/lh ~': ·.~ .

--ti:Ri versi.ty of ]Missouri-Columbia .-D~-Pa.rtrnent of '°Agricultural Economics / ·~apeJ:'. J\tO~ .. 1982-1$· .. · · .. . ·.· ·· :. ·----i

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~ ... , ' "

P:RosPEc'i's FoR ... " .. T ... ·.H. E ... ·.E. c.·.·.oNom ... · .. : .AN rNTERPRETAT:rDN~· · · .. ·· · · ... ~ .. : x.:__:;s'n"'Hc·-n ~~-.c.t;;·:J~ .. =~~rr~~ t)P . _ .. -Harol? F'. ~r~~myer 1 • < •\G~!.erL1:y1lF!~· ~i~oM£cs

Profes.sor and -Extensior: . Economist 7·:~~~· · ·· -, · ··· ··' · u:·;,;~L {1, 19B3

11Wk:t.c::n'mfin.,,. ·what. of. the. ~ight··?·- ·. JNatchman1·-:what-o.f. · .the nJ..ght.? The watGhman- .said, 'The morning., · ·· qoineth,,, , . alld . alSQ tti\e niriht I :• 0 . c

-> · · -- Isaiah ·.-:·-; '. :,

.. !... '

For a review of the pre.sent gloomy si tua'.tidrf ih 'th'e· economy and in agriculture .a Biblical quotation seems apt. Indeed, watchman, .. ''What of .the· night?" ...... .. . ' . ' . . ,:~ ' ' . . '

. . ... ··l·· .

. .. · ·.· J3~yon<L.a dpti]ot.,;,- t_he-: u. s . ,. e,C;onomy\ is< Jn, nighttime;;·: ·· I:t ls asle.ep'~:.. Many pf .Lts pa:r:;ticipapts are having nightmares~ Tc( drop the metaphor,···· l:he .. ·~con.omy,,. is in dep:te,ssion·~· It Is de-press~on., not "cyclical "recession. . . . . -.

' . >, ;-- • ~ .: . : :· - ~-- , '", ,, • • ' ' -.

.. . . We '7~t<:ra,ns''.. o~: ;the .19:,lOs see 1-:he telltale. signs •. '· Mqst visfble an_?!, c:lisJ::.,r'~ss,ilJ.g' is .. ~l:J.e •. sequ9nce ~ wlie:reby<'•unemployment in indust,-ry· ?trid~'.;loss.-of incqme in agricµl,tu:i?e· are· not only·.· severe but self-escalating. They feed on.themselves and each otner.v making the sit:ua,tipn.p:rogressively worse.

' '"_, t•·• ... ,. • .... -,.··.!' •· ' '

. ·. aere':is.:#batl:,,mean •.. ·Eacfrbusi.nes~.that faces rising 'tests· and .a .. sl:i;ipJc~ng,. rna;rke:t: ;resppn.as .:.by. dismiss·,~ng employees. Every· µnit; bf, goye]::nm~fit.he.ld, tq ,a·· ;redlJGed -.oudget takes the same action.. Wprkers. ~ho have· been .. fi.rec;l curtail· their buying; causing busii)ess. volume to ·arop::·agai·n. Slower htisi:rtess re-. du9e_s government revenues .f\:"lrther •. Businesses and government a're forced 1o .f'IJ.rlough, or fire·stilJ.,mor:$ workers~.~· :<•The process snowballs o · .- · · · · ·

< :· f, '

. . R:~§µc~:(l C~nsume:r .· incolt\e.'.::a,.nd .spel');<iling hurts· ma.rkets for farm progucts~ ., ·Fapners · .. wh9 eci.rn. less, spend.1.ess~·; .. They. con­tribute to the dismal downtrend. Businesses in rural communi­ties especially are hurt •.. · .

. .. ·,:It>·~· a· _<:'lo"';,il.ward spi,:rai.: :· ... Each :bus;L11?ss including ·each farrn makes adj'i.:istrrients that are, :rational .for '.it;-; indeed unavoid­able o . But the ·over.all consequence is harmful to the economy o

.. .. :· " ' ··;, ;."':-

· .. That'· i's .~~~t:ti:Y' ~iia\::. h~~~~~ea in is:to.,tci."'1933·.· we learned .then t:hat t,h~ sp,i.J:al Js.n,ot·,stqppeci eaa-ily ••. · !·'doubt it wilr­:turn around quic;kfY _,in the. :tsisos; ·

· ... "'' .. . '- '_• ... ·. :· <' .

Talk;•giv.en at· annual ·.meeting 6f·:i.'1prtheast :M~~sqttr~·E:re:ctt:ic · Pow.~r cooperatives·# Palmyra.,• illii'ssouri1 · April.·· 1; · l982. ·

., ' ;, ' ' . ·: •'.':"' '.:'1. "-. ,- ·~::_ ' ,., " . '

...

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Having begun -in such dolorous mood yet hoping to of fer some interpretation I am constrained by uncertainty. How can anyone interpret so complex a topic as the worJs:ings of the U.So ecohomy'?''<J:' wiTl be properly'modesto . ·.· . .·.·.

. ,

Moreover,.anotrier",experien~eof th@ Great Depression is that almost all the self..::proclaimed economic experts proved wrong and were no longer listened to. They sa~d a depression could hot: '.happen.. They promicsed< 'that~_ the·· bad _times in 1930 would correct themselves fast, withoutgov:ernmen.thelp. When than did not take place, those se1:E-decli:ired wise men were cast into outer darkness. J::predict the same destiny for the monetarists and supplysiders of todayo Whether a pragmatic extension economist such as myself will suffer the same fate I ca1rnot gue$.S,.

The Ending o:f'. Economic Grb~th

. In· my opin·ioh the even~ts of the' last 10 or is years can be summed in j.ust0 a few words.. t~hel1 .. the hlsi:Ory of cu~ cen-. tury is written it will say '.that the t.rnited 9_tates o~ America came out of World War II the strorige.st' nation on the planet~ It entered into a glorious period of expansion.. W:e said we were enjoying economic growth• Except:' for a few ·cyclical flutters employment· and output rose several perc:enJ:a9'~ points a year. The'wholeeconomy.was geared' to that wd~derful experience, and our psychology too. · · ,-. ·· · ·· · ·

-. _:,'.

The debacle of Vietnam foreshadowed a C!imming (?f our national -glory.·. By the :-.early 1970s 'we were bi=g:i,.nning to sense some loss of vitality .inbltidii1.g ev~n ·a. siowdo~n ·in. agricul'tural productivity. The C1ufr of·7 Rdrri.e ·told Us that' all_ expansions come to an end., "However 0 ··only a few dreamers. puch ·as myself pa.id attention.; ·But OPEC· came along to give a demonst:ratiop.

- •• -·' . . ' "''. ' ·,- ~- '., :~~ ·. • ' i . -.. < .'

Developments following OPEC' s first'increase :t~ petroleum prices confirmed what a few of us had been saying for a long time, namely 1 that our wonderful growth "7a~ _based le~s on technology than on cheap'energy and other raw materials in-:"· eluding a marvelously productive agricultlire that kept. farm .. products ·cheap ~too.;: · · · · · · · · ··

When OPEC pushed prices of_petroleurri,u,,pwarq from $2 a barrel to<$10,\ and then to $20, and $30, .~rid ilOW $34, the whole industr.ial world went into shock. We are still there.

,- .·'< '.· < ,-· .1 ,-: ··r . . "

When the price of petroleum jumps as fast •· c;\S. it did ... "· 10, .year's ago~ a/ buying country •such .. · as .the United Sta:tes has two :choi:ce~L. · It can resf:ric;,t s __ ha.rply ·_al.l .. i,ts uses .t=

of the oily black stuff -- I mean cutting.back greatly, by hal.1. or more -- thereby saving its dollars and forestcillipg f.urther pr ice jumps py .OPE:C •.. PresJdent Nixon· proposed that we. do·· sOo or as c;n opposite: choice,· Jhe :po~nt#y can ,.build the:. higher. ' costs into its price structure. -

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3

.... W~; made a" few e·rtergy· saving adjus_tment~.o Some of us now drive 4~<;ylinder automobiles and lots of homers hav~ pe~n llt­sulatedo· Also, in international exchange ·we let the dollal," . drpp, so ·theit by trimming our standard df .. 1.iving ,we. could.' pay for the more costly oilo . But these adjustn.1:ents were limited': half-heartedo By and.large we chose to paythehigber prices for petroleum.,-.we:were not ·ready "for· self-disci.:Pline.·

. . , . . - .- . . ·- " ... . .

Thereupon the: i.rl,~$.capable conseque.hce·· foilowedo. _.Highe . .t prices of energy were built~intoprices of manufactur~d PF()­ducts 0 .. As each rsel·ling price is someone: e~se • s cos:t, hig}le:r

. prices moved fort\7ard. ·to consumers·· goods.. J?ut ~qnsu~ers. WE)re not willing to accept the consequehce~ 6 ~6 ~ag~s· ahd salaries were pushed up .. People on retirement incomes.also resisted being yic.timiz.ed.~ ., so payments under Social Sec.urityD ci vi). . service and military retiremeht 0 ·and'quite a ;ew private pens.ions were ''indexed~'' · Farmers won high?r suppo:rt· PI'ices in farm programs o Every· group in our socil:i!ty used· all ava:i~.:l?lble tad:.ics to avoid being the victim of ··cost-push· iriflati6n; .. · ...... ··.· ·

·: ··.;

.· Bal'lkers · w$;-~·-~ulckly. dra~n inte> th.~ in:flationary spiral o

Businessmen 40 iri.c:t.uding farmers 6 \'.7ho .•faqed. z-ising cd'sts ·asked their banJcers t_o· .extend a bigger t~:qe ,o~ credit•· . It .was appf'bpl'.'iate tO dO $0~,: : f\ ~eW .0C000ffi:iStS haW~ Chastized bankSD saying that in making mor$ .. ¢redit availa}ol~ bankers· became evildoers in·· inflati'on o l . de.fel.1.d. that banks, are supposed to satisfy the legitimate cr¢dit need.:s of b1.iE3i0:ess .. oI deny that the financial community o.tmonetarypolicy,is the malefactor in our inflation~ nor c.an ·either $tOP inflation safe,ly .-- that

. is,; without -do frig_ g:r:~a:t harm 'to',. the eponpmy,.. . -- ~. '! . . - - ' ~ ..

If ~11 prices and wages could be increased at th~ same rate,. inflation would not do J:tt,uch .·harm.· .. Manifestly,_ such a nice· outcome 1s riot possible, so inflat:i.ol'l-. -unfairly: hurts some even as it helps others o . Bu,t the. most .alarming <feature of

'the inflation' of° the .l970swas its e~couragerq~·nt .of specuia-" ~ tive rathe·:r than '.productive. i!p.7estrne,!}t •.. It became more pro"" fitable to put investrg.eri:t. fuhds into a f-i-xed asset6 including farmland 6 'than a risky pew v.eriture o ,;All. the investor had to · ·

·do was sit and wait for. his ·asse't_ values to rise. More than that, he would pay le,ss· ta~ on capital gains income . than on earned income •.

Speculative Jnvestm~nt is a .b~d kame by :a11 •· t~sts. , · It robs p_roductive bµs:i.hess v~ntures of capit~d, it speeds infla­tion,·' and above. all it CJ:eates a structure of capital< values that is artificial: flimsy, arid demme¢1 "to ,_coll.apse' eventually. We are getting that collapse now, as water is squeezed out of asset values generally. It is painful. -

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. The Fede.ra.L.E:?s~.rve n-e.ard g6t into the' .act .• , Monetary. economists ha¢f aP.Plied. the :simplistic loglc that because ]:)usi­ne'ss operates on.,. credit arid. advancing . of 'credit had irid'eec;l . fun9ed the higher costs o.f energy and other materials# in:Ela-tion could be stopp~q by shrinking access t'o credito .

... · . .. . . .· '. . .•. . -·· ..

,. .. In .Oc;:tob,e.r 1:979 the Fed lower'ed .the boom. Chai~~a~ Volcker announced that the object of th,e tighter.mo.ney (credit)

. pql.i.cy waS? . to stop the inflationary rise· in asset; values o ~· , .. ,

· This was laudable o The .prob'l'em was· that _the effect.: of tighter money could not be confined to speculative invest;rii'ent ·in :fixed assets_o . The same' highe'r intere.st' rat.es WOU·ld :iin,P'inge on "ope.rat-

. irtg bU:_sinesses:,::inc.luding farms. :' · ·

. . J;n a·ddi;ti.onq and ironically, the situation was ma¢l'e worse by the tax .conc~ssion to capitai. ga1ns·o .. The best· way to

· · stop ai:;set inflation is to tax capital gains heavily~ , Instead we. kept' .. lowering. capital gains rates 0. we' have subsidized in~ flatiorl via lo-i;f capital ·gains taxes·~ , ..

In October 197 9 I .and many other economists made our sure-fire prediction. Hi:rher in,C.erest rcites would indeed take some of the bloom off prices o.f. faJ::mland and .. other. fixed assets .. If t;he economy were: squeezed hard .enpugh~ ·irifia'l;:ion. vioultl ,. _ .· subside. 'In the process .the economy V'.lOuld be thrown i_nto a. tailspin. ·specifically 11 :it was pr2dictable that tl,1e industrial sector wou'1d :respo'riq. _to highe~ cost~> by reducing. output. and . laying ·off workers. Agriculture :would, as always:u go the. route of maintaining prOdtictiori while abso.rbing a ·stea.dy decline ·in pr ices of products- ·sold. This has proved to be the outqome o

· · ·· ·$ ihce · octob~fr '1919.. ·... ·. · ·. · · · .... " · .• .. ' ·: · . : . Monetary policy ;remai~13 one o~ the .. c.auses ·of the present

doldrums.. But I do.· not over-rebuke. Monetary policy is not my favorite target .

. '. My venom is rese.rvecl for tax~ polic:,y. . Tax· policYL. for · exampleo has complicated the effectiveness of high.interest:: as an anti-inflationary policyo Inter~st paymentsare ded.uct­ibl~f~~ome subject to tax in .a. htinq.red different circumstances o

Whenever interest is deduC;ted, Uncle Sam: pays a share propor.­ti-onate ·t'o·the tax bracket.of the t'axpayero A homeowner in the SO·perc'ent·taxbracket who.pays 16 percent int:erest on his home mortgage-really only pays 8 percento . . '~ •': : ' . . ·.

Tax policy thus vitiates the Federal Reserve Board's attempts to control inflationo It also.is terribly preferential toward high income· taxpayers. To cqnt.ipue ~he homeowner illustration, the net intei-est rate for a 'm9rtgagee. in the 20 percent bracket is iitjt 8. pe~qent _o'u.t hf the nominal 16, but: 12·oa.~:o:pe·:i;,cento · ThEf u~s:., ·goveLrnmentpayr.s only.3~2 percent~

:·,.i, . o/·. ... . ...:: •... ·< .· .. "( -. . ' ' .: .. ;.

5

A Frustrated,. Thwartedu. Citizenry·

I not~d :earlier th~t. for a·· number of years ours was a .. growth economy. About a decade ago growth essentially stop.ped o

The change has proved traumatico I suggest respectfully that among all the ways .to interpret events of the. last generation,

·the t.ransition'.from growth to non-growth is one of the most en-1ightening·o ·

Economic growth is wonderful. During growth the majority of citizens, indeed almost all of them, can look forward to ~· better futureo They can do so without having to take away from someone else.

1'"j'Ot SO after. growth ends. !'. .. Will say more in a moment .. about qur travails: but first a word on why our growth has leve:Led outo Primax:ily it is a :matter of a growing popula7 ;: tion that presses on fixed:or even ~iminishing resources. Petroleum is both pJ::'irne example and symbol.. But our cropl,and acreage shrinks slightly each year, aquifers of water are . ·· slowly being pumped dry, and we dig ever deeper into the Mesabi for our iron ore.

During ·the l 9.70s when our people :fou~d they we.r:e no longer getting ahead e,conomically .despite longer numbers on their 1 pay ched~s,. they begantoshow frustration.. Former President Carte.r said in a TV. talk "that Americans were in malaise.. He met;; indignation but, he was right/.

.. We hav~ given· vent; t6 our insecurity in ·several ways" 1 One is to tu'.!=n introvertedf. as interest groups have 'become . more aggressive#'. and less concerned for what happens to others .. Sensing a diminishing stature for our nation we have rus:1e.d to build rnor~ -armament, disregarding Kipling's warning (i_n "Re-

. cessional 11 ) about :trusting "reeking tube and iron sh9.rd11 and even.forgetting President Eisenhower's farewell warning .. We have so~ght.to protect private incomes' by reducing all public ~ervices other than def~nse~ Politically w~ tutn ~lected

.officials into and outofoffice with·more and more haste .. No President since Eisenhower has finished two .terms of officer and my guess is that in the rest·of the.century hone willo

Capstone to the frustration and restless search for an escape route. is the new direction oµr national policies have taken in the last twelve months~ If the New Deal of the 1930s was the. fir.~t,.American cultural Revolution, :the .. event~ of 1981-820 however captioned; are the· secondo More. than may be realized, the second is a reversal of the first .. ·To be sure, we do not know how far it will proceed or just what form it will finally take.. But the change from national policies of

11 commented on American.s I responses in a talk given early in 1982r 11The U.So Economy -- Past,, Present., a.nd Futu:teo 11

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earlier years is not minor, but major~ The ~resident's Council of ~conomic Advisers, writing in the Econo~ic_Rep~rt of th~es2-_d,ent, says as much., clearly and emphat1cal ly o

I have time for only an illustration or twoc The Eco­nomic Recovery Tax Act of 1981 is the big itemc Interestinglyu it combines glorification of investors' role in the economy, a throwback to the 1920s, with virtual unconcern for the state of the federal budget. Accepting a badly unbalanced budget so blithely is new in our history and particularly new to the Republican Party.

In the 1920s we were told by Andrew Mellon and a host of others that investors are the real benefactors of the eco­nomy and if they are made properbus all others will share~ In 1981 an obscure .economist named Arthur Laffer only updated the messa.geg relieve the tax bite on corporations and individuals., and a stimulated economy will restore prosperityo Thereupon tax revenues will rise and the budget will be re-balancedo Not more than 10 percent of economists concurred but ours was not the voice that counted.

The Mellon doctrine of the 1920s was discredited by the Depression of the 1930s, President Hoover had to send Mr. Mellon to England. During the Depression people came to believe that an economy is sustained not by the' wealth of the rich but by the buying power of the great mass of ordinary citizens. f.;)o it was that for the next 50 years oui national policies were of a tradition that fostered social inventiveness directed toward the welfare of the rank and file of citizensc Rural communities have been among the beneficiaries. Rural electric cooperatives are a clear example of that traditionc

A frustrated nation has now turned in the other direction. It supported the 1981 tax law. The law 0 first of all., exceeds all limits of comprehensibility. It is infinitely complex. It gives tax lawyers and accountants a field day. More ominous it makes success in business depend, in many cases 0 less on efficient production and marketing than on clever manipulation of tax rules. Our tax laws invite chicanery, and the General Accounting Off ice says underreporting now amounts to $80 bil­lion a year.

The 1.981 law is class-preferential. It contains enough concessions to ordinary individuals to win their ·political support but is loaded with benefits to corporations and the rich. The principle of progressiveness in ihcbm~ taxes is all but scuttled.

2A review of th~ 'i982 Report of the Council of Economic Ad­visersu together with data on the 1983 federal budget, is given in Economic and Marketing Information for Missouri Agricultu-Y.-e~-April i982 (Cooperative Extension Serviceu Univer­sity of Missouri-Columbia)o

7

.. What ab~ut the ne~· unconcern fox an unbalanced budget? on this i.ssue I trust· neither my judgment nor that of other

. economists 0 our nation has never been' in such a predicament beforea We.have .never had an $800.billion budget with a de­

. ficit that will run at least $110 billiono We grope for understanding o · ·

Much of the soothsaying is wrong, I bel:ieVeo The-~n­balanced budget is not the cause of our pre.sent business re­cession. Government borrowing is .... not robbing businesses of investment funds. Businesses are' not borrowi~g .to expand be­cause they do not see prospects for prof it in our depressed economy. The situation is precisely as it.was in 1931. High interest rates also are discouraging but they are a secondary consideration, hot the first. · . ·

And with further regard to inter.est rates11 I suggest that the: alleged scarcity of money and high interest rates are strictly artificial. Interest rates are high because it is.a policy.of.the Federal Reserve Board to make them so. Aftet"alJ.? money is only a mediumo Money is not scarce of itself~ all that matters is whether the things bought with money are scarce" Definitely" labor and other resources are not scarce .. -To put ;it differently, only when an economy is going ~t full capacity or, as we often say, is overheated is it appropriate to slow it down by means of high interest rates or even credit controls. Our·economy is not overheated and does not need slowing downa It needs speeding up o · · ·

Now a few words more about the budget situation. It is easy to be ambivalento The deficit of $115 billion represents fiscal irresponsibility, and' it al$0 shows how silly 'it is to let Arthur Laffer make ~fiscal policyo But.something is to be said also for the comment of Professor Minsky of washing-ton University., He says the deficit is.all that sustains the eco­nomy just now.. A sudd'en 11 'Wrenching balancing of the federal budget would make the ecOnomy wors~.

The 1983 budget cannot be balanced.. It cannot even approach balance unless Congress takes two drastic actions, namely 11 pare back sharply the President's request for defenseu and J;'escind many of the reductions in income taxes. The idea is heard often t.hat the budget should be balanced by cutting out wa'ste and dropping ineligible people from Food Stamp and "tr-1elfare rolls.. ,rt. shows abysmal ignorance of the data. De­fense is 30 percent of the budgeto Social security, retirement benefits 11 medicare and medicaid are 35 percelito Interest.pay­ments on the national debt are 14 percent. The three items add to 78 percent of the totale

All the rest of the government takes only 22 percent of the budget, and the total spending for them exceeds the pro­jected deficit only.moderately .. Balance the budget by trimming fat? utter nonsense ..

8

Where tbe federal budget is concerned we have painted ourselves into a carrier~ We reduced taxes sharply without don­sidering the fiscal impac,ts. So long as the.defense budget is untouchable we can balance the budg~t only by closing out all communityo health 0 educational. vet~rana', space exploration, agricultural, and still other programso That is the cold. hard arithmetic of the situationo

In all the above I have not even mentioned energy policy" We are letting OPEC make our policy, ·except for the modest windfall tax on petroleum and, up to now, controlled prices of natural gas. Our energy policy has brought a massive transfer of wealth and income from energy consuming states~ including Missouri, to energy producing ones" Nothing could be more salubrious· for our economy than a breakup of OPECo allowing oil prices to fall by half or maybe three-fourths~ Texas would scream but get little sympathyo ·I see little prospect of such a happy event.

To conclude this part of my remarks 0 in a historical sense our nation is experiencing the pangs of an ending of economic growth. We.ate still a richly endowed nation" and in no sense am I talking about privation or doomsdayo . But we are finding it necessary to face problems new in our his­tory. We are resisting 11 and we are turning desperately in various directions for salvation. In recent years and espe­cially the election .of 1980 we have made a $harp ideological turn 0 reversing a course that begari with the depression of the 1930s.

Shakedown of institutions created during the last 50 years is taking place step by step.. At each step target groups are ranged against each othe.r for mutual checkmating u

while support is sought from other groups that, left untouchccd fol:'.' the mornent 1 enjoy a· false S·ecurity.. This is what David Stockma.n said in his famous interview published in the Atlantic. My guess is that early on the list for dismemberment is Social Security" I don't know what the calendar is regarding rural electric cooperatives.

The Situation in Agriculture

My comments on agriculture ·will be few; because the agricultural outlook is tied so closely to what happens in the economy.. Not since the 1930s has the connection been so close" We learned then that prosperity for agriculture rests on the. buying power of consumers. We are learning that lesson againo Agricul,ture is depressed for three reasons 0 and the first is that consumers find it hard to buy the higher value foods such as meat, milk, and eggs"

The second reason agriculture is in trouble is of course the seemingly relent.less rise in costs o: Higher cost of money

9

(interest rates) is extremely burdensome to farmers who bor­row heavily.. There is no need to dwell on this point ..

The third negative factor is differento It is the de­flation in vaJue of land, which reduces asset values on balance sheets. This was inevitable~ Land has been over­priced and many of us have said·that any slowing of inflation would · prick the land market bubble.

Until a year ago it was customary to couch all forecasts for agriculture in the prospects for exportsp which always were said to be rosey. It was easy to forget that more than three fourths of all farm marketings go to our own consumers. Ex~ port demand is not booming as it once did but ·it is still strong.. USDA predicts an export value for the year ending next September at $42,,,5 billiona down only a little from the $4308 billion of last ye2r.

Exports are lngging a bit because 01J.r buyers are experienc­ing depression, but also because our monetary policy that has made money scarce and interest rates high has simultaneously lifted the value cl:' the dollar in international exchange.. I cannot judge whether a stronger dollar was needed" I only know it makes our fa.rm products more costly to export buyers.

What of the future? My crystal ball is not merely cloudy -- the line almost all forecasters use.. Mine is bro~enu buried in a Columbia. landfill. If present national economic policies continue and control of inflation remains the single goal, it is hard to be optimistic.. In agriculture, asset values and matching debt load have been. based for years on an expectation of continued inflationo Reversal of that course will bring a rash of bankruptcies. Short of a welcome re­vival of general prosperity, that outcome can be averted only if rather drastic action be taken.. In a similiar situation in the early 1930s there was some scaling down of farm debts by creditorso Some new credit was advanced in government or government-sponsored programso It remains to be seen whether a similar course will be taken in the next year or two"

My analysis has been so doleful that I need to end on a high note" Obviously# we must have faith that our democracy is capable of responding to its crisiso A starting point is to face up honestly to the nature and depth of that crisis. This is a reason my comments have been so candido

Alsou one must believe that the longer run future for agriculture is bright. I will repeat the words I used in an­other talk. "We can all sympathize with the problems of Detroit but we could live without its automobiles" We cannot live without the product of our farms and ranches 6 nor can much of the world." I would much rather be associated with agriculture than with a dozen other industries I could nameo

10

including automobileso But I am not unmindful of the response farmers would make~ 11We too can see an island of safety in the harbor, but how do ·we get there? 11

A.bout all I can say is that we won't get there by swimming aloneo In the present situation we swim together or drown individually.. Interest groups in the economy will not sav~ themselves by cannibc:llizing. other groups, P..rim?-ri;l.,y by helping themselves to huge tax wr1teoffs and by abolishing public services.. A solution to our common dilemma must be-gin with a new sense of dedication that is comprehensive, for­ward looking, and generous 0 benevolent.. I regret that I do not feel that spirit among the American people just now. 1i·?e must hope that it will come before too long.