Copyright 1988 Federal Information Systems Corporation
Federal News ServiceOCTOBER 26, 1988
US AGRICULTURAL POLICY: BACK TO THE FUTURE
LECTURE AT THE INSTITUTE FOR POLICY STUDIES
by MARK RITCHIE, FARM AND TRADE ANALYST, MINNESOTA DEPARTMENT OF AGRICULTUREMR. RITCHIE: It's a thrilling audience, to have so many people from other countries. I want to thank all of you for taking the time, because it is an election campaign. There's a lot going on in other parts of peoples's lives. So, thank you for coming.
We're going to try to spend as much time today in an open question and answer discussion -- there are people here from all over the world, very involved in these policies. I know some of the folks in the audience, and some of you I don't, but I can tell everyone is very concerned about the direction and where things are going.
I want to spend about ten or fifteen minutes doing a little bit of history, and I realize that we're all at very different levels here, so some of you bear with this and then some of you, it may be important to know kind of how we got to where we are. I want to spend the next bit of time about basically the last decade, because where we go from here is really largely built upon the work that's gone on by some of you here in the room and others over the past decade. And then I want to spend the last bit of my time looking at sort of where do we go from here and some specific ideas about this. Reading back over what was in the book, which is less then six months old, it feels very dated. It feels very much like the world has changed and many things are changing. So I want to try to kind of go from there as well.
Please, if you have something specific that I say or talk about that doesn't make sense or doesn't click, stop me, but remember, there will be a lot of time for discussion at the end, but I want to make sure we all kind of hang together. And, please, in the discussion period, keep in mind that in this room is one of the most amazing collections of people from around the world who know these issues that I've seen in a long time, so I think we ought to kind of recognize the quality of the group here and make good use of that. I want to start with a little history, because I think it helps place where we are today, and that history, for us, starts very much in the agricultural community and in the debate on agricultural policy with the colonization of this continent by Europe. And I think one of the myths that has held us up in moving forward so much on policy is this idea that this was a nation that was all farmers, and somehow it's sort of now shrunk down to where there's, well, almost no farmers left, a few, but somehow that that's a natural process of civilization and of moving forward.
Well, the fact is, is that from the founding of the colonized parts of this continent, commercial agricultural production -- and keep in mind, I'm going to use that distinction today, that's farming to produce a crop to be sold away from your home or your home town -- commercial agricultural production in this continent was colonized for largescale, what we would call today, corporate-type commercial agricultural production, and the original structure of that type of agriculture in this country was very large scale: Chattel slavery in the Southeast, Spanish land grants and huges haciendas out West, the plantations, the estates in Virginia and all over. In fact, the people living in the countryside that we often think of as that nation of farmers, who are subsistence producers producing for themselves and their family. Agriculture as a commercial venture was initially founded in large scale units. And it wasn't until the 1860s, or in the later 1800s, that this nation and Europe, more or less at the same time, went through a revolution in the structure of commercial agriculture. Through political decisions, primarily made here in Washington, this nation was transformed from a nation in which commercial production of agriculture products was contolled in large scale units to nations where families were encouraged and enabled to go on the land. It took the military defeat of slavery and the passage of certain laws where poor people and blacks were allowed 40 and a mule, it took the passing of the Homestead Act in the upper -- what was called the Northwest territories, the opening up of Oklahoma.
But we've only had family farm agriculture as we think of it today for about 100 years. And from the minute that families came on to the land, there's been an economic struggle which defines the struggle we still are facing today. Families out on the land had two forces to contend with. One was they faced monopolies and the people who supplied them with what they needed to live and farm, whether it's machinery producers, the bank that provided credit, the railroad that brought out flour and food and the things that they needed. There were very tightly held monopolies controlling the things that they needed to live and survive.
And on the other side, there was a very tight monopoly of the places where they could sell their products, a couple meat packers, one cotton gin, one or two flour mills. And when the squeeze between these two sides of their economic lives became so intense, in fact, they called it in those days, the cost price squeeze, we still use the same words today. When they were squeezed to the point that they were going broke, were unable to buy food or fuel, we had what we nowadays call a depression. But in the 1800s, the word we used was, "a panic." And we had numerous panics between the 1860s and the early 1900s of family farm economies who were squeezed beyond the point of being able to survive. In each instance, when there was a panic, farmers responded in an organized way to their situation. In some instances they formed cooperatives, and this was the beginning of the cooperative movement here. Basically, the thinking was, was to put some competition into the capitalist system, that instead of just one bank in Minneapolis controlling all of the financing or one grain company controlling all of the purchasing, if there were cooperative lenders, if there were cooperative grain mills, there would be some competition, and therefore the system would be more fair.
Simultaneously, they began to be aware that their future was going to be very much controlled by the government, national policy, and therefore, they also began forming political movements. In the 1870s, we saw the -- a growing up the Grange, which was originally a very radical organization. Still around today, was political. The Farmers' Alliance, the People's Party, the Populist Party, the Greenback Party -- each of these were political organizations that grew out of a crisis when farmers were squeezed between what they had to pay to live and what they got for their products.
And throughout this late 1800s and into the early 1900s, we saw a growing national understanding of this -- the economics of this situation. In fact, the Omaha platform of the Populist Party or the People's Party -- from 1890 and I think 1892 both, had the elements of national farm policy that were not to be enacted for another 30 years, but which still form the basis of our policy today. So there is many, many years of political activity that went on before we began seeing these ideas incorporated.
In the early 1900s, farmers, particularly in coalition with labor, began taking control of state governments. What I mean by that is, at the state level. The most famous, best known example, is of course in North Dakota, where within the Republican Party, a non-partisan league was formed and that non-partisan league, in conjunction with labor, won control of the state legislature and the Governor's office and some of the other posts. They set about the business of passing laws which they believed would help farmers have a more even chance in this fight, this economic struggle that they were involved in. They created a state-owned bank, the Bank of North Dakota, to create some competition in the credit industry. They created a state-owned grain elevator, a state owned flour mill, to create some competition in the system, to ensure that farmers had an alternative if they thought they were being cheated at the elevator or some other problem.
What was important was that they began to see the state -- meaning the government -- as a point of intervention that could be brought in on their side to help even up the playing field. And they did quite well with some of the activities they were able to put forward. Most of these things still exist today, by the way, the State Bank of North Dakota, the grain elevator, whatever. But what they began to discover, after several years of this, was that, at the level that agriculture has been internationalized, and this is going back 2000 years B.C., agriculture has been an internationalized industry, that there were limits to what a state government could do, and they began agitating at the national level for national policies relating to this cost-price squeeze that they were facing. In the 1920s, farmers nationally were able to meet together, write, and pass through Congress the first national farm legislation. It's called the McNary-Houghin (ph) Bill. It was passed at least twice and was vetoed both times. And the reasons for veto range from, I think Mellon, who was the Secretary of Treasury, made the comment that it would raise food prices and therefore wages would have to go up, and if wages went up, our industrial products would be less competitive on the world market. So, you can hear the same arguments, you can hear the same comments, the same discussions, then as now.
But it really took the collapsing of the rural economy in the '20s, which eventually was part of the collapse of the whole national economy, to force through a national mobilization of farm people, rural businessmen, bankers, all kinds of folks, which then, in combination with the crisis in the cities, brought forth basically the Roosevelt administration in 1932. There's a whole lot of pieces to the story, there's a lot of different things that occurred, but in 1932, Franklin Roosevelt was elected president and the Democratic party, both in that year and in 1928, had advocated a very, very sharp, very precise change in national agricultural policy, which was then implemented once Roosevelt became president. In fact, within 17 days after inauguration -- we all think this is funny -- the American Farm Bureau Federation lawyer had written up the new farm legislation, which was called the Agricuture Adjustment Act, which was then passed through Congress, and that was the first time that national farm legislation of the kind that we typically talk about today was put into practice.
And I think it's the basics of that legislation that make up the debate in the discussion today, so I want to quickly talk about that legislation, because it's going to lead to how we view the work today. That legislation was sometimes called the parity farm legislation and sometimes called the Roosevelt New Deal -- it has all kinds of names. But it had three main tasks that it was trying to accomplish. The first one was to raise farm prices. The thinking went something like this -- in October, November of the year, the farmers harvested their whole crops and that was for the whole year and that the grain companies could basically wait until the crops came in, the price would plummet, they would buy everything up and basically not have to buy for the rest of the year. And they could buy at very low prices, because farmers were basically stuck having to sell. And in the 1890s, the Populist Party and others had come up with an idea -- it was first called the sub-Treasury plan, later on the name was changed, but in this instance, the government created a governmental agency though, called the Commodity Credit Corporation. It still exists today. The Commodity Credit Corporation had offices in every county in the United States. Still do.
And the Commodity Credit Corporation was set up to help farmers be able to extend their marketing year throughout the whole year. And the way it worked was this -- the Congress would pass a floor price, let's say on corn for, for the sake of argument, let's say it's a dollar. And what the government promised the farmers was that if the grain companies would bid the price below that level -- in other words, if you went down to the elevator and the elevator guy said, "Nope, I will give you 90 cents for corn," you could go into your county office and borrow money -- borrow a dollar a bushel -- a bushel is about 60 pounds, and not have to sell your grain to the grain company. And why this was important was that the fall was the time that the farmers had to pay their bills, put the kids in shoes and send them off to school, pay the taxes and make the land payments, so that they were having to have money in the fall. So the government loaned them a dollar a bushel and when the grain companies decided they wanted the grain, which was pretty much their business to buy and sell, they would bid the price back up above that level and the farmers would sell it to the grain companies and repay the loan with interest.
Now this was not only an effective program at that time, it happens to still be a very effective today because essentially for simply a loan from the government, farmers were able to set a minimum price with the help of the government, and it was extremely effective. In fact, if you look at farm prices since the 1930s, you'll see that the floor price set by Congress is essentially the market price. Nobody would sell to Cargill for 90 cents when they can get a dollar loan from the government -- it just didn't happen.
So, raising farm prices through the creation of a price floor was their central objective, and this was a very successful program. The second thing was they needed to protect consumers. In the 1930s, a third of the country was out of work and poor, really poor. But also in the 1930s, farmers themselves were the largest purchasers of agricultural products. People farmed with horses a lot and oats was the main fuel, so to speak, and people were raising cows, chickens, pigs, feeding them corn and other products. And what would happen -- this was especially the case in the droughts of the '30s -- the grain companies controlled the grain, and when there was a drought or a dustbowl or for whatever reason, they would begin moving the price way up. And the farmers who had to buy the grain, oats, and whatever, suffered as did the consumers -- the urban people who were also poor.
So, the wrote into this law, and this evolved over a few years, a ceiling price. What the Congress said was that if the price charged went above a certain level, that the government maintained a surplus stock which they would release onto the market enough to drive the price back down to this range. And in fact, they had a name -- it was called the "evernormal grainery." And it's funny, this year because of the drought, that name has started to come back a little bit. It meant that the government maintained large enough reserves, paid for by taxpayers money, that if the prices started to skyrocket, they released the reserves, pushed it back down, to keep the price within this range, a fairly narrow range actually.
So, the third thing that they had to take care of, which was the -- made up the basis of the program was to reduce cost to the government. One of the places the government was being stuck in a very high expense was that whenever there were years crops and surplusses built up, the government was always the purchaser of last resort. I think this is -- but it's basically true around the world. So that if there were few years of very large production, you would start building up surplusses. The government would end up having to buy them, dump them, shoot the baby pigs, dump the milk, whatever. So, they passed, as part of the program, measures to help farmers manage their production -- called "supply management" -- and the supply management programs were essentially -- well, there were different ones for different kind of crops, but essentially farmers were allowed to vote. All the cherry farmers or all the wheat farmers or all the dairy farmers voted in a referendum, and if there was a majority vote in that referendum, all the farmers would cut back their production more or less equally. The intention was to balance supply with demand, to keep it more or less in balance.
The secret of these three programs is that the goal here was to get a farm income -- the buzzword we use is "from the market," meaning to make Cargill pay a fair price to farmers, so that the farm income came out of the marketplace and it was to have the government intervention in agriculture be around helping farmers. There are millions of farmers out there and half a dozen grain companies helping those millions of farmers to coordinate their production so that supply and demand stayed in balance. So, this was some of the basic principles.
The fourth thing that was part of the original plan, that's important to keep in mind today, was they needed to make sure the program worked. And there were lots of pieces of this, in terms of technical assistance and stuff, but the key area came in considering imports and tariffs. And it's been a hot topic the last few years. But the point was was that if farmers were having to reduce their production to get supply and demand to balance, it didn't make a lot of sense to be having big imports from around the world to create a greater supply-and-demand imbalance. Likewise, if the government was trying to maintain some kind of a fair price here, it didn't make sense to bring in commodities. Cargill could go get sugar from Cuba, sugar from Haiti, sugar from the Caribbean at essentially a penney a pound, which is what they were doing at that time. To just bring it in and dump it on the US market would have destroyed this program. And so in the original farm legislation and over the years, as it evolved, one of the central features in helping this work is that we have a very extensive system of import quotas, import tariffs, import limits. Some of them are very explicit and verbal; some of them are implied, but they're very important to making the whole system work.
The elements of the farm program were essentially the US farm policy from about 1933 to 1953. And we went through a lot of changes. The law was challenged in court, it was rewritten -- many things happened. But in this 20-year period of time, we had Depression, we had dust bowl, we had war, we had a post-war kind of a recession -- we had lots of different parts of economic life. And during those 20 years, this was a very successful program. Farm income remained relatively stable and high. There was very low and stable consumer prices. We had for the first time increase in people coming back to the farm during this period of time. The repayment of the loans with interest meant that the government even made a little bit of money -- you know, $12 million on storable commodities is not much; only if you compare it to nowadays, it's important.
And we had a an explosion of soil and water conservation programs during this time. The founding of Soil Conservation Service was simultaneous to farmers having enough money in their pockets to do something about the terrible, terrible conditions that we face coming out of the '20s. What we see today in terms of erosion and stuff, we had the same kind of problem in the '20s. There were lots of good things about this program, and the one that I'm the most personally in tune with was that I grew up in a small town in the '50s, and I went -- a very small town, and that small town had fairly new churches, and a new school, and parks, and all kinds of things that were built from the wealth generated in this period of time. The community had the money, finally, to rebuild the church. The church burned in '31, and it was in the Depression, and no one had any money to rebuild the church. And finally, by the end of the '30s and into the '40s, families started being able to pay their bills and be able to rebuilt the church, and so on.
So, there were a lot of positive things in this period of time for rural America. But, there were some folks who did not see this program in their economic interest. And it goes back again to the same general forces that farmers have contended with since the 1860s. The people who supply farmers with fuel, fertilizer, seed, tractors -- their sense was that if there was some supply management programs -- let's say everyone was planting 10 or 20 percent fewer acres, they were going to be selling less fertilizer, less chemicals, less seed. I mean, it's true. There's no question about it. If you're controlling your production in years when there is a surplus, chemical companies are going to sell less chemicals. So, they saw this program as inhibiting their ability to sell.
Simultaneously, the people who were buying the commodities, for one, the people who dealt in speculation of commodities who made their money by swings, didn't like this narrow range; but, most importantly, the processors of cotton and other cereals, the exporters of grain, the makers of cereal for breakfast, and that kind of thing, saw that this price floor meant that they were paying more for their commodities than they might otherwise have to, because they could see in the '30s that prices could fall. Corn at one time I think it said was "three cents a bushel shelled and ten cents a bushel less if it was on the cob," you know, I mean, so they had seen very low prices and didn't like the system. And from '45 to 1953, those forces, the agribusiness suppliers and the processors worked very hard to try to dismantle this program. And, really, during the war, from '45, '46, '47, there's lots of writing, but they didn't have much success. But in the early 1950s, the kind of the mood of the country shifted, and they figured out the way to defeat this program which is that, as the McCarthy era really gained momentum in this country, they shifted to referring to these programs, and other Roosevelt programs as well, as "socialist" or "Bolshevik," or they called this "centrally planned agriculture." And in Congress, that was the argument that moved a lot of people, that this was somehow an alien, or foreign, proposal or idea. And in the 1952-53, this program was essentially dismantled.
Now, they weren't able to dismantle it completely and they weren't able to do this all at once. But they created a new momentum where classic economic theory about free trade, free enterprise, became the dominate driving force. One of the first things that they did was to weaken the supply management and lower the price. So the theory was something like this: Well, if we lower the price to 90 cents, we'll be able to sell more overseas; we'll be able to expand our nation's markets. All right? So they lowered the price on 90 cents. So all the farmers out there say, "Hey, I'm going to get 10 percent less for my crop, I'd better grow 10 percent more." So they, instead of growing this much, they grew this much. [Refers to figures on blackboard.]
Well, when you lower your price to 90 cents, the other producers around the world they have to lower their price to 85 cents. So you actually don't sell anymore because other people are still below you, so you build up a surplus. Well, when you get a surplus, under classic economic theory, the assumption is that you're paying those farmers too much money; they're over-producing because they're being over-stimulated or over-paid, so therefore, you have to cut the price to discourage them. And, by the way, you'll sell more wheat and that will help the whole process. Well, of course everyone comes in at 75 cents, the farmers have to produce any(?) more, and you get a bigger surplus.
And I mean they pursued this level of classic economic thinking for years and and years. Of course, after a while, when it got so big -- and I can remember this from when I was a kid -- they have such surpluses stacked everywhere that they just announced that they were going to close down whole counties. And during this period we had a program called the Soil Bank. Some of you might remember it. But essentially, it was, you know, no supply management, that's Bolshevik, that's socialist -- year after year after year, until it got so bad they woke up one morning and said, "Hey, we have a crisis. This county can't farm this year. We're going to pay you so much money and this county can't farm."
Which, in fact, brought the surplus down, but it ruined the businesses and the economies of those counties. Farmers might have gotten some money for not farming to make their bills and payments. But the agribusiness suppliers, the fertilizer dealers, the local banks, the local churches had no business, and it was a very disruptive program. And from the 50s through the 70s we went through a, you know, a roller coaster in rural America.
Now, a lot of things were masked in this period because of the nation's overall industrial economic boom. Lots of people were able to leave the countryside and sort of ignore this whole problem because we were absorbing people. In fact, there were serious, specific programs, particularly to move black farmers out of the South into the industrial North. And so the fact that we had removed this program, and that there was a roller coaster and a lot of craziness wasn't part of the national debate that much, but it was known in the countryside. And in the late 50s, for example, (NFO?) grew up as the next sort of movement out of the crisis being created by national policy. In the 1960s you had the same kind of dynamics -- a lot of craziness, prices being lowered, the whole thing. And by early 1970s we had reached a much more serious crisis in this whole equation. In fact, in 1970 -- well, let's see, I think it must have been 1971 or '72 -- so Nixon was elected in '72. I think in the Spring of 1972 I remember in Des Moines, Iowa being at a very large anti-war demonstration, and there were all the students on the one side of the street. And on the other side of the street were all the farmers throwing pitchforks at Richard Nixon over the low prices. And it was like a very intense confrontation.
In the early 1970s we had a kind of a national mentality about problems. I mean, I call it the "Great Society mentality." But what it was, problems existed; they often had origins that had to do with the class conflicts in our society between people with a lot of power and people with very little power. But anyhow, the way that you tackled a problem was you didn't go after the source of the problem, you tried to spend money to solve it.
So you had a situation in 1972 facing the national government where the price floor set by Congress was fairly low -- the price. And the farmers were saying to Richard Nixon, by throwing their pitchforks, "Hey, this price is too low for us to survive." And, at the same time, you had the grain companies, particularly in 1972 because we had a trade deficit -- nothing compared to today -- but we had a national crisis around the trade deficit. The grain companies were saying, "Hey, you can't raise the price to what these farmers want or you will loose your export markets, and you need the exports to balance your trade deficit."
So, in great tradition of that time, we tried to have it both ways. The Congress passed a new farm bill that set the price floor at roughly what the grain companies wanted, and they set a target price at roughly what the farmers said they needed to survive. And the difference between the two would be made up by the taxpayers in something called "A decision -- "I'm doing this fairly quickly and fairly -- in a kind of simplified version, but the idea was: give the grain companies what they wanted in terms of the price; find out what the farmers needed to survive; and the difference between the two. Have the taxpayers make up the difference. And this was the target price efficiency payment program.
In the early 1970's, this program made some sense from some points of view. It didn't make sense in terms of taxpayers and the Third World and a lot of other things. But it sort of worked. And because we have large sales to the Soviet Union; we had world-wide shortages. There was actually a lot of tightening. There wasn't a big amount of expenditure in this program. But as the seventies moved forward, we began seeing a broader and broader split, a broader spread, and the cost of this program became much greater. And somewhere in the late 1970's, Congress stopped asking the question -- How much do farmers need to survive and then, kicking in the money to make up the difference? They started asking the question -- How much can we afford to spend on the farmers? And once they figured out that number, then they would lower the target price, so that the difference between the two would equal what they thought they could spend on the farmers. Well, for one thing, it indicates where the power lie, which is that the prices stayed low. Of course, you could have saved money by raising the price. But that didn't happen.
But the second thing it indicates that the strategy of the grain companies, which was to figure out a way to get commodities cheaper, and to make it look like farmers were the ones being subsidized by the taxpayers, had worked. We called this payment a farm subsidy. But the farmers weren't getting prices above the cost production. Grain companies and the people they were selling to, were buying grain at below the cost of production being subsidized by the taxpayers. So we have evolved into a system where we talked about farm subsidies but in fact, they weren't subsidies to farmers -- they were subsidies to grain companies, exporters, and to the importing nations. And we'd evolve to a system where the previous effort, which was to keep farmers alive financially, was being sacrificed to meet budget requirements.
Now, in the 1970s -- in the '50s and '60s in the early period of this program, farmers had money in their pockets from selling their crops -- that was the whole idea from the '30s, '40s, and '50s. In the 1970s, the farmers had money in their pockets still because it was a combination of what was paid in -- (inaudible) -- payments. So, lots of small town merchants never really noticed the change, the schools, the churches. In the late 1970s, however, the combination of the two began being short. If this was the cost of production, the target price was below that, the price floor was below that, and farmers were only getting this much money. There was a loss.
But, the 1970s were also a very inflationary period, in general. Farmland, like in my county, from the late 1960s to the early 1980s, let's say, went from $200 to $2,000. So, like I was chicken-farming in California, for example, and growing corn. And so, I went into my banker in the late '70s and said, "Hey, we lost money on the crops," and the banker says, "Yeah, that's right. But, you know, the land went up so much in value because of inflation that we can just rewrite your note, change the value on the land and loan you more money. And oh, by the way, you'll be a millionaire before you retire."
So, throughout the whole '70s, although people were losing money, the perception and what you had in your pocket, people were able to function. It was a kind of an ideal system for a short period of time. But, in the late 1970s, in fact, in 1977 and '78, first you started hearing rumbling in the churches and the churches started writing some statements about how crazy this system was and weren't we tearing up the land and that kind of stuff. And in 1978 and '79 and in the early part of the 1980s, farmers around the country rose up in another rebellion.
They were able to see that each year they were going further in debt and were living off of paper or government subsidies, and their tractors rolled into Washington. And I think one of the problems is that they were somewhat prophetic. I mean, you had Jimmy Carter and Bob Bergman (?) calling them "greedy bastards," and stuff like that. I mean, it was as if the farmers were saying to the nation, "Hey, this system we are operating on is bankrupt and will not work." Yet, all the nation could see was farmland going up in value, big bunches of money being handed out called farm subsidies, assuming that the farmers were being subsidized. And there wasn't the kind of national response or support for what they were saying at that time and they still had enough money in their pockets because the whole system was working.
And 1978 and '79 and '80, they tried to move some legislation more similar to what we had in the '30s and '40s and '50s, and I think in actually one of the votes -- a vote where President Carter had lobbied very hard against them they lost by one vote. But they went home in 1979 and '80 fairly defeated in this process -- the American agricultural movement.
So, in 1981, with the election of President Reagan and the movement towards deflationary economies, the beginning of the -- what we call now the '80s farm crisis began to happen. Once land began to fall -- you go into your banker and you say, "Hey, I lost money on my corn," and he said, "Not only that, your land fell. I can't loan you any more money. You're up to your limit. You're over your limit. You have to sell out." And it was young people who came back from Vietnam in '72 and '73 and '74, who kind of got in when things were going up, were the people who got told by the bankers to start selling.
The minute land started going on the market, it's like when a neighborhood is being block-busted -- you know when they bust a block in an urban area, land started going down, other land in the neighborhood started going down in value, and every week you went into the bank, the banker would tell you that your land had gone down. Nothing had necessarily happened to your land, it was just going down in value. In fact, by the time the drop had occurred, farmland in the major midwestern states had fallen 61 percent.
I mean, what does that mean to an urban person? If you bought a house that cost $100,000. Let's say you weren't living here. You were living someplace else. And you had put $75,000 -- gotten a loan for $75,000, had put $25,000 down. If it had fallen in value by 61 percent, down to $40,000, your banker would have foreclosed on your house the minute it fell below $75,000. And, in fact, farms went into an accelerated downslide and this was the kind of crisis we had. In 1980 and '81, the farm movement and people active in this issue began getting organized again -- around this crisis. The crisis motivated people to start organizing again. You had lots of little groups springing up around foreclosures, you had lots of activity in the countryside. We had the benefit -- there were lots of people left who had been organizers in the '20s and '30s, so the farm movement had lots of old-timers who knew -- and this was a very active period in the early 1980's. And people began organizing internationally.
People began dealing with environmental questions. Lots of things. And in 1985, there was an attempt to put forward a unified approach. And in 1985 was the first major push to pass what at that time was called the Harkin bill. But it was farm legislation based on the old principles, getting rid of this deficiency payment subsidy program and setting the price floors at the cost of production. In 1985, that effort in the generalized way was put forward throughout the debate that year. In a couple instances it came down to votes on the floor of the House. And in probably the most important, sort of recorded vote, Congressman Bedell from Iowa put forward a provision for this kind of a program in feed grains and wheat and soybeans, I think. It lost by 41 votes. Of that, 47 urban liberal Democrats voted with Reagan consciously stood up and said, "You may think it's weird, but I'm voting with Reagan," and on and on.
Basically, I'm not sure all their motivations, but seeing somehow that if farmers got a fair price, somehow that might consumers, or maybe it will hurt the Third World, or I can't even explain all the thinking, but the point was, farmers got very close in '85, but lost, and didn't lose necessarily just because of Republicans, but lost because of a broader coalition that defeated them. And in 1985, we passed the '85 farm bill, which we've been living up under ever since. The '85 farm bill was a continuation of this old program, with a couple new twists. In two commodities, rice and cotton, they allowed the market to fall as far as it would with no financial support and then taxpayers made up the whole difference. On rice, it fell from $9 to $3.50, like in a matter of two months. And so the taxpayer cost went up, but also around the world, anyone producing rice, trying to sell it, either to their neighbors or export it, also saw the price of rice fall to $3.50. There were riots outside of the US embassy in Bankok, Thailand because rice is their largest export commodity and it created a tremendous crisis in their internal economic affairs. I mean, we didn't riot here, although maybe -- there a riot, because it created this kind of a disruption, but Thailand, because they had external bank debts had to keep selling rice, and like the farmers in the United States, when prices go down, they increase production. Thailand and the United States got into an export subsidy war throughout the world, but for example in West Africa, Thailand and the United States would ship rice into West Africa at 80 to 100 dollars a ton below the local cost of production and we destroyed the rice growing economies, particularly in the Cameroons. People had spent ten or twenty years trying to build up their capacity to feed themselves and their nation and, overnight, we basically made that impossible. And the thing that's so infuriating about this is that, for example, the rice program cost us as taxpayers about $2 billion, but the rice exports were only worth $500 million. The same year, we spent between $8 and $10 billion to subsidize our corn, and our corn exports were only worth $3 to $4 billion. In other words, you could have taken that corn and dumped it in the ocean, paid the farmers the same money, and had $6 or $7 billion to put back in to deal with Gramm-Rudman cuts, whatever. So the '85 farm bill was like the previous ones, only worse, and of course, because of this, the costs went up. The '81 farm bill, the costs were $12 billion a year; the '85 farm bill, so far they've averaged $22 billion a year. So, in 1985, we got defeated, and got defeated for good and bad reasons, so to speak.
In 1986, the farm movement then became much more active in the political process, being very involved in a number of Senate races. In fact, I think it's fairly safe to say that it's the farm vote in the Dakotas -- you had in North and South Dakota, 35 and 40 percent of the voting, voting because of the farm crisis, according to ABC exit polls, and of those, 66 percent in the case of South Dakota, and 56 percent in the case of North Dakota, were voting for the candidates basically opposed to this policy, the Democratic candidates, and favoring other policy. 1986, there was a retaking of the Senate. In 1987, the farm movement also got involved in the primary process for the '88 elections, having a very specific strategy, which was to place senior people in all the campaigns so that this message was going everywhere.
And in 1987, Ronald Reagan and the people he represents from the grain trade, began seeing a long-term threat to their program in the states, and began thinking of an international strategy for continuing this kind of a program. The Reagan administration made a proposal at the GATT negotiations, which are the global trade negotiations, to basically institutionalize this kind of a policy globally and the thing that's why this is important is that if Congress is passing laws, we have some influence, but when Reagan figured out that perhaps he wouldn't be able to control the Congress any more, he decided that if he moved farm policy discussion to Geneva that, number one, we wouldn't be there to know what they were doing; and, number two, we wouldn't be able to lobby; and, number three, if he made a trade agreement and brought it back to the United States to be considered by Congress, Congress accepts it an up or down vote. Well, you can pack in lots of goodies, and you can pack in a lot of bad things, and force Congress to take an up or down vote, and basically get your way. The goal was to institutionalize globally a policy that would prevent a Michael Dukakis or a Democratic Congress from going back to the kind of policies we have in the past.
So, in 1987, the farm movement both got more involved in the electoral process, but also started dealing internationally. I went to Europe for six months, and dealt a lot with the farm groups, the governments, basically asking Europe to say "no" to the Reagan plan until we got a chance to get reorganized, and also began trying to figure out how we can work with the farmers in Japan and the other powerful countries and Canada.
So, in 1988, there's been an extending of this work in the political arena, in the international arena, and especially in the trade work, which we don't have time to go into today, and maybe that's another topic, but the trade debate, the internationalizing of our deregulatory policies of the Reagan Administration, is now becoming central to our debate over the next domestic policy.
I believe this is happening in other areas. For example, I know in the US-Canadian Trade Agreement, there were a number of policies that the Reagan Administration has never been able to accomplish in Congress, which they put into the agreement, and then it got passed through Congress here with only 40 votes against it. I know they forced Canada, for example, to lower their pesticide regulations to the US level. They basically ensured a supply of uranium at half the price of the current uranium supply in the United States for a long period of time, therefore extending the life of our nuclear power industry. There are a thousand pages of things that they couldn't normally do, but because of the way trade negotiations work, they were able to do it.
In agriculture -- we're about to go through an election here. We're going to pick up some people who are good supporters. We're going to have some trouble in some other areas, and next year we will enter into the next fight -- these farm bills come in five-year cycles -- we will enter the fight on the 1990 farm bill. Probably the most important development is that we've begun now to see how a lot of these things fit together. The National Toxics Campaign just released a study here a couple of weeks ago, saying very clearly that this policy, which we have now, which requires farmers to get their income by getting a subsidy for every bushel they produce, forces farmers to produce every bushel possible from their land, and that the only solution for stopping the poisoning of our water is to say to farmers, as we did under the old Roosevelt programs, You can produce this many bushels, and you're going to get paid a fair price, which then creates the incentive to produce those bushels as cheaply as possible and using the least chemicals as possible. So the toxics people are starting to get invovled in this issue. Global warming and the whole way that we're applying fertilizers and what it's doing to ozone. There's beginning to be intersections that are going to be important in everybody's work over time. And as we enter the 1990 farm bill debate, we should have more discussions where we see how these different issues fit together. But, as we enter it, we also realize that we're probably going to face very tough times. There's going to be an economic recession of some kind. There's going to be the need to take the kind of budget savings that are possible with the new program and apply those to social programs. We have lots of things that we're going to have to do together.
The farm movement has been consciously trying to involve other movements to help us. But at the same time, and I think I can say this very clearly, the farm movement has put a lot of energy in trying to be there for other movements to educate rural people, to get folks involved, to be at the March on Washington when Jesse was here in '83 and '84 and involved in environmental issues, involved in the other movements so that we all see this as one struggle moving forward together.
We happen to have a very specific legislative program and a very specific trade kind of strategy. It's something, I think, people can help us with, it's fairly clear. Other movements, we're not always exactly sure how to support some of the things, but we're trying, and we need your help, those of you from other issues and concerns. The main thing is to know that there is this genuine desire to see these things move forward, and there has been a lot of learning in the farm movement, because people in that movement came from lots of other movements. But, folks in the farm movement, from the trade union movement, brought in the principle that the injury to one is the injury to all. And lots of those principles from other movements make up the core of the farm movement. You should see it as something of a resource for you and your other work and know that someday we'll need to tap on your shoulder and say, "We need your help to get over this hump or this hurdle, but we know we can't ourselves get up over the humps and hurdles. We'll all basically have to do this togehter." So let me stop there and we'll -- (Applause)
MODERATOR: I'm going to let you guys handle your own questions. MR. RITCHIE: Here and then here.
Q Where in your analysis does the evolution of the large billion dollar acquiring corporation, you know, the conglomerate fit, number one, and what is there relationship to the grain companies and how does the farm movement see this interaction?
MR. RITCHIE: Well, I think in the '70s, a lot of folks here were involved in sort of anti-corporate or corporate muckracking or somekind of general theory and I think our fear was corporations were going to take over the land, which they have done in some areas of the country. But I think a much more common experience that we've had that we're just now focusing on again -- and I think Al Krebs has followed this for a year -- is that the large corporations have decided that it's the most capital-intensive sectors that they want to concentrate on. So, for example, they've taken beef and meat packing as a real major area. Three companies now control about half the cattle raised directly or through contract and 78 percent of the beef packed.
So, like they took over the State of Wyoming, they built feedlots, fed them in small quantities, and then took over that industry. Now, what's important about that in the bigger sphere is that those three corporations -- one is IVP, which is owned by Occidental Petroleum, owned by a chemical company. And the other two, one is owned by Cargill and one is owned by Con-Agra (?). They're owned by very large crown companies.
So, in the old days, the grain companies wanted cheap grain, because they wanted to sell more overseas. And that was their thinking. And you know, you could argue with them about, well, it can't be too cheap or you won't -- nobody will make a profit. But since the 1970s and 1980s, now those grain companies are not just the biggest merchants of the products of farmers. They're also now the largest consumers. They want cheap grain and cheap soybeans to feed their chickens, cattle, hogs and everything else. So, in the old days, we would have a fight with the corporation. We would say, "Look, if you lower the price of wheat to 90 cents a bushel, Argentina is going to go to 80 cents. Stop this lunacy." And that was -- you know, we -- it's an argument we could work.
Now, they come back to us and say, "Look, we're feeding cattle, we're feeding chickens, we're feeding hogs. We want the cheapest grain possible." And when I talked earlier about imports, it also, then, makes them not only dedicated to forcing farmers here to accepting the cheapest price possible, it changes their thinking to wanting to open up the boarders to import as cheaply as possible. So, for example, the ripping up of rain forests in Central America and South America to produce beef or corn or other crops for us. So, what we see is not so much the taking over of the land, which we maybe originally had envisioned, but we see corporations taking over sectors of the economy and having a stranglehold on beef, for example, and those corporations themselves being taken over by the grain companies, which then creates this vertical integration from the grain which farmers are producing, which they are giving to the grain companies cheaply, all the way through to the table. And we're only now beginning to see the long-term implications of that.
Q What are their politics? I mean, you know, you ended your presentation with a description of some of the political consequences of what's being done, you know, by the farmers and against the farmers. Would these, you know, larger, multinational corporations at this point be a significant political force?
MR. RITCHIE: Yeah, in fact, they're a political force at three levels. One is, and I'll just take Cargill, because I'm from Cargill's home state, they created a PAC and in the paper, the newspaper article about the PAC, the guy who runs it said, "We are using our money to elect candidates who are opposed to the supply-management proposal that's coming from Senator Harkin." And they in fact spend their money to elect candidates opposed to it.
The second thing is that they've created large lobbying operations here in Washington. Cargill and about 12 others have created this agricultural policy working group to pump out reports, and they're sort of trying to buy respectability. The just put a million dollars into the University of Minnesota to form an "institute" on international food and trade policy, and stuff like that.
But the third way that they influence policy is in their direct impact on the government, lobbying directly and all the things corporations do to lobby, but also the placing of their senior people at the senior positions in the Reagan administration. For example, Dick Lyng, who is Secretary of Agriculture, came to the American Meat Institute, and it's no wonder he's done a lot of funny things around beef. Clayton Yeutter, who is the chief trade representative comes from the Chicago Mercantile, the speculators. And Daniel Amstutz (ph), who headed the USDA program on commodities and international -- was a senior Cargill vice president. He then wrote their international policy, and now he's the senior agricultural trade negotiatior in Geneva.
So, Cargill is able to both give money to certain candidates, sort of buy respectability by spending its money, and to directly influence the government through lobbying and placing their people at senior levels in the government. So, there was a hand here, and I think Alan (?) wants to respond too. Go ahead.
Q Actually, that was my question, but -- (inaudible). Could you go into a little more about any international initiatives that you're engaging in to get, since farmers all over the world are in the same boat? Are you constantly doing more of that or what kinds of things do you do?
MR. RITCHIE: In the early 1980s, whenever farmers would propose getting a fair price, friends and foes in Congress would say, "Well, we couldn't export our commodities, those farmers in other countries will undercut us or, you know, this or that or the other thing." And, it got to be that if we didn't have a real response to that, we couldn't make any progress. And so in 1983, farmers from about 20 countries came together at an international summit in Ottawa, because the Canadians were experiencing the same crisis, and there were some from different countries in Asia, and some from Latin America, and a lot from Europe. And after that conference, some of the Europeans stayed here and began helping us organize in this country to sort of learn about the crisis, but also, to share ideas. And from 1983 forward, there's probably been about six international summits where people from different countries have gone together and people have been exchanging each other.
In 1987, was the time that the Reagan administration jumped this by moving their strategy to Geneva. And so, in 1987, I then went to Europe for six months to work on that strategy to try to get Europe to say "no" to this proposal and to get the farm organizations of Europe focusing on Geneva. In Europe, the farmers are in their own national organizations, and then, they're in a European-wide organization and they were focusing on Brussels which is kind of like Washington to us. But, the negotiations and the changes were happening in Geneva. So, I was there working to try to get a focus on the negotiations in Geneva. And at the same time, we began especially working with groups in West Africa
and in Southeast Asia, and Mark Lenders (?) was with an organization there that I worked with, and now, he's here on kind of an exchange. And also, in this last year, we began working much more closely with the farmers in Japan who really -- Japan, the United States, and Europe set the international trade agenda. What they agree upon becomes the way the future goes. And it's not that the farmers can totally control their governments. Certainly, we don't hear and certainly in Europe and Japan they do more, but it means that if the farmers had a unified vision, then the governments could have a more unified vision.Now, in this last year, the farm organizations have begun to realize that the Reagan administration is serious, that they want to deregulate global agricultural trade. I mean essentially, there is 12 corporations who trade. You know, we talk about trade as if it's between countries. Well, trade isn't between countries; it's between corporation. There's 12 of them involved in food, and Reagan's proposing that we remove all rules and let them trade however they want to. And so, there's been a real strong upsurge of activity among farm organizations.
So, for example, there have been lots of delegations in Europe at the GATT, in Japan. In fact, the GATT negotiators are coming to Montreal in December for the midterm review and the farmers of Quebec have now put together with other people about a two week program including having farm leaders in from around the world. There's going to be a march on the GATT negotiators; there's going to be seminars; there's going to be discussions. So, we feel like every country has a big stake in this and they're all kind of -- you know, working together. Q Mr. Ritchie, are you getting involved in other issues like Third World debt --
MR. RITCHIE: Well, it all -- Q -- (off-mike) --
MR. RITCHIE: Yeah, it's -- Q Are you getting -- I mean, are you expanding your agendas? MR. RITCHIE: Well, it just depends on which country you're dealing with. But, for example, there was just a conference in Japan on rice and self-sufficiency and the discussion was on the US policy of breaking the rice price. Well, people from Thailand were there talking about how their third world -- their debt dictated how their policies were written. Same with Brazil. And of course, in the United States, people react to it in different ways. We see the World Bank financing the destruction of rain forests to produce competitive products. It seems like a crazy idea, but also we have our New York bankers who want to make sure that the Brazilians have the money to pay them. So, the Third World debt, for us, has been much more -- something that our farmers here in this country identify with now because they see themselves in the same spot. And so, we've used it much more for what would be kind of classically called, development education, talking with folks here about what's going on in Third World. There are lots of multilateral issues like UNCTAD and GATT that come up and the debt happens to be one of them that's crucial to a lot of people. Al, and the back here. I don't want to miss anyone.