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FEDERAL RESERVE BANK OF RICHMOND

MONTHLY
REVIEW
The Changing Role of Gold
Fifth District Ports—Maryland
The Fifth District Farmer
District Economic Growth







h e c h a n g in g r o l e o f g o l d
Gold has been much
in the news in recent months. Newspapers around the world have
carried such headlines as “ Gold Price Rise U rged” ; “ French Attack
Paper Gold Plan” ; “ Tw o-Price Gold Market Established.” These headlines
reflect the most recent developments in the turbulent history of gold,
developments which may well foreshadow fundamental changes in the role
of gold in the international monetary system. This article reviews briefly
the history of gold as a monetary metal, discusses the present role
of gold in the international monetary system, and describes the changes
that appear to be taking place in that system. • Gold has played an
important role in man’s affairs since the dawn of history. It has acted as
a store of value, a medium of exchange, and as a symbol of beauty
and worth since ancient times. Gold coins are said to have existed at
least as early as 3000 B.C., but gold did not become the dominant monetary
metal until fairly recently. A t various times and in various cultures a
large number of other commodities (e.g., cattle, tobacco, corn ) as well as
such metals as iron, lead, tin, and copper were used as money. Money
in the form of non-metallic commodities was usually found in primitive
societies, however, and as economic and financial systems
became more sophisticated there was a tendency to move from these
commodities to metallic money, and of the metals, gold and silver became
the most popular. • For centuries silver was a more important
monetary metal than gold, perhaps because the supply of gold was too
limited to permit it to serve the monetary function adequately. A t any rate,
silver was the predominant metal in ancient Greece and Rome
and the British pound was originally a pound of silver. Many countries
were on a silver standard at one time or another and some countries
adopted bimetallic standards, with two metals, usually gold and silver,
serving as standard money. The United States was 011 a bimetallic standard
from 1792 until it was forced onto an inconvertible paper standard during
the Civil W ar. • Great Britain, in a series of actions between 1816
and 1821, became the first country to adopt the modern gold
standard but most major countries did not adopt this standard until
after 1870. Thus, the commonly-held view that the gold standard is the
only legitimate standard and that its history runs back to ancient

T

times is erroneous.

Indeed, the full-fledged international gold

standard enjoyed a relatively brief reign in the period between 1875 and
the outbreak of W orld W ar I.

A ll of the belligerents in that war

except the United States went off the gold standard.

Most of them

returned to some form of gold standard after the war but abandoned it again
in the 1930’s.

After W orld W ar II the non-Communist countries of the

world established the present gold exchange standard centered around the
International Monetary Fund.
The Gold Standard

This system will be described later.

U nder the traditional gold standard that existed in

the decades prior to W orld W ar I, a nation defined its basic monetary
unit in terms of a certain quantity of gold, provided free coinage of
gold for its citizens, and maintained convertibility of other kinds 06
money into gold coin.

A free market in gold existed,

and citizens were free to import or to export gold.
A ccording to the theory upon which the gold
standard was based, marvelous things followed the
adoption of this standard by the major countries of
the world. For one thing, definition of currencies
in the common denominator of gold immediately
established the value of each currency in terms of
every other currency on the standard. And since
each government agreed to buy or to sell gold at
the official price, the market exchange rate for any
two currencies could not diverge very much from
the official par value for any length of time. A d ­
vocates of the gold standard looked upon this
stability of exchange rates as one of the chief virtues
of the system because they believed exchange rate
stability encouraged trade between nations.
Another virtue attributed to the gold standard was
the adjustment mechanism which was supposed to
ensure equilibrium in a country’s international ac­
counts. W hen a country began to run a deficit, the
value of its currency in the exchange markets de­
clined. W hen the market rate fell below the official
rate by more than the cost of shipping gold, the
deficit country lost gold to surplus countries. This
reduced bank reserves and the money supply in the
deficit country, and raised interest rates and de­
pressed prices and incomes in that country. Just
the opposite occurred in a surplus country. M ore­
over, in many instances the deficit country would
initiate a restrictive monetary policy and the surplus
country would follow an expansionary policy.
These policies served to reinforce the effects of
gold flows on the economies of the deficit and surplus
countries. In the deficit country the decline in prices
and incomes encouraged exports and discouraged im­
ports, while higher interest rates caused an inflow
of capital from the surplus countries. In the surplus
countries, prices and incomes rose, encouraging im­
ports and discouraging exports, while lower interest
rates encouraged an outflow of capital. Thus, the
disequilibrium was eliminated by changes in both
trade and capital accounts.
The protection of the nation’s monetary reserve
was the primary objective of monetary policy under
the gold standard. Deficit countries were subjected
to an iron discipline which required them to deflate
their economies until balance of payments equilibrium
was restored. Surplus countries, on the other hand,
•sometimes adopted expansionary policies, even at
the cost of some inflation. The demise of the gold



standard resulted primarily, perhaps, from the re­
luctance on the part of policy-makers to permit
economic policy to be dominated by balance of pay­
ments considerations.
The IM F and the Gold Exchange Standard T he
breakdown of the gold standard in the 1930’s was
followed by a period of chaos in international eco­
nomic relationships, with economic warfare the order
of the day. A s depressions swept the countries of
the world, each country tried to better its own po­
sition at the expense of its neighbors. Tariffs were
raised, direct import and exchange controls adopted,
and many countries engaged in competitive devalua­
tion. The most notable result of these activities was
a disastrous reduction in world trade. Consequently,
during W orld W ar II, world leaders began planning
an international monetary order based on coopera­
tion among nations to replace the economic anarchy
of the 1930’s. Out of this came the Bretton W oods
Conference and the present international monetary
system centered around the International Monetary
Fund.
The new system was designed to achieve the stable
exchange rates of the gold standard while avoiding
the harsh discipline of the gold standard. Exchange
rate stability was achieved by providing that member
countries of the IM F establish par values for their
currencies expressed in terms of gold or the U. S.
dollar, with each country agreeing to maintain the
market value of its currency for spot transactions
within a range of 1% above or below the par value.
A member may satisfy this requirement by agreeing
to buy or to sell gold at prices within limits es­
tablished by the Fund. A n attempt was made to
avoid the harsher features of the gold standard by
authorizing the Fund to provide medium-term credit
to countries experiencing temporary balance of pay­
ments deficits, and by adopting the adj ustable-peg
principle with respect to exchange rates.
Each member of the Fund was required to pay
25% of its Fund quota in gold or U. S. dollars, with
the remaining 75% payable in the country’s own
currency. The Fund makes loans to members by
selling them needed foreign currencies in exchange
for their own currencies, and a member’s borrowing
facilities are determined by its quota. Fund holdings
of a member’s currency may not exceed 200% of
the member’s quota, so the Fund may extend credit
in an amount equal to 125% of the quota, although

3

it is possible for the 200% limitation to be waived.
Not all of this drawing right is available immediately
and without question, however. What is known as
a member’s gold tranche position is normally de­
termined by the difference between the member’s
quota and Fund holdings of its currency. This
amount is available almost automatically and without
question, but drawings beyond that amount may be
subjected to various restrictions. For this reason,
most countries consider their gold tranche position
at the Fund as a part of their international reserves.
The extension of intermediate-term credit by the
IM F is designed to help countries experiencing tem­
porary balance of payments difficulties, but for
countries with persistent surpluses or deficits, the
Articles of Agreement provide for the possibility of
changes in official exchange rates.
A ny member
country may change the value of its currency in
either direction, but changes greater than 10% re­
quire prior consent of the Fund. This feature of
the system has not worked out as the founders of
the system had hoped.

The tendency to look upon

devaluation as a sign of weakness and a breach of
faith persists.

This is particularly true for the larger

countries, and recent experience indicates that it is
difficult or impossible to devalue one of the key
currencies without endangering the entire system.
The Role of Gold

U nder present arrangements,

gold is the basic international reserve, the ultimate
A N N U A L A D D IT I O N S TO FREE W O R L D
G O L D SUPPLY
$ Billion

------------------------------------------------------------------------------------------- 2.00

----- 1.50

1950
Source:

1955

1960

International Financial Statistics, IMF.




1965

means of settling claims between nations, just as it
was under the gold standard. But as the system
evolved in the postwar period the dollar, and to a
lesser extent the pound, acquired the role of reserve
currencies. A t the time the present system was
being established, the economies of most of the
countries of Western Europe lay devasted from the
war and their international reserves were virtually
nonexistent. Only the United States had the enor­
mous economic strength to assist these countries to
restore their war-shattered economies, and only in
the United States could the Europeans acquire the
goods they needed.
Thus, the dollar became a much-sought-after cur­
rency. The small deficits that began to appear in
the United States balance of payments in the early
1950’s were welcomed both here and abroad. Be­
ginning in 1958, however, the U. S. balance of pay­
ments deficit became a serious problem, and in the
following 10 years the United States lost almost $11
billion in gold to foreign countries. A t the same
time, the dollar reserves of foreign countries rose
sharply, particularly in the period since 1959. For
all member countries of the IM F , gold and foreign
exchange reserves rose by $13.4 billion between the
end of 1959 and the end of 1967. O f this total, gold
reserves increased only $1.6 billion, while foreign
currency reserves (mainly dollars) rose by $11.8
billion.
Thus, a large part of the additions to reserves in
the last 8 years were in the form of dollar holdings
of foreign governments and these increases resulted
largely from the U. S. balance of payments deficit.
This method of adding to reserves was acceptable as
long as foreign governments were eager to acquire
dollars, but most of the world’s major countries now
have all the dollars they want. But gold production
in recent years has been barely sufficient to supply
the needs of industry, the arts, and private specu­
lators, so that little new production has gone into
monetary reserves.
If new gold output goes into private uses and
the U. S. deficit is eliminated, how are the nations
of the world to add to their reserves ? This question
assumes, of course, that additions to reserves are de­
sirable, a point on which there is by no means
unaminous agreement. Some believe that the greatest
need is for a more efficient adjustment process to
eliminate deficits. But there is a widespread belief
that regular additions to reserves are desirable and
many believe it is better to have increases in reserves
determined by some policy-making group than by the
balance of payments deficit of a particular country.
These considerations, together with the recent gold

crisis, led to two important steps affecting the future
of gold in the world’s monetary system. The first
of these was the creation of a two-market system for
g old ; the other was an important step toward the
establishment of a new international monetary re­
serve, the Special Drawing Rights.
W ith regard to the first, it should be remembered
that the United States is under no obligation to en­
gage in transactions involving gold with any private
individual or institution at any price. For many
years our government has agreed to buy and to sell
gold in transactions with foreign official agencies;
i.e., central banks and treasuries. Under the Articles
of Agreement of the IM F , this is deemed to satisfy
our obligations with respect to exchange rate sta­
bility. Nevertheless, private markets for gold exist
in a number of countries, the largest and best known
being the London market. And from late 1961 until
last March 17 the price of gold in the London market
was stabilized by a group of central banks operating
what was called a gold pool. A s a result of specu­
lative activity in the London gold market in 1960,
the Federal Reserve System and the central banks
of seven Western European countries entered into
an informal arrangement whereby each agreed to
supply gold for the purpose of stabilizing its price in
the London market.
The Washington Agreement of March 17 dissolved
the gold pool and separated official gold transactions
from operations in private markets. The United
States and the six other active members of the nowdefunct gold pool (France withdrew in 1967) agreed
to maintain the official price of gold at $35 per ounce.
From that date on, they agreed, officially held gold
should be used only to effect transfers among mone­
tary authorities and, therefore, these governments no
longer would supply gold to private markets. M ore­
over, they declared, in view of the prospective es­
tablishment of the facility for Special Drawing
Rights, they no longer felt it necessary to buy gold
from the market. They agreed that their govern­
ments would not sell gold to any monetary authority
to replace gold sold in the private market. A num­
ber of other central banks have indicated their sup­
port for the new system.
Strict adherence to these policies would mean that
the market price of gold would be determined entirely
by private supply and demand, and it could rise above
or fall below the official $35 price. Official monetary
gold stocks would no longer be depleted by sales to
the private market, but they also would no longer
be increased by purchases in the private market.
T h is latter point underscores the im portance
of the step toward creation of the Special Draw­



ing R ights taken at Stockholm on M arch 30.
Much has been written and said about Special
Drawing Rights in recent months, and space does
not permit a discussion of all aspects of this new
reserve asset. Perhaps the most interesting feature
of S D R ’s is that they would be created by entries in
the books of the IM F and allocated to member
countries in proportion to their quotas. Otherwise,
they would perform the function of a reserve asset
in much the same manner as that function is now
performed by gold. A country in deficit might
need dollars to support its currency in the foreign
exchange market, and it would be able to acquire
them by selling S D R ’s to another country, perhaps
one with a balance of payments surplus. Thus,
S D R ’s would be held by and transferred among
monetary authorities. They would not circulate in
private markets.
The establishment of a facility to create Special
Drawing Rights would represent the most funda­
mental reform in the international monetary system
since the Bretton W oods Agreement in 1944. But
there are important hurdles to be overcome before the
new facility can be inaugurated. The success of the
two-market system for gold and future prospects of
the S D R ’s both depend to a considerable degree
upon improvement in the U. S. balance of payments.
Success of the two-market gold arrangement de­
pends heavily upon the cooperation of foreign mone­
tary authorities, and their cooperation could be in­
fluenced by their estimates of our ability to achieve
equilibrium. Moreover, one of the conditions for
activation of the S D R ’s is the achievement of a better
equilibrium in the balance of payments of member
states.
W hen the new reserve asset comes into being, its
impact on the monetary system will depend upon how
soon S D R ’s are activated and the rate at which they
are created. Activation is unlikely to occur before
late 1969, and it might be much later than that.
Moreover, S D R ’s probably will be created at a slow
rate, at least in the early years, and it may be many
years before they constitute a major portion of total
international reserves. So the creation of S D R ’s
does not imply the immediate demonetization of gold.
A s a matter of fact, S D R ’s are designed to supple­
ment, not to replace, existing reserve assets. Never­
theless, as time goes on and as S D R ’s become an in­
creasingly larger part of total reserves, the importance
of gold is likely to diminish. It is unlikely that the
precious metal will ever again occupy the dominant
position in the monetary system that it enjoyed in
the late nineteenth and early twentieth centuries.
Aubrey N. Snellings

5




MARYLAND PORTS
f a c il it ie s
in le ts

fo r

and

• T id e w a te r

w a te rb o rn e

harbors

in

p r o t e c t io n f r o m storm s.
th e C h e s a p e a k e a n d
the

accessib le .
in

to tal

th e

capes,

Chesapeake

e x c e lle n t

are

Bay

Canal

m ake

and

th e

num erous

w h ic h

th e

oth er

A tla n tic

• B a l t i m o r e , th e N a t i o n 's t h i r d

w a te rb o rn e

ha s

T h e re

a ffo rd

T w o e n t rie s in t o th e B ay, o n e t h r o u g h

D e la w a re

V irg in ia

M a ry la n d

com m erce.

com m erce

and

fo u rth

betw ee n

Ocean

e a s ily

la r g e s t s e a p o r t

la r g e s t

in

v o lu m e

o f f o r e i g n c o m m e r c e , e x c h a n g e s g o o d s w i t h 291 w o r l d p o rts
fo rm in g

a trade

p o rt h a n d le d
out o f the

li n k

w ith

e v e r y c o n t in e n t .

In

1966

5 .5 % o f a ll im p o r t s a n d e x p o r t s m o v i n g
U n it e d States, c o m p r i s i n g

23 .3

m illio n

o f c a r g o v a l u e d a t m o r e t h a n $ 1 .5 b i lli o n .

the

in a n d

lo n g

ton s

The p r i n c i p a l

c o m m o d it ie s i n v o l v e d in f o r e i g n c o m m e r c e w e r e m e t a l lic
ores, p e t r o l e u m a n d p e t r o l e u m p r o d u c ts , a n d coa l a n d
coke.

• Located on th e P a ta p s c o River 150 m ile s f r o m the

sea, B a l t i m o r e

lies f a r t h e s t i n l a n d

o f th e N o r t h A t l a n t i c

po rts.

This lo c a t io n m a k e s it a d v a n t a g e o u s f o r s h ip p e r s to use th e
p o r t f o r c a rg o e s h e a d e d f o r th e M i d - w e s t .
and

a ir

f a c il it ie s

t h e ir

fin a l

a rriv e

are

re a d ily

d e s t in a ti o n s .

a t th e

B a ltim o re

a v a ila b le
• An

to

Rail, tr u c k ,

tra n sfe r

average

and
kin d

e ffic ie n t

of

h a n d lin g

service,

of cargoes.

from

la r g e s t

th e

s h ip b u ild in g

and

of

th e

offers

re p a irs

• T id e w a te r M a r y la n d

v ic in ity

169 b e rth s

The p o r t has a r e p u t a t i o n f o r f a s t
o f cargoes, a n d

p o rts in a d d i t i o n to B a l t i m o r e .
in

to

vessels

ships ca n u t il iz e 12 a n c h o r a g e s , 92 piers, a n d
on th e 4 5 - m i l e w a t e r f r o n t .

goods

5,3 00

Even th e v e r y

p o rt y e a rly .

of

a lm o st e v e ry
to f u m i g a t i o n

bo asts t w o d e e p - w a t e r

S e a f o o d p a c k i n g in d u s tr ie s

r e c e n t ly

m o d e rn iz e d

C a m b rid g e

p o r t re c e iv e fis h f r o m Ic e la n d , V e n e z u e la , a n d th e C a n a r y
Is la n d s .

C a m b r i d g e a ls o r e c e ive s f u r s f r o m t h e U n ite d

K i n g d o m a n d W e s t G e r m a n e le c t r ic a l m a c h i n e r y .
in

1966 w e re v a lu e d
lo c a t io n

in

im p o r t s

lo w e r

at m ore th a n
Chesapeake

H onduran

bananas

These i m p o r t s

$5 m i l l i o n .

Bay,

th e

and

d y e in g

m a t e r i a l s f r o m S o u th A f r i c a .

• From

port

its

of

C r i s f i e ld

and

ta n n in g

A p r o je c t is n o w in the

p l a n n i n g s ta g e to e s t a b lis h a n 8 0 - a c r e i n d u s t r i a l p a r k on th e
C r i s f i e ld
o ce a n g o in g

w a te rfro n t.

C han nels w ill

vessels t o e n t e r th e a r e a .

be d r e d g e d

to a l l o w

The p re s e n ce o f these

f a c il it ie s s h o u ld a t t r a c t c o m p a n ie s w h i c h w i l l t a k e a d v a n t a g e
of

the

lo c a t e d a l o n g

de e p -w a te r

lo c a t io n .

th e M a r y l a n d

• M any

c o a s t lin e w h i c h

oth er

p o r ts

cater to

c r a f t a n d to b o a ts e n g a g e d in t h e o y s t e r in d u s t r y .

The la r g e s t

o f these p o r ts is A n n a p o l i s , th e c a p i t a l o f t h e S tate.
o rd e r to

in s u r e

the

co n tin u e d

g ro w th

of

are

p le a s u r e

the

• In
State's

c o m m e r c ia l p o rts , th e M a r y l a n d Port A u t h o r i t y , w h i c h w a s
e s t a b li s h e d

in

1956,

p ro m o tio n ,
s in g le

and

e c o n o m ic

asset,

has

as

its

o b je c t i v e

d e v e lo p m e n t
th e

p o rts

of

of
the

"th e

p r o te c t io n ,

M a ry la n d 's

gre atest

Chesapeake

B a y . '7

Census
P r o f i l e ...

THE

FI FTH
DISTRICT

FARMER




The 1964 Census of Agriculture provides the data
on which to draw a fairly up-to-date profile of the
average Fifth District farmer. Let’s take a look,
then, at what the average farmer and his farming
operations were like in 1964 in view of these latest
census facts.
Farmer Characteristics Census tallies found that
the number of farmers in the District in 1964 totaled
340,068— 22% fewer than in 1959. A s has been the
case since 1945, the number of non white operators de­
clined at a much faster rate than the number of white
operators. The average farmer was 52.2 years old
compared with 51.2 years in 1959. Roughly onefifth were 65 years of age or older, while only onetenth were under 35.
Their formal education
was rather limited. Only 19% had formal training
through high school, with 11% having only a high
school education and a mere 8 % having completed
one or more years of college. This low educational
level provides cause for concern in view of the
rapidity of technological changes and the growing
complexity of the farm-management decisions which
confront farmers.
Some 46% of all farmers worked off their farm
during 1964, and 72% of these or one-third of all
operators worked 100 days or more. The propor­
tion working off their farm 100 or more days was
somewhat greater than in 1959. O f the total days
worked off the farm in 1964, 97% were at non­
farm jobs.
Many members of farm families as well as the
operators had income from off-farm sources. In
1964, the income of District farmers and their ,
families from sources other than the farm operated
totaled $992.6 million. This sum was in addition
to the $2,254.4 million total value of farm products
sold. O f this $992.6 million in farm family income,
69% came from wages and salaries; 11% from non­
farm businesses or professions; 10% from Social
Security, pensions, veteran and welfare payments;
and 10% from rent from farm and nonfarm property,
interest, dividends, etc. Of all farm households re­
porting this additional income, 45% reported earn­
ings of $3,000 or more while 25% received $5,000
or more.
Tenure patterns of farmers continued to shift
between 1959 and 1964. The proportion of full
owners actually remained at 57% , the same as five
years earlier.

The downward trend in tenants and

the upward trend in part owners which have been
going on for around 20 years continued, however,
with the upturn in part owners almost offsetting th e .
downturn in tenants.

Part owners— those who rent

land in addition to that
which they own— comprised
22% of the total in 1964
com pared with 18% in
1959. On the other hand,
21% of all farmers were
classified as tenants in 1964
as against 24% in the pre­
ceding p eriod . That part
ownership of farms is in­
creasing can be explained by
the fact that many farmers,
especially younger ones, pre­
fer to rent land to make an
economical farm unit rather
than to buy high priced
farmland. By so doing, they
can use their available
capital to purchase farm
machinery and equipment
and other production goods.

SELECTED MEASURES OF FIFTH DISTRICT AGRICULTURE

Farms, number
Average size of farm , acres
Cropland harvested, acres

trict and in 1964 averaged

— 21.9

126.3

+ 1 5 .3

10,969,470

— 12.8

Value of land and buildings:
Average per farm , dollars

26,549

+ 5 5 .7

Average per acre, dollars

210.23

+ 3 5 .0

% of total
1959

1964

Full owners

57.2

56.8

Part owners

18.1

22.1

All tenants

24.3

20.6

Working off their farms 100 days or more

31.4

32.9

Under 35 years of age

11.3

9.8

65 years old and over

18.9

19.4

—

31.7

—

7.7

Under $1,000

—

27.0

$1,000 to $2,999

—

27.8

$3,000 or more

—

45.2

Farm operator characteristics:

Reporting 1 to 4 years of high school
as highest grade completed

Farm Size and Value
There were 126 acres in the
average District farm in
1964, an increase of 17 acres
over 1959. Total land in
farms declined much less
during the five-year period
than the number of farms
reflecting the increase in
farm size. Most of the de­
cline in farm numbers oc­
curred among the smaller
farms. Farms of less than
100 acres decreased 26% ,
while those between 100 and
499 acres fell 14%. Farms
ranging in size from 500 to
999 acres rose 3 % , and
those of 1,000 or more acres
increased 8 % . The number
of farms in these latter two
groups remained compara­
tively small, however.
Value of farmland and
buildings continued to in­
crease throughout the Dis­

340,068

Reporting 1 year or more of college
as highest grade completed
Income from sources other than the farm operated—
% farm operator households reporting with income:

Value of farm products sold—
% of all farms represented by farms reporting:
Under $2,500

58.8

53.5

$2,500 to $9,999

31.7

29.8

$10,000 or more

9.4

16.7

% of total dollar value represented by farms reporting:
Under $2,500

11.7

6.2

$2,500 to $9,999

37.1

24.2

$10,000 or more

50.8

69.1

42.0

Farms by size of farm, proportion:
Under 50 acres

45.7

50 to 99 acres

23.0

23.0

100 to 259 acres

22.9

24.5

260 to 499 acres

5.6

6.8

500 acres or more

2.8

3.7

Farm equipment and facilities, % of farms reporting:
Automobiles

69.7

76.8

Motortrucks

45.6

57.4

Tractors

55.3

62.9

Grain and bean combines

9.4

10.1

$210 per acre, 35% greater

Home freezer

46.2

65.9

than in 1959.

Telephone

42.8

59.7

—

86.8

W ith both

the average size of farm
and

the value

per

Television set

acre

rising, the value of land and



Source:

U. S. Bureau of the Census.

buildings per farm rose even more. By 1964, the
average farm was valued at $26,549, a gain of 56%
over the 1959 value. A m ong District states, the
value of the average farm in 1964 ranged from a
low of $13,882 in W est Virginia to a high of
$64,999 in Maryland.
Farm Equipment and Facilities W ith the g r o w ­
ing scarcity and high cost of labor, the proportion of
farmers investing in farm machinery and equipment
has continued to grow. Some 63% of all farmers
owned tractors in 1964, for example, compared with
55% five years earlier. Trucks were owned by 57%
as against only 46% in 1959. Though small by com ­
parison, the proportions who had grain and bean
combines, corn pickers, crop driers, and/or pickup
balers were also greater than in 1959.
Farmers generally were enjoying a higher level of
living in 1964. Those owning automobiles com ­
prised 77% of the total as against 70% in the pre­
ceding period. Two-thirds had a home freezer in
comparison with only 46% five years earlier, and
three-fifths of all farm homes had a telephone com ­
pared with just 4 3% in 1959. In addition, 87%
of all farm families in 1964 owned a television set.
Though the 1964 census did not ask how many farm
homes had electricity and running water, when these
questions were last asked in 1954, better than ninetenths had electricity and nearly one-half were
equipped with running water.
Higher-Income Farms Increasing U sin g the
value of farm products sold as a basis, the census
groups farms into two major categories— commercial
and noncommercial farms. Generally, all farms with
a value of sales totaling $2,500 or more are classified
as commercial. Farms with a value of sales of $50
to $2,499 are also classed as commercial if the
operator is under 65 years of age and does not work
off the farm 100 or more days during the year. The
remaining farms with sales valued at from $50 to
$2,499 are classified as noncommercial. These non­
commercial farms are further categorized into parttime farms, provided the farmer works off his farm
100 or more days and is under 65 years of age, and
part-retirement farms if the farmer is 65 years old or
older. The census changed the definition of the parttime farmer between 1959 and 1964, and this defi­
nition change decreased the number of farms which
would have been classed as part-time farms and in­
creased the number of commercial farms. Because
of this, all farms with a value of farm products sold
totaling under $2,500 must be grouped together for
comparative purposes.
W ith these criteria in mind, it is worthy of note

10



that the number of District farms with farm-product
sales amounting to less than $2,500 declined 29%
between 1959 and 1964. Even so, 54% of all farms
were in this classification in 1964, but their total
sales made up only 6 % of the value of all farm
products sold. Farms with a value of sales ranging
from $2,500 to $9,999 decreased 27% during this
same five-year period. Thirty per cent of all farms
still fell in this category in 1964, however, and they
contributed just 2 4% to the value of all farm-product
sales. Farms having gross sales of $10,000 or more
increased both in number and as a proportion of all
farms. The gain in number was a healthy 38% . A s
a proportion of the total, they rose from 9 % to 17%.
And their contribution to the value of farm products
sold from all farms increased from 51% to 69% .
A more detailed look at the farms with sales of
$10,000 or more in 1964 is rather revealing. Those
farms having gross sales ranging from $10,000 to
$19,999 increased 24% between 1959 and 1964 and
in 1964 made up 10% of all farms. Farms with
farm-product sales falling in the $20,000 to $39,999
category gained 52% in number and comprised 5%
of the total. The number of farms grossing $40,000
or more jumped a whopping 9 5% . Still only 2 %
of all farms fell in this classification in 1964.
Summary A s the fo re g o in g indicates, many
changes are occurring down on the farm. Y et there
is room for still further change in the years ahead.
Many farms are too small to be operated efficiently.
Modern machinery and equipment cannot be used
effectively on these farms, volume of output is small,
and unit costs of production are high and rising.
That 54% of the District’s farmers gross less than
$2,500 per year from the sale of farm commodities
is further evidence that more change is needed. Only
44% of this group, or 23% of all farmers, are parttime farmers— that is, receive additional income from
off-farm work— while 27 % of this low-income group,
or 15% of all operators, are part-retirement farmers.
O f the remaining low-income farmers, many would
no doubt find it to their advantage to join the ranks
of the part-time farmer. Still others may find more
adequate income from nonfarm employment entirely.
For those who continue in farming on a full-time
basis, an expansion of their farming operations seems
imperative. For some, this will mean the need to
buy or rent more farmland; for others, it will neces­
sitate the purchase of more machinery and equip­
ment ; and for still others, it will mean the need for
more credit.

Whatever the case, all will find it

more profitable to devote more study to their farmmanagement decisions.

Sada L. Clarke

1 '-/-VI lin I Uf\JVMAL
'
Dollars

The Fifth District
ECONOMIC GROWTH

Chart I

PERSONAL INCOME

$ Millions

700,000


1950
1955
1960
http://fraser.stlouisfed.org/
Source:
Federal Reserve BankDepartment of Commerce.
of St. Louis

Total and per capita personal income for the five
District states, D. C.. and the U. S. for the twentyyear period, 1948-1967, are shown in Charts I and
II, respectively. Both charts are designed to em­
phasize comparative rates of growth, and are based
upon recently published Department of Commerce
data. Accordingly, they are set up on semi-log scales
on which lines with equal slopes represent equal
rates of growth.
The personal income concept is a valuable one in
assessing the economic progress of states. It is the
sum of the income received by individual persons
from all sources, including welfare payments, before
income taxes and other direct taxes are removed.
On a per capita basis for a state it is a rough measure
of average individual prosperity for the population
of the state. For the U. S. as a whole, total per­
sonal income over the last twenty years has averaged
about 79% of gross national product, with very
minor variations. There is no throughly reliable
measure for gross state product, and even though
the U. S. relationship does not necessarily hold for
states, the personal income concept might be re­
garded as the best available alternative measure of
state economic activity.
Table 1 shows personal income data for the Fifth
District states, D. C., and the U. S. in some detail,
along with state rankings and rates of growth.

In

terms of total personal income, Maryland, Virginia,
and South Carolina advanced in relative position over
the 1948-67 period while D. C., W est Virginia, and

11
1965

PERSONAL INCOME

Table 1

Total
1948
$ million

Per Capita
Average Annual
Growth 48-67

1967

Rank

$ million

Rank

%

Rank

Dollars

Average Annual
Growth 48-67

1967

1948
Rank

Dollars

Rank

%

Rank

Maryland

3,331

19

12,644

14

6.9

5

1,467

20

3,434

12

4.3

15

District of Columbia

1,644

33

3,453

36

3.8

47

1,957

1

4,268

1

4.0

25

Virginia

3,624

16

12,592

15

6.4

9

1,130

38

2,776

30

4.6

5

West Virginia

2,126

29

4,210

34

3.5

48

1,120

39

2,341

47

3.8

37

North Carolina

3,732

15

12,049

16

6.0

15

973

43

2,396

44

4.6

4

South Carolina

1,779

32

5,631

30

5.9

17

891

46

2,167

48

4.5

7

United States
Source:
Note:

208,878

620,568

1,430

3,137

4.0

U. S. Department of Commerce.
1967 ranks and ranks of growth are based on 50 states plus D. C.

North Carolina declined in rank. The growth of total
personal income was higher in four of the states than
in the U. S., with only D. C. and W est Virginia
growing at slower paces. The four states leading
Maryland in total personal income growth were, in
order, Nevada, Florida, Arizona, and California.
Chart I indicates for example that growth was
somewhat more uniform in Virginia, North Caro­
lina, and Maryland over the total period than in
South Carolina or W est Virginia. All the District
states and the U. S. have shown steadier growth
since about 1958 than in the earlier years. H ow ­
ever, prior to that time, the unsteady growth paths
were more pronounced in South Carolina and W est
Virginia than in the other states. The increased
diversification of industry in these two states, as
well as the growth of manufacturing in later years
is partially responsible for the smoother growth paths
and the somewhat closer resemblance of their growth
to that of the U. S.
The per capita figures in Table 1 indicate that
only Maryland and D. C. exceeded the U. S. average

12

5.6




1948 ranks exclude Alaska and Hawaii.

in either 1948 or 1967 among District states. Top
rank over the period was retained by D. C. Maryland
advanced in relative position as did V irginia; how­
ever, Virginia remained below the U. S. average by
$361 in 1967. The Carolinas and W est Virginia
declined in rank over the period. States with lower
per capita personal incomes than South Carolina in
1967 were Alabama, Arkansas, and Mississippi.
Some of those states having among the lowest per
capita incomes have experienced rates of growth
among the highest. All the District states ex­
perienced higher per capita growth rates than the
U. S. except W est Virginia and D. C., the latter
being about equal to the U. S. Those states having
higher rates than North Carolina over the twentyyear period were, in order, Georgia, Tennessee, and
Alabama. Chart II shows that since about 1957 all
District states except W est Virginia exhibited rates
of per capita income growth not significantly dif­
ferent from that of the U. S. Prior to that date more
erratic growth patterns were evident, as was the case
with total personal income.
William H . Wallace