THE CHANGING STRUCTURE OF AGRICULTURE



expected to occur as the bulk of our population became more con-
centrated in location, thereby reducing the ability of farm families
to huckster their products directly to consumers or to small retail
stores serving consumers in nearby villages, towns, and small cities.

The extent of this economic separation of farm families from
their ultimate customers is measured in a gross manner by the series
we maintain on the farmer’s share of the consumer’s food dollar.
This share has declined almost steadily from 51 percent in 1947 to
38 percent in 1967. The figures we presented earlier on the absolute
decline in use of farm family provided inputs and the very rapid
growth in use of nonfarm produced inputs tells the same story about
what goes on behind the farm gate, the point from which we market-
ing economists have traditionally taken over in viewing the function-
ing of our food and fiber system.

If vertical integration has occurred in our food and fiber system,
then this trend is counter to that noted for the general economy not
only of the United States but of most Western nations. Many econo-
mists, from Adam Smith to contemporary writers, have concluded
that the progress of industrialization has so far been marked by fur-
ther specialization and by further separation of ownership rights and
management roles.

“Creative Destruction” Revisited

There is no question but that some stages of production, process-
ing, and marketing have been combined into new ownership and
management forms in the past. Joseph Schumpeter described such
processes of “creative destruction” twenty-five years ago in his
Cap-
italism, Socialism, and Democracy.

There are some facts which support the view that conglomerate
vertical ownership (and nonprice vertical coordination) of agricul-
ture may prove to be an arrangement which competition will not
long tolerate for the bulk of our food and fiber needs. First is the
fact that the progress of industrialization has so far been marked
by further specialization and by further separation of ownership
rights and management roles. While there may be some economies
of a vertical nature in specialization of management roles, we sus-
pect there are more economies in specialization of a horizontal na-
ture. Total capital constraints and diseconomies of scale may prevent
extensive exercise of both of these options simultaneously. This is
particularly true of present farmers. Yet, unencumbered land values
at present provide a considerable restraint against undisciplined entry
of outside entrepreneurs into agriculture who have only the econ-
105



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