THE ATTEMPT TO MODIFY THE EFFECTS OF COMPETITION - THE CASE OF AGRICULTURE by John Kenneth Galbraith The Case Of Agriculture The effort of longest standing to develop countervailing power, not even excepting that of labor, has been made by the farmer. And his efforts have taken a striking diversity of forms. Because of its importance in itself, and because of the light it throws on the problem of building countervailing power, the case of agriculture is worth examining in more detail.
In both the markets in which he sells and those in which he buys, the individual farmer's market power in the typical case is intrinsically nil. In each case he is one among hundreds of thousands. As an individual he can withdraw from the market entirely, and there will be no effect on price—his action will, indeed, have no consequence for anyone but himself and his dependents.
Those from whom the farmer buys and those to whom he sells do, characteristically, have market power. The handful of manufacturers of farm machinery, of accessible fertilizer manufacturers or mixers, of petroleum suppliers, of insurance companies all exercise measurable control over the prices at which they sell. The farmer's market for his products—the meat-packing industry, the tobacco companies, the canneries, the fluid-milk distributors—is typically, although not universally, divided between a relatively small number of relatively large companies. There is no more vigorously debated question in economics than that of the jurisdiction which such companies exercise over their buying prices.
That a measure of latent power exists for tacit or overt influence over such prices can hardly be denied. A canning factory must, after all, declare the price it will pay on a given day or during a given week or season for tomatoes. Implicit in such power of decision is some measure of influence over the price and the influence will be increased if the factory is the only one in the area or if it has a shrewd judgment as to the probable behavior of other buyers. But even where the influence is difficult to see, it may be inherent in the greater ability of the buyer to decide to buy or not to buy. This, in turn, can have considerable effect on prices.
The farmer has no equivalent discretion.
In our time, partly as a result of the new market power of the farmer and partly as a reaction to his very considerable political influence, the market power of those to whom he sells has come to be exercised with profound circumspection. This has not been true in the past. On the contrary, the farmer was often made to pay dearly for his lack of market power. It was this that led him to search long and hard for a formula for expressing effective countervailing power.
Indeed, the effort is nearly as old as settlement on this continent.
Within a few years after the first colonists arrived in Virginia, the tobacco planters were petitioning the Crown for redress against the oppression of the "unconscionable and cruel merchants" who bought their tobacco and supplied them with goods from England. In the colonial authorities stipulated that no tobacco might be offered for purchase of English goods at a valuation of less than sixpence a pound. The tobacco growers, for the first but not the last time, were seeking the support of public authority in an effort to bolster their bargaining position against their more powerful customers and suppliers. The result was the first but not the last support price for farm products in North America. The circumstances which motivated it were not different from those that led to the New Deal farm program almost exactly three centuries later. In both cases the tobacco producers were seeking to redress the organic inequalities of bargaining power in a market where the many face the few.
It might be added that this first support price had other consequences which later experience has made familiar. The colonial authorities were speedily forced on from price to production control. In 1639, a primitive Agricultural Adjustment Act established a maximum production for that and the two following years of 1,200,000 pounds. Viewers were appointed to secure compliance on the individual plantations and given plenary authority to burn inferior grades of tobacco and up to one-half of any planter's crop. Regimentation of the farmer is no latter-day development.