Looking Ahead at Harvest Time

November 1989

By Paul N. Wilson

WACO, Texas—[Late in May, Prof. Paul Wilson presented a paper entitled "Biblical Principles Applied to a National Agricultural Policy" at a Baylor University seminar here hosted by Dr. Richard Chewning. The paper will appear late next year as a chapter in a book on biblical principles and public policy that Chewning is editing. In view of the upcoming debate in Congress over the 1990 farm bill, we offer a few brief excerpts here.]

Covenant Economics

What does the Bible offer to agricultural policy makers at the end of the 20th century? Certainly the overriding biblical principle of a covenantal relationship between God and his creatures provides inspired guidance along the lines of charity, stewardship, and justice. In a Christian economic ethic, these principles are overlapping, interdependent, and must be lived out in a simultaneous fashion.

Charity is the willingness to share something of value to improve the life of another person. Stewardship is the covenantal responsibility to develop and share productive resources for the benefit of present and future generations. Justice, particularly distributive justice, concerns the relationship of a community to its many members. These principles truly help to point the way toward a more constructive future in the midst of multiple contemporary policy dilemmas.

Driving Forces Behind Contemporary Farm Policy

The primary objective of U.S. agricultural policy is to maintain a dependable, low-cost supply of food and fiber to the citizens of this country. Given the heavy investment in technologies and government programs designed to advance this aim in recent decades, however, a powerful desire has arisen among many to recover the social structures and agrarian values of the period before World War II. We might call this contemporary force "agrarian fundamentalism."

A second and competing force at work today is the economic calculation that farmers must go through to figure out how to make the best profit from their land. This "rent-seeking" drive has been guided ever more strongly in recent years by government subsidies and tax policies that have channeled the greatest benefits to large farm operations. This momentum obviously conflicts with the aspirations of agrarian fundamentalists.

A third driving force is the belief that modern science and improved productivity will insure the survival of American agriculture. Yet increased productivity has raised many ecological and economic problems that technology itself cannot resolve. For example, at the same time that we are investing in technologies to increase output, the federal government is pushed to establish programs to buy up the surplus so that producers can stay in business.

A fourth force at work today is the growing internationalization of U.S. agriculture. Domestic farm policies can no longer be developed and implemented without regard for international commodity and financial markets.

Applying Covenant Economics to Agricultural Policy

To maintain the goal of insuring an adequate and safe food supply within the constructs of a covenant economics framework, redirected farm programs will create gainers and losers in the agricultural sector and society at large. In covenant economics the gainers must be the poor and the land. The losers will be the rent seekers who have "farmed" government's policies for the last decade.

The first policy action based on covenant economics would be the gradual elimination by the year 2000 of the current price-support and loan programs which have been in existence in one form or another since the 1930s. Price subsidy programs create surpluses which the government must store and manage at a cost to the taxpayer. Subsidies obscure real production costs. Domestic and international market signals become distorted.

In place of the old system we need an approach that will do at least three things: 1) stabilize farm income through a new insurance program; 2) target policy benefits to promote better stewardship of the resources that make farming possible; and 3) emphasize rural education and development to overcome poverty and open up employment opportunities for more people.

The approach suggested here may succeed only if international trade negotiations lead to the lowering of subsidies throughout the world, since the U.S. is part of an international market. But coupled with trade reforms, the insurance program I have in mind would address many problems in the current system by shifting the risk in farming away from the government and towards the farmer.

Farmers would insure themselves against a particular income level. When income fell below that level, the farmer would receive a cash payment which would be 80 percent of the loss in net cash income or $50,000, whichever was lowest. The federal government would pay half the insurance premium. Premiums would fluctuate based on claims made the previous year. A stabilization fund also would be established as a financial reserve. Farmers would invest part of their profits in this fund and their contributions would be matched by the federal government. These private contributions would be tax deductible. Reserves from the fund would be used prior to receiving benefits from the income insurance program.

The question is whether those drafting the 1990 farm bill will have the political courage to redirect programs in such a radical way.

[Dr. Wilson is Associate Professor of Agricultural Economics at the University of Arizona in Tucson.]