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The farm financial crisis
308
Book Reviews
transform the living standards destroying the en~ronment.
of the
poor
JONATHON Friends
of the
without
PORRIT
Earth, U.K.
The Farm Financial Crisis, S.H. Murdock and F.L. Leistritz (eds), 205 pp., 1988, Westview Press, Boulder, CO, $32.50 pb
This book is the latest in the recent spate of publications about the Farm Crisis in America. In many ways, however, it is also one of the least satisfactory. The strength of the book lies in the abundance of tables and statistics which illustrate how one-fifth of the nation’s farmers fell into financial stress in the early 1980s. The weakness is that while farm financial stress remains a problem for a significant minority of farmers, a huge infusion of federal money has beefed up the farm sector since 1985. In Chapter 1, the authors competently explain how, in the 197Os, farmers were encouraged to expand their operations by high grain prices, inflating land values, eager bank managers and farm economists. But when the Federal Reserve Board pushed interest rates to historic highs in the early 1980s farmers with hefty debts were trapped and thousands of farm bankruptcies ensued. The higher interest rates propelled the U.S. dollar sharply upward against foreign currencies; this in turn dampened foreign demand for American farm exports (especially maize, soyabeans and wheat). Crop prices plunged as surpluses mounted, and farmland values sank by up to 50% in the export-dependent corn and wheat belts of the Midwest. Chapter 2 puts the Farm Crisis into a historical setting, with an emphasis on the growing dual structure of a few large farms and many small farms with medium-sized farms being squeezed out. Chapter 3, on rural demographics, is too generalized to wnnect how the Farm Crisis will affect rural communities throughout the United States. The authors seek to make a case of the importance of farming in rural areas, but do not recognize that farming employs less than 10% of the rural labor force. Clearly, communities in counties where farming provides 20% or more of total income (farm-dependent counties) are vulnerable; but these counties make up only one-sixth of all rural counties and contain only 4 million people. Chapter 4 contains a useful description of the terms involved in analyzing financial stress, and Chapter 5 contains an interesting discussion of farmers’ responses to financial stress. Chapter 6 is a case study of farm stress and community impacts in North Dakota; this is really a journal article rather than a book chapter. In Chapter 7, the authors make some heroic assumptions about farm failure in farm-dependent counties in the next few years, while making no mention of the role of federal farm programs. Chapter 8 offers a research agenda on farm stress and concludes with a call for a longitudinal study of the Farm Crisis; indeed, the scope and time frame of this book are too narrow and brief. The Farm Financial Crisis has three serious flaws. First, the analysis of the Farm Crisis ends in 1985, which was certainly the darkest year in U.S. agriculture since the
Great Depression. Since 1985, the federal govemment has pumped $68 billion into the farm sector, farm debt has been reduced by some $40 billion, and farm income has touched record levels (see Drabenstott and Barkema, 1987). Second, the authors omit any detailed discussion of federal farm programs and how those programs have helped ease the financial crunch, or how they could be tailored to help specific farmers. For example, in fiscal years 1986 and 1987, the Commodity Credit Corporation doled out a total of $49 billion in non-recourse loans (basically loans farmers can keep in exchange for their crops). Proposals have been made in Congress to ‘de-couple’ farm deficiency payments (the difference between a target price and the market price for certain major commodities) from volume of production; in essence, de-coupling would pay mediumsized family farmers whether they plant a crop or not. Third, the authors do not make a convincing argument as to why it is important to rescue farmers in financial stress. They cite the economic and social decline of rural communities, but they fail to see the other side of the story: when rural economies falter, rural dwellers migrate to urban areas, and America’s cities have all the problems they can handle right now. A rural exodus has caused severe urban problems in Third World countries and similar problems on a smaller scale could occur in America, too. Moreover, the loss of one-fifth of America’s farms probably would not result in any domestic food shortages, unless the drought of 1988 recurs in the next few years. The largest single category of farms under financial stress are cash grain operations which depend on exports. The writing in The Farm Financial Crisis is academic in tone and style. Many sentences are excessively long and the authors employ too much passive voice. A minor problem is that none of the authors is identified, other than the two author/editors, one a,rural sociologist and the other an agricultural economist. But at $32.50 for barely 200 pages, this paperback is hardly a bargain. Chapters 1, 2, 4 and 5 are useful as background reading on the Farm Crisis, and the list of references is good. But four chapters do not make a book. References Drabenstott, M. and Barkema, A. (1987) U.S. Agriculture on the mend. Federal Reserve Bank of Kansas City Economic
Review 72 (12), 28-41.
THOMAS
L. DANIELS
Kansas State University, U.S.A.
The Peasant Betrayed: Agriculture and Land Reform in the Third World, J.P. Powelson and R. Stock (eds), ix + 302 pp., 1987, Oelgeschlager, Gunn & Hain in association with the Lincoln Institute of Land Policy, Boston, MA, U.S.$40.00
Land reforms in the Third World are generally perceived as powerful tools for equitable distribution of national resources. Co-editors John Powelson and Richard Stock, however, argue that land reforms have mostly failed to upgrade the welfare of peasants and small farmers.
Book Reviews
transform the living standards destroying the en~ronment.
of the
poor
JONATHON Friends
of the
without
PORRIT
Earth, U.K.
The Farm Financial Crisis, S.H. Murdock and F.L. Leistritz (eds), 205 pp., 1988, Westview Press, Boulder, CO, $32.50 pb
This book is the latest in the recent spate of publications about the Farm Crisis in America. In many ways, however, it is also one of the least satisfactory. The strength of the book lies in the abundance of tables and statistics which illustrate how one-fifth of the nation’s farmers fell into financial stress in the early 1980s. The weakness is that while farm financial stress remains a problem for a significant minority of farmers, a huge infusion of federal money has beefed up the farm sector since 1985. In Chapter 1, the authors competently explain how, in the 197Os, farmers were encouraged to expand their operations by high grain prices, inflating land values, eager bank managers and farm economists. But when the Federal Reserve Board pushed interest rates to historic highs in the early 1980s farmers with hefty debts were trapped and thousands of farm bankruptcies ensued. The higher interest rates propelled the U.S. dollar sharply upward against foreign currencies; this in turn dampened foreign demand for American farm exports (especially maize, soyabeans and wheat). Crop prices plunged as surpluses mounted, and farmland values sank by up to 50% in the export-dependent corn and wheat belts of the Midwest. Chapter 2 puts the Farm Crisis into a historical setting, with an emphasis on the growing dual structure of a few large farms and many small farms with medium-sized farms being squeezed out. Chapter 3, on rural demographics, is too generalized to wnnect how the Farm Crisis will affect rural communities throughout the United States. The authors seek to make a case of the importance of farming in rural areas, but do not recognize that farming employs less than 10% of the rural labor force. Clearly, communities in counties where farming provides 20% or more of total income (farm-dependent counties) are vulnerable; but these counties make up only one-sixth of all rural counties and contain only 4 million people. Chapter 4 contains a useful description of the terms involved in analyzing financial stress, and Chapter 5 contains an interesting discussion of farmers’ responses to financial stress. Chapter 6 is a case study of farm stress and community impacts in North Dakota; this is really a journal article rather than a book chapter. In Chapter 7, the authors make some heroic assumptions about farm failure in farm-dependent counties in the next few years, while making no mention of the role of federal farm programs. Chapter 8 offers a research agenda on farm stress and concludes with a call for a longitudinal study of the Farm Crisis; indeed, the scope and time frame of this book are too narrow and brief. The Farm Financial Crisis has three serious flaws. First, the analysis of the Farm Crisis ends in 1985, which was certainly the darkest year in U.S. agriculture since the
Great Depression. Since 1985, the federal govemment has pumped $68 billion into the farm sector, farm debt has been reduced by some $40 billion, and farm income has touched record levels (see Drabenstott and Barkema, 1987). Second, the authors omit any detailed discussion of federal farm programs and how those programs have helped ease the financial crunch, or how they could be tailored to help specific farmers. For example, in fiscal years 1986 and 1987, the Commodity Credit Corporation doled out a total of $49 billion in non-recourse loans (basically loans farmers can keep in exchange for their crops). Proposals have been made in Congress to ‘de-couple’ farm deficiency payments (the difference between a target price and the market price for certain major commodities) from volume of production; in essence, de-coupling would pay mediumsized family farmers whether they plant a crop or not. Third, the authors do not make a convincing argument as to why it is important to rescue farmers in financial stress. They cite the economic and social decline of rural communities, but they fail to see the other side of the story: when rural economies falter, rural dwellers migrate to urban areas, and America’s cities have all the problems they can handle right now. A rural exodus has caused severe urban problems in Third World countries and similar problems on a smaller scale could occur in America, too. Moreover, the loss of one-fifth of America’s farms probably would not result in any domestic food shortages, unless the drought of 1988 recurs in the next few years. The largest single category of farms under financial stress are cash grain operations which depend on exports. The writing in The Farm Financial Crisis is academic in tone and style. Many sentences are excessively long and the authors employ too much passive voice. A minor problem is that none of the authors is identified, other than the two author/editors, one a,rural sociologist and the other an agricultural economist. But at $32.50 for barely 200 pages, this paperback is hardly a bargain. Chapters 1, 2, 4 and 5 are useful as background reading on the Farm Crisis, and the list of references is good. But four chapters do not make a book. References Drabenstott, M. and Barkema, A. (1987) U.S. Agriculture on the mend. Federal Reserve Bank of Kansas City Economic
Review 72 (12), 28-41.
THOMAS
L. DANIELS
Kansas State University, U.S.A.
The Peasant Betrayed: Agriculture and Land Reform in the Third World, J.P. Powelson and R. Stock (eds), ix + 302 pp., 1987, Oelgeschlager, Gunn & Hain in association with the Lincoln Institute of Land Policy, Boston, MA, U.S.$40.00
Land reforms in the Third World are generally perceived as powerful tools for equitable distribution of national resources. Co-editors John Powelson and Richard Stock, however, argue that land reforms have mostly failed to upgrade the welfare of peasants and small farmers.