Going Broke in the Midst of Plenty

Going Broke in the Midst of Plenty

We have too much food in this country. This is no health faddist talking. It is President Reagan’s Secretary of Agriculture telling the farmers they have produced too much food and therefore are going broke. Our grain elevators are full. To have prosperity we have to push a lot of people off the farm and stop growing such big crops.

Perhaps this news shocks you. You remember the pictures on TV – the pictures of starving Ethiopians and Sudanese with their matchstick arms and legs, their swollen but empty bellies and their despairing expressions. Put this alongside our bulging storage bins and the contrast is appalling. How can such things be?

It is the economics of scarcity, which is at the heart of the free market philosophy. According to that philosophy goods are produced not for use but for profit. No profit, no production, even if people are starving. The Ethiopians and Sudanese have nothing to trade for food, and so they get none except as charitable nations and people buy it and give it to them. If you have no wealth you are outside the economic system, whether you live in America of in Africa. The poor in this country have learned that and the almost poor are getting the lesson.

In economics there is a “law of diminishing returns”. It goes like this, a man produces a hundred items which he sells for $1,000 each. He takes in $100,000. It costs $500 each, or a total of $50,000, to produce them. He has a profit of $50,000, or $500 per item. Now, suppose he produces 200 of these items. Because of greater production his cost per item goes down to $400. Total production costs are $80,000. But because of the increased number he has produced he must create an increased demand by reducing the price to $600 per item. If he sells them all he takes in $120,000; he pays $80,000 in production costs and gets a profit of $40,000. The profit on each item is now down to $200, as compared with the $500 when he had fewer items, and the total profit is also less than it was with lower production. The management skill is to find the place where increased sales will balance out the reduced profit per unit. But always, increased production without equally increased demands will reduce profit per unit, and may require a selling price below costs in order to make any sales at all. This is what happened to farm production. This is what ails agriculture and governs periodically sickens our whole economy. We produce for profit and not for use. That is the logic of our system.

You can cure the illness by cutting production or by increasing the effective demand. Let’s look at the demand side. On the one hand you have demand for food, without purchasing power to implement it. On the other hand we have a society with excessive purchasing power, even after its real needs are met. This is the moral contradiction which the Protestant National Council of Churches, for years, and now the Council of Catholic Bishops have condemned. They call for a radical revision of the Reagan economic priorities to bring our economy into line with Judeo-Christian ethical principles. Right-to-life protestations extend beyond abortion issues to cover starving and suffering children and adults as well.

There are a lot of complexities in the situation. Many factors may be cited to try to minimize the evil. But strip away all the verbiage of excuses and you come down to the heart of the matter. The imbalance exemplified by simultaneous existence of great wealth and starvation is a sin.

Perhaps the imbalance is according to economic law. Economic law was never handed down from Mt. Sinai. It simply says: This is the way we do things. It does not say this is the way we ought to do them. Perhaps the law should be changed.

Perhaps we should paraphrase the words of Jesus: “Economic law was made for man, not for economic law.”