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From The Militant, Vol. 12 No. 7, 16 February 1948, p. 2.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).
Feb. 10 – In their year-end forecasts for 1948 the most conservative of capitalist experts and government economists saw no trouble whatever ahead for at least six months. The ink has hardly dried on these optimistic predictions when we find the prices of one agricultural product after another undergoing grave convulsions, with a huge question mark placed over the fate of American agriculture as a whole.
Never before in the 100-year existence of the Chicago wheat pit did prices of wheat and corn break so violently as they did for four days beginning with Wednesday, Feb. 4.
This was not limited to foodstuffs alone. Raw materials like industrial and inedible oils followed suit. These registered by the second day “a decline unprecedented since the days immediately following World War I,” according to the Journal of Commerce, authoritative Wall Street daily.
No less crucial is the extent of this price break. Involved were not only foods (wheat, corn, oats, flour, cocoa, lard, etc. ) but a long list of raw materials (cotton, hides, rubber, cotton oil, tallow, grease etc.).
Many government and business spokesmen have dismissed all this as a temporary and even a “wholesome and healthy” adjustment. Just the opposite is true. It denotes instead the eruption to the surface of monstrous dislocations of inflated capitalist economy. These dislocations are now breaking through its weakest sector, the agricultural price structure.
Not superficial causes but profound and lasting changes in agricultural conditions, at home and abroad, underlie the current price break. In brief, this changed condition is as follows: Last year began as a year of famine crops in Europe. Australia raised little more than was needed for home consumption. Canada’s crop was poor and at home there was a “corn shortage.” Apart from Argentina, the 1947 world market was thus dependent on the Chicago wheat and corn traders.
What they did is now history.
They forced food prices so high as to severely restrict consumption even at home.
But this year begins in an entirely different setting. The highly inflated domestic agricultural price structure is subjected to the additional strains of an unexpectedly large carryover of almost 800 million bushels of wheat. This is enough to increase government shipments abroad, maintain record home consumption and still retain 150 million bushels by June.
Meanwhile Australia and Argentina, both with bumper crops, are today in a position between them to export from 3 to 4 million tons of grain and still retain ample reserves. Prospects for Europe, whose grain harvests come early (June), are quite favorable, just as is the case in both Canada and here, where harvests come a month later. At the same time Russia has reentered the world grain market with sizable deliveries.
The Chicago traders and speculators are thus faced with the prospect of no longer being principal world suppliers as in 1947. Instead of serving as a basis for unbridled speculation, the huge stocks at home now overhang the market, threatening to turn from assets into liabilities within the next months when new crops will make additional millions of bushels available for export.
Only natural catastrophes at home or in Europe can alter this situation decisively. While time is running shorter and shorter, the odds are in favor of good crops.
The unfolding situation thus parallels that of 1920 when with the revival of the world market, agricultural prices collapsed, causing widespread hardship among farmers everywhere while millions continued to go underfed or hungry because they were too poor to buy even at reduced rates.
Thus, barring a series of natural calamities, what is decisive is precisely this greatly improved world agricultural condition. The situation is not altered by whether or not the commodity markets are sustained temporarily at this or that level, or whether commodity prices are allowed, amid wild fluctuations, to drop to government supported parity levels.
The only question still in doubt is how much and how quickly the farmers and the country as a whole will be made to pay for these unavoidable price “adjustments” in agriculture. The decision here rests for the time being in the hands of Big Business and its government in Washington.
It goes without saying that Washington will intervene vigorously in the commodity markets, just as it has been doing all the while by its behind-the-scenes operations.
In the unpredictable day-to-day and week-to-week developments ahead this government intervention will, of course, play a major role. We have not long to wait before the staunchest opponents of government “interference” and “controls” will begin clamoring the loudest for them.
But powerful as it is, government intervention is not omnipotent. It is one thing to prop up temporarily this or that commodity, it is something else to long sustain all the foodstuffs and agricultural raw materials at artificially inflated levels.
Even if the American capitalists were willing to spend billions – as they are not – to protect agriculture at home from the impact of the world market, they could succeed only in temporarily modifying world market trends, but never in reversing them. Prices of foods and other agricultural products are determined on the world market and not in Chicago or Washington.
The current price convulsions therefore spell out an ominous message to the American farmers. It reads: “Your days of prosperity are numbered; the good old ‘normal’ days of depressed prices for crops and high prices for manufactured goods are before you.”
This far from exhausts the meaning of the commodity price-breaks. Does it signify, as in the past, sharp declines in other markets, in particular a slump in retail trade? And is it also the first installment of the depression for economy as a whole? Or can price “adjustments” be confined primarily to agriculture while industry, nevertheless, keeps going at high levels for a prolonged period of time?
On these questions, government and business opinion is now sharply divided amid an atmosphere of tension, anxiety and even panic. Next week we shall answer these questions and give our reasons why the unfolding crisis of American agriculture must at the next stage bring in its wake the crisis of other sectors of the economy, in the first instance a slump in retail trade, and with that, the crisis of the economy as a whole.
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