People who like to call themselves conservatives are also pleased to complain about the excessive role of government in the economy. These days they point with special horror to obstreperous farmers demanding higher governmet support for agricultural prices.
But why are the farmers so mad? Because, not for the first time, they got suckered by a Republican secretary of agriculture preaching the usual conservative nonsense about the unmixed blessing of the free market.
As secretary of agriculture in the administrations of Presidents Nixon and Ford, Earl Butz did three notable things. First, he dismantled the system of acreage allotments whereby the government obliged farmers to hold down production in return for price supports. Second, he dismantled the machinery in the Department of Agriculture for dealing with big commodity surpluses.
Finally, he told the farmers that, thanks to the blessings of the free market, they could produce as much as they wanted, and sell their produce at good prices. "I reduced the price-support budget by $4 billion a year," he used to say, "and more than doubled the price of wheat and corn."
In fact, farm income did rise rapidly in the arly part of this decade. The farmers made roughly $12 billion annually in 1970. In 1972 the figure soared to $15 billion, and in 1973 to over $25 billion. In 1974 and 1975, it was still relatively high. But by the end of 1976, farm income was once again down around $12 billion.
What made for the change, of course, was not the free-market policy as advocated by Butz, but the international grain pricture. In 1971, worled production was high (about 1.3 billion metric tons) and there was a surplus of over 181 million tons, 1972 was a bad year, and the surplus disappeared. Though production recovered slightly, there was no surplus in the next three years. The surplus showed up again in 1976 - the year farm income went back to where it had been before the big bulge of 1972-75.
More specifically what accounted for the buying up of surplus, and the bidding up of prices, was the performance of Soviet agriculture. The Russians had very bad crops in 1972 and 1975. Each year they purchased almost 20 million tons of grain from the United States. In 1976 they had a good year, and purchased only the minimum requirement: 6 million tons.
American farm income, in other words, has been closely tied to the ups and downs of Soviet agriculture. When the Russians were in trouble, international supplies ran low, and American farmers sold huge amounts abroad and enjoyed a strong cash flow. When the Russians did not have to buy abroad, reserves built up and American farmers suffered declining prices.
But if Butz and his free-market principles were not responsible for the rise in farm income, they did have a hand in the fall. With production going all out, and the machinery for price support dismantled, the government was in no position to help distressed farmers in 1976 or last year. So many farmers have turned back to government now. Under their pressure the administration has already pushed through the Congress a measure that will reimpose acreage allotments and put a floor under prices in 1978.
Now the farmers ar walking up and down the land asking for higher price supports. My impression is that no increases are justified.
For one thing farm assets - in real estate and equipment - have stayed at very high levels (up from about $260,000 per farm in 1970 to nearly $570,000 per farm in 1977). Farm debt has not advanced nearly so much. Prospects for 1978, moreover, suggest large U.S. sales abroad and a better cash flow for farmers. Finally, higher price supports are bound to mean new pressure where the economy can least afford it: on the inflationary front.
But the cnetral point is a larger one. It is that no issue can be usefully settled simply by invoking the conservative principle of the free market. That is mere rhetoric, pleasing to some ears, but not decisive as a guide to policy in the modern age. As the case of the farmers demonstrates, blind obedience to the free market is a recipe for trouble and an appeal for a fix by mroe government intervention.