Substituting Capital For Labor

As has been frequently attested to, agribusiness is now securely amalgamated within the powerful domain of corporate America. In its pursuit of maximum returns on investment it has established the major goals for itself of substituting capital for efficiency and technology for labor, the standardization of the food supply and the creation of synthetic food.

Each day, with increasing frequency we see how these latter two goals are being realized, but at this point we need to further understand the vital role that substituting capital for efficiency has come to play in the metamorphosis of farming into corporate agribusiness.

Agricultural policy makers have almost always shown a distorted reverence for capital as compared to labor. As we have seen, farm labor was long considered an "inferior input." Proposed solutions to America's chronic agricultural crises repeatedly express this assumption: The only way to increase income to farm laborers would be to accelerate the out migration of labor from agriculture.

Yet, there is increasing evidence that the amount of capital being utilized by American agriculture is disproportionately large, in comparison with other sectors of the economy.

Some ag economists, like the late University of Missouri's Harold F. Breimyer believed that the consequence of this over-application of non-farm capital and over-investment has been the lowering of realized marginal returns for farm labor. As corporate agribusiness has attempted to devise new methods for shifting the risks of employment and of earned income in food manufacturing onto society, it has come to clearly see that more money can be made from farmers than is made by farmers.

Take for example the source of most of this capital -- - the banks. As economist Michael Perelman has written:

"Bankers ... know that their business would not fare well in a nation of self-sufficient farmers or even self-sufficient communities. They have no reason to encourage farming practices which could do away with the need for borrowing. On the contrary, the more farmers adopt capital intensive techniques, the brisker the demand for the commodity banks sell -- namely money. Banks also realize that they are dependent on the success of business in general. A general business failure means a general banking failure. Again, capital intensive techniques are in the bank's best interest."

The government has also repeatedly participated in substituting capital for efficiency through the very laws and programs that were originally designed to alleviate the woes of low-income farm families and foster a "family farm system" of agriculture. But, through the consequence of "policies and manipulations," these government programs, supported and encouraged by various and sundry "communities of economic interests," have largely become a regressive redistribution of income.

These large expenditures by the federal government on farm programs have historically and materially benefited the large commercial, non-family farm type growers. They have also influenced the greater expansion of capital investments in agriculture to displace labor, whether that labor be hired or performed by the farm family.

This substituting of capital for efficiency has further evoked many other serious questions, particularly in recent years. In 1972, Richard G. Milk, assistant professor of economics at Northeast Louisiana University, writing in Land Economics, posed one such question:

"Have our programs, directly and indirectly financed by our federal government resulting in a destruction of 6.5 million job opportunities, been a wise allocation of scarce resources? Many economists feel that in almost any society -- if there is a serious choice between policies which will promote maximum employment and those which will promote maximum output -- the decision for maximum employment becomes more crucial when unemployment is destroying morale and undermining the society. For a sector like American agriculture, where maximum output is no longer a desired objective, this has special validity."

(It is with considerable irony that Milk concluded his essay by noting that "entirely new approaches are needed for our national farm problem, centering on the human beings involved and not on the maximization of profits of fewer and fewer firms," but he added that "general economists, such as the author, are leaving the field of 'specialty of agricultural economics' because that specialty is now dominated by a fanatical 'capital for labor substitution fundamentalism!'")

Farmers justifiably have always considered themselves an integral part of agribusiness. They have nevertheless constantly been faced with increasingly narrow political choices to enable them to best meet society's needs for food and at the same time protect themselves from economic extinction.

Now emerging from what many of their urban neighbors like to call "rural isolation," farmers are rapidly coming to a realization that they also are now important participants in the same economic system as everyone else -- a system that is constantly being confronted with the struggle between poverty and monopoly.

Most farmers, for example, have historically feared the organization of industrial workers on the grounds that labor unions' wage demands would drive up the price of farm supplies and equipment, while at the same time the unions seek to insure a "cheap food" supply. On the other hand farmers, until recently, have seen themselves almost solely as producers, rather than also as consumers subject to the vagaries of a giant food manufacturing system.

As more and more farm families are coming face to face with the reality that they are being forced to sell their raw materials at wholesale prices, often at a price cheaper than their costs of production, and that they are having to buy, including their own food, at retail prices, they are rapidly coming to recognize the common concerns that they now share with so many others outside the farm community, including organized labor.

One need only glance at most farm magazines or newspapers, which are now either owned, controlled or beholden to large commercial industrial interests, to confirm that farmers in the world of corporate agribusiness today are seen more as buyers than sellers.

A.V. Krebs is director of the Corporate Agribusiness Research Project, PO Box 2201, Everett, WA 98203. He publishes a free e-mail newsletter, The Agribusiness Examiner; email;

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