The Egg in Politics

June 22, 1959

A crisis has developed among the poultry farmers, the result of a huge overproduction of eggs. Eggs have been selling in recent months below their cost of production for most small farmers. The result, as usual, has been pressure on the government to “solve” the problem, and the Department of Agriculture has been forced to promise to step up its egg-buying program. It has already bought some 500 million eggs, dried or frozen, and perhaps the race has just begun.

Of course the effect of this program, to the extent that it is “adequate,” can only be to encourage continuance of overproduction. Without this government buying, adjustments would soon set in to bring the overproduction to a halt. But, at least as far as farmers are concerned, most politicians consider the adjustments brought about by supply and demand as too callous and cruel; every farmer must at all costs be protected from them. The congressmen who take this view do not see that what they are refusing to accept is the whole principle of the free market, which is the central principle of free enterprise.

WHAT FREE MARKETS DO

It is the principle of the free market that regulates the relative price and production of thousands of different commodities to meet the relative wants and consumption of millions of consumers. When there is too little of a desired commodity, the demands of consumers will lift its price relative to other commodities; and more of that commodity will be produced because of the higher profit margin, until the price falls again. When there is too much of a commodity, its price will fall below the previous marginal cost of production, and the highest-cost or least-efficient producers will have to turn to something else.

This sometimes means great hardship for the individuals affected. But this finely graduated system of rewards and penalties, of incentives and deterrents, leads in the long run to the greatest production, growth, and general welfare provided by any economic system. And this same system, which politicians think “intolerable” as applied to farmers, is in fact accepted in nearly all other fields. The annual figures of industrial failures are a constant reminder. Government studies have shown, to cite only one statistic, that only three-fifths of firms in retail trade survive their first year, and only a sixth reach the age of ten years.

The practice of price support must involve favoritism. It simply cannot be universalized. We cannot subsidize everybody at the expense of everybody else. One of the very things that the egg farmers are chiefly suffering from, in fact, is the price supports and subsidies to the grain producers. These have raised the price that poultry raisers are forced to pay for feed. Nothing could help the egg farmers more than the termination of price supports on grain.

FIASCO IN WHEAT

The price-support program in wheat grows more and more fantastic. In a statement on June 1, President Eisenhower pointed out that the existing program had piled up $3 billion worth of wheat, a supply equal to two and a half times our annual domestic needs; that storage, handling, and interest charges alone for this wheat will cost the American taxpayers close to half a billion dollars during the next fiscal year, and that “continuation of this legislation for another year leads the wheat program one step closer to disaster.”

These programs, which increase the price of feed for cattle and poultry raisers, and the price of food for city workers, are costing the taxpayers some $6 billion a year. Grain farmers are growing crops for government storage rather than for markets. The Wall Street Journal reports that some farmers are even deliberately growing inferior-quality wheat in order to take advantage of the government’s generosity.

Secretary Benson’s proposed solution is to reduce the price support to 90 percent of the average market price for the three years preceding the crop year. This would certainly reduce the dimensions of the problem. But any price support at all, to the extent that it is effective, must encourage excess production and storage. Today’s “farm problem” is government-created.