Editorial Notes Questions of how to do it are inseparable from the thought of huge produc tion, now and after the war. The LAND POLICY REVIEW devoted its last Fall issue to farm labor. Now it considers a few of the phases of the financing problem both in the large and in the concrete. AGRICULTURAL ECONOMISTS comprise many of the contributors to this number. They include DONALD G. HORTON, GERHARD J. ISAAC, and M. M. REGAN among the authors, and NEIL JOHNSON and E. C. WEITZELL among the book reviewers. All are members of the BAE. The authors are specialists in the lines of which they write and the reviewers in lines that touch the subjects of the books they here consider. NORMAN J. WALL is in Charge of the Division of Agricultural Finance of the BAE. LUCILE W. REYNOLDS, formerly Chief, Family Credit Section, FCA, is now field agent, Home Demonstration Work, Eastern States, in the Extension Service. ALLEN B. MACMURPHY is an information specialist in the AAA. RAUB SNYDER has served the Farm Security Administration in several capacities and is now Director of its Cooperative Division. BOOK REVIEWERS include RUSSEL LORD, well-known writer and the editor of THE LAND who has a department in Progressive Farmer that stirs an exchange of opinion among nearly a million farm families; OLAF F. LARSON, Social science analyst, BAE; JAMES S. HEIZER, Acting Director, Management Division, FSA; MARY G. LACY, who made the BAE library known the world over and is now cultivating ancestral acres in Virginia; CHARLOTTE CHATFIELD, in Charge of Nutritional Needs Section, Civilian Food Requirements Branch, FDA, and Franklin Thackrey, information specialist, BAE. Land Policy Review is published quarterly by the Bureau of Agricultural Divergent Views By DONALD C. HORTON. Agricultural credit policy has always been a fertile field for diverging opinions. This economist shows why and discusses views and possibilities. PUBLIC agricultural credit policy has seldom, if ever, been free from divergent views-primarily because credit policy, in whatever field, is a powerful instrument to restrain or to facilitate economic change. And because individuals and groups usually have divergent interests in particular kinds of economic change, credit policy, like taxation and other measures that have farreaching economic effects, must be expected to be a controversial topic. Those who would contribute significantly to formulation of public credit policies during and after the war must be prepared both to isolate the deeper lying issues out of which divergent views on agricultural credit grow and to indicate the credit policies most likely to be effective in promoting alternative pub lic objectives. Nevertheless, they cannot be expected to give complete answers on those aspects of agricultural credit policy that depend on decisions yet to be made on still more basic questions. In fact, many of these questions are inherently political and ultimately must be decided on that basis. At times, however, the need for a particular kind of agricultural credit policy has been so widely recognized that little difference of opinion has developed on major objectives and methods. The need for a vigorous Federal loan program to refinance farm debts in the worst years of the 1930's-to stem the tide of foreclosures and to help maintain the solvency of institutional lenders holding our savings-was widely accepted by economic groups that frequently had had divergent interests. The problem then was largely one of putting into effect an agricultural credit program to help retard depression changes that were detrimental to the interests of almost all groups. But once the emergency phases of the debt-refinancing program had passed, underlying divergent views on agricultural credit policy became pronounced. What should be the future role of the Federal credit agencies that had originated with the depression or had been markedly changed to meet the emergency situation? Should their structures be adjusted gradually to functions formerly performed by such agencies, or should the agencies be continued in their existing form? Such questions had to be considered as aspects, not only of agricultural policy, but also of general financial policy. Financial Machinery In the broader field of agricultural policy in the post-depression period, some stressed immediate measures to facilitate agricultural adjustments that would place farming as an industry ultimately on an independent financial basis. Thus, the development of financial machinery whereby farmers can obtain credit at the lowest cost consistent with the risks and the necessary administrative expenses of rural lending becomes a principal correlative objective. But the central policy urged by others put greater emphasis on assisting farmers in a weak financial position to improve their economic situation. Credit policy is utilized as only one of several methods to achieve this end. Accordingly, with this viewpoint, cost is evaluated with other public expenditures for the purpose of rehabilitation. What Methods? But in some respects, conflicts have been more apparent than real between "subsidized credit" and "business credit," as well as between supervised and unsupervised credit. Assuming that the public does bear responsibility for rural rehabilitation, the credit issue becomes mainly a question of whether special publiccredit arrangements or some other instrument-such as direct financial aid and general price policiesshould be the primary medium through which to deal with the situation. Moreover, it should be recognized that many of the other questions of agricultural policy in the late 1930's that had credit-policy counterparts were partly questions of the most appropriate first steps to be taken after the depression to help. place the farming industry ultimately on a more secure business basis. Answers given to such questions often depended on the degree of general recovery expected to result from the national recovery program as a whole. Roots It is among these diverse issues in agricultural policy-issues both apparent and real-that divergent views on the agricultural credit phase often have their roots. Consequently, failure to trace back such views to more basic issues, and to deal with them at that level, may mean abortive efforts to reconcile apparent conflicts within the credit field itself when the real conflict lies elsewhere. Some pre-war issues in agricultural credit policy carried over into the war. Emergence of wartime problems now has overshadowed other issues. To this accumulation of modified depression and recovery issues have been added others that have their roots embedded in underlying current questions growing directly out of the war and the prospective post-war situation. Those who think the war period the time for certain of the subsidized farm credit agencies to narrow their operations now can point to the improved position of most farmers and the availability of funds from customary credit sources. Those who see in the war situation an enlarged field for special Federal credit agencies can point to the functions of special credit arrangements in promoting needed short-run readjustments. Different Concepts In this controversy, two somewhat different concepts of credit are involved. Those in the first group seem to regard "credit" in the conventional business sense of the term. So prospective ability of the farmer to repay necessarily occupies an important place in wartime loan policy. This is a different concept from that which places more emphasis on credit as one of several channels through which farmers can be induced to raise necessary wartime products. It is true that credit mechanisms are the same in both cases, but standards governing loan policy may be decidedly different. A basic issue here is whether the production policies adopted by the Government for the war shall be partly implemented through special arrangements for financing agriculture or almost entirely through noncredit measures, in which case the tendency is to place more emphasis on financing through the conventional business credit agencies. Post-War Debts Despite our concern over the kind of rural economy we may have after the war, the need for maximum production now reduces the emphasis given to the effects of wartime credit and other policies on the later rural economy. But one current issue in agricultural credit policy definitely relates to longer run objectives-the credit policies to be pursued during the war to safeguard the post-war financial structure of agriculture. Concern over the possible post-war debt situation of farmers is reflected in proposals to control farmers' use of credit. Is there any real conflict of a program involving selective credit expansion by public agencies to facilitate agricultural production with one involving general restrictive credit controls to safeguard the financial structure of agriculture? This may depend on the qualitative attributes with regard to selection of borrowers and liability for repayment that are attached to the additional farm credit. It has been pointed out that terms and conditions of credit extended by a special public agency can be so arranged that the debt representing the counterpart of the credit used by farmers need not fall entirely on the farmer borrowers. The debt carried over by the farmer can be made to conform to his ability to repay, provided that a contingent burden is assumed by a public agency; or arrangements can be made through public guarantees to insure the farmer enough income to keep his post-war debts from being unbearable. Even more basic issues, however, are concerned with the question whether, after all, special financial risks inherent in wartime farm production should be carried by the Government and whether special arrangements associated with the credit mechanism are the most appropriate means. Full consideration of these more basic issues as integral parts of the whole problem of wartime control of agricultural indebtedness is desirable. New Combinations As we move from the wartime situation to the post-war period of agricultural readjustments, it seems probable that underlying agricultural questions that have been pushed aside temporarily by the war will reemerge, and with them their agricultural-credit counterparts. There will be differences of opinion not only on the kind of rural economy we should strive for after the war but also on the instruments of public policy to be used; and these differences will be reflected in divergent views on the farm credit phases of these national problems. If, toward the end of the war and immediately thereafter, farmers should borrow extensively to buy Far Beyond land at sharply rising prices and for other excessive expenditures, as they did during and after World War I, it seems reasonable to expect that the credit measures and other controls needed to discourage such action will become active issues. And it seems reasonable to expect that post-war agricultural credit policies ultimately will need to be concerned with arrangements assoIciated with the credit mechanism to cushion and render more orderly the post-war readjustments to a peacetime economy. Credit mechanisms are especially well adapted to such functions. Other post-war developments may require that this mechanism be the vehicle for public policies with regard to international trade in farm products, international food policies, and other phases of our relation to world agriculture. One thing is sure. Agriculturalcredit issues will continue to be a mixture of old and new, and will change with conditions that cannot be fully foreseen. Answers to postwar credit questions cannot be given entirely on the basis of "credit principles" concerned mainly with the functioning of the credit mechanism itself. As in the past, it will be necessary to delve still deeper for important parts of the answers. Consequences of contour farming reach far beyond the individual farmer's pocketbook; so do consequences of careless and ruinous cultivation. -RUSSELL LORD |