Relation of Population Growth and Land Supply to the Future Foreign Trade Policy of the United States By L. C. GRAY Economist in Charge of Land Economics, U. S. Department of Agriculture A LITTLE more than a decade ago ›y pointing to the diminishing magniude of our agricultural exports, paricularly of grain, and suggested that it no far distant time the nation would be face to face with an agricultural deficit. The prediction seemed justified by the agricultural trend of that day, and yet at the present time it would appear that the tendency is entirely reversed, and the prediction one more shining example of the futility of economic prophecy. The volume of our exports in recent years has increased at an amazing rate, particularly of the cereals. During the past three years the markets of the world have been sagging under the pressure of the stream of grain, and the farmers of this and other countries have been afflicted with a serious depression which may result in portentous political consequences in this country at least. In view of this sudden economic about-face, we may well ask: In what direction are we really headed? Is the present depression only a temporary interruption, a mere episode in the general trend toward greater economic scarcity caused by the increasing pressure of population on limited natural resources? Or is it the beginning of a significant economic epoch which requires a new outlook on our economic destiny? EXPORT ACREAGE INCREASES First let us consider the trend with reference to production for export. Up to the five-year period 1899-1903, the acreage in continental United States devoted to export production was increasing. The next five-year period showed a decrease, which was continued during the five-year period 1909-1913. It was this decade of decreasing export acreage which lead the "Empire Builder" and others to the conclusion that the nation which had been for half a century the world's granary was headed toward an agricultural deficit. Then came the war with its double incentive of rising prices and patriotic appeal, followed for approximately two years after the Armistice by the continuance of the price levels of the war period. As a result of these stimuli the average crop acreage devoted to export production from 1919-1921 was 46 per cent larger than for the period 19091913. This increase was entirely accounted for by expansion in acreage of the cereals employed for export production, which increased about 200 per cent from the period 1909–1913 to 1919-1921. The total increase in area of twelve principal crops devoted to export production during this period amounted to a little over 14 million acres, but the increase in the acreage of the cereals employed for export was over 18 million acres, of which the bread grains, wheat and rye account for about 16 million acres. The larger increase in cereal acreage than in total acres employed for export is accounted for mainly by the decrease in export acreage of cotton. PER CAPITA ACREAGE IN CROPS DECREASES Now, let us turn to another side of the picture. What has been the tendency in regard to total crop acreage per capita? Is the large increase in acreage devoted to production for export due to a large increase in total crop acreage per capita? The fact is that the total crop acreage per capita was less in 1909 than in 1899, and still less in 1919 than in 1909. Moreover, the acreage of nineteen principal crops was nearly 2 per cent less in 1922 than in 1919 although population continued to increase.1 LIVESTOCK PRODUCTION DECREASES How may we account for the apparent paradox, a large increase in both total and per capita acreage of crops produced for export while our per capita acreage in crops has been decreasing? The first explanation that would. occur to one is a possible increase in average yield per acre. A careful study shows that the index of average yield per acre of nine principal crops for the period 1918-1922 was about 16 per cent higher than for the period 18831887, but in the period 1903-1907 it was 19 per cent higher than in the earlier period, so that in the past two decades there has been no increase in average yield per acre, but rather, a slight decrease.2 Since there has been a large expansion in acreage employed for export 1 Even the increase in acreage of the cereals from 1909-1913 to 1919-1922 was only 12 per cent, while during this period population increased about 14 per cent. 2 Apparently the increase in productiveness made possible by scientific progress and the diffusion of technical information has been fully offset by the necessity of expanding our acreage through the addition of lands of inferior fertility, by the declining fertility of old lands, and by the increasing ravages of plant diseases and insect pests, such as the boll weevil. production, but a decrease in total acreage per capita, and no increase in yield per acre, the only possible conclusion is that there must have been a diminution in acreage required to provide for domestic consumption. This change is accounted for statistically by the rapid decrease in the relative significance of livestock and livestock products in American consumption. A careful estimate indicates that the average per capita acreage for 19191922 employed in the feeding of livestock was only 91.6 per cent of the average for the period 1909-1913. If the per capita acreage employed for this purpose had been as large in the later as in the earlier period we should require an addition of approximately twenty-one million acres. The total increase in the acres of all crops devoted to export was a little more than 14 million. Consequently the reduction in acreage required for livestock on the per capita basis of 1909-1913 would account for more than the increase in export acreage, but approximately equals the increase in the export acreage of cereals. It appears, then, that the expansion of exports in spite of the general decrease in per capita acreage in crops is largely attributable to reduction in the acreage requirements for livestock, particularly of beef cattle and horses. The first mentioned change is mainly due to a reduction in per capita consumption of beef, estimated to have decreased nearly 28 per cent between 1907 and 1921.3 The decrease of 22 per cent in the number of horses per capita from 1890 to 1920 was largely owing to the employment of gasoline and electric power in substitution for horse power. 3 Meat Production, Consumption, and Foreign Trade in the United States, 1907-1921, by John Roberts, mimeographed circular, Bureau of Animal Industry, U. S. Department of Agriculture. EXPORTS AND PRICE DEPRESSION Let us now consider the connection between this change in our export trade in farm products and the nearly threeyear-old price depression by which our farming industry is afflicted. It is well to trace the development of popular opinion on this subject. Just after the depression appeared in the fall of 1920 popular attention was directed to the great decrease in the volume of exports to Europe measured in dollars. Immediately friends of the farmers began to explain the decrease in the prices of farm products as due to a sudden decline in Europe's power to import American products. The great variations in exchange rates and the chaotic credit conditions appeared to afford easy explanations. The result was a great clamor for a means of promoting our export trade in farm products. All sorts of "remedies" were suggested, and it was this stage in our national thinking which produced the revival of the War Finance Corporation and which directed favorable attention to the Ter Meulen plan and other schemes for promoting international trade. However, economists and others who carefully analyzed the situation came to realize that the general public had jumped at an explanation which was at best only a half-truth. The decrease in volume of exports as measured by value was an effect rather than a cause of lower prices. It soon became apparent that the exports of farm products in terms of physical quantities had not shown a notable decrease. In fact, the exports of the five cereals were considerably larger in 1921 than they were in the period of the war when prices were very high. Gradually, in recognition of this fact the popular attitude has changed, and now the outcry is not so much for promoting foreign trade, but rather attention is centered on our unwieldy export surplus, and this surplus is credited with being responsible for the depression in the farming industry. Again, however, public attention has been focussed on a half-truth. The export surplus of the United States alone does not determine the world supply and consequently the price level of cereals. The fact is that our exports of wheat increased from an average of 103 million bushels per year for 1909– 1913 to an average of 225 million bushels during the war years 1914-1918, and this enormous expansion was accompanied by an increase in average prices from 90.1 cents to $1.45.4 Furthermore, the large exports of 1919 and 1920 amounting to 214 million bushels and 309 million bushels respectively were disposed of at prices averaging $2.13 for the former year and $2.17 for the latter year. Compared with the general price level these prices were not high, but they were much more than double the present price, although the exports of wheat for 1921 and 1922 were 11 per cent less than in the two years 1919-1920. It is clear, then, that the sudden decrease in the price of wheat was not caused in the first instance by a sudden expansion of our wheat exports. Furthermore, wheat has a world market. Our production and exports make up only a part of the world's balance sheet. THE WORLD SUPPLY OF CEREALS NOT INCREASED It is necessary, then, to consider the world supply. It is well known that the war eliminated Russia and to a large extent the Balkans as large exporters of the bread grains. The large increase in the exports of Canada and 4 Averages for first of each month, Yearbook, 1922, p. 596. crease in prices of cereals. Consequently, we must attribute a large part of the responsibility for the great change in price level of the cereals to fundamental changes in demand, and we will naturally look for this change in the chaos of war-torn Europe. DEMAND FOR CEREALS DECREASED If we consider the four great consuming countries, the United Kingdom, Germany, France and Italy, it appears that the consumption of cereals from both domestic production and net imports was only 72.6 per cent in 19191921 of the pre-war average, 1909–1913. The supply of the two bread grains, wheat and rye, was 80.8 per cent of the pre-war average. It is true, the net imports of the last mentioned products were greater than in the pre-war period by 15 per cent, but not enough greater to make up for the decline in domestic production. The four countries considered as a whole were unquestionably the United States have been required to supply this gap. Has the result been an increase or decrease in the supply of the bread grains available for the consumption of the world outside of Russia? According to the International Institute of Agriculture, at Rome, the average area of the five cereals from 1919 to 1921 inclusive outside of Russia was about 4 per cent higher than the average area exclusive of Russia in 1909-1913, but practically no higher than during the war years 1914-1918, when good prices generally prevailed. The average production of cereals in quintals from 1919 to 1921 was slightly less than from 1909 to 1913, although slightly more than for the years 1914 to 1918 inclusive, but the rate of increase was not greater than the probable rate of increase in world population outside of Russia. The average area of wheat was about 9 per cent greater for 1919 to 1921 than for the period 1909 to 1913, but the production was slightly less. The sit-consuming less of the bread grains than uation is even more striking when we make comparison of the supply of bread grains available for the consumption of the world outside of Russia from 1919-1921 and the supply available from 1909-1913 when Russian exports were also included. The world supply in the last mentioned period was 10.2 per cent less than it was in the first mentioned period. Thus it appears that the great expansion in American exports of cereals helped to offset the loss due to the elimination of Russia and the decreased production of other European countries, but only partially; and the average supply of the bread grains outside of Russia for the years 1919 to 1921 was considerably less than it was in the years 1909-1913. It is clear, then, that there has been no increase in world supply, whether total or per capita, sufficient to account for the great de in the pre-war period. This is especially true of Germany, where the supply of bread grains was only 56.9 per cent of the pre-war average while the population decreased but 8.8 per cent. It is an elementary principle of economics that demand is to be measured not only by the quantity taken but also by the price at which it is taken. If a nation purchases the same amount of a given commodity as formerly, but at only half the price, it is evident that its demand has declined. The people of the four European nations mentioned above taken as a whole are not only using less of the bread grains than in the pre-war period, but buying at a much lower price even if we take into consideration the decrease in the purchasing power of gold that has occurred during the period since the outbreak of the World War. WHY THE DEMAND DECREASED Since the reduction in demand has been so largely responsible for the decline in the value of cereals, what are the factors responsible for this decrease in demand? In the first place, Europe's problem has been not merely to maintain her former imports, but also to make up by additional imports for the marked decrease in her own production. The average annual deficit in the production of Europe, not including Russia, for all five cereals during the period 1919-1921 was 250 million quintals as compared with the period 1909-1913-that is, the product was 23.2 per cent less in the later period than in the earlier period." If European consumers had maintained their prewar level of consumption it would have been necessary to increase their imports above those of the pre-war period by the huge amount mentioned. Instead of increasing their imports by 250 million quintals they actually succeeded in increasing them by only 94.8 million quintals, leaving a deficit of 154.7 million quintals. It is highly probable that the reduced consumption reflects a reduced ability to purchase as large a supply of cereals as formerly at a normal level of value. It is not probable that the enormous decline in Europe's cereal production has been adequately compensated by increased productivity in other direc 5 A part of this apparent deficiency was due to the fact that because of price control peasant farmers in some of the Balkan states failed to report correctly their production. On this account, the deficiency appears larger than it really tions. The United Kingdom has had approximately two million men out of work for several years. In the other countries strikes have been frequent, and the great fluctuation in prices, especially in Germany, must have seriously reduced the efficiency of productive effort even though that effort has been stimulated to a frenzy of activity through the influence of currency inflation. No doubt, in parts of Central Europe malnutrition has also played a sinister part in reducing the level of productiveness. To an audience composed of students of foreign trade and international relations I need do no more than summarize the obstacles that prevented the great enlargement of European imports of farm products. The fluctuation of foreign exchange rates has been a great obstacle in itself. The rapid depreciation of the currency in Germany has created an artificial difference between foreign trade values and domestic values due to the fact that domestic prices are adjusted more slowly to changes in the volume of the currency than are the exchange rates. When I was in Germany last summer, a competent economist told me that the domestic value level was about two-thirds the foreign value level. The result has been to put a premium on exports rather than on imports. Even if the national income of Western Europe had not been reduced, the demand for cereals would probably be greatly diminished through the great redistribution of income which in the countries of extreme inflation has resulted in impoverishing the middle classes and enriching the few without correspondingly benefiting the laboring classes. Such are the conditions that reduced the ability of Europe to increase her imports sufficiently to make up by in |