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and the fight against

A Part of the Official V. S. Government
Information Program on Economic

Prepared by
In collaboration with

In conformity with the National War Agencies Appropriation Act, 1945, which provides '.'No part of this or any other appropriation shall be
expended by the Office of War Information for the preparation or publication of any pamphlet or other literature for distribution to the public
within the United States," this publication is not for general distribution but is restricted to the use of media presenting information to the public.

JULY 1944


The American farmer has a high stake in the fight
against rising prices and the crash which would
be the certain consequence of an inflationary
boom. Many farmers know from bitter experience that the kind of price collapse which occurred
after the last war may mean not only temporary
hardship but the loss of everything patiently built
up through the years.
From their experience in both good times and
bad, farmers also know that their long-range
interests are closely linked with those of the rest
of the population. Although they by no means
shared to the extent they should have in the good
times of the 'twenties, in general farm income has
been relatively high when the Nation as a whole
has prospered, and has plummetted when depression and unemployment struck the cities. Farmers have the same stake as every other important
group in the population in the maintenance of the

kind of stable?price structure which is most likely
to perpetuate prosperity.
The farmer has a unique role in the fight to
prevent a recurrence of the roller-coaster price
movements which occurred during and after the
last war. He is not only an individual consumer
and worker, but the manager of an important
business. His actions in this latter capacity
significantly affect the Nation's struggle to hold
prices stable.
Two things, in particular, will play a part in
determining the outcome of that struggle: (1)
the farmer's attitude toward the price of his own
products; and (2) the way in which he manages
his wartime income. What farm people do in
these two important areas can either set the stage
for another post-war price collapse or contribute
to the long-term economic security of America's
farm people and^the Nation.

The remaining pages of this section describe the choices which confront the farmer with respect to prices and the disposition of his
wartime income. Part II outlines an information program which,
it is hoped, will help farmers to reach decisions that will serve their
own long-range interests and the Nation's in the critical days ahead.

The Problem with
Respect to Prices
It is generally agreed that there must be price
adjustments from time to time among various farm
products, as changes occur in the Nation's food
and fiber requirements, in production costs, etc.
However, a series of demands for excessive prices
on one commodity after another might lead to a
rise in the general price level which would sooner
or later reverse itself into deflation and depression.
According to Bureau of Agricultural Economics
figures, for 20 years, from 1921 through 1941, the
prices of farm products were low in relation to
other prices. Now, however, the situation is
reversed. At all levels, from the farm to the final
consumer, agricultural prices on the average are
relatively high.
To the extent that higher farm prices have contributed to a better economic balance* corrected
past injustices, and stimulated production, they
are of course a healthy development. It is important to maintain the stability achieved by
ceilings over, and support "floors" under, the
prices of farm products. In wartime any marked
rise in the general level of farm prices might only
spell trouble. I t ' can even be said that such
advances would not necessarily increase the
farmer's present purchasing power. Under war
conditions the farmer may have enough money
to pay the wages of additional farm workers, yet
be unable to hire them simply because they are
not available. Similarly, he may be unable to
buy improved farm equipment or many of the
things he wants for himself and his family.
Furthermore, in a war economy higher farm
prices would set in motion a chain of events
which would mean, ultimate losses for the farmer
and everyone elge. The cost of food now represents more than 40 percent of the total cost of
living. An increase in the cost of living inevitably leads to demands for higher wages on the
part of city workers. Higher wages mean higher
prices for most goods, including many of the
things the farmer must buy for his everyday
living and for the operation of his farm.
The farmer knows how detrimentally such a
spiral-like advance in prices works out from his
actual experience during the last war, when
neither farm nor nonfarm prices, nor wages, were
controlled. During that period the prices of farm
products rose very rapidly—but nonf arm prices
moved up sharply too; the farmer could buy very
little more with his larger income. By the fall of
1920 farm prices were already relatively low in
relation to nonfarm prices. By 1921, after the
collapse of farm prices which began in the 6ummer
of 1920, the farmer was at a very sharp disadvantage.
In this war, prices of farm products have risen
in about the same proportion as in the last war.
But the increase in the prices of commodities
bought by farmers has been held to one-third the

amount of the increase that occurred between
1914 and 1920, the peak of World War I inflation.
Thus in this war the farmer has had a real, not an
illusory, gain in buying power. And farm prices
have been brought into better balance with other
Any further significant increase in farm prices
would destroy the balance which has been achieved
under the present stabilization program. It is
extremely doubtful, moreover, if Higher prices
could be supported under peacetime conditions,
with the vast areas now devastated by war
returned to agricultural production and increased
acreage put under cultivation in this country. A
decline in prices would be the more likely prospect,
and Government action might be necessary to
avert a complete collapse. But an tincontrolled
rise in prices now might antagonize the very
groups who, under other circumstances, would
support such a program, for example, the millions
of people living on low and relativelyfixedincomes.
Although these people have often made common
cause with the farmer in the past, they would
unquestionably change their attitude if what they
regarded as profiteering made it difficult for them
to support their families. Broad social and
economic considerations alike suggest that the
farmer might jeopardize his own long-term welfare
and the Nation's by pressing for still further price
increases during wartime.
The Problem with
Respect to Income Management
How farmers use their wartime income will also
help determine whether we shall have economic
stability or a dizzy inflation followed by a collapse. The farmer's present economic situation
consitutes a challenge. Never before have cash
receipts from sales of farm products exceeded
expenses by so large a margin ag they do at
present. Misused, this money can jeopardize the
farmer's position and make him extremely vulnerable to a post-war collapse. Used wisely, it
can put the American farmer in an unprecedentedly strong position and contribute to national
In the 5 years preceding the outbreak of the
present war-—between 1935 and 1939—the realized net income of farm operators (gross farm
income minus total expenses of agricultural production) averaged $4.7 billion. In the 3 years
1941-43, it averaged about $9.4 billion. Furthermore, farm people are now receiving larger
amounts of money than ever before from nonfarm
sources—from wages for part-time work in factories and from royalties, dividends and profits
from nonfarm investments. In 1943, the'Bureau
of Agricultural Economics tentatively estimates,
farm people received an extra $3,7 billion from
these sources.
The increased importance offinancialmanagement today is even greater than these figures


PRICES (1910-14=100)
LAND VALUES (1912-14 = 100)

( World war I)

( World war H)

Land values
( World war I)

Land values
( World war U)

l.u. •i.ilnliiliA.lljJ.ulj.i.l.ii.l


NEG. 39932


might suggest. When farm income is low, a
farmer has little choice as to its disposition; much
of what he makes is usually needed for payment
on debts and living expenses. Today the farmer
has large sums he can use as he pleases—including
large amounts which normally would be expended
on purchases which now must necessarily be
Only once before did the American farmer have
an opportunity of equal promise to improve his
long-term financial position—during the period of
Xhe first World War. Farm people who lived
through that era will be the first to acknowledge
that most of them failed to take advantage of
the opportunity. Numerous individual farmers,
of course, acted wisely. But many became involved in a land boom which drove land prices
up about 70 percent between 1913 and early 1920.
With few exceptions, these increases were based
on the ill-founded hope that farm prices would
remain high indefinitely or even rise further. On
the basis of this hope, many farmers went deeply
into debt to purchase farm land. Farm mortgage
debt rose from $4.7 billion on January 1, 1914, to
$10.2 billion on January 1,1921. In the hope that
the downtrend was only temporary, many farmers
continued to go more deeply into debt even after the
agricultural depression started. The peak of mortgage indebtedness was not reached until 1923.
With the collapse of farm prices in 1920,
thousands of farmers lost their farms—farms
which in many cases represented the labor and
savings of years. The hardship caused by lower
prices was not limited to those who had contracted excessive debts, nor were farmers the only
people who speculated in land. In retrospect it
seems fair to say, however, that the unwise way
in which numerous farmers used their inflated
wartime income both contributed to the collapse
which ensued and made them more vulnerable to it.
The Present Prospect
Are farmers going to repeat the same mistake
they made a quarter of a century ago? This is
one of the most critical questions facing the
Nation today. It is frequently said that the
consequences of "last time" are too fresh in their
memory. And it is a fact that, to date at least,
in notable contrast to the situation during the
last war, both total farm-mortgage debt and total
short-term debt are being reduced.
But there are ominous storm clouds on the
horizon. In many areas there has been what
appears to be speculative buying of farm land.
Tracing the same pattern as in the last war, the
price of farm land for the country as a whole has
increased more than one-third in the last 3 years.
(See chart.) In some important agricultural
States increases of 50 percent and more have been
registered. In some instances land values have
already reached levels which many agricultural

economists feel cannot be supported on the basis
of the long-range prospects for the prices of farm*
products. And farms are changing hands at an
all-time record rate.
Furthermore, despite the over-all reduction in
farm debt, a great deal of new debt has been
incurred in connection with land purchases. Increases have been witnessed in the average size of
mortgages and in the average debt per acre on
farms being sold. Heavy debts are being placed,
on many of the farms now being bought. M. M.
Regan of the Bureau of Agricultural Economics
points out:
The average mortgage debt per acre
in sales financed by credit has increased
about 25 percent during the last 2 years.
About one-third of the credit-financed
sales currently being made involve
mortgages for 75 percent or more of the
sales price, and in almost four-fifths
such sales mortgages equal or exceed
50 percent of the sales price. The n u m ber of farms becoming heavily indebted
is more indicative of the real danger of
future debt difficulties than are changes
in the over-all total outstanding mortgage debt, ratios of over-all total debt
to total value of all farm real estate, or
the proportion of farms being sold for
Since speculation feeds on itself, there is still a
real possibility that many more farmers will
forget what happened "last time," start bidding
land prices up, and begin buying on a shoestring.
Dean W. I. Myers of Cornell University, former
Governor of the Farm Credit Administration, has
characterized present developments in the farm
real-estate markets as "an incipient land boom"—
and termed the situation "close to the number
one problem of America today." Of course,
^speculation in farm land is not confined to farmers,
any more than it was in the last war. But there
are particularly good reasons for calling farmers'
attention to the danger of the present situation.
As a result of the prosperity of recent years,
farmers generally have unprecedentedly large
sums of money at their disposal. Yet War Bond
sales have lagged in many rural areas. Demand
deposits and money in circulation, on the other
hand, have reached an all-time high.
In the present economic environment such funds
are liquid dynamite. They can be used to fan
the fuel of a wartime inflation—or they can be
put to work in such a way as to strengthen the
position of farm people and the Nation. George
L. Peterson, formerly an economist of the Department of Agriculture, writes "
the financial welfare of farmers during the next two or
three decades may depend to a large extent
upon the disposition which they make of their
wartime incomes."

*Are Farm Land Values Inflated? The Agricultural Situation, April 1944. Washington: U. S. Department of Agriculture, Bureau of Agricultural

A VIGOROUS, comprehensive information program is needed to make farm people better
acquainted with the economic facts bearing upon
their present situation and to put those facts in
long-range perspective.
Such a program cannot tell any individual
farmer how to manage his war income, Even in
the same area, the purchase of land may be undesirable for one farmer and desirable for another
because it permits him to enlarge his farm unit to
a more efficient size.
An information program can, however, suggest
to farm people the desirability of consulting their
long-term, as well as their immediate, interests in
connection with both their prices and their
financial management. It can point out that
their actions now will have a very important bearing on the way the country withstands the difficult
transition from war to peace. More than half the
farmers interviewed in a recent public opinion sur-

vey indicated that they expected a depression
after the war. But depressions are not something
to be accepted fatalistically, like bad weather.
Our own wisdom as a Nation, as reflected in our
actions both now and after the war, wiH help
determine whether we will have good times or bad
after the war. And the actions of farm people,
who are businessmen as well as consumers* will
be of particular importance. Information can
help make this clear.
The information program can also suggest
specific ways in which farmers can manage their
money so as to strengthen their own economic
position and the Nation's. There are many
things they can do which will at once help stabilize
the economy and provide protection against a
slump, should one occur. Almost all farm economists agree that certain financial practices are
desirable today both from the point of view of the
Nation and the individual farm family. Among
these are the following:

1 Reduce outstanding debts. Be cautious about contracting
new ones. This applies to all kinds of debts. Since both
principal and interest payments are harder to meet when farm
prices are low, indebtedness leaves farmers particularly vulnerable to price declines.

2 Don't pay too much for land. Stick to values based on
long-term earning capacity. Where land is bought at a
high figure to round out a farming unit, write off the excess
cost of such land as quickly as possible.

Q If labor and material are available,, invest in farm practices
which will increase the productive capacity of the land—in
such things as contour planting, strip cropping, terracing, and *
repair of farm buildings (within Government wartime limitations).
/L Carry adequate insurance. For example, a farmer who is
in debt might consider the purchase of low-premium term
life insurance, so that in the event of his death his family can
pay off the debt without having to break up the farm. A
farmer without debt might consider insurance that will protect his family when he dies and provide a saving reserve for
contingencies during his own lifetime.


rt Build financial reserves. The present level of farm income gives the farmer an unsurpassed opportunity to build
up reserves for the future. And the best way of doing this, as
is explained under point 6, is through the purchase of War
Part of the reserves set aside today should be earmarked for
specific post-war expenditures, including expenditures which
must necessarily be postponed at present. A part of the income farmers are receiving today should really be regarded as
payment for used-up capital. Reserves must be set up for
farm-machinery depreciation, building repairs now necessarily
being postponed, and depletion of soil fertility.
Funds should be set aside not simply to replace machines
presently in use, but for the purchase of new ones which will
contribute to more profitable operations. Still other reserves
might be earmarked for remodeling and building. Chris L»
Christenson, former dean of the University of Wisconsin College of Agriculture, and now an executive of a building supply
company, estimates that properly constructed farm buildings
could increase food output by as much as a third.
Many farmers find it useful to set up reserves against such
hazards as crop failure, livestock losses, and illness. Another
portion could be put aside for the realization of personal
plans—a new home, a long-wanted trip, home and farm
ownership, the children's education. Finally, as large a share
as possible should be put aside as permanent savings for the
£L Buy War Bonds. For a number of reasons War Bonds
represent the best haven for the financial reserves of farmers. Unlike the Liberty and Victory Bonds of the first war, the
present War Savings Bonds cannot decline in market price.
Although both patriotic and personal considerations make it
desirable that they be held to maturity wherever possible, they
are highly liquid; after 60 days they can be cashed in at any
time. Yet they are a bulwark against careless spending.
Most people are more hesitant about cashing in a War Bond
than about spending money in their pockets or drawing money
from the bank. Finally, War Bonds are an unsurpassed investment and yield a relatively high rate of interest.

One important informational job is to keep such
sound financial practices as the foregoing constantly in the forefront of farmers9 minds. In addition, forms can be made widely available which
will encourage farmers to take account of farm
machinery depreciation and make it easy to compute. The Agricultural Extension Service has

developed a Ten-Year Capital and Inventory
Record which represents years of experience in
helping farmers with their accounting problems
and nearly all of the state Extension Services have
prepared farm record books that fit the needs of
their particular area. Forms and records of tjiis
character deserve the widest possible distribution;

"I What is needed above all* else is factual economic material which shows the farmer how
much he personally has to gain from price stability
and the practices which contribute to it. Part I
contains some material of this character. Additional material may be obtained by writing the
Office of Program Coordination, Office of War
Information, Domestic Branch, Social Security
Building, Washington 25, D. C ; or the Office of
Information, U. S. Department of Agriculture,
Washington 25, D. C.

Q Informational material should give due credit
to the immense contributions the farmer is
making both to military victory and to success in
the fight against rising prices through his production achievements. It should be made clear that
the actions this program recommends represent
no more than additions—though highly important
ones—to things the farmer is already doing to
help win the war.

O This factual information, to be most effective,
must be linked with the farmer's personal hopes
and desires. The average farmer is not interested
in abstract economic theory. He is concerned
with such goals as improving the farm and leaving it to his children in good condition and free
of financial encumbrances. Similarly, he is
interesed in War Bonds because they will help
win the war and bring those children back
home sooner; and because they can contribute to
the realization of personal financial goals. To the
greatest extent practicable, economic data should
be translated into concrete, personal terms.

/jT Informational material should not fail to
remind farmers of the consequences of the unwise management of farm income a quarter of a
century ago. But the main emphasis of the
program should be positive rather than negative.
Above all, it should not be suggested that inflation is inevitable; the belief that it is encourages
speculation and other actions which may, in fact,
make inflation inevitable. Continued stress
should be put on the innumerable benefits to
farm people themselves of wise money manage-

ment now.


This program is part of a comprehensive information program on economic
stabilization for the entire public. Information media and Government officials can obtain a booklet on the overall * program by writing the Office of
Program Coordination, Office of^War
Information, Washington 25, D. C.
Also available is a booklet called
Planned Spending and Saving, which
outlines an information program developed to implement the over-all pro-

gram. The Planned Spending and
Saving Program emphasizes specific
practices which will enable individuals
and families to manage their wartime
income to best advantage.
Advertisers interested in this special
anti-inflation program for farmers can
secure a "Formula Folder," containing
suggestions for ads, by writing the War
Advertising Council, 11 West Fortysecond Street, Suite 1781, New York 18,
N. Y.