NFO-225 (AV10738): US Farm Report: Agricultural America - Past and Present

hi everybody and welcome to us farm report the subject of today's show is rural America its past and its present we have with us two outstanding guests spokesmen on this subject I'd like for you to meet mr. Vince Rossiter Vince is president of the Bank of Hartington in Hartington Nebraska in the northeast corner of that state a town of some sixteen hundred population mr. Rossiter is author of numerous articles on the subject of the economy of rural America he has been published nationally many many times by the Independent Bankers Association to which organization he belongs in its publication the independent banker I would also like for you to meet Dr. E. W Muller Dr. Muller grew up on a farm in Northern Iowa upon graduation from Seminary he served a small rural church for about twelve years and right after World War two Dr. Muller was appointed secretary of his church's town and country work and he served in that capacity for 24 years currently Dr. Mueller is in South Dakota as director for community organization and Area Development at Sioux Falls Dr. Mueller is truly one of the nation's most outstanding rural church leaders on the one hand we have a gentleman who works with the spiritual and social values in rural America on the other hand a gentleman who works at the hard financial facts the material side of rural America yes we have a preacher and a banker giving their points of view gentlemen welcome to both of you it's our pleasure to have you with us today may I say that this program is the first in a series of two a week from now on us farm report mr. Rossiter and Dr. Mueller will be here with me to discuss rural America and its future but today gentlemen the past and the present now then first of all mr. Rossiter to further qualify you you were very influential as I understand it in establishing a committee on agriculture in your banking group the independent Bankers Association when did this come about and for what reason Oh in 1962 this occurred not so much through my influences as my recommendation the influence was on the part of the leaders of the Independent Bankers Association who felt that this was a sound topic of discussion and concern for the rural banks and particularly the membership of the independent Bankers Association which is a group of 6500 primarily country banks and it was something that turned out to be very useful and relating ourselves to our customers and their problems and to understand the agricultural economy better as it relates to the rural economy as a whole as well as our banks mr. Rossiter I understand too that you accepted that appointment from Governor Morrison of Nebraska how did you serve the governor this was a committee appointed by the Nebraska state legislature to study uses other than the normal use for farm products such as industrial uses we developed processes made from corn starts for example to size paper we developed a film to package vegetables made out of high amylose content of the corn kernel mm-hmm and things of this nature the idea was to find some way to eliminate the surplus farm commodities other than to through the normal consumption channels I think perhaps one of your greatest accomplishments in terms of recognition nationally mr. Rossiter occurred back in about 60 or 61 in conjunction with the farm crisis report carried on in the Midwest by US News and world report would you tell us a little about that well this was quite a surprise to me actually because the US news making one of their usual forays through the Middle West to get information on how they farm economy is operating stopped in the reporter stopped in to see us and visited with us like to do everybody I discovered this gentleman had a wealth of information actually until I asked him to go to lunch with me so I could pick his brains a little bit and we had a wonderful conversation and they left and then there was a brief quote in the next issue or saw the US news that I had made and subsequently I was in Washington DC and in one of the trips that we made in and the industrial uses cause and I called him and invited him to have lunch with our industrial uses committee and he came over with his editor and we had lunch and after lunch he suggested I go down to the US news office and and answer a few questions for the editor and so on and so I agreed and it turned out that I was the subject of a full-scale interview which was subsequently published in the US News and World Report well gentlemen let's get to the subject at hand rural America its past and its present I'd like for you mr. Rossiter and Dr. you certainly can comment as we go along I would like for you to comment on the status quo of rural America economically and at the same time answer this question did the situation in agriculture as we know it today grow like Topsy or to quote your article in the independent banker is that a result of deliberate debauchery of agriculture well actually the status of Agriculture today is no better and somewhat worse than it was last year and has grown steadily worse in relation to the other areas of the economy ever since 1951 now one could assume that this was due to the natural laws but the facts seemed to refute this and the truth of the matter is that it is a deliberate policy of government to maintain relatively cheap farm raw material prices in order to sustain relatively cheap food shoes clothing beverages and tobacco prices at level this has been used over the years to reduce the average of the wholesale prices index to make it appear as though the dollar wasn't losing as much value as it was actually but the the farm economy has been the tail of the economic kite of the United States and has been used to offset the rises in the other areas of the economy and it really hasn't been progress at all in any sector of the economy to give you an example of what I mean in 1954 and 55 the Joint Congressional Economic Committee was conducting hearings to determine what was responsible for the lower farm prices at this time and among those called to testify was William McChesney Martin jr. chairman of the Federal Reserve Board in congressman Wright Patman the chairman of the Joint Congressional Economic Committee asked mr. Martin whether it would be ruinous if farm prices were up as much as other prices chairman Martin replied it's certainly something we don't want to contemplate we presume that mr. Martin's reluctance to contemplate the thought of farm prices rising in ratio to industrial goods was undoubtedly because this would result in an increase in the average wholesale prices index and a decline in the value of the dollar before this same congressional committee the same question was put to Oris Wells the top us be economists of that day the question was the stable prices between 1951 and 56 in other words were at the cost of the farmers mr. wells replied certainly if we had not had falling farm prices the price level would not have been stable this was rather surprising to many people of the day to think that the top administrative people in the United States would admit that there was some kind of a program to stabilize farm prices at a low level later on before the house banking currency committee chairman Martin of the Federal Reserve Bank made this statement and I quote the great shame to me was that we kept stability in the dollar from 1953 to the early part of 1956 by a decline in farm prices which was being offset by a rise in manufacture goods he went on to say in other words the stability was not balanced it was farm products going down and manufactured products going up and the net result being stability now I submit that this is deliberate debauchery of agriculture Vince I'm impressed by your analysis of the agricultural situation but maybe your statement of being a deliberate debauchery may be a little strong I know you can defend it but I think it was also a matter of our whole agricultural politics involved in significant date in our agricultural history or vicaroo life history in 1908 when President Roosevelt the Teddy Roosevelt appointed the first rural life commission and ever since that commission we've had programs to make agriculture more productive was this the granddaddy of all of our government agriculture programs Dr. now this came any good things name any good programs but the emphasis has repeatedly continued to be on production from production and now imagine this has resulted probably in some kind of a manipulative program to keep the farm programs down but I think we need to keep in mind that this was a policy and a policy that we as American citizens call for I think it's time to take a honest look at this and began to see whether the answer does not like it's in production but perhaps in other areas of better marketing in this light I agree with you doctor I think that's absolutely right but it was during the twenties when many great men of that day proposed farm programs that were later adopted in the 1930s which did work and did enhance farm prices and did maintain a hundred percent of parity from 1946 to 1952 but these same programs and presumably programs that have been improved upon have resulted in an average decline in farm prices from that day to this day and an absolutely static net farm income at a time and the rest of the economy was achieving all-time new highs of income and profit so I don't say the programs are bad I say the administration at different times for different reasons but if administration's political ministrations have served different purposes and in recent years and I can say this and I think prove it that since 1951 the policies of government have been for a declining price level in agricultural product products so that the prices go down a little each year now you can't have prosperity in an economy with a declining price level when all other sectors of the economy have a rising price level and this is a problem today could see they thought it was to make that up by being more efficient production listening is a fallacy so I agree with your facts yes okay well now we've talked about the economic deficiencies and certainly they're evident and have been evident in the past let's get into your area Dr. Mueller sociologically and spiritually in your opinion what have been the deficiencies of rural America well I think our deficiencies sociologically entire very closely tied in with this agricultural analysis that Vince has given us we have made agriculture more productive and we have substituted capital for people for example when a man buys a seven bottom plow he's substituting capital for people this makes agriculture more efficient economically but it means less people on the land it means less schools and less churches so this has resulted in an out migration of people and another thing this is bad but this is a fact that through our advanced and effective technological innovation we have in a very large degree substituted capital for people and this has made us made the efficient agricultural machine for example one worked real hard to get REA to the rural areas yeah that was good never tease for this but immediately when the farmers had electricity the farm they began using electrical motors and electrical motors began to replace replace youth and so youth was leaving to go to the cities to make electric motors now this resulted in a tremendous out migration of the rural areas I think in the last 25 years for example we've had net migration of about nine million people that's an immigration like we had to Europe America it's very serious I think we were using figures two or three weeks ago at the present time about twenty five hundred farmers per week are leaving the farm you see ended and this leaves the people that left behind with obsolete structures we're concerned about the people leaving and rightly so but the people left behind had the same number of school districts that's a number a political districts the mineral-rich churches and often we well that can be proved proven that in some areas where we have the most churches per capita we also have the most uncertain that's very interesting because of no one is because the units are large enough yes and this has left the people with a real problem of making adjustment and this they need a lot of help I mean I need educational help to be able to know what kind of structure do we need to fit the new situation the out-migration problem has left the people with real problems of adjustment they need to think in terms of new social structures and for this they need a good deal of help I would say educational help in order to know what the alternatives are and what real new structure they need to adequately meet the needs under the present situation Dr. Miller has said is vital to the survival of the rural areas and the viable rural cities but it's quite commonly understood that the out migration of people hasn't cut the costs of doing business because the people have been replaced by technology and in this case the technology costs as much as the people did so the idea that as the people migrate out of agriculture we can curtail the income to agriculture is a mistake it doesn't make it a difference actually if we finally get to the place where there's a 100,000 farm operations this 100 thousand will have to earn a proportionate share of the total national income and that present-day standards it would have to be twice as much gross and at least three times as much net in order to do it's double duty in the economy number one provide the income the farmer operator and number two provide the raw material income or the new wealth that's necessary to sustain not only the farm economy but is the limiting factor on all the new constructions in our nation in any given year now this is [unclear] contrary to commonly accepted economic concepts that the money is created by bank loans this were true we would never have any problem because as long as we could loan money we would have prosperity but the truth remains that our economy is slowly drying up the liquidity of our banks is that being eroded away annually at a long-term rate which is becoming almost dangerous at the present time Dr. Mueller you commented to mr. Rossiter and me a little while ago before we went on the air that you feel that rural America is on the defensive I'd like for you to qualify that statement if you will I would say the real American offensive make that statement because rural people tend to want to keep things as they are they like the status quo yes and because they've been losing a school and then losing a church they've been losing a store and they're they're constantly on there giving in mm-hmm and this tends to make them defensive to try to protect what they have I think this probably the wrong strategy I think rural people need to get off the defensive and get on the offensive but to do this they need the conceptual tools for this and they also need to have an idea of what rural America is going to be like in order that they can begin to regroup their forces and began to initiate such programs that will move them in the direction of making rural America would like it to be when I research as a matter of regrouping our forces I mean to include more than the farm people I think as part of the agriculture problem is concerned this the farmers themselves have to solve but they need the support of the other citizens that make up the larger community and perhaps the term rural is no longer useful term we somehow need to get rid of that dichotomy between rural and urban and we people who live in a small town of 500 sometimes think that urban and not rural it's really one piece if you already take the news the situation as it is today you probably find the life polarized around a major city and that people live in many different types of communities they have their convenient shopping center their partial shopping centers a complete shopping center and their wholesale retail centers now this is one web of human activity not the people in this larger community which is off multi-county could could regroup their forces and begin to work together and encourage the farmer to solve his problem be supportive of what he's trying to do and then the farmers in turn be taken interest in the economy of the town the local bank local store then we could move in the direction of beginning to build a new type of rural America that wasn't like the past but something that's quite different it has a new image that promises more future doctor in our so-called farm group do you feel there is a deficiency in what we might call human loyalties I think sometimes it's an overemphasis of the concern for the right of the individual and not enough concern for the interests of the group mm-hmm and we need to have a balance between self-interest and group interest then I think we got to keep in mind that not all people had the same capability we say a lot about the fact that all people are created equal and this in a sense is true but this means that all people have the same worth in the eyes of God but doesn't mean that all people have the same capability and the fact is that some people are strong and some people are weak now is they too often we have the strong exploiting the weak and this to my mind is contrary to our Christian values and I think the Christian values teach that the strong ought to help the weak find fulfillment that doesn't mean paternalism but rather to create opportunities that the those that are weaker also can share in the productive economy and help produce part of this world's need that's an interesting comment because I've I've detected that this philosophy of the strong exploiting the weak is the basic economic philosophy of supply and demand and this has been my contention all along that unless we can get away from this basic philosophy that only the large and the great and the powerful survive and we're going to destroy agriculture as we know it today as a matter of fact if the present crop of older farmer dies off and the young cop doesn't come on we're going to be in trouble in this nation in just a few years but I think the point that the doctor makes is is important I've felt in our area and had we 15 years ago been concerned about the little communities around us our county seat towns losing their resources and their services that we might have been a stronger community today ourselves so as a consequence and this spreads out then to the the farm operator who is fundamentally the source of wealth and in the whole community yes and unless the people of the communities and even the large agrarian cities such as Omaha and Sioux City and even Chicago recognize that they are the recipient of the income that's created in the rural areas by multiplying the price of a farm product by the number of units produced and that's the income that comes into this economy and eventually winds up in the metropolitan areas and to other areas economy first has to be created on the farm by the farmer and he is the first recipient it's comparable to a wage income in a metropolitan area only to the rural area this is our industry agriculture and if the farmer doesn't create an adequate income at an adequate price level then we go down the drain and this is what's happening to rural America and it hasn't been until the the progressive policies of the national farmers organization have been evidenced that there's been any effort in anybody's part to adopt or adapt these agricultural economy and to a marketing economy rather than an exclusively a production economy so it is true that we must be strong entities in the rural areas must help the weak entities in order for the strong to survive and not for the weak Dr. Mueller just a moment ago we were talking about a deficiency of human loyalties in the farming communities I called it a deficiency and you said you felt rather it was misplaced loyalty pointing out that individuals more more interested in themselves individually than in the group and then you took exception for that and I'm wondering if if anything has evolved of late to rectify this situation well I think the effort to organize farmers is an effort in that direction for example the NFO now I would say the NFO to be real successful will need to be able to get across to people that they need to balance their self-interest with group interest but too often however when they think in terms of short-term gain and the short-term gains conflict with the losses that they have as a group they will desert the group now this will be the test and therefore when I talk to any poor people and address an entire audience I seek to make it plain to them that it is their responsibility if they believe in the organization to stick with it and to balance their self-interest with their group interest because in the long run the self-interest will also win because we need both this is the key we can't get along with self-interest we can't get along with group principle we need both Ludwig Erhart I mean he caught a significant figure in history when he became Chancellor of Germany he was talking to the labor groups and he said we need increase gross we need the organization to speak up for different interest groups but he's any added however an interest group must remember that is not the nation and therefore is the larger group so we need to be interested in individual farm but the individual farm must be recognized it is not the egg culture industry and we're concerned about the well-being of the agricultural industry will concern about the well-being of the total agriculture community let's talk just for a moment mr. Rossiter about the position of the banker like yourself in the rural community and your status quo in terms of money and banking what's the most serious problem the average farmers facing today well I think perhaps the most serious problem is the price problem but aside from that in his effort to increase his efficiency and to accomplish more with the same amount of manpower he's been investing substantial amounts of money in new equipment such as silos and feeding setups and things of this nature well these things cost money is I pointed out before so in order to pay for them he asked to increase his operations well in a period of rising capital costs this is extremely painful and of course this is what we've been having experiencing this last year so today with the rising capital requirements and rising capital costs coupled with the stable and declining farm prices with inflation inflation entering into the picture - it's it's an almost impossible situation which is effectively squeezing the the people and the financial assets out of agriculture at a very rapid rate yes you've commented earlier about the difference two or three years ago and what you considered in your bank a large borrower a substantial borrower as compared to the same today would you tell our viewers about that I'm thinking of the same individuals as a matter of fact that prompted the previous comment in these cases a loan of 25 to 30 thousand dollars three or four years ago is considered a substantial loan today in one individual that I have in mind is borrowing eighty two thousand dollars and another one down the road not too far away over a hundred thousand dollars now there are capital requirements not ball being covered by their bank loans about additional money in other areas for the capital improvements they made on their farms that required this additional investment in banking across the country mr. Rossiter our loans exceeding deposits loans and do not exceed deposits but they're growing at a faster rate than deposits I've been growing at a faster rate of deposit since 1945 the only interruption to this trend was in 1966 at the at the end of the money cruncher at the point of the money crunch at that time and in the last year it has exceeded the annual rate from forty five to nineteen sixty seven three times so there's been a tremendous expansion of credit in religion and ratio to deposits or loans and race of deposits now this ultimately obviously means that the money will run out one day and of course this refutes the Orthodox economic concept that the bankers create money in making loans this isn't working out this isn't going to function the money is created in the price level in the profit and the profit earned on raw materials and this is the source of wealth and we have effectively curtailed both the production and the price on the raw materials produced on farms for the last 18 or 20 years but the consequence that we're not creating the new wealth to continue the operation of the economy on any basis mm-hmm let alone on a cash pay as you go day to day proposition that we could have with honest farm prices I want to thank you very much and you too doctor for being my guests today on US farm report and I'll be looking forward to our continuing this discussion next week thank you my guests today have been on my right mr. Vince Rossiter president of the Bank of Hartington in Hartington Nebraska and one of America's outstanding agricultural clergymen Dr. E. W. Muller we have concerned ourselves today with agricultural America past and present next week on our program we will show you some of the effects of the exodus from the farms as it is seen in the small farming communities and we will concern ourselves with the future of agricultural America until next week then so long everybody [music]