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That the industry of agriculture must be considered as to its investment, labor, and income, to be on a parity with other industrial enterprises, to insure a reasonable degree of economic stability in this Nation.
That there will be no return to prosperity for all classes and kinds of people, or for all classes and kinds of business, nor real security for our banks, insurance companies, and other institutions of vital importance to society, until the stabilization of agricultural values and agricultural income is definitely and positively provided for in our economic system,
That the continuation of the present profound disturbance in our economic structure is due primarily to the disparity between relative prices of farm commodities, representing farm income, compared with prices of other commodities, which has resulted in practical bankruptcy for agriculture, our chief industry, with consequent impairment of value and income throughout the Nation.
The constitutionality of this plan being unquestioned it is possible of immediate execution under the present Agricultural Marketing Act without further action of Congress.
The Clair plan is a just, direct, practical, and legal means for insuring agricultural stabilization and may be summarized as follows:
1. Contends that the restoration of prosperity in this country is dependent upon domestic trade and domestic conditions.
2. Provides for yearly determination of a reasonable minimum price to the producer for the raw clothing and food crops necessary for United States consumption.
3. Provides for yearly determination of prorate for United States consumption against total production of each of these crops, on which quantity prorated for domestic consumption, no less than the established minimum price shall be paid according to law.
4. Provides for a Federal marketing control without governmental subsidies or credits through the agency of the United States Post Office, which is positive in its method of control, lends itself to any form of buying, selling, and crop credit procedure and does not entail additional public expense.
5. Provides that the marketing methods proposed will be made compulsory by law, to be executed under the present Agricultural Marketing Act.
6. Provides for tariff protection of the American minimum price.
7. Provides for taking the United States Government out of the business of trading in agricultural products, and restores the business of handling these commodities to the normal channels of trade.
8. States that there should be no governmental restriction of production of these crops in this country. Incentive to voluntary reduction in production is provided to those accepting.
9. Provides that surplus production of these basic agricultural commodities, over the national domestic prorate, shall be impounded on the farm unless sold for export.
10. Establishes economic equalization and stabilization between basic agriculture and other industries.
I. RESTORATION OF PROSPERITY DEPENDS UPON DOMESTIC TRADE AND
DOMESTIC CONDITIONS There are over 2 billion people in the world today. There are $10,800,000,000 of gold in the world. This country has about 125 million people and these people of the United States own nearly one half of the gold supply of the entire world. Obviously, we have enough gold in this country to facilitate trade and
The foreign nations of the world owe this country approximately 2772 billion dollars. There is not enough gold in the whole world to pay even half of this enormous debt. But it will be argued that this debt will be repaid by goods in kind. In what kind? We do not need their automobiles. We produce better and cheaper ones at home. We do not need their manufactured products. Our own factories are either closed down or running part time, with millions of our workers unemployed. We do not need their basic agricultural products. Only rubber, coffee, tea, and tin remain as important items that this country will need to import.
The money that we have loaned the various nations of the world came out of our capital surplus. This was not our real wealth but was the income or the production from our wealth. We still have our fertile lands, our marvelously equipped factories and railroads, our industrious, intelligent people, our leasers of commerce and industry, our incomparable crops of scientists and engineers;
we have as many people to feed and clothe as ever before and as many hands to produce the wherewithal to this end, together with the necessary raw materials for this purpose.
It is time we realized that world conditions have nothing to do with the major part of our own plight. We should face the conditions intrinsic in our own country; examine into the domestic trade balance between agriculture and industry, and find out what is wrong. There is available the greatest trade balance that is possible for us to find anywhere in the world, right within the borders of our own country. Exports at our peak never amounted to more than 10 percent of our total trade and, moreover, we have not lost all of our foreign business during this depression.
Let us state further that there are those, both in this country and abroad, who contend that the inflated and subsequently unstable conditions in the United States greatly contributed toward upsetting the world's economic condition; and that there will be no real world recovery until this country is again in a sound and prosperous condition.
It should be apparent that there is an internal cause of maladjustment within our own economic domestic equation, responsible for the appalling decline that has come upon this Nation's finance, manufacture, and agriculture.
“Where has the money gone?” The answer is, no money has gone from our country. In 1919, the total annual farm wealth was $17,000,000,000. Since that time there has been a steady decrease in farm wealth. In 1929, the total of our farm wealth was approximately $12,000,000,000. In 1931, this total was only $7,000,000,000. For 1932, the farmer's wealth promises to be the lowest on record for several decades (estimated at less than $5,000,000,000).
This decrease in farm wealth has not been due to lack of production, but for the most part to the unwarranted decline in the value of these products to a fraction of what they should be bringing. Consequently, billions of dollars of buying power, represented by produce on hand, warehouse receipts, bank credits or actual cash, has been unjustly wiped out and disastrously so to society. The significance of the loss of these billions of dollars of farm value and wealth can only be appreciated by considering that they must be multiplied several times over in the turnover in the annual trade of the Nation; thus creating additional billions of annual wealth in the form of clothing, machinery, luxuries, and everything else that the farmer and the city working man should be using in a common and constant manner and exchanging between themselves in the ordinary course of trade. We do not know the potential possibilities of production and exchange of all commodities in this Nation.
Considering our peak unit production and consumption as an index of 100 percent, and without attempting to be too exact, all surveys of our raw materials and manufacturing sources have indicated that our potential production is probably around 130 percent or 140 percent. It is generally agreed that our total production and consumption is 50 percent below our peak; thus we have an index of 50 percent on actual production and consumption as against a potential of 130 percent to 140 percent production; which total production we could use in society if we could find an equitable method of distributing our income from our annual created wealth. This problem can be solved at least in a very large degree by two simple economic principles that can be applied
We saw the first sign of maladjustment between production and consumption assert itself in 1914. The war saved us. Then again in 1920 the same phenomenon developed. During these years of housing expansion, industrial expansion, including the tremendous expansion of the automobile industry, and the development of installment buying, the tremendous expansion in the moving picture industry, the radio, foreign loans and resultant foreign buying; plus a hectic exaggerated speculative buying and spending era postponed the final expression of this problem economically until 1929 when the crash came, and the rude awakening that followed as to how much we knew that wasn't so.
During this entire time the farmer-industry's largest and best customerwas forgotten and his plight has grown worse and worse until this day of economic reckoning.
In 1920 we established the Federal land banks, which permitted the farmer to go more and more in debt, without any means afforded for paying these debts.
Finally, beginning with 1930 the prices on agricultural products began & precipitous decline. This was due largely to the surplus in these commodities. In industrial production we can control surpluses to a great extent, but in agriculture our surplus acted as dynamite to drive our agricultural prices down to world levels in total disregard of ühe fact that our price structure in all other phases of our economic field was being maintained on the gold standard.
The market price of securities is dependent upon their income. These securities are not the wealth of the Nation, but are only evidence of ownership. Lands, buildings, factories, and mines are worth just as much as the income derived from them through the annual created wealth of these assets and no more. In the case of the annual created wealth of agriculture, which is probably the most basic of our economic factors, we permitted agricultural prices to sink to such low levels that we destroyed the rightful relative money value of this part of our annual created wealth.
Thus, it will be seen that the whole of our economic well-being depends upon our annual created wealth and its interchange and use in society at a sound valuation. But this significant fact stands out: The beginning of this exchange of the annual created wealth of the Nation lies primarily with the farmer, who produces the agricultural crops from the ground, and the working man who produces the industrial crop from the factory. If these folks haven't money or credit based on honest value of the human effort they have made (or are willing to make), enabling them to create their share of annual wealth, we wreck the whole economic structure.
There is no necessity to create and circulate fiat money in this country, nor a need of any other form of inflation to restore prosperity. It is only necessary that we take our annually created agricultural wealth, establish it on legitimate and just price levels, based on American standards, and the problem of purchase money or credit available for trade will disappear.
Give cotton, wheat, corn, and the other basic agricultural products just prices in proportion to the capital and labor required to produce them, resulting in additional billions of dollars of credit or cash for the farmer, and the beginning of the end of our depression will come so fast as to be startling.
We will thus correct the condition that has deprived our marts of trade of billions of dollars of crop credit money that was and will be again (with minimum prices at law) just as acceptable in trade and banking circles as any gold of the realm.
II. MINIMUM PRICES TO BE PAID THE PRODUCER FOR CERTAIN Raw CLOTHING
AND FOOD CROPS NECESSARY FOR UNITED STATES CONSUMPTION The Federal Farm Board, in collaboration with the Tariff Commission and the Department of Agriculture, shall determine the yearly minimum basic prices that shall be paid to the producer at the farm or patch or terminal center for such proportion of the following indispensable, nonperishable, raw clothing, food and feed crops, cotton, wool, flax, wheat, corn, rye, oats, rice, barley, buckwheat, and hay—to grade or to grade and staple, as are required for United States consumption.
When it comes to determining reasonable basic minimum prices the Clair plan contemplates making use of the same factors and of similar methods used in arriving at tariffs on nonagricultural products.
Under this plan minimum price stabilization is in effect an "inverted tariff” with the advantage of really giving price protection whether or not there is a surplus.
If the world price for wheat is 75 cents per bushel and we assess a 42-cent tariff, in effect the Tariff Commission has ascertained that the reasonable minimum price for wheat in this country is about $1.15. The plan suggests, however, that it is impossible to arrive at any reasonable annual determination of basic minimum prices (or tariffs) except in consideration of certain fundamental factors relating to the varying annual costs of production. (Not allowing, however, for the abnormal inflation in farm investments as have occurred to a large extent in recent years.)
The minimum price will have a normal and consistent relation to nonagricultural price indexes and to cost of living indexes as disclosed in our past experience over a period of normal years or perhaps in the pre-war relationship of such index numbers. Thereby stabilizing agriculture with other industry as to commodity price levels.
Careful research into agricultural costs has indicated that application of the minimum price determination principle to conditions normal in the past, would result in minimum prices of about 14 cents to 18 cents a pound for cotton, about $1 to $1.25 a bushel for wheat, about 70 cents to 90 cents a bushel for corn, and prices on other crops in proportion.
It is possible to have immediate execution of this plan under the Agricultural Marketing Act, through the instrumentality of the Farm Board working jointly with the Tariff Commission and the Department of Agriculture on the basis of facts currently in possession of these organizations, from which reasonably accurate minimum prices may be determined in a short period of time.
The principle of a yearly minimum basic price will raise the issue of price fixing. This issue is faced without evasion or subterfuge. The minimum price principle does not fix prices except to establish an irreducible minimum price on these products, based on average American production costs, below which the agricultural industry cannot survive in its economic relationship to protected rates and prices in other industries.
Setting the minimum prices on basic agricultural products will raise the issue as to increasing the price to the consumer. Let us see how much there is to this argument. In a 5-cent package of crackers there is wheat worth one eighth cent, and the retail price of 5 cents for this article is the same now as when wheat sold for over $1.65 a bushel. In a loaf of bread, at the present starvation price of wheat, there is wheat worth three eighths cent. The president of one of the largest baking companies in the country stated that they did not consider the cost of wheat as a deciding, or even important, factor in determining the retail price of bread. How about cotton? In an ordinary $2 shirt there is cotton worth three fourths cent at the bankruptcy price of 5 cents a pound.
We simply ask that the planter get 2 cents to 272 cents for the cotton that is in a $2 shirt, and the wheat grower from 174 cents to 132 cents for the wheat that is in a loaf of bread.
But suppose this were not so—have we any right to deprive the man who labors on the farm of a just and fair reward for his effort? Furthermore, what good does it do the working man in the city to have low prices, without the wage income to purchase these commodities? He then faces precisely the same situation that confronts his neighbor on the farm. It is this inadequate and unjust exchange in the value and distribution of the income from our annual created wealth that is the root of our present economic maladjustment.
The day that minimum basic prices are established on these basic farm commodities, we make a business man out of the farmer who heretofore has been our greatest gambler; billions of dollars will be added to the yearly farm income and prosperity will again return to this country.
These added billions of farm income will subsequently flow into industrial centers for the purchase of needed goods and will turn many times in the rehabilitation of our annual created wealth. Many more billions of dollars will be added to farm land valuations.
Further billions will be restored to the value of American securities, insuring an abundance of credit. The president of one of the largest national banks in Chicago, to whom this plan was presented, expressed the opinion that the day the plan was put into effect "loads” of credit would move to the country banks to take care of agricultural needs.
III. DETERMINATION OF UNITED STATES CONSUMPTION OF Basic CROPS;
PROCLAMATION OF THE NATIONAL PRORATE PERCENTAGE TO BE MARKETED
The Department of Agriculture, as now required by law, forecasts the crop production of these basic commodities. The organization necessary for this is now established and forecasts have been made with remarkable accuracy for years. Statistics are available on annual domestic consumption for all of these basic crops. The domestic consumption of the food and clothing crops is probably the most stable factor that we have in trade and commerce even during the depression years, and under normal conditions is almost constant.
The Farm Board shall proceed to calculate the percentage which United States consumption bears to total United States production in any one of the commodities included under the plan, and publicly proclaim at the end of each crop year, to the producers of each crop, the national prorate percentage which may be marketed for domestic consumption, together with the basic minimum prices for the various basic crops.
The national domestic prorate percentage, determined by the Farm Board, will include that part of the grain crop production that is used for stock feeding purposes and for general domestic consumption.
The annual prorate for any of these commodities can be adapted to any seasonal growing or marketing conditions. Preliminary prorates can be made amounting to 50 percent or 75 percent. Final and total prorates need not be made until the end of the crop season. The amount of these commodities in channels of trade will provide for any “lag.” First year's domestic prorate should be on a very conservative basis to remove any unnecessary surplus from the market.
This national domestic proration and minimum price determination principle, by law, is feasible and capable of execution. Experience would indicate that no voluntary plan will prove practicable or workable. Experience with farm group movements indicates clearly that no plan is adequate that is not national in its scope and application, and enforceable by law with adequate penalties for violation.
IV. CONTROL OF MARKETING AND SHIPPING THROUGH EXISTING FEDERAL
AGENCIES AND UNIFORM BILL-OF-LADING HANDLING, AT PRACTICALLY No ADDITIONAL EXPENSE
The basic principles of the Clair plan are fundamentally simple and sound. The chief difficulty in the application of all agricultural marketing plans hitherto proposed has been the market control. The method must be simple to execute, inexpensive as to cost, and flexible enough to be convenient and effective under a wide variety of marketing conditions.
At the end of the crop year, the producer shall certify on a form provided, the number of acres of each crop cultivated, total production and yield per acre, of each specified grain and fiber crop. This production report remains on file at the producer's local post office and is a public record.
The post office will issue to each producer a Federal production-disbursement card, certifying the number of bushels or pounds that the producer is entitled to sell or ship for domestic consumption at minimum domestic prices, according to the yearly domestic percentage proration and minimum prices proclaimed for the corresponding year by the Farm Board.
Any surplus quantity over and above the domestic proration of each producer must remain impounded on the farm and used thereon, unless sold through a licensed dealer (direct buyers from the producers) for export.
Postmasters and R.F.D. agents (carriers) will be supplied with books of Federal marketing vouchers, in two colors. One color will authorize all movements of the specified crops off farms for domestic consumption—the other color to authorize the movements from the farm for export shipment. Also voucher for validity sale of hogs.
Any farmer having secured his production-disbursement certificate, and contemplating a sale, will present this certificate to the postmaster or R.F.D. agent, who will issue the proper marketing voucher for all or any part of the domestic prorate, or balance of the total production for export or for the sale of hogs.
In its entirety this market control is extremely simple. (1) An annual production report is made out by the producer. (2) A disbursement record (duplication of the production report) is issued at post office. (3) Federal marketing vouchers, both domestic and export. (4) Uniform bill-of-lading handling. (5) Export and domestic ledger record (instead of single record) at elevator. The work performed by the post office does not involve any judgment; is a simple recording procedure. Clerical work of railroads and at elevators is almost identical.
Marketing, so far as the farmer is concerned, is very simple. It is intended that the annual domestic prorate always be on a conservative basis as there is always sufficient of these commodities in the channels of trade to provide for any "lag." Ultimately there is always insured an absolute demand for the domestic prorate. Any producer can obtain, upon request, Federal domestic marketing vouchers covering the whole or any portion of his domestic prorate as soon as it has been harvested. Consequently this plan will result in the following practice: (1) Domestic grain will be stored on the farm; (2) in local elevators; or (3) in terminal elevators, held on account. The farmer will then have in his possession either a storage receipt or a Federal domestic marketing voucher, either of which document as soon as issued, for whatever number of units at the governmentally stabilized minimum price, will be accepted at face value at any bank as collateral for loans. Marketing vouchers and warehouse receipts under this handling are almost as safe as United States bonded warehouse receipts. Thus the farmer, assured of a steady future market at governmentally stabilized reasonable minimum prices, has financial accommodation the same as any other legitimate manufacturer and can market his product at will.