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.