Larry D. Sanders AGEC 4990: Spring 2002

1. 13. Ethical Issues in Saving the Family Farm Larry D. Sanders AGEC 4990: Spring 2002 Dept. of Ag Economics Oklahoma State University

2. Farming: The more it changes, the more it remains the same? “At the end of World War I most farm families lived on unimproved dirt roads; farmed and went to town with horses and horse-drawn equipment obtained their news from weekly newspapers, and used kerosene lights when the sun went down. Few farm dwellings had central heating or flush toilets. Few farm boys were attending high schools. Farm incomes and farm land values had been rising almost steadily since 1900. Many people thought we were approaching a farm land shortage similar to that experienced in western European countries, which would make farm ownership more and more difficult for succeeding generations. “. . . Though substantial progress has been recorded in farm families’ standard of living and in the legislation designed to improve and stabilize their incomes, the basic problems remain unresolved. . . .” --Wilcox, W., 1947 (p. 388, p. 398)

3. Farming Trends Seem to Turn “Free Market” on its Ear “This nation has long pursued the ideal of a farm sector populated with privately operated ‘family farms,’ as opposed to corporate farms or large public units. Have today’s farms become so large that they can no longer be considered ‘family farms’? Have they evolved into corporate-line business organizations which threaten to weaken productive efficiency as well as contribute to an unacceptable distribution of income?” “. . . The use of formal coordination devices such as these [contractual agreements & vertical integration] arose out of a felt need by the private sector to minimize risk to both producer and processor. The proliferation of these devices, however, is accompanied by new concerns about the adequacy of fairness of contract terms, concerns about the adjudication of contract disputes, and consequences of the resulting ‘thinness’ of any still remaining open markets.” --Milton C. Hallberg & Dennis Henderson, 1994 (p. 55, p. 66).

4. Farm Trends Certain? “Farms in the United States are becoming fewer in number and larger in size as farm operators take advantage of new technologies to achieve additional size economies and become more specialized. This trend will likely continue into the foreseeable future as technological developments continue and as management levels improve.” --Hallberg & Henderson, 1994 (p. 71).

5. Status of Ag Economy: 2002 • Many farms continue to be in poor economic health • Farms are more dependent on government aid • There are increases in small farms & large farms

6. Status of Ag Economy (continued) • Agriculture is becoming more concentrated • With more flexibility in govt. programs, there is less flexibility from contract agriculture & biotech • Farmers are “aging”

7. Status of Ag Economy (continued) • Average Farm Household & Nonfarm Household Income now comparable (farm income accounts for 12%) • Most farms are marginally profitable or unprofitable, but most income comes from off the farm

8. Status of Ag Economy (continued) • 10-15% farms produce 80-85% farm sales & are “profitable” on average (8% farms account for 72% of production) • Top 10% farms received 63% of govt. payments in 2000

9. Net Farm Income &Government Payments NAFTA WTO $ Billion 1996 Farm Act

10. Net Farm Income &Government Payments (cont) Average ($ bil/year) 1991-95 1996-016-yr trnd Net farm income 43.4 47.7 steady Govt. payments 9.2 15.3 up NFI - G 34.2 32.5 down Govt. portion of NFI 21% 32% up Note: updated 1 Mar 02

11. INDUSTRIALIZATION OF AGRICULTURE • Transformation from “Way of Life” to a Business • Production Scale Economies • Marketing Scale Economies • Venture Capital • Market Needs Drive Industrialization thru Search for Efficiency Gains Along Marketing Chain • Integration is the Organizational Mechanism

12. Farming: “A way of life” or “A way to make a living”? “America is of two minds about agriculture. One submits to the creed of farm fundamentalism, emphasizing belief in the primacy of agriculture and the family farm. The other submits to the creed of democratic capitalism, emphasizing belief in the primacy of free enterprise and authority of the people at large expressed through the political system. . . .” “. . . Although the two creeds sharply conflict, both are widely held, often by the same person. This results in a kind of individual and national schizophrenia regarding how farmers shoulod be treated by government. . . .” --Luther Tweeten, 1989 (p. 73; p. 82).

13. Farm Fundamentalism(adapted from Tweeten) • Agriculture is the most basic occupation. • Agriculture must prosper for nation to prosper. • Farmers are better citizens, have higher morals, & are more committed to traditional American values. • The family farm must be preserved because it’s a vital part of our heritage. • Farming is a way of life. • The land should be owned by the person tilling it. • Anyone who wants to farm should be free to do so. • A farmer should be his own boss. • The family farm is the ideal nuclear family unit.

14. Family Farms as the Ideal • Maintains healthy rural economy • Maintains strong moral rural base for nation • Avoids rural economic malaise and pressure on urban areas • Food production in caring hands • Land stewardship in caring hands

15. Democratic Capitalism(adapted from Tweeten) • Farming is a business. • Free market is the most efficient way to allocate resources, & decide the size/role of farm sector. • Family farm survival is dependent upon the market, & may be replaced. • Government should not interfere except to maintain fair play in market. • Reward comes from level of proficiency. • All persons are of equal intrinsic value. • Concentration of power destroys individual freedom. • Property rights are inviolable.

16. Farming as a Business Ideal • Resources allocated to most efficient uses • Inefficient resources reallocated to improve economy • Improves likelihood to achieve/maintain competitive advantage in global economy • Could reduce need for government support • More efficient farm economy should lead to more food at cheaper prices

17. The Real Question: Not whether to save the family farm, but how do farm families adjust to change? “. . . farmers are facing a situation common in the American past: adjustment, in circumstances beyond their control, of a rural population to the realities of a changing economy. The migration of country people to other occupations and localities and the surrender to a new way of life that substitutes for the rhythms of nature the timetables of shop and factory are major themes of social history. The situation of the modern farm family, forced to sacrifice the farm which is home, livelihood and legacy to their children, is symptomatic of a continuous adjustmenht of farming since the time the land was first settled. --Mark Friedberger, p. 1, 1988.

18. Ethical Dimensions of “Family Farms” (TMR) “It is harder to see why anyone should take the family farm issue seriously, that is, why it should be part of a rational argument intended to sway disinterested parties toward sympathy with the integrated producers’ point of view. . . .family farm arguments are irrational, founded on nostalgia and emotion. . . . But there is no good reason for policies to save the family farm. . . . Little more than a cloak for interest group politics. . . . There is no ethical content to the notion of the family farm. . . . “This conclusion is hasty, however, for it ignores the arguments that have been given to support a policy goal of preserving the family farm. . . .” --TMR, pp. 241-2.

19. Ethical Dimensions of “Family Farms” (TMR) • No intrinsic connection between farm size & family ownership • Bonnen & Browne: family farm is agrarian myth & muddles public policy discussion • Libertarians: government can’t intervene w/o violating noninterference rights • Utilitarians stress “farm size” (structure) as key in public policy • Govt. involvement judged on consequences (B>C?) • Some add nonmarket values such as aesthetic, historic, symbolic value • Agrarian views (populists & traditionalists) stress “family farm” as key in public policy

20. Ethical Dimensions of “Family Farms” (TMR) • Agrarian Populism • Jeffersonian agrarianism • Breimyer & Hightower: Egalitarian view of opportunity rights as essential • Breimyer stresses the interests of the poor and weak over the interests of property & efficiency • Hightower: ag & family farm ensure legitimacy of American political system; a moral & political imperative to maintain this component of economy to counter corporate middlemen & suppliers • “Right to farm” essential to liberty

21. Ethical Dimensions of “Family Farms” (TMR) • Agrarian Traditionalism • Emerson & Berry • Loyalty & character as aspects of personal morality • Personal loyalties embedded in a web of concrete social relations that establish that social structure & individual role are codetermined • Social morality becomes fixed by the web of relationships in the form of “community” & small, low-tech farms preserve work habits that build strong moral character & bind farm families into a close-knit community

22. Ethical Dimensions of “Family Farms” (TMR) • Agrarian Traditionalism (continued) • Family farming places a way of life within the socio-cultural setting and social interdependence, rather than economic gain as the end that justifies the means • Meaning is derived from work, nature & community, rather than achieving economic success • Does not accept enlightened self-interest & the social contract as acceptable basis for agricultural ethics

23. Issues • Definitional • Structural • Economic • Political • Ethical

24. A Curious Twist (2001+)? • Farmers & farm groups who previously called for less government regulation, less supply control, less government support, & more free market have shifted to calls for more government support to assure free market & survival of family farm • Farmers who continue to call for more government intervention (financial support & supply control) to save family farm are out of political favor

25. Competition,“creative destruction” & the protective response • “Destructive gales” of competition (Schumpeter) lead to the protective response from public & private sectors (Polanyi) • Private sector protective response: • concentration/consolidation/contracting • externalizing costs • unionization/cooperation • Rent seeking • Public sector protective response: • redefining “public good” • regulation/taxation/tax breaks/ protection/ subsidies • education

26. Public Alternatives & Consequences • Simple choice: • Regulate the market or, it will regulate us • Difficult process: • Who decides? • How fast to let change occur? • Whether & how to compensate “losers”? • Self-regulating market cannot sustain itself & remain “free” • Ethics is inherent in this process, whether conscious or unconscious, planned or unplanned

27. References Friedberger, M. Farm Families & Change in 20th Century America, The University of Kentucky Press, 1988. Hallberg, M. & D. Henderson, “Structure of Food and Agricultural Sector”, Food, Agriculture, and Rural Policy into the Twenty-First Century: Issues and Trade-offs, M.C. Hallberg, R. G. Spitze, & D. Ray, editors, Westview Press, 1994. Sanders—various professional presentations & writings TMR Tweeten, L. Farm Policy Analysis, Westview Press, Inc. Boulder, 1989. Wilcox, W. The Farmer in the Second World War, The Iowa State College Press, Ames, 1947.