Originally published September 6, 2003
They say timing is everything. This speech made to the National Farmers Union 81st convention on March 1, 1983. Could have been this morning. It's time for the American people to know why the economy is going downhill. It was going downhill in 1983 and it's still going downhill. Why? We once were strong - now we are not. Why? Eddie Albert knew the answer in 1983. I believe it is still true today. What do you think?
-- Willie Nelson
Entertainer Willie Nelson is the president of FarmAid. FarmAid 2008 was held on September 20th in Mansfield, Massachusetts and included performances by Willie, Arlo Guthrie, John Mellencamp, Dave Matthews and Steve Earle. For more information about the concert including a webcast, go here. For more information about Willie's tours and news, go to www.willienelson.com.
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81st Annual Convention
National Farmers Union
San Diego, California
March 1, 1983
There was once a strong farm policy. It developed during the other depression -- the thirties.
A lot of thought went on to figure out what went wrong -- why, how, when and where.
Some of the thinkers wanted to prevent another depression. Others had in mind making money out of it.
There were some good farm programs proposed, but there were some strong forces lined up opposing their adoption.
Although in 1941 the depression still continued, there was a war coming on and there were a few intelligent congressmen who realized that if we were to win this war, we must have a strong economic base.
Early in 1942, the Banking and Currency Committee adopted the concept of "parity". Congress then passed the Steagall amendment, which provided for 100 percent parity for all raw materials and the amendment was attached to the "defense act of W.W. II".
Hitler had already done the same thing. Germany had been destitute and gearing up for war, Hitler established a fair price floor for all raw materials. Within a year, Germany was on the road to recovery.
Our recovery started in 1942, the year of the Steagall amendment, but the war got the credit.
From 1943 to 1952, we had the Steagall amendment and economic stability. Farm raw materials were supported at 100 percent of parity. It provided a steady flow of earned income to buy government bonds to finance the war and post-war conversion to peacetime.
There was a sound dollar, no inflation.
There was approximate full employment.
Now, these circumstances didn't just evolve as the natural consequences of "supply side" economics, or "demand side" economics. They evolved as the result of some careful thought by some very intelligent people which resulted in laws and regulations enacted by Congress and certain wartime powers delegated to the president of the United States.
They included the Steagall amendment, wage and price controls, the temporary abandonment of the gold standard and other measures, plus the dedication of a proud and loyal citizenry determined to win the war and also to win the peace. And they worked!
However, as I said, some folks didn't like this. They didn't like restriction on their actions, their investment return, the growing political power of farmers and their friendship with labor. That bothered them.
They are powerful people -- well organized.
After the war, in 1952, (the Steagall amendment) was allowed to expire after ten years of economic stability.
In 1953, the Farm Act of 1953 took its place with sliding parity, 60 to 90 percent. The bad guys won. You and I know which of those figures it's going to slide toward.
That was their first important step. What these folks had decided was they had to have ownership of the land. That would eliminate government interference and they knew something about making money during shortages.
The shortages in the 80's and 90's will be mainly in food. Ownership of the land is where the power lies - political and dollar power. Land is collateral. Ownership controls wages, surpluses. Ask the South American farmers. This has been true for centuries.
So their goal, very clearly, was to get hold of the land and they decided to do this by moving 2 million farmers off the land into the cities and replace them with a small number of super farms, corporate-owned, a few large family managed operations, and several million small farms, financed primarily by off-farm income.
These plans were spelled out in literally dozens of reports, policy recommendations and studies that are available in almost any land-grant college library or the Library of Congress.
And so, the Committee for Economic Development (CED) was born. Let me give you some actual quotes from its papers - its approach was:
"Removal of excess resources (farmers) to be utilized in other sectors of the economy, to generate greater returns on investments. (Excess resources -- farmers -- were measured by return on investment).
"The movement of people has not been fast enough to take full advantage of the opportunities that improving farm technologies, thus increasing capital, create". (You are not moving fast enough, they have a plan).
Their plan, which was called "the adaptive approach," was almost identical with Russia's first ‘five-year plan' of ‘28-33. We, too, were to move millions of farmers and ranchers into cities for the advantage of industry. Never mind the city problems!
"The adaptive approach utilizes positive government action to facilitate and promote the movement of labor and capital where they will be most productive and will earn the most income".
"The support of prices has deterred the movement out of agriculture."
And, how about this?
"If the farm labor force were to be, five years hence, no more than two-thirds as large as it's present size of approximately 5.5 millions, the program would involve moving off the farm about two million of the present labor force, plus a number equal to a large part of the new entrants, who would otherwise join the farm labor force in the five years."
There you go kids.
"The price supports for wheat, cotton, rice, feed, grains and related crops, new under price supports, be reduced immediately." (3 cents a lb. on rice, 22 cents a lb. on cotton...). Never mind the market, the demand, your costs.
"The importance of such price adjustments would discourage further commitments of new productive resources to those crops unless it appeared profitable at lower prices." Profitable at lower prices? Whose?
The corporate presidents and academics who make up the CED, recommended the elimination of one third of the farm population within five years by enforcing low parity pricing. As they stated, the primary benefits of their recommendations would be:
1. Increased return on corporate investment in agriculture.
2. Over two million farmers and families entering the urban labor pool, which would tend to depress wages.
3. Lower prices of agriculture products which would both increase foreign trade and provide cheaper raw materials for domestic food and fiber processors.
4. "...invest in projects that break up village life by drawing people to centers of employment away from the village...because village life is a major source of opposition to change. Where there are religious obstacles to modern economic progress, the religion may have to be taken seriously or its character altered."
Eight years later they issued a report:
"The desired result--one-third fewer farmers--was achieved."
Two million farmers were moved off their family farms-by suppressing supports--were moved into the cities to look for employment, housing, depress labor's wages, bankrupt some cities. Bankrupt their rural towns and communities, close their schools, over crowd the city schools, hospitals. Over 200 years to build the greatest nation in human history, and in only five years, shattering our delicate economic balance by tampering with the farm prices and bringing on our greatest, and most painful and dangerous depression.
Back to the report--
Their evaluation was that their analysis and recommendations were fundamentally correct and that the government had faithfully implemented their recommended policies.
"We do not mean to overlook the poverty that still persists among many small farmers and other rural Americans." One third of U.S. families are rural and 40 percent of these live in poverty.
"Farmers who can neither attain a decent standard of living nor find an adequate non-farm job represent a strong case for direct income support.....assistance to low income farmers should be contingent, not upon farm production or a presumption that low farm prices are the cause of an adequate income, but upon need.... we believe development of adequate federal welfare programs." Not a fair price for production, but welfare.
Although the strategies and tactics of the CED are carefully spelled out, it is never hinted until the very end what their underlying goals and motivations might be.
"A recurrence of agricultural instability must be kept in mind so as to maintain an atmosphere relatively free of the political pressures from farmers in the past."
Minimizing farmers' power was crucial to the corporations for several reasons.
Farmers had historically aligned themselves with trade unions and urban workers, including the formation of farmer-labor parties, which held political power in a dozen Midwest and southwest states. The men who developed these specific programs to accomplish the aims of lenders and large corporations were mostly hired economists who were then placed in the necessary positions of power within the government (USDA), to bring into being their recommended programs.
Now, do you still believe that your problems result from what the economists call "supply and demand" and that nothing can be done about the surplus but lower the price even further?
Why did I stress all raw materials, and especially farm income? Is there something different, something we haven't discussed?
Let me go back for a moment to those ten successful stable years of parity, from '43 to '52, and the Steagall amendment.
What did we learn from those ten years? What lessons?
An economist named Kuznets, later a Nobel Prize winner, noticed that there seemed to be six most important sectors that dominated our economy. They were:
1. Farm income
3. Interest income
4. Small businesses and professionals
Hubert Humphrey expressed it even shorter: "A 3 legged stool -- capital, raw materials and labor. Short change any one of those three legs and the stool falls over". He was talking of balance.
Go back to six sectors. Kuznets states that to provide a healthy economy, they, too must exist in a reasonably precise balance in relations to our national income. For example, (1) farm income, which they intended to suppress, should share in about six to 8 percent of our national income; (2) wages, labor, etc. 66 or 67 percent, (3) interest income 1.2 percent; (4) small business 10.5 percent; (5) rents 3.8 percent; (6) corporations 12.6 percent.
Those were roughly the shares of those sectors of our national income during our prosperous base period, ‘43 - ‘52.
For example, 40 years of statistics show that (1) if farm income falls one percent, then unemployment for labor rises one percent; and (2) if farm income rises one percent, then unemployment falls one percent. All six sectors are connected. Touch one and you affect the other five.
They intended to suppress farm income to achieve their plan. Now, to tamper with farm income, raw materials, is foolish and dangerous.
Unlike the other five sectors, farm products are "raw materials". Raw materials -- grain, oil, minerals, coal, timber, fish, etc., etc. -- they are the base of our economy, the foundation. When they are harvested, dug up, cut down, whatever, they are new wealth for our nation, something that did not exist before. In the case of farm products, they are new every year, are perishable, non-storable, are consumed every year - unlike metals, for example -- and farm products are 70 percent of all our raw materials.
I'm indebted for this information, by the way, to the Raw Materials National Council and the National Organization of Raw Materials........
Back to raw materials - grain, oil, iron ore, coal, minerals, cotton, wool, tobacco are raw materials.
As I said, new raw materials are the base of our new growth each year, our prosperity. A factory wheel does not turn until some fellow drives up in a truck, up to the factory door, unloads some raw materials, gets a receipt and drives off.
Only then can the processing start. Labor takes over; oil is turned into gasoline, plastics, fertilizer, energy. Grain is turned into bread and Twinkies. Iron ore into steel, steel into cars, planes, skyscrapers, concrete into highways and all into prosperity wages for consumers. And let us not forget that although nothing happens to the raw materials until labor gets her or his hands on it and starts the raw materials up the processing ladder.
The raw materials rise in value as they are improved, worked upon, transformed, creating jobs for labor, wages turning workers into consumers with money in their pockets, enabling them to buy the farmer's produce and surplus and enabling the farmer to have money to buy industry's production of tools, trucks, combines, etc.
Now, what is of equal importance and can not be exaggerated, these raw materials must have a price, not only a fair price to the producer, but a correct price, to carry out that balance correctly -- neither too high nor too low.
By the time those raw materials reach the top of the processing ladder, those base price dollars for the raw materials will multiply themselves five times, all the way up to contribute five-to-one to our nation's annual income and that raw material processing and national income figure represents our strength, our health, our wealth, our security, our livelihood, our democracy, our freedom, our civilization.
Another bit of good news. Raw materials multiply-five-to-one. But, agricultural raw materials multiply seven-to-one.
This is known as the "multiplier effect." It is known as the lever. I'll tell you why.
Let's say the base price is 3 dollars a bushel. Multiply that by 7. That's 21 dollars. But, you multiply 21 dollars by 12 billion bushels and you get 252 billion dollars.
That's serious money, but the lever works both ways.
Suppose the price is suppressed to $2. Two times 7 is only 14, not 21. 14 times 12 billion bushels equals 168 billion dollars. By dropping the farm price $1, we have robbed the national income, jobs, wages, and consumption by $84 billion in one harvest.
Farm production is 70 percent of raw materials and, unlike five sectors of the economy, multiples itself seven-to-one. You can't short change a lever like this without causing a depression. And, you don't forget, farmers have been short changed in the past 30 tears --$2, $3, $4 a bushel. Using the average figures from our ‘43-‘52 base as a yardstick, and nothing that the farm sector's 6.6 percent share at the national income in ‘43-'52 was purchased downward for 30 years until today - it is no longer 6.6 per cent but 8/10th of one percent, multiply that loss per bushel times seven times 12 billion bushels, times 30 years and you are talking very serious money, around $5 trillion -maybe more- lost forever to the people of the United States.
Imagine $5 trillion held back from the economic processing ladder, held back from creating jobs, wages, construction, consumption taxes, our world leadership actually - because a few clever fellows decided they would rip off the farmers.
If you start chopping away at the roots of a tree you have no right to be surprised when you see the leaves and branches whither and die, the roots are not fed and almost die.
They don't realize that 12 million workers are idle, out of jobs, because the farmer has not been getting enough money to buy the industrial tools those workers had been making. The plants were closed down and workers were put out on the street. Idle. Now the shoe is on the other foot. Those 12 million idle, hungry American workers have no money to buy the farmer's food--his grain, bread, cereals, corn, and beef-- so the farmer has a surplus.
Debt. Easy credit. Land prices going up. Remember "get big or get out? Remember Butz? Open up marginal land. Seventy million acres. Plant fence row to fence row. Right up to the doorstop, debt.
After 30 years of this, our public and private debt over $6 trillion. Who knows? Some say over $11 trillion. What's the annual interest on that? How, who will pay it? Our national deficit this year around $200 billion, and growing. And next year, worse.
Two hundred billion dollars is your farm loan this year. Interest, say $20 billion. But did I hear correctly? Your income is around 19 billion.
Six trillion; 11 trillion. Nobody seems to know. A debt has to be paid and will be paid, either by the borrowers or the lenders or the taxpayers.
Who pays it? My new granddaughter? Yours? Our great grandchildren? Our great, great, great grandchildren? How?
What have we done with this rich continent that god gave us, free? These beautiful United States of America. What have we done?
What are we going to do?