United States Congressional Serial Set

• Corrected print

71ST CONGRESS HOUSE OF REPRESENTATIVES

1st Session

FEDERAL FARM BOARD ACT

APRIL 17, 1929.-Ordered to be printed

REPORT
No. 1

Mr. HAUGEN, from the Committee on Agriculture, submitted the

The Committee on Agriculture, to whom was referred the bill (H. R. 1) to establish a Federal farm board to promote the effective merchandising of agricultural commodities in interstate and foreign commerce, and to place agriculture on a basis of economic equality with other industries, having considered the same, report favorably thereon with the recommendation that the bill do pass.

That the condition of agriculture requires legislative intervention in its behalf, we think we may assume. The platforms of both great political parties concede the necessity of action, and the President has called the Congress in special session to provide relief. We, therefore, were authorized to sit during the recess since the last session of Congress to consider the situation in order that prompt remedies might be provided.

In planning our hearings we were entirely agreed that we needed no further proof of the conditions that prevail than had been detailed in numerous hearings in past Congresses. We were also agreed that the basic trouble-at least so far as legislative help could be givenwas upon the business rather than the production side of agriculturethe disposition of the product, not its creation.

It was also entirely obvious after the recent election that certain forms of remedy and means of approach to the solution were not in accord with the views of the great majority of the people. We, therefore, requested that witnesses who appeared before us should avoid discussion of measures which could not be enacted into law. This decision eliminated, for all practical purposes, evidence upon such methods of dealing with the problem as the debenture plan, the equalization fee, and like proposals looking either toward placing the Government in business, the arbitrary raising of price without

complete control of production, or the fixing of prices for agricultural products. We were also convinced that no form of subsidy could be effective or was desired by the farmers of the country.

We were very fortunate in the group of witnesses who accepted our invitation to present their views. They were mainly drawn from what might be called the business men of agriculture-the heads of the great cooperative marketing associations which have grown with remarkable strides in the past 10 years. To these were added the representatives of great farm organizations; editors, educators, and men from the business and manufacturing world. We commend the record of the hearings as well worth the reading of any one interested in the problem, and we desire here to record our gratified appreciation of the invaluable assistance given us by these gentlemen, most of whom appeared at considerable personal inconvenience and expense. Our indebtedness to them can be best shown by the fact that the bill we are now reporting is based almost entirely upon, and is completely supported by, the record of the hearings. We particularly desire to note that no representative of any trade or consuming group appeared before us except with helpful and sympathetic suggestions.

Before entering into an explanation of the bill itself we think it well to state the purposes with which we approached the subject. Briefly, these were both economic and social. We feel very strongly that the United States both wants and needs an agriculture based apon small farms, independently managed so far as possible by their owners, which will preserve that type of life from which the country has continuously renewed its strength and leadership. The farm home has meant too much to the nation to be lost. So, too, we feel that the growth of great corporations and chain stores has so rapidly absorbed the small, independent manufacturer and shopkeeper and transformed him into an employee that the Nation can not spare its one remaining great group of independent, unincorporated producers— the farmers. And yet we know that corporate and merger methods have been the road to wealth for industry and trade. Our problem, then is the effort to keep for the farmer his independence of thought and action, yet bring him a return for his capital and labor at least sufficient to maintain the traditional farm home which knew comfort even though it lacked ease.

This we believe is what the farmer means when he speaks of eco nomic equality with industry. He neither asks nor expects equal financial rewards with the giants of industry or banking. He does ask and want that agriculture shall not be reduced to peasantry nor forced into corporate form to save its existence. In full agreement with his position, we have therefore tried to find how best we can accomplish his desire for that complete economic equality under modern conditions that the American farmer-alone of the farmers of the world-has heretofore enjoyed.

THE STRUCTURE OF MODERN INDUSTRY

It seems to us that we can best determine the way to find equality by first analyzing the differences which exist between industry and agriculture. Let us, therefore, examine the structure of modern industry.

First, we find that industry is highly organized. To-day it is practically all corporate in form. Not only has the small manufacturer and merchant been largely eliminated but the corporations have become so large that no one man owns or controls any of our greater industries-except, perhaps, Henry Ford. This has come since industry has found that very large units are needed in the modern world for three main purposes: To utilize mass-production methods of manufacture, thereby cheapening the product and increasing the sales; to control the market for the product through volume of sales and, in this way, to eliminate as many middlemen as possible; and to reduce overhead expense both in production and distribution.

Second, we find that this great size of our corporations has greatly simplified their old-time financing problems. To-day the major share of their financing is done through the sale of stock. This method greatly reduces interest charges and debt and secures them the money they need on a basis where they pay for it only when they make profits.

Third. Industry has become almost completely mechanized and the cost of labor therefore is a lesser proportion of its gross volume of sales.

Fourth. In many cases, copper and oil for example, it has bought or created a complete chain of operations from the production of the raw material to the manufacture, advertising and direct sale of its finished product.

Fifth. Industry has become largely organized in trade associations for the interchange of information and the formation of a trade policy for the control both of production and of distribution. It has also formed many export associations through which numerous corporations jointly solicit foreign customers, divide the resulting orders, and control the flow of goods to foreign markets.

The results of these various policies of industry have been numerous and highly valuable to it.

Through these trade and export associations intimate contact has been established with all the factors in the industry, from the producer of raw material to the final consumer of the finished product. Such contacts, supplementing the statistical and information services maintained in part by the industries and in part by the Department of Commerce, enable industry to have accurate and prompt knowledge and forecast of the conditions of the markets at home and abroad, and thus cut their production to the potential demand. The size of the various corporations enable them to hire the best brains in the country and to train them into their service. Indeed, so standardized have the methods of business become that it is not at all unusual to take men out of an entirely disassociated line and place them at the head of great enterprises. The president of General Motors Corporatior was a manufacturer of roller bearings less than 10 years ago, and the chairman of the board a powder manufacturer. The chairman of the Steel Corporation was a banker when elevated to his present position, and the president came from the sales force without producing experience. Knowledge of the general principles of economic laws and of sound organization practices are the criterion of usefulness to modern business, rather than ability on the side of production.

From all this has come a gradual elimination of middlemen in some industries-the motor business knows no wholesalers--and the

reduction of their share of the total profits in many others. Speculation, both in raw material and finished goods, has greatly lessened. Inefficient and weak concerns have failed or been absorbed by their competitors. And, finally, despite growing control of markets, prices to the consumer have been reduced through lower overhead costs, quantity production and distribution, and the lessening of the number of hands through whom the product must pass on its way to market.

WHAT THE GOVERNMENT HAS DONE FOR INDUSTRY

In all this development the Government has cooperated in numerous ways. Primarily, of course, through liberal expenditures for education, it has provided minds trained for the great tasks of industry and of research and furnished the means for continuous improvement in the quality of the goods. More directly, it has provided the laws under which corporations can operate safely and tariffs to protect the domestic market against foreign competitors. It has authorized the formation of export associations and, through the Departments of Commerce and of Justice, has aided the establishment of trade associations and the standardization of manufacture. The Federal reserve system has stabilized to a large extent the flow of credit. The patent laws have protected the results of ingenuity in the development of new processes and products.

At the same time, through the Sherman law, the Clayton Act and the Federal Trade Commission, a high degree of regulation has been established in the interest of the consumer, primarily, which has undoubtedly slowed up greatly the control of market and prices by the industries of the country.

How much of this structure of industry can we assist agriculture to set up? In the answer to this question, our law must be found, for in it lies the economic quality we are seeking.

THE STRUCTURE OF AGRICULTURE AS AN INDUSTRY

To answer our last question, we must see wherein agriculture and industry differ and where they are or can be made alike.

First, let us take the production side. Here the greatest differences appear. For instance, we start with the desire to preserve the small units the small farms, the individual farmer-where industry is geared up for mass production and the ruthless destruction or absorption of the small producer. So we can reduce production costs only by getting greater yields and better quality per acre and not by enlarging the size of farms and eliminating farmers as business has eliminated independent manufacturers and storekeepers. Then the lack of unified control of production; the fact that millions of individual farms produce the same product at the will of their owners; and above all, the vital influence of weather and other natural causes on the size of the crop make quick control of the volume of production. impossible.

On the other hand, agriculture has some advantages on the production side. In the first place, in the preservable crops such as wheat and cotton which are necessities of life, styles do not change nor substantial improvements make the product unsalable a year after it is

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