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.
Works Cited
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.
farm subsidies: a necessary evil?