Farm Parity

John Ford

Dairy farms form a big part of Vermont’s economy and character and the ongoing loss of farms continues unabated. As of spring 2010 there are about 1,000 dairy farms in Vermont and according to the worst case scenario the Agricultural Dept. expects that number to be reduced to 800 farms in less than eight months. In Vermont in 1947 there were over 11,000 dairy farms. To address this problem adequately we need agricultural parity, similar to the programs developed in the 1940’s and subsequently phased out in the early 1950’s. Parity is simply a measuring device that puts a fair price floor on the value of raw commodities at a level that equals all the costs for production including labor and capital costs. Translated this means we pay farmers a live-able wage. Without parity, land and farms will continue to disappear because there is little economic incentive to farm when you cannot break even.

During the last Depression there were a number of careful studies done on farm parity. Early in 1942 the US Banking and Currency Committee adopted a policy idea of parity, and then Congress passed the Steagall Amendment which provided a full 100 percent parity for all raw materials.  Our recovery from the Depression started in 1942 with the passage of the Steagall Amendment and full employment. Contrary to the popular opinion, it was not the War that brought us out of the Depression or Roosevelt’s New Deal, although both played a role. It was raw materials parity that lasted until 1952 that provided full employment and a stable economy that brought us out of the depression.

With the passage in 1953 of the Farm Act, parity was phased out and the goal of this Act was clearly to move millions of small farmers off the land and replace them with corporate owned super farms. During this period the Committee For Economic Development CED was busy churning out policy papers outlining the necessity of moving farmers off the land. “Removal of excess resources (read farmers) to be utilized in other sectors of the economy, to generate greater returns on investment.” The problem of course with large numbers of small farms and why they had to be phased out is because farming is an activity which has a multiplier affect on the money in an economy, keeping that money circulating and multiplying in the real economy and out of the grasp of the Financial sector. The CED went on to recommend the elimination of one third of the farm population over a period of five years by enforcing low parity. That number translates into more then 2 million farmers moved off the land. They outlined the benefits to the Financial sector:

  1. Increased return on investment due to greater borrowing from the corporate mega- farms.
  2. With over 2 million farm families entering the urban labor pool, the net result would be lower wages and increased profits for corporations.
  3. Low priced agricultural products would increase foreign trade.
  4. Move farmers off the land to centers of urban employment and you break the bonds that create real communities and the character of place and people. The net result is that you now have a population that is more ‘pliable’ for corporate profiteering.

In concluding the report the CED states that, ‘’A recurrence of agricultural instability must be kept in mind so as to maintain an atmosphere relatively free of the political pressures from farmers in the past.”

No doubt the policy wonks at the CED when talking about the ‘political pressures from farmers in the past’ were worried about another populist rebellion like the one  organized by farmers in North Dakota in the 1920’s that finally resulted in the formation of the Non Partisan League and the most successful populist movement  in the country. Tired of being foreclosed on by the banks, having grain prices manipulated by commodities brokers and being ripped off by the railroads for grain transportation, they took over the legislature of the state of North Dakota and then formed a state bank, the Bank of North Dakota, built state owned grain elevators and negotiated better rates with the railroad.

There are a number of lessons to be learned from the farmer populist movement of that era and one of the most notable is that the Bank allowed the people of North Dakota to invest in themselves as a state, as opposed to investing in Wall St. . It was also Wall St. who at that time was the principal adversary against the formation of BND. Because North Dakota has had the ability to invest in itself and recycle the interest proceeds from these loans back to the state fund it is the only state today currently running a budget surplus and adding jobs rather than losing them.

Though there are a number similarities to the problems facing Vermont farmers today and the North Dakota farmers of the 1920’s, most notably depressed commodity prices and the inability to break even, let alone earn a reasonable profit, the times we live in are very different and they are different because of the hegemony of the financial sector and their absolute control over government. There is no sovereign government in the US today. The banks and finance are now sovereign. It’s a different playing field and finance always wins the game due to the unseen mechanism of compound interest in the greater economy, that continually extracts more and more wealth and value from the producer sectors, forcing everyone to compete against the compounding spiral of interest in the market place. The net result is you work harder, stress more and pay more for less. That is, if you can even manage to keep yourself employed.

Parity is an indispensable lever for monetary/economic stability. Parity provides leverage because its net affect is to act as a ‘multiplier’ within the economy creating jobs and stimulating spending.  When raw materials work through to the top of the processing ladder, those base price dollars for raw materials will multiply themselves five times over. When you move parity into the agricultural sector this multiplier changes again to a factor of seven. What this means is that when a dollar of gross farm income can generate a dollar of profit within a parity program, that dollar of profit generates seven dollars in the regional income on an earned basis.  In theory, a 10 million dollar increase in Vermont’s gross agricultural profits would translate into 70 million dollars in regional income assuming the farm commodities were sold within the state.

Given that we have now had over half a century of Federal Programs intent on destroying small farms and replacing them with mega-farms it is clear that the only way to create agricultural parity is within a regional economy outside of the US dollar. In the transition toward economic and food security in Vermont, sustainability will never be possible within a debt currency system that is the single most unsustainable component of our economic ecosystem. And since currency is the meta-system under which all other systems are shaped, it is a complete contradiction to think that a unsustainable money system will yield anything but long term instability in any sector outside of finance, which  ultimately becomes the sole beneficiary in any debt based monetary system.

Sovereign credit money is a public resource.  It is not a fractional reserve currency based on debt. A free and self-determined people do not borrow money to manage the economic affairs of the State. They create that money, that can then be used to fund parity, create jobs, rebuild farms, all necessary components of the localization network.

In building an agricultural based economy in Vermont, the implementation of long term parity programs acts as the catalyst to spark the initial transition into a parallel currency exchange that provides the funding for these programs that become the foundation for a local economy.

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