Schuh
Challenges in Policy
problems, however. But as noted above, pol-
icy has evolved in a rational direction here as
well. The introduction of deficiency pay-
ments with the 1973 farm legislation, and
their ratification and extension with the 1977
omnibus bill, has enabled us to take some
strides in disconnecting price policy from in-
come maintenance programs. The severance
is far from complete, however, and events of
this past year suggest that such disconnection
as we do have is at best tenuous.
The gradual extension of manpower and
social welfare programs to agriculture and the
rural sector in the late 1960’s and early 1970’s
provided the opportunity to move away from
product price policy as the primary means of
dealing with the income problems of agricul-
ture. The programs evolving from the 1977
legislation, with the price bands cir-
cumscribed by loan rates and reserve release
rates, combined with a subsidized system of
grain reserves, holds promise of providing
income stability to commercial agriculture.
However, we still have a long way to go in
dealing with the secular income problem of
agriculture, or with income problems re-
flected in resources that have become mar-
ginal to agriculture. The major challenges we
face in the decade ahead still lie in these
areas.
Explicit recognition that the income prob-
lem of commercial agriculture is different
than the proverty problem of rural America is
an important step in devising a more rational
policy. We have made considerable progress
in this direction, although it is disappointing
to see the extent to which we discuss the
income problem without recognizing that
well over 50 percent of the income of farm
people comes from non-farm sources.
Clearly, this is a case where our sectoral
perspective creates problems.5
5Discussions of the 1977 legislation were almost devoid
of any recognition of the importance of nonfarm sources
of income, or of the simple proposition that it is family
income from all sources that is important in understand-
ing the equity question, not the income from agricul-
tural sources above.
In turning to the secular income problem
of agriculture, it seems fair to say that the
development process as experienced in the
United States has been quite wasteful of both
human resources and physical capital. We
have probably depended excessively on re-
gional migration to bring about equilibrium
in the labor market, not recognizing that the
externalities associated with this process
cause it to be largely self-defeating.6 The
selective nature of the migration process
causes the labor exporting region to lose its
human capital, its young, its vital and
entrepreneurial, and with them whatever
mobile capital they have. What is left behind
are the aged, those who cannot compete in
the non-farm sector, and fixed capital whose
productivity inevitably declines with the
outmigration of labor. It is little wonder that
it took roughly 100 years for the South to
reach something approaching an equilib-
rium, or that other pockets of poverty have
stayed with us for such a long time.
A more rational policy would reduce the
burden that labor has to bear in adjusting to
changing economic conditions, and make
greater use of capital flows as a means of
reaching equilibrium. A greater emphasis
would be placed on taking new industry to
areas of excess labor, and greater attention
would be given to devising an explicit loca-
tional policy.
The goal of such a policy would not be to
reduce sectoral mobility. To the contrary, it
might well increase sectoral mobility since it
would reduce the need for geographic dislo-
cation to obtain alternative employment.
This would reduce both the pecuniary and
psychic costs of changing jobs. Similarly, it
would not lead to a geographically less effi-
cient allocation of resources. Rather, it would
provide for a more efficient use of resources
in the aggregate, by reducing the negative
externalities that our past policies have im-
posed on both supplying and receiving re-
gions.
6For a more ample discussion of this problem, see Schuh
(forthcoming).
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