Publications of The University of Texas Publications Committees: GENERAL: J. T. PATTERSON J. L. HENDERSON LOUISE BAREKMAN A. SCHAFFER FREDERIC DUNCALF G. W. STUMBERG R. H. GRIFFITH A. P. WINSTON OFFICIAL: E. J. MATHEWS L. L. CLICK C. F. ARROWOOD C. D. SIMMONS E. C.H. BANTEL B. SMITH The University publishes bulletins four times a month, so numbered that the first two digits of the number show the year of issue and the last two the position in the yearly series. (For example, No. 3501 is the first bulletin of the year 1935.) These bulletins comprise the official publica­tions of the University, publications on humanistic and scientific subjects, and bulletins issued from time to time by various divisions of the University. The following bureaus and divisions distribute bulletins issued by them; communications concerning bulletins in these fields should be addressed to The University of Texas, Austin, Texas, care of the bureau or division issuing the bulletin: Bureau of Business Research, Bureau of Economic Geology, Bureau of Engineering Research, Bureau of Public School Interests, and Division of Extension. Communications concerning all other publications of the University should be addressed to University Publications, The University of Texas, Austin. Additional copies of this publication may be procured from the Bureau of Public School Interests, The University of Texas, Austin, Texas at 35 cents per copy, four copies for $1 THE UNIVERSITY OF TEXAS PRESS ~ THE UNIVERSITY OF TEXAS BULLETIN No. 3538: O~tober 8, 1935 GOVERNMENT CONTROL OF COTION PRODUCTION By THOMAS A. ROUSSE, M.A., LL.B. Bureau of Public School Interests Division of Extension PUBLISHED BY THI: UNIVERSITY FOUR TIMES A MONTH AND ENTERED AS SIECOND-CLASS MATTIER AT THE POSTOFFICE AT AUSTIN, TEXA8, UNDER THE ACT OF AUGUST :&4, 191:& The benefit. of education and of useful knowledge, generally diffused through a community, are eaaential to the preservation of a free govern­ment. Sam Houston Cultivated mind is the guardian genius of Democracy,and while guided and controlled by virtue, the noblest attribute of man. Itistheonlydictator that freemen acknowledge, and the only security which freemen desire. Mirabeau B. Lamar TABLE OF CONTENTS PAGE Foreword _____ _ __ _______________ ·---------------___ __ ·-· -----· ___ -·· -----------· ____ --· 5 Explanation ------------------------··-·-----··----------···-·--··-------_______ ______________-·-·----___ 7 Suggestive Briefs -----·· ----····-· _-· ------------··---... ____________ --------· __ __ __________________ 9 (a) Introduction _____-----· --------· _______________________________________________ _._ ________ 9 (b) Affirmative ______________ _-----·__ __ ______ ____ _____________ ___ ___________ ______ ________ ___ __ ____ 11 ( c) N egative _----------------------··-----···------________________________________________ ____ ·--------__ 30 Bibliography ______ ----·· ______________________ -------------------------------------------------------------43 General Material ---------------·.... ------------------------------····------------------------------47 Affirmative Material _____________ __ ---------------------------------------------------------~-_____ 83 Negative Material --------------·--___ _ _ _______---···· _______________ __ -------------------__________ 197 Index to Authors Quoted ___ ---··-----------------------------_____________________________________311 "If we estimate dignity by immediate usefulness, agriculture is undoubtedly the first and noblest science." DR. JOHNSON. FOREWORD C ENTENNIAL YEAR in Texas calls for adaptation of contests in the Interscholastic League wherever such adaptation may be made without sacrificing any of the educational values to be derived from the same. We have found that it is principally in the public speaking contests that cooperation is possible with the great com­ memorative enterprise of the Centennial without yielding one jot or tittle to that bane of all contests: commercialization or propaganda. In one the senior divisions of the declamation contests, selections from Texas orators, or orations touching the history and progress of Texas, are to be offered in bulletin form to member-schools. In Extemporaneous Speech, topics will be prescribed which will necessi­tate a study of Texas conditions, Texas industrial enterprises, dis­tinguished men and women of Texas, and distinctively Texas contributions to general social welfare. We only wish that there were enough Texas poetry available for the junior divisions in declamation, but as yet Texas poets have not put out a sufficient volume of really distinguished poetry to offer a wide choice of strictly Texas selections. It would be fine, also, to limit the dramatic contests to Texas plays, but alas! our Texas playwrights have not yet produced plays in the number and variety necessary to supply the five hundred schools which yearly enter this competition. In the debate, however, we have a field which lends itself admirably to cooperation with the Centennial. Cotton is the principal agricultural resource of the State, and much division of opinion has arisen over the Federal Government's method of maintaining prices. Whether or not it is a wise policy for the Federal Government to limit cotton production is a problem which has sharply divided even the best illformed opinion on the subject. Either side to the con­troversy may quote eminent authority to support its contentions. Even "the doctors disagree," and as Sir Roger de Coverly was wont to say, "there is much to be said on both sides." In order to make a creditable showing in the debate, students will be stimulated to study intensively a subject which is of vital im­portance to the economic welfare of Texas; and economic welfare involves social welfare. Texas produces more cott.on than any other political unit in the world. In the upset of international trade following the great war, the low price of cotton threatened the ruin of Texas cotton farmers. T·he present Federal Administration adopted a remedy. Many competent students declare that the remedy is worse than the disease. Is it? That is the question. The present bulletin was prepared by Professor Thomas A. Rousse, after thorough experimentation with debating the question in his regular classes in debate in the University. There is assembled here The University of Texas Bulletin expert opm1on and carefully selected statistics from both camps. Briefs, merely for guidance (not for slavishly copying), are presented. There is also a bibliography included which is meant to stimulate and guide intelligent research. It is a hefty volume, but we trust that its mere size will not daunt the ambitious youngsters who select inter-school debating as an extra-curricular activity. Although there are some three hundred pages printed herein, the disputable features of the query are by no means exhausted. This is a live question. There is hardly a newspaper published which does not, either in the news or editorial columns, contain pertinent material. Hence, the debater who stays up with the development of the question throughout the current year will have an advantage of the one who is satisfied with the material assembled in this bulletin. Coaches will miss a great educational opportunity if they fail to direct their pupils in efficient methods of research, and teach them to follow the developments of the argument as they appear in the daily press and in the current periodicals. Card-indexes, annotated scrap-books, indexed and cross-indexed, so as to make the year's accu­mulation of periodical literature available for any particular debate will be found invaluable, and at the same time this procedure will give pupils valuable training in methods. Unlike gambling, the debating contest is one in which you win even if you lose. Chief of the Bureau of Public School Interests. EXPLANATION I N PRESENTING the briefs, analysis, and reading material on the cotton control question, an attempt has been made to include the most essential arguments. Obviously, the treatment of the subject is not exhaustive or inclusive, although enough argument is presented to give the debater a starting point. It should be noted in passing, also, that the control of cotton is, relatively speaking, a new question, and much of the material is yet to come. The debater should watch the daily newspapers and current periodicals for new material, and seek aid, whenever possible, from the local authority on cotton. Authorities have been cited for each major contention, whenever possible, but the debater should seek out his own facts and authori­ties. For the exact page and statement of an authority cited by the writer in the briefs, the debater should consult the "Index to Authors Quoted" in the Bulletin. It is unnecessary, of course, for the writer to suggest that the debater will gain much if he would use some ingenuity in the prepara­tion of his case. The Cotton Control question lends itself very readily to originality and both sides should take advantage of the opportunity offered here. In other words, the briefs contained in this bulletin, at best, offer only a general survey of the subject. It is incumbent upon the debater therefore, to seek out the strong and weak arguments of the affirmative and negative sides. The writer is indebted to many individuals for helpful suggestions and aid received during the preparation of the Bulletin. Mr. Roy Bedichek, Chief, Bureau of Public School Interests, and his efficient staff deserve, and are hereby given, sincere thanks for the assistance they rendered. To Dr. A. B. Cox, Professor of Marketing and Director of the Bureau of Business Research, the writer owes a deep sense of gratitude for his tolerant and helpful hints and for the contributions he made to the Bulletin. It is hoped that the Bulletin will prove helpful to the debater in his search for a solution of the cotton control question. THOMAS A. ROUSSE. The University of Texas. September 10, 1935. SUGGESTIVE BRIEFS RESOLVED, That the Federal Government should control the production of cotton. INTRODUCTION I. The question of Federal Government control of cotton produc­tion is vitally important, because A. The cotton represents the largest single industry in the United States. B. The welfare of fourteen states is closely allied to the fortune or misfortune of the production of cotton. C. The nation as a whole depends upon cotton for much of its export trade. D. There is a widespread demand that the Federal Government take whatever steps are necessary to protect the cotton industry. E. There has been much discussion on the subject of cotton during the last few years. II. History of the Question :1 A. Production of cotton. 1. From two thousand pounds in 1770, cotton reached seven billion pounds in 1912. 2. In 1866, the cotton acreage was estimated at 7 ,600,000. 3. In 1927, the cotton acreage was estimated at 45,000,000. 4. Two million five hundred thousand farmers and laborers are employed in the production of cotton. B. Federal Government activity in cotton. 1. In 1907, the New York Cotton Exchange and other investigations were begun by Congress. 2. Period of Regulation: In 1914, the Cotton Futures Act was passed. It regulated trading in the cotton exchange for future delivery. Other regulatory acts were passed later. 3. Active governmental participation in the cotton industry: a. The Act of 1929 set up the Federal Farm Bureau. The purpose of the Bureau was to give the farmer the best possible price for his cotton. b. New Deal Legislation. ( 1) The A.A.A.-Control of Production through vol­untary cooperation of the farmers. (2) The Bankhead Act-"Compulsory" eontrol of production. 1see The History of Cotton Production, infra. The University of Texas Bulletin III. Definition of Terms: A. The Federal Government: The Government of the United States of America acting through any of its legally consti­tuted agencies. B. Control: To "check or regulate. Power or authority to control."2 Corpus Juris, Vol. 8, p. 837, defines the term "control" as "A restraining or governing influence.n C. Production: The "act or process of producing."3 Bouvier's Law Dictionary, Vol. 3, p. 2733, defines "production" as "That which is produced or made product; fruit of labor; as the production of the earth comprehending all vegetables and fruit." On page 631 of the same book, the term ''production" in political economy, is said to be "the creation of objects which constitute wealth." D. Cotton: "A soft, white, fibrous substance composed of vari­ous malvaceous plants (especially of the genus Gossypiurn)." IV. Irrelevant Matter: A. It shall be irrelevant to argue the constitutionality or uncon­stitutionality of Federal control of cotton production. B. It shall be irrelevant to argue about the legality of any Federal Government agency. V. Admitted Matter: A. Both sides will admit the advisability and need for cotton production in the United States. B. Both sides will admit the feasibility of amending the State and National Constitution, in order to legalize a plan and put in into operation. C. Both sides will admit that the Federal Government has attempted to regulate and aid the farmer in the production of cotton. VI. Main Issues: A. Is there a need for the Federal Government to control the production of cotton? B. Is governmental control of cotton production sound in theory? C. Is the proposed plan for governmental control a practical remedy? D. Is the proposed plan for Government control the best remedy? •Webster's Colleniate Dictionary, Third Edition of the Merriam Series. 3fbid. DISCUSSION OF THE AFFIRMATIVE I. There is a need for the Federal Government to control produc­tion of cotton, because A. The situation of the farmer is desperate and he must be helped by the Government,1 for 1. He can no longer rely solely on normal economic cura­tive reactions, for a. His purchasing power is far below that of industry, for (1) He buys in a "closed" market and is forced to sell in a "world" market. ( 2) The cost of producing a bale of cotton has been increasing. ( 3) He has suffered a loss of 53 per cent of his purchasing power, since the prewar days. 2. The individual farmer can't control the present dis­ordered condition,2 for a. The farmers are striving to raise enough money for their individual needs. b. National and international markets are beyond the influence of the individual farmer. c. The individual farmer cannot adjust himself promptly to changing worId conditions. d. He cannot compete with industry which is protected by tariffs and production control. 3. Taxes on agricultural lands have increased 150 per cent since prewar days.3 4. Farm indebtedness has increased 150 per cent since the prewar days.4 5. Agricultural freight rates are more than 50 per cent in excess of prewar freight rates.5 6. Cotton acreage has increased 50 per cent in five years. 7. Carry-over of cotton increased to alarming proportions durings 1930-32. 8. Foreign markets are being lost by the farmer. 9. The farmers have for many years produced at capacity while the industrialist controlled his production to mar­ket demand.6 1Ccmgressicmal Digest, February, 1938, p. 42. 21bid. 8Jbid., p. 40. 4Jdem. 5Jdem. eR. H. Mont~omery. 10. There are some people who would abandon the farmer to the ruthless forces of individualism, while retaining for certain other groups the centralizing power of government as has been possible for many years past in this nation.1 11. The farmer is gradually, and in increasing tempo, losing his property,s for a. From 1920-29, 500,000 farmers lost their lands. b. Farm bankruptcies are increasing, for ( 1) One and five-tenths per 1,000 farms were lost through bankruptcy during 1905-14, or (2) Over 100 per 10,000 farms were lost through bankruptcy every year since 1922. c. In 1902, over 30 per cent of our mortgaged farms were worth less than the mortgage. d. The average return on capital invested in farms from 1919 to 1928 was 1.8 per cent.9 e. The fourteen southern states have 52 per cent of the United States farm population and a per capita annual income of $260. Farmers in other parts of United States have an income of $470 per year. The non-farmer's income in the South is $570 per year.10 How DISTRIBUTION OF POPULATION AFFECTS AVERAGE FARMING AND NON-FARMING INCOMES-BASED ON INCOME DATA FOR 1918 OF NATIONAL BUREAU OF ECONOMIC RESEARCH 14 Southern Rest of States the U.S. Per capita current income of farm population---------- ----------------$260 $470 Per capita current income of non-farming population_ ______________ 570 760 Percentage of the farm nopulation of the U. S. -------------------------52 48 Percentae:e of the non-farm population of the U. S.________________ 20 80 From Blacks Agriculturnl Reform in the U. S., p. 30. 12. Three hundred thousand southern farm families are on relief rolls, and 100,000 Texas farm families are on Federal relief rolls. This is 20 per cent of the Texas farm population.11 13. The farmer's income was reduced from ten billion in 1919 to five and two-tenths billion in 1932. The Govern­ment must help the farmer gain at least four billion of the lost income.12 7H. A. Wallace. BPresident's Committee on Recent Social Trends Report, 1930, p, 498. •Black's Aoricultural Reform in U. S. (See Table 2). p. 26. 10Jbid., p. 80. U.Clayton, W. L. Acco Press, Vol. 18, No. 6, June, 1935. u:Mead and Ostralenk, p. 104. Government Control of Cotton Production 14. The 1909-14 cotton dollar is worth only 48 cents today.13 B. The cotton croppers, black and white, are probab_y the most needy class of people in America,14 for 1. Low prices during the last four years (1929-1932), the incomes per family, have run as low as $30 per year. 2. Their standards of living are being continually reduced. 3. A survey of 14,000 farm families over a period of four years showed that the absolute minimum requirement for health and decency for a farm family of five is an income of $1,800 a year, of which $1,200 should be in cash. Fourteen hundred dollars is the boundary of extreme poverty.15 4. The average income of farm families from 1918 to 1927 was $740. This sum is much less than is necessary for minimum for health and decency.1 6 C. The almost total lack of buying power has brought business to a standstill in many sections of the South,17 for 1. The cotton farmer has lost 53 per cent of his purchasing power since the prewar period.18 2. The lack of purchasing power in the farmer is directly or indirectly responsible for much of the unemployment. 3. The farmer's purchasing power, according to another report, has declined from sixteen billion in 1919 to five billion in 1932.19 D. The economic plight of the farmer has given rise to many serious social conditions, for~0 1. Young men are leaving the farms for the cities, increas­ing the people on relief. 2. Child labor is substituted, in order to reduce the cost of cotton picking. a. Children are withdrawn from school to do back­breaking work. 3. Schools are inefficiently operated, for a. Taxes are not forthcoming regularly. b. Poor salaries attract only the less capable teachers. 4. Churches find it difficult to function properly in farm communities. E. The economic needs of the farmer tend to color his political outlook, for 13Ketcham, Hon. John C. (Majority Report.) 1'New Republic, 76 :299. AUK. 2, 1938. usu. S. Department of Aariculture Yearbook, 1928, 'PP· 280-282. 18Kinst, W. I. "National Income and Its Purchasing Power/' a bulletin of the National Bureau of Natwnal Research, v. 310. u~., Republic, 75 :299, AuJl:. 2, 1933. -c"..atessional Digest, Feb. 1983. 19Preeliilnt's Committee on Recent Social Trends Report (1930), v. 480. 20Tbomas, Norman. 14 The University of Texas Bulletin 1. Ambitious politicians prey on his dire condition to their advantage, for a. Politicians hold out false hopes and remedies to the farmer for his vote and support, for ( 1) He is promised tax reduction. ( 2) Direct government aid is held out to him for political support. 2. Constant disappointments tend to make him a radical. F. The causes for the farmer's plight are National and only the Federal Government can control the situation, for 1. The greatest single defect in the farmer's plight is over­production of cotton, for a. Low prices always follow when the supply exceeds the demand. b. There was no centralized Federal agency prior to 1932 for the effectual control of cotton production. 2. The individual is impotent in his attempt to control supply, for a. His production is proportionally small and a reduc­tion by a few individuals will have no appreciable value on the supply of the entire Nation. b. Many farmers increase, rather than decrease, their cotton production after a poor season, for (1) They reason that other farmers will reduce acre­age and higher prices will prevail the following season. (2) Even with low prices, the farmer produces more cotton to raise his income. 3. Another defect in the farmer's dire plight is that he is forced to buy in a "closed" market and sell his product in a world market, for a. The farmer pays high prices for the manufactured goods he has to use on his farm and for his family,21 for (1) He pays from 75 per cent to 150 per cent more for his manufactured goods, due to the high pro­tective tariffs on goods he has to buy. (2) The manufacturer can be, and is protected from world competition in the United States by high tariff. b. The farmer sells all of his cotton for domestic and foreign use, in competition with cotton producers of the world. c. Only 40 per cent of United States cotton production is sold at home, while 60 per cent of the crop is sold to the world at large. d. The cost of production of the American farmer is higher, due to the protected industries at home, than that of foreign producers of cotton, for nwarren and Pierson, The Agricultural Situation. Wiley & Sons, New York, 1924, p. 27 4. ( 1) Higher wages are paid by the farmer for labor in the United States. (2) Higher prices are paid by the farmer for manu­factured goods. e. The disparity between the farmer's cost of production and selling price is beyond his control, for ( 1) He cannot buy his manufactured goods, or labor elsewhere and thus reduce his cost of production. (2) He must sell his cotton at a price set by his low­cost-production foreign competitor or lose the entire market. (3) The present problem may be solved in one of two ways:22 (a) The farmer may be allowed to work out his own salvation with the consequent instability and hardships, or (b) Federal control of production may be used to adjust the present maladjustment and give the farmer a higher price for his products. G. Only the Federal Government can remove the causes (defects) and remedy the situation, for 1. Federal control could reduce over-production in cotton, for a. The Federal Government under the A.A.A., did reduce production in 1934.23 b. Federal control has resulted in higher prices for cotton. 2. The Federal Government by cooperation or compulsion can coordinate the work of the farmer for the good of the individual and the farming industry as a whole, for a. Surplus of production will be made effective.24 b. The income of the farmer will be increased from 6.5 cents to 12.3 cents per pound of cotton.25 c. The world carry-over of cotton will be reduced and brought in line with world demand.26 2"lJdead and Ostralenk, infra. •James, D. L., "What the A.A.A. Is Doing," Nation':! BusineBs, May, 1934, p. 69. "Cobb, Cully A., The CottO'n Trade Journal, 16: No. 26, July 6, 1935, pp. 1-3. 25Jbid., p. 1. 26Jbid., p. a. The University of Texas Bulletin 3. Federal control could place the farmer, who composes nearly thirty million people, on a parity with the indus­trialist, for21 a. The unequality of buying in a "closed" market and selling in a world market can be mitigated only by the Federal Government. b. Control of production plans can be promulgated by the Government to reduce an over-supply, wherever this plan is desirable. c. Proper marketing, to avoid dumping, could be promul­gated by the Government. d. Any improvement in the cotton belt will help other sections of the country. e. The Federal Government is the only agency that can really intelligently handle and take cognizance of the law of supply and demand,28 for ( 1) "Let nature take its course" in agriculture means destitution for the farmer. (2) The high value of gold and diamonds is due to their scarcity. H. Only the Federal Government can secure centralized control of agriculture and reduce production, for 1. Industry reduced its production during the depression and retained a fair price, while agriculture, without cen­tralized control, increased its output 4 per cent during the same time with consequent drastic fall of prices,29 for a. Sixty-five per cent of the factories in America were closed during the depression. 2. It is not fair to have controlled industrial production and have uncontrolled agricultural production. a. Industry and agriculture should be controlled alike, or both made to produce at full capacity, for (1) If the factories were forced to produce at capacity, the surplus would reduce prices and the farmer's cost of production would be lowered. (2) The farmer then could afford to produce at capacity also, for (a) His goods would exchange at reasonable prices. I. Other plans, such as diversification, better farming and marketing, for aiding the farmer have been tried and failed, for 1. The farmer is suffering from maladjustment between the agricultural and industrial prices. 1'1Bankhead, John H., Nation's Business, June, 1934, pp. 25-2'1. •Ibid. •&.. H. llontgomery. 2. The need is for centralized control of production, in order to produce only what can be sold profitably. J. The Government should introduce business-like methods to reconstruct the South in its cotton production,30 for 1. Competitive over-production must cease,31 for a. The world will no longer pay for the excess cotton. b. We must reduce our large surpluses through orderly reduction of production. c. Millions of acres must be taken out of cotton pro­duction. K. The Federal Government is the only agency that can control cotton production,32 for 1. Drastic action is necessary if a disaster of major propor­tions throughout the cotton belt is to be averted.83 2. The Federal Government is the only agency sufficiently able, as a financial and central unit, to handle the farm­ing problem. L. The price of cotton is affected vitally by the amount of production,34 for 1. In 1923, with ten million bales production, the price of cotton was 31 cents per pound. 2. In 1927, on the other hand, with seventeen million bales, the price of cotton was 10.9 cents per pound. 3. The 1927 crop brought $589,093,000 less money, although seven million more bales were produced. M. With Federal control of production, the farmer will know in the spring what, approximately, he will get for his cotton in the fall. N. The size of the cotton crop determines the price of cotton, 35 for 1. The price of cotton dropped from 19 % cents per pound in 1929 to 5% cents per pound in 1931, because a. There was a surplus of thirteen million bales at the beginning of the 1931 cot+-on season, when the normal carry-over is usually four million bales. 2. With large surpluses, 75 per ce.nt of the price of cotton and of the purchasing power of the farmer disappeared. 3. In 1923, with a ten million-bale crop, the farmer received 28.69 cents per pound. 80Ford, Amos A., New Republic, 74: 41-8. Feb. 22, 1933. 11wallace, H. A. 31Bankhead, John H. ISE. D. White, "The Government's Cotton Pro2'ram." MBankhead, John H. 85Bankhead, ''The Cotton Industry," Cong. Record, Vol. 79, No. 68, Apr. 4, 1935. 4. In 1924, when the crop was 13,600,000 bales, the price fell from 28 % to 23 cents per pound-a loss of 6 cents per pound. 5. In 1925, with a crop of 16,100,000 bales, the price dropped to 19 % cents per pound. 6. In 1926, considered a very good business year, the crop was 18,000,000 bales, and the price dropped to 12 % cents per pound. 7. The 18,000,000 bales of 1926 brought $1,120,000,000, while the 10,000,000 bales of 1923 brought $1,320,000,000. In other words, the farmer received $200,000,000 less money for producing 8,000,000 more bales! 8. In 1927, the crop was 13,000,000 bales (5,000,000 less than the preceding year) and the price jumped to 20 cents, the farmers receiving $1,300,000,000. II. Government control of cotton production is sound in theory, because A. Government aid and control will make the law of Supply and Demand effective in the cotton industry, for 1. It will control the supply of cotton, for a. The Government may increase or decrease the supply, depending upon the demand for raw cotton. 2. It will encourage and expand the demand for cotton,36· for a. The Government can enter into and encourage trade agreements with other nations whereby cotton may be exchanged for other goods, for (1) United States and Germany arranged to trade cotton for other goods. b. The Government can promulgate orderly marketing and avoid "dumping" large quantities of cotton on the world markets.37 3. Adjustment of supply and demand will bring the farmer the best possible price for his cotton, for a. The cause for low price cotton is due, largely, to maladjustment, for ( 1) The farmer usually produces more than is de­manded and low prices follow. (2) Control of production will more nearly adjust supply to demand. 86Peek, G. N., "How to Sell Cotton," Cotton Trade Journal, 15: No. 21, June 1, 1935, p. 2. SiFord, Amos W., "Federal Control Goes South," New Republic, 74: 41-3, Feb. 22, 1933. b. Cotton will receive parity value with other goods which are sold under a proper adjustment of the supply and demand law.s8 4. The aim of governmental control is to adjust production to effective demand and hold production at that point as nearly as possible.39 5. A sound control program operates to the advantage of all society.40 6. The cotton farmer, as well as agriculture as a whole, is entitled to the protection extended by the Government to other industries.41 7. The farmer should not operate on "capacity" production. He should be able, as is the average industrialist, to con­trol his production and thus retard falling prices.42 B. The theory upon which Government aid and control is based is sound and has ample precedent, for43 1. It is a "well established principle that the Government shall assume the risk of pioneering and experimenting in fields where public interest is involved, and to do so in behalf of the public welfare."44 2. The Government has aided the Merchant Martine.45 3. The Government inaugurated the Muscle Shoals and other power projects.46 4. Land banks were started by the Government. 5. The railroads were aided.47 6. The organic law of the United States recognizes as an established principle of public policy that no one should be deprived of his property without due process of law, for a. The Supreme Court has held that a utility effected with public interest is entitled to a reasonable rate of return on a fair valuation,48 for ( 1) Five and three-quarters per cent return on in­vestments were allowed to the railroads. (2) Six per cent return on investments were allowed many other utilities. 38Bankhead, John H., "Why Fear Cotton Control,'' The Nation's Business, June, 1934, pp. 25-27. 39White, E. D., "The Government's Cotton Pr~ram," op. cit., p. 114. ' 01dem. 41Lucas, H. G., Austin Statesman, July 23, 1935. '2Bankhead, John H., Nation's Business, op. cit. 4.3Report to Accompany Apr. Surplus Control Bill: S. 4808. 4'1bid. 4lSJbid. 46/bid. 47/bid. 4BMead, E. S., and Ostrolenk, Voluntary Allotment, pp. 75-76. The University of Texas Bulletin (3) In 1931 the light and power industry made eight hundred million dollars on thirteen billion invest­ment. 7. The production of the farmer is vitally necessary, and should be classed as a public utility and its prices con­trolled in order to assure a "reasonable" return on a fair valuation of the property. G. The Federal Government has been uniformly successful in the aid it has given to various industries, for 1. The Merchant Marine is well on its way to successful operation. 2. The Muscle Shoals project has proved a success. 3. The land banks are now a proved experiment. 4. The railroads were stabilized by Government aid. III. The proposed remedy49 is practicable, for A. Plan J5o may be applied to the present situation, for 1. Plan No. I is based on the theory that: a. The purchasing power of 1929 (nine and four-tenths billion) should be restored to the farmer. b. Four and five-tenths billion should be added to the five and two-tenths billion income of 1932 to give the farmer a practical parity with the industrialist. 49PLANS. Editor's Note.-The affirmative, in advocating cotton control, will have to formulate a suitable plan. It was thought advisable by the Editor, however, to suggest four possible plans of control, because many so-called remedies have been proposed. In substance, the plans suggested above were obtained from the authorities credited in the footnotes, although certain omissions and additions have been made by the Editor. It must be emphasized again that the affirmative is not limited to the four proposed plans. The plans offered here represent certain variations in the method of control of production which must be understood by the debater if he hopes to present a clear and a workable plan. Plan I, for example, sets a definite goal for production at a given price (10,000,000 bales at 20 cents per pound), plus an attempt to raise the farmer's incom~ to nine and four-tenths billion. Plan II emphasizes decentralized control and ins~sts that voluntary action is very essential. Voluntary controlled is in­cluded also in Plans I and III, but Plan II stresses this feature. Plan III would control production through control of acreage. Further, this plan advocates centralized control, working, as in the other remedies, through local, county and state agencies. Plan IV differs from the other three suggestions in that it would make cooperation "(;ompu:s'.lry" by imposing a 50 per cent tax on any cotton ginned over and above the allotment allowed the individual farmer. Thus, a non-e<>Operating producer would not receive any quota of the tax-free allotment and pay 50 per cent of the value of every bale he gins. It should be pointed out in passing that all four plans advocate a processing or excise tax to finance the cost of the benefits to the farmer and the expenses of administration. The debater is advised to study these plans, read the articles from which these plans were derived, and then work out his own remedy of Government control of cotton production. 5(\Mead and Ostralenk. c. Past experience indicates that if the farmer can reduce his production to 10,000,000 bales, cotton can sell for 20 cents per pound. 2. The administrative set-up of Plan I is relatively simple. The plan calls for : a. A Federal Board to control cotton production. ( 1) The Board will have all of present and future market information from which it will deter­mine: (a) The price that will give a reasonable re­turn to the cotton farmer. (b) The visible supply of cotton on hand and estimate the amount needed for consump­tion at the given price. (2) The farmers would be invited to cooperate with the Board in producing no more than the amount which the market will take. (3) The Federal Board, acting through state and local officials in the farm countries and through the county agents, will determine the amount of land to be devoted to cotton. (a) Each county would be assigned its pro rata share based upon past production and the acreage necessary to produce the allotted amount. ( 4) The Federal Board will determine the price that each farmer must receive for reducing his acreage. ( 5) An excise tax, collected by the Government, will be placed on cotton sufficient to bring the price of cotton up to the predetermined figure. (6) Only those who cooperate will benefit from the extra income. Full cooper a tion by all farmers will result. B. Plan II may be applied to the present situation, for 1. Plan II51 is based on the theory that: a. If production is controlled and prices elevated, the benefits will be reflected to all other commodities and the producers of the exportable commodities (cotton) will be prevented from shifting their production and causing over-production in other domestic com­modities. b. It is not necessary to admit that we must take the isolation (national production only) route. 1>1Wilson, M. L .• "Farm Relief and the Domestic Allotment Plan," pp. 24-45. 22 The University of Texas Bulletin c. That our exports are in a bad form and it will take some time to restore our European markets. 2. The administrative set-up of Plan II is practical, for a. It provides that an excise tax should be collected at the source of processing-at the textile mill. b. The amount of the tax should be sufficient to give the farmer prewar purchasing power. c. Each farmer shall receive his pro rata share of the tax for his crop do-niestically consumed, provided ( 1) The farmer "signs a production control contract agreeing not to increase his production, but, if necessary, to reduce it to an amount which would bring about a better balance between supply and effective demand." (a) The purpose of the reduction will be to eliminate existing surpluses and not to bring about a permanent plan of produc­tion which will limit cotton production for domestic use only. The farmer has "a natural world advantage in cotton produc­tion" and it will not be necessary for us to "retreat from the international markets." d. The plan should be voluntary. (1) It should be so operated that only cooperators in the adjustment of production would receive the benefits. (2) The non-cooperators would receive the world price only. ( 3) The cooperating farmer would receive the benefits of price increase-as a direct price supplement. e. The plan should have decentralized control: (1) The operations should be largely on a county, a township, or school district basis. ( 2) The expense of administration should be borne by the producers benefited and not by the gen­eral public. f. A review of the steps of the plan show it to be practical because it calls for: ( 1) That Congress, through proper legislative action, should require the farmers to determine for themselves whether they want the allotment plan put into operation. (2) Educational meetings to be held by the county agents for full discussion. (3) A referendum vote based either on individual or per acre. Each farmer should also give the amount of his production and his number of acres. (4) Accurate allotments to made, for (a) A national agency would give each state its allotment. (b) A state agency would, in turn, make the allotments to the counties. (c) The county committees would be set up to make allotments to the individual farmer. ( d) The county committees, acting through township officers or local school districts, would receive applications from the farm­ers for allotments. ( 1) The applications would be publicized. (2) The farmer must give affidavits on his production and yield per acre. e. No farmer would be compelled to participate-his action would be purely voluntary. f. The plan would be self-policing and self-adminis­trating. C. Plan !1152 may be applied to the present situation, for 1. Plan III is based on the theory that, a. It is possible to establish and maintain parity for the farmer with industry. This parity is based on the 1909-14 period. 2. The administration set-up of plan III. The A.A.A. "plow-up" plan of 1933) is practical. It provides that: a. The Secretary of Agriculture will have the right to lease land and take this acreage out of production. b. The Government pay benefits to cooperating farmers. c. A processing tax should be used to raise the sum needed for the benefit payments. d. Farmers may join, voluntarily­ (1) One million and thirty-two thousand farmers participated and received cash rentals approxi­mating $112,000,000. 3. Another variation of Plan III. (The A.A.A. plan of 1934) is also practical. It provides that: a. All adjustments should be made on the basis of a five-year period, 1928-1932. b. The farmer may rent 35 to 40 per cent of his cotton acreage. He is to be paid 3.5 cents per pound on the acreage yield for the base period. In addition, he is l52The A.A.A. Plan. (See: "General Material" in the Bulletin for complete discussion of this plan.) to receive a parity payment of 1 cent a pound on 40 per cent of his base production. . 4. The county committees inaugurate the campa1~ and adjudicate all disputes and have the contracts signed. The signed contracts are then sent to the State Board of Review for approval. After the State approval, the contracts are sent to Washington for individual ac­ceptance by the Federal Government. D. Plan IV may be applied to the present situation, for 1. Plan IV.53 The Bankhead Act for 1934-35, is based on the practical idea that all farmers should be made to cooperate in the reduction of cotton production. Here­tofore, a small majority would not cooperate and attempted to gain an advantage over the cooperating farmers. 2. The administrative set-up of Plan IV is not unduly complicated. It provides that: a. The State allotments should be made on the basis of production. The base used in the 1928-32 period. b. There should be no change in the State quotas. That is, the quotas of the A.A.A. would remain the same. c. The A.A.A. should administer the act and use the same local, county, and state committees of the A.A.A. d. Control should be made effective (compulsory) by a 50 per cent tax on the value of cotton over and above the 10,000,000 bales allowed as tax free. If a farmer produces more than his allotment calls for, he may gin this excess by paying a 50 per cent tax on it. Farmers who do not sign the reduction or produc­tion agreements are not allowed to participate in the tax-free quotas and must pay 50 per cent of the value of their cotton as a tax if they try to gin it. e. The allotment provides for 10,000,000 bales of tax­exempt cotton. E. The plan (Plan I-II) offers very definite benefits to the farmer,54 for 1. It will raise prices on parity with the industrialists. 2. It will finance itself, for a. The public treasury will not be called upon to pay the expenses, for (1) The manufacturer will have to pay a processing tax when he purchases raw cotton MThe Bankhead Act. See: Cox, A. B., "Control of the Cotton Industry,'• in the '"General Material.. section of the Bulletin. MJ4ead and Ostrolenk. 3. No dumping will be allowed. 4. It will use the existing agencies and operate through the local groups rather than through the national, bureau­cratic organizations. 5. The action of the farmers will be purely voluntary. 6. Export surpluses will be eliminated, thus removing the greatest incentive to low prices for cotton. This action will check falling prices. F. The A.A.A. Plan and the Bankhead Act (Plans III-IV) offer very definite benefits to the farmer, for 1. It will secure a fair price for the product by adjusting production to an effective demand and holding produc­tion at that point as nearly as possible.55 2. The plan operates to the advantage of all society as well as to the farmers.s6 3. The plan has already proved successful: prices have doubled since control. 57 4. The farmers have been able to use retired cotton land in producing grain, roughage, and vegetables to be con­sumed on the farm. The Bankhead Act has succeeded in bringing about a measure of the crop diversification that agricultural economists have been preaching for generations.5s 6. Relief has been achieved without putting a heavy burden on the consumer. The processing tax adds only 3 % cents to the price of a cheap cotton shirt as compared with a tariff of 23 cents. 59 6. The A.A.A. has diminished the unwieldy carry-over.60 7. In Texas, the 1933 cotton crop income was double that of 1932. In spite of the drought, the income in Texas for 1934 was 40 per cent above 1932. 61 8. The Bankhead Act will result in even better prices, for a. With the inclusion of the 50 per cent tax, greater control of production will be achieved. 9. It has been demonstrated that prices can be kept up by restricting the production to the demands of the market. The industrialist is the best example of the truth of the foregoing statement.62 66White, E. D. fi6Jbid.. MGard, Wayne, "Decline in the Cotton Kingdom,'' Current History, April, 1935. 59/bid. 89Jbid. eopeek, George N.• "How to Sell Cotton,'' Cotton Trade Journal, June 1, 1936. 81Cobb, C. A., Cotton. Trade Jou.r'Ml, July 6, 1936. 82Gard, Wayne. 26 The University of Texas Bulletin 10. In 1905, the southern farmers, through voluntary :educf tion of 14 per cent, were able to raise the price o cotton 2 cents per pound.aa 11. The farmer will be able to trade on the basis of a fair exchange in terms of goods he has to buy, for64 a. The plan will raise his price through production, reduction and cooperation. b. The cotton dollar will reach parity with the indus­trial dollar. G. Federal control of cotton production will not raise materially any new problems in foreign trade,65 for 1. The export trade in cotton was not affected by the A.A.A. price raise in 1933, for a. The ten-year average of American cotton exports was around 7 ,000,000 bales. b. In 1932, when cotton was selling at 51h cents per pound, the foreign countries had accumulated a sur­plus of 3,439,000 bales-about a six-months' supply. c. In 1933, the surplus was increased to 3,537,000 bales. This stock was decreased to 2,859,000 in 1934. d. In March, 1934, we exported 3,250,000 bales. This means that the supply of American cotton abroad is 6,109,000 bales, with four months yet to purchase. This total compares with the usual 7 ,000,000 bales foreign countries use each year. 2. There are no available acreage statistics on foreign countries available, for a. Foreign countries do not have up-to-date methods of reporting acreage, and figures on production is the only real test available. b. Our Bureau of Economics, however, reports that there has been no material increase in planted acre­age in 1934 as compared with 1933, in any cotton­growing country except Brazil. The Bureau's report shows that: (1) The peak of planted acreage in foreign coun­tries was reached in 1925-26. After an eight to nine year decrease the average was increased in 1933 to near the 1925-26 level. But the acreage increase in the United States was higher in 1933. (2) Egypt and India, taken together, produced 2 per cent less cotton last year. 631bid. MWallace, H. A. 05Bankhead, John H. ( 3) The increase in cotton acreage ( 10 per cent in Brazil) in 1933 was not due to our plow-up campaign, for (a) The plow-up campaign was not inaugu­rated until after the cotton in all of these countries had been planted and was in a state of cultivation like ours. 3. The loss of our foreign markets was not due to price or supply, for a. French and German consumers have been trying to buy cotton, but could not do so due to our anti­dumping laws. b. Countries still on the old gold standard have 40 per cent higher prices on their goods and they can't trade with us. c. Foreign countries do not have gold with which to purchase our cotton. d. Since we do not import very much, the foreigners can't secure American dollars with which to pur­chase cotton. e. We exported more cotton when prices were higher than we did when prices were low. 4. "No nation can sell to another nation unless that nation buys something," for a. Nations swap goods, and the balance of trade (the difference between the goods sent less the goods re­ceived) is paid in money. b. The balance of trade cannot run in favor of one country indefinitely without draining all of the gold from that country. 5. "The tariff-rate barriers, the quotas, the trade agree­ments between different nations, have brought down our commerce, industrially and agriculturally...." 6. Reciprocal trade agreements may ameliorate the tariff, for a. We cannot afford to pull down our tariffs, for ( 1) The country would be flooded with imports and, at the same time, get no advantage by trading or shipping our goods into countries which are shipping theirs here. b. It would take time, patience and statesmanship to secure world-wide reduction of tariffs. 7. Foreign competition in cotton production is highly ex­aggerated, for66 8. Crop reduction in the United States will not easily stimulate foreign production,61 for elGard, Wayne, "Decline in the Cotton Kingdom," Cur. Hist., April 1, 1935. The University of Texas Bulletin a. Egypt can't increase her production very much, for (1) The land is needed for food crops: . . (2) Any large production would require costly 1rr1­ gation and drainage projects. b. The need of land for food crops in China, India and other countries will operate as a check to cotton production increase. c. Russia's increase is slow and cannot keep up with her consumption. d. The increase of cotton in Brazil cannot have con­ tinuous rapid development, for (1) She is thinly populated. (2) She lacks adequate labor supply. (3) Immediate expansion is discouraged by the in­ festation of the pink bollworm. ( 4) It will be necessary to clear dense hardwood forests in order to plant cotton. (5) The recent cotton boom in Brazil has been largely a reaction to the slump in coffee. a. Unfavorable climatic, economic and social conditions in other countries will prevent immediate increase in cotton production. b. The control of cotton in the United States is aimed at price parity and this price will not materially increase foreign production. c. The plow-up campaign program of 1933 was not irresponsible for the small acreage increase in for­eign countries that year, for (1) Very little cotton was planted a/ter the date of the 1933 plow-up campaign. IV. Government control of cotton production is the best of all possible remedies, for A. Other remedies used to help the farmer have failed,es for 1. The plans have been aimed "primarily at the artificial support of prices by the use of public funds to take crop surplus off the market." The plans (the Export Debenture, the McNary-Haugen Bill, the Farm Board, and the so-called stabilization plan) "did not touch the supply factors which produced these surpluses." 87Wbite, E. D., ..The Government's Cotton Program," The Cotton Crisis, Arnold Foundation, S.M.U., Dallas, 1935, op. cit. 68Mead and Ostrolenk, op. cit. B. Price raising schemes, without control, have failed,69 for 1. Brazil's attempt to raise the price of coffee, without control of production, failed. 2. Attempts to raise the price of copper and rubber, without control of production, also failed. 3. The Farm Board failed to decrease production through the control of price only, for a. The interests of the individual farmer are in conflict with the interests of the farmers as a group, for (1) Each farmer would produce more, in order to profit from the artificial price. (2) The individaul farmer assumed that the farmer would reduce. 4. The two-price plan (Domestic Allotment Plan) will also fail to regulate production, for a. The individual farmer will produce all he can (as was suggested under the other schemes) for foreign consumption and thus flood the market. C. Only middlemen (ginners, shippers, compress owners, rail­road executives, and exporters) object to a Federal control of production, for 1. They profit on the volume of cotton rather than on its price, for a. Greater number of bales means more business for them. D. No other plan, except Government control of production could:70 1. Double the income of the farmer in one year. a. The A.A.A. plan doubled the income of the farmer in 1933, according to C. A. Cobb. 2. Reduce the carry-over nearly 3,000,000 bales. 3. Raise the price of cotton from 6.5 to 12.3 cents per pound. 4. Make the processing tax the "farmers' tariff." 5. Win the enthusiastic support of the large majority of the farmers. E. The processing tax will not prove burdensome to the con­sumer,11 for 1. The cost of the raw material in the finished product is relatively small. 2. The tax will not greatly affect consumption. 3. The objectors to the tax assume that the farmer has been receiving correct prices. The purchasing power of the farmer, however, has been on a decline. -Wilson. M. L., oP· cit. "°Cobb. C. A., Cotton Trade Journal, Vol 15, No. 26, July 6, 1935. 11WiJson. M. L.. oP· cit. The University of Texas Bulletin CONCLUSION Since: I. There is need for the Federal Government to control the pro­duction of cotton~ II. Government control of cotton is sound in theory, III. The proposed remedy is practical, IV. Government control of production is the best of all possible remedies, Therefore, The Federal Government should control the production of cotton. DISCUSSION OF THE NEGATIVE I. There is no need for the Federal Government to control the production of cotton, because A. Federa:i control of cotton production. will not remedy the so-called "dire need" of the farmer, for 1. The condition of the farmer is not as bad as is found in other sections and groups in the country.1 2. The cause of the economic depression is national as well as world-wide. 3. The cotton farmer needs to lower his cost of production through better planning and financing, and not restrict his production,2 for a. The farmer, through better farm management, needs to diversify in order to eliminate the one-crop system. b. There is a dire need for the restoration of hundreds of thousands of rural families (now on relief rolls due to the restriction program of the Government) to homes on farms, for (1) The farm does offer more profitable employment to these people than any other enterprise. 4. Wealth cannot be created for the cotton farmer through scarcity,s for a. The farmer needs expanding markets (in order to produce more cotton) and not bonuses. 5. The possibilities latent in the production of cottonseed could be studied and its value increased. 6. The emergency situation in the cotton industry today is due largely to unwise Government policies. B. The "dire" condition of the tenant farmer will not be rem­edied by Federal control of production,4 for 1McGugin, Harold, New Outlook, 164: 31-3, A. 1934. 2Cox, A. B. scox, A. B. *J'homas, Norman, Current History, April, 1935, PP. 36-41. 1. The large landowners will receive the benefit payments and keep the "lion's share." 2. The unscrupulous plantation owners have taken ad­vantage of almost every opportunity to substitute casual day laborers for share-cropper labor. 3. The temptation to do the foregoing will increase as the share of the tenants is increased in benefit or parity payments. 4. Many tenants have been thrown on relief rolls and driven from the cotton fields. 5. Tenants have been reduced to day laborers and are paid 75 cents per day for 13 hours of work. 6. The tenant system must be abolished if the need of the tenant is to be remedied. C. The only permanent cure for the difficulties of the cotton growers will not come through an arbitrary restriction of production, but through a restoration of markets.5 To do this we must: 1. Restore foreign trade, through a mutual reduction of the tariff barriers. D. The cause of the farmer's plight is due to the fact that he buys in a "closed" market, and sells his products in an "open" market,6 for 1. The industrialist has received protection through tariff for the home markets, while the farmer has had to sell his products at a world-wide price in competition with foreign cotton pwoducers. 2. Tariff protection to the industrialist has produced for the farmer a condition of life saturated with inequality of the most cruel and unjust sort for a. He has had to pay high prices for the goods he purchases. b. His cost of production has been much higher than that of the foreign producers of cotton. 3. In an attempt to overcome this inequality the farmer has been forced to use "his women and children in the cotton fields." 4. Relief "from the unjust burdens of the tariff" and not restricted production through governmental control will ameliorate the condition of the farmer. E. Federal control of production in the United States would not remedy the needs of the American farmer,7 for &Nation, The, 137 :366, Oct. 4, 1933. 'Clayton, W. L., Acco Press, 13: June, 1935. 7Da.llaa News-An Editorial, Acco Press, 13: No. 1.1. November, 1934. 1. The Federal Government cannot control the produ~tion of a commodity so widely distributed in internattona1 traae as is cotton for a. The Federal Government cannot control cotton pro­duction in foreign countries. 2. Control of production in the United States will actually injure the American producer while the foreign producer will reap the benefits of America'~ decrease production. F. After almost two years of operation, Federal control of pro­duction has brought very little farm relief to the farmer, although much money has been spent.8 G. Control of production by a central agency is not the only element found in the insecurity among one-crop farmers, for 1. The greatest insecurity among the one-crop farmers is fluctuating yields and fluctuating prices.9 Weather con­ditions, the boll weevil world demand and production and many other elements determine the fluctuating yield and price, for a. Favorable conditions may secure a large income for the farmer one year, while a crop failure means no income the next year. 2. The best and perhaps the only lasting security against the numerous hazards of the farmer is diversification. H. Diversification, and not Federal control of production, is needed by the one-crop farmer,10 for 1. It requires the acreage devoted to the principal crop. 2. It spreads the farmer's risk so that a failure of a given crop from any cause is not so disastrous. 3. Small farms are better adapted to diversification. 4. Farmers, through intelligently conducted demonstrations, can soon learn to diversify. II. Governmental control of cotton production in the United States is unsound in theory,11 because A. Reduction in the United States does not reduce world pro­duction, for 1. The other nations increase their production and develop their cotton industry through securing a greater foothold in the market heretofore dominated by the United States. B. Artificially high prices in the United States will cause in­crease in production in other countries. C. Attempts to control prices through control of production or otherwise important crops on the part of one nation without the world cooperation have been fiascos for 8Nation, The. 138 :208, February, 1934. 9Cox, A. B. 10New Republic, "What Next for the Farmer?" March 2, 1927. 11McGugin, "The Murder of King Cotton," New Out'look, 164: 31-4, Aug. 1934. 1. Brazil failed in its attempt to control coffee. 2. England failed in its attempt to control rubber. D. Control of production by the Government will result in a series of controls and repressions exercised from Washing­ton, detrimental to the best interests of the people, for 1. Such actions will disregard and destroy the principle of fair price, quality and service. Without this principle we cannot hope to maintain a prosperous and lasting industry. E. Control of production is an improper sphere of governmental activity and is resented by the people. F. The fanciful doctrine that we can grow rich by creating scarcity is fundamentally unsound for12 1. "In the long run the standards of living of a people depend upon the richness and variety of natural re­sources and the efficiency with which they are utilized." G. The principle that price should be the guide in controlling supply and demand cannot be violated,13 for 1. Monopolistic conditions through price control have failed, for a. Artificial prices demoralize the markets. b. Artificial prices lower the demand. III. Governmental control of cotton production in the United States is impractical because A. The control program has failed to achieve its major ob­jective-the rise of the price of cotton,14 for 1. The present price of 12.56 cents per pound of cotton is due to the devaluation of the do1lar and not to control, for a. In 1932, when the United States was on the gold standard, the price of cotton was 6.58 cents per pound. The price of cotton on January 15, 1935, with the devaluated dollar was 12.56 cents. The gold dollar value of this 12.56 cents cotton is 7.42. In other words, the price of cotton has actually advanced less than one cent from 1932 to 1935. 2. As the gold value of the dollar fell, dollar prices of cotton went up in almost exact ratio, for :i. The export price of cotton is a world gold price, for ( 1) We normally export 60 per cent of our cotton production, and foreigners pay for cotton through the purchase of dollar exchange. 12Cox. A. B. J.SHauhart, William F ., The Cott011. Crisis, pp. 66-67. HCox, A. B., "Evaluating the Government Program,'' The Cotton Crisis, p. 123. See, also, Carothers, Neil, Congressional Digest, 13: 307-111, Dec. 1934. . . has been due not to 3. The one cent (.84 pomts) mcrease d d d 1 governmental control of supply but to supp y-an -eman conditions, for . a. There has been some improvement in world busmess conditions, which has improved the demand for cotton. B. The procesing tax has done more harm than any other item m the reduction program,15 for 1. It is the worst sort of a sales tax, for a. It is pyramided through at least three agencies before the consumer finally pays it. b. It costs more and pays less in proportion than any other tax, for ( 1) The public pays four times, for (a) The consumer pays the 4.2 cents a pound when he buys cotton goods. (b) A tariff is put on all imported cotton goods of the same amount. When the consumer buys these imported goods he pays the tax on them. (c) The farmer is paid with this tax money to restrict production, which raises prices. Thus the public pays again. (d) By restricting production through the tax money, hundreds of thousands are thrown out of employment and placed on relief rolls. The public pays again in higher taxes for relief. c. The processing tax falls heaviest on the poor people,16 for ( 1) Cotton coarse goods are taxed heavily and these goods are purchased largely by the poor people. C. The cotton reduction program has done more harm than good,17 for 1. It caused the farmer to lose money by destroying cotton crops and reducing his output for the world for a. The world market could have bought all that was produced. 2. It caused the loss of over $50,000,000 worth of cotton picking. 3. It caused the loss of $40,000,000 worth of ginning. 4. It caused the loss of $30,000,000 worth of transportation; $30,000,000 loss of compressing, merchandising, etc. 1'-Cox, A. B. 16Cox, A. B. 17Cox, A. B. Government Control of Cotton Production 5. It curtailed the production of nearly 3,500,000 tons of cottonseed having a working cost of more than $20,000,000. 6. The Government destroyed and prevented production of over 2,500,000 tons of cottonseed meal and hulls. a. Later, the Government had to kill cattle, sheep and goats, because there was lack of feed! 7. The textile mills would have been more active and all people better clothed. 8. Foreign production would have been kept down and our position in the world market strengthened. 9. The reduction program has caused the loss of world markets. D. Governmental control of production has created new and alarming difficulties in the South, for 1. Physical hardships have been imposed on the share­cropper,18 for a. Four hundred thousand families, or 20 per cent of the dependent farm population of the South, have been thrown off the plantation and on relief by the opera­tion of the A.A.A. crop-reduction program. b. Most of these people will probably never be reem­ployed, for (1) Owners discovered that they can plant and raise cotton cheaper by employing transients. 2. There has been a sharp rise of class feeling on the part of the tenants in order to protect their livelihood. 3. Permanent economic dislocation threatens the South owing to rise in cotton prices and governmental curtail­ment of production, for a. Foreign production is increasing, for (1) Brazil has tripled its production in the past five years. (2) The Soviet Union doubled its crop. (3) China, Peru, and Mexico have added materially to their output. b. American exports have fallen from 8,000,000 bales annually to 3,000,000 in 1934-35. (1) From 60 per cent of the world's supply the United States now grows only 45 per cent of the world supply. (2) Greater reduction of production in the United States is practically inevitable unless the Admin­istration drastically modifies its present policies. lBNation, The, 140: 525-526, May 8, 1935. The University of Texas Bulletin 4. If the Government insists on its curtailment a c~m~lete th South is mes- reorganization of the economy of e capable, for . a. New industries, or means, must be discovered to absorb into productive employment from 600,000 to 1,000,000 share-croppers and their families. b. New enterprises on a vast scale which are more profitable than cotton will be hard to discover. 5. Intelligent planning would look toward an increase rather than a reduction of the commodities the South is best able to produce. E. Government control of production has necessitated pernicious price-supporting loans on cotton,19 for 1. These loans will do more than any other agency to stimulate foreign production and drive the American producer out of the foreign market, for a. The loans are made on above the market prices. 2. The loans will have to be maintained on the new crop. 3. With the loan price above the market price, cotton will continue to go into the Government loan as it is ginned, and none of it will go into consumption channels. F. The crop reduction program of the Government proved to be unsuccessful,20 for 1. The Government planned to reduce production in 1933, but the production was higher by 98,000 bales than the 1932 crop. 2. The Government had planned for a 5,000,000-bale reduc­tion in 1933 and spent $111,000,000 for acre rentals. The 1933 crop was 13,100,000 bales, while 13,001,508 bales were produced in 1932 without governmental control. 3. The farmers rented the poorer land to the Government and intensified the cultivation of the remaining acreage. The net result of this action was an increase in cotton production, although the Government had spent $111,000,000 to reduce it. G. Substitute textile materials, especially fibers, present a greater danger than foreign production to the cotton farmer,21 for 1. World production of synthetic fibers, especially rayon, increased to about 130,000,000 pounds. This is twice the normal increase. 2. Synthetic fiber can be produced on the basis of decreasing cost and may eventually force the price of cotton down to as low as 5 cents per pound. 19Cotton Trade Journal. 15: No. 23, June 15. 1985. 20MacDonald, William, The Menace to Recovery, pp. 335-340. 21cox, A. B., The Cotton Crisis. H. The cost for maintaining its program of agricultural relief has cost the Government huge sums,22 for 1. The "revolving fund" for production credits, the capital and regional banks, and the borrowing resources of the central cooperation bank aggregate nearly 3,000,000. 2. The processing tax requires several hundred millions. 3. The R.F.C. gave a grant of $250,000,000 to the Com­modity Credit Corporation for loans on the 1933 cotton crop. 4. The acreage rentals is estimated as an ultimate total of $111,000,000. I. Without Federal control of production, and the processing tax, cotton would be selling today for 25 to 30 cents per pound,23 for 1. History proves that any two short crops, hand running, since the Civil War, have brought about abnormally high prices. 2. This is the third consecutive short crop in the United States and the price is relatively low. J. Government control of production can't control certain ele­mental conditions,24 for 1. Weather conditions, which defy control, have a very determining influence on crop production. 2. It is almost impossible to secure the cooperation of 30,000,000 people, for a. With so many people, it is impossible to secure unanimity of opinion. K. Much propaganda is used by the Government agencies to gain favorable attention for their plan and to condemn the objectors to Government control of production,25 for 1. At times, this propaganda is unjust and misleading, for a. The textile industry has been charged falsely with attempts to do away with the benefit payments. L. Government control of production may lead to serious political consequences,26 for 1. Some people profess to see a growing trend toward regi­mentation which must inevitably lead to communism and/or fascism. 2. "Radicals are deeply perturbed over the fate of the South's two million share-cropper and tenant families." 22MacDonald, William, The Menace to Recovery, pp. 325-340. 23Talmadge, Governor Eugene. KJenkins, Thomas A., Congressional Digest, 12: No. 2, p. 36, February, 1933. zcotton Trade Journal, 15: No. 23, June 15, 1935, p. 1-Quoting Dexter Stevens. 1:6Nation, The, 140: 525-526, May 8, 1935. 3. The high cost of cotton is reducing domestic ~ons.umption and the consumers, represented by the textile mterests are complaining. 4. Governor Talmadge and the more conservative growers, fear the elimination of the lucrative cotton crop of the South. M. Governmental control of p·roduction under the A.A.A. "is right now in grave danger of bleeding to deatk,"21 for 1. Through its policy of curtailed production, we have made it possible for foreign nations to increase their produc­tion as fast as we are reducing ours, for a. Fifty yeat"s ago, the South was producihg 75 per cent of the world supply of raw cotton. b. Six years ago we still held 60 per cent of the pro­duction. c. In 1934, due to governmental curtailment, the South rais~d only 41 per cent of the world's supply of cotton. d. From August 1, 1933, to July 31, 1934, we lost. 800,00(J bales in markets while foreign cotton growers gained 1,300,000 bales. 2. Foreign countr1es have recently increased their produc­tion from 10,500,000 bales to 13,250,000 bales, while we have cut ours from 15,000,000 to 9,500,000 bales. 3. The Federal Government, under its control program, "is holding a huge umbrella over the rest of the cotton world," for a. It has enabled foreign producers to increase their production at remunerative prices. b. The Government is taking our cotton and thus remov­ing it from the channels of trade, for (1) Practically the "entire supply of such cotton is either in the hands of Government agencies or is earmarked for same." 4. If we try to force the rest of the world "to pay our own idea of price then we must be resigned to a further cut in the amount of cotton which we can market." 5. If we accept a cut in our share of the world's cotton trade it will result in a. Loss of cash income for the farmers. b. Unemployment for hundreds of thousands of people, such as tenant farmers, pickers, employees in gins, oil mills, compresses, transportation, etc. c. The destruction of huge investments involved in the various cotton-handling industries. 27C}ayton, W. L.. "'The South's Cotton Industry Threatened with De t . ,, s ruction, Acco Press, 12: No. 11, pp. 1-4, November, 1934. See, also, RaYtn d "Plowing Down to Rio," New Outlook, 165: No. 4, pp. 11-15, APri1, 193;n • Allen, d. Placing a drag on National economic recovery be­cause o the increased unemployment and other losses. e. Injury to coast cities like Houston and especially Galveston, Texas. f. Placing "the raw cotton mdustry of this country on the rocks." IV. There are other remedies superior to the plan of Government control of production,2s for A. The Government could aid the farmer in correcting world trade conditions, for 1. The Government could sponsor world cooperation for the elimination or diminution of war, for a. The aftermath of war is usually very severe on the farmer. 2. The Government could help solve the problem of war debts, for a. These debts have closed the markets of the world and have injured the farmer more than any other group. 3. The Government could create stable money, for a. Stable purchasing power at home and abroad depends upon the stability of national currency, in order to avoid constant maladjustments of prices. B. The Government could aid in solving certain domestic prob­lems, thus aiding the farmer with controlling production, for 1. The Government could regulate those external agencies that materially affect the position of the farmer, for a. Regulation of speculation in elevators, warehouses, ex­changes and transportation could aid the farmer. 2. The Government could lessen or overcome "the discrimi­nation that has developed between agriculture and the other phases of national life," for a. The credit facilities of the Nation could be made more accessible to the farmer and facilitate the securing of needed financial aid. b. The taxation system is unfair to the farmer and some amelioration is due him, for (1) Local and state taxation is notoriously unfair to the farmer, for (a) His local and state taxes have been increas­ing although his income has been declining. (b) The general property tax rests more heavily on the farmer. 2BSeligman, Edwin, R. A., Economics of Farm Relief, Columbia University Press. 1929, pp. 189-209. 3. Lowering the cost through a reduction of the tariff would naturally constitute one method of improving the status of the farmer, for a. It will reduce the farmer's cost of production. b. It will reduce his cost of living. 4. The Government could aid the farmer by furnishing edu­cational facilities, for a. Information and advice could be furnished to the farmer by government experts, such as statistics, care of land, etc. 5. The Government could aid the farmer through price modification attempts, the aim of which will be "to modify or influence the more basic factors of agricul­tural prices." C. Parity income with reasonable security can be secured for the farmer,29 for 1. Improvement of the grade staple, length, and other quality characteristics, is the surest way to raise the price of cotton. 2. The farmer's cost of production may be lowered, for a. The Government could give the farmer technical, skilled advice and thus help him to increase his margin by lowering the cost of production. 3. Tariffs must be lowered in order to lower the farmer's cost of living and provide a broader basis for foreign trade. 4. Diversification can be developed and the one-crop system eliminated. 5. Better farm management practices (which are needed very badly in the South) can be promulgated in order to give the farmer increased income. The agricultural col­leges of the State can work out the programs and benefits may be given by the Government to those who cooperate. 6. The marketing system can be organized to aid the farmer "to sell each bale of cotton in his local market on its merits at any time." 7. A farm and farm-enterprise financing can be adopted to help finance the farmer and meet this need. 8. A comprehensive system of crop and live stock insurance could be adopted for the farmer, in order to guard him from unexpected losses. 9. Benefit payments offer the means of readily putting the foregoing plan into operation. 'l90"\X, A. B. a. The money for such benefits should come from current tariff revenues. Thus, as tariff is lowered, benefit payments would be lowered. b. In order to secure the benefits, the farmer must follow the minimum requirements laid down by the State Agricultural College. D. The domestic allotment plan could be used by the Govern­ment to aid the farmer, without resorting to control of production, for 1. ''The essential principle of the domestic allotment plan is paying producers a free-trade price plus the tariff duty for the part of their crop which is consumed in the United State,s . ..."3o 2. It would make the tariff principle protect our producers of agricultural curpluses,31 for a. It will subsidize our production for home consumption, but will leave us free from any acreage reduction. 3. The domestic allotment plan will prove practical, for a. It can be applied without acreage reduction. b. Prices will be permitted to reach natural levels, but the producers will be given a subsidy in order to bring this price up to "parity"-on the domestic con­sumed portion of his production. c. It will leave the farmer free to produce for export, if he so desires. d. Competitive price, once established in the free mar­kets of the world, will bring about a correct balance between supply and demand. 4. The domestic allotment plan will contribute certain bene­fits to the farmer, for a. The stimulus for export production will not be re­moved.32 b. Foreign countries cannot object to it, for ( 1) There is no export bounty in this plan. c. It will tend to give producers pre-war prices.33 d. It will give the farmer parity at home and allow him to compete in the foreign markets free of artificial prices.34 e. It will restore automatic control of crops.35 f. It will reward the energetic farmers instead of pun­ishing them as is done under the A.A.A. 30BJack, John D., Agricultural Reform in the U. S., p. 271. 31Clayton, W. L., "Our Vanishing Markets," The Cotton Crisis, Arnold Foundation, S.M.U., Dallas, 1935, pp. 33-39. 32BJack, John D., op. cit. 33Congressional Digest, February, 1933. MCotton Trade Journal, July 6, 1935 (quoting Congressman Dies of Texas). 83Jbid. The University of Texas Bulletin CONCLUSION Since: I. There is no need for the Federal Government to control cotton production. II. Government control of production in the United States is un­sound in theory. III. Governmental control of cotton production in the United States is impractical. IV. There are other remedies superior to the plan of Government control of production. Therefore: The Federal Government should not control the production of cotton. BIBLIOGRAPHY I. BOOKS AFFIRMATIVE Meal, E. S., and Ostralenk, B., Voluntary Allotment, University of Pennsylvania Press, Philadelphia, Pa., 1933. Montgomery, R. H., The Cooperative Pattern in Cotton, Macmillan Company, New York, 1929, pp. 260-263. U. S. Department of Agriculture, Year Book of Agriculture, 1930-32. Wallace, Henry A., America Must Choose, Foreign Policy Association and the World Peace Foundation, Publishers, Boston, Massachu­setts, 1934, pp. 4-7. Warren, G. F., and Pearson, F. A., The Agricultural Situation, John Wiley & Sons, Inc., New York, 1934. NEGA'l'IVE Black, John D., Agricultural Refor'Yn in the United States, Mc-Graw­Hill Book Company, New York, 1929. MacDonald, William, The Menace of Recovery, MacMillan Company, New York, 1934. Seligman, Edwin R. A., Economics of Farm Relief, Columbia Univer­sity Press, New York, 1929. II. ARTICLES GENERAL READING Agricultural Adjustment Act, May 12, 1933. Congressional Digest, 13 :289-290 D. 1934. ----, 13:298, D. 1934. ----, 13:296, D. 1934. Cotton Trade Journal, "Estimated World Acreage and Production," 15:3, July 13, 1935. -----, "Acco Estimates 1935 Production," 15 :3, July 6, 1935. Cox, A. B., "Control in the Cotton Industry." Prepared for the Bulletin. Rousse, Thos. A., "An Analytical Discussion of Cotton Control." Pre­pared for the Bulletin. -----, "The History of Cotton Production." Prepared for the Bulletin. lThe present Bibliography is not intended to be exhaustive or inclusive. For further material the debater should consult The Reader's Guide to Periodical Literature, and the Congressional Record, where reports on committee hearings are to be found. Literature on cotton may be secured, also, from the Southwestern Office Division of Information, A.A.A., P. 0. Box 264, College Station, Texas. The Agri­cultural Index should be examined for cotton control articles appearing in the various agricultural magazines and periodicals. AFFIRMATIVE Bankhead, Senator John H., "To Regulate Producing an~ Ginning of Cotton." Hearing before the Committee on Agriculture and Forestry, United States Senate, S 1974, 73rd Congress, Second Session, January 15-20, 1934. -----, "Why Fear Cotton Crop Control," Nation's Business, June, 1934, pp. 25-27, 55. -----, "The Cotton Industry," Congressional Record, Vol. 79, No. 68, April 4, 1935, pp. 5175-5183. "13 Cent Cotton Seen for 1935," Austin American (AP), ' June 15, 1935. Congressional Digest, "Varying Views on Production Control," Feb­ruary, 1933. Cotton Trade Journal, The, Vol. 15, No. 21, June 1, 1935, p. 1; No. 22, June 8, 1935, p. 1; No. 26, July 6, 1935, pp. 1-3; No. 26, July 6, 1935, p. 1. Ford, A. W., "Federal Control Goes South," New Republic, 7 4 :41-3, February 22, 1933. Gard, Wayne, "Decline in the Cotton Kingdom," Current History, April 1, 1935, pp. 31-36. James, D. L., "What the A.A.A. Is Doing," Nation's Business, May, 1934, pp. 69-70. Means, Gardiner C., "Industrial Prices and Their Relative Inflex­ibility," Senate Document No. 13, 74th Congress, 1st Session. New Republic, 75 :299, August 2, 1933. Peek, George N., "How to Sell Cotton," Cotton Trade Journal, Vol. 15, No. 21, June 1, 1935. Poe, C., "Bankhead Act and Democracy," South Atlantic Quart., 33 :321-33, October, 1934. Wallace, Henry A., "The Processing Tax," The Catton Trade Journal, June 29, 1935, New Orleans, La., p. 3. -----, "Statement by the Secretary of Agriculture," before the Committee on Agriculture and Forestry, March 7, 1935. -----, "Is the A.A.A. Experiment Proving a Success?" Con­gressional Digest, 13 : No. 12, p. 302, December, 1934. White, E. D., "The Government's Cotton Program," The Cotton Crisis, Arnold Foundation, S. M. U ., Dallas, Texas, 1935, pp. 102. Wilson, M. L., "Farm Relief and the Domestic Allotment Plan" The Day and Hour Series, University of Minnesota Press Minne­apolis, 1933, pp. 24-28, 34-36, 43--45. ' NEGATIVE Acco Press, The (Anderson-Clayton Company, Houston, Texas), 12 :23, N., 1934; 13:1-8; February, 1935; 12 :3-4, May, 1935. 13:1-4, June, 1935; 13:5-6, July, 1935. ' Business Week, "Cotton Quandry; Demand for Crop Restriction to Protect Prices," June 10, 1933, p. 9. -----,"Cotton Joker; Ideal Growing Conditions Produce Bumper Crop on Reduced Acreage," August 12, 1933, p. 22. -----, "Cotton Magic," December 2, 1933, p. 22. -----, "Cotton Fascism; Compulsory Acreage Reduction," Feb­ruary 17, 1934, p. 21. Clayton, W. L., "The South's Cotton Industry Threatened with Destruction," Acco Press, 12:1-4, Houston, 1933. -----, "Our Vanishing Markets," The Cotton Crisis, Arnold Foundation, S. M. U ., Dallas, 1935, pp. 25-39. Gorothers, Neil, Congressional Digest, 13 :307, December, 1934. Cotton Trade Journal, The, "Increase in Argentina's Cotton Produc­ tion Shown, 15 :3, June 1, 1935. -----, "Government Loans on Cotton," 15:2, June 15, 1935. -----, 15:1, June 15, 1935. -----, "Domestic Allotment Plan for Cotton Producers," 15:1-4, July 6, 1935. -----, "McFadden Urges Direct Aid-No Loans to Cotton Farmers," 15 :2-3, June 15, 1935. Cox, A. B., "Evaluating the Government's Program," The Cotton Crisis, Arnold Foundation, S. M. U., Dallas, 1935, pp. 121-137. -----, "A National Cotton Policy." Prepared for the Bulletin. Dallas News, "Brazilian Charges U. S. Firm Seeks to Establish Monopoly and Limit Production," June 30, 1935. Fortune, 12 :35-39, July, 1935. Hauhart, William F., "Our Disregard of Economic Laws," The Cot­ ton Crisis, Arnold Foundation, S. M. U., Dallas, 1935, pp. 66-67. Helm, Fielding, "Helm Domestic Allotment Plan." Prepared for the Bulletin. Jenkins, Thomas A., "The American Farm Problem, 1920-32," Con­gressional Digest, 12 :36, February, 1933. Lang, Aldon S., "Currency Control and Cotton Prices," The Cotton Crisis, Arnold Foundation, S. M. U., Dallas, pp. 80-97. Literary Digest, The, "Revolt in the Cotton South," 119 :31, May 4, 1935. McGugin, Harold, "The Murder of King Cotton," New Outlook, 164:31-3, August, 1934. Nation, The, 137: 366, October 4, 1934. ----, 138: 208, February 21, 1934. -----, "Cotton and the South," 140: 525-526, May 8, 1935. New Republic, "What Next for the Farmer?" 165, May 2, l 927. Raymond, Allen, "Plowing Down to Rio," New Outlook, 165: 11-16, April, 1935. Talmadge, Gov. Eugene, "No Federal Control of Cotton Production." Prepared for the Bulletin. Thomas, Norman, "Decline of the Cotton Kingdom," Current History, April, 1935, pp. 36-41. GENERAL MATERIAL AN ANALYTICAL DISCUSSION ON COTTON CONTROL* I. INTRODUCTION Purpose o / the analysis.-The purpose of any analytical discussion is to eliminate all irrelevant points from the discussion and center the argument on the pertinent issues of the problem presented to the debater for solution. Therefore, in discussing the proposition, Resolved, That the Federal Government Should Control the Pro­duction of Cotton it becomes necessary to analyze the meaning of the various terms used, point out the irrelevant and admitted matter, and, finally, state and briefly analyze the main issues. In short, the present discussion is an elaboration of the suggestive briefs contained in the Bulletin. The importance and histo·ry of the question.-In the introductory part of the suggestive briefs, it was pointed out that the question of cotton control was vitally important, because it effected many states and involved the welfare of millions of people in the South. The importance of the topic is further illustrated by the widespread demand that something should be done for the largest agricultural industry of the nation. Historically speaking, the need of the farmer, and this includes the cotton farmer as well, goes back many years. The importance of this industry and its needs have been discussed and debated many years, but very little, if any, direct action has been taken by the Federal Government to aid or control this industry. It is interesting to note that the Federal Government first approached the cotton question from the marketing angle. In 1907, Congress investigated the New York Cotton Exchange, and seven years later the Cotton Futures Act was passed. Other regulatory acts followed, in an attempt to assure the farmer fair marketing facilities. In 1929, the Federal Farm Bureau was established for the avowed purpose of raising the prices of farm commodities. It should be noted, however, that Federal control of production was not a feature of the Government's action. As a matter of fact, the Government attempted to raise prices by aiding in the marketing and financing of the crops. Regulation, rather than control, was the feature of the Government's action. By 1933, however, the Federal Government had decided to handle the cotton problem by controlling production. For a full discussion of the various phases of control, the article by Dr. A. B. Cox, in the General Material, should be studied. •Prepared by the Editor. The University of Texas Bulletin Definition of ternis.-The terms of the question have been defined in the Introduction of the Brief. It should be pointed out, however, that control of production does not necessarily mean that the Govern­ment should reduce production. The Government, in other words, may reduce or increase the production of cotton, as it sees fit. Further, it is up to the Government to say whether this control of production should be "voluntary" or "compulsory" on the part of the farmers. In other words, the affirmative may suggest voluntary control of production, or compulsory control. The negative, on the other hand, takes the position that governmental control, voluntary or compulsory, is undesirable. Production is taken to mean "the creation of objects which constitute wealth." In the present dis­cussion, therefore, the term "production" refers to the planting and creating or producing cotton. Irrelevant matter.-The purpose of this discussion is to argue the advisability of governmental control of cotton production and not to settle the issue, or discuss the problem of the legality of such action .. Consequently, the constitutionality or legality of any action of the Government is irrelevant to the present discussion. It is assumed by the affirmative and the negative alike that if governmental control is advisable, proper legal steps can and may be taken to put such a plan into effect. Admitted matter.-In order to clear the proposition under consid­eration from further ambiguity, it is essential that certain admission be made by both sides. It is admitted first, that there is need for the continuation of cotton production in the United States. Second, it is admitted by both sides that the State and Federal Constitutions may be amended, in order to legalize the plan and put it into operation. In other words, the feasibility of putting the plan within constitutional bounds is admitted in the present discussion. The third obvious admission is that the Federal Government has made several attempts to aid the cotton farmer. The foregoing admissions presume the truth of certain facts and these facts are made uncontroversial. It should be noted, however, that the debater may argue from these admitted facts. In other words, the debater may admit the necessity for a cotton industry in the United States, but he may disagree with his opponent as to the best means of preserving and fostering the industry. Furthermore, the feasibility of amending the constitution may be granted, but the debater may argue against the advisability of such action. In short, whereas, irrelevant material may not be brought into the discussion, admitted matter may play a very vital part in a debate. One may not argue the constitutionality of governmental control of cotton production, since this is irrelevant to the discussion; but the advisability of amending the constitution, assuming the feasibility of such action, is certainly open to debate. The main issues.-With the definition of terms settled and the irrelevant and admitted matter discussed, the mai:n issues growing out of the proposition should be stated. The pertinent issues of the cotton control question are: 1. Is there a need for the Federal Government to control the production of cotton? 2. Is governmental control of cotton production sound in theory? 3. Is the proposed plan for government control a practical remedy? 4. Is the proposed plan for governmental control of produc­tion the best remedy? It is submitted that a full and intelligent discussion, Pro and Con, of the foregoing questions will bring forth the relative merits of the questions and lead to a reasonable solution of the problem. In the following pages, an attempt will be made to discuss the above question by pointing out the affirmative argument and contrasting it with the negative contentions. The various contentions, unless other­wise specified, will be taken from the briefs contained in this Bulletin. II. NEED Duties of the respective sides.-When a proposition of policy is presented for debate, it is the duty of the affirmative to show that the present situation is bad, attribute a cause for that condition, and offer a solution that will remedy the situation. The negative, on the other hand, is duty bound to answer the affirmative on the affirmative's case and show why the contentions of the affirmative are not true. The negative may, although it does not have to, offer a counter-remedy for the need. In other words, the negative is not compelled to offer a remedy to meet the present situation and it may insist that the affirmative solve the problem. On the other hand, if the negative does offer a counter-plan, then the burden of proof on this counter­plan is assumed by the negative and the affirmative may demand that this onus be satisfied. The presentation of a counter-plan by the negative, however, does not in any way relieve the affirmative of its burden of proof with regard to the affirmative need and remedy. The debater should keep the foregoing duties in mind because they will help him understand the discussion which follows. Is there need for Federal control of cotton production?-In answer­ing this question, the affirmative contends that there is a dire need for Federal control of production, because the farmer is in a desperate situation and cannot aid himself. He must be helped by a central agency, because he is one in several million and his individual effort cannot afford him relief. The affirmative contends, in short, that the present situation, which has resulted in dire economic and social results for the farmer, is due to over-production of cotton. Over­production has resulted in low prices with all of the necessary evils that grow out of lessened income. The more the farmer produces, The University of Texas Bulletin the less he receives for his goods. This condition is beyond the _cont:ol of the individual farmer and something must be done to aid ~Im. Marketing schemes, cooperative organizations, and m~ny othe: devices have been used to aid the farmer and bring him higher prices, but all plans of this type have failed to aid the agriculturalist. The affirmative would point out that unless over-production, which is the real cause for poor prices, is controlled, no amelioration of the farmer's condition can be secured. The results of uncontrolled pro­duction are pictured in dark colors by the affirmative. Poor living conditions, worse social environments, and a hopeless, helpless monotonous existence is the result of the individualistic attempts of the farmer to help himself and better his condition. Another cause, in addition to the foregoing, is suggested by the affirmative. It is contended that the farmer not only over-produces because he lacks proper control, but he is forced to buy his manufactured goods in a "closed" market and sell his products in an "open" or world market. In other words, the manufacturer, through the tariff, is able to control the price he may charge to home consumers and thus receive high prices for his goods. Further, the manufacturer controls his production. If the market is flooded with his goods, he cuts down the production, thus keeping the price up. The farmer, on the other hand, is always producing at capacity regardless of the surplus on hand. Obviously, says the affirmative, it is unfair to the farmer to buy the goods he needs for his living at a high, controlled and tariff­protected market, and then sell the fruits of his labor for a price that is set by cheap foreign competition. In other words, the cotton producer has to sell his goods for what he can get for them in competition with cotton from Egypt, China, India and Brazil. Uncon­trolled production, a huge surplus, depresses the prices the farmer may receive for his cotton, but his living expenses, his production costs are not reduced. As a consequence of this condition, the farmer finds himself at a great disadvantage. He is forced to pay the lowest possible wages, use his own small children for back-breaking farm work, deprive his family of the necessary comforts of decent living, and in divers ways attempt to gain a meager existence. It is the contention of the affirmative that only the Government can possibly control the production, through voluntary or compulsory means and bring about a reduction of the present over-production. The' gist of the affirmative's contention is that there must be full and complete control if over-production is to be reduced. The Federal Government is the largest and most powerful organization and has the fi · 1 · · t · nan~a d as ~ell as the a mm1s rat~ve ~eans of putting through a scheme of nat10nal control of product10n m cotton. In substance the ffi t" · · h · d t "th ' a rma 1ve mamtams ~ at m us ry WI government tariff protection and control of production has been able to make a profit. Agriculture, on the other hand, without governmental aid and no control has b . . . . . ' een 1os1ng money and Is quickly reachmg Its final stages of extermination. The industrial dollar is near par, whereas, the agricultural dollar is worth about fifty cents. Obviously, there is a dire need, and that need calls for immediate and drastic control of cotton production. The need and the negative.-The negative, in meeting the argument presented by the affirmative on the need, practically admits that the condition of the farmer is rather deplorable and should be improved. The negative, however, does not agree with the affirmative that the cause is due to over-production of cotton. As a matter of fact, says the negative, you cannot create wealth for the farmer through the theory of scarcity-by destroying the very goods that really constitute wealth. Better and more expanding markets, better quality of goods, etc., are needed to increase rather than decrease the production of cotton. The negative, further, would agree with the affirmative with regard to one of the causes of the need-namely, the tariff. The negative agrees that the tariff has given the industrialist an advantage. Reduce, or abolish, if you can, the tariff, says the negative, and the farmer will pay less for the goods that he buys. Thus, the negative would disagree with the affirmative on the over-production as a cause for the farmer's plight and agree that the tariff, a real contributory element, is the maladjustment of the farmer's dollar. In passing, the negative would call attention to the fact that any governmental scheme of control of production does not take into con­sideration the tenant farmer who is the man in real want, but would aid the planter and the large landowner. III. THE REMEDY The plan: Affirmative observations.-In offering a plan to remedy an admittedly bad situation, the affirmative would suggest a central Federal agency to control production. This agency, usually the Secretary of Agriculture, could determine the supply that would be needed for the following year, and make the proper allotments to the various states on the basis of prior production. A processing tax, paid by the manufacturers as they purchase the cotton, could be levied and the money needed to pay the farmer for reducing his production would be thus secured. This plan could be made voluntary or compulsory, depending upon the necessity for compulsion. The provision of the Bankhead bill may be advocated as a means of compelling the non-cooperative farmers to restrict their production. This bill calls for a 50 per cent tax on all cotton produced over the allotted amount. It was pointed out in the affirmative brief that several plans are possible under the question. Four remedies were suggested by the writer. These remedies differed in detail, but the essential feature of Government control is to be found in all of the suggestions. It will only be necessary, therefore, in the present analysis, to discuss the essential features of governmental control, because these ideas are embodied in all of the plans. Is a plan of governmental control sound in theory? The affi~m­ ative.-Governmental control is sound in theory, says the affirmative, because it would make the law of supply and demand operative. Only enough cotton will be produced to meet the demand, and this is sound theory for it has been followed by industry for many years. The aim of the Government would be to control and adjust the production of cotton to the effective demand. It is unfair to ask the farmer to produce at capacity when the industrialists control their production to demand. Furthermore, it is theoretically sound for the Government to assume the risks involved in helping this industry, since it is the only agency that is capable of performing the task. Too, the Govern­ment, on numerous occasions has performed this type of work for other groups, because public welfare is involved. The Merchant Marine, the electric light and power projects, land banks, and rail­roads have been aided by the Government. Why not agriculture? It should not be forgotten, the affirmative further contends, that the Federal Government has been uniformly successful in these various undertakings. The negative.-Governmental control of production is unsound in theory, says the negative, because reduction in the United States could not possibly mean that the world at large would reduce its production also. As a matter of fact, the opposite effect will result. As production in the United States decreases, world production will increase. Too, an artificially high price in the United States would cause rapid increase in foreign production of cotton. It is further pointed out by the negative that control of -price and production was tried by Brazil and England in coffee and rubber, respectively, and the scheme failed in both instances. No industry, in other words, can disregard fair price, quality and service, and hope to build a permanent and lasting prosperity in its product. It is fundamentally unsound to believe that a country or an industry can grow wealthy by creating scarcity, because a reduction of the natural resources of the land always make for a poorer people. Monopolistic attempts violate the principle of supply and demand and bring dire economic results to an industry. The principle that price should be the guide in controlling supply and demand cannot be violated. Is the proposed remedy practical? The affermative.-Practicability must be judged by results, says the affirmative, in advocating govern­mental control of cotton production. The aim of any control measure is to reduce the present over-production and raise prices. This double aim has been accomplished by the Federal Government, contends the affirmative, because the carry-over of surplus cotton has been reduced considerably and the price of cotton today is 12 cents per pound as compared to the 6 cents per pound of the uncontrolled days of 1932. In other words, the Government, under the A.A.A. program, has achieved very definite results. Prices have doubled, the income of the farmer in cotton has more than doubled, and a certain amount of diversification has been made possible. All this has been achieved without placing a heavy burden on the consumer, because, for example, the processing tax adds only a mere 3% cents to the price of a cheap shirt. The administrative difficulties proved to be only minor in character and have been solved. Consequently, from the practical point of view, the plan of the affirmative is acceptable. Would new problems be created by the plan?-Will the plan create any new difficulties? The affirmative assures the questioner that no difficulties are to be expected. The export trade which the negative offers as a new problem, explains the affirmative, will not be materially affected by governmental control of cotton production. The A.A.A. has not materially affected foreign trade, contends the affirmative, because the United States has been actually losing her foreign markets during the past ten years, but not as a result of Federal control of cotton production. The real cause for the drop in the export trade may be attributed to the high tariffs, war debts, and the world-wide nationalistic feeling created and fostered by the several nations after the war. Nor is it possible for foreign countries to produce more cotton and become serious competitors of the United States, says the affirmative, because these foreign countries are limited in their production of cotton by many reasons. For example, Egypt, India, and China cannot be expected to increase their pro­duction in cotton, because they need the land for food-raising purposes. Brazil has the land for cotton, but she is limited by lack of transportation, efficient labor for raising and processing cotton, and the necessity of clearing thousands of acres for cotton planting. The negative.-When the question of practicability is raised, the negative is vociferous with its objections. In the first place, it is contended Government control of production has proved itself im­practical. The Federal Government, under the A.A.A. attempted to reduce production and raise prices, but it failed to accomplish either end. The cause for the apparent 12-cent cotton today and compared to the 6-cent cotton of 1932 is the devaluation of the dollar and not controlled production. The value of cotton in France, a country which is still on the gold standard-the same standard that was used in the United States in 1932-today is about 7 cents per pound. This clearly indicates that the gain in price is the result of the devaluation of the dollar. In other words, the actual increase in the value of cotton is less than 1 cent; the other 4 cents increase is due to the devaluation of our currency. Furthermore, the negative con­tends, the famed crop reduction of the Government failed completely. In 1932, without governmental control, 13,001,000 bales of cotton were produced. The next year, with control and the expenditure of $111,000,000, the production of cotton was increased by 98,000,000 bales over that of the preceding year! The negative further objects to the processing tax as a very pernicious kind of a sales tax. It is a tax that may be pyramided through at least three agencies, and it costs the people more and brings in less than any other tax. The consumer, in the first P.lace, pays the tax, when he buys cotton goods. In the second pla~e, if he purchases cotton goods imported from a foreign country' he IS call~ upon to pay the tax again. In the third place, ':hen the farmer IS paid to reduce production, this act tends to raise prices, and the people pay for the third time. Finally, by using this tax money to restrict production, thousands are left unemployed and the Government has to give them relief-again raising further taxes to meet this self.. inflicted emergency. Other practical objections of the negative take the form of evils of reduction. It is pointed out that the farmer loses good income when he refuses to produce, because the world could use his product. Again, much loss is suffered by allied business, when production is reduced, because mills, transportation agencies, cotton pickers, and other people who depend upon cotton for a living suffer irreparable mJury. Unemployment has been increasing in the South at an alarming rate, says the negative, in spite of the fact that the A.A.A. has been in operation almost two years. Tenant farmers are being turned away by the landlords and transient labor is substituted, because the owners can reap the benefits of idle lands and cheap labor. The hardships of this group of share-croppers cannot be over­ estimated. Furthermore, the cost of Government-control runs into huge :figures and involves complicated attempts to peg the price of cotton at an artificial figure. If this unnatural price is maintained, thP. negative contends the foreign markets for cotton will be irreparably lost to the American farmer. Indeed, there are authorities today who con­tend that the farmer has already lost his foreign markets, due to the interference of the Government and its price-fixing activities~ Statis­tics show rather definitely that foreign production of cotton is increasing. Isn't it reasonable to assume that with reduced produc­tion in the United States and an artificially high price foreign production will increase to even greater proportions? Rayon and other cotton substitutes present an even greater evil, according to some authorities, than the temporary reduction scheme of the Government. In the future, cotton will have to be produced ~t 5 cents per pound if _it hopes to compete with rayon. This product is produced oi: dec:easmg cost basis. If cotton -prices rise enough, rayon production will receive great impetus and, in a short time, will force cotton out of the market. In short, the negative contends, the cotton industry is doomed ~nless the artificial and harmful governmental control of productio~is removed at once. Is there a better remedy? Negative assert,;,.ns -Th ffi ati . "" . e a rm ve,bl. after t ishmg the farmer's plight and suggest· es a tal . mg governmeu control of cotton production as a remedy, might well ask the negative for a better remedy. If the negative does not agree with the plan, what would it offer to correct the present or future evil of the farmer? The negative, of course, could reply that the duty lies with the affirmative to suggest and substantiate a plan for the elimination of the alleged evils. But the negative could go further, however, and suggest that there are other remedies. It is pointed out by the negative that the Government could engage in purely governmental function in its attempts to help the farmer and the country as a whole. For instance, the Government could help world trade by eliminating war and other international disturbances. This step, of course, would require world cooperation, but such help can be secured. Furthermore, the war debts have caused world trade to stagnate, and the Government could take steps to solve this question. In other words, the Federal Government could use its legitimate influence and power to remedy world conditions and thereby help create a more stable international market for all goods. World-wide stabilization of currency could be secured also. Domestic aids.-Certain domestic problems could be solved by the Government. Better regulation of the marketing, financing, and transportation facilities could be inaugurated. This action would make it possible for the farmer to sell his goods at an advantage, secure the best possible credit arrangements, and transport his products at reasonable rates. Again, it is a well known fact that the taxation system, based on the property tax, is obviously unfair to the farmer. The Federal Government could take the initiative in cor­recting this burdensome method of local and state taxation. The tariff, furthermore, represents a huge barrier to the prosperity of the farmer. Some amelioration and gradual reduction of this arti­ficial obstacle could be secured by the Federal Government. Complete abolition of the tariff within a short time may be highly inadvisable, but gradual adjustments could be made for the benefit of the farmer without unduly sacrificing the interests of the more fortunate indus­trialist. Again, the Federal Government could carry on an educational campaign among the farmers for the purpose of improving the quality and staple of cotton. Technical skill could be furnished by the Government to the farmer. This advice would help the farmer to make the most out of his farm through better farm management, diversification, and, the most important of all, the reduction of his cost of production. The dmnestic allotment plan.-Finally, and in addition to all of the foregoing suggestions, the Federal Government could aid the farmer by paying him a certain sum over and above the price cotton would receive, in order to bring about a parity price between the cotton consumed in the United States and industrial products. In other words. the Government could give the farmer this parity price on all cotton consumed in the United States. This scheme would make the tariff principle applicable to the cotton farmer 3:nd give him a reason­able price for the products consumed in the Umted States. The plan would subsidize home consumption, but it would lea.ve the farmer f~ee to nroduce for foreign trade and at a world price. Thus foreign trade, 60 per cent of the farmer's cotton marke~, will be . left unencumbered and the loss of this vital trade will be avoided. Furthermore, the farmer would receive equal treatment with the industrialists in that he would be protected in the home market. Prices will be permitted to reach natural levels, in keeping with the supply and demand principle, without artificially imposed production control. or price manipulation. In short, governmental control of production will be eliminated, and automatic, natural control of production will be restored. Affirmative answer.-The affirmative objects to the foregoing schemes, because all of the suggestions disregard the real cause of the present situation-uncontrolled production. It is submitted by the affirmative that any scheme that disregards the necessity of controlled production (in a world where all industries are operating under controlled output) will fail. The affirmative points to the price­control schemes without control of production, of Great Britain and Brazil and the failure of these attempts to bring about any appreciable aid. The Farm Board failed, furthermore, because price manipulation without control of production led to an oversupply. In other words, the very first step that any scheme or plan must take is to control the supply to effective demand. If this step is not taken, the market will be flooded and prices will go down. Giving the farmer a parity price for his home market will only help him in 40 per cent of his production. Furthermore this scheme would cause him to produce larger crops for foreign production and thus depress the world market. Foreign manufacturers would get much cheaper cotton and could undersell the textile industry of the United States at home and abroad. Again, as the world price for cotton decreases, the subsidy for the home consumption quota would have to be increased, thus the subsidy tax will have to be increased and the textile manufacturers put into an even worse position than before. Where can a plan of this kind end? Finally, the affirmative contends that the foregoing schemes are proposed by middlemen, ginners, shippers, transportation agencies, and others who stand to gain from the volume of production rather than the price that this volume will bring to the farmer. The farmer wants Federal control, because he knows that it is the only remedy that will bring him a reasonable price for his labor and investment. He realizes that individually he cannot control the produ~tion of cotton; that it will take a strong, capable agency to orgamze the farmers (and compel a few misinformed individuals if necessary) , in order to bring about control of the supply of co~on to the effective demand. Consequently, the affirmative is in favor of Government control of cotton production, because it is the best and only remedy for the individual farmer and the country as a whole. IV. CONCLUSION The problem.-In the foregoing pages an attempt was made to present the major issues of the cotton-control problem. Obviously, all of the Pro and Con arguments could not be included in the present discussion, but enough controversial material has been in­jected into the discussion to give the debater a starting point. For the purpose of recapitulation, it may be stated that the affirmative contends that the farmer is in a dire need. The cause of the farmer's plight is attributed to uncontrolled production. This capacity production of the farmer, in a country where control of production is practiced by other industries, has brought about a certain maladjustment of the farmer's dollar with the dollar of the industrialist. The farmer has to buy in a "closed," protected market and sell in a world market. This situation places the farmer in a disadvantageous position. Consequently, the affirmative maintains that the farmer needs control of production by a centralized authority. In other words, agriculture, and cotton farmers in this instance, would copy the "production-for-profit-only" scheme of the industrial­ist. All other plans advanced for the aid of the farmer have failed, says the affirmative, because production was not controlled. The negative, on the other hand, would grant, substantially, that the farmer is in a dire situation, but would disagree with the affirmative as to the real cause of this need and the remedy to be applied. The real cause for all this trouble, says the negative, is due to the high tariff, poor farm management, and many other minor reasons. Furthermore, control of production should not be attempted, because it is theoretically unsound and impractical. Economic theory and the experience of the A.A.A. during the past two years are offered as evidence on the foregoing two points. The solution of tke problem.-Apparently, both sides recognize that there is a problem to be solved in the cotton situation. The affirmative attributes over-production as the major cause, while the negative suggests tariff and several other reasons for the present situation. Since different causes are attributed to a given condition, it must follow that the respective sides should suggest opposing remedies. It must be emphasized again, however, that the burden of proof in any debate rests with the affirmative. A prima f acie case must be made out by this group, in order to meet the burden placed upon them. It must not be overlooked, however, that the negative also has certain duties to perform. The most essential duty of the negative is to meet the case of the affirmative, as presented by the affinnative. The last statement is necessary and should be emphasized, because many negative teams do not attack the affirmative case at once, but . · st any affirmative plan. limit themselves to general observations again . t th . h th negative must mee at If the affirmative present a plan, t en e t d b t •t · · · F f 11 d comp1e e e a e 1 is plan and attempt to disprove it. or a u. an ' very essential that the foregoing suggestions should be observed by the debaters. It is the hope of the writer that the present discussion will enable the directors and debaters to gain a better view of the question. The cotton question is timely and of vital importance to the South and Texas, and the writer feels confident that the young men and women of Texas will do full justice to this intricate and intensely interesting question. THE HISTORY OF COTTON PRODUCTION* Cotton is said to have been brought from the West Indies to the United States about 1641. The "Wool Tree," as the ancients called this fleecy product, took immediate root in the fertile lands of the South and, today, cotton is considered the most important farm crop in the country. This "vegetable hair or filament constituting the wing of the seed of the different species of Gossypium," can be grown in temperate and tropical climates. Dry and sandy soil is required for best results in cotton production, and marshy lands are wholly unfit for it. Wet seasons are particularly damaging to cotton crops. From the first authentic record of production in 1607 at Jamestown, Va., the cotton industry in the United States has undergone an almost unbelievable change. While in 1770 only 2,000 pounds were produced, the invention of the cotton gin in 1793 resulted in a jump to over 17 ,000,000 pounds by 1800. The numerous other inventions of the industrial revolution acted as further impetus to the develop­ ment of the cotton industry, with the result that by 1912 the United States produced over 7,000,000,000 pounds. As to bales of about 500 pounds each, the production has increased from about 3,000,000 bales in 1869 to nearly 14,000,000 per year between 1928-1932.1 The first record of acreage appears in 1866, when about 7,600,000 acres were devoted to the planting of cotton. In contrast appears the acreage of over 45,000,000 averaged during the last years of the twenties. Since then the acreage has decreased, particularly since the New Deal measures were put into effect; but nevertheless the figure is still large as compared with the puny acreage of the last century.2 It is estimated that about 2,500,000 farmers and laborers are employed in the production of the cotton crop in the United States. About 45 per cent of the crop is produced east of the Mississippi and *Prepared by the Editor. I The Americana, vol. 8, pp. 60-72. 2ldem. Government Control of Cotton Production 59 55 per cent west of it.3 Such has been the development of the production of cotton that an eminent authority has been led to state: "The cotton industry is probably the greatest single industry in the world if the cultivation, manufacture, commerce, and the uses of the cotton products are considered."4 In view of the rapid development of cotton production in the United States, with its far-reaching consequences in the fields of commerce, manufacturing, and finance, it is not surprising that the Federal Government has taken an interest in this industry since the first decade of the present century. This interest has been marked by a change in attitude in the relations with the industry. The activities of the Federal Government may well be divided into three stages: 1. Peri-Od of non-compulsory cooperation. In 1907 Congress asked for an investigation ef the New York Cotton Exchange. The result of the study was the voluminous Herbert Knox Smith Reports, which gave a general picture of the cotton situation. In 1909 the Depart­ment of Agriculture was authorized to make standards for the grades of cotton and to offer them to the exchanges. Official standards were devised. Furthermore, attempts were made at international agreements as to standards, but the success of the conferences was impaired by the opening of the World War. The whole policy of the Federal Government during this period, it should be emphasized, was one of assistance without compulsion. The government offered aids and urged voluntary cooperation, but there was nothing forced on the industry. 2. Period of regulatwn. In 1914 the policy of the Government shifted to that of actual regulation of the industry. (a) "The United States Cotton Futures Act" of 1914 was passed with the intention of regulating trading on the cotton exchanges in cotton for future delivery. A prohibitive tax was placed on that type of trading unless the parties complied with a set of conditions provided for in the act. The purpose of the law was to remedy certain evils which existed at the time and to protect the cotton grower. New official standards for the nine grades of cotton were established, and trading in future deliveries was required to be on the basis of these official cotton standards. Later the act was amended to conform with a question of constitutionality, but the general principles remained.5 (b) "The United States Warehouse Act" of 1916 authorized the Secretary of Agriculture to investigate the storage, warehousing, 31dem. "Brooks, E. C.. The Story of Cottcm. Rand, McNally & Co., Chicago. 5The Americana, vol. 8, p. 71. The University of Texas Bulletin classification of products according to grade or otherwise, weighing, and certification of agricultural products. Thus the warehouses would would be forced to conform with the rules laid down by the Secretary of Agriculture.6 (c) "The United States Cotton Standards Act" of 1923 provided, in short, for all cotton activities of every sort-transactions, ship. ments, publications of prices or quotations-to be carried on under the official cotton standards of the United States.7 In this period, thus, the government proceeded to lay down the rules of the game and to act as a sort of referee, with the right to enforce its decisions. 3. Active participation in the industry. This is the third and final step in the evolution of governmental activity. "The United States Cotton Marketing Act" of 1929 set up the Federal Farm Board, which attempted to set a minimum price on cotton and keep it there by a process of buying up cotton and keeping it off the market. With the advent of the New Deal came further governmental participation in the cotton industry. The Agricultural Adjustment Act and the more recent Bankhead Act attacked the problem not from the marketing end but from the other side-control of produc­ tion. The first year saw the "plow-up" policy in effect. Last year there was a reduction in acreage which resulted in the smallest crop since the first decade of this century. Apparently the same policy is in store for next year. The idea, of course, is to raise prices by limiting the supply. The farmers have received financial remunera­ tion for their loss, being paid out of the revenue from the process tax, which is levied on manufacturers and on others who turn the raw product into a product for the market. The third stage, then, has seen an active participation by the Federal government in the cotton industry, with the emphasis at present being on the control of the amount produced. What step should next be taken is a matter over which there is great conflict. Whether the A.A.A. is really satisfactory in its present form; whether a substitute is all that is needed to help the cotton industry; whether the government should cease active partici­pation in the industry altogether and revert to its former policy of "umpiring" as before 1929-all these are questions which can serve very well as debatable matters. 6U. S. Statute at Laroe, vol. 39, part I, p. 486. 1/dem., vol. 42, part 1, p. 1517. CONTROL IN THE COTTON INDUSTRY By DR.A.B.COX Professor of Cotton Marketing, Director of the Bureau of Business Research, The University of Texas (This article was especially prepared for the Bulletin.) Control in the cotton industry is neither new nor novel. The amount of it varies widely from one phase of the business to another as well as between countries and pressure of special occasions. I. CONTROL OF COTTON MANUFACTURING The International Cotton Spinners and Manufacturers Associations attempt to exercise a measure of control over the entire cotton manu­facturing industry of the world by standardizing hours of work and other important phases of the business. Most European countries, and especially Germany, maintained very strict control over cotton manufacturing during the World War. Control in cotton manufacturing.-In the main, governments have been interested in control to increase cotton manufacturing in their respective countries. Most usually this has been done through some form of tariff protection, though other special considerations have been given. There is one case where the attempt at control has for its purpose the reduction in the number of spindles. England, with the greatest number of cotton spindles of any country in the world, has had a bill introduced in Parliament to reduce the number of her spindles by buying up and dismantling high cost mills. A writer in The Manchester Guardian C omniercial said : "The fact cannot be denied that there are redundant spindles in Lancashire created by the fact that we have lost so much of our foreign trade, and if we are convinced that by no method of reorganization or improvement in world conditions can we regain that trade, but that in the future we must content ourselves with production for home consumption, then the redundancy scheme is a necessary and logical corollary. "1 In the meantime economic pressure seems to be solving the problem of redundant spindles in England. Manchester Guardian of July 5, 1935, quoted Mr. 0. L. Jacks, chairman of the opposition committee, as follows: "In my view redundancy must be left to take care of itself. The promoters of the scheme say the elimination of spindles by natural means is too slow. Now our total spindleage in 1920 was 58, 700,000. By 1926 it was down to 57 ,300,000. By 1929 it was lMa.nchester Gua.rdia.n. Commercial, :May 17, 1935. The University of Texas Bulletin down to 56,000,000. By January, 1932, it had shrunk to 50,2?0,000, and by July of that year to 49,000,000. By January, 1934, it was 47,900,000, and by July 45,900,000. By January, 1935, it was .down to 43,800,000. So far from thinking that the natural process IS too slow, I should say that it was far too quick." II. CONTROL OF COTTON PRODUCTION Cotton in terms of its available uses is not a single commodity. So widely separated are the qualities of cotton and the uses to which they are put that two widely separated varieties are commercially non-competitive. Some varieties are worth far more than other depending on their uses and the available supply. This has been recognized for a long titne and for many years governments and organized groups have been actively interested in controlling quality production to secure higher prices. They have done this primarily through two avenues: importation and adaptation of varieties from foreign countries, and breeding and selecting varieties and strains of cotton best adapted to each state and nation. Control through voluntary co-Operation.-Control in this phase of cotton production has been attempted mostly by means of voluntary cooperation; however, there are a number of instances of compulsion on the part of governments to improve the quality of cotton. It has been successfully tried in only one instance in the United States. California has a law limiting cotton production to one variety of cotton only, Acola. India and Russia have gone extensively into control of this sort. Egypt, Brazil and some other countries control the varieties of cotton grown by maintaining a monopoly of the supply of cottonseed. Indeed, governments of all important cotton growing countries have and are exercising more or less control over the varieties of cotton planted for the purposes of improving quality and increasing per acre productivity. United States Government has been active in importing and adapt­ ing new varieties of cotton and in cotton breeding and selecting work. In this it has cooperated with state experiment stations. So far the Federal Government has not resorted to compulsion to improve either the quality or productivity of cotton in the United States. CONTROL OF VOLUME OF COTTON PRODUCTION The idea of controlling the volume of production is not new. Control may be exercised either to increase or decrease production. Control of production by governments and other organized groups to increase volume of cott.on production antedates efforts of organized groups and governments to decrease volume of production. European efforts.-European countries were the first to make organized efforts to increase cotton production. Hargrove's invention of the spinning jenny in 1764, Arkwright's spinning frame in 1769 ' Crompton's spinning mule in 1779, and Cartwright's farmer loom in 1785, cut the cost of manufacturing cotton goods to a fourth of what it was and lowered the price of cotton goods and increased the demand for raw cotton until by 1800 European manufacturers became so alarmed over the failure of supply to keep up with demand that in 1802 the British organized the first association to promote cotton growing. Rapid expansion of cotton production in the United States from 1800 killed the incentive for such organizations, with the excep­ tion of the Civil War period, for exactly 100 years, the present British Cotton Growing Association was organized in 1902. Since the World War especially, similar organizations have been formed in many countries, such as France, Belgium, Germany, and Japan. South American countries and expansion.-Brazil, Argentina, Aus­ tralia and many other countries are promoting cotton growing to develop and expand their agricultural possibilities and add a new cash enterprise with which to buy manufactured goods. They are glad to expand cotton production to facilitate trade with cotton manufactur­ ing countries. The United States and cotton expansion.-Older cotton growing sections of the United States, Egypt, India, are interested not in expansion but in preventing expansion of cotton growing. With them the primary consideration is one of price and maintenance of their relative position. Considerations growing out of this situation form the base for efforts to control production. The United States cotton belt east of the Mississippi River was 18,469,000 acres in 1911. Total acres harvested in the United States in 1911 was 36,045,000. World War acted as a stimulus to producti-On.-The stimulus of high prices following the World War led to a rapid completion of the expansion program in the Gulf southwest of the United States by 1926. The area harvested in cotton west of the Mississippi River in the United States exceed the area east of the river in 1913 for the first time. In 1926, the year of maximum acreage in the United States, the states west of the Mississippi River harvested 30, 7 45,000 acres and the eastern states only 16,342,000 acres. In 1926 India likewise reached a maximum acreage for considerable time to come. Egypt pretty well completed its real cotton production expansion program as a result of the impetus of high prices during the World War. PRICES AND ACREAGE CONTROL There is a very high degree of correlation between prices received by farmers for a crop and the acreage planted to cotton the following year. For this reason it is said often that over-production and low prices are their best cures, in that they increase demand on the one hand and decrease acreage on the other. Very great declines The University of Texas Bulletin . . . f ll w very large crops which m the relative price of cotton genera11Y o o ge yield per acre com- are usually the product of an unusua11Y 1ar . · · h b" t1·ons of production and bmed with a large acreage. Sue com ma · d l" · · · 1904 1908 1914 1920, 1926 and 1931. drastic ec ines in price came in -' ' h. h were followed by unusual These unusual years were the years w ic . efforts made to decrease production through more or less orgamzed during these years that the Agricultural Extension effort. It has been . ·fi · f services have put on most vigorous campaigns for d1vers1 cation o farm enterprises and live at home progra~s. ~he~~e~ these cam­paigns of farmers' organizations and educ~bo~al msbtut1ons had ~ny appreciable effect on cotton acreage reduction is a debatable quest~on. Statistical analyses show that the natural responses are sufficient to explain the acreage cuts. BEGINNINGS OF OFFICIAL CONTROL OF COTTON ACREAGE Egypt began its official cotton control program in the early 1920. The government got into the cotton control business by financing and buying cotton to prevent price declines. The continued fall in the price in spite of government efforts and the accumulation by the goYernment of large stocks of cotton caused it to resort to drastic control of production to reduce oncoming supply, and enable it to dispose of its over stocks without too great loss. In recent years Egypt has abandoned its program of control except as to quality. Cotton control for the United States began in 1929.-Foundations for official cotton production control programs in the United States were laid in 1929 with the passage of the Farm Marketing Act and the creation of the Farm Board. In the fall of 1929 the Board loaned money rather freely, especially to cooperatives, to hold cotton off the market. It was unable to stop the decline in cotton prices. As a result cotton cooperative associations faced financial difficulties, and in order to relieve this situation the Board created a Stabilization Corporation fo:r cotton in the spring of 1930 which bought some cotton and eventually took over that on which the Farm Board had advanced funds in 1929. In the spring of 1930 the Farm Board took the lead in a strong campaign for voluntary cotton acreage reduction. Resulting acreage reduction was not in proportion to price declines, due partly perhaps to the then prevailing 16-cent loan and to the belief, on the part of some farmers, that the price would remain "pegged." Yield per acre in the 1930 crop was comparatively low, and the situation would probably have righted itself had it not been for the depression. A more vigorous voluntary cotton acreage reduc­ tion campaign was put on in 1931. Prices had declined still further and it was known that the Farm Board could not or would not peg the price. Acreage reduction amounted to about 11 per cent. Once again nature upset plans by making one of the greatest yields per acre on record, and the result was an all-time record crop. As soon as the heavy yield became obvious the Farm Board proposed that the farmers plow up every third row of cotton. Some state governments more or less on the suggestion of the Farm Board proposed to deal drastically with the cotton situation. Under the leadership of Huey Long, Louisiana passed a law declaring a cotton holiday for 1932 in which no cotton should be planted. Some other southeastern states passed or agreed to pass laws to restrict cotton acreage provided other states would pass similar laws. Texas passed a law more or less under the guise of a soil conservation measure purported to restrict cotton acreage about 50 per cent. The Texas law was declared unconstitutional and efforts at state control of cotton acreage came to an end. The 1991 crop.-As a result of the still lower price for the large 1931 crop farmers reduced acreage still further to 37,580,000 or about 9 per cent. The yield per acre was about normal so that production itself would have been bullish had it not been for the large carry-over from the previous crop plus the large accumulation of cotton held by the Farm Board, and the further fact that demand was still below normal due to the depression. The upshot of the whole matter was that when the Democratic Administration came into power on March 4, 1933, the country faced the greatest carry­over of American cotton on record. Prices were low and farmers had been promised relief. The Farm Board which passed out of the picture after having lost most of the $500,000,000, given to it in its efforts to prevent price declines, had thoroughly demonstrated that merely buying and holding commodities would not solve the farm problem. In the meantime much was written about the Russian ''five year plan" of control, as well as of special benefits of centralized control, especially in Italy. The new administration determined to try central control by means of a subsidy. Accordingly the Agricul­tural Adjustment Act was passed May 16, 1933. In substance the law gives the Secretary of Agriculture the right to lease land to reduce crop production and to pay benefit payments to cooperating farmers. While the Act carried an appropriation of $100,000,000 to make it effective immediately, it provided that the funds to carry it on would be raised by processing taxes, each commodity being counted as a separate unit, and, for the purposes of the law, self-supporting. Section 2 of the Act declared the policy of Congress to be : "To establish and maintain such a balance between the production and consumption of agricultural commodities, and such marketing condi­tions therefor, as will reestablish prices to farmers at a level that will give agricultural commodities a purchasing power with respect to articles that the farmers buy, equivalent to the purchasing power of agricultural commodities in the base period. The base period in the case of all agricultural commodities except tobacco shall be the pre-war period, August, 1909-July, 1914." The University of Texas Bulletin Legally the cooperatioR of farmers under the -:'-gricultural A?just­ment Act was and is voluntary. Notwithstandmg the very hberal payments offered farmers for rentals and benefits many did ~ot see fit to cooperate in the program. In 1933 farmers w~re permitted to lease from 25 to 50 per cent of their land planted m cotton to the government to be destroyed. Enough farmers cooperated in the so-called "plow up" of 1933 to make the program reasonably successful for that year. The government has estimated that 4,400,000 bales of cotton were destroyed. The government's own estimate of the success of the program may be judged from the following: Adjustment in 1933.-Adjustment of cotton production was the objective of the first basic-crop program under the Agricultural Adjustment Act. Soon after the passage of the Act, the Secretary of Agriculture and the Agricultural Adjustment Administration faced the necessity of immediate action to avert further decline in cotton prices. The 1933 crop already had been planted and there were prospects of a 1933-34 supply of American cotton considerably larger than those of the two previous seasons. A program was developed, in conference with representatives of cotton producers, and was announced June 19, 1933. Under its opera­tion producers withheld from production 10,500,000 acres which, at average yields that year, would have produced 4,500,000 bales of cotton. The 1933 crop was held to 13,047,000 bales. In consideration of their participation in this program, cotton producers to the number of 1,032,000 received in cash rentals approxi­mately $112,600,000. Some of these producers also received options on a quantity of Government-owned cotton, on which they have made a profit of more than $70,000,000.2 The 1994 Program.-The A.A.A. program inaugurated in 1934 fol­lowing the "plow up" took on more permanent aspects. In the first place it was announced as a two-year program. Administrative machinery was worked out and systematized. Adjustments were to be worked out in terms of the acreage in a base period, the five years, 1928 to 1932, inclusive, being the time selected, except on farms where production had begun since 1928. The average acreage for the period was about 40,500,000. Under the agreement farmers obligated themselves to rent to the Secretary of Agriculture in 1934 between 35 and 45 per cent of their base cotton acreage. They agreed further to rent to the Secretary in 1935 not more than 25 per cent of their base cotton acreage. For their rented acreage in 1934 the farmers were to receive 3.5 cents per pound on the average yield of their land during the base period, and in addition receive a parity payment of 1 cent a pound on 40 per cent of their base production. !!Agricultural Adjustment in 1934, United States Department of Agriculture, p. 46. The sign-up campaign was inaugurated January 1, 1934. The county production control associations, organized in 1933, conducted the sign-up. A county committee selected by the control associations checked contracts and adjudicated disputes. The county committees forwarded the contracts to the State Board of Review appointed by the State Director of Extension with the approval of the cotton section of the A.A.A. When the contracts were approved by the State Board they were forwarded to Washington for individual acceptance. By 1934 it became evident that the A.A.A. voluntary cotton acreage reduction program alone would not solve the cotton problem. Many farmers would not cooperate; it was an invitation for others to start cotton production, and for all to use increased quantities of fertilizer and more intensive cultivation. THE BANKHEAD ACT Production and compulsory control inaugurated.-The main argu­ ment for the passage of the Bankhead Act was to force farmers who did not wish to cooperate in the A.A.A. voluntary reduction program to cut down their production. In reality it meant a shift in the policy from acreage control to a policy of control based on production as well as a shift from a voluntary to a compulsory program. To what extent the law meant to create proprietary rights of states in cotton production cannot be determined, since the law so far is recognized as temporary. Certainly it has made no provision for change in state quotas. Further provisions of the Bankhead Act.-The Bankhead Act became effective for the 1934-35 crop. The total allotment of tax exempt cotton for 1934-35 was 10,000,000 500-pound net weight bales, or 10,460,251 average 478-pound net weight bales. State allotments were based on average production for the five years, 1928-32, inclusive. Ten per cent of the quota for each state was reserved for making county and individual adjustments within that state. The law provided it should be administered by the Agricultural Adjust­ment Administration. The same local county and state committees were used for the Bankhead Act as for the A.A.A. Control is made effective by means of a tax of 50 per cent of the value of middling seven-eighths in cotton in the control market. The tax was 6 cents per pound in 1934-35. The 1935-36 cotton production control program is essentially the same as that of 1934-35. The rental payments under the A.A.A. are 3.5 cents as last year, but the parity payment has been raised from 1 to l JA, cents per pound. The total production of tax-exempt cotton under the Bankhead Act has been increased from 10,460,251 net weight bales of 478 pounds to 10,994,000 478-pound net weight bales. Since the 1934-35 crop was less than the allotment under the The University of Texas Bulletin Bankhead Act and since these exemption certificates were declared valid for 1935-36, it is estimated that there will be available about 11,500,000 bales of tax-exempt certificates for the 1935-36 season. CONTROL OF PROCESSING Cotton ginning has been subject to control much longer than pro­duction. Most foreign cotton producing countries exercise more or less official control over ginneries for the purposes of controlling qualities of cotton planted and to reduce the menace of pests, especially the pink boll worm. Control of this sort in the United States has been confined to the states. In the main two reasons are advanced for state control: one is to regulate the price of ginning and the other is to prevent physical damage to the cotton. The Oklahoma law is typical and exemplifies about average results in its operation. III. CONTROL OF COTTON MARKETING History of the evolutionary development of modern methods of cotton marketing is a long story and need not be gone into here. Suffice it to say that the present market structure was completed with the development of cotton futures markets which was completed in the United States in 1871. The effectiveness and efficacy of the system was not seriously challenged until about 1907. The first attack was not as a revolt at the whole system but rather at some specific practices of the New York Cotton Futures Market in fixing differences for different quali­ties of cotton deliverable on futures contracts. The 1907 investigation.-Investigations of the Com.missioner of Corporation of the Cotton Futures Markets ordered by Congress in 1907, and whose findings were published and known as the Herbert Knox Smith Report, called attention to certain defects in these markets and especially paved the way for further criticism. More­over, two very specific results came from the investigations. In the first place Congress instructed the Secretary of Agriculture to prepare a set of cotton standards to be used in the markets of the United States. These standards were permissive. This put the Government in business merely in an advisory capacity. The Cotton Futures Act of 1914.-The second and more important result was the passage of the Cotton Futures Act in 1914. The Cotton Futures Act did two important things in relation to govern­ment and business: it established official government standards for the classification of cotton delivered on futures contracts, and it put government in the cotton business in a regulatory capacity in so far as the futures markets are concerned. Government Control of Cotton Production The Warehousing Act of 1916.-ln 1916 the Federal Government passed a similar regulatory legislation with reference to warehouses and warehousing. Among other things the United States Warehouse Act provides for the investigation and classification of warehouses, the licensing and bonding of warehouses, the making of regulations governing the operation of licensed warehouses and the issuance of receipts. Many states followed the lead of the Federal Government and passed similar legislation with reference to warehousing. Most of the latter are now more or less ineffective. In 1923 the Federal Government passed what is known as the Cotton Standard Act. It provides in effect that if any cotton standards are used in describing American cotton sold and shipped in interstate and, as foreign commerce, they must use the United States official standards. This law not only allowed the use of all other standard descriptions of cotton in the United States, but it was largely instrumental in forcing the adoption of universal standards for the description of American cotton. The Act of 1929 and cotton marketing provisions.-A third phase of the relation of the Federal Government to the cotton marketing business was reached with the passage of the Agricultural Marketing Act in 1929. This Act provided, among other things, for the setting up of stabilization corporations through the Farm Board for buying and selling cotton. The cotton stabilization corporation was set up and began operation in 1930. This legislation then actually put the Federal Government in the cotton business as an ordinary merchant and in direct competition with them. In reality this legislation put the Federal Government in the position of playing in a game in which it had already assumed the position of dictator of the rules and of the umpire of the game. Aid for the cotton growers.-It must be kept in mind that the primary motive behind all the legislation just described was to help the cotton growers. In other words, the middle man and the market facilities set up by them were assumed to be the cause of the farmers' troubles, and that a modification or elimination of them would relieve the farmers' distress. It was this motive of helping the farmers by giving them a share of the supposedly huge profits of the middle men that prompted the great amount of state and federal legislation and service for cooperative marketing. It is not proposed here to discuss the merits and demerits of cooperative marketing of cotton or even of the Federal Government in business, but rather to outline the series of events that led up to the passage of the A.A.A. and the Bankhead Act. The fact is the experiences of the cooperatives and the Farm Board demonstrated that they could not hope to increase greatly the cotton growers' income by narrowing the margins between the farmers and the cotton manufacturers, that farm problems were much deeper than methods of marketing. The failU're of marketing efforts.-By 1933 the whole scheme of farm relief then in operation had clearly demonstrated its inability to cope effectively with the fundamental farm problems. Stated concisely, that problem is the inability of the great mass of farmers to secure a standard of living on farms comparable with standards obtainable by men of like ability and energy working and living in towns and cities. Fundamentally, it resolves itself into a lack of adequate cash incomes from farm operations on the one hand and the excessive costs of providing most of the mechanical services and necessities in isolated farm homesteads on the other. At least the agricultural leaders in the Democratic Administration which came into power March 4, 1933, appreciated the fact that the old farm relief schemes did not carry the solution to the farm problem, and that somehow it lay in the lack of comparative cash income. In the meantime great supplies of cotton, wheat, corn and other products had accumulated partly as a result of former Federal farm relief policies and otherwise, and these accumulations had been accompanied with drastic declines in prices. Over-production, burden­some surpluses and smothering in super-abundance of production became the topics of general conversation. Crop restriction inaugurated.-It was in this atmosphere that the idea of crop destruction and limitation as the solution of the farm problem was born. The idea was to reduce supplies to raise prices and increase income. Do less and get more became a bewitching slogan. Will it solve the farm problem? Reduced production and price.-Drastic cuts in American cotton production will raise the price of cotton. Whether the policy of restriction to raise price per pound will raise the cotton farmers' total income as relative to buying is still another question. Income from cotton is measured by price times volume of production. In the Agricultural Adjustment Act the five years, 1909-1914, is chosen as the so-called parity period. In order to get parity income it is necessary for the cotton grower to have parity production, that is, the average number of bales produced in the years 1909 to 1914 as well as the parity price. The average price of cotton in the period was 12.4 cents per pound and average production per farmer was approximately eight bales. This means that in 1909 to 1914 the average cotton farmer received from lint cotton about $496 per year. According to the United States Department of Agriculture parity price for cotton in June, 1935, was 15.9 cents. This means that it takes 15.9 cents to buy as much now as 12.4 cents bought in 1909-14. It also means that if the farmer is to have parity buying power from cotton he must have an income from it of approximately $636 instead. of $496. Under a policy of reducing production to raise price it wiU be necessary to raise it as much above parity as production is cut. In other words, if production is cut 50 per cent, then price to secure parity income from cotton is not 15.9 cents, but must be 31.8 cents per pound to secure $636-parity income. To the extent that the farmers receive supplementary payments and other incomes from the use of the land taken out of cotton to that extent it is possible to reduce income from cotton and maintain parity buying power. Three questions must be answered.-In order to judge correctly the value of the reduction program it will be necessary to answer the following three questions: First, how much has the government cotton restriction program actually raised the price of cotton'! Second, how much supplementary income has the cotton farmer received in the way of benefit payments? Third, is this method of increasing income a sound and workable policy? AMERICA'S CROP CONTROL EXPERIMENT ANALYSIS OF THE PROBLEM WITH STUDY OUTLINE (From Congressional Digest, Vol. 13, No. 12, pp. 289-290, December, 1934.) Aid of agriculture major feature of New Deal.-One of the major features of the "New Deal" program, as announced by President Roosevelt, shortly after his inauguration on March 4, 1933, was the enactment of legislation in aid of agriculture. Long before the advent of the economic crisis in the industrial and labor ranks in 1929, the farmers had been complaining of their lot and demanding legislation that would better their condition. History of farming conditions: 1909-1914.-From 1909 through 1914 general farm conditions had been good throughout the country. That is to say, the farmer was getting a price for his products which enabled him to maintain a good standard of living and buy what he needed. The World War and cotton.-In 1914 the World War broke out and this increased the demand for food supplies from the American farmer, since the agricultural production of the Allied Nations, most of whose man power was engaged in military activities, naturally fell off. Three years later, in 1917, America entered the war and this brought increasing demands for American farm products. An important part of America's war policy was to insure plenty of food, not only for American soldiers, but also for Allied soldiers. To this end the Government appealed to American farmers to produce to the utmost of their capacity, opening up additional lands to cultivation wherever possible. As a result of this farmers all over the country not only planted all their regular crop lands but plowed up pasture lands and sowed them with crops. The University of Texas Bulletin Agricultural boom and its results.-This brought on a tremendous agricultural boom. Practically every farmer in America made. money, not only during the war, but for a short period after~ards, ~mce the foreign countries involved in the war were unable 1mmed1ately to get their agricultural production back to normal. With the profits they had made from the war-time boom in agri­culture, many farmers bought more land and increased their output. Mistaking an abnormal condition for a natural growth, they assumed that the agricultural boom had come to stay. Agricultural production was geared, not only to meet the require­ments of American consumption, but a generous foreign consumption as well, and the maintenance of American production at this level depended upon the sale abroad of all farm products over and above those absorbed by the American people. Post War and cotton.-This condition lasted until about 1919, when the war boom began to be deflated. In America the Government stopped its outpouring of money. Troops were demobilized with great promptness. Government pur­chasing of food supplies was curtailed. In fact, the Government had surplus supplies on hand, most of which were subsequently diverted to foreign relief. Thus the farmers' market at home was drastically reduced. Europeans become self-sustaining.-Added to this domestic situation was the determination of European nations to become as self-sustaining as possible. The fact that most of them had been forced to look outside their own borders for food supplies during the war had produced a powerful impression in all the countries which had par­ticipated in the war or which, as neutrals, had faced food shortages because of the interruption of the normal flow of international trade which, before the war, had enabled them to augment their home-grown food suplies with imports from food-producing countries whenever necessary or desirable. As a result of this feeling, practically every European nation began studying methods by which to encourage domestic agricultural production. These methods involved not only various bonuses and other direct governmental aids, but also high tariffs against imports. All this action by foreign Governments naturally reduced the volume of American agricultural products sold abroad and, if con­tinued, was calculated to shut off American sales in the future. Domestic production decreased.-On top of the curtailment at home, because of the cessation of Government purchases incident to the war and the development of greater crop production abroad, came two important factors in the domestic situation that added to the difficulties of the American farmer. The first was the ra9id increase in the use of the automobile truck for hauling and the tractor for plowing. The change from horse power to motor power naturally reduced the number of horses and mules used by the farmer and this reduction in the unemployment of farm animals reduced the need for hay and grain for feeding purposes. Americans eat less f ood.-The second was the undoubted reduction in the amount of food eaten by the average American. Farmers who produced meat and farmers who produced grain both felt this change in diet. The general farm depression that followed resulted in the inability of farmers in many sections to pay their debts and the resultant failure of banks in agricultural sections. From the senators and representatives of farm districts came immediate appeals to Congress for legislation for the relief of the farmer. In the Chronology, beginning on page 291 (Congressional Digest), will be found the history of the various efforts made to correct the farm situation by legislative action down to the enactment in 1933 of the Agricultural Adjustment Act, which created the Agricultural Adjustment Administration, or "A.A.A." The theory of the A.A.A.-The theory back of the Agricultural Adjustment Act and the policy it established is that the general economic welfare of the country as a whole, as well as that of the farmer, depends upon a balance of buying and selling between those engaged in farming and those engaged in industry, by which balance the farmer will receive enough for the sale of his crops to buy freely from those who are engaged in industry and other pursuits, while the latter will receive enough from their efforts to enable them to buy freely of farm products. Those responsible for this theory and for putting it into legislative form and having it passed through Congress maintain that the period from 1909 to 1914 was the ideal period of balance, or parity, in America between the farming element of the country and the industrial element. It is to bring the country's economic balance back to what it was in that period that was and is their main object. Principle of the A.A.A.-The basic principle of the Agricultural Adjustment Act is that, until such a time as industry and agriculture are adjusted to the balance existing during the 1909-1914 period, the Federal Government should work out a national plan to cut down on the product of the farms to the point where the accumulation of a surplus is avoided. With no surplus, farm products should bring better prices and the farmer will then be able to realize a genuine and fair profit on whatever he produces. In order to induce the farmer to cut down on his crop production, the Government must grant him a certain cash allowance, or benefit, on the amount of crops he loses by refraining from planting above a given amount of land. The University of Texas Bulletin To raise the money to pay the farmer for crop reduction, the Government places a special tax upon the processors of farm products-processors being millers, who make grain into flour; pack­ers who butcher and cure meat for marketing; manufacturers of cotton goods and all others who turn raw farm products into products for the market. That is to say, the manufacturer of food products and not the farmer, is called upon to pay the costs of putting the plan into effect, the farmer being guaranteed against loss. Who 'JXLYS the Process Tax?-The manufacturer must either work on a smaller margin of profit or raise the selling price of his manu­factured products in order to pass the added cost along to the consumer. It is the theory of the plan that, simultaneously, wages will be raised in industry to increase the purchasing power of the consumer to the point where he can pay the increased cost of farm products. Involved in the theory back of the proceeding is that the Govern­ment can and should, by planned economy, bring about and maintain an even balance between supply and demand and guard against heavy fluctuations that bring boom times on the one hand or depressed times on the other. Once the initial phases are gone through with, advocates of this system declare, farmers and industrialists, with occjlsional supervision by the Government, can thereafter act to maintain the balance them­selves. When the balance is finally effected, they hold, Government financial aid will be necessary and the present heavy payments to farmers will be withdrawn. Opponents to A.A.A.-Opponents of the theory back of the Agri­cultural Adjustment Plan take the position that, without sustained Government financial aid, the plan can never succeed. Nor can it be kept in operation for any great length of time without the exercise of Government compulsion, since it is in direct violation of the age-old law of supply and demand. If the Government is to exercise planned economy, they argue, the Government must become sole owner and dictator of all of the country's products, together with the machinery for production and distribution. Otherwise, the plan cannot be made to work permanently. All the phases of the controversy are covered in the Pro and Con section, begininng on page 300 (Congressional Digest). ACREAGE, PRODUCTION AID CROP CONDITIONS ESTIMATED WORLD ACREAGE AND PRODUCTION, 1934-35 (From The Cotton Trade Journal, vol. 15, No. 27, p. 8, July 18, 1935. The Cotton Trade Journal, Inc., Publishers, New Orleans, La.) Total world acreage.-The latest available estimates of acreage in most of the principal cotton-producing countries and many of the minor producing countries now indicate that the total world acreage in cotton for the 1934-35 season amounted to approximately 73,600,000 acres. This estimate is 1,000,000 acres or 1.3 per cent smaller than the estimated acreage (revised) in 1933-34 and the smallest since 1923-24. The small world acreage estimate is due entirely to the reduced acreage in the United States. The 1934-35 United States acreage, which was estimated in May by the Crop Reporting Board at 26,987,000 acres, was approximately 3,000,000 acres or 10 per cent smaller than in 1933-34, 13,567 ,00 acres or 33.5 per cent smaller than the average, 192S-1932, and the smallest since 1900. Foreign acreage.-Total foreign acreage for 1934-35 is now esti­mated at 46,600,000 acres, which is 2,000,000 acres or 4.5 per cent larger than the previous peak acreage of 1933-34, and is 4,800,000 acres or 11.6 per cent larger than the average, 1928-29 to 1932-33. Total world 'JWOduction.-The latest information available indicates that the world production of all cotton in the season now drawing to a close amounted to the equivalent of about 23,622,000 bales of 4 78 pounds. This is approximately 3,000,000 bales or 11.1 per cent less than the revised estimate of 1933-34, is 2,595,000 bales or 9.9 per cent less than the average for the five years 1928-29 to 1932-33, and like the acreage is the smallest since 1923-24. The 1934 United States production amounted to 9,636,000 bales compared with 13,04 7 ,000 bales the previous season and an average for the five years is now estimated at 13,986,000 bales, which is 464,000 bales or 3.4 per cent higher than the revised estimate of foreign production in 1933-34 which was itself the highest in history and is 2,435,000 bales or 21.1 per cent higher than the average for the five years, 1928-29 to 1932-33. A.C.C.A. STATISTICIAN ESTIMATES 1935 PRODUCTION 10,500,000 (From The Cotton Trade Journal, vol. 15, No. 26, p. 3, July 6, 1935. The Cotton Trade .Journal, Inc., Publishers, New Orleans. I.a.) Tentative estimate of cotton acreage of 30,131,000, with a crop of probably not in excess of 10,500,000 bales, from which calculation the effect of floods has yet to be fully estimated, has been made by E. M. Daggit, statistician of the American Cotton Cooperative Association, based on actual crop survey. "We believe," says the Daggit report, "that conditions at present indicate a crop of probably not more than 10,500,000 bales. We estimate the acreage tentatively at 30,131,000. Our reports, however, are not yet complete, and the lateness of the crop this year, together with flood conditions in Arkansas and in parts of Louisiana and Texas, make an accurate acreage estimate difficult this early in the season. It seems probable at this writing that the average yield The University of Texas Bulletin for the belt this year may be reduced by floods, cool weather' excessive rain and weevil damage at least as much as it was reduced last year by the drouth. The old saying that a dry year scares ~armers to death, while a wet year starves them to death, holds particularly true of cotton. 11.50 price for 1935 season.-"An average yield equal to that of last year with our acreage estimate less an average abandonment, would pr~duce a crop of 10,500,000 bales. A crop of this size, in our estimation, would justify growers in expecting an average price of about 11.50 cents for next season, with a low around 10 cents early in the season unless a loan is made at a higher level. Texas condition poor.-"Crop conditions in Texas are very poor, especially in the black land belt of Central Texas. In South Texas a very favorable prospect three weeks ago had been seriously damaged by floods and continuous rains. West Texas now has plenty of moisture and will make a good crop with a favorable fall. Plenty of snaps and hollies are looked for this year from Texas and Oklahoma. In Oklahoma the crop is about three weeks late, but looks favorable in the eastern part of the state, while very backward but promising in the west. Arkansas lands under water.-"In Arkansas the best lands are nearly all under water. Heavy abandonment is ex"!}ected. The same is true of parts of Louisiana, though this state has some good cotton. Heavy abandonment is looked for in Tennessee from grassy fields and continued rains. Good crops east of the river.-"East of the river the crop is gen­ erally good, but somewhat late, and an excellent prospect is reported from many sections. The weevil is reported as showing up earlier than usual in Mississippi eastward to South Carolina, and a number of our correspondents report the infestation as the worst in years. The crop is very backward in North Carolina due to cool weather and lack of rain after planting time. A good crop should be made east of the river with two weeks of hot weather in July, otherwise severe damage from weevils seems almost inevitable. Weevil damage not apparent until August.-"The full extent of weevil damage does not become apparent until August, and the crop in a weevil year often looks deceptive until then. The destruction of squares by the weevils throws the fruiting strength of the plant into stalk growth. This in earlier years gave rise to the expression 'flapper cotton,' which looks good but has nothing on it." Is five-cent cotton possible ?-Mr. Daggit repeated previous asser­tions that fear of return to 5-cent cotton is not justified, even with com­plete abandonment of acreage control, inasmuch as devaluation of the dollar placed the old 5-cent price at 8.50 cents, additionally pointing to the improvement in world business and reduction of the American carryover by more than 3,000,000 bales. He also expressed the view that the purchase of present certificated cotton would eventually Government Control of Cotton Production result in spot cotton going to a more tenderable basis. He also pointed out that withdrawal of the stock assures long contracts that they will not be tendered some undesirable cotton in an undesirable location. THE AGRICULTURAL ADJUSTMENT ACT May 12, 1933 Title 1-Agricultural Adjustment Declaration of Emergency That the present acute economic emergency being in part the consequence of a severe and increasing disparity between the prices of agricultural and other commodities, which disparity has largely destroyed the purchasing power of farmers for industrial products, has broken down the orderly exchange of commodities, and has seriously impaired the agricultural assets supporting the national credit structure, it is hereby declared that these conditions in the basic industry of agriculture have affected transactions in agricultural commodities with a national public interest, have burdened and obstructed the normal currents of commerce in such commodities, .and render imperative the immediate enactment of Title 1 of this Act. DECLARATION OF POLICY SECTION 2. It is hereby declared to be the policy of Congress­ (1) To establish and maintain such balance between the production and consumption of agricultural commodities, and such marketing conditions therefor, as will reestablish prices to farmers at a level that will give agricultural commodities a purchasing power with respect to articles that farmers buy, equivalent to the purchasing power of agricultural commodities in the base period. The base period in the case of all agricultural commodities except tobacco shall be the pre-war period, August, 1909-July, 1914. In the case of tobacco, the base period shall be the post-war period, August, 1919­ July, 1929. (2) To approach such equality of purchasing power by gradual correction of the present inequalities therein at as rapid a rate as is deemed feasible in view of the current consumptive demand in domestic and foreign markets. (3) To protect the consumers' interest by readjusting farm produc­tion at such a level as will not increase the percentage of the consumers' retail expenditures for agricultural commodities, or prod­ucts derived therefrom, which is returned to the farmer above the percentage which was returned to the farmer in the pre-war period, August, 1909-July, 1914. The r../niversity of Texas Bulletin PART 2-COl\Il\IODITY BENEFITS GENERAL POWERS SEC. 8. In order to effectuate the declared policy, the Secretary of Agriculture shall have power-Reduction in acreage.-(1) To provide for reduction in the acreage or reduction in the production for market, or both, of any basic agricultural commodity through agreements with producers or by other voluntary methods, and to provide for rental or benefit pay­ments in connection therewith, or upon that part of the production of any basic agricultural commodity required for domestic consump­tion, in such amounts as the Secretary deems fair and reasonable, to be paid out of any moneys available for such payments. Under regulations of the Secretary of Agriculture requiring adequate facilities for the storage of any non-perishable agricultural com­ modity on the farm, inspection and measurement of any such commodity so stored, and the locking and sealing thereof, and such other regulations as may be prescribed by the Secretary of Agricul­ ture for the protection of such commodity and for the marketing thereof, a reasonable percentage of any benefit payment may be advanced on any such commodity so stored. In any such case, such deduction may be made from the amount of the benefit payment as the Secretary of Agriculture determines will reasonably compensate for the cost of inspection and sealing, but no deduction may be made for interest. Marketing agreem,ents witk processors.-(2) To enter into market­ing agreements with processors, associations of producers, and others engaged in the handling, in the current of interstate or foreign commerce, of any agricultural commodity or product thereof after due notice and opportunity for hearing to interested parties. The making of any such agreement shall not be held to be in violation of any of the antitrust laws of the United States, and any such agreement shall be deemed to be lawful: Provided, That no such agreement shall remain in force after the termination of this Act. For the purpose of carrying out any such agreement the parties thereto shall be eligible for loans from the Reconstruction Finance Corporation under Section 5 of the Reconstruction Finance Corpora­tion Act. Such loans shall not be in excess of such amounts as may be authorized by the agreements. License handling of cotton.-(3) To issue licenses permitting processors, associations of producers and others to engage in the handling, in the current of interstate or foreign commerce, of any agricultural commodity or products thereof or any competing com­modity or product thereof. Such licenses shall be subject to such terms and conditions, not in conflict with existing acts of Congress or regulations pursuant thereto, as may be necessary to eliminate Government Control of Cotton Production unfair practices or charges that prevent or tend to prevent the ~ffectuation of the declared policy and the restoration of normal economic conditions in the marketing of such commodities or products and the financing thereof. The Secretary of Agriculture may sus­pend or revoke any such license, after due notice and opportunity for hearing, for violations of the terms or conditions thereof. Any order of the Secretary suspending or revoking any such license shall be final if in accordance with law. Any such person engaged in such handling without a license as required by the Secretary under this section shall be subject to a fine of not more than $1,000 for each day during which the violation continues. PROCESSING TAX SEC. 9. (a) To obtain revenue for extraordinary expenses incurred by reason of the national economic emergency, there shall be levied processing taxes as hereinafter provided. When the Secretary of Agriculture determines that rental or benefit payments are to be made with respect to any basic agricultural commodity, he shall pro­claim such det.ermination, and a processing tax shall be in effect with respect t.o such commodity from the beginning of the marketing year therefor next following the date of such proclamation. The processing tax shall be levied, assessed and collected upon the first domestic processing of the commodity, whether of domestic produc­tion or imported, and shall be paid by the processor. The rate of tax shall conform to the requirements of subsection (b). Such rate shall be determined by the Secretary of Agriculture as of the date the tax first takes e1fect, and the rate so determined shall, at such intervals as the Secretary finds necessary to effectuate the declared policy, be adjusted by him to conform to such requirements. The processing tax shall terminate at the end of the marketing year current at the time the Secretary proclaims that rental or benefit payments are to be discontinued with respect to such commodity. The marketing year for each commodity shall be ascertained and prescribed by regulations of the Secretary of Agriculture. . . . Processi1&1J taa; rate.-(b) The processing tax shall be at such rate as equals the difference between the current average farm price for the commodity and the fair exchange value of the commodity; except that if the Secretary has reason to believe that the tax at such rate will cause such reduction in the quantity of the commodity or products thereof domestically consumed as to result in the accumulation of surplus st.ocks of the commodity or products thereof or in the depression of the farm price of the commodity, then he shall cause an appropriate investigation to be made and afford due notice and opportunity for hearing to interested parties. If thereupon the Secretary finds that such result will occur, then the processing tax shall be at such rate as will prevent such accumulation of surplus stocks and depression of the farm price of the commodity. In com­puting the current average farm price in the case of wheat, premiums paid producers for protein content shall not be taken into account. What is fair exchange value?-(c) For the purposes of part 2 of this title, the fair exchange value of a commodity shall be the price therefor that will give the commodity the same purchasing power, with respect to articels farmers buy, as such commodity had during the base period specified in section 2 ; and the current average farm price and the fair exchange value shall be ascertained by the Secre­tary of Agriculture from available statistics of the Department of Agriculture. COMMODITIES SEC. 11. As used in this title, the term "basic agricultural com­modity," means wheat, cotton, field corn, hogs, rice, tobacco, and milk and its products, and any regional or market classification, type or grade thereof; but the Secretary of Agriculture shall exclude from the operation of the provisions of this title, during any period, any such commodity or classification, type or grade thereof if he finds, upon investigation at any time and after due notice and oppor­tunity for hearing to interested parties, that the conditions of production, marketing and consumption are such that during such period this title cannot be effectively administered to the end of effectuating the declared policy with respect to such commodity or classification, type or grade thereof. AN ANALYSIS OF THE FARM OUTLOOK FOR 1935 (From Congressional Digest, Vol. 13, No. 12, p. 298, December. 1934.) . Further expansion of cotton production in foreign countries is expected. But this is likely to take place slowly since there are factors which tend to retard such developments in most of the foreign cotton producing areas. Cotton acreage in the United States will be increased next year, it is stated, since the adjustment contracts which cover both years provide for a maximum reduction in 1935 or 25 per cent from the grower's base acreage, whereas, in 1934, the contract signers planted 38 per cent less acreage than during the base period.•.. MONEYS PAID OUT BY THE "A.A.A." TO DATE (From CongreBBional Digest, Vol. 13, No. 12, p. 296, December, 1934.) As of October 1, 1934, the expenditures for crop control d . f I d . d b an crop re1ie tota e m roun num ers, $468,850,000. Of this am~u~t, $345,593,486 was spent by the A.A.A. on benefits and rentals, d1v1ded as follows: Wheat contracts, $72,631,099; tobacco contracts, $16,343,293; corn­hog contracts, $101,945,334; cotton conf'racts, $154,67 4,759. In addition to this the following sums were spent on removal of surpluses: Corn-hogs (1933) , $45,951,873; wheat (Pacific Northwest) , $5,619,253; butter and cheese (for relief), $12,107,561; drouth cattle, $62,691,046; seed conservation, $6,877,489. These funds came from the emergency drouth appropriations outside the regular A.A.A. crop control funds. The expenditures for the purchase of surplus hogs, cattle and wheat went direct to the farmers. The butter, cheese and seed pur­chases were made in the central markets. So far 3,351,514 farmers have signed A.A.A. contracts. Of these, 550,000 signed wheat contracts; 1,026,514 signed cotton contracts; 275,000 signed tobacco contracts, and 1,500,000 signed corn-hog contracts. THE "A.A.A." AND ITS WORK (The Agricultural Adjustment Administration. From Congressional Digest, Vol. 13, No. 12, p. 296, December, 1934.) The Agricultural Adjustment Administration is charged with carrying out the provisions of the Agricultural Adjustment Act, approved May 12, 1933. This act expresses the policy of Congress to establish and maintain such a balance between the production of agricultural commodities and the demand for them, and to provide such marketing conditions for these commodities, as will restore the purchasing power of agricultural goods to the level which it held durin2 the years 1909-1914. The act also provides for protecting the interests of consumers by insuring that farmers will not receive a ~reater percentage of consumers' retain payments for the products of agricultural commodities than farmers received during the pre-war base period. Voluntary agreements; benefit payments.-Two methods of increas­ing agricultural income are provided for in the Argicultural Adjust­ment Act; one is by voluntary agreements between the Secretary of Agriculture and producers of seven basic agricultural commodities. In these agreements the producers agree to adjust their production; in return they receive compensating benefit payments to prevent their total income from being reduced as a result of their adjustment of production. The other method is through marketing agreements among distributors and manufacturers of agricultural goods. The Secretary of Agriculture becomes a party to these agreements. Their purpose is to improve returns to producers, remedy defects in dis­tributing methods, and protect consumers against undue increases in distributing and retail costs. 82 The University of Texas Bulletin The cost and the proc6ss tax.-Funds for making benefit payments to farmers who adjust their production in accordance with the programs of the Agricultural Adjustment Administration are derived from the proceeds of processing taxes levied by the Secretary of Agriculture on basic agricultural commodities and upon commodities that compete with these basic commodities. The basic commodities listed in the act are wheat, cotton, corn, hogs, tobacco, rice, and milk and its products. Act ainis to improve domestic and foreign markets.-The Agricul­tural Adjustment Act also provides for efforts toward improving foreign and domestic markets for American agricultural products, and authorizes action to remove from the market burdensome sur­pluses of agricultural commodities. Under an executive order of the President, codes of fair competition for all industries engaged in handling food products were placed under the jurisdiction of the Agricultural Adjustment Administration except as regards provisions relating to wages, hours, and conditions of labor. [(A.A.A.) Official description in the Congressional Directory.] AFFIRMATIVE MATERIAL I. IS THERE A NEED FOR GOVERNMENT CONTROL OF PRODUCTION? THE COTTON PROBLEM By HENRY A. WALLACE* Inventions, wars, growth of population, and the development of great corporate enterprises change the situation. Each generation has a different problem. If the rules are not changed fast enough and in the right direction, the game eventually breaks up in a riot. Need for change.-The need for changed rules in the United States has never been so great as since 1920. It was one of the marvels of the world that this country was able to sit in fat complacency with hands folded, doing little to meet a changed world from 1921 to 1932. By 1920 most thoughtful people realized that five disintegrating, yet ultimately beneficent, forces would be acting over a period of at least a generation. These forces are: 1. The end of westward expansion, the gradual reduction in great population increase, and the necessity for meeting unemployment problems more consciously. There is no longer cheap land on which we can thoughtlessly place the unemployed. 2. The rising tide of scientific investigation, inventions, and methods of mass production. This brings sudden and unexpected technological loss of employment, loss of investment and general confusion. 3. The postwar reversal in credit balances between the United States and other nations. Eventually this makes necessary either a reduction in United States exports or an increase in United States imports. 4. The steadily increasing concentration of industrial activity into a few great corporations. This has almost destroyed the effectiveness of the old-fashioned free-play of the market place. 5. The decentralizing effect of a loaded freight-rate structure, shattering as a result of developing highway transportation. With the situation that exists and is likely to exist in the United States for the next ten years, the chief objective of our democracy should be so to manage the tariff, and the money system, to control railroad interest rates; and to encourage price and production policies *Statement by Secretary Henry A. Wallace to be used in a bulletin for guidance of debaters in the University Interscholastic League of Texas. t . h"p the 1 between that will maintain a continually balanced reIa ions income of agriculture, labor and industry. It has been all too easy for powerful financial inte~e.sts under the guise of old-fashioned economics to use the centrahzmg power of government for their own ends. It is not surprising that they protest when we attempt to put the centralizing power of government at the service of the majority of the people. Control is self-imp-0sed.-Whenever you have rules, you auto­matically impose a certain amount of control. In democracy, of course, this control is really self-imposed-when the democratic processes, that is, are genuinely at work. Nevertheless, it is possible to have a democracy in which the democratic processes are at work only some of the time-in times of crises, for instance. At other times, in times of so-called normalcy, the democratic processes are frequently shelved in lieu of pressure politics and what amounts to economic oligarchy. That is, a relatively small group may impose its will on the majority under cover of very skillful propaganda and astute political maneuvers. As a consequence, we have had regimen­tation growing out of tariffs worked out by business men sitting with representatives of the Government behind closed doors; we have had regimentation through monetary policies worked out by bankers sitting with representatives of Government behind closed doors; we have had regimentation resulting from privileges granted to great corporate entities. At times it has almost seemed as if in support of these three kinds of regimentation there has been a regimentation of public opinion. This regimentation has gone on subtly and continually ever since the Civil War. This regimentation to many is as natural as the air they breathe. It has gone on so long that they think it is the normal course of events. That is why they are shocked when the machinery of government is made available for the cooperation of farmers. It is new; strange and-to these unthinking people---dangerous. A little reflection, however, must convince them that government aid must be extended with a measure of impartiality. Otherwise the economic structure becomes top-heavy. Unless adjustments are made and the situation corrected, there is certain to be a crash. Something of the kind happened during the Hoover Administration. Afterwards, it was inevitable that there be an examination of the maladjustments and the inequities that had caused the collapse. Then began an attempt on a broad front to make the necessary changes. The Agricultural Adjustment Act was one result of this movement. The adjustment plan as a whole could not have been inaugurated without the use of the centralizing power of the Federal Govern­ ment. And so long as that centralizing power is at the service of all the people, rather than a powerful few, that, too, is a measure of democracy and a step toward its preservation. This social machinery, unquestionably, is a change in the rules of the game in so far as the farmer is concerned. It says that the old rule of dog-eat-dog, of farm your neighbor out of existence, is neither sound for agriculture nor for the Nation as a whole. It says that if any of our previous heritage from the countryside is to be pre­served the rule must be faced which puts a limit on individual selfishness. And, finally, this new social machinery says that the exploitation of one group in the population by another must give way not to class warfare, but to that balance between our national producing groups which is dictated both by sound economic and social justice. We have reason to believe that more and more farmers are looking beyond the government check to the heart of agriculture's adjustment problem as well as their own production schedules; and that they are beginning to see in the Adjustment Act a stride toward the fashioning of that social machinery which every National Adminis­tration since the War has agreed must be provided if the American farmer was ever to get a new deal. The postwar depression and agriculture.-In any discussion of what has happened and what is to happen, it must be remembered that agriculture failed to emerge out of the postwar depression during the period of general prosperity, 1923-1929. The post-1929 depression brought agricultural conditions about twice as much below prewar levels as the postwar depression did. Agriculture's share of the national income was 16.0 per cent in 1914. In 1918 and 1919 it rose to 20.5 per cent, then declined abruptly to 12.6 per cent. In the period 1926-29 the share ranged between 10.4 and 11.00 per cent, and then reached the historic low of 7 .5 per cent in 1932. In the post-1929 depression the national income was greatly reduced and agriculture received a smaller share of the decreased national income. Agricultural prices were disastrously low, and by 1933 agriculture had enormous surpluses of wheat, cotton, tobacco and hog products, which had accumulated as a result of war-time expansion, economic nationalism, strangled foreign trade, the dis­ appearance of foreign markets, and reduced domestic consumption. Merely to avert farm ruin, it was imperative to eliminate the surpluses. Cotton crisis and the A.A.A.-One of the principal reasons for adoption of the Agricultural Adjustment Act was the crisis in cotton. The cotton situation in 1932 and early 1933 was briefly this: The average farm price stood at 4.6 cents a pound at the low point in June, 1932. While the things farmers bought in 1931-32 averaged 14 per cent above the prewar level, the prices they received for cotton averaged 54 per cent below the prewar level. Gross farm income from cotton and cotton seed had fallen from $1,470,000,000 in 1928-29 to $464,329,000 in 1932-33. T·his collapse in cotton prices and income, which was calamitous not only to the South, but to the entire country, was caused by the combined influence of increasing production and declining demand. Together these resulted in mountainous cotton supplies which clogged the market and crushed the price. Tkree courses for agriculture.-Three possible courses were open in dealing with the agricultural situation: internationalism, national• ism, or a planned middle course. We cannot take the path of internationalism unless we stand ready to import nearly a billion dollars more goods than we did in 1929. What tariffs should we lower? What goods shall we import? Which goods? Tariff adjust­ments involve planning just as certainly as internal adjustments do. We do not care to follow voluntarily a path of nationalism in this country. Producing only for domestic consumption would make necessary too drastic a revision in our whole economic structure. In cotton as with other agricultural commodities the middle path between economic internationalism and nationalism is the path we took. This path is clearly designated in the declared policy of the Agricultural Adjustment Act: "SEC. 2. It is hereby declared to be the policy of Congress­ " ( 1) To establish and maintain such balance between the production and consumption of agricultural commodities, and such marketing conditions therefor, as will reestablish prices to farmers at a level that will give agricultural commodities a purchasing power with respect to articles that farmers buy, equivalent to the purchasing power of agricultural commodities in the base period. "(2) To approach such equality of purchasing power by gradual correction of the present inequalities therein at as rapid a rate as is deemed feasible in view of the current consumptive demand in domestic and foreign markets." Continuous inconie for cotton producer is the object.-From both a National and a regional point of view, the best cotton program would be the one which, without exploiting domestic consumers, would bring the largest continuous income to the cotton producers. This is the objective of the present cotton plan. This plan is being accomplished by gradually reducing the burdensome supplies of American cotton to the actual world demand for such cotton and by reimbursing producers through adjustment payments for reducing their production. When a balance between supply and demand is once achieved the program will be one of maintaining such a balance. How effective the program has been in increasing the cotton producers' annual income is shown in the farm value of the cotton crop for the past three years. The farm value of the cotton crop of lint and seed was $483,913,000 in 1932, and including adjustment payments was $893,632,000 in 1933, and $882,772,000 in 1934. Gratifying as all this may be, the truly fundamental thing for the cotton farmer is not the government check nor the higher price for his crop; the truly fundamental thing is the better adjustment production to the changed world picture. It is unwise to subsidize any class unless the subsidy results in such a change of productive forces that the entire Nation is better adjusted to the world situation. That is why I have talked again and again to the farmers of the cotton South, the wheat West, and the corn and hog belt of the fundamentals which have to do with the creditor position of the­United States and our tariff policy. They understand that we are­in the midst of a tremendous shift in productive forces, and that the Nation is not handing out money to them as a bribe, but as a means of enabling them to make the shifts with the least trouble possible, then I am hopeful that we can develop a feeling of intelligent, national consciousness such as we have never had before. It will be a genuine advance if the farmers can feel that they are part of the Government and that the Government is a part of them; that. we are all pulling together t.o realize an objective which is good for the farmers and good for the Nation and good for the world as a whole. Therefore, as proposals to alter our course have been made, it has been necessary to weigh the arguments for each one of them against the loss of cotton income which would result from termina­tion or drastic change of the program. The test is not wether an about-face offers any advantages, but the more vital question of whether these advantages would offset the sacrifices of cotton farmers which would be involved. Foreign markets and controlled production.-It is popular in many quarters to say that the cotton program is destroying the foreign market for American cotton. This is not true. The truth is that a creditor nation with a high tariff inevitably destroys a large part of the foreign market for its surplus the moment it stops loaning money abroad. The Unit.ed States stopped loaning money abroad in 1930, and at that time the American carry-over of cotton stocks began piling up until August 1, 1932, it was three times the normal. Our tariff policy has made some reduction in our cotton exports inevitable and has intensified the need for some form of production control. Under the Agricultural Adjustment Administration it is my con­ception that I have primarily two duties,-first, to acquaint the farmers of the United States with the fact that the centralizing :rower of the Government is now available to help them in their supply and demand problem, and, second, to inform them continuously concerning the statistics of the supply and demand situation. It is up t.o the farmers themselves to work out the particular plan which they want to use to meet the particular supply and demand conditions in a given commodity, including cotton. Before any program is put int.o effect, we want to be sure that the leading farmers of the di1ferent communities all over the U nit.ed States are willing t.o take the responsibility for putting the plan over, township by township, county by county and state by state. This is not regimentation or an approach to a dictatorship-but a democratic use of centralizing power. Collective cooperation for the fa.rnier.-1 hope to live to see the day when this present experiment is further perfected and when the human hearts that run this social machinery are better intentioned and more fully informed. Today we are haltingly feeling our way toward a new concept. We are making mistakes but we are on the march. And we are giving the farmers an opportunity to cooperate so that they collectively may share further in the Nation's abundant wealth. Just so long as industry keeps tariffs that are too high; just so long as the corporate structure enables a few men to control busi.ness empires; just so long as the Nations of the world insist upon following a nationalistic trend; just that long must the Federal Government offer the farmers the machinery for cooperation on a national scale to secure a measure of economic justice. OUR APPROACH TO ISOLATION By HENRY A. WALLACE (From America Must Choose, pp. 4-7. Published jointly by the Foreign Policy Association, New York and the World Peace Foundation, Boston. 1934.) Competitive overproduction must be subdued.-As a foundation and framework of the new American design, we have undertaken to put our farmland into better order. We are out to subdue competitive overproduction. In consequence we are forced to think of what we ought to do with the forty-three million marginal acres of plowland we are going to take out of cultivation in 1934 because the world no longer will pay us for the extra wheat, cotton and corn we have been growing there. We are not going to have a random expansion and exploitation conducted without regard to human values, as we have in the past. World agreements are necessary .-Theoretically, we recognize that this bringing of order out of chaos should extend as rapidly as possible into world agreements. But until such agreements can be made we must work to set our own land in order. To do so is not incompatible with plans for world cooperation. It might even be argued that we must learn to cooperate at home before we are fit to practice world cooperation in agriculture, trade and the arts of peace. United Stat~s surplus breeds poverty now.-As things are now, our millions of surplus acres breed nothing but confusion, poverty and waste. As long as we remain a creditor nation with high tariff policies, refusing to accept foreign goods in payment, those acres should not be tilled. Until our people have the vision to adopt a Government Control of Cotton Production long-time world trading policy which is in keeping with our position as creditors, we must engage in the delicate processes of adjusting basic production downward. The farmer in 1914.-At the opening of the World War, our farm production chanced to be pretty well in hand. There was no glaring disparity between the prices that farmers received for their crops and the prices they paid for things they had to buy. It is that condition of balance, or parity, between our major producing groups, attained more or less by chance in the years 1909-1914, which the Agricultural Adjustment Act is designed to restore. European acreage out of production.-The war rushed us out headlong to world markets. Fifty million acres of Europe, not counting Russia, were out of cultivation. Food prices rose. A new surge of pioneers strode forth upon those high and dusty plains, once called the Great American Desert, and found that they could grow wheat there. Throughout the country, sod was broken. Before the surge was over, we had put to the plow a vast new area. To replace the fifty million lost acres of Europe, America had added forty million acres to its tilled domain and thrown its whole farm plant into high gear. United States acreage not needed after the war.-When the war ended, Europe no longer needed those extra forty million hard-tilled acres of ours, or for only a little longer, at best. We did not realize it at the time or for some years thereafter; some of us shrink from the realization even now; but at least forty million acres of land, scattered all over the country, became surplus acreage very rapidly. We went on producing for the world market just as if that market were still there. Worse than that, instead of putting fewer acres we actually put more acres into crops for export. With an empire of our own to possess and conquer, America has never as yet displayed a consistently imperialist temper, in the broadly expansive sense of that term. After the World War, the Allies divided the world up, with a shrewd, contending eye for the deficit acres; and the United States said it didn't want any. Disillusioned and confused by terrific adventures in our first war beyond the water and by the struggle at Versailles afterwards, we yearned only to come home quietly, expand some more in our own way within our own borders, and contend thereafter only among ourselves for the old · t ·1 f " 1 "spacious, separa e spo1 s o norma cy. Postwar realitie,s: overproduction.-That couldn't be. The marvel is not that we are now moving so fast, but that we were able to delay so long facing the realities of the postwar situation. It is a tribute to our great resources and our technical productive ability that our fields and factories from 1914 to 1930 were able to send to the outside world twenty-five billion dollars more in goods than we received. It is a reflection on our leadership that not until 1933 have we done any The University of Texas Bulletin effective thinking as to the steps the United States may have to take because it is simultaneously a great exporting nation and a great creditor nation. We went into the World War owing other nations $200,000,000 annually en interest account, and came out with other nations owing us $500,00,000 annually. Moreover, the production of our farms and factories was enormously stimulated during the war. False market maintained abroad.-Our financial and political lead­-ers tided over the situation, or glossed it over, by maintaining a false market for our surpluses abroad. To do so, we loaned an average ·of more than $500,000,000 a year to foreign countries. While this false foreign market for American exports was being maintained Congress, amid general consent, twice raised tariffs. Schedules were raised in 1922 and again in 1930. Oversuwly from 1926-1990.-From 1926 on it became increasingly . plain that modern technique applied to agriculture and to the produc­tion of other raw materials was heaping up a world-wide oversupply. World overproduction played an important part in the ever­descending spiral which began in 1930. The problem of the present Administration.-When the present Administration came into power on March 4, 1933, it had been for several years apparent that there is no longer an effective foreign purchasing power for our customary exportable surplus of cotton, wheat, lard and tobacco at prices high enough to assure social stability in the United States. It was apparent that more than forty million acres of American soil were producing material which could not be consumed within the country, and which could probably not be con­sumed even were all our industrial payrolls again to blossom magically to the pumped-up boom-time levels of 1929. It was apparent that, with things as they are and with our inherited attitude as to tariffs, it would be impossible to reestablish a large American trade abroad at once, or in the next few years. Orderly retreat from surplus acreage necessary.-Accordingly, the present administration is conducting an orderly retreat from surplus acreage. In essence, it is a program of governmental adjustment payments to cooperating farmers, rewarding a cooperative adjustment of acreage pro rata, farm by farm. In the administration of this and of auxiliary or fortifying measures, the Farm Act of May 12, 1933, gives us wide permissive powers. Of the present Congress ( 1934), we shall probably ask amendments permitting an even wider, and far more selective, retirement of acreage on a more per­ manent basis. At present none of our production schedules for export crops will be adjusted to a strictly domestic basis. Our foreign trade in these crops has very seriously dwindled, but we still have foreign cus­ tomers for cotton, tobacco and certain foodstuffs. We want to keep that trade if possible and get more foreign trade if we can. Our immediate effort is to organize American agriculture to reduce its output to domestic need, plus that amount which we can export with profit. Program must be kept elastic.-Our adjustment program must in its very nature be kept elastic. If or when world trade revives, we still can use to excellent advantage our new social machinery for crop control. We can find out how much of our crops they really want in other countries, and at what prices; then we can take off the brakes and step on the gas a little at a time, deliberately, not with the reckless disdain to world traffic signals that we exhibited in years past. Fifteen million acres reduction in cotton.-By the end of 1934 we shall probably have taken 15,000,000 acres out of cotton, 20,000,000 acres out of corn, and about half a million acres out of tobacco. Add to that the 7,600,000 acres that we used to sow to wheat and now shall not, and you get a total of 43,000,000 acres which may be no longer planted to our major export crops. Forty-three million acres is nearly one-eighth of all the crop land now harvested in the United States. Administration working toward a permanent pla,n.-We do not claim that the action taken under the Agricultural Adjustment Act or the National Recovery Act, or any other of the emergency acts, helpful as they may have been temporarily, constitute a fundamental plan for American agriculture. What we have done has been frankly experimental and emergency in nature, but we are working on some­thing that is going to be permanent. We are well aware that our present machinery for production adjustment may not be at all like the machinery we shall have to design and operate for the longer future. Using government money derived from processing taxes, we have asked the voluntary cooperation of the American farmer in making emergency adjustments to present world conditions. Thus we are sparring with the situation until the American people are ready to face facts. The bare, distasteful facts, I mean, on such matters of policy as exports, imports, tariffs, international currency exchange, export quotas, import quotas and international debts. These are the weapons of economic warfare which are more deadly than artillery. These economic weapons are so subtle that they have a nasty way of bouncing back on you with redoubled force when you think you are using them against the enemy. Fundamentally, these weapons are spiritual in nature, although this is not recognized by business men and by very few statesmen. The University of Texas Bulletin THE GOVERNMENT'S COTTON PROGRAM By E. D. WHITE (From The Cotton Crisis, Proceedings of Second Conference, Institute of Public Affairs, pp. 102-104 ; 106-108 ; 114. Arnold Foundation, Southern Methodist University, Dallas, Texas. 1935.) THE POSTWAR COTTON SITUATION The war-time and postwar developments upset the balance between cotton production and consumption. The price of cotton increased from 12.4 cents per pound during the prewar period to 28.4 cents per pound at the close of the World War. The favorable price situa­tion did not lead to a great expansion in production, because of high production costs and relatively high prices of other agricultural products. After a brief postwar slump, cotton prices recovered and again reached significantly high levels. The farm price in December, 1923, was 32 cents a pound. This was an incentive to increased pro­duction because at this price cotton was a relatively profitable crop. Expansion from 1921 to 1926.-From 1921 to 1926 tremendous expansion took place in the West. Texas alone increased production from 2,198,000 bales to 5,628,000 bales during this period, and in Oklahoma production increased from 481,000 to 1,773,000 bales. The acreage of cotton harvested in the United States during this period increased from 28,678,000 acres to 44,616,000 acres. A similar expan­sion occurred in foreign countries. During the period from 1921-22 to 1925-26, foreign cotton acreage increased from 28,322,000 acres to 42,310,000 acres. More than two-thirds of the increase in acreage was in India. Production from 1926 to 1933: its results.-After 1926 cotton production was maintained at a relatively high level. The business depression that began in 1929 apparently had little, if any, effect in decreasing cotton production, while on the other hand the depression contributed materially to a reduction in cotton consumption. The world carry-over of American cotton in the 1929-30 season was less than 5,000,000 bales, whereas, by 1932-33 such carry-over reached nearly 13,000,000 bales. Thus, with production remaining at high levels and with cotton consumption declining, burdensome surpluses were created and prices fell to an extremely low level. The price which producers received for cotton fell from 18 cents a pound in 1928-29 to 6.5 cents per pound in 1932-33. The gross income from the sale of cotton and cotton seed in the United States fell from $1,470,000,000 in 1928-29 to $483,912,000 in 1932-33. This represented a decline in the average gross income per farm family from the sale of cotton and cotton seed of from approximately $735 in 1928-29 to $242 in 1932-33. With the price of cotton moving sharply downward during this period, farm incomes were decreased tremendously. The price of things farmers bought, on the other hand, remained relatively high. The price of things farmers bought in 1932-33 averaged 7 per cent above the prewar level, while the price of cotton and cotton seed averaged 54 per cent below the prewar level. As a result, the purchasing power of cotton farmers was greatly reduced, standard-of­living conditions were materially lowered, and current expenses and fixed debts were difficult, if not impossible, to meet. Thus, the economic situation in the cotton belt in May, 1933, was the culmination of a disastrous downswing in cotton prices and farm income over a period of years. Drastic action for 1933 was necessary.-ln view of the situation and the fact that another large crop of cotton was in prospect in 1933, it was clear that drastic action was necessary if a disaster of major proportions throughout the cotton belt was to be averted. On May 23, 1933, representatives of the Bureau of Agricultural Economics, the Extension Service, and the Agricultural Adjustment Administration met to consider the situation. In this conference it was emphasized that while fluctuating yields have seemed the dominat­ing factor in cotton production in some recent years, acreage is the dominant factor in the long run. During approximately the first thirty years of this century, cotton yield fluctuated and showed a net decline, while the acreage of cotton harvested increased over 70 per cent. Acreage reduction would not easily stimulate foreign production.­ Domestic production could without doubt be curtailed by reducing acreage. Would such reduction in production in the United States stimulate foreign production and increase competition in the world markets? A study of the foreign cotton situation revealed that it would not be easy immediately to stimulate production materially in most countries because of unfavorable climatic, economic, and social conditions. Although it would be desirable to have all producing countries adjust production uniformly and thereby distribute the burden of improvement, it would be unwise for this country to wait until such unanimity of action could be obtained before putting any program in effect. The important objective was to correct the unsatisfactory situation and yet avoid stimulating foreign production. The creation of a world shortage of cotton and excessively high prices might stimulate cotton production abroad, but a program aimed at reduction of the cotton surplus and the increase of cotton prices to parity did not seem likely to bring about material expansion in foreign cotton production. Not until a large part of the excessive carry-overs had been removed would there likely be any danger of world-market prices advancing to a point which would result in significant increases in cotton acreages abroad. The University of Texas Bulletin THE PROCESSING TAX Funds with which to make rental and benefit payments to cooperat­ing cotton producers are obtained from a processing tax of 4.2 cents per pound net weight on cotton entering domestic consumption. Two factors make the processing tax on cotton of slight effect on prices received by producers. First, the United States normally exports between 55 and 60 per cent of its cotton crop. Since no tax is levied on cotton for export, the price to foreign buyers is not appreciably affected by the processing tax on domestic consumption, and the price paid by domestic mills cannot be less than that offered by foreign buyers. The tax, therefore, is an additional cost attached to cotton in domestic consumption, over and above the export price for cotton. It does not increase the price to foreign buyers or place American cotton or cotton goods on an unfavorable cornpetiti · ..·e basis abroad. Second, the domestic demand for textile materials is relatively inelastic. Domestic mills will pay relatively high prfoes for cotton and consume large amounts of it when the consumer demand is strong; but when demand is weak, consumption i-s decreased, even though prices are low. Tax needed for readjustment.-Voluntary farm readjustments could not be made without benefit payments, and hence the need for processing taxes or other means of providing funds with which to make payments. From past experience we may be sure that unless farmers were helped or forced to make such adjustments, they would be made too slowly. Meantime, hundreds of thousands of farm families would be pauperized, and the depression in both town and country would be indefinitely prolonged. Some advantages of processing taxes are that they are easy and inexpensive to collect and difficult to evade. The revenues obtainable can be forecast with a high degree of accuracy. The rates of processing taxes can be easily and quickly adjusted to meet changing market conditions. The cotton tax of 4.2 cents a pound represents about 8 cents on a pair of overalls costing $1.60, less than 8 cents on a sheet costing $1.30, and about 31h cents on a work shirt costing 90 cents. Studies indi­cate that most of the cotton processing tax is passed to the consumer in the form of higher retail prices. Prices in 1938 still below ']>arity.-While cotton prices during the fall of 1933 were approximately 50 per cent higher than in 1932, they were still below parity as defined in the Agricultural Adjustment Act. The farm price of cotton during the 1933-34 season averaged 9.7 cents a pound compared with parity prices at around 14·1h cents a pound. This parity price was somewhat higher than in June, 1933, when the rate of the processing tax was determined, and is due to a rise in the prices paid by farmers for commodities bought. Cotton consumption increased in 1989.-Even though the 1933 pro­gram reduced the supply of cotton by 4,600,000 bales, world supplies Government Control of Cotton Production 95 of American cotton for the 1933-34 season were still large, amounting to 24,635,000 bales, but they were, however, 1,326,000 bales, or about 5 per cent, less than the supply for the previous season. This reduc­tion was due to increased consumption, both at home and abroad. Had the world consumption of American cotton in 1933-34 been equal to the relatively high consumption of 14,171,000 bales in 1932-33, the carry-over on August 1, 1934, would have been around 10,500,000 bales, or more than twice the 10-year ( 1923-32) average carry-over. Tke plow-up cam'J>t only in itself, but as a dramatic illustration of our foreign trade problems. Eco­nomically speaking, cotton is our most important stable commodity in international trade. By tradition, American-grown cotton has dominated the markets of the world. Over half of our raw cotton has ordinarily gone into export. Upon American cotton we have built up a vast economic machine for its production, handling and sale, and for its manufacture into textiles for sale at home and abroad. The cotton business in its various aspects affects more people in the United States than does any other single commodity. The importance of restoring balance to this great economic and com­mercial asset of the United States long has been apparent and the whole-hearted efforts of this Administration have been devoted toward attaining this result. Higher prices and reduction of surplus achieved.-These efforts have been successful to the extent that they have materially increased the return on cotton to our producers and have diminished the unwieldly carry-over. They have been unsuccessful in that they have failed to dispose of our surplus by sale abroad in normal quantities. Our exports of raw cotton have fallen off at a truly alarming rate. At the same time a stimulus has been given to the production and use of cotton grown in Brazil and other countries abroad. The case of American cotton textiles is no less serious. They have lost valuable markets, particularly those in the Philippines and Latin America, to foreign competitors, such as Japan. They are also experiencing severe competition, notably from Japan, in the domestic market. The list of closed cotton mills both in the North and in the South bears graphic testimony to the straits in which the cotton textile industry finds itself. Must correlate foreign trade with recovery program.-The failure to attain recovery in the cotton business is not due to any lack of The University of Texas Bulletin effort or of good intentions but is rather in my opinion, illustrative of a more general failure to correlate properly our foreign trade policy with our national recovery program. I believe that many will not dispute the statement that the demands of domestic recovery are paramount and that foreign trade policy must be based on and conforms to them if it is to help and not to hinder. In other words, the tail should not wag the dog. It is generally recognized that the fundamental cause of our national depression was the decline in prices for agricultural commodities and the resultant loss of farm purchasing power, upon which our industries were in the last analysis dependent for their existence. To build up farm prices and farm purchasing power to a parity level with industry was and is a primary objective in our program for domestic recovery. Through the opera­tion of the Agricultural Adjustment Administration and other factors progress toward this goal has been made. The processing tax.-In the case of cotton, the processing tax plus the government cotton loan policy is once more giving the cotton grower something resembling a fair return for his product. How­ever, so long as great and growing surpluses remain unabsorbed in the United States, price parity for cotton or for any other commodity must remain upon a highly artificial and precarious basis. If parity is to be maintained, price depressing surpluses must be definitely removed from the actual or potential American market. Obviously, these surpluses must be sold abroad. What deterniines world prices?-World prices are determined by supply and demand and by other considerations quite outside the power of Congress, however potent its legislation may be in shaping our domestic economy. We are, moreover, confronted with the collapse of currencies as mediums of international exchange and the develop­ment of individual price levels in various countries which are at variance with our ovn1 and with each other.... Changed conditio1~s.-Other nations have been prompt to recognize changed conditions cf present day international trade and to adapt themselves accordingly. England, for centuries the principal trading and financial nation of the world, with a greater stake in foreign trade than any other country, revolutionized her national economic policy in 1931 to meet the new trends in international trade. She revived protection, went off gold, started keeping detailed books on her foreign commercial and financial transactions. She negotiated a large number of special preferential trade agreements, both with her dominions through the Ottawa Agreements and with other nations wherever she could find a basis of mutual interest. Her slogan was "buy from those who buy from us." The result has been a definite improvement in England's foreign trade and material progress toward national recovery in England. Selling cotton through negotiatio~s.-. · · Furthermore, during the winter, negotiations took place lookmg toward the trade of American "Cotton and other farm commodities to Europe, on what amounted to a goods-for-goods basis. For example, a fairly complete arrange­ment was worked out between American cotton exporters and German merchants and spinners. Germany was to take up to three-quarters of a million bales of American cotton, paying for it 25 per cent in cash and the rest by the exportation to the United States of a wide range of German goods customarily imported by America. Appro­priate safeguards were agreed upon to prevent damage to the American market. This particular agreement was not consummated, but it indicates that there are still important potential markets for our cotton in Europe. If we fail to avail ourselves of these possible markets, our historic place in them will be taken by foreign cotton producers and by the use of substitutes for cotton. II. IS THE PROPOSED PLAN SOUND IN THEORY? FARM RELIEF AND THE DOMESTIC ALLOTMENT PLAN By M. L. WILSON (From The Day and Hour Series of the University of Minnesota, No. 2, pp. 24-28; 34-86: 43-46. Published by The University of Minnesota Press, Minneapolis, 1933.) Current farm relief proposals.-The new situation is causing farm­ers and others who have ingenious and inventive minds to be thinking about ways of meeting the new problem. Since Governor Roosevelt made his Topeka speech, there have been probably as many as five hundred farm relief plans proposed in the United States. Likely 95 per cent of these plans have had to do with raising or supple­menting the price and only 5 per cent of the plans have embodied in any manner whatsoever the principle of production control. From the price-raising standpoint the plans divide into three general classes: Three price-raising 'JWoposals.-1. Governmental fixing of prices. One of the several difficulties in this proposal is that it is in conflict with the Constitution. 2. The division of a commodity into the domestic and exportable portions and the requirement that the first purchaser pay different prices for each-one price for the domestic portion, i.e., the worId price plus the tariff, and the world price for the remainder. Most students eliminate this proposal as unworkable and also doubt the The University of Texas Bulletin legality of the Government compelling any purchaser to pay a certain price. 3. Plans to elevate or supplement prices by means of bonuses or subsidies, the funds for such bonuses or subsidies to be derived from an excise or sales tax on the commodity. This is a new element and a new line of thought introduced into the farm relief arena last spring. Price-raising schemes have failed.-Many of the price-fixers en­tirely forget the lessons which are to be learned from the price-raising attempts throughout the world during the last ten or fifteen years. They forget the Brazilian coffee experiment, the experiences with rubber, copper, and so forth, which demonstrated that if prices are artificially raised without production control, then production will be artificially stimulated, and in a very short time the situation will be further out of balance than before. Any price-raising farm relief proposal must be accompanied by some means for controlling pro­duction. Five proposals for control of production.-An analysis of recent farm relief plans looking toward production control brings forth a five-point classification: 1. Farmers asked to produce less.-First, persuasion, talk. This was the Farm Board method when they told farmers that they should produce less, but it has done little good in the past and there is less hope in the future. There is a fundamental conflict between the interest of farmers as a group and of farmers as individuals. It is to the advantage of the wheat farmers as a whole to produce less wheat, thus reducing the supply and thereby increasing the price. However, if such action were to take place it would then be to the interest of the individual farmer to raise just as much wheat as he could. In all such attempts in the past most individuals have assumed that others would reduce production, but as for themselves they would maintain or increase their own crop so as to get the double benefit of enhanced price and added product. Thus all such proposals in the past have failed. 2. The two-price plan.-Second, the division of the commodity into two lots. It is argued that the farmers would then receive two prices, a domestic price for one portion and an export price for the other portion. Some have said that this would teach the wheat farmer that he would be better off not to produce the export portion if it were at a loss. The difficulty here is the same as that I have just outlined. Suppose the farmer is receiving 75 cents a bushel for the domestic portion and 25 cents a bushel for the export portion. The argument is that the 25-cent portion will be unprofitable, and consequently he will cease producing it. But he will not do this unless he has a definite allotment which segregates his portion from that of all other wheat farmers. If this is not done the individual will say: "Since this division is made upon the total number of bti.shels of wheat that I sell, if I reduce my production from 1,000 bushels to 750 bushels, the probabilities are that some other farmer will increase his from 750 to 1,000 bushels and therefore the effect of my reduction will be lost." A little thought on this proposal will lead to the conclusion that it will not regulate and control production. 3. Control through contractual agreements.-Third, the develop­ment of production control through contractual agreements, as proposed in the domestic allotment plan, whereby each farmer has a definite allotment, an arrangement whereby he can decrease his exportable portion and be assured of higher returns on the domes­tically-consumed portion. 4. Land leasing by the Governme,nt.-Fourth, taking land out of production through lease or purchase by the Government. This is a more drastic step than the allotment plan and is a frank recognition of acceptance of the isolation route. It means withdrawal from the world market. 5. Use of surplus products.-Fifth, the use of surplus products for non-food uses. This proposal is to convert such products into industrial alcohol and blend this with gasoline. The voluntary domestic allotment or 'f>rO rata plan will remedy the international situation.-The voluntary domestic allotment plan is designed to meet the international situation described above. Its proponents do not necessarily admit that we are forced to take the isolation route. They admit, however, that we are in a bad jam and conclude that at best we cannot expect the European markets to be restored immediately. A plan must be developed, therefore, which, in the beginning at least, will be of an emergency nature, but will bring back the purchasing power of the exportable commodities, on the one hand, and prevent the increased price from stimulating production on the other. The voluntary domestic allotment plan is new. Neither its basic philosophy nor its technique is generally understood either by Congress or by the people of the United States. It is applicable only to the exportable commodities of wheat, cotton, corn in the form of hogs, and tobacco. It is predicated on the theory that if production of these comrrwdities can be controlled and prices elevated, the benefits will be reflected to all other commodities and that the producers of the exportable commodities named will be pre­vented from shifting their production and causing over-production in other domestic commodities. The plan consists of four principal elements. The plan has four principles: 1. Excise tax.-First, an excise tax collected at the point of processing, that is, at the flour mill, the cotton textile mill, the packing house. The amount of this excise tax, according to one plan, would be the amount of the tariff; according to another, it would be a sum sufficient to give the commodity its prewar purchasing power. From a legal standpoint, the collection of this tax has nothing to do with what is to be done with the funds so accumulated. Of course, the processor cannot bear the tax, which The University of Texas Bulletin means that the tax will be passed on to the consumer, and that the consumer will pay for these commodities prices that bear a reasonable relation to the general price level, -probably the same relation that would have prevailed had the European markets not been lost, or if the s:Jpply was down near domestic demand. 2. Each farmer to receive 'JWO rata share of tax.-Second, the governmental ad~inistrative agency would pay each farmer his pro rata share of the funds so collected on the portion of his crop domestically consumed 'Pf"Oviding he signs a production control con­tract agreeing not to increase his production, but, if necessary, to reduce it to an amount which w01dd bring about a better balance between su'PPlY and effective dumand.* This plan does not assume that we necessarily are going to reduce production to a domestic basis, as it is almost unthinkable that cotton production should ever be so reduced. The United States has a natural world advantage in cotton production. If the plan were to be proposed again the word ''domestic" probably would be dropped. The plan would be to reduce production temporarily so as to remove such great surpluses as have accumulated in wheat and cotton. As a permanent policy the plan would be to reduce production to an amount which would be domes­tically consumed plus that which could be sold abroad to advantage. It would not necessarily mean or retreat from the international markets. 3. Benefits for cooperators only.-Third, the plan should so operate that only the man who cooperates in adjusting his production would receive the benefit. The man who does not cooperate and who feels that his personal liberty is being curtailed may go ahead and produce as much as he desires, receiving the world price and none of the benefits from the plan. This arrangement would thus be voluntary, there would be no coercion, no farmer would be compelled to sign contracts or take part in the operation of the plan. The farmers who voluntarily participate in the plan would receive the benefits of the price increase, while those farmers who did not sign contracts and adjust production would get no direct price supplement. 4. Decentralized control.-Fourth, the plan should be decentralized in its administration and should not build up a great bureaucracy. It should be operated largely on a county, a township, or school district basis, and the expense of administration should be borne by the pro­ducers benefited and not by the general public. The plan is not complicated.-. • • A review of the steps in this­voluntary domestic allotment plan show that it is not nearly as complicated as some have thought. 1rJtaJics by the Editor. 1. If Congress should pass a voluntary domestic allotment bill it would require the farmers producing each of the exportable com­modities to determine for themselves whether or not they wanted the voluntary domestic allotment plan put into operation. 2. A series of educational meetings by county agricultural agents would be held and all producers of a commodity would be informed of the economic conditions which necessitate some plan of this kind and the alternatives to the plan proposed. 3. A referendum would be held in which the vote was on the basis either of individuals or of acres, and the vote should be made public as should also the statements of each individual voter as to the amount of his production and his number of acres. How the allotments will be made.--4. If the plan went into opera­tion a national agency would give each state its allotment, a state agency would in turn make the allotments to the counties, and finally county committees would be set up to make allotments to individual farmers. The principle of self-policing and self-administration as outlined in the case of the Stillwater County assessment system would be the basis for the allotments. The county committee, perhaps using the assistance of township officers or local school district trustees, would receive applications from farmers for allotments. The applications would be given wide publicity, and in case of com­plaint individual farmers would be compelled to produce supporting affidavits of production and yields. No farmer would be compelled to participate in the plan; his action would be purely voluntary. The opponents' criticism.-The opponents of this plan have con­centrated their criticism largely on three points: First, that the plan is too complicated to be understood; second, that consumers will revolt against the excise taxes; and third, that the plan is not workable. The charge that the plan is complicated is not correctly stated. It would be more accurate to say that the plan is new and that human minds are such that we are apt to be skeptical and critical of things which are new. The plan now suffers from its newness. I have out­lined how the plan would work; you must judge for yourselves as to this criticism. In the county it can be made to work like a cooperative organization. It is based upon self-help, self-administration, and self-policing. It is now proposed that it be made operative for only a two-year period, after which, if there is not world recovery and a return of our international markets, the plan can be modified and adjusted on the basis of the two years' experience. The tax objections.-In regard to the objections to the tax, it should be remembered that the raw material costs of the wheat in bread, the cotton fiber in cotton textiles, the tobacco in cigarettes, and the farm price of live hogs as related to the retail price of pork are quite small. The excise taxes will not greatly affect consumption. Many of those who complain about the tax infer that the prices received by farmers now are about the correct prices, and if the prices should be The University of Texas Bulletin raised so as to put purchasing power back into agriculture, we would be giving farmers something more than is justified. This view is not correct. Objections to its workability.-As to its workability, its opponents say that this plan would require 150,000 new federal employees to administer it, that it would really be unemployment relief instead of farm relief, that it would set up a tremendous bureaucracy, and that it would be absolutely impossible to supervise and police. In answer, the proponents say that if the referendum feature were used the plan would not go into operation unless the majority of the producers of the commodity wanted it. Next, if it were administered by the county, the expense of the administration would be left to the producers. They would receive the benefits and in return would pay the cost of the county administration. In the case of wheat it is estimated that the voluntary allotment µIan can be administered for 21h cents a bushel. If the county-unit plan were made use of, it would operate very much like a cooperative. The traditional land policy must be reversed now.-. .. Ever since the Revolutionary War our national land policy has been one of expansion, bringing new lands under cultivation and rapidly develop­ing our agricultural production. Certainly the time has arrived when we must reverse our traditional historic land policy from that of expansion to one of adjustment and perhaps of contraction of the tilled area. We should immediately repeal the Homestead Act and set up some system of state and federal land use planning looking toward retiring the poorer lands from production. Lands affected with ''the public interest" should be zoned and acquired either by the Federal Government or jointly by the Federal and State Govern­ments. Time does not permit a detailed discussion of what may be done in the way of land use planning. It should not be regarded as an emergency measure, but viewed from its long-time effect on agriculture. Another plan: Government ']YUrchase surplus acreage.-Mr. James Ford Bell, of Minneapolis, has thought out a plan that, in my judgment, is worthy of very serious consideration by all who are interested in the farm problem. He proposes to set up a federal farm land reserve and to provide that the Government take out of production farms totaling thirty or forty million acres, at least sufficient land to bring us back to a balanced production base. If, and when demand justified, this land would be resold and placed back in private use. The federal farm land reserve plan immediately raises the question: "What is to be done with the farmers who are now occupying the land which would be taken out of production?" National planning necessary.-If we are forced into a position of isolation, then it is absolutely necessary that we develop some type of national agricultural planning, not only with reference to taking the poorer land out of use, but also to facilitate the adjustment of production on the remaining productive land. The domestic allotment plan as outlined is based on an assumption that a national policy of tariff adjustment will be enacted and that the present emergency will only be of two or three years' duration. But if European nationalism remains a permanent policy, it may be necessary to continue the domestic allotment plan as a more or less semi-permanent institution. Likewise, if the land leasing proposal or land purchase is tried, we must have some basis whereby the poorer land will be taken out of production and the production shifted to the best land. It is to the interest of all that production be upon the best land and in the area of greatest comparative advantage. It is also necessary that the land which would be thrown out of production through the domestic allotment plan, through leasing or through any other pro­posal, be not allowed to shift into the production of other commodities which are not now needed. In order to do this it is necessary that we develop some basis for planning agriculture in this country. In using the word "planning" I do not have reference to any such scheme as is in operation in Russia, but to a program for securing and applying a type of information which we do not now have. Informa­tion of the kind I refer to would enable each farmer to know definitely where he stood in the scale of competition, the public agencies would have some definite guide as to what lands should be removed from production, and the individual farmer would have a basis for determining his future prospects and the competitive rela­tion of this production to that of other producers both locally and in the nation as a whole. DECLINE IN THE COTTON KINGDOM I. THE PLANTERS' PROSPECTS By WAYNE GARD (From Current History, pp. 31-36. Published by The New York Times Company, April, 1935.) The future of cotton and new situations.-Whether cotton growers in the South return to the stale hominy of the Hoover era or retain the happier diet attained during the last two seasons will depend on the outcome of several new situations that have arisen to plague them. Some observers will not be surprised if the next decade brings to King Cotton's domain agricultural and social changes as profound as those which followed the Civil War. The "mechanical" picker will reduce cost.-In the first place, cotton, the one major American crop which thus far has resisted mechaniza­tion, is now confronted with mechanical pickers which threaten to The University of Texas Bulletin displace much of the hand-labor used since the earliest days. Suell mechanization would reduce the cost of producing cotton and thus enable the United States to compete more advantageously with those foreign nations which, for some time at least, might cling to hand labor. The cotton belt is shifting westward.-An additional result might be the further westward shift of the American cotton belt. Texas already has become the leading cotton state, producing a third of the nation's crop; and New Mexico, Arizona and Southern California have begun growing a fine quality of long-staple cotton. Mechaniza­tion appears likely to make its most rapid progress in the Southwest, where the relatively flat land is favorable to the use of tractors and where labor is scarce. The threat of substitutes and disaster for the South.-Another de­velopment, even more disturbing to the equanimity of southern farmers, is the threat of new cotton substitutes. In addition to rayon, which competes with cotton as well as with silk, several new synthetic fibers have been developed by European scientists from cellulose made of wood pulp. The new fibers have the advantage of being of more uniform length than ordinary cotton fibers, and they are adapted to cotton-spinning machinery now in use. Samples of the new textiles, already examined in this country, have caused considerable uneasiness. One, produced by textile mills in Milan, has been declared capable of replacing 80 per cent of Italy's cotton consumption. From Germany have come several new types; vistra can be made to look like either cotton or silk, while woolstra is as warm as ordinary woolen cloth and only half as heavy. The cost of manufacturing these new synthetic products is still slightly greater than of those textiles for which they are intended as substitutes, but quantity production may make their manufacture practicable before long. Meanwhile, Germany is rapidly increasing her production of rayon as a means of freeing herself from the necessity of importing cotton; and jute and other fibers are being used extensively, even in the United States. The large-scale manufacturer of cheap cotton substitutes could hardly avoid bringing disaster to the cotton belt of the United States. Mechanized farming might soften the blow by reducing the cost of producing cotton, but thousands of acres of cotton land now con­sidered profitable would become submarginal almost overnight. In the Southeastern States much of the poorer cotton land would probably be planted in trees for the production of paper and of synthetic cloth, and rural population would dwindle. The westward shift of the cotton belt would be facilitated, since the Southwestern States cannot grow forests and already, by partial mechanization, are growing cotton more cheaply than it is produced in the older states to the east. The problem of control is pressing.-Of more immediate concern than the problems of mechanization and of cotton substitutes, how­ever, is that which has to do with acreage control and cotton exports. A more permanent cotton policy must be adopted soon; and, if acreage control is retained, attempts must be made to cope with the rapidly expanding cotton production in Brazil and elsewhere. Oppo­nents of the present policy of production control maintain that the foreign market for American cotton is being permanently sacrified for the sake of temporary relief to the growers. This question is a pertinent one, since the present control measures extend only through the 1935 crop season. The present Congress will have the responsibility of retaining or dropping the policy of control now in effect. The December referendum of southern farm­ers on the continued operation of the Bankhead Act did not by any means settle the controversy, though it did reveal unmistakably the farmers' attitude. Farmers favor control by the Governm,ent.-Long regarded as deep­dyed individualists, the cotton growers had been represented as opposed to the regimentation of the Bankhead Act. Their ballots showed that, far from being resentful, they have embraced enthusias­tically the principle of agricultural planning. They have concluded from their recent experience that, in farming as in manufacturing, prices can be kept up by restricting production to market demands. Of course, the administration's promise that two-bale farmers would be exempted from an inequitable provision of the Bankhead measure, helped to make the approval overwhelming. Yet the 600,000 small planters, some of them pinched by the tax on excess production, constitute less than 30 per cent of the total, and their output amounts to only one-tenth of the crop. Benefits of plan: Higher prices.-The December nine-to-one vote indicated that dollars talk louder than traditions. The cotton growers not only have been receiving prices more than twice as high as those which prevailed in the season before the gold standard was abandoned and acreage control was undertaken, but, in addition, have received checks from the Federal Government for the cotton they did not grow. Agricultural Adjustment Administration payments to cotton farmers in 1933 and the first ten months of 1934 totaled $166, 786,380. This money came from the consumers of American cotton goods by the way of a processing tax of 4.2 cents a pound on such goods, collected from the manufacturer. Diversification made possible.-Southern farmers have benefited further by being able to use their retired cotton land in producing grain, roughage and vegetables to be consumed on the farm. Thus the Bankhead Act has succeeded in bringing about a measure of the crop diversification which agricultural economists have been preach­ing for generations. The University of Texas Bulletin Detriments: The tenant is not receiving his just share.-From the cotton fields, almost the only adverse criticism of the acreage. limitation program is that its benefits have not gravitated sufficiently to the share-croppers and other tenants, who constitute the bulk of the actual cultivators and who live under conditions closely approach­ing peonage. Often the landlord has retained a lion's share of the rental check which came from the Government for retired cotton land. Nevertheless, the share-cropper has gained from higher prices, and steps are being taken to protest his interests in future acreage­reduction contracts. History of crop control.-Ideas of diversification and crop control in the interest of higher cotton prices did not descend upon the South from a clear sky with the advent of the New Deal. As long ago as 1868 people were discussing "the dethronment of King Cotton" as a matter for congratulation; and in 1891 8-cent cotton led to the advocacy of a plan to reduce acreage by charging a license fee of $1.50 an acre for the privilege of planting the crop. In 1905, undEr the leadership of the Southern Cotton Association, a 14 per cent reduction was effected through voluntary agreements, resulting in an increase of 2 cents per pound for that year's crop. The roulette wheel method of production regained its dominance, however, and the 1931 plea of President Hoover's Farm Board for "immediate plowing under of every third row of cotton now growing" fell on deaf ears. Only the existence of a national emergency led to compliance to the plow-up campaign of 1933. Middlemen owose the plan.-The main opposition to the Bankhead Act comes neither from farmers nor from consumers of cotton goods, but from middlemen-from ginners, shippers, compress owners, rail­road executives, brokers and exporters. Middlemen profit on the volume of cotton rather than on its price. When production outruns market demand they are not pinched by lower prices as are the farmers. In fact, they gain from the excess, since they refuse to lower the rates charged for their services. On the other hand, they do suffer loss of income when the volume of cotton is curtailed. These groups serving the cotton industry have made heavy invest­ments, and some of them are large employers. Obviously, their wel­fare cannot justly be overlooked. It must be recognized, however, that on the issue of crop control their interests conflict directly with those of the growers. Any effective method of relieving the cotton farmers from their burden of overproduction is almost bound to hurt the middlemen. Yet, in the case of the railroads, the loss of cotton freight in 1934 was more than equalized by the gain in other southern business. The Government's cotton program so greatly increased consumers' buying power that--despite the cotton loss and the worst drouth in half a century-nearly all the southern roads had greatly increased Government Control of Cotton Production 121 operating revenue over 1933. Yet many railroad executives failed to see the situation as a whole and cast their lot with that of the processors and brokers. Arguments against the pl,an: (1) Loans disrupt world prices.­ Acting from a natural self-interest, middlemen groups are marshaling every available argument in their fight against the administration's policy of cotton control. They oppose the loan of 12 cents a pound which the Government has been making to growers, contending that this domestic stabilization disrupts world price relationships and makes it difficult for foreign spinners to buy American cotton. They maintain that this pegging policy, together with the curtailment of the American crop, will bring increased production in other lands and permanent loss of this country's foreign markets, which in earlier years have bought more than half of our lint. (2) Exports of American cotton reduced.-Opponents of cotton control point out that in the year ended July 31, 1934, sales of American cotton in world markets fell off 632,000 bales, or nearly 5 per cent, while sales of other cotton increased 1,373,000 bales. With reference to the current crop, they call attention to a drop of 43 per cent in bales, or 25 per cent in dollars, in our cotton exports for the first five months of the 1934-35 shipping season. Further, they cite estimates indicating that the aggregate foreign cotton crop is the largest in history and that in 1934 the United States produced only 42 per cent of the world total, compared with a predepression normal of 60 per cent. Taken alone these figures appear to give strong support to the contention that King Cotton is rapidly bleeding to death. But this alarmish view constitutes only one side of the cotton picture. America's loss in cotton exports cannot fairly be attributed to emer­gency measures taken by the Roosevelt Administration; much of the loss came before the present policies were adopted. Foreign countries have increased their cotton production steadily for more than forty years, regardless of the large American crop. By 1930 these countries had expanded their cotton acreage to half the world total. In 1933, before cotton control was undertaken here, we increased our planting by 5,000,000 acres and other lands increased theirs by 4,000,000 acres. Even when the price was as low as 51h cents our exports were diminishing. While it is true that government loans to farmers on their cotton have tended recently to keep American prices slightly above world prices and thus discourage foreign buying of our cotton, the major export loss must be attributed to factors which arose before these loans were made and before acreage reduction was undertaken. In addition to the gradual increase of cotton acreage in other lands­spurred in some countries by political as well as economic considera­tions and in Brazil by the crippling of the coffee industry-conditions The University of Texas Bulletin injurious to United States cotton exports include the effect of world.. wide business depressions in lowering market demands and the unwillingness of Americans to accept goods from other countries in return for exports. Our tariff barriers, with the resultant dwindling of our imports, have made it difficult for potential buyers to obtain American exchange with which to buy our cotton. Foreign cOperate in cotton-reduction plans. Cotton production taa: plan.-The cotton production tax plan has the same general objective as the Bankhead plan; that is, to insure a reduction of cotton production to a point compatible with remunera­tive market demand. The cotton production tax plan, however, attains its objective in a manner which, it is believed, will more readily meet with the approval and continued cooperation of cotton producers. What the taz plan provides.-The tax plan provides that whenever a majority of cotton producers voluntarily signify their adoption of a 148 The University of Texas Bulletin cotton-reduction plan offered by the Secretary of Agriculture by entering into agreements with the Secretary for such reduction, this shall constitute prima facie determination that the plan of reduction offered is satisfactory to such producers. A tax will then be imposed on every pound of cotton ginned, but provision will be made for the refunding of this tax to cooperators in the plan. The aim of such tax is to prevent the plan of control which has been approved by the majority of producers from being offset by the failure of a minority to participate. The cotton production tax plan will operate in such a manner as will well permit it to be superimposed on the present reduction program being followed by the cotton section. Essentially, the tax will be a means of adding to the attractiveness of cotton-reduction plans in such a way that all cotton producers will cooperate with the administration in the execution of such plans. The incentive for large production will be removed.-The tax plan provides for the levying of a tax of 40 per cent of the price of cotton against every pound of cotton ginned. The proceeds of the tax will be used to increase the benefit payments to cooperators in cotton­reduction plans. Furthermore, the cooperating producers will be credited with the prospective increased benefit payments in such a manner that the payment of the tax by them on an amount of cotton equivalent to their contracted base production will not require any payment in cash of such tax by cooperators. For any production by cooperators in excess of a fixed per cent of their base production, such cooperators will not receive benefit payments that will offset fully the tax paid by them on such excess production. The loss of the benefit payment advantage on the excess crop will act as a dis­advantage to any producer who exceeds his contracted base produc­tion. There would be no incentive, therefore, for cooperators to take advantage of circumstances and increase abnormally their production on the acreage allotted to them under the terms of the contract. Non-cooperating producers, on the other hand, will have to pay the tax in cash and will not receive any benefit payments. No abatement or exemption will be provided for producers who do not enter into and fulfill cotton reduction contracts. Additional rulings will be provided so as to permit the cooperation of farmers who produced cotton during the base period, 1928-32, and in 1933, but who are not now eligible to participate in 1934-35 cotton acreage reduction plan. These producers, in other words, will not be taxed without first being given an opportunity to cooperate with the administration in the reduction of cotton production. Amount of tax to be determined by the Secretary of Agriculture.­ The amount of the tax, 40 per cent of the price of cotton, will be the tax in force for the 1934-35 ginning season. The price of cotton will be determined in each production year by the Secretary of Agriculture, and shall be announced not earlier than the fifteenth day of June in the production year to which such determination Government Control of Cotton Production 149 applies. The Secretary shall have the power to lower the tax rate whenever he has reason to believe that the tax at the rate specified above will cause a reduction in the quantity of cotton that may be sold and in the depression of the current average farm price of cotton. The amount of the tax recommended was determined on the basis of giving advantageous returns to the cooperator at any given price of cotton as compared with the returns that would be obtained by the non-cooperator for his production at such prices. The advantages that will accrue to cooperators in cotton reduction plans recommended by the administration will not permit any economic excuse for the non-cooperation of certain producers who persist in their refusal to participate in plans designed to benefit the majority of producers. Voluntary action.-The cotton production tax plan includes all the features of voluntary action on the part of producers that are stressed in the Agricultural Adjustment Act, and in connection with the 1934-35 cotton acreage reduction plan. The plan will supplement the present reduction programs in that it will induce the cooperation of all cotton producers who are eligible to participate. The production on the agreed acreage will exceed or fall short of any amount of cotton set as the goal of production to the extent that climatic condi­tions and cultural practices may cause fluctuations in yields above or below the average production obtained in the past. Those producers whose current production exceeds their contracted base production will not benefit as much, however, because of the larger benefit pay­ments that will be made to cooperators whose current production does not exceed their contracted base production. This will serve to dis­courage the use by cooperators of such intensive cultural practices as might increase abnormally their production of cotton on the agreed acreage. Conclusion.-The disadvantages of the Bankhead plan, as considered in this discussion, may be summarized as follows: (1) The Bankhead plan is based on arbitrary action and may meet with considerable producer-resistance, particularly when eco­nomic conditions improve and cotton producers are forced to gin only the amount of cotton permitted under the terms of a long-time production plan. (2) The physical factors of lack of suitable storage facilities and of the impossibility in some sections of successfully storing seed cotton from one crop season to the next would make for difficulties in the application of the Bankhead plan. (3) Political consequences may ensue in any community or in the belt as a whole as a result of the accumulation of excess seed cotton on producers' farms that cannot be disposed of at a time when funds are sorely needed and the ginning restrictions are kept in force. ( 4) Landlord-tenant relations would be strained and the possi­bility of the abuse of tenants would be increased. The University of Texas Bulletin (5) It is believed that the "bootlegging" of cotton illegally ginned would be encouraged to the extent that the plan may lose the support of cotton producers. The cotton production tax plan, on the other hand, does away with these disadvantages in the Bankhead plan, and in addition will more readily enlist and maintain the support of cooperators in production programs. The full efficacy of cotton-reduction plans is based on the cooperation of all producers. The cotton production tax plan is intended to become a definite part of the Agricultural Adjustment Act and to serve as a supplement to the present cotton reduction program being followed by the cotton section as a means of insuring the participation of those producers who in the past have largely been responsible for the failure of cooperative reduction plans based on educational campaigns. A variation of the production tax plan would give to cooperating producers an allotment in bales or pounds of lint, which allotment would be determined by the average production per acre on the acres grown under acreage-reduction contracts. Any lint produced above this amount would be subject to a tax sufficient to discourage such excess production. Producers who for any reason do not enter into cotton-reduction contracts would be assigned a quota in bales or pounds which quota would be tax free. Any excess production above such quota would be taxed at the same rate provided for the excess production of cooperators. The quota for a non-cooperator would be fixed by bis county and community committee composed of persons familiar with his business. The aim would be to fix a quota for each non-cooperator that would exempt from the tax an amount of cotton approximately the same as would be allotted if such producer would sign a reduction contract. Cooperators and non-cooperators would thus be taxed alike upon excess production only, the difference being that cooperators would have the advantage of whatever benefit payments might be made. The chief provision of the Bankhead plan is the arbitrary control that it gives of cotton production in any given season. However, its provisions of control without benefit payments would make the increased price of cotton the only source from which remuneration for reduced production would be derived and is a departure from the policy of the administration as expressed in the Agricultural Adjust­ment Act. This would deny the producers of the United States any advantage over foreign producers in the placing of the domestic price level on a higher plane than the world price. THE COTTON INDUSTRY (From Congressi.onal RecO'Td, Vol. 79, No. 68, pp. 5175-5183. April 4, 1935.) A DEFENSE OF COTTON PROGRAM By SENATOR JOHN H. BANKHEAD MR. BANKHEAD: Mr. Presi,dent, on account of efforts of some people who are personally and financially interested in breaking down the cotton program of the administration, and because of the fact that the senior Senator from Maryland (Mr. Tydings) a day or two ago brought the subject to the floor of the Senate, I have decided that it would be appropriate to submit some observations upon that gen­eral subject. Why not the supply and demand principle for cotton?-Mr. President, the whole program relating to cotton under the present administration has, from its inception, been based upon an effort to apply to the cotton industry the old, inexorable trade law of supply and demand. We have sought to follow the principles adopted and practiced by the business industries in this country, but it appears that what is accepted as good business and sound economics on the part of industry, upon the part of business, so-called, in this country, when the same rule is sought to be applied to agriculture becomes a great offense in the eyes of business and of critics of the administration. The depression and the close down of industry.-We heard no com­plaint and criticism of the great industrial corporations when, following the crash in 1929, they began to close down plants here and there, when they reduced the number of workmen from day to. day, when they reduced the number of units of their output to fit the purchasing demands of the consuming public. That was accepted as good business and the proper thing to do, notwithstanding it resulted in the discharge of millions of workmen, deprived them of employment, and finally turned them over to the relief rolls of the Governmen±. Has anyone on the floor of the Senate or in the newspapers of the country or upon the stump denounced the man­agers of industry for reducing production when the situation became necessary in order to meet a declining consumption of their particular commodities? But, Mr. President, as soon as agriculture seeks to adopt that principle, which has always been followed with success under the old trade law of supply and demand, we find at once a cry of horror arising in the land. "Oh, these working farmers, these cotton farm­ers, or wheat farmers, ought to work as long each day, six days in the week, as the weather will permit to produce all they can at whatever price their commodities will bring." It is asserted that it is sinful for the farmer individually and the farmers collectively to seek some machinery under which they can adjust the supply of their commodity to fit the consuming demands of the market. · Increase of acreage.-Mr. President, as a result of the great in­crease in the demand for cotton, growing out of the World War, and what are known as the "boom days" following the World War, the cotton acreage in the United States was tremendously increased, as it was in foreign countries. During the five prewar years we had an average acreage planted to cotton of 33,000,000 acres. Finally that acreage, during the early twenties and from 1924-25 down to 1930, was increased to an average of 44,000,000 acres. When the crash came in 1929, when businesses in the country were reducing the number of units they turned into the market, when prices were declining, when consumption in all lines was decreasing, what took place and what happened with the cotton farmers of the United States? For the three years from 1929 to 1931, inclusive, the world consumption of American cotton was an average of 12,250,000 bales. During the same three years the farmers, geared to a high rate of production upon a large acreage, proceeded to the operation of their plants at full capacity and produced an average crop for those three years of 15,250,000 bales of cotton. Carry-over increased.-Beginning with the normal carry-over of 4,000,000 bales, in three successive years an average of 3,000,000 bales in excess of consumption was produced, thereby accumulating the greatest quantity of American cotton in all the history of the country. The supply at the end of the year, when the new crop was coming in, was 13,000,000 bales; more, in fact, than the actual annual consumption at that time. Therefore, when we approached the crop year of 1933, there was enough cotton in the warehouses or cotton mills of the world and in the possession of the cotton merchants available to the cotton mills to supply for an entire year all the mills that used American cotton, if not a single stalk of cotton had been raised in the year 1933. Price went down.-As a result of this very great increase in the supply of cotton over consumption, of course, the price went down, down, down. From an average of 191h cents per pound in the year 1929, when the depression started, the price went to an average in 1932 of 51h cents a pound. Thus nearly 75 per cent of the price of cotton and of the purchasing power of the raw cotton disappeared. No one can say that was attributable solely to the great depression. In the whole list of industrial commodities we cannot find one where the price decreased in that proportion. Whoever heard of a $20 suit of clothes going down to $5 or $6 in the same proportion that cotton went down? Whoever heard of any industrial commodity falling in Government Control of Cotton Production 153 the same percentage that cotton and wheat and other agricultural commodities fell? The mere suggestion is sufficient to show that the destructive and pauperizing price received by the cotton farmer was not the sole result of the de!>ression and the reduction in consumption. The other factor, and the larger factor, was the inability of the farmers of the country to adjust their production to meet the chang­ing condition in purchasing power. Size of cotton crop determines price.-In a brief way I desire to point out, from figures taken from the Bureau of Economics of the Department of Agriculture, that the price of cotton and the total amount of money received by the cotton growers are governed directly by the size of the cotton crop each year. Of course, there may be abnormal conditions which cause it to vary. Let me refer briefly to the years 1923-27, a period of five years, when there was no depression either here or abroad, when purchasing power was strong, when consumption was at its very height during those great days of business activity. During the thirteen years from 1917 to 1929 the average amount of money received by cotton growers of the country for their lint cotton alone was $1,400,000,000. When the depression came and the surplus piled up each year, they lost $1,000,000,000 of that annual purchasing money. Instead of receiving $1,400,000,000, the greater portion of it coming from foreign customers, they received in the years 1931 and 1932 only between $400,000,000 and $500,000,000. In 1931 they re­ceived $483,000,000 and in 1932, $424,000,000. With that great reduction in the purchasing power of the great mass of people stretching across America from California to Virginia, and with the money received for cotton in the many large areas in that section being the only cash money that came into those sections to replace the money being sent out by every mail to pay for prac­tically everything they bought in the stores of the country, including also interest payments, insurance premiums, and all t~e other items that go to the financial and industrial centers of the country, it is clearly apparent there could be nothing like prosperity among the cotton farmers of the country. Destitute conditions in the South.-They were prostrate, the farm­ers losing their homes, tenancy being increased, children going in rags, many farm people without money to buy school books, merchants having their credit facilities exhausted, banks all in trouble, pur­chasing power all over the cotton belt having disappeared, and there was a year's crop already in the warehouses; and still we find these preachers of the doctrine espoused here the other day by my friend the senior Senator from Maryland (Mr. Tydings), these theorists who denounce what they term the philosophy of scarcity, standing by and saying that nothing should be done by Congress to aid a situation which was bringing to despair and pauperism millions of our people. The University of Texas Bulletin The doctrine of scarcity and industry/-Scarcity! Economy of scarcity! I have not heard the senior Senator from Maryland or anyone else denounce anybody but the farmers of the country for practicing the doctrine of scarcity. If the industries of the country had not practiced the doctrine which the Senator from Maryland so loudly denounces on the part of agriculture, and had shipped shoes and clothing and farm implements and fertilizer out to the farmers at any price they would pay for them, as some persons want the farmers to do with their wheat and cotton, the farmers might have gotten along all right if they could have bought on the same scale of prices on which they were obliged to sell; but they had to deal with the philosophy of scarcity practiced by all those who offered their products to the farmers-the cotton farmers, the wheat and corn and hog farmers. They had to buy at prices that were not com­mensurate with the prices which the farmers were getting for their products. MR. BAILEY: Mr. President, will the Senator yield? MR. BANKHEAD: I yield. MR. BAILEY: I do not intend to be at all controversial; but before the Senator leaves the subject I should like to have him compare our policy of scarcity with the foreign policy of increased production in respect to cotton. I am sure the Senator can throw a great deal of light upon that subject, and I think it is one which we ought to consider in this connection. MR. BANKHEAD: I am coming to that phase of the matter. I shall deal with it before I conclude. MR. BLACK: Mr. President, will the Senator yield? PRESIDENT 'fJTO tempore: Does the Senator from Alabama yield to his colleague? MR. BANKHEAD: I do. MR. BLACK: Before the Senator leaves the question of scarcity in agricultural products, I think he might be interested in a bit of evidence on this identical subject that came out before the Finance Committee several days ago. A witness from the State of Michigan-whose name I do not recall, but who is a manufacturer of furniture, and as I remember, is the chairman of the code authority on furniture-was on the stand. He stated that in 1927 his factories ran almost to their maximum capacity, and that since 1929, including the year 1930, his factories have run at about 33% per cent of capacity. I asked him those questions because he was complaining of an economy which would impoverish the people by lack of production. In other words, for five years-and the witness stated that his factory operations were comparable with other factory operations­because his factories could not sell their goods at the profit they desired, they had reduced the production of furniture in this country 66% per cent. I asked the witness if, in his judgment, that was in line with the reduction of production on the part of the other manufacturers throughout the nation, and it was his judgment that it was. So, just as the Senator states, although the farmers have reduced their production they have not yet reduced it to the extent to which production has been reduced in industry and in manufacturing. A conservative estimate is that since 1929 we have lost $300,000,000,000 worth of products in this nation by reason of the fact that there has been a curtailment of production. So the Senator is very clearly presenting the fact that so long as we have an economy of scarcity in manufactured products, the economy of scarcity being brought about for the express purpose of keeping up prices and maintaining profits, it becomes interesting to know whether the farmers alone, of all the people of the nation, should produce in superabundance in order to lower the price, while the manufacturers produce under the economy of scarcity in order to raise the price. MR. BANKHEAD: I thank the Senator for his informative state­ment. It certainly confirms the general rule that all even casual observers of conditions during the days of the depression will under­stand, whether they are willing to admit it or not. Unfortunately, the cotton farmers and the wheat farmers were unable to comply in any way with the doctrine practiced by industry until, by overproduction and the accumulation of burdensome carry-overs, they had gotten themselves in a position where they could not readjust themselves as readily as could industry; and they su:ffered for two or three years as a result of their inability to follow the precepts of business. MR. CONNALLY: Mr. President, will the Senator yield? MR. BANKHEAD: I yield. MR. CONNALLY: In connection with the suggestions regarding the economy of scarcity, is there any real economy in producing an article or a product below the cost of production? MR. BANKHEAD: It is absolutely uneconomic and wasteful. MR. CONNALLY: Is there any real economy in a course of that kind, whether with regard to manufactured articles or farm products or anything else? Is there any real economy in producing a thing and then selling it for less than it costs, with resultant economic disaster and poverty to the producer? MR. BANKHEAD: My answer is, clearly, "No." I have not even insisted upon industry practicing production below cost. I am reply­ing to those who speak in terms of industry when they denounce agriculture for following their example. MR. TYDINGS: Mr. President, will the Senator yield? MR. BANKHEAD: I yield. The Unii,ersity of Texas Bulletin MR. TYDINGS: Under the philosophy of scarcity, would it not be a good idea if we should again cut the cotton crop in half, and then the farmer could get 35 to 40 cents a pound for his cotton? MR. BANKHEAD: When a reasonable argument is being made, it is useless to try to reduce it to an absurdity; and one who undertakes to do so is clearly conscious of the weakness of his position? MR. BLACK: Mr. President, will the Senator yield again? MR. BANKHEAD: I yield. MR. BLACK: As I understand the Senator, his idea is to increase all production by trying to provide customers for the things which are produced, even the fertilizer for which the South has had to pay at exorbitant rates for many years. The Senator, as I understand, is going on the principle not of a permanent philosophy of scarcity but of trying to bring about a balanced economy on the part of the people of the country that will supply customers, so that we may prevent industrial manufacturers from reducing their production 66% per cent. Producing for a profit!-1 asked the gentleman to whom I have referred why he had reduced his production. He said because he had not been able to sell his product at a profit. Of course he could not sell it at a profit to the farmers of the South on 5-cent cotton, nor to the wheat farmers of the West on 25-cent wheat. So, as I under­stand the Senator's philosophy, it is, under the system by which we operate, to try to increase the income of the purchasers of the nation and thereby to increase the production of all products, including cotton, instead of decreasing it. MR. BANKHEAD: That is correct; including the production of industry. MR. TYDINGS: Mr. President, will the Senator yield? MR. BANKHEAD: I yield. MR. TYDINGS: Let us see how sound that argument is. We con­tend that the more money we can put in the hands of a man, the more he can buy. That is sound. Conversely, by the same token, the higher we make the price of an article, the less he can buy of it. So if we increase the cost of an article we decrease its consumption, and if we increase the wages of the people we increase consumption; but if we increase the price of cotton we must, by the very logic we use to prove one point, be bound by it in proof of the other, namely, that the higher the price of cotton, the less of it will be consumed. MR. BANKHEAD: Mr. President, there is, of course, a limit upon the price level; but the Senator has just enough learning about cotton for it to be a dangerous thing. I call his attention to the fact that in 1919, when cotton was selling at 36 cents a pound, we exported more cotton than in either of the preceding four years or either of the succeeding four years. MR. TYDINGS: I will answer the Senator later. I do not desire continually to interrupt him. MR. BLACK : M1·. P.resUlent, will the Senator yield? MR. BANKHEAD: I yield. MR. BLACK: I should like to suggest that price does have a great deal to do with consumption; but in 1929 the income tax returns showed that 511 individuals in the United States received enough income from the products of the nation to buy every bushel of wheat and every bale of cotton raised by all the millions of farmers in America. It seems to me a little strange and a little strained to complain that we seek to increase the income of the farmer without at the same time suggesting some method for stopping the "economy of scarcity" in industry and the high prices which ''economy of scarcity" has placed in the hands of 511 men more income than was received by all the millions of wheat and cotton farmers in the United States. MR. BANKHEAD: I thank the Senator. Ma. LOGAN: Mr. President, will the Senator yield? MR. BANKHEAD: I yield. MR. LOGAN: As to the interesting suggestion of the Senator from Maryland, is it not a fact that if we reduce the price of cotton seriously, instead of that increasing the amount of cotton that will be produced, eventually it will result in there being no cotton to sell at all? Unless the farmers are slaves, or have to produce it, they will cease producing. What the Senator desires is to have the surplus reduced so as to encourage the farmer by raising the price for his cotton? MR. BANKHEAD: That is all. MR. LOGAN: If he does not receive more than the cost of producing the cotton, he will eventually quit producing it, or he ought to do so. MR. BANKHEAD: He will be obliged to quit. MR. LOGAN: Reverting to the question asked by the Senator from North Carolina, as to why it is that some countries in other parts of the world are increasing their production while we are reducing ours, I believe the Senator was diverted from his answer. MR. BANKHEAD: I will come to that. MR. LOGAN: The Senator expects to come to that eventually? MR. BANKHEAD: yes. MR. LOGAN: I believe it is true that in Egypt there is a controlled production of cotton, and always has been. MR. BANKHEAD: Not always, but they had it for two years. MR. LOGAN: They have had it for the last several years? MR. BANKHEAD: yes. 158 The University of Texas Bulletin MR. BAILEY: They have recently withdrawn the control. MR. BANKHEAD: That is true. They got control of their surplus, and that is what we propose to do. MR. BAILEY: I am not criticizing the Senator's policy. What has happened is the result of the recently adopted American policy. But I will wait; I do not want to divert the Senator. The Egyptian cotton situation.-MR. BANKHEAD: While we are on the question of the Egyptian control, though it is a side issue, we might as well clear that up now. As a result of overproduction as compared with the market demand, Egypt, following the crash in 1929, accumulated a great surplus of their long-staple Egyptian cotton. Of course, the price went down, as ours went down, in a disastrous way. In 1931 and in 1932 Egypt did exactly what we undertook to do a year later; by government decree they reduced their acreage the first year, 1931, about 50 per cent, and then in 1932 they increased the acreage slightly less; but for two years there was compulsory control of the quantity of cotton, and they reduced it so materially during those two years of control that they disposed of their burdensome surplus, and then went back last year and the year before to normal production. Of course, everyone who has any connection at all with this cotton program fully understands that we have not embarked upon any payment program of arbitrary limitation and reduction in the size of our cotton crop. We embarked upon the program because of the necessities growing out of the pauperized condition of our farmers with such low prices as a result of the biggest surplus in the history of the worId. We have gone at the program too slowly, according to my judg­ment. I wanted to cut the size of the cotton crop more last year than it was cut. I wanted to reduce the acreage. I wanted to trim the big carry-over down faster, and get through with it more quickly, so that we would be in position, with a supply bearing a reasonable relation to the consumption demand of the world, to go back into a normal cotton production commensurate with the requirements of the world for American cotton. MR. BAILEY: M1''. President, will the Senator permit me to interrupt him again? MR. BANKHEAD: Certainly. MR. BAILEY: I assure the Senator that I am not undertaking to present any opposition to his proposal. MR. BANKHEAD: I proceed on that theory. MR. BAILEY: My information is that the Egyptian Government is encouraging a very great increase in their production; and in order to do that, they are abandoning, to a large extent, the production of long-staple cotton. MR. BANKHEAD: I hope the Senator will permit me to go a little further before I come to foreign conditions. MR. BAILEY: I will propound my question and then wait. MR. BANKHEAD: Very well. MR. BAILEY: How is it, if, with the tremendous world carry-over, the surplus of which the Senator is speaking, Egypt can afford to increase her acreage, that we cannot do so? I should like to get some light on that point. MR. BANKHEAD: I will answer that very briefly now by saying that Egypt is not increasing her production, except by going back to normal production as compared with the two years when they had compulsory production. MR. BAILEY: I think it is agreed that Egypt is undertaking now to reach a production of 800,000 to a 1,000,000 bales, and by way of abandoning the production of long staple, because they can produce a larger poundage of short staple than of long staple. The point of the whole matter is that Egypt is increasing her production, we are decreasing ours, and there is a surplus which causes us to decrease. Why does not that surplus cause them to decrease also? MR. BANKHEAD: As I have already submitted, Egypt is not increas­ing its production. If the Senator will inquire from the Bureau of Economics and get a report recently made by a Mr. Norris, who has just returned from Egypt, where he made an investigation, the Senator will find that Mr. Norris reports that in Egypt there is little additional available acreage to put into cotton, unless they expend about $175,000,000 on irrigation, which would taken them some years to accomplish. Mr. Norris did indicate in the report that they were disposed to turn to short-staple cotton, not for the purpose of increasing the cotton crop, but as a change in the quality, because there is greater demand for the short staple than for the long staple. In other words, no change is contemplated in total production, but merely in the quality of cotton being produced. MR. BAILEY: I will say to the Senator that I have read the pamphlet to which he refers and based my statement on the informa­tion contained in the pamphlet. I will send over to my office and get it. MR. BANKHEAD: Very well. MR. BAILEY: The statement is made in this pamphlet that the Egyptians are abandoning the long staple because they can produce more poundage per acre with the short staple. I think the Senator will agree with me about that. They are increasing the crop, or, as the Senator says, returning to normal. How is it they can return to normal despite the tremendous carry-over, while we cannot? 160 The University of Texas Bulletin MR. BANKHEAD: They got rid of their carry-over, I have under­taken to impress upon the Senator, during their two years of compulsory reduction. MR. BAILEY: What is there peculiar about their carry-over? It is a world carry-over of cotton we are having to deal with, not the excess of Egyptian cotton. MR. BANKHEAD: I assume that the Senator recognizes, I am sure he knows it, though he may have forgotten it for the moment, that practically all the Egyptian cotton is long-staple cotton, for which there is a special demand. We import into this country, after paying a 5 per cent tariff, several hundred thousand bales of Egyptian cotton, because it is used in making specials; and because of that situation, the world supply does not involve them as much as it does us, because their cotton is not in direct competition with our upland grade cotton. MR. BAILEY: Assuming that to be so, this colloquy between the Senator from Alabama and myself is predicated upon the report of the department that Egypt is abandoning the long staple and is producing the short staple. That is the point of the question I have in mind. MR. BANKHEAD: I have stated that they are inclined to go to short staple in lieu of the long staple, not in addition to it. MR. BAILEY: The Senator's last argument was to the effect that they were not competing in the short staple, but had a monopoly in the long staple. MR. BANKHEAD: They were competing when they were under­taking to control the surplus. MR. BAILEY: Very well. Assuming we have gotten this far, they are now moving in the direction of the production of short staple and in the direction of the production of a normal crop. I think the Senator has agreed to that. I come back to my question: In the face of the world carry-over, how is it that they can go to the short staple and return to normal production, while we must continue to reduce our production? That is the question which troubles me. MR. BANKHEAD: Mr. President, to begin with, the price of Amer­ican cotton makes the world price. MR. REYNOLDS: Mr. President-PRESIDING OFFICER (Mr. Guffey in the chair): Does the Senator from Alabama yield to the junior Senator from North Carolina? MR. BANKHEAD: I yield. MR REYNOLDS: Referring to the question of my colleague, the senior Senator from North Carolina, is not the condition to which he refers attributable to the fact that labor is so much cheaper in Egypt and the other costs of producing cotton there are lower than in our southern states? In view of the carry-over, in view of the difficulties we experience with cotton, in view of what the Senator has said in :regaTd to the growing of the short staple and abandoning the long staple, and the increase in Egypt of the production of short staple, will not the Senator agree that the present condition is attributable very largely to the wages of the workers in the cotton fields of Egypt receive in comparison with the wages paid in the United States? MR. BANKHEAD: Undoubtedly, I will say to the Senator, the cheap labor prices in Egypt, India, and Brazil during the last few years, especially when the price of silver has been so low, have been a most disturbing factor in our cotton program, in my judgment, because those conditions have made it possible for them to produce cotton cheaper than they did in former days. Brazil's increased 'Pf"oduction.-MR. REYNOLDS : Mr. President, will the Senator yield? MR. BANKHEAD: I yield. MR. REYNOLDS: I think that is true to a certain degree. Brazil, if my recollection does not fail me, increased its cotton production some sixty-odd per cent during last year. I think reports will show that some other cotton-growing countries also increased their cotton pro­duction last year. That increase is perhaps due, in part, to the price of silver. MR. TYDINGS: Mr. President, will the Senator yield? MR. BANKHEAD: I yield. Ma. TYDINGS: May I ask the Senator from North Carolina to state to what extent Brazil can increase its cotton production? What is the limitation of the extent to which it can increase its cotton production? Ma. LoNG: Brazil can produce more than the world can use. MR. REYNOWS: I will say to the Senator that, as he probably knows, Brazil has been producing cotton for a length of time almost as great as has the United States itself. The probabilities are, according to those who are familiar with the countries of Gentral and South America, that they started growing cotton for commercial purposes even before we started it in the United States. Taking into consideration the tremendous area of Brazil and its climatic condi­tions, which make a large portion of that country peculiarly adapted to raising cotton, I believe that eventually we shall probably find Brazil competing with us to a greater extent than India or Russia or China or Egypt or the Dutch East Indies. Ma. TYDINGS: If the Senator from Alabama will yield to me further, I desire to point out that there is the nub of the problem. First of all, it is conceded on the floor of the Senate that Brazil alone can greatly increase its cotton production. The University of Texas Bulletin MR. BANKHEAD: What is the Senator's remedy to prevent that? MR. TYDINGS: Permit me to finish. It is also conceded on the floor of the Senate that Brazil can produce cotton more cheaply than can the United States. If Brazil can produce more cotton, and she can produce it more cheaply, should we try to keep the price of cotton up so as to encourage her to overproduce, or should we bring the price of cotton down and discourage her from producing? MR. REYNOLDS: That brings up another question. One of the difficulties experienced in the country today is that we can sell cotton in Texas, and it can be shipped aboard Japanese vessels to Japan, they can pay our price for that cotton, they can work that cotton, and they can return it to this country and sell it for less than we can manufacture it, by an extremely large percentage. MR. TYDINGS: Mr. President, will the Senator yield right there? MR. BANKHEAD : I yield. MR. TYDINGS: I do not want to get into an involved discussion of this question, because we are trespassing on the time of our friend from Alabama. MR. BANKHEAD: Yes ; I should like to go ahead. MR. TYDINGS: I should like to make this concluding observation, and then I will answer further in my own time. Cost of cotton production is less in other countries.-We cannot escape the logic that if it costs more to produce cotton in this country than it costs to produce it in other countries, and if we accentuate that cost by increasing its price, we invite the other countries of the world, at a better profit than they have heretofore enjoyed to increase more and more their production of cotton; and if that policy is pursued, the logical end is that eventually they will produce most of the cotton, and we will produce less of the cotton. What are those who are temporarily getting these high prices going to do when the foreign cotton producer has taken their markets? MR. LONG: Mr. President, before the Senator goes further, will he not let me put in a word? MR. BANKHEAD: It depends upon whether or not it is on my side. MR. LONG: It is half on the Senator's side and half against him. MR. BANKHEAD: State that which is on mine, and then I will continue. MR. LONG: I desire to say to the learned Senators that we shall all be voting for a tariff on cotton very soon. Does industry produce at capacity?-MR. BANKHEAD: Mr. Preside11,t, when someone satisfies me that the United States Steel Corporation and General Motors and other motor companies should continue to produce to the full limit of their plants in order to hold the foreign markets which they had before this tariff was started, I shall be willing to consider the suggestion of the Senator from Maryland. But, Mr. President, as I stated before, persons remote from agricul­ture, persons who do not understand the misery in the farm homes of America during the past three or four years, stand here without any knowledge of those conditions, without any deep study of the economics involved, and undertake to advise our people about what they should do with their great financial problem. The Senator from Maryland (Mr. Tydings) intimates that we ought to produce cotton low enough to drive out of competition all the cheap labor in the world. "Why not," he said, "produce enough and sell cheap enough to stop Brazil, stop the East Indians, stop the Mexicans, stop the Egyptians, and drive them out of the world production of cotton by starving them to death with low prices?" I am astonished that a member of the Senate should be standing upon this floor with the credentials of my own Democratic Party announcing any such doctrine as that. The cotton farmers have lost a considerable amount of their foreign business, and the wheat farmers have lost their foreign business to a greater extent than have the cotton farmers. I am astonished that the Senator should stand here and pronounce the doctrine that we must get down to the very bottom with prices for the only cash crop our farmers have to drive the peons of Mexico and of Brazil, in the tropical countries, out of the cotton business. That is such a strange doctrine, Mr. President, that it seems to me no one should want to give it any real serious consideration. MR. BAILEY: Mr. President, may I interrupt the Senator? MR. BANKHEAD: I should like to proceed. MR. BAILEY: But will the Senator just let me call to his attention that the problem which is troubling everyone of us, I am sure, the Senator from Maryland almost as much as the Senator from Alabama, is the one of preserving the American world market. That is our problem. How can we do it under the present circumstances'! If we lose the foreign market when the domestic market takes only 65 to 68 per cent of our cotton production, what happens to the southern farmer? That is the problem which is troubling me. MR. BANKHEAD: Mr. President, when I get through with the domestic phase of this problem, I am going into the foreign end of it, if the Senator will have patience enough to wait. MR. BAILEY: I shall be very happy to do that. The size of the crop and price.-MR. BANKHEAD: Mr. President, I started some time ago, but was diverted, to call attention to the figures which show how directly the size of the crop governs the amount of money which is paid for the cotton crop, the greater part of which comes from foreign countries, new money, Mr. President, new money brought from foreign lands, not solely for the benefit of The University of Texas Bulletin the cotton farmer-for his primary benefit, of course-but to help support the business of the agricultural implement manufacturers of this country, to help support the steel plants of this country-and a considerable percentage of the present steel output is going on the farms-to help support the fertilizer companies of this country, the manufacturers of shoes and of hats and of clothing-in other words, to furnish purchasing power for those things which, in large part, are not produced in the cotton belt. We do not get much money in the cotton belt from anything but cotton, but the quantity of money we get bears directly upon the number of workmen employed in the industrial plants of this country. It bears directly upon the time that those industrial plants are able to operate. Just think of what it means to the country when the cotton belt loses the billion dollars a year which it had been receiving annually for thirteen years! All of it came right back to the indus­trial and financial centers of this country. Just as certainly as the waters from a spring go into the branch, and from the branch to the river, and from the river to the ocean, just so fast as we get more money in the South it goes to the merchants, it goes into the banks, it goes to the wholesalers, it moves on to the manufacturers, and in a short time it is all gone, and our people then are trading upon credit to get supplies actually to survive and carry their families until they can get another return flow of money from cotton. It seems strange to me that objection, and carping objection, should come from some sections of the financial and industrial parts of this country; and that it should come from the City of Baltimore, with its great distributing wholesale houses there, which for years have had their chief customers in the southern states, the cotton states, which houses lost the better part of their business during the years 1931 and 1932 and on into 1933 because the consuming power, the pur­chasing power, of their farmer customers had disappeared. We see Senators stand here and hear them bewail the loss of some portion of our export trade without giving any thought to the great loss in our own domestic market. We do not hear any complaint about that---no; all complaint is directed across the sea. I reminti the representatives of industrialism and of the financial interests of the country, to whom our people pay so much interest and dividends and financial returns, of an old religious song. I do not know whether or not many of them ever attended a revival meeting and heard it, but I want to paraphrase that old song in this way: If you cannot cross the ocean, And foreign lands explore, You can find the markets nearer; You can find them at your door. Mr. President, instead of looking around their own doors, instead of considering that great mass of willing purchasers and consumers, Government Control of Cotton Production 165 we hear able men say to the cotton producers: "Forget it; put your prices down where you cannot buy anything from us; all we look for the cotton farmers to do is to drive off the farm the peon labor of Central and South America, of India and China; that is their job." Now, let me get to the point I have been trying to reach for some time; that is, the effect of the size of the crop. It ought to be of interest to the representatives East and North and all manufacturing and industrial sections of the country, because, sooner or later, they get all the money. We had had years of the boll-weevil scourge; the boll weevil had spread over the South by 1921, and the cotton crop that year was cut down below 8,000,000 bales; in 1922 the crop was 9,000,000 bales; and in 1923 it was 10,000,000 bales. There was an average production for the three years of 9,000,000 bales of cotton. The surplus had gone. Foreign markets were not lost when crop was reduced.-Oh, Mr. President, we did not then lose our foreign market. We had, of course, a reduction in exports. The word went out to the cotton­growing countries all over the world, "America has a pest which will ultimately put its people out of the cotton business; their dominance in cotton production has gone." Did we lose our exports perma­nently? No, Mr. President. As soon as we got control of the boll weevil, and brought our production back to normal, we immediately increased our exports over those of previous years. All foreign countries know that we are going through a temporary reduction program. To listen to some people talk, one would think that foreign countries had just discovered that cotton had been grown in America and that they themselves would proceed to grow some. Since the days of the Civil War, when the embargoes upon cotton and the absence from the farm of the men put the price of cotton above $1 a pound, every foreign country that had suitable soil and climate has been endeavoring, from year to year, to produce all the cotton it could economically produce and sell in competition with the superior grades and staple of American cotton. In 1923, after the surplus had disappeared, we produced 10,000,000 bales of cotton, and the farmers received an average price 28.69 cents a pound. The total sum paid to the farmers for their lint cotton was $1,454,000,000. The next year the size of the crop increased by three and one-half million bales. We began to get better control of the boll weevil. The crop totaled 13,600,000 bales and the price fell from 28 % cents to approximately 23 cents, a 6-cent reduction as a result of the increase of three and a half million bales of cotton. In 1925 the crop again was increased two and a half million bales, the total being 16,100,000 bales. The price dropped down from 23 cents to 19 ~ cents. The total amount received by the farmers was approximately the same, $1,570,000,000. For 5,000,000 bales more The University of Texas Bulletin of cotton than in 1923 the farmers received about the same amount of money. Then came 1926, regarded generally as the best business year in all that cycle which followed the World War, the year to which economists have pointed as the ideal price year. Then purchasing power was strong; consumption was as strong as ever, not only in America, but abroad; the prices of everything the farmers bought were high, right at the peak. There was no depression, no dis­turbance, nothing to bring about a change in the price of cotton, except one thing, and that was the supply. That year, induced by the rising tide of prices, by the complete control of the boll weevil, our farmers planted the largest acreage to cotton in our history, nearly 48,000,000 acres. They produced 18,000,000 bales of cotton, the largest crop known to this country. In that wonderful year of wonderful business in America and abroad the price fell from 19 % cents to 12 % cents a pound. No one can say that was due to a depression; no one can say that was due to a reduction in consumption. It was due solely to overproduction beyond the consumptive requirements of the world. For that crop of 18,000,000 bales our farmers received only $1,120,000,000. In other words, from a crop 8,000,000 bales more than was produced in 1923, when the supply was adjusted to world requirements, 8,000,000 bales more, with all the additional labor involved, with all the additional expense involved, with certainly a better business year in 1926 than in 1923, which was so soon after the deflation of 1920 and 1921, the farmers received for that 8,000,000 bales more of cotton $200,000,000 less than they received for the 10,000,000-bale crop. MR. NORRIS: M"r. President, will the Senator yield there? MR. BANKHEAD: Gladly. Large crop--and reduced prices.-MR. NORRIS: I wish the Senator would tell us how much of a reduction per pound that was; how much did the market go down per pound of cotton in 1926 on account of that big crop? MR. BANKHEAD: It went down from 19.59 cents average for 1926 to 12.47 cents for 1926, a reduction a little in excess of 7 cents a pound. MR. NORRIS: And that resulted, although the farmers produced a bigger crop, in their getting less money? Less money for more coUon.-MR. BANKHEAD: Much less; more than $200,000,000 less. Now, let me take 1927. The years 1926 and 1927 were almost as alike as two peas, so far as business conditions were concerned. In 1927, as the result of that low price, a smaller crop was produced; the crop dropped down to 13,000,000 bales, a 5,000,000-bale reduction. The price jumped up to 20 cents a pound, and the farmers got $1,300,000,000. In other words, they received about $200,000,000 more in 1927 than in the preceding year for 5,000,000 less bales of cotton. Government Control of Cotton Production 167 MR. FLETCHER: Mr. President, the Senator does not mean that the farmer got 20 cents a pound for his cotton in that year, does he? MR. BANKHEADS That was the average farm price, as computed by the Bureau in 1927. Mr. President, it thus appears that it is in the interest, not only of agriculture--and it does not apply to cotton alone, although I am dealing only with cotton-but it is to the interest of everybody in this country, not only in the agricultural South but the farmers every­where and those engaged in industry and :finance and everyone else, for the cotton growers to get a fair living price for their cotton. The figures I have just read covering those six years of uneventful, unchanging business conditions tell the tale and demonstrate that the amount of money the farmers get for their crop is directly controlled by the relation of the supply to the demand. The exports problem discussed.-Now, let me discuss, briefly, the subject of the export business. In the first place, I assert that there is an undue alarm about the loss of exports in cotton. It is dis­turbing, of course, but the facts are not properly understood by the public, as they have been misrepresented and a wrong conclusion has been drawn. Our normal exports of American cotton for a 10-year average were a little over 7,000,000 bales. That is the 10-year average we have been exporting. When the price of cotton was very low foreign spinners and foreign cotton merchants accumulated an unusual supply of American cotton. In 1932, when the price of cotton averaged about 5% cents a pound, there was in foreign countries-and these are Government :figures-an accumulation of 3,439,000 bales on the first day of August when the new crop was coming on the market; in other words, about a 6-month normal supply based on the 10-year average of consumption of American cotton in foreign countries. In 1933 the accumulated stock was increased to 3,537,000 bales. By reason of the increase in the price of cotton, in 1933 and early in 1934, the stock decreased, but on the first day of August, 1934, when the cotton crop was entering the market, they had 2,859,000 bales of American cotton in foreign countries. While very greatly decreased under the preceding years, the exports up to March 1 were 3,250,000 bales. In other words, with the supply of cotton on hand on the first of August and the exports made this year, with four months yet to go in the current cotton year, they have had a supply of American cotton on hand of 6,109,000 bales, with a 10-year average consumption in foreign countries of a little in excess of 7,000,000 bales. The exports do not in any true sense reflect the consumption of American cotton in foreign countries. They have taken out of these stocks of shipped cotton, grabbed up and accumulated there in unusual quantities; they have been eating out of that store of cotton rather The University of Texas Bulletin than shipping currently as they had done theretofore. With four months yet to go in this cotton year, if they continue at the same rate of consumption of American cotton, there will not be a very large reduction in the consumption of American cotton abroad notwith· standing the very material reduction in exports. For the eight months, while there has been a reduction in exports of over 2,000,000 bales, the reduction in consumption has been only about 700,000 bales. Foreign cotton acreage figures not available.-There has been some discussion about an increase in acreage planted to cotton in foreign countries. The figures of the acreage for 1934-35 are not yet avail­able. Nobody has the figures. Nobody claims to have the figures, neither the Bureau of Economics with all its reporting agencies nor the New York Cotton Exchange service with whatever agencies it has. In other words, in the foreign countries they do not have the up-to-date methods of reporting acreage that we have through our trained agencies in this country. The only real test is production, so far as accurate figures are available. No material increase in 1934 foreign production.-! assert, however, upon information given to me by the Bureau of Economics, that there has been no material increase in planted acreage in 1934 as compared with 1933 in any cotton-growing country in the world except Brazil. Moreover, the peak of acreage planted to cotton in the world was reached in the 1925-26 crop. After eight or nine years of decreased acreage, in 1933 the acreage was increased about that of 1925-26. The acreage increase in the United States that year was in higher percentage than it was in all foreign countries. Brazil's 'JWOduction.-As a result of high prices about that time every country converted to cotton planting all the acreage that was suitable for it that could be spared from food production, except alone Brazil. China has increased somewhat. During the last few years, not particularly this year, they have had an increasing trend, it is said, because a large area previously planted to cotton was not reported. They did not have the facilities for exporting it and it was not commercially used. China is not a commercial exporting country. It exports practically no cotton. Russia raised very little cotton.-There has been an increase, of course, in Russia since their five-year plan was put into operation; but our agencies, after a field survey, report that they have little, if any, additional acreage which they can put to cotton that is suitable for economical cotton production. Because of the cost of irrigation on most of their cotton lands now, their costs are relatively high com­pared with the costs of other countries. Egypt and India decreased production last year.-Egypt and India are our two chief competitors in the matter of the exportation of cotton. Last year, judging by production, which gives us the only available figures, there was a decrease in cotton production not only in Egypt and in India, but in all foreign countries combined, including Brazil, with its large increase. All of them put together had slightly in excess of 2 per cent less cotton produced last year than was produced in 1933. Still we hear all this alarm and all this great scare, as if foreign countries had just discovered the value of cotton. They have been increasing steadily, just as America has been increas­ing steadily over the years. There is no way to prevent it. They are not now engaged in a production race. In 1933 they increased their acreage 10 per cent in excess of their average acreage for ten years, but that increase was in no sense due to our cotton program. We did not have any cotton program for plow-up of excess until the cotton in all these countries had been planted and was in a state of cultivation like ours. They had no information of the restriction program, and therefore, of necessity, their increase was not the result of the control of cotton production in this country. I have just presented a statement showing that last year, with knowledge of the cotton-production control, their production was less than the preceding year. MR. BAILEY: Mr. President-PRESIDING OFFICER (Mr. Pope in the chair) : Does the Senator from Alabama yield to the Senator from North Carolina? MR. BANKHEAD: yes; I yield. MR. BAILEY: The Senator relates his statistics to one year. I have before me the report of the United States Department of Agriculture, Cotton Leaflet No. 3, issued October 25, 1934, which gives the foreign cotton production as follows: 1920--21, 7 ,671,000 bales 1921-22, 7,400,000 bales And it runs from that time-1921-22-to 1933--34, 13,053,000 bales. I am unwilling to consider the figures on the basis of one year. I think we should base our argument on the fact that since 1920 the foreign production has increased from 7 ,671,000 bales to 13,053,000 bales in eleven years. MR. BANKHEAD: Yes; and America has increased her production in about the same ratio. MR. BAILEY: No; I beg the Senator's pardon. MR. BANKHEAD: I do not mean compared with our control years, 1933 and 1934. MR. BAILEY: No; in 1920--21 the American production was 13,429,000 bales. In 1933-34 the American production was 13,047,000 bales, which is practically the same. Those are the statistics of the Agricultural Department, and they are the statistics with which we must deal. MR. BANKHEAD: Mr. President, the Senator evidently does not get my point. The University of Texas Bulletin MR. BAILEY: But does the Senator get the force of these statistics from the Department of Agriculture? MR. BANKHEAD: Undoubtedly, foreign production has increased since the days when the war started. The Senator went back and took his base before that time. MR. BAILEY: It has increased from 7 ,600,000 bales to 13,000,000 bales. MR. BANKHEAD: I get the Senator's statement. The point I am making is that the assault on the cotton-control program by the Senator from Maryland and others on the theory that it is respon­sible for the increase in foreign growth is not supported by the facts. The Senator from North Carolina has just proven the point I have in mind. We are not debating this subject in a controversial way. We are trying to get at the facts, both of us being friends of the cotton farmer. The Senator has just pointed out, and correctly, that there has been a trend toward increase in foreign production of cotton since the end of the World War; but that trend had begun before that time, and it was not a steady increase. The principal part of that increase was in 1933-34, and our Bureau reports that it was due not so much to increase in acreage as to unusually good weather conditions through the cotton-growing countries. MR. BAILEY: I am sure the Senator did not mean to suggest that I had made such an assault. MR. BANKHEAD: No; I said we were engaging in this debate as joint friends of the cotton farmer. MR. BAILEY: In January, when the matter came up, I took pains to point out that the increase in foreign production related to a time far back of the control program. MR. BANKHEAD: I agree to that. MR. BAILEY: The Senator will bear witness to that. MR. BANKHEAD: Oh, to be sure; and I distinctly stated that we were working toward the same end, to develop the facts and deal with the program, both of us as friends of the cotton grower. I clearly understood the motive of the Senator; but I was glad to have a statement made by him supporting the position I had taken on the subject. Mr. President, cotton is not the only commodity which is in trouble about its exports. I do not know why a lot of these people who do not study cotton much and who never get any cotton money in their pockets, desire to pick on cotton. They seem to think it is a play­thing to be picked on here all the time. That is the reason why I am speaking this morning. I am getting a little tfred of hearing so many statements made by some people who, I know, do not know anything about cotton. In the first place, our cotton people under­stand their problem. They are going through a temporary reduction Government Control of Cotton Production 171 program; but, if I can have my way, I will say to all concerned that I would enact permanent legislation under which, year after year, the cotton farmers could adjust the size of their crop to the consumptive demands of the worId. Loss of foreign markets?-If we are losing our export business­and we are losing a great deal of it in all agricultural and industrial commodities-if our markets are disappearing, I desire to ask in the name of common sense and reason why we should not boldly, as brave business men, in the interest of our constituents, meet that situation and deal with it, if we can, just as business men have always dealt with their problems of readjustment to fit changing conditions in their respective businesses? Loss of foreign ma;rkets not due to price or supply.-! have no thought of any arbitrary price for cotton. The Senator from Mary­land talks about reducing the present price. Our export trade in cotton has not shrunk or been reduced as a result either of supply or of the price. On the first day of August, when the new crop starts to the market, we shall have a supply of American cotton of between eight and a half and nine million bales to furnish an apparent world consumption of around twelve million bales. So no one can insist that as a result of our two years' effort to reduce the burden­some carry-over we have reduced the supply to a point which endangers a reasonable price for cotton. Fair relation between supply and demand needed.-The truth is that in the prewar period, when we had a parity price for cotton as compared with the things which the cotton farmer bought, 12 % cents, we had during those five years an average carry-over of 3,200,000 bales-plenty of margin to meet any change in the size of the crop, due to weather conditions, whichever took place in the history of this country. With that fair relation of supply to demand, we secured parity prices. How can any thoughful person expect us to receive parity prices when we still have, with the reducing consumption, almost a year's supply to meet the requirements of the mills of the world using American cotton? So the supply is there. The distinguished Senator from Maryland seems to have the thought that the present price of cotton is an obstruction to the export of our cotton; and he, as I understood him, wants America today to go back to the old gold-standard currency. I call his attention to the fact that France and Italy and Germany, old gold-standard countries which were formerly among our very largest consumers of American cotton, have almost discontinued the use of our cotton. England, a former large customer, is now securing her cotton from the cheap labor of India and Egypt, two silver-using countries controlled by her. Under her trade agreements with her colonies, England has displaced American cotton with Egyptian and Indian cotton. France and Italy and Germany, as consumers of our The University of Texas Bulletin cotton, have almost disappeared from the map, due, as we are told not only by the economists in the Department of Agriculture, but by representatives of those countries who have been in America trying to buy cotton, to our anti-dumping laws, which do not fit the condi­tions which they fitted at the time the laws were passed. Devaluation of dollar and fo1reign trade.-Now, by virtue of our devaluation of the gold dollar, our taking approximately 40 per cent out of it, those countries still on the old gold standard have as measured by weight of gold, prices about 40 per cent higher than we have. So when they undertake to ship goods to this country in payment of cotton as they have heretofore done--of course, in the old days they shipped more gold; now they have not the gold; now they cannot spare the gold-they are left in a position, under the change in the currency situation which has taken them away from us as customers of cotton; and our raw cotton trade, instead of going to our old cus­tomers, is now largely going to Japan. Foreigners can't secure American dollars.-What has cotton control to do with that? A representative of one of those countries stayed here for several months, and came and talked to me, and talked to different agencies of the Government; and in those conversations he stated-he stated it positively to me, and I heard that he made the same statement to others-that they would not object to a price of 15 cents a pound for cotton. Their problem was securing American dollars; and as a result of the difference in their gold-standard currency and ours they could not sell here cheaper than they sold at home, although they were willing to do it in order to get our cotton; but they could not do it without violating, as construed-a technical violation, if you please--the anti-dumping law. MR. LONG: Mr. President, will the Senator yield? PRESIDING OFFICER: Does the Senator from Alabama yield to the Senator from Louisiana? MR. BANKHEAD: yes. MR. LONG: The Senator says the great trouble with these foreign countries is getting American dollars. What we needed was a free­silver law in order to 09en up the trade with India and China. What we needed was a currency or money which was more universal. Is not that one of our main troubles? MR. BANKHEAD: Mr. Presiilent, while I had not intended to digress into the currency question, I may surprise the Senator from Louisiana with the statement that I am in full accord with that view. MR. LONG: Fine! Foreign competitors are on the silver standard.-MR. BANKHEAD: All the cotton-producing countries competing with the United States are really on the silver standard-Mexico, China, India, Brazil. Whether they are theoretically upon that standard or not, it is their only money; it is the money their people are used to. It is the money which circulates among them, and with silver cheap they can pro­duce more cheaply than can those countries which have a higher­valued dollar. While I live probably 2,000 miles from a silver mine, it is my humble judgment that instead of starving the American farmers into low prices our country could render no better service than to raise the cost of production of cotton in those countries by bringing about an increase in the price of silver. I think one of the most beneficial things we could do in a proper and legitimate way in carrying out the constitutional functions given to Congress would be putting the costs of production of our com­petitors nearer than they are now to our own cost of production, all of which grows out of the very low price of silver. As a result of the interruption of the Senator from Louisiana, I have digressed to say this much; but I say it with great earnestness and sincerity. Thirteen-cent cotton and increased exports.-Mr. President, I have occupied the floor longer than I had expected to, due, in large part, to the interruptions and colloquies. But the price of cotton is about 11 cents, and some people want it to go still lower. The fact is that last year, when cotton was selling at 13 cents a pound, we exported more cotton than we have been exporting since the price has gone down. We are not troubled in our exports from the standpoint of the price of our cotton. MR. BAILEY: Mr. President, may I interrupt the Senator on that point? MR. BANKHEAD: Certainly. MR. BAILEY: As I understand, it is the world price that relates itself to and governs exports, and the world price is the gold price; and the present gold price of a pound of cotton is not more than 61h cents. So the argument that cotton is selling high could not possibly agree with the conclusions which are intended to be derived from that argument. Is not that correct? MR. BANKHEAD: That is correct. I am glad to have the confirma­tion of the Senator. MR. BAILEY: The 61h-cent cotton of today compares with 11% cents in American money, but the world price of cotton has changed about a cent. The Senator from Alabama said the price was 51h cents in 1932 and 61h cents now. Is that approximately correct? MR. BANKHEAD: That is true, so far as gold is concerned. MR. BAILEY: The American price of cotton is due to the valuation of the dollar, and because we consider the price in terms of American dollars rather than in terms of gold, but prior to the devaluation we always spoke of the price of cotton in terms of the gold price. 174 The University of Texas Bnlletin MR. BANKHEAD: That is correct. I am glad to have the Senator's statement in that regard. Instead of the present price of cotton being reduced, it should be increased to the parity price of 15 cents a pound. Mr. President, as I stated, we shipped more cotton when the price was higher than we do now. We hear no objection from prospective buyers on account of the price, because, as indicated by the able Senator from North Carolina, the price is around 6 cents a pound as measured in gold, the medium of foreign exchange. Everything farmers buy has gone up. Here we have an argument for lowering the prices of what they produce and sell, when nobody interested in this subject, and who has gone into it, insists that the present price of cotton, 4 cents below parity, has anything to do with the loss of our exports. Low wheat price and loss of exports.-! should like to have someone tell me, the Senator from Maryland, or anyone else who is making this argument, why our country lost practically all of its exports of wheat in 1932. We had a carry-one of 360,000,000 bushels, the largest in the history of this country, and the price went down to 35 cents a bushel. In the face of that low price for wheat-and this was under the former administration-and without any suggestion of a control program or a reduction in the size of the crop, our export business simply disappeared. I had hoped the junior Senator from Virginia (Mr. Byrd) would be here. I want someone to tell me why we have lost nearly all of our business in the export of apples. Heretofore that comprised one of the largest exports of agricultural commodities. MR. TYDINGS: Mr. Prt3sident­ PRESIDING OFFICER (Mr. Pope in the chair): Does the Senator from Alabama yield to the Senator from Maryland? MR. BANKHEAD: I yield. MR. TYDINGS: I think I can answer, in part, in reference to apples. MR. BANKHEAD: I yield to the Senator. MR. TYDINGS: As a matter of fact, we have a favorable trade balance with France. France is one of the largest importers of American apples. So much gold was being drained from France to pay for her unfavorable balance of trade with the United States that the French Government not only put a tariff on apples, but they put an embargo on apples, so that even if we were willing to ship apples to France, after a certain amount of shipments had gone into that country, no additional apples could be shipped there. The reason was obvious. It was because we were pursuing the philosophy, ever since the World War, when our condition changed from what it was before the war, that we could sell to countries without buying from them. That cannot be done. MR. BANKHEAD: I am in full accord with the statement of the Senator from Maryland; but we have a clear-cut statement from the Senator from Maryland also that we did not lose our exports of apples on account of any control or reduction program, or on account of the price of apples. MR. TYDINGS: I must take issue with the Senator. When we adopt high tariffs, that is in effect a control of all exports. MR. BANKHEAD: I am talking about a control of production. That is the program the Senator and those who agree with him are criticizing. If we sell-we must buy!-MR. TYDINGS: When we control imports, as we do indirectly through the tariff, we automatically control the exports, because of the control of imports. The two things go hand in hand. No nation in the world can sell to another nation unless that nation buys something. Money is only an incident to the transaction, a yardstick, a measurement; that is all. What really happens is that nations swap goods, and only the difference, the balance of trade, as it is called, is paid in money. What we are really doing is swapping products, and consequently we cannot export produ<."ts unless we import products. If we were to bar all importations into this country whatsoever, our exports would fall over night to almost the vanishing point. MR. BANKHEAD: The Senator from Maryland cannot provoke any argument from me on that subject. I think we are in full accord in our views about the necessity of turning from our present nationalistic spirit. But, as I have heretofore insisted, with his splendid intelli­gence, with his knowledge of the cause of the loss of exports in wheat, and apples, and other things, the Senator must concede, as a straight shooter, that the argument that is being made that cotton growers alone of all who produce agricultural commodities and all industrial commodities have lost their foreign trade as a result of a program of control, or the operations of the Agricultural Adjustment Administration cannot be sustained. The bad effects of tariffs.-The Senator knows, and he has just stated it, and I agree with him, that our problem is not a problem of the adjustment of supply to demand, but our problem is the trade wars going on throughout the world-the tariff-rate barriers. I know the Senator from Louisiana does not like that and does not agree with me in that statement. I agreed with him once, but I differ with him in this. The tariff-rate barriers, the quotas, the trade· agreements between different nations, have brought down our commerce, indus­trially and agriculturally; and, as I suggested once before, we have that condition confronting us. By action of the American Congress alone, as I see it, we are not able to restore the former free-trade relations with the nations of the world. 176 The University of Texas Bulletin I know that we precipitated the tariff war; I know that we brought about retaliatory tariff measures as a result of our former tarifl' program. There is no sort of doubt of that in my mind. But that has been done. We did it. America did it. We provoked the battle. The foreign countries have been fighting us ever since. They are in the ring now, nearly all those nations, ready to carry forward a masterly battle with us and with other nations. Having provoked them into the ring, where they now are, with their arms up ready to hit, and have been hitting, I say that the American Congress, although it started the row, cannot afford to stand there now and drop its hands and permit the other countries to strike mortal blows. Reciprocal trade agreements as a remedy.-! do not know what we Americans can do except what we are trying to do through the reciprocal trade agreements. I do not think the Senator from Mary­land (Mr. Tydings) would advocate pulling down our tariff rates in any general way, and stand by and see our country flooded with import! and at the same time get no advantages by trading and shipping our goods into the countries which are shipping theirs here. We have that serious problem and that is what we have to deal with. It will take patience, it will take policy, it will take great diplomacy, and it certainly will require great statesmanship; but, so long as we have that condition over which we have no control, I appeal to the common sense, judgment, and the fairness of my colleagues here · whether we should recognize that situation in the business of agri­culture, or blindly go about the old system of uncontrolled and unlimited production, with full knowledge that the markets are gone. We must deal 1with present facts.-1 submit, instead of abandoning this program because of the loss of exports and the loss of markets, knowing that it is because of the tariff barriers and other causes I have mentioned, that the fair and just thing to do is to meet the situation and deal with it as the facts require, regardless of any theories or formulas abstract in their nature. We have got to deal with a condition which confronts us; we have to deal with facts which confront us. If our markets have diminished, we ought to do as the steel corporation does and as the automobile industry does-recognize the situation and readjust accordingly. That is more important when we are losing markets than it is when we have got steady markets or gaining markets. That is our problem, Mr. President. I have spoken longer than I had intended. I appreciate the indulgence of those who have listened. I was anxious, at least, that certain phases of this problem should be brought to the attention of members of the Senate. A.A.A. PROGRAM IS UPHELD BY 6 TO 1 OVERWHELMING APPROVAL IS GIVEN PLANS (From Austin American., June 15, 1985.) Washington, June 14.-(UP)-Agricultural Adjustment Adminis­tration programs were upheld by vote of more than 6 to 1 in the four referenda conducted in the last eight months, the farm agency reported Friday. A total of 2,918,678 votes were cast, 2,511,109 for ·continuance of the control programs and 407 ,983 against. Of 535,690 votes cast in the corn-hog referendoum, 37 4,585 favored the A.A.A. Cotton growers numbering 1,521,887 voted on continuance of the Bankhead Act, 1,361,347 favoring it. 13-CENT COTTON SEEN FOR 1935 DRAIN ON AMERICAN POOL FORESEEN BY BANKHEAD (From Austin America.n., June 15.) Washington, June 14.-(AP)-Cotton at 13 cents a pound this year was foreseen Friday by Senator Bankhead (D) of Alabama in an analysis of the world cotton situation. The world crop, he said, promised to be sufficiently short to cause a drain on American pool cotton, and he predicted farmers owning the pool options "can easily be organized under existing circumstances to hold their cotton for 13 cents a pound." Bankhead stated also that the cotton on which farmers have obtained 12-cent loans under the government price peg will not move until the 13-cent level is reached. Possibilities of a short world crop were linked by the Alabamian with a "ocrnered" carry-over and low stocks in American mills as the basis for his prediction of higher prices for the lint. III. IS THE PROPOSED PLAN PRACTICABLE~ STATEMENT OF HENRY A. WALLACE, SECRETARY OF AGRICULTURE (Thursday, March 7, 1935. United States Senate, Committee on Agriculture and Forestry, Washington, D. C.) . SECRETARY WALLACE: In appearing before your committee today in support of the amendments to the Agricultural Adjustment Act as proposed in the bill introduced in the Senate by your chairman, Senator Smith, I wish to speak briefly concerning some general principles involved. I will rely upon the administrator of the act, Mr. Chester C. Davis, for a detailed explanation of the amendments. themselves. These amendments are intended to strengthen and reenforce the Adjustment Act. They cannot be considered except as part of the act, and its operation. A bill for the econoniic rights of the farmer.-The act has been called a "Magna Carta" for agriculture. The policy laid down in the act by Congress, that farm products should have a fair exchange value in terms of the goods farmers buy, constitutes a bill of economic rights for the farmers of the United States. Certain methods by which farmers might achieve these rights were specified in the act. Experience has shown ways in which the act needs to be refined in order to utilize these methods effectively. The real issue in the bill under consideration is whether the Agricultural Adjustment Act is to continue to be recognized as an instrument for achieving the farmers' rights, and refined as may be necessary, or whether the Nation is to return to the former policy of abandoning agriculture to the ruthless forces of individualism, no matter how cruelly these forces may press down upon the individual farmer. Ruthless individualism for the farmer only?-If I may interject at this point, Senator, there are some apparently who would abandon the farmer to the ruthless forces of individualism, while retaining for certain other groups in our society the privilege of utilizing the centralizing power of government as has been possible for many years past in this Nation. There are two important ways in which agriculture is at an acute disadvantage unless it continues to have the opportunity for coopera­tive action with the aid of the Government. The Administration desires increase in exp-orts.-One is the fact that export markets are still largely closed to our farm products. This fact is not new to the members of this committee. We, in the Department of Agriculture, are reminded of it almost daily, as we come up against the buzz saw of iron necessity. For two years we have been working with farmers on production adjustment programs which were made imperative by the lack of these export markets. While efforts are being made by this Administration to restore foreign trade, progress has been retarded by resistance of tariff beneficiaries, who are unwilling to meet competition from outside our borders. As a nation we cannot escape the fact that in order to export we must import. Every amendment in this bill is related, directly or indirectly, to the situation brought about by loss of our export markets. Everyone knows that wheat, cotton, pork, tobacco, and apples are on an export basis. Not everyone realizes that beef, butter, poultry products, and miscellaneous fruits and vegetables are also on an export basis, in that their prices are inevitably related to the prices of those farm products sold in world markets. . . . Industry controls production and price-why not agricuUure?-The second disadvantage from which agriculture would suffer without cooperative action through government aid, results from the control of both production and price by industry. Industry has reduced production.-Like the export situation, the contrast between agricultural production and prices on one hand, and industrial production and prices on the other, has been repeatedly called to public attention. While agriculture has been maintaining its production even at the sacrifice of price, much of industry has maintained price even at the sacrifice of production, with the resulting unemployment of 10,000,000 workers. In effect, agriculture has been exchanging virtually its full volume of production for only a fraction of the normal volume of goods made available to it by industry. Price-and production-control practices by a large portion of industry has forced agriculture to adopt similar methods in self-defense. But I would like to point out that the restrictions farmers have imposed upon their own production are slight in comparison with the drastic reductions carried out by industry. Farmers continue to use their entire productive plant, but have shifted a portion of it from export crops into other crops, while industry has entirely closed down many factories. The proposed amendments to the Adjustment Act help to give agriculture a chance to operate on somewhere near even terms with the rest of the economic system. If I may interject there again, the reduction as carried on by agriculture was in the crops or in the products where there was a tremendous carry-over. You remember when we began the adjustment in cotton, there was nearly three times the normal carry-over on August 1, 1933. When we began in wheat, there was more than three times the normal carry-over as of July 1, 1933. There were large supplies of live stock, and it was true of hogs and lard. . . . Control of production is vital to farmer.-Perhaps the only way for farmers to realize how vulnerable their present prices are would be for them to abandon all their present controls and let nature take its course. I'm afraid that if this happened their awakening would be rude indeed. And no branch of agriculture in this kind of situation is justified in assuming that it would be immune from farm price difficulties. As I indicated a few minutes ago, the prices of all agricultural products are more or less tied together. When part of agriculture goes down, its fall tends to pull down the rest. . . . The University of Texas Bulletin EXTRACT FROM SPEECH By DR. R. H. MONTGOMERY Professor of Economics, University of Texas Delivered, 1935 Industry reduced its production during the depression while cigri­culture, without control, increased its output!-. . . I want to take up two or three specific cases of that: When Roosevelt came in, the manufacturing industry was running 35 per cent capacity. That means that 65 per cent of all factories were closed on March 1, 1933. It doesn't take any argument to prove that there is something wrong, something abominably silly, in a system that only runs 35 per cent of its machinery, but that's the situation. You can see what that does to agriculture. Agriculture during the depression has increased its production 4 per cent. Between 1929 and 1933 the five major crops, cotton, wheat, etc., had increased production 4 per cent. Manu­facturing cut down 65 per cent. In 1929 it took ten bales of cotton to buy a Ford car. In 1933 it took fourteen bales, because the farmers are still producing fifteen million bales of cotton and Henry Ford cut his production three-fourths. We call it elasticity and inelasticity of demand and supply. What we really mean is that any large industry owned by a few investment bankers in New York can be, and is, controlled. By that we mean that when we cannot sell eight million cars in a year at $700 and up we will cut down to four million. Here's the farmer who cannot do anything about that. There is a mortgage on his farm that was placed there when cotton was 20 cents a pound; now it is 5 cents. They not only cannot cut down, they have got to raise more, which gets them in deeper. There isn't a cotton farmer who doesn't know that, so far as income is concerned, he is better off if the South only produces ten million bales instead of fifteen. But it isn't better for him to produce ten instead of fifteen bales when everybody else is planting fifteen. So all he can do is produce all he can, and he goes broke, and as a result he can't buy a Ford car because manufacturers have cut down and it takes more cotton to buy the thing he has to buy. Capacity production, or restricted production, sher capita income.-Centuries of human aspiration and cultural achievement have no meaning for these poor folk in a region with the lowest per capita income in the United States. Racial prejudice requires separate schools and separate churches. Com­munities that could scarcely afford to maintain one decent school or church are forced to maintain two-more in the case of churches laecause of denominational differences. The high percentage of illit­eracy is easily understandable. Social e11il,s of mMWtonous life.-Cotton cultivation is dreary, mcmoi;onous and back-breaking. Those who follow it have, however, oertain months of idleness, or comparative idleness. Yet they have 118ither the individual nor the community resources for enriching lm&ure. Life affords few escapes from drudgery or boredom except Jdrhly emotional evangelism, liquor and sex. Crimes of violence aboland, the homicide rate is high and the cotton country furnishes a wholly disproportionate share of those lynchings which are our ..tional shame and ignominy. Pla:n.tation owner receives most of income.-Behind all this are Item economic facts. The money income from cotton varies from $10 to $60 an acre, of which the plantation owner gets the lion's share. fte income from a bale of cotton runs from $25 to $200. Today cotton at 12 cent.s a pound brings $60 a bale. It takes about a month for a picker to pick enough seed cotton to make a bale. A share-cropper and his family rarely handle more than 20 or 30 acres and, especially in the old South, it is remarkably good land that produces half a bale to an acre. The average income for cotton tenants in Eastern Arkansas was $260 in 1933; of this total $50 was the estimated rental value of the huts in which the families lived. A church social survey of 112 negro tenants in Alabama made during 1931, showed that 60 tenants ended the year in debt to the planter, 20 had a yearly cash income ranging from $1 to $50, 40 between $50 and $100, and only 2 had between '1GO and $150. The eulogists of "white supremacy" may claim that this situa­tion can be true only of the Negro. As a matter of fact, as Dr. Rupert B. Vance tells us, "there are over 1,091,000 white tenants in the South and 698,000 colored tenants." Negro tenants in the South actually decreased by some 2,000 during the decade of the Twenties, The Uni1,ersUy of Texas Bulletin while white tenants increased by more than 200,000. Over half the Negro tenants are share-croppers who own nothing, who are "fur­nished," that is, they are carried through the year by the plantation owner and form the most depressed class of cotton workers except the casual day laborers. One-third of the white tenant farmers fall in the same class; the rest are either cash tenants or what are known as share-renting tenants, some of whom in turn farm out parts of their land to still poorer share-croppers. Does the landowner assume risks ?-There is a familiar argument that the landowner performs a social function because he assumes risks that the cotton tenants either cannot or will not assume. Dr. Vance has recently written: "This argument at present comes with a savor of unconscious irony from large la,.1downers in the South. The truth of the matter is that the government has assumed most of the risks of the landowners and thrown them on the tenant. The risk of overproduction is met by fixed quotas with rent to the land­owner for his retired lands. These benefits take little, if any, account of labor's previous interest in the crop. The tenant's share of rental is pitifully small or nil, and on him is thrown the brunt of reduced acreage. The risk of price fluctuation is met by the government's policy of pegging prices by loans at, say, ten or twelve cents per pound on cotton. Though its Intermediate Production Credit Cor­poration the Farm Credit Administration offers the landowner pro­duction credit at 41h to 61h per cent interest. The tenant cannot secure this cheap credit unless the landlord waives his first lien on the crop. If he refuses to release the crop lien to the governmental agency, the landlord may then secure the loan for all his tenant farms at 41h to 61h per cent and then advance supplies and fur­nishings to his tenants at customary credit prices, 20 to 30 per cent above cash prices. Here again the tenant bears the brunt of the risk. If he can repay, his surplus is wiped out by extortionate credit charges; if he cannot repay, he loses his crop and whatever chattel and work stock he may possess." Is tenant protected?-This statement regarding the relative pro­tection of landlord and tenant under the A.A.A. program requires amplification at two points. The first concerns the nature of the pro­tection given to the tenant with regard to occupancy of land under Section 7 of the contract which was supposedly drawn to protect both the share-cropper and the agricultural laborer. At least four clauses in this section give the unscrupulous landlord loopholes enough to get rid of any tenant he does not want because he regards him as either superfluous or as too likely to stand up for his rights. Since hereto­fore the contracts have been enforced by authorities representing only the land-owning interest, it will be seen how hollow is the protection afforded the tenant and agricultural laborer under this contract. Government Control of Cotton Production 221 It will also be remembered that a rather elaborate plan was worked out for giving to cotton growers a certain parity payment on cotton on hand, grown before 1934. With this payment went a pay­ment to landlords for "rent" of the land on which the cotton was raised. On the basis of the contract provision for the division of this government benefit, the landlord wins against the share-cropper by a ratio of eight to one. The share croppers, therefore, have called this parity payment a "poverty" payment Yet it is only fair to say that the Secretary of Agriculture has recognized the criticism of this parity payment and has promised that new contracts will be better. Here, however, fresh danger arises. Already plantation owners have taken advantage of almost every opportunity to substitute casual day labor for share-cropper labor. The temptation to do this will be increased as the share of the tenants is increased in benefit or parity payments. Thousands driven from cotton fields.-The net result of all this is what one might expect. Unknown thousands have been driven from the cotton fields to join the tragic army of the unemployed in towns and cities. The Dallas News of January 3, 1935, printed a long quotation from a statement by Dr. A. B. Cox, Director o The Uni­versity of Texas Bureau of Business Research, the gist of which is that the demand for seasonal workers has been reduced, with the :result that a great many of them have bP-en thrown on relief rolls. Professor William R. Amberson, of Memphis, a loyal friend of the Dare-cropper, points out that landlords have succeeded in reducing share-croppers to the status of day laborers who earn 75 cents for a thirteen-hour day and are allowed to exist in plantation shacks. Tenant's must organize.-As an answer to this situation, the Southern Tenant Farmers Union came to being in Eastern Arkansas and Western Tennessee. It is an intelligent and courageous effort on the part of these forgotten men to organize for themselves. Its Tery existence is more significant than any reform that might be imposed from above. While in addition there should be political protests, it is not generally realized how difficult it is to vote in the South. Policies and the tenant farmer.-In many southern states, on the plea of maintaining white supremacy, thousands upon thousands of the poorest whites along with Negroes have been disfranchised by poll taxes. It has become the fashion to talk about the "hillbilly" vote which is responsible for Southern statesmanship of the brand of Blease, Bilbo, Heflin or the great Huey Long. Yet Professor Mercer G. Evans writes that of all white persons eligible on the basis of age and citizenship to vote in the 1932 elections, only 24.1 per cent actually exercised the franchise in Alabama, 25.2 per cent in Georgia and 26.7 per cent in Mississippi, as compared with 58 per cent in Wisconsin. Either the masses cannot vote because of the poll tax or they are prevented by their frequent wanderings in search of job or home. Perhaps they have no great faith in voting. This same analysis applies in principle to the vote taken by the Department of Agriculture on the compulsory reduction of cotton acreage. Those who have suffered most from that program were already out or on the way out of the picture. Those who remained had gained something temporarily by the government's policy and the dominant plantation interests had gained a great deal. It is this fact that gives such significance to the efforts to or­ganize both white and colored workers in a union with an intelli­gent program. Of course the growth of the union has aroused bitter opposition. This has been expressed in Arkansas by the eviction of tenants for no crime except belonging to the union, the breaking up of meetings and other acts of intimidation. Organizers have fre­quently been arrested, and one arrest, that of Ward Rodgers, may become a cause celebre. Ward Rodgers, originally a young Methodist preacher, more recently a teacher in the F.E.R.A. workers classes and a volunteer organizer for the Tenant Farmers Union, was sentenced to six months in jail and a $500 fine for "anarchy"-a charge based on a speech made to a mass meeting of share-croppers. Fortunately the fact that the union pursued wise and restrained tactics, while the government sent into the territory an able investigator who was genuinely anxious to find the truth, prevented lynching or violence. Meanwhile, the gov... ernment has held up rental and benefit payments to a few landlords who have been particularly outrageous in evicting tenants belonging to the union. All in all the share-croppers find hope in the situation and are joining the union by the hundred. Protection for share-croppers needed.-Still, the problem of the share-cropper does not permit of any easy solution. Professor Amber­son recommends that the Department of Agriculture should itself create a national agricultural labor board charged with direct responsibility for the protection of share-croppers and agricultural laborers. He adds that labor clauses of new contracts must have the full force of law; that the right of agricultural laborers to organize and bargain collectively should be proclaimed; that the labor of chil­dren under 14 years of age should be forbidden by national statute. There are many children who begin to pick cotton at the age of 5, to chop or hoe cotton at 10, for as little as 3 cents an hour. The union asks 20 <;ents an hour for day laborers. Tenant system must be aboliBhed.-All these things would help, but, as Professor Amberson points out, ''ultimately the plantation system must be liquidated." He is in hearty agreement with Dr. J, H. Dillard when he declares that there can be no decent civilization until the whole tenant system is abolished. But a substitute for the plantation system is another matter. Dr. Vance seems to favor a Government Control of Cotton Production 223 system of peasant proprietorship in which a great many of the peas­ant holdings will have to be turned from cotton to diversified farming. But at this stage of our economic and social evolution it is doubtful whether an economy of abundance can be realized on the basis of any sort of subsidized peasant proprietorship. Socialization of farming as a remedy.-The cultivation of cotton, especially with the advent of machinery, will probably require large farms for successful operation. The ultimate title to those farms should be in society. Security of tenure should be given to those who live and work on the farms and they should be organized and trained in cooperatives. All of which is, of course, easier said than done. Indeed, any realistic approach to the problem of the cotton farmer makes one realize afresh how difficult is all piecemeal planning. A probable solution of this problem involves a great increase in con­sumption of cotton, and that in turn requires a degree of planning or the social good wholly incompatible with the present system, which the A.A.A. is meant to maintain and not to end. DEMANDS OF COTTON GROWERS (From The Nation, Vol. 137: No. 3561, p. 366, October 4, 1933. The Nation, Inc., 20 Vesey Street, New York.) The demands of the southern congressmen and of representatives of cotton growers or 20-cent cotton and a direct inflation of the cur­rency through the printing of paper money were met by President Roosevelt with an immediate compromise. He has now pledged the Government to lend 10 cents a pound against this year's cotton to all planters who will agree to reduce their acreage next year to 40 per cent of their average acreage or the last five years, and to reduce plantings in 1935 by 25 per cent from those of the same base period. What does this involve? It involves, in the first place, a resumption of the old disastrous policy of the Farm Board, but on potentially a much larger scale. For it means lending against cotton an amount higher than the price at which cotton sold before the pledge was made; and it means potential loans of $400,000,000. And if this is done for cotton alone, why, in principle, should it not be done for the growers of other crops? The latter, at least, will be certain to make demands along these lines, and it will be extremely difficult to refuse them. It is held that the present plan differs from the Farm Board experiment in that it involves a drastic crop reduction. But it remains to be seen whether the administrative problem of making this crop reduction effective can be solved-whether dependable fig­ures can be obtained on the average plantings of individual growers in the last five years, whether the 40 per cent reduction can be over­seen and enforced, and whether the net result of a more intensive cultivation of 60 per cent of the former acreage will not offset smaller plantings. Suppose, however, that the reductions actually are The University of Texas Bulletin enforced. The project comes down to one of lessened production. It would be well if the Administration made a fresh study of what happened to rubber under the Stevenson restriction plan. The British, by forcing a reduced output, did force up the price of rubber; but by the same token they stimulated Dutch production enormously, so that in the end the price of rubber collapsed and the British lost their former share of the world market permanently. Is there any reason why similar consequences cannot follow in the case of cotton? Cotton markets must be restored.-The only permanent cure for the difficulties of the cotton growers will come not through an arbi­trary restriction of production but through a restoration of markets. And for the cotton grower this means primarily a restoration of foreign markets, for normally 55 per cent of our total cotton produc­tion is sold abroad. A restoration of foreign markets, in turn, means a mutual reduction of tariff barriers. It even means a reduction of our own tariff wall, whether any other country reduces or not. For the only purchasing power the outside world has with which to buy here comes out of the proceeds from what it sells here. It is to the great credit of Secretary Wallace that he has recently spoken strongly on the need for tariff reduction if American agriculture is to be, permanently helped; but on the same day that he spoke, it was announced from Washington that administration officials had com­pleted the draft of a plan by which President Roosevelt, under the terms of the N .R.A., "could arbitrarily impose extra fees in addition. to the import duty" on cheaply made foreign articles. Thus the polit­ical probabilities are that our extravagantly high tariff will go up rather than down. This probability is strengthened by recent trade figures. Thus in August there was actually an excess of imports over exports, an excess amounting to $24,000,000, the largest so-called "unfavorable balance of trade" for any month in seven years. This runs counter to the theories of those who supposed that a depre­ciated currency would swell our exports and restrict our imports; it is precisely the depreciation, paradoxically, that has probably caused the import excess, but it will be difficult to get Congress, when it meets, to believe this. The cure proposed will be the usual cure of higher and higher tariffs, so choking international trade even more. Congress will then be astonished because there are still no markets for farm products. AN EAR TO THE GROUND Editorial and Other Comments on Our National Cotton Policy (From ACCO Press, Vol. XIII, No. 2, February, 1935, p. 8. Editorial from Washing­ton, D. C., Post. Published by Anderson, Clayton & Co., Houston Texas.) Criticism on cotton policy increasing.-Criticisms of the cotton pol­icies of the A.A.A. increase in number almost weekly. Thinking people everywhere are beginning to realize the vital necessity of restoring our cotton production and our cotton markets so as to provide reemployment for the thousands of southern families "of farm origin" now on relief rolls. An editorial in the Washington, D. C., Post con­cisely reviews the entire situation: International agreem..ents proposed. Control of cotton through an international agreement is the latest objective of the Administration in the agricultural field. Secretary Wallace has been instructed to negotiate with India, Egypt, and Brazil for the purpose of stabilizing cot­ton exports and prices. At last the Administration has come to recognize the impossibility of manipulating a world market by a domestic curtailment program. At the very beginning of the A.A.A. experiment critics pointed to the risk that foreign cotton would be substituted for the domestic product in the textile industries of Europe and Asia. But Secretary Wallace gave little heed to such warnings. Our average production was reduced by more than 3,000,000 bales, while the output abroad was increased by 2,600,000 bales above normal. American prices soared in com­parison with the quotations for Indian and Egyptian cotton. Foreign spinners replaced American cotton by these cheaper growths wherever it was possible. Immediate price benefits dangerous. This outcome was so inevitable that it should have been fully contemplated by the A.A.A. Instead of considering the basic economics of the problem, however, that agency con­centrated upon immediate price benefits to domestic growers. Liberal loans were added to the curtailment program as a means of pegging prices considerably above the world mar­ket level. Today the South is feeling the benefits of this temporary stimulation, but there is grave danger that the basis for a lasting solution of the surplus cotton problem has been undermined. E:x:pansion abroad anticipat6d. Exports during the first five months of the current crop year were the smallest in fourteen years. Some improvement in this situation during the next few months is anticipated bceause the heavy demand for foreign cotton is increasing its price. But the curtailment program in this country is being continued for at least another year; further expansion of acreage abroad may be anticipated, and a permanent shrinkage of our cotton exports must be faced. Experts say that Egypt and India can expand their out­put to some extent, and that the potential cotton-producing area of Brazil is at least equal to that of the United States, although it is not yet developed. Brazil is now engaged in an extensive campaign to stimulate her cotton industry and thus discourage overproduction of coffee. In view of these circumstances it is not surprising that the A.A.A. would like to secure an international agreement on cotton. The astonishing thing is that the Administration The University of Texas Bulletin failed to initiate such an agreement until it had alre.ady created serious obstacles to its consummation. Concessions we might have offered to secure restriction programs in India, Egypt, and Brazil have already been made without any requirements on their part. These countries now see an opportunity to reap the artificial profits that were intended for American farmers. International agreement will fail. Moreover, the experience of the Administration with the international wheat agreement affords little hope for the success of the current proposal. The proposed negotiations are encouraging only because they imply recognition of a fundamental weakness in the A.A.A. that should have been considered at its inception. WHEN IS A PEGGED PRICE PEGGED? By W. L. CLAYTON (From ACCO Press, Vol. XIIT, No. 5, May, 1935, pp. 3-4. Published by Anderson, Clayton & Co., Houston, Texas.) Only 45% of world cotton furnished by the United States.-. According to Garside* the world consumption of all kinds of cotton, August-February, inclusive, has been 14,883,000 bales, of which the United States has furnished 6,710,000 bales or 45 per cent and foreign cottons have furnished the remaining 55 per cent. If we had fur­nished our customary 60 per cent of this consumption, our total would have been 8,929,800 bales, showing that we have lost during the first seven months of the present season markets, heretofore ours, for 2,219,800 bales of cotton, or at the annual rate of 3,800,000 bales. Wallace's explanation not suffi,ciemt.-Secretary Wallace's explana­tion of the slump in exports as being due to the inability of foreign buyers to pay for our cotton because of our tariff policy, etc., doesn't explain, because these same buyers used other kinds of cotton in place of ours and the only way they could pay for these other kinds of cot­ton was through the foreign exchange markets. Just for example, deliveries of American cotton to English spinners from August 1, 1934, to March 29, 1935, were 649,025 bales as compared with 1,010,000 bales for the same period in the previous year, showing a reduction this season of 361,000 bales, or about 36 per cent. Brazil's sales.-But English mills took for the same period this year 298,428 bales of B.razilian cotton against only 29,000 bales the previous year. Foreign exchange had to be secured with which to purchase this Brazilian cotton, and there are no restrictions on the purchase of foreign exchange in England. The English spinner was *Alston H. Garside, Economist of the New York Cotton Exchange. absolutely free to buy the cotton which suited him, price considered, and he did so. He bought Brazilian cotton, because, quality for qual­ity, it was selling at a greater discount under American than in many years, as can be seen from an examination of the official reports of the Liverpool Cotton Association. The cable and correspondence files of every American exporter of cotton are full of proofs of almost daily loss of business because of the price disparity of American over foreign growths of cotton. Other United States exports increased.-Then, too, 1934 is the first year in which we have suffered heavy losses in cotton exports, except for the year in which the Farm Board cornered the cotton market (May-July, 1930) in its stupid attempt to carry the cotton world on its puny shoulders. And 1934 saw a marked increase in imports of merchandise and gold into this country. In other words, foreigners were greatly increasing their ability to pay for something in this country, if not cotton. A look at the record of 1934 exports gives the answer. Our total 1934 exports showed a substantial increase over 1933. Some of the individual increases were spectacular, as for example: Automobiles increased 120 per cent in quantity and 107 per cent in value over 1933; non-ferrous metals increased 7 4 per cent in quan­ tity and 87 per cent in value; iron and steel increased 125 per cent in quantity and 119 per cent in value-apparently plenty of foreign exchange for these things. But what happened to cotton in 1934? Bales Our cotton exports in 1932 were____________________________________8,9l 6,430 Our cotton exports in 1933 were___________________________________ 8,353,449 Our cotton exports in 1934 were____________________________________ 5, 753,644 At the rate we are now going the 1935 exports of cotton will show still further losses. The tariff has many sins to answer for, but we can't hang this one on it! Loss of cotton foreign market due to price pegging.-We are losing our export cotton markets for the very simple reason that the present Administration has added to its policy of extreme economic National­ ism the perfectly futile attempt to fix the world price of cotton. How the old Farm Board was ridiculed in campaign speech and platform! The "New Deal" would succeed where the Farm Board failed by the simple process of outwitting the fructifying processes of nature~ Anyone visiting the Port of Houston may observe the result: Houston's business affected.-Ordinarily the busiest cotton export­ing port in the world, Houston has this season had to content herself with 50 per cent of her normal cotton exports, but the flags of many The University of Texas Bulletin nations may be seen flying from shi9s in Houston's harbor unloading Argentine grain. Dwindling consumption follows close upon the heels of restricted production of American cotton. We can sell to ourselves at our own price but when it comes to selling to the peoples of other lands, that's a different story! In a speech in the Senate on March 28, 1935, Senator George of Georgia, said : "What is happening is that Mr. Wallace, under the Agricultural Adjustment Act, is paying benefits to the farmers. He is paying us to plough up our cotton and to kill off our hogs and to reduce our acreage and to reduce our production, but how is he doing it? Farm business sold for "a mess of pottage."-"He is doing it by asking the American farmer to sell out his business, to sell out his capital investment. That is what he is doing. I closed out a part of my cotton business, and every other American farmer has done the same, and the hog-raisers and the other producers of the country, in a measurable degree, have done likewise. Particularly such a state­ment is true with reference to any crop more than 50 per cent of which, or always approximately 50 per cent of which, must be sold in the foreign market. We have soUi our farm business for a mess of pot­tage, or one or two or three years of benefit favors." There is ample evidence to support the belief that the southern states are becoming deeply aroused over the loss of export markets for cotton. What will the South do ?-What will the South do when expanding · foreign production catches up with the full measure of American restriction, resulting in prices leveling off to a normal basis? We will then have lost our production and our markets and our artificial price level as well. Will we continue then to sell the cotton to ourselves (Government above-value loans) and to pile it up, as we are doing now, millions of bales of it, in warehouses to eat up its value in storage, interest and insurance? American mills are already paraphrasing the cry of "oceans of water but not a drop to drink" with "millions of bales in Government hands but not a bale to spin." The literature of governmental price-pegging ventures, from the time of the Roman Emperor Diocletian (300 A.D.) down to the present moment is very voluminous and very uninteresting. The "plot" varies little; the ending is always the same ! Tke Domestic Allotment Plan ignored by Administration.-The tragedy of the present drama is that the Agricultural Adjustment Act provides, through the Domestic Allotment Plan, for compensation to the cotton farmer for the burdens of the tariff and N .R.A. without Government Control of Cotton Production 229 loss of his markets, but the Administration chose to chase the rainbow of price-fixing for the whole cotton world. When the South arrives at the end of the present adventure, she will find that she has indeed sold her birthright for a mess of pottage. When the full significance of this realization sinks into Southern hearts and Southern brains, we may see a repetition, on a larger scale, of the political revolution which shook the land of Dixie in 1928! Economic misery will result.-Since the Civil War the South has never fought for her interests; she has merely fought for the Demo­ cratic Party. That party is now following a course which can only end in reducing the Southern States to a condition of economic misery comparable to that of the Reconstruction days following the Civil War. PLAYING WITH FIRE (Editorial) (This editorial from the Houston Post appeared in the same issue and on the same page with Mr. Clayton's letter.) (From ACCO Press, Vol XII, No. 11, November, 1934, p. 2. Published by Anderson, Clayton & Co., Houston, Texas.) The Post has expressed doubts as to the wisdom of curtailing cotton production in this country without at the same time providing sub­stitute cash crops. The esteemed Dallas News has reached the same conclusion, as is here shown. Reduction may iwove disastrous/-"From a Texas angle loss of foreign markets for our cotton, without finding a domestic outlet or a profitable substitute cash crop, would spell disaster, since 95 per cent of the State's cotton goes into export annually. If the Govern­ment stands committed to a policy of indefinite curtailment of cotton production, then some way must be devised to take care of several millions of the South's cotton farmers." That puts the whole case in a nut shell. Playing with fire in an inflammable structure is a no more dangerous practice than this of curtailing cotton production and stopping there. Unemployment and reduced acreage.-Already there are evidences of an increase in the number of unemployed throughout the South by reason of smaller cotton acreage and a droughty condition in Texas, and this alarming situation will be intensified if there is a repeat order and nothing to take its place. The University of Texas Bulletin COTTON AND FOREIGN TRADE By W. L. CLAYTON An address delivered to the Foreign Trade Confer6nce, Houston, May, 1935 (Extracts) (From ACCO Press, Vol. XIII, No. 6, June, 1935, pp. 1-4. Published by Anderson, Clayton & Co., Houston, Texas.) Both the time and the place are well chosen for this Foreign Trade Conference. For many years, Texas has been second, and sometimes first, among the States of the Union in the importance of her export trade. Certainly it may be said that no State owes more to foreign trade for increase in her population, in her wealth and in the development of her resources than does Texas. Texas' prosperity dep6-rtds on cotton exports.-And without a doubt Texas is more directly dependent upon exports for her future pros· perity than any State in the Union. The per capita value of Texas' exports has for many years exceeded that of any other State. Texas is a State of vast surpluses-a surplus of land, of wheat, of cotton, of petroleum, of sulphur, and of many other forms of wealth. Obviously, unless there are markets to absorb our steady stream of production, the prices of our products sink to disastrous levels. The outstanding agricultural product of Texas is, of course, cotton. There are, or were, some 500,000 farm families in this State whose chief cash crop is cotton. It is no exaggeration to say that half the people of Texas are directly, or indirectly, dependent upon the export cotton trade for the principal part of their cash income. In one year (I believe it was 1924) the cotton crop of Texas ex­ceeded in value the wheat crop of the entire United States. In several years, our cotton crop has brought more than $500,000,000. Cotton is perhaps the only crop of which the farmer sells all he raises, hence this huge annual production of new wealth serves to generate an enormous commerce. It is well known that over 90% of the Texas cotton crop has always been exported. Thoughtless persons, and many others who should know better, attempt to minimize the importance of the foreign trade of the United States by saying that 92% of our trade is domestic and only 8% foreign. A Chicago publisher, at the head of some Government Com­mission under the Hoover Administration, flippantly said that we could pitch this 8% out of the window and still lead the world back to prosperity. Well, we have just about pitched it out of the window, so far as our agricultural exports are concerned, but I do not see Uncle Sam at the head of a prosperity parade, cheering the rest of the world on. Cotton· consumption increasing.-The most remarkable thing about cotton, it seems to me (and now I am speaking of the world cotton situation) is the fact that during the five years of this depression the consumption of cotton throughout the world has been at a substan­tially higher annual rate than the average for the ten boom years immediately following the World War. I wonder if any other world commodity can match this record. In weighing the significance of this statement, you will of course remember that cotton is peculiarly an article of international com­merce, and you will not forget what has happened to international trade as a whole during this depression. The present cotton season: consumption up.-Coming now to the present cotton season, we find that the world is still consuming cotton of all growths at a very rapid rate indeed. Mr. Garside, Economist of the New York Cotton Exchange, and recognized as the leading cotton statistician of the world, says that world consumption for the first eight months of the present season-that is, August, 1934, to March, 1935, inclusive-is almost the largest on record, and if the consumption during the remaining four months of the season be maintained at the same rate, the total will be 25% million bales, which almost equals the record consumption of all time. Relief rolls and the farmers.-... According to the officials of the F.E.R.A., there are 300,000 Southern farm families on Federal relief rolls. There are over 100,000 Texas farm families on Federal relief rolls -20% of the Texas farm population. Think of it, in this land of mild climate, where anything will grow, at almost any time, and where a minimum of clothing and shelter and fuel are required, we find Governmental policies forcing people off the land where they belong and into the towns where they don't belong but where they can become the subjects of a Government dole! May not Washington be counting too heavily on the ignorance of these poor tenant folk, and on their willingness to make of themselves poor, dumb sacrifices to just another mad adventure in world price fixing? The cause of the farmer's plight.-Every informed person knows that the Southern cotton farmer has for many years sold the fruits of his labor in the free markets of the world, while buying everything The University of Texas Bulletin in a protected market. This has produced for him a condition of life saturated with economic inequality of the most cruel and unjust sort. Even in the period before the World War when a pound of cotton would buy much more than it will buy now, the Southern cotton farmer could only carry on by working his women and children in the cotton fields. Following the War, under the continued jacking up of the tariff, a pound of cotton bought less and less of manufactured goods, and paid less and less of taxes and interest. The cry for relief was so loud and so insistent that eventually it was heard in Washington, but the answer to it, both by the Hoover and Roosevelt administrations has been the Biblical one of giving a stone where bread was asked. Release from unjust tr cotton as seen by Representative McGugin, of Kansas. (From New Outlook, Vol. 164: pp. 31-33, August. 1934.) The first farm crop to yield completely to New Deal regimentation is cotton. The growers of that great staple have ceased to be free agents who can do as they please on their own broad acres and have placed themselves completely in the hands of the bureaucrats of Washington. The 'fiUrpose of the A.A.A.: raise prfoes of cotton.-The Bankhead cotton limitation bill has passed the Congress, has been signed by the President and has become a law. Its purpose is to hold cotton produc­tion down to ten million bales a year where it has been running around thirteen or fourteen, sometimes eighteen million bales. The theory was that this limitation of production would raise the price to the farmer, and price raising, without reasonable regard for other considerations equally as vital, has been a blind fetish of the present Administration ever since it came into offiee. The position of the advocates of the measure has been like that of the motorist who thinks only of speed and ignores the hairpin curve on the brink of the cliff ahead. This bit of legislation is so true an example of action based on erroneous and disproved theoretical conceptions that it deserves analy­sis, not for itself alone, and not because it threatens the life of one of our most important industries, but as an example of the quite mad drift of these dangerous times. The f<>unders of the A.A.A.-lt is interesting to take the back track a little on this bit of New Deal legislation. It is fathered, as everybody knows, by the Bankhead brothers, from Alabama, one of whom is a Senator, the other a Representative. It made its first bow to Congress but a few days after the senior Bankhead arrived in Washington as a member of the Senate in 1931. He very promptly introduced his cotton limitation bill. It was received tolerantly as a vagary of a new member but got no consideration whatever. Why? Because it was so obviously unconstitutional, in its proposal to inter­fere with the individual's right to produce as he chose as to be foolish. But this spring, reappearing with the surge of the tide for regi­mentation, backed by the Brain Trust and a personal letter to the House Committee on Agriculture from the President, asking its passage, it forthwith became a law. Its apparent sole purpose is to limit cotton production to ten million bales, allocating permissible production on that basis to states, counties and individuals in propor­tion to past yields. Each farmer is to be told just how many bales he may grow and whoever produces cotton above his allotment must pay half the sales price into the Treasury. The southern gentlemen who fathered this bill were thinking only of this limitation, but the new Americans in Washington who sneer at the time-honored theory of the individual's responsibility for taking care of himself saw it as a long stride toward that Federal control of all activity which they were seeking. Fifteen cent cotton was the aiml-The original intention was that this law should have the effect of prohibiting production above ten million bales and that this artificially created scarcity would cause the price to go to fifteen cents a pound. From the President's stand­point it was another candle lighted at the shrine of high prices. He could extend the prohibition for a second year, if he chose to do so. Administration influence might make cotton regimentation permanent, if it chose, at the end of that period. So was the first great crop brought under definite Federal control. It might be the first in a series of such actions. Many feared that in the minds of those who controlled policies for the Administration the establishment of the precedent of Federal domination over one great crop was an accom­plishment to which more thought was given than to the welfare of a specific farm group. The law was so weakened before final passage, in fact, that it lost much of its actual strength though it retained its force as a precedent. It was originally intended that its tax on over-produced cotton of one-half the market value should be paid at the time of ginning. This was amended to make it payable when sold. Thus a farmer could raise cotton above his allowable quota pay the gin charges out of the returns from his seed and store his excess in the bale against the time when the law expired or was repealed. This weakness, allowing cotton in storage to accumulate and thus affect the market, will tend to prevent the law from serving its primary purpose of raising prices. Like so many of the other theoretical interferences with industry which the Administration has fathered it fails to function as planned. Evil effects of the A.A.A.-But grant that the result turns out to accomplish its intended purpose, is a success from the standpoint of its supporters, does cut production to ten million bales and does raise the price to fifteen cents; what other results, that seem not to have been contemplated, become apparent? The University of Texas Bulletin Heavy planting elsewhere.-A primary effect that already has ap­peared has been that an announced intention to cut down production in the United States has led to heavy planting elsewhere. In 1933, when the United States started plowing cotton under, the word went abroad and foreign production increased 2,000,000 bales. The Depart­ment of Agriculture reports that foreign planting for the current year, under the influence of our crop curtailment, has increased from 40,500,000 acres to 44,500,000 acres. The point is that reduced pro­duction in the United States does not reduce world production but resuj.ts merely in the transfer of that production from our cotton farms to those of Brazil, Egypt, India, or Russia. They get the cotton money which we lose. They develop an industry, get an improved foothold in a market, which heretofore we have dominated. Loss of markets.-This is a fact so amply demonstrated in the past that it is hard to understand how Administration theorists could have missed it. No longer ago than the season of 1929-30, when the Farm Board first came into operation, it bought cotton until it had established a fictitious American price. The world, including the United States, for five years previous to that time (using round numbers), had been consuming an average of 15,000,000 bales of American cotton and 10,000,000 bales of foreign-grown cotton. The United States had been producing 60 per cent of the world's cotton and the rest of them 40 per cent. No sooner was the American price raised than our con­tribution to world consumption ran down from 15,000,000 bales to 13,000,000 bales. The foreign share in world production jumped from 40 per cent to 4 7 % per cent. During the second year of Farm Board buying, America's share fell to 11,115,000 bales, while foreign produc... tion rose to 11,216,000 bales. For the first time in its history America produced less than half of the world's cotton. It became obvious that if artificially high prices were maintained here production abroad soon would be developed that would take care of all the consumption outside the United States and only the local market, consuming about 6,000,000 bales a year, would remain. There would be over-production in the United States, measured by this local market, and cheap cotton. The trend in this direction was so strong that the Farm Board had to abandon its program and cotton prices fell to a low level. This did not prove an unmixed misfortune, how­ever, for America once more sold abundantly abroad and regained much of her foreign market. Incidentally the Government was left with millions of bales of cotton on its hands for much of which it had paid 11> cents a pound. Recent cooperative programs with cotton growers have included assignment to them of portions of this cotton at six cents, which represents a loss that would not seem good busi­ness from the standpoint of the taxpayer. Much of this four-year..old cotton, however, is still being carried by the Government. Government Control of Cotton Production 237 Brazil and England failed with a similar scheme.-In principle this venture was an exact parallel to what we are doing now and presents an exact picture of what is bound to happen. Recent industrial history has other examples of similar attempts to control prices of important crops by action on the part of single nations without world cooperation, and all have been fiascos. Most notable of these have been Brazil's actions with relation to coffee and Britain's in the case of rubber. Artificial price brings resentm6nt from the world.-Right here en­ters another consideration, the resentment that is aroused abroad at our infliction of artificially high prices on all the world in an attempt to grab an unnatural and selfish profit for ourselves. It is not difficult for the American mind to go back ten years to a time when the British had forced rubber prices up on a similar theory. Every time we bought an automobile tire, paying twice the normal price for it, we denounced the British. Resentment against them on this score still rankles within us. In exactly the same way forcing cotton to un­natural levels will arouse antagonisms around the world that will long be detrimental to American trade. Present program is fallacious.-The present program so obviously flies in the face of the demonstrated fallacy of such undertakings that it is hard to understand the logic back of it. It seems inevitable that the conclusion should be reached that this step upon which depends the well-being of one of the greatest of our fundamental industries and millions of people whose welfare rests upon it was taken without adequate consideration of inevitable results. The plan was based on theoretical, half-baked considerations and carried out, like many other present day ventures, in a spirit that can be described as nothing less than reckless. South in comparatively good condition.-Furthermore, it was exe­cuted in behalf of a section of the country and an industry that was already, as compared with other sections and industries, in excellent condition. Cotton was already selling at twelve cents a pound with a good crop running through the gins, which spells prosperity to the South. The depreciation of the dollar, actual in the foreign market while hardly apparent at home, had lavished its benefits on cotton, and hence on the South, to a greater extent than anywhere else. The distribution of Federal largess to the South, in the form of bonuses and loans to farmers and cash to C.W.A. workers, had introduced much ready money. Foreign production increased.-The chief cotton producing coun­tries of the world, outside of the United States, are India, Egypt, Russia, Brazil and China. An indication of their position in the face of the present American situation may be obtained from reports from cotton gin manufacturers who state that while sales are poor in the United States demands for cotton processing machinery from those countries are very heavy. Another interesting sidelight is thrown by 238 The University of Texas Bulletin an admonition issued by the Argentine government to farmers of the Chaco, spotlighted by the past two years of war, a share of which constitutes its cotton-growing area. "Chaco growers," it says, "increase your crops this year, duplicat­ing them if possible, inasmuch as the conditions for the world market for cotton prices indicate a favorable outlook. Bear in mind that in the United States the average yield per acre is very poor, when com­pared with our Chaco fields, and has to be fertilized. The United States, to improve present prices, is reducing its planned acreage. Get busy!" The future and governmental policies.-Should the United States persist in its efforts to maintain an artificial price of fifteen cents a pound for cotton, in the face of the fact that other countries can produce it for ten cents a pound or less, the ultimate results become quite obvious. American sales abroad would not disappear imme­diately but would decline gradually as foreign countries could not immediately get into large scale production. American cotton would figure to be displaced at the rate of some 2,000,000 bales a year. In four years we figure to lose 8,000,000 bales and reduce our production to American requirements, about 6,000,000 bales. It might even fall below that amount as a higher price for cotton would encourage the use of rival materials such as rayon, paper, jute, linen and silk. This export cotton usually brings about $500,000,000 a year in ioreign cash to the United States, although there have been banner seasons when the .amount of outside money brought in by this staple has gone above $1,000,000,000. And a billion-dollar item is a very rare specimen and quite beyond the comprehension of the minds of most of us. There is another aspect of this situation, however, that is much more serious than the money loss-the sacrifice of employment by the people engaged in the production and handling of these 8,000,000 bales of export cotton. Between a million and a half and two million people on southern farms work at producing this cotton. There are 14,000 cotton gins employing large numbers of people, cottonseed mills, cotton compresses, warehouses, docks, etc. In the transportation of cotton by wagon, truck, railroad and boat much work is provided. Cotton, in fact, is the chief provider of employment for the southern tier of states. Even though a greater return to the planter were received by cutting the crop in two, it is doubtful if accomplishing this end would be an advantage sufficient to counter-balance the misfortune of unemployment for millions of people which would result. In fact the latter tragedy would, obviously, be vastly too great a price to pay. The theorists are discovering practical difficulties.-Those theorists in government who are feeling their way toward a regimentation of the farmer exercised their customary bad judgment in making cotton their bellwether crop. They selected the staple of them all t-0 which Government Control of Cotton Production 239 the foreign market was most important and a loss of which would be most disastrous. Had they chosen to put a limitation on a crop the export considerations of which were relatively unimportant the folly of it would have been less obvious; but with cotton it is otherwise for we grow cotton, not for ourselves alone, but for all the world. The theorists are finding that unexpected difficulties are likely to arise to plague them when they tackle one of these economic problems that have so many ramifications that the contemplation of them all, the discounting of every exigency that may arise, is beyond human understanding. Attempting to juggle these fundamental problems, to get profit through hatching fancy schemes for their manipulation, is not unlike the activities of those gentlemen who through the decades give themselves to the study of systems for beating the god of chance at the roulette wheel. Even more immutable than the law of chance, they find, is the ancient and omnipotent law of supply and demand which all the legislative bodies in the world are powerless to alter or repeal. Well-b6ing of millions at stake.-Yet it comes to pass that uncertain circumstance sometimes brings to high places sincere but irresponsible zealots consumed with enthusiasm for their theories who, at no risk to themselves, are willing to stake the well-being of millions upon the correctness of their unproved (and often disproved) theories. They abandon the principle of the virtues of price, quality and service in maintaining our industry. They attempt to create through a series of controls and repressions, exercised from Washington, an artificial influence under which millions of Americans will girate like so many marionettes on the ends of strings. Bureaucratic cost is heavy.-Then there is the matter of the increase in the personnel and cost to the people of the Federal bureaucracy that will be necessary to the enforcement of the law. Representative James P. Buchanan, of Texas, a good Administration Democrat, is Chairman of the House Committee on Appropriations and therefore in a position to speak with authority. On page 9290 of the Congressional Record of May 17 last he states that an organi­zation consisting of a secretary, three clerks and three committeemen in charge of allotment of production and ten supervising committee­men must be appointed in each of 1,075 counties. The total of em­ployees is seventeen to the county, or 18,275 altogether. Each State will have three administrators. All of these people will be appointed on a patronage basis. There will be office rent, telephones, telegraphs, etc. The total of expense, Mr. Buchanan warns, will run to $8,250,000 ! Tax-free cotton vs. heavily taxed cotton.-This law, obviously, will develop two classes of cotton, one of which is tax free and the other of which rests in a warehouse and a bill for half its sale price levied against it. It is easy to foresee the time when there will be illicit gins just as there are illicit distilleries. There will be mills that thrive on half-price, bootleg cotton just as there are refineries around Texas oil fields which operate on half-price and illicit oil. There will be ships in southern ports that find a way to ship these cargoes of bootleg cotton. Present program will destroy a venerable industry.-Certain it is that cotton production is to be thrown quite out of joint. A venerable industry, carefully adjusted through a century of operation, is to be thrust upon the mercies of absentee theorists who, in mapping out its destiny, do not seem even to have given weight to recent economic e2Cperience. If restriction succeeds i.n reducing production, as it already has done to a degree, it will stimulate other countries, as it now is doing, into increased production that will divert hundreds of millions of dollars away from America and rob millions of the citizens of the South of employment. If it turns out to be a mere temporary ex­pedient, as some of its Southern advocates think it will, that damage is done. If it succeeds, if it develops into a permanent scheme of farmers' regimentation as conceived by some of its textbook advocates, then the blight on the dominant industry of the South becomes per­manent and, some think, well may recall carpet-bag days of an earlier era. Either way it injects the Federal Government into an activity in which it has no proper place and which will be resented by the American people as soon as the confusion of many disconcerting activities has cleared away and it can once again get a proper perspective on Government functions. OUR DISREGARD OF ECONOMIC LAWS By WILLIAM F. HAUHART Director, School of Comnnerce, Southern Methodist University, Dallas (From TM Cott°"" Crisis. Proceedings of Second Conference, Institute of Public Affairs, pp. 66-67. Arnold Foundation, Southern Methodist University, Dallas, Texas, 1985.) Price as controlling suwly and demand.-T.he principle that price should be the guide in controlling supply and demand has been dis­regarded in the cotton industry for a number of years. The present phase of tinkering with the price of cotton had its origin about 1927 as a result of the enormous crop of the summer of 1926. It was a part of the general program of farm relief with its continuous interference in one way or another with the function of price as a stabilizer of supply and demand. The results are before us today in our vanishing cotton markets, and in our failure generally to ameliorate the eco­nomic condition of the farmer. Monopolistic conditions through price control have failed.-In­ stances may be given from economic history to show how the market for a commodity is lost by an attempt to produce monopolistic con­ditions through a control of its price. The case of the Dutch pepper merchants of the sixteenth century presents an illustration. For a time they controlled the shipments of pepper from the Spice Islands to England. Gradually they raised the price from two shillings to eight shillings a pound, until serious dissatisfaction arose among the merchants of London, culminating in the formation of the East India Company in 1600. As a result of the development of this company, the Dutch soon found, to their grief, that their pepper trade had largely disappeared. The case of United States cotton is not axactly analogous to the Dutch pepper trade, but the resemblance is quite close, because our attempt at price-fixing was carried on in utter dis­regard of the probable cotton supply that would spring up in other countries. Artificial prices de'YYUYraJ,ize m,arkets.-Other instances might be given to show that the attempted maintenance of an artificial price will demoralize the market for any commodity. If the commodity is widely produced and sold in a world market, that market will be lost all the more quickly. The attempt of the British to control rubber under the Stephenson Act, as well as the efforts of Brazil to valorize coffee have been without success. The rubber monopoly lasted only a few years, and the Brazilian control of coffee is now looked upon as a complete failure so far as any long-time stabilization of markets is concerned. Supply and demand principle cannot be violated.-The principle that price will control supply and demand cannot be violated. When­ever there is any prospect of a rise in price, the cominodity or service which is affected will be produced in larger quantities. In the case of cotton, domestic lands that have previously been submarginal or that have been used for producing less profitable crops, will then be planted to cotton. Other cotton-producing countries will also help to swell the output and increase the surplus or carry-over from year to year. The problem of price, accordingly, becomes more acute as each succeeding year goes by. The other aspect is that an artificially high price will lower the demand for any commodity. If price is allowed to find its level in relation to the quantity produced, wider uses will be found for that commodity whenever the price falls. Attempts to maintain an arti­ficially high price will make these lower levels of demand ineffective. When an extraordinary large crop has been produced, partly through the bounteousness of nature, a lower price is imperative if the large supply is to be consumed. The University of Texas Bulletin III. IS THE PROPOSED CONTROL OF PRODUCTION PRACTICAL) "The loss of our foreign markets for cotton is traceable directly to the fact that our governmental cotton policy has priced our cotton out of the market."* EVALUATING THE GOVERNMENT'S PROGRAM By A. B. COX (From The Cott01t Criltis. Proceedin~s of Second Conference, Institute of Public-: Affairs, pp. 121-128; 129-130; 131-137. Arnold Foundation, Southern Methodist University, Dallas, Texas, 1935.) Cotton prices.-Whether the cotton-reduction program of the United States has paid as an emergency measure will depend on how much the price has been raised and why it has been raised. Much confusion exists as to why cotton prices in the United States have gone up from 6.49 cents the average price of middling 7/8 inch spot cotton in New Orleans during the harvest months of September, October, Novem­ber, and December, 1932, to 12.73 cents, the average price for similar cotton for the same period in 1934. Two elements involved in price of cotton.-Broadly speaking, the forces which make the price of cotton can be divided into two groups. The first group, the one we usually think of, is the forces of supp·ly and demand. No:&mally these are the most important, but not always. The second group includes the factors affecting the value of money. Since the Government's program is concerned primarily with con­trolling supply, the main objective here is to determine the effect of changing supply and demand on cotton prices, especially changes in supply. American cotton prices are world prices. This means that the price of American cotton under normal conditions is the same at any one market as at all other markets using American cotton, when the cost of marketing from point of origin is taken into account. More specifically, this means that the price of cotton at Le Havre, Bremen, or Liverpool, is the same as at New Orleans, or Houston, or any other market in the South, less the cost of marketing from any point in the United States to these foreign markets. •From ACCO Press, Vol. XIII, No. 2, February, 1985, back cover page Published by Anderson, Clayton & Co., Houston, Texas. Government Control of Cotton Production 243 It should not be difficult to show that a world price prevails in the case of American cotton. If we can find a country that has main­tained the same standard for the gold value of its money throughout the period from 1932 to 1935, we can measure fairly accurately the advance in the price of cotton due to supply and demand. The '/)rice of cotton in France.-Fortunately for our purpose, France is a very powerful country and a big market for American cotton. It has maintained the same gold content of its money through­out the period. Le Havre is one of the world's leading cotton markets. Its futures contract is based on American cotton. Le Havre, like markets in the United States, trades in and quotes American cotton prices in terms of Universal Standards. Prices quoted for American cotton in Le Havre, therefore, are comparable with prices quoted in American markets for American cotton, when the terms of the con­tract and costs of marketing are taken into account. Let us study the French gold price of American cotton to determine what effect supply-and-demand conditions have had on the world price. France quotes cotton prices in terms of francs per 50 kilograms. During the harvest months of September, October, November, and December, 1931, the average weekly price was 211-3/5 francs. For the same period in 1932, it was 231-1/9 francs; for 1933, 213-6/7 francs, and for 1934, 253-2/9 francs. The equivalent prices of these francs in American money in terms of our gold dollar are 7 .54 cents in 1931, 8.19 cents in 1932, 7 .54 cents in 1933, and 9.03 cents in 1934. The remarkable thing about these :figures is that they show that from 1932 (the low point of the depression) to date the world gold price of cotton has advanced less than 20 per cent, and that in 1933 the gold price of cotton was actually about 8 per cent, or 65 points, lower than it was in 1932. Is it possible, then, that approximately 80 per cent of the advance in the price of cotton in the United States has been due to the decline in the value of the dollar and not to changes in supply? The figures above indicate that is exactly what has happened. Figure No. 1 shows the course of world cotton prices measured in gold in terms of French francs, and converted into their equivalent in American money prior to the devaluation of the dollar, and in the current dollar prices. It will be noted that dollar prices and world gold prices were essentially the same until April, 1933, when the United States went off the gold standard. Since April, 1933, the price of cotton in the depreciated currency of the United States has been about 40 per cent higher than the equivalent world gold price. Is it a mere coincidence that dollar prices are up 40 per cent on the franc price at the same time American money has declined to only 59.06 per cent of the old gold-dollar value? Indeed, is it not already evident that it was the decline in the value of the dollar and not the Government's cotton-reduction program which caused the advance in the price of cotton? The University of Texas Bulletin Gold value of cotton.-What is the gold value of cotton at the pres­ent time? In order to convert the present price of cotton into its equivalent of 1932 gold value, multiply the present price by 59.06 per cent. The New Orleans spot price of cotton was quoted at 12.56 cents on January 15, 1935. Its equivalent in gold in terms of the old gold dollar, or the 1932 price, is 7.42 cents. The actual New Orleans spot price was 6.58 cents in January, 1932. In other words, that por­tion of the advance in the price of cotton from 6.58 cents in 1932 to 12.56 cents in 1935, due to the decline in the gold value of the dollar, is approximately the difference between 7.42 cents and 12.56 cents, or 5.14 cents. The net advance due to supply-and-demand conditions is the difference between 6.58 cents, and the gold price in 1932, and 7 .42 cents, the equivalent gold price on January 15, 1935, or 84 points, or less than one cent per pound. In other words, stated frankly and bluntly, the Government's cotton-reduction program cannot be given credit for more than 84 points of the dollar advance in the price of cotton since 1932. We have 12.56-cent cotton now instead of 7.42-cent cotton because we have a 59-cent dollar. The cotton dolla1r vs. the gold dollar.-Figure No. 2, which shows the decline of the American dollar in terms of the French gold franc and the advance in the American-cents 9rice of cotton, illustrates very vividly the close relationship between the fall in the value of the dollar and the rise in the dollar price of cotton in the United States. In the light of facts presented in Figure No. 2 can there be any ques­tion as to what caused the advance in the dollar price of cotton after April, 1933? Why did the dollar price of cotton advance in proportion to the fall in the gold value of the dollar, whereas most other com­modities did not? A good question. The answer is that about 60 per cent of American cotton is normally exported and that the export price is a world gold price. Foreigners pay for cotton through the purchase of dollar exchange. As the gold value of the dollar fell, dollar prices of cotton went up in almost exact ratio because other­wise American cotton would have declined in gold value and become an exceptional bargain in world markets. Potatoes, eggs, and other commodities produced for domestic consumption are priced in dollar currency and not in terms of the gold exchange value of the dollar. The facts just cited relative to the cause of the advance in the price of cotton should be given great weight in shaping the cotton policy of the United States. To ignore them is to commit economic suicide in so far as the South is concerned. It has been shown that the decline in the gold value of the dollar explains the major share of the increased dollar value of cotton. It has also been shown that less than one cent of the advance in the price of cotton from 6.58 cents in New Orleans on January 15, 19·32, to 12.56 cents on January 15, 1935, has been due to supply-'lnd­demand conditions. This is very significant because the fundamental part of the United States Department of Agriculture's program to Government Control of Cotton ProductioJl 245 aid the cotton farmers has been to reduce the supply to raise the price. We know there has been some improvement in world business conditions, which has improved the demand for cotton; but just what fraction of the 84-point advance in the gold price of cotton has been due to reduction of supply, is problematical. However, it is certain that not all of the 84-point advance is due to forced reduction of supply. Has reduction paid?-Let us grant, though for the sake of argu­ment, that the total advance of 84 points in the world gold price of cotton has been due entirely to the Federal Government's cotton­reduction program; the next question is, has it paid, even granting that? Let us see. According to official figures, the A.A.A. has kept out of harvest during the past two years a little over 8,700,000 bales of American cotton. By so doing, we have granted, the gold price of American cotton has been raised 84 points on the 22, 778,000 bales actually harvested. Over the whole period, of course, it has been much less than that, for last year the gold price was even lower than in 1932. The 84 points multiplied by the 22, 778,000 bales equals about $95,667 ,000. Now suppose the United States had not plowed up any cotton in 1933 or kept any out of cultivation in 1934, and that the production of the extra 8,700,000 bales had caused the gold price to go down as much as its reduction caused the gold price to rise; that is, the full 84 points even cumulatively for 1934-35. The two crops in that case would have sold for more dollars than they actually sold for. It will be observed that the price curve for the world's supply of cotton shows this assumption to be generous, because, on the average, each additional unit added to the supply causes a smaller decrease in the price. This assumption is, of course, in line with the theory of those who wish to reduce supply to raise price. Other losses due to raise in cotton prices.-In addition to the fact that the two American crops would probably have brought more money to the farmers, the Government's program caused the loss of over $50,000,000 worth of cotton picking, about $40,000,000 worth of ginn:ng, $30,000,000 worth of transportation, $30,000,000 worth of compressing, warehousing, interest and insurance payments, and mer­chandising; and curtailed the production of nearly 3,500,000 tons of cottonseed, which would have had a working cost of more than $20:000,000. These items by no means exhaust the total cost of this destructive program. The Government destroyed and prevented pro­duction of over 2,500,000 tons of cottonseed meal and hulls, and then later had to kill our cattle, sheep, and goats because we had no feed. In the absence of this program, world textile mills, especially our own, would have been far more active, and all the people better clothed. \Ye would have kept foreign production down and strength­ened our position in world markets, instead of losing it as we have. The University of Texas Bulletin Results of cotton program.-In the light of the figures cited, it seems evident that the cotton-reduction program designed to raise prices did not work, and that it is probable that even as an emergency measure it has done more harm than good. The fact is, the cotton growers were given a tremendous advantage through the devaluation of the dollar, for prices of other things did not go up nearly so rapidly as cotton. Under these conditions, prob­ably the logical thing for the cotton growers to do would have been to increase production of cotton instead of decreasing it. The processing tax.-When time and experience have written the full history of all items of the Government's cotton program, it is probable that the processing tax of 4.2 cents per pound on cotton delivered at the mill will be found to have done more lasting harm than any other item in the program. The most obvious need of the cotton industry is for wider markets. The processing tax, by raising the price of goods, is restricting cotton consumption. What is still more serious, the processing tax serves as an indirect subsidy for products competing with cotton goods, especially synthetic fibers. A sales tax.-The processing tax is the worst sort of a sales tax. It is put on at the mill and has to be pyramided through at least three agencies before the consumer finally pays it. It is difficult to conceive of a tax that costs more and pays less in proportion. The public pays it four times. In the first place, the consumers pay the 4.2 cents pyramided when they buy the cotton goods. In the second place, an equivalent tariff is put on all imported cotton goods; and to the extent that the public buys such goods, it pays the processing tax on them. In the third place, the tax money collected is used to pay farmers to restrict supply to raise price-­which, if it works, will further raise the price of cotton goods; and so the public pays again. In the fourth place, the restriction of cot­ton production by the use of the tax money for the purpose of restricting cotton acreage has been the biggest factor in throwing hundreds of thousands out of work and on the relief rolls in the South. The public has to pay again, and heavily, in higher taxes or to take care of those on relief. Affects poor people.-The processing tax falls heaviest on those least able to pay because it is heaviest on coarse goods, the ones poor people buy. Gove-rn'YMnt interference with marketing processes.-Efforts of the Federal Government since 1929 to interfere in one way or another with normal cotton-marketing processes have been injurious to all concerned. The disastrous effects of the Farm Board's efforts to peg prices are well recognized and need no comment. On the other hand, it is difficult to see any fundamental difference between the Farm Board's program and the 10-cent loan in 1933 and the present 12-cent Government Control of Cotton Production 247 loan. They are all price-pegging devices of a sort and serve to ac­cumulate surpluses which should, and otherwise would, move orderly into consumption. It has been demonstrated over and over again that in effect it amounts to the Federal Government's holding an umbrella over our foreign competitors~ Such a policy will almost invariably do more harm than good, especially in respect to a commodity with a world market and production such as cotton. Cotton a community industry.-lt seems apparent that those re­sponsible for framing the Government's cotton program had an entirely inadequate conception of the industry's ramifications in the economic and social life of the South. Cotton growers, pickers, gin­ners, cotton merchants, compressors, transporters, bankers, supply merchants, manufacturers, and many other groups are engaged in the great cooperative enterprise of creating wealth out of cotton. To say that the service of one group is more important than that of another is to quibble over terms, and to try to aid one group at the expense of another is to tear down all in the long run. No cotton program has a chance to succeed which is not big enough to include all branches of the industry. Unfortunately, the cotton program of the Federal Government is entirely too restricted in its scope to succeed. Restriction of production as a long-time policy.-ln the case of any commodity produced for a world market, there are two fundamental reasons why enforced restriction of supply to raise price will not work as a long-time program; in the first place, such a program stimulates foreign production; and in the second place, it restricts demand and invites substitutes. Modern developments indicate that American cot­ton is far more vulnerable to attacks from both of these avenues than seemed possible even two years ago. As has already been pointed out, official figures indicate that the Government has reduced American production 8, 700,000 bales during the past two years, and that during the same time foreign production has increased about 4,200,000 bales. In other words, to date under the program, American cotton growers have reduced their harvests two bales in order to reduce world har­vests one bale. What to my mind is far more significant, world supplies have been reduced far less than production, due largely to restricted consumption. The world supply of cotton on July 31, 1933, was 16,255,000 bales, and indicated supplies on July 31, 1935, are about 14,450,000 bales, a reduction of only about 1,800,000 bales, which means we have reduced American production about 8,700,000 bales to get a reduction of 1,800,000 in world supplies of all cotton, a ratio of about 4 to 1. Prior to the inauguration of the Government's cotton-restriction program, the United States produced normally about 57 to 60 per cent of the world's supply of cotton. This year our production is about 43 per cent of the world total. The United States has voluntarily moved from its position of commanding importance in the world production The University of Texas Bulletin of cotton to one of secondary importance, compared with the total of the rest of the world. Loss to farmer hard to measure at present.-It is impossible yet to measure the cost of this restriction program to the South, and espe­cially to the cotton growers. In the past, America's share of the world production of cotton was so large that the size of the American crop dominated price movements. Thus in years when we had a big crop we had large volume to offset low prices, and when we had a small crop we had high prices. With the rest of the world producing over 50 per cent of the supply, it is possible for us to have a low yield and a comparatively low price at the same time. Thus the smaller our proportion of the world's cotton crop, the greater become the fluctuations in yields and the uncertainty of our income from cotton. In the past the large dependable supply of different classes of cot­ton coming from America gave our cotton a market value of from 100 to 200 points over equivalent qualities of foreign growths of uncertain supply. As a result largely of the cotton-restriction program, cotton loans, and other interferences with free markets, American cotton has lost a large part, if not all, of its market advantages. Reduced supplies mean increasing processing and marketing costs for Ameri­can cotton. A declining industry is always subject to increasing costs. Foreign production increasing.-Contrast the gloomy outlook for American cotton with the prospect for foreign growths. Millions of spindles which were built to spin American cotton are now having to be adjusted to spin foreign cotton. Foreign growers are increasing their volume, which increases the dependability of their supply, and enables them to classify their cotton into more even-running lots, to lower costs of processing and marketing, and to build up good will. Gov6rnment policy has "Yippled tke merchandising force.-The American cotton crop had built around it the strongest, best mer­chandising force ever to back a commodity. Well-trained salesmen with ample capital were strongly urging the sale of American cotton in every cotton-consuming market of the world. Because of volume sales and highly specialized technique, they were performing this service at an incredibly low cost. The Government's program since 1929 has severely crippled that force and is now literally driving it out of this country with its capital, to buy foreign cotton, especially to supply customers in Europe. In reality we are not only giving the foreign producers our markets, but we are also giving them our mer­chandizing force with its capital to market cotton. Foreign customers and competitors with whom I am in contact marvel at the utter aban­don with which we have been doing these things. Synthetic fibers a threat to the cotton industry.-All available facts indicate that increasing foreign cotton production, serious as it is, is perhaps not so important as increased competition of substitute textile materials, especially synthetic fibers. World production of synthetic Government Control of Cotton Production 249 fibers last year, especially rayon, increased about 130,000,000 pounds -that is, about twice the trend in the normal increased demand for cotton due to the increase in world population. Synthetic fiber produc­tion involves a physical and chemical process and is thus subject to lowered costs with increased volume. William J. Hale of the Chemical Foundation, a chemist of recognized authority, recently made the statement that cotton is 98 to 99 per cent alpha-cellulose, and that alpha-cellulose can be made from wood-pulp at a cost of four cents a pound. Hence, artificial silk-like fiber is based upon a price for alpha-cellulose, which forever prevents cotton, as a substitute, from rising materially over about five cents per pound. Figure No. 4 shows world rayon production since 1920. From what has been said, is it not clearly evident that the Federal cotton-restriction program to raise prices is increasing foreign cotton production on the one hand and rapidly increasing competition of other textiles, especially synthetic fibers, on the other, and that it has absolutely no chance of success as a long-time program? A constructive cotton program.-! shall conclude this paper with an outline discussion of a constructive program for the cotton industry. As has already been agreed, the two major objectives of the cotton program for cotton growers are: income on a parity with the base period of 1909 to 1914, and an increased measure of security. Let us discuss, first, ways and means of securing parity income. As has already been stated, parity income is a product of price times volume of production. Is it possible in order to increase income, to raise the price of a commodity and at the same time expand the market? Yes. Those who know American cotton know that there are very great opportunities for the improvement of its quality. I submit that the improvement of the grade, staple, length, and other quality characteristics of American cotton is the surest way to raise its price. Our soil, climate, skilled technicians, intelligent farmers, and highly developed marketing system give us our greatest advantage over our competitors. The Buchanan Bill now before Congress would aid greatly in developing this part of the program, in that it would tend to give cotton growers confidence in measures to improve the quality of cotton. It may be old-fashioned these days to talk about lowering costs of production, but that is exactly what must happen on most of our cotton farms. This does not mean longer hours and lower rates of pay. In a great many ways it will mean just the opposite. It can and will come through better planning and better financing. In view of facts already cited, would the Government not be rendering the cotton farmers of the United States a far more constructive service if it devoted the funds and technical skill at its command to helping farm­ers increase their margins by lowering their costs of production, The University of Texas Bulletin instead of devoting its resources to cutting down production to raise price? Market restoration essential.-Restoration of markets, both do­mestic and foreign, for American cotton is an essential part of any program for restoring the cotton farmers' buying power. Tariffs must be lowered to lower farmers' costs of living and to provide a broader base for foreign trade. It will be necessary to stop governmental interference with the free movement and marketing of cotton, whether by some price-fixing scheme or by acquiring and holding cotton. American manufacturers will profit much more by increasing the buying power of the South, than by placing too much emphasis on foreign markets for their finished goods. Better farm 11ianage?nent needed.-Better farm-management prac­tice is the crying need of the South. It can be made the means of effectively controlling cotton acreage, of developing more cash enter­prises, of raising the standards of living on farms, and of eliminating the one-crop system. When properly worked out, it will be the biggest factor in preventing erosion and in restoring soil fertility. In order to accomplish the desired results, it will be necessary to make approval of allotments for benefit payments conditional on the adoption of farm-management programs outlined by the agricultural colleges of the different regions, and to work out a more flexible and permanent contractual relationship between landlords and tenants. The development of this phase of the plan would be the biggest educational program ever undertaken in any region; however, there is no question that it can be done with even less than the funds being spent by the Federal Government in its cotton-reduction program. Real homes for rural families.-Restoring hundreds of thousands of rural families now on relief rolls to real homes on farms will be a task of the first magnitude. Such a task is an inseparable part of the cotton program, for no other enterprise offers anything like the volume of profitable employment for so large a body of unskilled labor. In order to accomplish the desired results, it will be necessary to restore cotton production to normal levels, and in doing so it will be necessary to equalize the buying power and social opportunities of the actual cotton growers with those of persons of like skill residing in towns and cities. Under the present emergency, this can be done only through some form of benefit payments like those already suggested. Security of income.-In many respects security in small income is more important than large income with insecurity. The greatest sources of insecurity among cotton growers are fluctuating yields and fluctuating prices. A source of diversified income is the best and perhaps the only lasting security against such hazards. Farmers generally recognize the problem and often caution each other against "taking all their eggs in one basket." Low costs and high-quality Government Control of Cotton Production 251 z 0 ~ ... 0 tton restriction 'fYT"Ogram of the United States." Thus for the second time in its checkered history, Brazilian cotton is seen the beneficiary of a domestic emergency situation in the United States. The first was in 1861. A review in O Jornal a newspaper here, said: "The Civil War of the United States proved a great incentive to cotton production in Brazil." The University of Texa.s Bulletin And at Brazil's first national cotton conference, held recently in Sao Paulo, a speaker told delegates from 14 States that their country's second great epoch in cotton had been due "considerably to the Amer­ican war of secession." Cotton once ruled as king here. The country led world production from 1781 to 1800. Brazil's capacity is 'vast.-Said a recent study of the foreign min­istry: "The productive capacity of Brazil is so vast, and so easy is its improvisation to produce, that there was a time when we sent Eng­land markets more than 700,000 bales of cotton (1872) ." This compared with Brazil's total exports last year of 558,076 bales. In 1933 the total was 51,566. Today cotton grows in all Brazil's 20 States. Official estimates are that literally millions of acres in this tropical and subtropical land are fit for its cultivation. The soil is largely virgin. Thirteen of the world's 24 longest rivers are in Brazil, some with the richest alluvial sediment. "The entire area given over to cotton now is 1,200,000 hectares, 45 per cent more than last year," musingly said a report of the Minisb·y of Agriculture in 1934. That means 2,964,000 acres compared with 1,976,000 in 1933. Golden era at hand.-Brazil is entering what some officials and planters call "the golden age of cotton." At the producers' conference in Sao Paulo, plans were laid for large scale production and an in­vasion of world markets. INCREASE IN ARGENTINA'S COTTON PRODUCTION SHOWN (From The Cotton Trade Journal, Vol., 15, No. 21, June 1, 1935, p. 3. Published by The Cotton Trade Journal, Inc., New Orleans, La.) Cotton cultivation has increased in Argentina in recent years, a report to the Commerce Department from Commercial Attache A. Y. Dye, Buenos Aires, shows. In the 10-year period between 1920 and 1.930 the number of acres planted in this crop increased from 60,000 acres to 314,000 acres, while in the crop year 1933-34 the total acreage had increased to 482,000, statistics show. Argentine cotton is grown chiefly in the Chaco region in the northern section of the country which lies near the tropics. Estimated production in 1934-35 was approximately 55,000 metric tons, an in­crease of about 12,000 tons compared with the preceding year. Sixty pe1· cent exported.-Approximately 40 per cent of Argen­tine's cotton fiber is consumed within the country while 60 per cent is exported. Practically all of the cottonseed produced is consumed locally. Cotton fiber exports have risen progressively in recent years, the report shows. Total shipments abroad from March 1, 1934, to February 28, 1935, amounted to 36,275 metric tons, compared with 27,112 metric tons in 1933-34 and 20,564 tons in 1932-33. lndUBtry being ez'JXLnded.-Concluding his report, Commercial Attache Dye points out that Argentina's cotton manufacturing indus­try has expanded in the last two years more rapidly than in pre­ceding years, consuming larger quantities of local cotton. IV. IS THIS THE BEST POSSIBLE REMEDY~ A PROGRAM FOR FARM RELIEF By EDWIN R. A. SELIGMAN, LL.D. (Reprinted from Seligman: Economics of Fa.rm. &l.ief. pp. 18~209. by permission of the Columbia University Press. 1929.) What can the Government do for export trade?-If, then, we in­quire what the National Government can do for agriculture, we must at the outset remember our classification into world and domestic problems; we need, moreover, again to divide the latter class into two categories : Government action which affects agriculture only incidentally, as contrasted with the action that deals with agricul­ture more directly. In other words, we have to consider a general governmental policy, affecting agriculture among other things, as well as a special farm policy influencing agriculture in particular. A program of Government farm relief must be built partly upon general legislation and partly on specific effort. lnte1-national coiiperation.-In so far as agriculture is affected by world conditions, it is clear that the most important phase of Govern­ment activity must be devoted to the elimination or diminution of war. The fundamental difficulty into which American agriculture has recently been plunged is, as we have learned, due primarily to the aftermath of the War. If we wish to prevent a repetition of such a situation, we must bend all our energies to render impossible the recurrence of war. If the farmer really knew his own interests, he, more than almost any other class in the community, would abandon the old-time policy of national isolation. He would realize that it is impossible for our country today to practice the policy of aloofness with any hope of success. He would learn the lesson of the ~~rld War and would appreciate the fact that, whatever be the political constellation it is impossible for him to avoid being implicated in the nexus 0 i. world forces. The farmer, if he correctly estimated his 288 The University of Texas Bulletin own position, would today become the chief advocate of a close asso­ciation of his country with the other nations of the world, in the endeavor to create a political basis for common economic action. W a.r debts ·must be settled -Furthermore, not only would a govern­ment, solicitous of the interests of the farmers, abandon the present policy of "splendid" isolation but it would take a very different atti­tude to some of the problems bequeathed to us by the War. If, as we have seen, one of the causes of the recent difficulty was the falling off in the European demand, a government really mindful of the prosperity of the farmer would do everything in its power to restore as rapidly as possible the foreign purchasing power. This would mean, among other things, a different attitude of gov·ernment toward the question of the allied debts. A notable consideration in that ques­tion is not so much what Europe can afrord to pay as what we can afford to receive. Inasmuch as our exports are still so largely com­posed of agricultural products, our insistence on the repayment of the allied debts reduces to that extent the ability of Europe to relieve us of those commodities. A government intelligently devoted to the best interest of the farmers would reconsider our whole attitude on the allied debts. Must create stable money.-The second possibility of government action designed to influence the operation of world causes affecting agriculture is concerned with the changes in the general price level. In the case just discussed, the difficulties emanate primarily from in­fluences affecting commodities and chiefly from the dislocation of production and consumption engendered by the War. In this case the principal difficulty is ascribable to the conditions of the money supply, in the broadest sense of the term. The objective there is a more stable purchasing power the aim here is the creation of a more stable money. To this problem statesmen and economists have of recent years been addressing their best efforts. While no definite solution is yet in sight, it may be said that, inasmuch as the difficulties arise from world causes the solution must ultimately be sought in world cooperation. In fact, we even now notice the beginnings of such cooperation in the field of banking. Since the United States has become the chief custodian of the gold supplies of the world and is now to an increasing extent the creditor nation of the world, the Federal Reserve banks have begun to realize the responsibility that rests upon them and have been giving some attention to the attempt to preserve, as far as within them lies, a more stable level of prices. Through their discount policy and their open-market purchases, they have commenced to exert such an influence. What is more to the point, they have learned the desirability of at least an incipient cooperation with the banking systems of Europe in order to prevent sudden fluctuations of the price level. To the extent that our currency affairs are successfully handled, agriculture, like every other form of business, will benefit. Government Control of Cotton Production 289 Thus in the fields both of the avoidance of the cataclysm of war, as well as of the stabilization of the world's currencies, the Govern­ment of the United States has significant tasks to perform. Domestic trade and Government aid.-When we leave the world arena and come to consider the more particularly domestic problems in the solution of which Government can play a role, it is possible to classify the Government functions under four heads. These might be specified as the functions of regulations, of equalization, of edu­cation, and of price modification. Control of speculation.-The function of regulation has reference to those external agencies that materially affect the position of the farmer. It would comprise the attempt to deal with speculation; with the charges and practices of the elevators, warehouses and exchanges; and, above all, with the various media of transportation. This func­tion would be a part of the general regulative activity of Govern­ment that has been engendered by the complications of our modern capitalist economy. Other governmental functions.-The function of equalization has reference to the duty of Government to ove:tcome or to lessen the discrimination that has developed between agriculture and the other phases of national life. Under this head we might include credit, taxation and the tariff. Education.-In education we might put such activities as would aid the farmer to help himself. These would include spread of in­formation and advice which would come from further research on the part of the Government authorities on almost every point that affects the life of the farmer. They would comprise such matters as the collection and dissemination of the pertinent statistics; the effort to introduce a proper classification of lands for arable, grazing or forestry purposes; and all those points where the increasing knowl­edge of the expert might be made available to the individual farmer. Price modification.-The fourth function, that of price modification, has to deal with the effort to modify or to influence the more basic factors of agricultural prices. These four functions may, as has just been stated, be divided into two categories, the one reflecting the attitude of Government in gen­eral toward the economic life of the community as a whole, with only incidental regard for agriculture; the other representing a series of activities designed more particularly to assist the farmer. If we regard the problem from this angle, it will be found that the functions of regulation and equalizati~n f~ll wit~i~ the first category, and those of education and price mod1ficat1on w1thm the second category. They are both parts of a general farm program, but t~ey differ in th~t the one category has to deal with the general f~nct1ons and agen~1es of Government, while the other is concerned with the more specifically agricultural functions or agencies. Although Government has already 290 The University of Te:ras Bullet-in accomplished not a little in all these matters, the lack of a compre­hensive program has precluded entirely adequate achievements. Taxation.-... The problem has two sides to it, that of ex­penditure and that of revenue. In proportion as our economy has become wider in character and as the national market has been re­placing the local market, there has been a distinct trend toward the assumption by the National Government of functions hitherto rele­gated to the States. It is the same development as that which has been going on within the States as between the State and the local government. The more restricted and confined the area, the more difficult is it for that particular agency of Government to meet the new responsibilities that have been thrust upon it. Characteristic is the very recent movement in New York, where an essential feature of farm relief has been declared by Governor-elect Roosevelt's agri­cultural council to consist in the transfer to the State of not a few classes of expenditure hitherto reserved for the localities. For in New York the first step in the reform has already been taken. The general property tax has virtually disappeared for State purposes and has been replaced by the income tax, thus affording the farmer some relief. What is taking place as between State and local expendi­ture is also commencing as between Federal and State expenditures. In the matter of improved roads and in education this movement is only in its beginning. As time goes on, it will be realized that the development must be accelerated. In proportion as our economic life is becoming national, the fiscal ability of the nation is destined to grow more rapidly than that of the States; and with this transition there must come a further shifting of Government functions. Just as the country schools were gradually being improved through the help of State funds, so the State highways are being rebuilt through Federal assistance. Expenditures which are difficult to make from local budget can more easily be met from State resources; tasks which transcend the abilities of State initiative are gradually being ren­dered possible through Federal expenditure. Taxing systern is unfair to farrner.-On the other hand, so far as concerns revenues, it is notorious that our prevalent system of State and local taxation is unfair to the farmer. The situation is especially burdensome to hjm at present where State and local taxation has been increasing rapidly in the face of a correspondingly rapid decline in his income. The State and local revenues still consist to a very large extent, and especially in the agricultural communities, of the general property tax; whereas, in the more industrial states, like New York, the general property tax has been replaced by the income tax. The business man has realized that his prosperity is to be measured in modern times by his profits, and not by his stock in trade. The farmer is only beginning to learn that, under a system where intangible per­sonalty slips out of the assessment lists and especially in a period of low prices, with a comparatively slow adjustment of land values to lessening profits, he will fare better under an income tax than under a property tax. Where, as is so generally true, tax reform is delayed by the opposition of the middle classes and the force of tradition, it is even a question whether it would not be desirable for the Federal Government to use its influence in hastening the transition of State taxation from a property to an income basis. The Federal Govern­ment is already exerting pressure upon the states to retain and to modify the system of inheritance or death taxes. Is there any sound reason why a similar influence might not be exerted with respect to the income tax? Local finance has been considerably improved in recent years by the pressure, direct and indirect, b~ought to bear upon the localities by the States. Are we not fast nearing the time when a similar pressure exerted by the Federal Government may help to bring about more equitable methods of State taxation? The tariff.-... Lowering the cost through a reduction in the tariff would naturally constitute one method of improving the status of the farJner. We should in this way reduce the farmer's expenses of production and his cost of living without setting in motion the com­plicated machinery which would be necessary in order to bring about an increase in the prices of his products. A reduction of the tariff presupposes, however, that the farmer does not secure any benefits from the protective tariff. We need not go into this question, because of the obvious consideration that it would be believed to mean a lessening of the profits of the manufacturer and a reduction in the wages of the laborer. Whether or not these consequences would follow is immaterial, because of the evident political impracticability of the entire scheme. Whatever we may think of the advisability of a sub­stantial reduction of the tariff, there is no doubt that it is as yet beyond the pale of practical politics. The United States is committed for good or for evil to the policy of protection; and it will in all probability not be until our exports become overwhelmingly industrial in character and until the foreign market assumes a far greater im­portance than the domestic market that we may expect to see any change of moment in the tariff. Since, therefore, a reduction of the tariff on the products purchased by the farmer may be eliminated from practical consideration, the question arises as to whether the tariff cannot be increased for the purpose of securing higher prices for the products sold by the farmer. Foreign competition f-0r home markets of slight importance.-So far as a direct benefit from agricultural protection is concerned, it must be remembered that many of our agricultural products are not in a position to be injured by foreign competition. In certain staple com­modities like cotton and wheat, we are on an export basis, and in not a few other products the costs of transportation are so relatively large as in themselves to act as protective influences. There are, 292 The University of Texas Bulletin indeed, a few exceptions as in the case of wool, of sugar, of certain grades of wheat, and occasionally of other products in the areas contiguous to the Canadian frontier. In the main, however, a direct influence of the tariff on agricultural products in general would be difficult to establish at the present time. Export duties, even if they might be of any use, are forbidden by the Constitution; and import duties are of slight avail when nothing is imported. OUR VANISHING MARKETS By W. L. CLAYTON (From The Cotton Crisis, Proceedings of Second Conference, Institute of Public Affairs, pp. 25-29; 33-39. Arnold Foundation, Southern Methodist University, Dallas, Texas, 1935.) Governniental policy rnust off set the tarijj.-If the industry hereto­fore chiefly responsible for supplying the economic life-blood of the South is to continue to decline under governmental policies, how are these southern people now on relief going to be put back to work? Every step taken by our Federal Government for the relief of the cotton farmer has, in the words of one of our eminent economists, merely been "a counterweight to the tariff." No one questions that the cotton farmer has been placed in a position of grave economic inequality. Few question that the tariff must bear the major re­sponsibility for this injustice. Then why not remove the obstruction to economic health by a major operation, instead of administering palliatives which only weaken and debilitate? Instead, we do nothing about the tariff, we continue to demand payment of the international political debts, meantime drawing as if with a huge magnet vast quantities of gold and silver from all parts of the world, causing deflation and making impossible any substantial advance in the world price level. When finally the great bulk of all the world's gold has been stored in the subterranean vaults of our Treasury, how then will we get paid for our exports? The only sound policy for relief of our agricultural surplus-producing population is a drastic reduction in the tariff and recognition of the uncollectibility of the war debts, so that our surpluses may again find a market abroad at compensatory prices. A possible alternative remedy: the domestic allotment plan.-lf this course be politically impossible, which I question, then we must make the tariff principle protect our producers of agricultural surpluses. The only way in which this can be done as to cotton is to subsidize in one form or another our production of cotton for the domestic market, free absolutely of any condition of acreage reduction. It is admitted that this simply means the adoption of one artificiality in Government Control of Cotton Production 293 -order to preserve another-a process which will go on and on until eventually the whole false structure collapses. If the protected group persists in its refusal to give ground, the sooner it is forced to admit within its circle all producers, agricultural as well as industrial, whether for domestic use or export, the quicker will the whole rotten fabric give WHy, enabling us to start building anew on a foundation of social justice and economic truth. The Do·•Yf,estic Allotment Plan as a remedy.-The so-called Domestic Allotment. J:>lan is p!"ovi~led for in the present law and can be applied without requirement of acreage reduction. Under that plan, prices would be permitterl to reach natural bvels, but the producer would be compensated by the Government, up to "parity" price, on the do· mestically consumed portion of his production. He should be left free to produce or not to produce for export at the world price. There is only one means of preserving a correct balance between supply and demand in a great world commodity like cotton, and that is through the corrective influences of competitive price levels established in the free markets of the world-a harsh method, rerhaps, but the only one that works. For centuries, man has sought protection in other sys­tems, only to find that temporary shelter ends in disaster. Dr. A. B. Cox, of The University of Texas, has suggested that funds for carry­ing out the Domestic Allotment Plan should be taten from tariff revenues. There is much to recommend this suggestion. It would do away with the processing tax which is nothing but an exorbitant and specialized sales tax on one of the prime necessities of life, the impo­sition of which certainly puts cotton under a heavy handicap in its competition with other fibers. A.A.A. will destroy the farming industry.-Our present cotton pol­icy means the complete loss within a comparatively short time of our export markets for cotton. I ask again, how will we then put to work the 2,000,000 families formerly earning their livelihoods in this trade? Are they, perhaps, to go to the cities and work in the factories? What cities'! What factories'! Or must they start to raising corn and hogs in competition with the Middle West'! If there are other channels, more remunerative than cotton rais­ing, in which the economic energies and resources of the South may be employed, the experience of more than a century has failed to develop them. Possibly those responsible for charting our present course have in mind some other and more profitable activity to which southern labor and capital can turn; if so, they have thus far failed to indicate it. 294 The Uniz,ersUy of Te:ras Bulletin THE DOMESTIC ALLOTMENT PLAN By JOHN D. BLACK, PH.D. (From Agricultura.l Reform in the United States, pp. 271; 281; 283-284; 289-292; 294-298. Published by McGraw-HiU Book Company, New York, 1929.) The essential principle of the Domestfo Allohnen.t Plan is paying producers a, free-trade price plus the tariff duty for the part of their c>·op which fa consumed in the United States and this price 1vithout the tariff duty for the part of U that 'is e:rpo1·ted this to be aJTanged by a system of allot­ments to individual producers of rights to sell the dom,estic part of the crop in the domestic market. Two important advantages are gained by such a plan: first, the stimulus to further production for export characteristic of the other plans is largely if not altogether removed; and second, for this reason, foreign countries cannot object to it on the usual grounds of their objection to export bounties, or raise import duties to meet it as they can with a specific export bounty. The economic principles basic to the operation of this plan now begin to stand out. First of all, it is a plan which "makes the tariff effective" in a more direct sense than do the other plans. The allot­ment rights are worth an amount per bushel to the grower which equals the amount of the tariff duty, except for the discounts and transportation and quality differentials above mentioned. The plan simply gives the tariff rate a chance to impose itself on the whole of the domestic consumption. Second, it leaves commerce in the commodity on a free-exchange basis so far as transportation advantages and quality differences are concerned. A.dniinistrafive vroblems.-The weaknesses in the plan from an administrative point of view other than those of making the allot­ments at the start, already described, are as follows: (a) Some growers may try to increase their allotment by falsifying reports and records; (b) local buyers may not make purchase records with suffi­cient care; ( c) millers may conceal evidence of purchase of wheat, and of production and sale of flour to brokers, etc., thus saving the cost of purchase of rights. Conceivably, a grain dealer and miller might enter into a secret agreement to conceal a transaction; or a miller and dealer in flour; ( d) milling for local consumption in remote districts might develop to a small extent-"moonshine'' flour might become a subject of conversation. The internal revenues have not caused troubles of this kind with tobacco, and they probably would not with wheat. Application to cotton.-In many ways, the plan appears more ap­plicable to cotton than to wheat. It would, of course, be necessary first to establish a tariff duty on cotton. It might be advisable in establishing tariff duties on cotton to vary the rate according to the length of staple of the cotton. Otherwise, imports of the longer staples would be stimulated. The manufacturers would figure that if they must pay import duties on cotton, they had better get the best grade they could for the money; and their reason­ing would be sound. Combining the transferable-rights allotment plan with the tariff duty would add a special stimulus to such imports because its basic principle of operation is to force exports out of the country to the point of raising the domestic prices by the amount of the tariff. The exports forced out under such circumstances would be of the grades of cotton least desired by our cotton mills, and bet­ter grades could be imported instead if they could be found abroad, unless the tariff duty was scaled to prevent it. If the tariff duty was a flat rate regardless of staple, the plan would slightly favor the development of forms of textile manufacturing in the North based on the use of imported staples. If it did, the South could well afford to overlook it in view of the great gain it would derive from the higher price for the cotton covered by the allotment rights. It might well be deemed good national policy to let the mills import the better grades. It would encourage the development of textile manufacturing using such grades of cotton. Saving in transportation would figure less in encouraging imports of cotton than of wheat because most of the competing supplies of cotton are at a considerable distance-not close like wheat in Can­ada. On the other hand, transportation costs are a smaller part of cotton values than of wheat values. Tenants and allotment rights.-The great amount of cotton pro­duction by tenants and under crop liens will make especially impor­tant the matter of the person to wh<>m the allotment rights are assigned. The arrangement previously suggested of assigning them to the tenant, but giving the landlord authority over them till the crop is delivered, and final ownership if the crop is not delivered, should work in this case the same as with wheat. But the matter must be handled so that the grower could get his production credit early in the season. This could be done by having the landlord make the advance to the tenant, which would be without interest, because the landlord would be getting his interest out of the appreciating value of the rights as the season advanced. Or the landlord could instead assign his equity in the rights to a merchant. 296 The University of Te:ras Bullet'in The interest realized from the possession of the rights would be at low rates compared with those prevailing in the South; for rea­sons already stated, they would be the rates at which this form of paper would be actually discounted. If local bankers or merchants were to undertake to exact higher rates, agencies would at once de­velop which would be glad to handle this paper at regular rates. All owners and operators would be able to cash in on their rights at once at these rates, and landlords and tenants would manage between them to secure the regular rates. It is highly probable that the cooperative associations would take advantage of this new production credit, and that it would assist them greatly in setting up agricultural credit corporations for their mem­bers and by reducing the necessity of large advances to growers upon delivery of the cotton to the pool. It would also solve in considerable part their difficulty of crop liens on members' cotton. The production credit feature of the transferable-rights plan as applied to cotton is of tremendous significance. Production of credit is more needed than anything else in the South. This plan provides a considerable amount of it with startling directness and simplicity, provided the allotment and other features of the plan are workable. The ins1tTnnce feature of the Domestic Allotment Plan.-The in­surance features of the plan will work out somewhat differently than for wheat, because the United States produces so large a part of the world supply, and the curve of net income from the cotton crop slopes downward rather than upward. The table following parallels the one for wheat given earlier. An effective tariff duty of 5 cents a pound is assumed, 17 ,977 ,000 bales as a large United States crop and 13,628,000 bales as a small United States crop; and 6,000 pounds of lint cotton as a large individual farm crop, 2,000 pounds a small individual farm crop, and 2,000 pounds as the allotment to this farm. A.-A Small Unitf:d Sta.tes Cotton Crop (1924) of 18,628,000 Bales at an Average Price to Producers, December 1, of 22.6 Cents Per Pound. Farm production, pounds -----· ---------------­Sales value ----------------­Expenses ---------------------­ Net income -­Ratio of net income to expense -------------­ - ( 1) At present 6,000 1,356 588 2,000 $452 422 $768 $30 1.31 0.07 (2) Under propo ed plan 6,000 2,000 $1,456 $552 588 422 $868 $130 1.48 0.31 B.-A Large United States Cotton Crop (1926) of 11,977,000 Bales at an Average Price to Producers, December 1, of 10.0 Cents Per Pound. Farm production, pounds ----------------------­Sales value ------------------­Expenses --------·--------------­Net income -------------------­Ratio of net income to expense ------------------­ (1) At present 6,000 2,000 $654 $218 588 422 $66 -$204 0.11 -0.48 (2) Under proposE:J plan 6,000 2,000 $754 $318 588 422 $166 -$104 0.28 -0.25 With a short crop in general and high prices, the plan would insure the farmer against loss to the extent of $25 a bale on the four-bale crop assumed as a short crop for him, but would add only $8.25 a bale to the price of his crop if he were so fortunate as to have a twelve-bale crop on his farm. The price of cotton falls so low when there is a very large crop that even the help obtained from the plan would not prevent a loss if an individual grower happened to have a poor crop that year. The plan may increase production of cotton more than of wheat because of the greatest significance of the credit advance at planting time. It may cause more fertilizer to be bought, and in later years, more machinery. Cotton labor is more largely family labor, which partakes of the nature of fixed costs. Plan would check acreage inerease.-Since our own production is so large a part of the total, reducing the allotments would no doubt have a significant effect in checking increase in cotton acreage if a period of overproduction surpluses threatened. Cotton production has been shifting rapidly of late; and if mechan­ical picking develops in the near future, the shifts will be even more pronounced. Unless the allotments are carefully handled, this shifting may be hampered somewhat. In general, however, the transferability of the rights takes care of this difficulty. Most of the other administrative features of the plan will be as easy to handle as for wheat. There will be fewer small mills to supervise, and there will be no uses of cotton comparable to those of wheat for feed and seed. The checking of purchases of cotton against output of cotton products at the mills will be more difficult. The separation of the manufacturing operations between spinning, weaving, and clothing plants further complicates the same problem. The Un-i,vers'ity of Te~~as Bulletin The plant which converts the raw cotton into its first product is probably the only one which will need to be supervised. But some mill~ carry the product through two or three :;t.ages. Computing the raw cotton equivalent of imports of cotton goods would be difficult; but high accuracy is not needed for this-the safety margin can be made large enough to cover possible errors. SUMMARY: ADVANTAGES AND DISADVANTAGES As compared with the other plans based on the export surplus, the Domestic Allotment Plan has the following advantages when applied to wheat and cotton: 1. It would stimulate less increase in production, and what it did stimulate would be upon a better economic basis. 2. It would provide an important source of credit for production and marketing at a low rate of interest. 3. It would provide some insurance against crop failure and price decline from large crops. 4. The raw product would move into the channels of trade at regular world price levels except for transportation and handling differentials. 5. As a result of the above, domestic users of the product for feed and seed would not pay the import duty; and users of the products resulting from the use of the feed vwuld escape the import duty effects that would arise therefrom. 6. It would interfere much less with trade movements as to volume, types of product, and direction than the other plans. It would be less objectionable to importing countries of our products. So far as the exporting countries are concerned, it would be preferred to our import duties. It would hurt the Canadian farmers less while helping our own farmers more. 7. The plan finances itself at no more cost to the consumer than the equalization-fee plans; but at somewhat more cost to the consumer than the export-debenture plan, if the consumer under the latter plan did not have to pay other sorts of taxes to compensate for the drain upon the revenue of the Government. 8. Applied to wheat and cotton, it would be more difficult to admin­ister than the equalization-fee plan only as to making of the allot­ments; and probably easier than the fee plan in some other respects. It would be much more difficult to administer than the export-deben­ture plan. 9. The principal argument against it, aside from the general argu­ment of raising the cost of living, is the difficulty of administration and revision of the allotments, and the invasion of the private busi­ness of the processors; and a certain amount of non-enforcement. The substitution of somewhat arbitrary control for more or less free determination of production may also appear as an objection. 10. The fact that it can probably be applied to only two major products at this time at least will be counted an objection to it. The Corn Belt farmer will want to know how he will benefit from it. One answer is that the tariff system reaches some of the products, that this covers two or more of them, two very important ones, and that some way will presently be found to provide for the rest. 11. A related objection will develop when some of the farmers not now growing wheat will want to grow it and will ask for an allotment. They will consider that giving an allotment to a neighbor just because he was growing some wheat at the time is not equitable treatment. DIFFICULTIES AND ALTERNATIVES Revising the allotment difficult.-The most serious of the difficulties confronting the transferable-rights plan is that of revising the allot­ments without stimulating acreage increase. It is claimed that if the grower in the old producing areas knows that his allotment is going to be revised in 5 years on the basis of his production record, he will be sure to maintain at least his present production; and that in sections where economic conditions make even production for export profitable, there will be an expansion; and that the combined effect will be an expansion of production. There will even be shifts stimu­lated by the desire to share in later allotments. Probably more farm­ers will presently be found growing wheat and eventually sharing in the allotments. Farmers in Kansas and Nebraska will grow more wheat and less corn. New areas may keep 'J)Toduction constant.-With fixed allotments, growers in old areas where population is declining would feel safe in cutting their production, and the declines in such regions would offset the gains in the newly developing areas; and the net effect would be constant production. With fixed allotments, growers would also feel free to hold over portions of their crops till next year. The allotment problem would also be simplified in many ways. No records of receipts and production would be needed and, hence, there would be no such records to falsify. The reasons for providing for revision of allotments in the state­ment of the plan are as follows: 1. It will be impossible to make an equitable allotment at the start, and 3 to 5 years of experience and records will provide the basis for correcting mistakes made in the original assignments. 2. There would be an increasing number of cases of farms receiv­ing wheat allotments, but producing no wheat; and these would come to be looked upon as bonuses or subsidies to individual farms. The psychological effects of this would not be desirable. 3. Shifts in production within the established farming areas are constantly going on, and they should not be checked. There is too much lag in readjustments as it is. 4. Land now out of cultivation temporarily, as a result of fore­closure proceedings and the like, would be penalized. 5. Lastly, and most important of all, it is doubtful if the plan would work as intended if revision of allotments was not provided. The present growers would simply accept their allotments as bonuses and go ahead producing as at present, except as the bonuses might improve their financial status. Sorne sort of tie-up between future prodftct-ion and future allotrnents is needed if the essential idea of the plan is t.o be realized, namely, a price plus the tariff on the domestic consumption and without the tariff on the export part of the crop. Make the allotments fixed on the basis of past records and this essen­tial relationship ceases to exist so far as any future production is concerned. If the allotments are revised, another objection to the plan is largely met, namely, that of injustice between different producers. If wheat is substituted for corn, then corn prices will rise and corn growers will share in the benefits along with the wheat growers. But wheat production will have expanded, which is not what the plan intends. The plan p1~esents a dilemma!-Obviously, the plan presents a dilemma on this point: change allotments and production will in­crease; fix the allotments, and a simple bonus on past production results. The latter might be justified as a bit of legislation to right the evils of the war and postwar period. But what is wanted is a mechanism that like the protective tariff can serve agriculture indefinitely. Cmnpromising with a dilemma?-Possibly a compromise can be discovered. One proposal is that only minor revisions to correct mis­takes be made within the next three or five years, and following that, revisions only of the township quotas on the basis of evidence as to shifting economy of production as worked out by the Division of Farm Management in the Bureau of Agricultural Economics. Individual farm allotments would be increased and decreased by uni/orm per­centages within each township. Certainly, this compromise arrange­ment would be safer at the outset than the one included in the descrip­tion of the plan. If some township quotas were enlarged, others would have to be reduced. The result would be an influence to reduce acre­age in some sections which would offset the increases in others. Others have urged that allotments be based on the potential pro­duction of the farm rather than on the actual acreage. This would mean that farms in the southern Minnesota counties which never grow wheat would get the same allotment as those which do. The basis of this proposal is that relief should be distributed to all farm­ers in the area, not just to those who happen to be growing wheat. This arrangement would decrease the average allotment per farm. The argument probably has merit enough to warrant basing allot­ments on potential acreage to a limited extent. One of the agricultural leaders of the country believes that the plan could be worked with corn and hogs and beef cattle more success­fully than above indicated. He says that only licensed persons should be allowed to sell meat anyway, and if they were all licensed, it should be possible for them to keep records of purchases. Most have agreed that the plan handles the problem of different grades and types of wheat satisfactorily, that the millers could get the kinds of wheat they want, and the gr~wers would get their allot­ments on a proper basis. Will farmers be satisfied with their allotm,ents?-Some have stressed the point that the individual farmers will not be satisfied with their allotments; that it will be impossible to make them equi­tably on the basis of any existing or obtainable information. No doubt many complaints on this score will arise. But it seems reason­able to assume that growers would soon become reconciled to their allotments; or would furnish the commission with dependable data that would justify their claims. We submit to great inequities in tax burdens without seeing just where we are getting values in return. In this case, the values in return would be almost as tangible as hard cash. PREDICTS DOMESTIC ALLOTMENT PLAN FOR COTTON PRODUCERS (From The Cott