The Power of Agriculture
PROTECTIVE TARIFFS AVOID SLAVERY OF INTERNATIONAL TRADE
By WHEELER McMILLEN, Editor, Farm Journal and Farmer's Wife
Delivered before the American Tariff League, New York City, June 15, 1944
Vital Speeches of the Day, Vol. X, pp. 625-628.
AGRICULTURE is in favor of international trade. Agriculture is in favor of tariffs. There is no necessary conflict between these two positions. Farmers are still in position to produce quantities of certain commodities in excess of the effective domestic demand. They would like to have profitable export markets for some of their output. As consumers, they desire certain agricultural products from other parts of the world. They have been accustomed to using coffee, tea, cocoa, spices and rubber among the many agricultural materials which they do not produce. They believe that trade in such commodities is of mutual advantage and thoroughly sound.
Farmers are keenly aware in addition that the great market for their output is within the borders of the United States, They desire to see American industries prosper and commercial enterprises active. They have observed that well-paid workers who are busy the year around are much better customers for food than ill-paid part-time workers. Therefore, they are anxious that those industries partially dependent upon export sales shall be able to send their goods abroad. They are perfectly willing that both their own goods and the exported industrial commodities shall be paid for by the customary procedures which make American dollars available to foreign buyers, including the reception of imports into this country.
Farmers are not willing, however, that industrial exportsshall be paid for principally with imports which compete with what American farmers produce.
The plethora of propaganda and the loud confusion of controversy have tended to obscure some of the simple truths about trade among nations, as well as about the essentials of domestic prosperity. There appear to be those among us who have come to believe that "tariffbarrier" is one word. Propagandists for political theory and for foreign or selfish interests seldom mention tariff without describing it as a barrier. They have persuaded many against their own and against the national interest that tariff is a barrier to trade and injurious to the national well-being.
Ill advised tariff schedules can be barriers. They can be so high or so low as to diminish commerce and reduce advantage. That, however, is far from being the whole story. Correct tariffs are a fertilizer for international trade. Wisely applied, tariff can be a stimulus and a lubricant as easily as no tariff or an incorrect tariff can be a barrier. The most difficult and the most general barrier to trade is lack of purchasing power. Lack of purchasing power is generally synonymous with lack of production.
The most universal ailment of the human race is want. Want can be overcome only by production. When production reaches a level high enough to supply a people with necessities, whether by direct use or by exchange, then further: production can be applied to increase in the standard of living. Tariffs that stimulate and diversify production raise the standard of living. Therefore, they increase the need for the non-competitive imports. Higher imports lead to more exports.
The favorite half-truth of internationalists is that "we can't export unless we import." The other half of the truth is that we cannot and will not import unless we maintain domestic prosperity at a rate high enough to give us the means to buy foreign goods and materials.
The United States stands as the supreme example among nations of a high standard of living. The American people! out-produce every other people in the world. Having larger means, they therefore constitute the most envied and desirable market in the world. Since they create for themselves an extraordinarily high percentage of the goods they desire, their high degree of purchasing power is a magnet which attracts competition.
It may be a fantastic but is nevertheless a useful illustration to assume for a moment that after the war nearly everything used by Americans might be produced more cheaply in some other country. If our government were therefore to assume that it would benefit Americans by permitting them to buy all goods from the cheapest sources, the consequence would be disastrous. Obviously the result would be the prompt destruction of the purchasing power of Americans. Since all goods would then come from abroad, no means of earning and acquiring purchasing power would remain. We would produce little or nothing. The American] people promptly would be plunged into poverty and want. And the once highly attractive American market would have disappeared.
Foreign criticism of United States tariffs will ever hereafter come with poor grace. Every liberty-loving peopled abroad ought to be eternally thankful that American production has been built to the high abundance which now enables us to share our strength and plenty with those desperately in need of our support.
* * * * *
A basic principle of prosperity and well-being is that: Production has two distinct functions. One is to supply goods. The other is to create power.
When a nation's economy is so balanced as to engage all its working population in profitable production, and employment is therefore widely diffused, that nation can have a high standard of living. The slight additional cost which a tariff rate may impose upon a consumer may well be the insurance premium he pays for maintenance of his purchasing power.
* * * * *
The best consumers the United States has had for its exports have been those nations with the highest purchasing power. The largest volume of imports has been obtained to the United States in those years such as 1929 when domestic prosperity was at high levels. It is at such times that our people can most readily satisfy their demands for foreign luxuries and at such times that they require the largest imports of raw materials.
* * * * *
I have referred to the fact that agriculture desires export markets for commodities such as cotton and wheat. It i$ pertinent to point out that agriculture's most troublesome problems arise around these commodities. They are problem commodities because the price is not determined by what a prosperous domestic American market can pay. Their prices are influenced by what a less prosperous foreign consumer can afford to pay and a low wage foreign producer will take. It might be said that the price of cotton is ordinarily determined by what a coolie in Penang can afford to pay for a shirt or by what a coolie in some backward colony will accept for a day's work. Coolie standards are not American standards.
We have trouble with wheat and cotton simply because they seldom can be directly benefited by the kind of tariff protection which has so successfully been used to moderate the effects of world competition upon many of our other products.
No nation can expect to erect a stable structure of prosperity upon exports of raw materials such as wheat and cotton. To do so exposes its workers and farmers to the competition of the cheapest of wage workers anywhere. Should the United States adopt as its future policy the encouragement of unlimited export of raw materials 'from other nations, it would inflict injury rather than benefit upon the people of those nations. To do that would tend to encourage them to continue upon the low level of raw material prosperity.
A far more generous policy would provide first for the maintenance of prosperity in the United States by adequately protecting the earning power of Americans. Then it would, in addition, encourage the people of less fortunate countries to produce not for sale abroad but for consumption at home. Whenever other countries advance in the production by themselves of the things their people need for themselves, international trade itself will expand. There will be more demand and more capacity for the exchange among nations of the goods one or another may need to obtain. Only by producing more for themselves can a people attain more earning power to expend for imports.
* * * * *
There is one approach by which the correct use of tariff can contribute constructively to the solution of cotton on wheat surplus problems. That may sound strange in view of the general acceptance of the idea that there must be cotton and wheat surpluses and that commodities in surplus cannot be benefited by the use of tariffs. Cotton and wheat surpluses come into existence because farmers in the great one-crop cotton and wheat areas do not have other crops that are normally more profitable. If they could grow other equally satisfactory crops, certainly they would not take the continuous risk of low prices for excessive production of cotton and wheat.
In the corn belt a new crop has been added. It is the soybean. In 1914 about 50 thousand bushels of soybeans were harvested. By 1935 the total had grown to 45 million bushels. The last two or three years have seen production in excess of 200 billion bushels. The soybean has been a highly satisfactory new cashable crop in the corn belt states. Having industrial as well as food uses, its price has been fairly stable.
More genuine and effective agricultural adjustment was accomplished during the Past twelve years in the corn belt through the addition of the soybean crop than by all the laws adopted by the New Deal or by all the millions paid out from the Federal treasury.
Almost within sight are new crops for the cotton states, crops which can help to prevent cotton surpluses in future years. If the cotton states were to produce quantities of vegetable oils equal to the quantities normally imported, the acreage required would be in excess of that normally devoted to cotton for export. This is significant since, of course, not all cotton grown for export is necessarily surplus cotton-not when the export prices are profitable. The South can grow peanut oil, soybean oil, tung oil, with certain other possibilities such as castor beans, okra and perrilla and, of course, cottonseed oil. Many of these oils are interchangeable in their industrial uses.
Protective tariffs correctly applied so as to encourage the domestic production of vegetable oils in the South by preventing low wage competition from the tropics, can hasten the day when southern farmers and workers will be freed from their dependence from the uncertainties of foreign markets and the low purchasing power of foreign customers, to say nothing of the low wages of foreign competitors. And mark the fact that a prosperous American South will out-buy any overseas nation from the output of American industry, and will create far more jobs for American workers.
Not within the visible future, but neither a wholly improbable concept, is that cotton production on a domestic basis might eventually itself desire the protection of a tariff.
Vegetable oils, of course, are not the only alternative to cotton. Southern soils and climate are well adapted to the production of starches to replace the 400 million pounds normally imported each year from the tropics. Cotton is not the only fibre that southern farmers can produce. As byproducts of vegetable oil production and of starch crop production, there will be both protein and carbohydrate feeds, the lack of which has delayed diversification of southern crops. The availability of satisfactory all-year feed stuffs will improve the southern capacity for production of meat, milk and eggs.
Prospective new crops to prevent the creation of surpluses in the one-crop wheat areas are not quite so readily pointed out. However, our crop practices have developed through habit as much as through experience. Mankind has not yet tried very hard to find out what the plant resources of nature are good for. We grow only about 200 commercial crops in the United States, although fifteen thousand species of plants are indigenous to this country. Botanists have identified more than 300 thousand species of plants on the face of the earth. The new sciences of organic chemistry and plant genetics will in time enable man to establish additional plants as commercial crops. Among them certainly will be other plants than wheat that will flourish on the Great Plains, add stability to the incomes of farmers in the one-crop wheat areas, and improve the prosperity of the entire nation.
* * * * *
Agriculture is by no means an isolated enterprise. No one realizes better than do farmers how much they depend upon widespread employment at good wages. Busy and well-paid cities are the primary market for agriculture's primary output, which is food. Farmers are against policies which may diminish the effective demand for food anywhere in the nation. They want to see labor fully employed and adequately paid.
Consequently agriculture generally favors whatever protective methods are necessary to insure full activity by industry. Likewise agriculture looks unfavorably upon some of the erroneous thinking that endangers both rural and urban prosperity.
Farmers have been assailed, for instance, for wanting a tariff on sugar at a level that will permit profitable production of sugar beets in the United States. Lower sugar schedules have often been advocated on the theory that more American automobiles and other items might be sold in Cuba. In the first place it is pertinent to remark that a tariff of one cent costs American consumers about one dollar per year, assuming that the full rate of the tariff is added to the cost of their sugar, and assuming that they receive no benefit whatever from the rate. Per capita sugar consumption runs around 100 pounds a year.
Any good sugar beet county will be found to buy automobiles at a rate equal to or above the average national rate. There will be one car for each four or five people in the county. I understand there is about one automobile in Cuba for each 175 people. Is it fair to ask which place is the better market for American automobiles?
Agriculture has a definite interest in the future arrangements for the American rubber supply. Farmers would like to grow some of the post-war rubber or some of its ingredients. They have definite opportunities, providing research is vigorously pursued. They can produce latex from the guayule or Russian dandelion plants. They can provide raw material for rubber by way of alcohol from carbohydrate crops, vegetable oils, or even from the whey which is a byproduct of milk.
They figure that if all the rubber of our future is grown by American farmers on American land at American prices, or produced at American wages by American workers, they will have additional good customers for food. They have never sold much of anything to the coolies of the rubber plantations. They also figure that the American rubber producers will be more active customers for American manufacturers of all kinds, and that the whole national economy will thereby profit.
Nor are our farmers oblivious of the fact that we have once been caught in costly unpreparedness. If the rubber is produced within the United States, it will be here when needed. In South America it would still be four thousand miles distant, and in the Orient the same old risk would be repeated. Then the United States would be dependent upon Brazil for a rubber supply. Brazil would be dependent upon us for a market. Both will prosper better by producing at ome the goods needed at home.
The challenge at once comes up that this policy will be unfriendly to improved international trade and other relationships. To that I would first declare that it has yet to be demonstrated that international trade has ever prevented a war, nor even that it has not been the active cause of many a war.
Then I would return to something I alluded to some moments ago. Peace and plenty are closely related. Peoples who are kept in dependence upon their production of a raw material for a distant foreign market never live in plenty. They live hazardously at low and uncertain wages. Far better would it be to assist such peoples to produce the things they need for themselves. The Malay coolie never had any use for the rubber he produced. He bought no automobiles, no tires, and probably not even a raincoat. But he does have need for better food, better clothing, better sanitation, better education and recreation and a hundred things that he could be producing for himself if he were freed from the slavery of international trade.
Raising the standard of living begins at home, wherever home may be. To help others to help themselves—and in the process to help ourselves—may well be the most profitable of post-war policies for American relationships with the less fortunate peoples of the earth, and also a potent measure for peace.
* * * * *
Certainly the prime point of American policy must be to build this nation stronger and stronger. Through our strength rather than our affability will the United States influence the rest of the world for peace. Strength has to be produced. It has to be produced by a busy and prosperous people. The United States will be incredibly foolish if it refuses to use the tariff, and any other honest device of the protective system, to husband and nourish that national strength.
We shall have to produce enough to pay our huge debt. The only honest way to meet that will be to pay it. The dream of a national income of 150 billions a year is not impossible of achievement and without inflated price levels. American science, American management, American machines and American resources can produce that much.
There is no ceiling on consumption, since few of the human race even in our superb United States have ever come near being able to buy all the things they want, we can consume that much. Production can pay the debt.
However, unless production is tremendously expanded and maintained, the debt will be a stupendous burden, payable only by continuous deprivation. The tax load will threaten the strangulation of enterprise and the extinction of freedom. The American standard of living will become a memory of the past. (Some one recently remarked that to socialize the United States, and impoverish its people also, nothing more would be needed than to leave the present federal taxes as they are.)
The level of production necessary after the war will require a good job for every worker. There will not be» good job for every American worker if the American standard is depressed to give equal access into this great market for farmers and workers abroad who are willing to labor for fifty cents or a dollar a day. Destruction of American standards will even reduce American capacity to buy from the good neighbor abroad those goods of his which we shall desire to buy. Americans can best be good neighbors in this modern world by improving their capacity to produce and consume. Under freedom in this nation we have demonstrated that power over nature—the power to produce—pays far better than power over men—the power to command, Science, which is the knowledge that gives us power over nature—scientific power and engine power, the American story proclaims, are far more productive than political power.
The ideal protective system is higher efficiency and lower costs. Thanks in no small degree to protective tariffs, a few American producers have achieved that ideal. Agriculture and others aspire to continuation of the opportunity. Few wish for prohibitive protection and none should have it, for the spur of competition should always stand to inspire greater efficiency.
Agriculture is the fundamental economic enterprise. One-fourth of Americans are farmers and depend directly upon the land for their incomes. Another fourth, in the towns and small cities, never have a dollar until a farmer brings a new dollar or a dollar's worth of new wealth into town, Thus half of the nation's population is dependent, first hand or second hand, upon what farmers produce and upon how that production is priced. If it is priced so low as to prevent farmers from having profits and spending money, depression affects the entire nation. If the income of the rural half of America is prosperous, there are eager buyers for the products, of the urban industries, employment runs high, and the whole nation flourishes. The cities cannot afford to be misled into destroying tariff protection for agriculture. They will pay high for making such a mistake.
Agriculture creates an endless flow of new wealth for America out of the soil and air, the rain and sun. Each year agriculture does it again. Half of America lives on the new farm dollars, first hand or second hand. No one can estimate the beneficial economic lifting force of the third and fourth and seventh turn of those dollars. Agriculture possesses the power to energize American prosperity. Let us never permit a foreign economic invasion to paralyze that power!