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Show Editorial (Comment! By Dr. Paul A. Eke.Dept of Agricultural Economics Until the beginning of 1941, defense efforts did not markedly change the income or costs relationships for farmers. Prices of all farm commodities averaged about 100 points in index numbers based upon 1910-14 conditions during the early and late months of the year 1940. Even as far back as 1938 this figure was 95. Costs of living and production remained in the neighborhood of 123 points during 1940 and in 1939 and 1938 this figure fig-ure was only 1 or 2 points lower. The purchasing power pow-er of the farmers which is derived from the ratio of prices pri-ces received to prices paid was in the neighborhood of 82 points for 1938, 1939, and 1940 as compared to 100, points in 1910-14. In November 1941, this ratio had risen to 96 points. ..This means that farmers had been given 14 points increase above that of 1938 to 1940 in purchasing power or a net increase of 17 per cent. In December 1941 prices received by farmers increased still more and it is expected that further rapid increases will result in the early months of 1942. According to L. A. Pearson and W. I. Myers of Cornell university, this is nothing to worry either for consumers or farmers. "During the third year of World War I, the cost of living rose only 0.25 per cent for each per cent advance in; prices of farm products. Consequently, it is erroneous to conclude that an advance ad-vance in farm prices is reflected in a corresponding advance ad-vance in cost of living." During advancing prices farmers far-mers therefore continue to gain with each advance, but if prices fall after the war, farmers will correspondingly lose because prices of farm products will drop faster than prices that farmers pay. Pearson and, Myers continue: con-tinue: "There is a lag in an advancing cost of living following rising farm prices. From July 14 to September Septem-ber 1916, prices of farm products rose 25 per cent, but the cost of living did not rise so much as 25 per cent until un-til April 1917, seven months later. A 50 per cent rise in farm prices was not reflected by a similar increase in the cost of living index until 16 months later ; although farm prices doubled by February 1918, the cost of living did not double until March 1920, 25 months later." So far price rises have followed World War I experience. It is hoped that some ceiling can be put on this rise in prices to prevent such serious after-war effects. At present price rises have been largely wholesome. Note Pearson and Myers "The recent advance in prices has corrected disparities in the price structure and has encouraged farmers and other producers, but the small advance in the cost of living has had little or no .' effect on consumers. In fact, up to the present time, consumer incomes have risen faster than the cost of living. liv-ing. This is one of the most important reasons for our lagging armament program. ooner or later, consumer purchasing power must be reduced. This can be accomplished accom-plished by very high taxes on consumers, enforced savings sav-ings or moderate inflation. It is politically impossible to raise taxes and enforce savings in sufficient amout to reduce consumer purchasing power materially. Allowing Allow-ing moderate increases in prices is the simplest method of reducing the standard of living of the salaried groups who must bear a goodly part of the cost of war. Moderate Moder-ate inflation is in the best interest of the nation at this time." Assuming Pearson and Myers to be correct it means an increasing purchasing power for the farmers for some time to come. The present situation can be understood better by looking at the history of the percentage of the income of non-farm families which has gone for food. By typical years' it is as follows : 1913, 32 per cent; 1919, 38 per cent; 1929. 27 per cent; 1932, 29 p3r cent; 1940, 24 per cent; 1941, 23 per cent. The consumer of food whether he be farmer oi non-farmer has not yet suffered from price increases to farmers. Some salaried people .have lost but wage workers have gained. In actual dollars of income to the farmers quotations quota-tions from the Bureau of Agricultural Economics dated January 1942 is revealing. Other factors which may reduce income during the next year or two is weather conditions and labor supply. Farmers will need to save some of their current income in-come for a post-war period when the ravages of 20 yeass of farm depression since World War I can be at least in part repaired. Farmers' buildings and fences have been sadly neglected, even if machinery is relatively relative-ly new and efficient. Farm mortgages are still high, and the farmer's equity in his business has steadily declined. de-clined. Tenancy has increased and agricultural labor has been deplorably ill paid. Neglect of health and education edu-cation has been a part of the lot of agriculture even up to the present. There is room for much better paid agriculture agri-culture in the United States with little or no cost to the nation as a whole. Intelligent planning with adequate ade-quate controls will be necessary to achieve this end. |