion the the right to a good education of the organizational structure of Agriculture, the organizational structure of Agriculture the kinds of business units and their relationship. We've long had a historical preference that I call a decentralized individual proprietorships market-oriented. And applying the Revolutionary idea the ploughman can earn can own at least some of his land. Let me say it again. So revolutionary idea historically that we have held to in this country that the ploughman can expect to own at least some of the land that he tells and that has been our tradition is often called The Family Farm. That's what we're talking about. And I have defended it more than most agricultural economists. I've defended it. I think it served the swells productivity record as good as soil conservation record is not that (00:12:16) good. But the reason (00:12:20) I defend it is somewhat different I Ruiz I defend it because it fits my scale of values that has a relatively Democratic and relatively (00:12:29) egalitarian. (00:12:33) Arrangement for our agriculture. It gives status to the Resolute Farm family. And avoids converting agriculture to a layer cake class (00:12:44) division. (00:12:47) And I suppose what it amounts to is my scale values I care and as I go cultural Economist divide, I'm going to plenty of words and dr. Gardner's now don't misunderstand but in my faculty at Missouri, we divided right down the middle half care and half don't care. And that is really what is it issue? And and the traditional agriculture is on the road to Oblivion is going out. It's going out right now for two national policies that are not agricultural in nature as such one is Tight money and monetarism and the second is the income tax code now, dr. Gardner like many condos didn't say much about income tax, but I've been saying a lot he did mention the first in 1979 the Federal Reserve board shifted monetary policy very quickly to tighten money they did. So first to arrest inflation is second to a reason no one wants to point out. They want to advance the interest of money lenders the Savers the investors and bondholders. And so they initiated a massive transfer of wealth to the lenders now, let me be fair. The inflation of the 1970s was very partial to the borrower. It was anti lender and now we've switched totally around. And now we have a policy that's very favorable to lender in devastating to the borrower. And this was National policy not agricultural policy, but meanwhile a change took place in their lending practices that had particular bearing in agriculture. So not confined to it we shifted from Fixed to variable interest rates. The reason for it was innocent enough. It was to begin to index interest rates to index them aligned with inflation, which was justified. But then when the Federal Reserve board went to a high interest policy it made the new interest rate not the plight just two new borrowings, which would have been the old system but retroactively to old (00:14:46) borrowings (00:14:48) and old borrow couldn't carry the new rates cannot be done. And this is a matter of national policy. And so we now have a devalued ID capitalization and US agriculture in the order of 300 billion dollars in my estimate and thing and very far wrong and my private guess is that the unless there's a change in National policy that the casualty want to mount about 300,000 full-time Farmers United States of America plus probably a thousand or more rural Banks and Rural businesses. It is not small scale and it is not isolated. It is (00:15:22) massive. tax code (00:15:28) and I go cultures asked elsewhere all sheltered investment has an advantage over the young sheltered has a competitive (00:15:35) advantage (00:15:37) and agriculture has been the favorite sheltered areas. And here's a personal judgment. I don't want to see agriculture is primarily a sheltered playground. I've been saying if we do not change the tax code eventually all assets in agricultural be owned owned under shelter because the the unsheltered farmer (00:15:56) cannot compete (00:15:57) with any investor who can make maximum use of the tax go to Simply Basic economics in a way. It's a kind of (00:16:03) Market Bruce. It's a (00:16:06) one of the bizarre applications for the market, but that's the way the tax code works and this was the inevitable outcome if you don't change But now the next point I want to make with some emphasis. I am not really arguing for a particular kind of organization of Agriculture as such what I am arguing for. Is that the decision should be made by some kind of vision as to what we want our agriculture to be and not as the incidental or accidental outcome of unrelated policies such as (00:16:39) tax code and monetary policy (00:16:42) and that is not what we were doing, but we should make an explicit. (00:16:48) public (00:16:48) purpose decision as to the kind of Agriculture we want and I have no faith at all the some kind of a market idea will take care of the matter because I'm confident will not Point number five real quickly I could mention protective measures, but that's not really our topic. I would use a mortgage Corporation to write down some of the principle of low of loans of good Farmers not everybody. I think we have to have a degree of commodity price support assistance to give some degree of stability in agriculture. You'll never have new Young Farmers coming into agriculture without some type of credit Aid so I favor that but that's not my topic. my last point point six and last one of my messages last 20 years and Missouri never did kick me out of the state for Santa saying it so often. Is that as our traditional agriculture has come under more strain farmers and the farming Community also are at fault. Here's where I put on my old testament. Khloga to considerable extent. Farmers brought it upon themselves. And here I'm almost going to read my paper. They have done so by virtue of their glorying in their independence of the denying how much of the prosperity of the 50s and the 60s and 70s arose outside their own performance. Problems come out come about also because of internal divisiveness and even these days in these Royce tough times. I hear accusations with an agriculture of agricultural cannibalism. Although well our Farmers wanting to group by out and close out some of the farmers who are in trouble the internal divisiveness contributes to the present situation, but above all I've been using the phrase for 20 years. The farmers are guilty of the Paradigm that I call their non Instinct for self-preservation. Let me just remind you that even that. Despite the good record of family farmers. Family farming was kept open to new entrance. For about 45 years into the 1980s mainly because economic Trends and public policy made that possible. And just to be an Old Testament Prophet for just a minute and give me about two or three more minutes. I think I'm just about to run out and we'll give you one I think rather impressive bit of evidence from the early 1930s when I started out until 1980 the asset value in agriculture increased from 40 billion to one trillion dollars at 25 times increase. The latter date Farmers Equity was 800 billion. The attractive fantasy is the farmers build up that Equity by their own good hard-working management. So on I say to you that 3/4 of that came through revaluation and not more than 1/4 came from Farmers putting their own money into it. They're diverting their money from their family income the total trend of the economy economic growth and inflation for 45 years in the middle 1930s and 1980 was very favorable. And without those Trends in the and of course we had public policy to help. Without those Trends you could not have hand that had the the type of Agriculture the family farming that we have had this takes no credit away from those from the good job done, but is awful easy to neglect the role of public situation public policy. And since 1980 has been absolutely reversed and since 1980 anyone who did not get almost totally established by 1980 has found the going virtually impossible. not because the productivity has changed at all but four others outside circumstances and I say to you that we are going to have Traditional agriculture in the future it can come about only through a public decision to do it and I say I could have mentioned some of the steps. Although I think one of the first one of the first steps would be to change the income tax code like to Garden didn't mention that. That there's no way in the world that that is a family farming can continue in the face of the present income tax code and my last comment is to a (00:21:22) Stillness. (00:21:24) Old Testament Prophet role this is almost the prime example. How found how family Farmers United States could not see their own Collective future. family individual Farmers beg for all these write-offs because they all they could see was their own little tax report in the spring of each year and look good to them individually they beg for not realizing that a small write-offs the ordinary farmer. Converted into a large right off to the high bracket outside (00:21:58) investor. (00:22:00) Now most Farm groups are finally wised up and this year proposal for tax reform the farm groups doctor Garden. I think are addressing the subject much more responsibly and knowledge than they had in the past. This Monument mainly in Madrid where the individual farmer can see beyond his (00:22:17) own accounts his own you say his own line fans (00:22:21) can have some sense some (00:22:23) appreciation of how (00:22:26) public decisions that may not be very attractive individually. Maybe the (00:22:32) Lifesaver of the institution collectively. (00:22:38) Therefore I'm not anti Market. I am saying that the future of Rural (00:22:43) America depends really upon public purpose (00:22:47) and the idea of a market really doesn't help very much. Thanks very much.


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