VI. The Agrarian Crisis

Closely connected with the general crisis is the agrarian crisis, which has been lasting for several years, but has received scant attention. In my “Crisis” I have already referred to the agrarian crisis as an important phenomenon, but only in connection with economic United States. The reason for this was the fact that that the agrarian crisis remained concealed for a long time because of the effect of inflation. The harm that came to the farming business through the low prices for agrarian products—low as compared with the general level of prices for industrial products—was compensated for through the automatic depreciation of mortgages, through the actual exemption of farmers from taxation, and through the circumstances that the farmers were able during the inflation period to purchase their industrial products below reproduction costs.

The agrarian crisis is of special social significance, since it has a tendency to separate the small and middle-sized farmers from the capitalist class, and to loosen their identity of interests. This expresses itself most sharply in the United States in the efforts to organise a third party.

The “Scissors.”—The economic reason for the agrarian crisis is the so-called “Scissors,” i.e., the opposite development of prices for agricultural and industrial products during the post-war period. It is exceedingly difficult to express this in figures. From a purely economic viewpoint it is impossible to establish a normal relationship between the prices of agricultural and industrial products, unless one were to assume that the price for agricultural products must be so high that the cultivation of the unrented ground, the yield of which is still necessary for supplying the world market, nets the average profit on the capital. This is theoretically correct, but it can by no means be estimated in figures, since too many factors, modificatory in nature, are brought into play: land hunger, freight rates, varying productivity, depending upon the climate, weather, &c. There is no other recourse for us save to take the relationship of prices in a normal year, in other words, a price relationship uninfluenced by either agrarian or an industrial crisis, as our starting point. Such a year is 1913, which in most cases was also chosen as the starting point for estimating the various index figures. Since, however, inflation has caused confusion in the price relationship and since there are no index figures for prices fixed uniformly for all capitalistic countries, it is hardly possible to use the index figure for determining the “scissors.” Depending upon the weight attached to the industrial and agrarian products in estimating the various index figures, contradictory figures are arrived at for the different countries.

Under these circumstances it seems best to us to use the figures for wheat, the most important agricultural product, as our starting point. In Table X are given the market prices of certain grades of “wheat in the most important produce exchanges of the world, divided into export and import markets, as well as the notations of such European countries as on the whole produce their own supply. The price quotations of pre-war times show that the prices in the export markets were graded quite evenly, depending upon the distance from or freight charges to Western Europe. With the European countries there is a sharp divergence of prices, depending upon whether there is free trade or protection tariff. Thus the price for inland wheat per quarter was (all prices are expressed in gold francs):—

If, now, we follow the prices, figured in gold francs, in all important exchanges of the world, we see that with the exception of France the price of wheat everywhere lags far behind the general rise of prices. If we compare the present moment, in other words, the course of prices at the beginning of April, 1924, with 1913, we find the following:—

These figures are all reduced to gold francs. If we take into account that the general purchasing power of gold, as reflected in the wholesale trade index figures for the United States, is about one-third less than in 1913, it is evident that the price of wheat at this moment is far below that of pre-war times in the whole world. And as wheat may be looked upon as characteristic for all agricultural products (except textiles), there can be no doubt but that the position of the farmers in the world’s markets has become considerably worse, and that there is a “scissors” in the world market. The difference is sharpest in the countries where there was a high tariff on grain before the war, which, however, during the post-war period was either removed or greatly reduced: Germany, France, Italy.

The reason for this difference in the fixing of prices between agricultural and industrial products is above all the fact that during the war and after monopolies were established in industrial concerns in greatly increasing numbers. We have already referred to this in a previous chapter. Through the formation of trusts and monopolistic companies the prices of industrial products are more and more placed outside of competition, and the profits of organised branches of industry are increased at the expense of those not comprised in such combinations. Owing to the fact that there are untold millions of independent producers, a monopolistic fixing of prices is an impossibility in agriculture. The monopolistic fixing of prices can take place only in exporting countries with the help of the government, as was the coffee valorisation scheme in Brazil. Attempts of that sort ere made in the United States and Canada, but thus far without success. Were such an artificial concentration of surplus export for purposes of raising prices to come to pass in the most important countries, the “scissors” would in all probability disappear rapidly. It would be quite sufficient for Argentina and Canada to create a monopoly for the export of grain, since these two states, together with Russia, which monopolises its whole foreign trade anyway, control the world’s grain market.

The creation of such monopolies is prevented, however, by the circumstances that the capacity of the European market, which is decisive in shaping prices, for absorbing the product is very small as a result of the decline of European capitalism that is taking place just now. Thus the agrarian crisis and the crisis of European capitalism are closely inter-connected.

The reaction of agriculture to the “scissors” was and is different in the different countries. In this connection the divergent policy governing the fixing of prices in the belligerent countries during the world war is of importance. In the countries of the European continent a maximum price was fixed for the agricultural products, at which the farmers were compelled to yield their produce. Although these maximum prices were constantly circumvented by the farmers, this system, taken by and large, nevertheless led to a decrease of the gold earned from agricultural products and also to a decrease of production itself. In the Anglo-Saxon countries, however—England, the United States, and the British colonies—the very opposite price policy was followed. No maximum prices were fixed and everything left to free competition. But the governments bound themselves to purchase certain agricultural products, above all wheat, for a number of years at a fixed price which was set rather high. This system tended to the very opposite of the fixing of maximum prices in the continental countries of Europe: it led to the extension of production, as this proved very profitable for the producers. The surplus profit of agricultural producers was, of course, turned into capital and led to a sharp increase in the price of land. Then when this system was abrogated after the close of the war, the effect of the collapse in prices that soon followed was felt in the following manner:—

In England and the United States, where all land is in private hands, and where the rents had been increased, corresponding with the higher productivity during the war, the crisis was and is severest. It manifested itself in the United States in this manner: hundreds of thousands of farmers went bankrupt and left their farms, streaming .into the cities. Other hundreds of thousands were only held on the farms because their creditors left them unmolested, their calculation being that if these debtors sell their land at auction, the creditors will eventually lose everything, while if they left them on their farms there was at least the hope that under more favourable business conditions they might be able to collect. In 1923 the crisis among the wheat farmers in certain parts of the United States (the Dakotas) became such that hundreds of financial institutions were driven into bankruptcy. The reason for this is the fact that the leases and rents went up during the war, but the farmers, who during the boom bought land at high prices on credit or leased it, are now, in the face of the low prices, unable to pay their interest or rent. In England, where the farms are in the hands of better situated capitalists, such a catastrophe did not ensue.

But in both countries the result is a sharp shrinkage of the area devoted to the raising of grain. The area under cultivation was:—

In England the area under cultivation is far less in extent than during the pre-war period. In the United States the cultivation of winter wheat in the fall of 1923 was 13 per cent. less than in 1922. This means that the United States with an equally good harvest has only half as much wheat to export as in 1922.

In Canada and Argentine the area under cultivation has increased still further despite the low prices. This is to be ascribed to the fact that there is still free land to be had and that the extension of grain cultivation includes lands that were thus far not tilled at all. The original fertility of this land is made use of, and with intensive cultivation and very smal1expensesharvests are achieved that even during the present time of low prices make the effort put into production worth while.

The area under cultivation in Canada was:—

In continental Europe, where agriculture is for the most part conducted by peasants, the “scissors” began to show their full effects only now. Their detrimental effect upon the position of the peasants, as already intimated above, was prevented by the fact that the farmers during the inflation period for the most part got rid of their mortgages; that until very recent times, also as a result of inflation (in Germany, Poland, Hungary, Austria, in part also in France), they had to pay taxes that were minimal in comparison with pre-war times; that they produce but once per year and by the immediate use of the money realised can escape the losses due to inflation; and that, finally, in purchasing goods they profited by the circumstance that industrial products were being sold under production costs.

The peasants began to feel the full weight of the agrarian crisis the minute stabilisation had taken place. Immediately they are loaded down with taxes in gold. The new mortgages must be made out in gold values and the interest paid in gold. The fixing of prices now turns very much against the farmers, in that they must now pay for the industrial products that are manufactured from raw materials at a much higher advance than before the war.

The classic example for this is furnished by Germany, where at present the agrarian rests upon the peasants with all its weight. The change in the fixing of prices is especially significant. We here cite several figures from the Borsen Courier of Berlin for December 9, 1923:—