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TEAMTCRK CR TROUBUB
Address
by
Chester C# Davis
President, Federal Reserve Bank of St. Louis
Before the
Twenty~fifth Anniversary Meeting
Tennessee Farm Bureau Federation
Maxwell House, Nashville, Tennessee
Wednesday evening, November 20, 1946
TEAMWORK OR TROUBLE
Eight years have passed since I last had the pleasure of meeting
with you here in Nashville*
Looking £ack, it seems like a century, so much
has happened. Organized human society has had {mother warning - which may
be its last - that manfs social and economic and political development is
lagging thousands of years behind his scientific and technological progress*
Events of the last eight years have raised in thoughtful minds the question
whether man is going to be able to master the machines he has built before
they destroy him - and only those of purest faith are confident that history
will record an affirmative answer.
These intervening years have seen miracles of production by
American agriculture, with the help of a benevolent Providence. During the
war the food and fiber grown on our farms sustained our armed forces and
those of our Allies, and helped keep civilian life going in friendly lands
abroad. With only 15 per cent of the nation9s labor force in their ranks,
the farmers of the United States brought food production 30 per cent above
the pre-war level and held it there. The food production of the farms of
the United States last year averted mass starvation that threatened many
millions of the earth's population.
Farmers came out of the war with a good record, and in better
shape to meet the inevitable shake-down than was the case after World War I«
In general their debts have been cut down and their cash and other assets
have increased. Tough and trying years of adjustment are ahead of us f but
the farm segment of our country has the stamina and the resources to come
through them in good fashion if only the rest of the economy behaves itself.
I suppose I could call that my text, the central theme of my talk tonight.
- 2 In looking at the present scene, and maybe prospecting a little
into the future, I have to go over much of the same ground I covered in a
talk to the Tennessee Extension folks at their Memphis meeting not quite two
weeks ago. A good many of them are here, and if they would rather "take a
walk11 than hear it again, that will fre a}l fight with me* I am a little timid
about trying to analyze future trends, anyway. Events have a way of popping
up in a year or two and making a liar out of the man who today thinks he
knows some of the answers*
First let us try to see farming in the right perspective in our
complex modern life. It is impossible to consider agriculture by itself, the
way you can fence off and cultivate an eighty-acre field. All of our interests
are interwoven in a tightt complicated, fast-moving economy*
In the long run,
conditions under which you raise and market your crops may be more nearly
controlled by developments entirely outside of agriculture than by what
happens in your own field* Decisions in Moscow or Paris or London, in the
houses of Congress, in board rooms of great corporations, or in labor union
halls will help determine whether you suffer or prosper in the years ahead*
Generally speaking, agriculture will fare better in an expanding
economy, with other groups in our national life busy producing goods and
services to the best of their ability and capacity, than it will under
conditions of curtailment, unemployment, and falling non-agricultural production
and purchasing power* Conversely, the rest of the economy is better off when
agricultural production is high, and prosperous farmers are exchanging their
abundance on a fair basis for the products of others.
Your president in his annual address to this Convention told you
that the principle of parity of prices or income should ever be held up as
a practical ideal in the minds of industry* labor, agriculture and other groups*
- 3 I think that thought will bear a little elaborating.
Parity does not mean
a fixed price level; it relates rather to the purchasing power or exchange
value of the products of one group wlien traded for the products or the labor
of another group•
The price level is, very important to a farmer who is in
debt* but in every other sense the most important consideration is not the
dollar price of a product§ but what it will bring when exchanged for other
goods and services*
If then we think of all the farmers as one trading group9 and all
the rest of the economy as another trading groupt there are two ways to hold
the exchange value of the farm output high, or to increase it.
One way would
be to cut down the volume of farm production. The other way would be to
increase the quantity of goods and services produced by the non-agricultural
group.
I favor the second way as being better for the Country, better for
the farmers, and better for the world.
If I could be granted the fulfilment of one wish for the growth and
prosperity of agriculture, it would be this*
let the non-agricultural
industries and labor find the way to keep working at full efficiency and
capacity turning out goods and services that can be absorbed by this Country
in a high standard of living - in better houses, equipment, electrification,
refrigeration, sanitation, clothing, ad infinitum.
With steady work and
efficient production, prices could go down without cutting profits or wages.
Real wages would increase, for the laborer is like the farmer - it isnft the
number of dollars, but what he can buy with his product or his labort that
counts•
Under such conditions, the farmer could produce abundantly and
still trade on good terms for what the other man makes; he could prosper at
lower price levels•
I think that really is the way out. The relation of
- 4 agriculture to the rest of the economy is changing radically and radical
changes are ahead of us. When Tennessee became the sixteenth state of the
Union, about 90 per cent of the nation's population lived on farms which
produced only enough surplus
to feed the 10 per cent who lived in town*
I told you a minute ago that 15 per cent of the nation's labor force
produoed in 1943 and 1944 the all-time record crops which fed and clothed
this nation and its own and allied vast war machines*
Not much more than
one-fifth of our total population actually lives and works on the farms,
although the percentage directly dependent on farming is much greater than
that*
So you see that with so few producing so much to feed so many,
the ability of the cities and towns to pay for and consume our farm products
is an all-important consideration to the farmers. That ability in turn rests
on the rate at which towns and cities, the mines and factories, keep busy
and produce.
In view of the importance to the farmer of this puliebeat of national
business activity, of employment and production off the farms, what is the
situation today, a little more than a year after flV. J. Day"? And what is
the outlook? We have seen the break in the stock market rub off 20 billion
dollars from quoted stock prices, and cotton fall over 10 cents a pound from
high to low in the last few months. Do these signs point to early, inevitable
depression?
Letfs Hake a look at the record11, as Al Smith used to say.
The number of workers in jobs, the physical volume of production
from factories and mines, and the total income payments of allfcirids#411
show that this nation has done an amazing job of conversion from war to
peace* At September 1 we had 58,000,000 men and women in civilian jobs; a year
ago the most optimistic hope in reliable quarters was for 53 to 56 million jobs,
• 5 Nine million out of 11,000,000 men and women discharged from armed service
are back at work, and many of the others are in college or- unable to work*
The volume of industrial production - not dollar valuef the actual goods
produced - is running three-quarters above the average volume turned out
from 1935 through 1939* National income is at double the pre-war rate* We
have a hugh backlog of unsatisfied needs, and enormously expanded liquid
resources in cash, bank deposits and bonds privately owned*
That is the record now. There are plenty of trouble signs all
around us f but I do not believe that early, drastic depression is inevitable*
The elements are present to support a high level of business activity for
some time to come, if we can only overcome two great big lfIFStf that confront
us* We can forge ahead:
1* If labor will realize that it must increase its production
in order to have increased wages* Without increased production,
increased wages are phony, and labor leaders know it and will
admit it, though they don't all practice it; and
2« If management will strive for lower prices as volume
grows, and will share fairly with labor and consumer the
benefits of increased productivity*
These are stubborn ^ifs" but they are very important*
They have
their roots in human attitudes, in human behavior* Perhaps you may say
there isnft much agriculture can do about these things* But they are
fundamental to farm welfare, and there ore some things we can do, as well
as some things we should not do* Back in 1938 at its annual meeting in
New Orleans, the American Farm Bureau Federation based its whole program on
the demand for teamwork among industry, labor and agriculture to develop a
fuller national economic life* That demand should be sounded again and
should not be permitted to die* And agriculture can set the right example*
m 6 -
Farmers have always done a better job than the others have done in keeping
on producing at capacity through bad times as well as good.
Letfs not be
jockeyed now into a position where we will be leading the procession toward
curtailment; instead, letfs try to get the others to march along with
agriculture in full production.
*t is the only way the economy can be made
to function at a high level.
I am not forgetting nor minimizing the great and difficult
adjustments agriculture will need to make when the war-born vacuums have
been filled. The foreign demand which we have tried to meet, will not
continue very long*
Restoration of the farms has A-l priority abroad.
Farm imports will be sought from countries which will accept payment in the
form of manufactured goods,
life can look forward to the time when we will not
need billion bushel wheat crops for human food* and when our cotton crop will
have to find, its level along with synthetic fibers and foreign growths. On
the other hand, milk, meat and other dairy and livestock products, tobacco,
poultry, fresh vegetables and fruit will have a sustained and expanding
market here at home if employment and wages and non-agricultural production
keep high.
You can see generally what I think is ahead of us. I expect to
see prices of farm products work lower as the war and early post-war demand
falls off*
I expect this tendency to develop and continue in spite of any
laws now on the books or enacted later, though we can all be glad that we
have legislation aimed to support farm prices for a limited period while
farmers get their house in order. Farm prices may show a tendency to break
before other prices do* because wages and controlled or managed prices are
"sticky"•
That is why I hope that volume will rise and prices fall in
non-agricultural lines as soon as possible. Too much lag would be dangerousf
- 7 ~
The increasing productivity per worker in farming to which I
referred before, has resulted because farmers, year by year, command more
and more capital per worker in the form of machines and land*
As one pair
of hands gats more and better tools to work with, their owner manages more
land and works it better; his unit costs go down? and the farm yields higher
returns and a better living per worker. This trend is going to continue;
it is inevitable.
It means better homes and a better life for those who
remain on the farms.
It also raises the question whether the growth of
decentralized industry throughout rural America will be rapid enough to
absorb the workers who are released from the farms as mechanization proceeds•
I do not think this development necessarily will be troublesome.
Again it is a question of the right human behavior. Think what it would
mean right here in the Mid-South if all our population at home became
educated to want and demand a full, healthful, rich diet I You know we can
keep 10 to 13 times as many people alive on an acre in cereals, as can be
fed on the livestock products from that acre, but we aren't going to do
that in this Country*
The trend is the other way*
We could use our farm
resources fully, with more workers than are now employed in agriculturef
if all our people could buy and consume the dairy^and-livestock diet necessary
to maximum national health.
Certainly here in the Mid-South we have a long
way to go before we produce at home all the high-type food of this sort we
need.
Early this month I spent a week driving over Western Tennessee.
I saw the enormous waste and destruction caused by row-cropping the hills and
slopes with cotton and corn. Hundreds of thousands of hills and slopes in
this country like those of Western Tennessee ought to be in permanent pasture
or legume and small grain rotation instead of growing sorry crops of cotton
~ 8 -
and corn* We have here in Tennessee great natural advantages for all-yearround pasture farming, marketed as livestock products, supplemented, of courset
by cash specialty crops like cotton and tobacco where they can be profitably .
and safely grown. Yet we buy year after year a large part of our dairy and
livestock products from the colder states up north where costly barns and
indoor feeding are necessary a considerable part of each year.
I could talk to you all night about the amating opportunities all
around us to build safer and more profitable farms on the ruins of the old
ones simply by using the land rights
Soil conservation and the kind of
farming that goes with it are not only right morally - they pay big dividends
in dollars and cents•
I donft believe there is any place I have ever seen
where the land is more responsive to good treatment - or to t>ad treatmentt
either - than right here in Tennessee. We can use a lot of the capital and
the labor we have here in putting complete soil-and-water- usd programs in
effect on individual farms•
^e have the capital, the tools, the nknow-how11#
the minerals, and the seeds and plants with which to work a farming revolution
here*
The only thing that stands in the way is human inertia - human behavior
again.
As Jo© Frank Porter can tell you, Ifve gone the full cycle from the
last war to this watching the evolution of farm policy aimed to provide
remedies for farm problems as they unfolded.
I am not afraid of the new or
the untried, or of legislative formulas, or of government action*
know there is no magic*
But I
Th^re is no substitute for efficient production,
which can be secured by the intelligent use of plenty of capital per man in
the form of land, tools, buildings, lime and fertilizers, and livestock*
Nothing can take the place of good management of our soil and water resources*
- 9 It will be better to seek high returns per worker through largevolume, low-cost production, than to try to get the same high return by means
of high prices for scarce, limited production*
But the rest of the economy
must play the game under the same set of rulest
There is a way to lick these problems here at home, and that is to
have genuine teamirork of la,bor and industry and agriculture rooted firm in
the understanding that the common good must have priority over the special
interest of any one group, We give lip service to that principle., but we
let it end there.* We are either going to practice that kind of teamwork, or
we are going to have trouble r plenty of it*
If each major group insists on
going down its own road, with no real meeting of minds on national policy,
we will court national disaster*
The same principle applies to the international
situation, as well, but now Ifm talking about the domestic scene*
We must have genuine recognition of tho principle that we canft
prosper by ''gouging11 each other ^ we just canft gouge our way to prosperity*
We may think we have progressed far from flthe public be damned11 attitude of
%Jfe early Vanderbilt, but each day gives evidence that we have not*
Genuine
teamwork based on the realization that we have to produce something before
we can divide it up, could yield us a gigantic national product to share*
It may take a scare, or worse than a scare, to make us realize it*
Now just a word in conclusion!
The Tennessee Farm Bureau is
rounding out 'twight its first quarter century of service and growth*
Over
much of that time I have had the privilege of knowing and working with your
retiring_ president, who has been your leader throughout every one of these
fruitful 25 years*
In his own quiet, effective way, he has seen to it that
this organization in its field stood for cooperation and for service. You
have had differences and clashes of interests, many of them, but you have
worked them
out% under his leadership, and gone steadily forward*
Why canft
- 10 we make that attitude9 that principle, work on the national and even on the
international scene? To make it work we need men with the understanding of
Joe Prank Porter, with his patience, and his good-humored appreciation of
the other manfs problems • We need them particularly at the points where
group policies are determined*
before we can have teamwork*
We must have men of vision and understanding
Teamwork - organized cooperation - is necessary
at home if we are to keep from throwing ourselves into a tailspin* The
inhabitants of this earth will have to practice international cooperation,
too, eternally and vigilantly, if civilized and organized institutions of
mankind are to be saved from destruction* This is a sober note on which to
close, but I hope you will remember it# Trouble is too faint a word to
describe what is going to happen to us unless we loarn how to cooperate to work as a team - and learn it at once*
000OOOO000
@FedFRASER