oversight

The GAO Journal, No. 10, Fall 1990

Published by the Government Accountability Office on 1990-01-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                        A QUARTERLY SPONSORED BY THE U.S. GENERAL ACCOUNTING   OFFICE




                        JOURNAL

                                                                                        WASHINGTON
                                                                                        AND THE
                                                                                        FARMER
                                                                                        Appraising
                                                                                        U.S. agriculture



                                                                                        SPEAKING FOR
                                                                                        CHILDREN
                                                                                        An inter&v with
                                                                                        Maria92 Wtighl
                                                                                        Edehmzn



                                                                                        HOW MANY
                                                                                        AND HOW SOON
                                                                                         Reducing American
                                                                                        forces in Europe




NUMBER IO   FALL 1990
.“.
      I
      i
      I
 NUMBER IO
                                            THE r,~~J-““J
                                    A QUARTERLY SPONSORED BY THE U.S. GENERAL ACCOUNTING                         OFFICE
 FALL 1990




                                    JOURNAL
                                                C        0          N          T         E        N          T            S

                                                FROM THE COMPTROLLER           GENERAL                                    3
                                            “WE REALLY MUST REACH OUT”                                                    4
                                            An Interview with Marian Wright Edelman
                                        APPRAISING           AMERICAN    AGRICULTURE
                                            l   ,4N OPPORTl’NITY    TO MODERNIZE         IT.!% FARM POLICY                11
                                                Jdffy Ifell
                                        l       AT $25 BILLION A YEAR, PLENTY         TO THINK   ABOUT                 17
                                                Richard f! Anderson                                                    18
                                                Linda F: Golodnner                                                     19
                                                k-non ,lil. Cmwder                                                    20
                                                Trenna I?. Grubnwski                                                  22
                                                Ralph E. Grossi                                                       24
                                                Don Reeves                                                            2.5
                                                Dwn Klerkner                                                          27
                                                Doq~as I? Wheeler                                                     28
                                                Mike Harper                                                           29
                                                Kristen ~~chtf                                                        31
                                    l           AGRIBUSINESS     LEADERSHIP:       24 KEY TO WORLD    PROSPERITY      32
                                                Rq A. GoIdbrrg
                                    SCALING DOWN AMERICAN FORCES IN EUROPE                                            37
                                    John R. SchuIt2 @ Charles 17 Smith




Cover illustration by John Porter
A QUARTERLY   SPONSORED   BY Tlit   U S CtNERAL   ACCOUNTIKC   OFFICC




JOURNAL
                                                                        .   Ediioria~ Adiliwq~ Boawi
                                                                            JOHL F. AIIEARNE                   ALAri H. LEVENSOs
                                                                            GbZORGb: J, ALEXAVDEK              DAVID P. LINOWES
                                                                            EI3WARI) HA1,I-S                   BEUS LO&GSTRETH
                                                                            THEODOKE         C. BARREAtIX      CHAKI,ES I:. I,IJI:E
                                                                            NOR’I’ON M. BEDFORD                HRIJW K. hlacI.AIJRY
                                                                            KOBRK’I’ F. BORI:(:tl              ANN hlcI~AI~GHL1N
                                                                            NORhI         M. BlUDBt~RN         JO1 iN I,. ktcLIJCAS
                                                                            JOHN BRADEMAS                      DOKIS MEISSNEK
                                                                            MARVIN HRESSLER                    ASTKID E. MERGE’1
                                                                            ANDREW F. BRIMR-IEK                W . 1,EE NOEI,
                                                                            JOHN C. BITK’I-ON                  Al,FREI) E:. OSBORNE, JR.
                                                                            X11I:11~\~:1,x. CHE’I‘KOVICI I     RLSSELI, E:. PALMER
                                                                            SHELDOK COIiEU                     MER’I’O~ J. PECK
                                                                            ~VtLLIAhl ‘I‘. C:OLE:1\,IAN. JR.   K4Yhf<)ND E. I’EE’I‘
                                                                            \IICHAEI,      COI>t,INS           AIlLANA L. Ft-‘I’ERS
                                                                            MORRIS \2’. H. COLLINS. JR.        I)ONAt,I> A. FIC’I‘RIE
                                                                            ROBER’I‘ (:tTRVtU                  GEORGE W . PI1tI,LIPS
                                                                            BRliWS’l‘EK C. DI’k M ’            JOHk B. RHINEI.ANDER
                                                                            JOIlk ‘1‘. DI:SLOI’                EI,I>IOT RICHARDSON
                                                                            I-RSIIIA F. I’AIRBAIK~             J. ROBERT SCHAEWEI,
                                                                            I’hlII, I,. I;OS’rI<R              III)CVIN I I. SlhlMONS
                                                                            J. KONAI,I) FOX                    J. EDkVAKI) SIMPKINS
                                                                            BAKHAR!~ tl. FRhNKLIS              AI,VtN K. ‘I’ARLOV
                                                                            hlAK’I‘HA \I?. <;II,I,II,.4~1~     SIISAN J. ‘I‘OLCHIN
                                                                            FA’t‘KI(:IA A. (;RAI IAhl          ROBERT \VARNER
                                                                            C JACKSON C;KA1’SOU, JR.           ROBEK’I’ \VEAVER
                                                                            KOBER’I’ HAVI~XI                   SIDNEY J. WEINBERG, JR.
                                                                            I:H.4RI>I1S ‘I‘. I IOKNGKEN        KAREN 11. W ILLIAUS
                                                                            Mt’l,\:IN    K. LAIKI)             (:I IARLES J. %WICK
                                                                            1Il3R!vIAN H. I,EO’lhRI>
FKOM THE COMPTKOLLERGENER~L


                                                        implications that extend far beyond farming.

T
          HIS ISSUE OF the GAO Journal features a
          package of articles on American agricul-         Professor Ray A. Goldberg of the Harvard Busi-
          ture policy-a timely subject for discus-      ness School, one of the foremost experts on agri-
sion as the Congress considers the 1990 farm bill.      business, writes for us about agribusiness’s
The legislation that eventually emerges-both            increasing significance to the world economy. He
houses have passed differing, as yet unreconciled       calls agribusiness “the most important sector of
versions as we go to press-will      determine how      the world economy and the key to global eco-
much of our current farm policy will be retained,       nomic development?
and at what spending level, for the next five years.       We were also fortunate, this past April, to talk at
    Considering that it is five years between farm      length with Marian Wright Edelman, noted chil-
bills, most of our readers may not be familiar with     dren’s advocate and President of the Children’s
the major elements of farm policy-even       though     Defense Fund here in Washington. “What happens
that policy has profound effects not just in agricul-   to [our children] and to our families,” she told us,
ture but in such other areas as international trade,    “will determine how well we compete economi-
the environment, rural development, and the price       cally, what kind of standard of living we’re going to
and variety of the food we eat. For this reason, we     have, what the whole fabric of our society is going to
asked Jeffrey Itell of GAO’s Resources, Commu-          be like in the next century.”
nity, and Economic Development Division to sum-            John R. Schultz and Charles E Smith of GAO’s
marize the federal government’s major agriculture       European Office write on another major issue: the
programs and some of the areas in which GAO has         drawdown of American forces in Europe. Everyone
found opportunities for reform. After all, modern       agrees that a reduction in our forces will soon take
American agriculture policy originated in the New       place, but how? And by how much? Messrs. Schultz
Deal. Modern American agriculture, on the other         and Smith convey a sense of just how careful poli-
hand, has been evolving ever since. As Mr. Itell        cymakers are going to have to be, and just how vast
points out, “even within the context of the current     will be the task that faces them.
approach to agriculture, policymakers could imple-         Facing the people of Puerto Rico next summer is
ment a number of changes that would make a lot          another question. The island became part of the
of sense.”                                              United States some 92 years ago. Now, the Con-
    As part of the GAO Jow-nal’s coverage of farm       gress may give Puerto Ricans the opportunity to
policy, we asked 10 people who have considerable        decide their own political status. Next summer-
knowledge of agriculture-either      by having                   pending a congressional go-ahead-they
made their living through farming or by                          I.    I..         W.C..WL   YLYC’S’YV..,   “‘“dye”..


having studied agriculture issues-to                                  ence, or a revised version of their com-
consider a question: “This year, Ameri-                                monwealth status. GAO’s John M.
can taxpayers will spend $2.5 billion on                               Kamensky spells out the options-and
food and agriculture programs. Are                                    what their consequences might be-in
they getting their money’s worth?”                                          “The Slst State?”
We called upon small farmers                                                          These are fast-changing
and agribusinessmen, con-                                                           times. The future, it seems,
sumer and agriculture                                                                 keeps arriving earlier than
advocates, conserva-                                                                   we had expected. It’s our
tionists,    a banker-                                                                  hope that the articles in
and their responses                                                                      the GAO Yo/ovmal help
certainly demonstrate                                                            ‘:       prepare you a little bet-
                                                                                 &
that farm policy has                                                                       ter for it.
                          “WE REALLYMUST
                          REACHOUT"


                                       MERICA'S CHILDREN AND families have no better-known advocate than


                              A        Marian Wright Edelman. A lawyer by training, Ms. Edelman is Presi-
                                       dent of the Children’s Defense Fund, a national advocacy organization
                               she founded in 1973. It is headquartered in Washington, D.C.
                                 The status of children, families, and the nation’s public policy regarding
                               both was the subject of an interview with Ms. Edelman conducted in April
                               1990 by Comptroller General Charles A. Bowsher. Ms. Edelman and Mr.
                               Bowsher were joined by three members of GAO’s Human Resources Division:
                               Franklin Frazier, Director of Education and Employment Issues: Linda Mona,
                               Director of Intergovernmental and Management Issues; and Kathryn Allen,
                               Children’s Issues Coordinator.




4   THE G.A-0   IOURNAL
B   OWSHER-Yau've said ihut children’s issues and
famiiy issues ure be nation’s number one security
 and economicprobkm. Why do you think this is so.2
                         EDELMAN-Because         we’re in trouble. At a time when this nation is facing a more
                         competitive world, one in which we’re going to need to make the most of every
                         child’s potential, we are watching the disintegration of families and the waste
                         of children. I happen to believe that our children are the future. What happens
                         to them and to our families will determine how well we compete economically,
                         what kind of standard of living we’re going to have, what the whole fabric of our
                         society is going to be like in the next century.
                            American demographics are changing. By ‘2000, there will be about 4 million
                         fewer young adults aged 18 to 24 than there were in the mid-1980s. Those who
                         are children today are lagging behind Japanese and German children in key
                         areas of academic achievement.
                            I think we need to recognize that high school graduation begins before
                         birth, not when the child walks through the school door. If we don’t invest in
                         children before they are born, we’ll find more of the American future lying in
                         places like the D.C. General Hospital neonatal intensive care unit. It’s much
                         more frugal to spend $600 per child on prenatal care than to spend thousands
                         and thousands to keep those little three-pound babies alive, and then pay
                         again and again for the physical, mental, and emotional problems that come
                         later. We’re going to have to invest in our kids if we’re going to be prepared
                         for the future, and if we’re to avoid paying the price of neglect: more crime,
                         more institutionalization.
                            But quite apart from economics and social costs, I think we also need to
                         confront who we are and what we want to be as a nation. You can cite any hard-
                         nosed rationale, if you need one, for acting on behalf of America’s children.
                         But what it really comes down to is doing what we all know is right.

ALLEN--T& society IUS alwuys stressed individuul
responsibihty Aren’t t&e some basic vakes at work
here against going in and helping people when it may
appear thut they could be doing more to
Aefp themselves?
                          EDELMAN-YOU see this sort of thinking at work in several ways. One is when we
                          blame children for what their parents are doing. We judge the parents and the
                          children pay.
                              A second notion many of us have had for a long time is that families ought to
                          be independent-as if all families weren’t dependent in some way on support
                          systems outside themselves. This shows up in government policy toward the
                          poor. I don’t know why, for instance, it’s okay to offer tax credits for day care
                          expenses incurred by middle-class families such as mine, but less okay to di-
                          rectly subsidize the day care expenses incurred by poor families.
                             Thirdly, we are a very diverse country with a distrust of government and of
                          government interference in family life. We’re quick co recall the failures that
                          may have taken place in social programs. But by now, I think we have the capa-
                          bility to analyze programs and figure out which ones will strengthen and enable




                                                                                                  FALL 1990      5
ROUND TABLE




                                                   families rather than weaken or destroy them, as many of our foster care policies
                                                   and many of our welfare policies have done. I think we can figure out how to
                                                   enhance the self-sufficiency of families. Most parents really do want to be good
                                                   parents; the question is how to build on that, how to make it more possible for
                                                   them to do so.
                                                      Another thing we’ve done wrong is to make judgments about how we wish
                                                   families were, instead of coming to grips with the realities of family life. We’re
                                                   all pining for a model family out of some hazy past. We’ve ignored, at least in
                                                   the public policy arena, the realities of changing family demographics-such
                                                   things as single-parent families and teenage families and two-working-parent
                                                   families-many     of which have been brought about by changes in the economy.
                                                   We’ve always had teenage parents, for instance, but now a teenage mother
                                                   can’t just drop out of school and get into the economic mainstream. The econ-
                                                   omy demands more skills and more knowledge than she has to offer.

                         BOWSHER-W,k you talk about investing QTthe
                        federal’level, whzt sort of inoestmenfs are you
                         talking abour?
                                                   EDELMAN-In the near term: meaningful child care legislation, an expansion of
                                                   Head Start to reach every eligible child, immunizations for all children, expan-
                                                   sions of Medicaid and WIG [the Special Supplemental Food Program for
                                                   Women, Infants, and Children] funding. Beyond that: investments in educa-
                                                   tion and youth employment, employment training, housing, health, family sup-
                                                   port, and income support.

                        MoRRASome wuu/d argue t&zt there art? limits to
                        how much thefederalgovernment cffn accomplish, or
                        should meti try to accomplish, in affechg lives at
                        this level. Shouldn’t a lot of the responsibility fan to
                        states and communities?

                                                   EDELMAN-It depends on the kinds of problems you’re trying to solve. Education,
                                                   for instance, has traditionally been a state or local function. But it’s very clear
                                                   that there will be significant nationalconsequences if we don’t produce a well-
                                                   educated, well-motivated work force. To me, the fact that this is a truly na-
                                                   tional interest means that the federal government has a legitimate-indeed,        a
                                                   necessary-role to play. Certainly this is true from an investment standpoint.
                                                      I also think that the federal government has a responsibility to ensure what I
                                                   call a floor of decency under our children-in    seeing, for example, that they are
                                                   all born healthy-simply     because they are Americans. I don’t think a child’s
                                                   opportunity for prenatal care ought to depend on whether he happens to be
                                                   born in Mississippi or New York. The child is an American first,
                                                      The federal government can also help establish the goals this nation wants to
                                                   reach. I’ve been pleased to see more and more goal-setting by the Surgeon
                                                   General on such things as infant mortality and prenatal care---even if we
                                                   haven’t yet taken much action to meet them. I’m glad to see people debating
                                                   national goals for education and teenage pregnancy. I think that setting the
                                                   goals and direction, using the White House and other forums of national lead-
                                                   ership to set expectations, is critically important.




6   THE C-A.0 JOURNAL
                                                                                 ‘WE REALLY MUST REACH OUT




FRAZIER--DO you hnt     thathas been lacking?
                         EDELMAN-It certainly has been lacking over the past decade. We’ve seen an at-
                         tempt to virtually repeal the federal responsibility for caring for children and,
                         more broadly, for all the poor.

hhmA--Relatively     speaking, though, not too many
voters seemedto mind. Why mzs it, do you think,
that the Greut Society impulse grew stale for a lot
of Americans?
                          EDELMAN-I think it grew out of several things. One factor was the Vietnam War,
                          which diverted our attention from a lot of domestic concerns, including the War
                          on Poverty. Another factor was the economic downturn. Then you have to com-
                          bine those events with the changes that occurred in the Civil Rights move-
                          ment. When the Civil Rights movement began to broaden its demands to
                          include housing and jobs and affirmative action-particularly     during tough cco-
                          nomic times-it meant, inevitably, that some people would be threatened, that
                          some people would lose something. It’s one thing to pursue basic political civil
                          rights; it’s another to try to establish the social and economic underpinnings
                          that make for true equality. When the focus of the movement broadened, the
                          politics became more complicated. I also think a very different set of national
                          leaders came to the fore. In the aftermath of John E Kennedy’s assassination,
                          and with the passing of Lyndon Johnson and Robert Kennedy and Martin Lu-
                          ther King, I think we lost some of the moral direction we’d had.
                             But I also believe in historical cycles. We attack a problem for a period of
                          time and then get worn out with all the dissension and debate and need to rest
                          for a while. I think that we’ve been in that resting period for at least a decade,
                          during which many problems have been allowed to get worse. Rather than ex-
                          pand Medicaid, for instance, or health programs or AFDC benefits or food pro-
                          grams, the tendency has been to cut them back. So a decade passes and more
                          families fall into poverty.

ALLEN-There are somethilrg like I25 federal programs
that seme children and theirfamilies. is itpossible
that people see this array of programs attd assume
that plenty of resources are going into them, and then
question whether those resources are being used as
efficiently and effectively us possible?
                         EDELMAN-The idea that nothing works-that all government is bad-has been
                         part of the public perception for a long time. But there are a lot of wonderful
                         people running wonderful programs all over this country who are taking the
                         right approaches and who are making a difference and are getting results.
                         We’ve got to document, again and again, what’s working and why, and what’s
                         not working and why not. And we’ve got to get the message across that the
                         problems involved are not insolvable, that most poor children are not part of an
                         intractable underclass-that many of them need a simple immunization rather
                         than protracted medical care, that most of the mothers just need reasonable
                         prenatal care rather than some massive amount of government investment, that
                         most kids just need a tutor rather than 12 years of special education.




                                                                                              FALL 1990      7
ROUND TABLE




                                                     I don’t for a moment doubt that we can solve the problems of our children
                                                  and families, But it’s going to take a sustained, thoughtful set of efforts and a
                                                  lot of experimentation, It’s going to take trying and failing, just as it does when
                                                  we want to put a man on the moon or take on some other great challenge.
                                                  We’re going to need to pursue the same kind of scientific experimentation in
                                                  social areas until we figure out what works.
                                                     I like the idea of making domestic programs accountable for their results. I
                                                  want it to happen. In fact, I’m terrified that this expanding interest in children
                                                  may lead to programs that are merely cosmetic.
                                                     At the same time, though, I’ve also seen a double standard at work. Defense
                                                  programs, for all their waste and overruns, haven’t experienced the kind of crit-
                                                  icism that programs for kids have experienced. The savings and loan scandal
                                                  makes Teapot Dome look like nothing, yet there’s been less outcry against this
                                                  outright scandal than against programs that try to help kids. If we’re going to
                                                  talk about how we need a more efficient and accountable government, let’s ap-
                                                  ply these standards across the board.
                                                     I just want to make one other point. We need to move the debate beyond
                                                  policies and programs and dry statistics. We’ve got to personalize child suffer-
                                                  ing, make people see what’s at stake in the choices the government makes. I
                                                  remember that one of the most effective statistics we used in all of our years of
                                                  doing budget analysis did not address the massive cost overruns at Defense.
                                                  Instead, it was the fact that while we were cutting immunizations for poor chil-
                                                  dren in 1981, we were spending $4.2 million immunizing the pets of military
                                                  personnel. That made people mad.
                                                     When we make our case for children, we have to make people mad, even
                                                  ashamed. Most of the time, they just don’t get it. The Congress really doesn’t
                                                  get it. They don’t really understand why we get upset when they delay child
                                                  care legislation for another year, because they don’t understand what it’s like to
                                                  be a mother trying to get across town at five o’clock in the morning to drop
                                                  your kid off someplace, or what it’s like at that day care center where you can
                                                  barely get through the next week. They don’t know anything about that life.
                                                     One of the things we’re doing now is trying to get congressional people and
                                                  business leaders and media people to go with us to D.C. General Hospital and
                                                  see the American future lying there hooked up to these tubes and see how
                                                  much it costs all of us. And I want to take them to Southeast General Hospital
                                                  to see an alternative setting where better programs operate, and how much is
                                                  saved in dollars and suffering.
                                                     The point is that we do have choices, that these are man-made problems that
                                                  men and women can solve. But the people who make the decisions and shape
                                                  the public.‘s awareness are going to have to be taken into these housing projects
                                                  and see these rats and smell that urine, and then they’ll understand why kids
                                                  may come to school and not be filled with confidence and enthusiasm. And
                                                  they’ll have to be convinced that it will cost much more to neglect these kids
                                                  than to invest in them.

                          BOWSHER--ln the past, it seems, the federal government
                          bus always had enough money to deal with major
                          problems. But now we’ue allowed oursekes to get
                          iftto this terrible budget sitllation, so that many
                          people say thut whateuer n&> resources the




8   THE C.A.0   JOURNAL
                                                                                  ‘WE REALLY MUST REACH OUT”




goaernmenr comes up wifL.4 possib/e peare dividend,
for instance-ought to go to dejcif reduction. There are
four or& areas f&at are going to be crucial to our
 competitiaeness, but alhere wejust don’t seem to have
 the monq to so/w ourproblems. Does ihis state of
 affairs worry you.?
                          EDELMAN-It worries me a great deal, but I also have a very strong set of feelings
                          about it. There are some things that you’ve simply got to do, not just if you’re
                          going to be competitive, but if you’re going to survive intact. Investing in your
                          children is one of them. Keeping your families together is another.
                             Children are a deficit reduction strategy. In a deficit era you can’t afford not
                          to make the up-front investment in children and families. Peace dividend or no
                          peace dividend, you’ve got to take care of your kids. What do you get other-
                          wise? The fastest growing area of public spending at the state level is in
                          prison costs.
                             There’s an awareness growing everywhere around the world, I think, that
                          preventable child suffering is wrong, just as the awareness gradually developed
                          that slavery and apartheid were wrong. In September, for instance, the United
                          Nations will hold a summit of world leaders in New York on kids and world fa-
                          mine. If America expects to be a moral force in a world that is two-thirds non-
                          white and two-thirds poor, we’re going to have to demonstrate our commitment
                          in this area.

FRAZIER-Z Aeardyou mention the underclass earlier
Do you make any distinction between a child
who lives in poverty and one who is part of t/e
so-called underclass.? Do we need a special under-
class strategy?
                         EDELMAN-Well, I did use the word underclass, but in the context of saying that I
                         think most poor children aren’t in it. At our office we hate the word underclass,
                         first of all because nobody can define who’s in it or why they’re in it, and sec-
                         ondly because you can use the concept as an excuse not to act-to say that
                         these social problems are intractable and therefore we shouldn’t try to do much
                         to solve them.
                             What we say instead is that most kids can be helped, and that people tend to
                         move in and out of poverty, and that we ought to prevent as many folks as pos-
                         sible from falling into this condition that we fear may be an underclass.

FRAZIER-WC have been sfrug-ghng with the concept
ourselves /see “The Issue of Ihderclass, ” the GA 0
Journal, Number 5, Spring 19891, becauseyou see
fhe term coming info wide usage without any real
notion of what ir means.
                        EDELMAN-We’re very uncomfortable with it, although I think that when you
                        look at some combinations of symptoms-teenage mothers with drug prob-
                        lems, for instance-you can clearly see there are some categories of folks none
                        of us really know how to reach. But when I see a 30-year-old male drug addict
                        in the subway, I know that even if we can’t reach him, we might still reach his
                        child. We mustn’t lose that opportunity.




                                                                                                FALL 1990       9
ROUND TABLE




                           BOWSHERJR serving o7tthe National Commission
                           to Pmwnt Infant Mortality with Senator Lawton
                           Chiles, I get a sensefrom some people in the business
                           world that they understand the itnpor#unce of early
                           chddh~od initiatives, buf bhat ofhers think fhejob of
                           preparing children for a competitive world begins
                           later-in e[elemeniarysc/rool or evenjzutior high.
                           What’s your sense of that?
                                                     EDELMAN--I think that is what most of them still feel, although we’re making
                                                     progress. The Committee on Economic Development report [see “Investing in
                                                     the Very Young” by Owen B. Butler, the GAOJoumna/, Number 3, Fall 19881
                                                     made a very strong case for reaching these children in their early years. A major
                                                     part of that involves working with disadvantaged mothers.
                                                        Any way you look at it, no one’s come up with anything better for kids than
                                                     parents. But in this society, we don’t value parenting in a way that’s reflected in
                                                     public policy or private sector practices. \.lk haven’t come to grips with the
                                                     need to balance work and family-especially       with the sorts of families that are
                                                     so numerous today. How are we going to nurture and prepare the next genera-
                                                     tion? Where have our values got co change? These questions must be con-
                                                     fronted. We’ve got to bring the debate out to center stage in this country.

                           MORRA-HOW do you intend to do that?
                                                     EDELMAN--I think the overarching task is to convince a critical mass of the Amer-
                                                     ican public that this is, fundamentally, a national security problem. Neglect of
                                                     our children is something more likely to destroy us than any external enemy.
                                                     We can’t say it enough, can’t preach it enough, can’t write it enough, and
                                                     we’ve got to win over other people from all backgrounds and get them to say
                                                     it, too.
                                                         From the mail I receive, and from my visits around the country, I get a sense
                                                     that the people are ahead of the politicians on this one. They know that we’re
                                                     in trouble. People are out there hanging on by their fingernails, and middle-
                                                     class people are as worried as the poor. Poverty grew in the 1980s among whites
                                                     and two-parent families-among all those folks who thought it couldn’t happen
                                                     to them. Everybody knows somebody who’s working but struggling economi-
                                                     cally, even working and homeless. People are beginning to understand that
                                                     middle-class women can be one divorce away from welfare, or that middle-class
                                                     kids are just a mistake or two away from drugs and crime. The letters and calls
                                                     that I receive from the little nooks and crannies all over the country-from
                                                     towns in Idaho and Montana, for instance-tell      me that people understand this
                                                     because they’ve experienced it or have seen it around them.
                                                        But while people are struggling in their individual ways, all their struggles
                                                     haven’t quite galvanized into something bigger. I think the 1992-96 period will
                                                     see the nation really begin to sort through these things.

                           BOWSHER-IS that yourprediction?
                                                     EDELMAN-That’s my determination, let’s put it that way. By 1992, I want to have
                                                     a Children’s Day that will have the same sort of impact on the public’s con-
                                                     sciousness as Earth Day. I think to get things done we need to bring together a
                                                     mass constituency, and I think it would be a shame if we didn’t aim high
                                                     enough for the brass ring. We really must reach out. l



IO   THE C.A.0   JOURNAL
Jai??-ey
      Itell

AN OPPORTLJNITY TO
MODERNIZE U.S.
AGRICULTURE POLICY
In Zightof a chaflging Americanagtictihre, federaZfam p 0Ziq
fact3 new XTutiny.
                             when the United States of all the farmland in California, Colorado, Kentucky,

S
       EVERAL YEARS AGO,
        began its infatuation with oat bran, Ameri- Louisiana, Montana, and Wisconsin.
        can food processors could meet rising domes-     This failure to respond to changes in demand for
tic demand only by importing oats from Canada. The
IT.5 agricultural sector (arguably the most efficient JEFFREY ZTELL, is a senior evaluator in the Food
in the world) was unable to supply the additional oats and Agriculture issue Area of GAO’s Resources,
despite 60 million idled farm acres-the equivalent Community, and Economic Development Division.
                            food commodities was by no means an isolated case.          development, and domestic social welfare; it ac-
                            In 1988, for example, many Corn Belt producers lost         counts for $40 billion to $50 billion in annual federal
                            a good marketing opportunity when they did not              spending, {In fiscal year 1990, only about $25 billion
                            react to market signals suggesting that a switch from       of this went to the farm sector; the remaining$‘23 bil-
                            corn to soybeans would yield higher market returns.         lion was spent on social welfare programs such as
                            Government subsidies that are higher for corn than          food stamps and child nutrition programs.) The 1990
                            for soybeans, and farmers’ need to maintain their           farm bill promises to be one of the most significant
                            corn base acreage for government subsidies, resulted        pieces of legislation developed this year.
                            in an undersupply of soybeans, a gap that some of our          As laid out in the farm bill, agriculture policy uses
                            major competitors-Brazil        and Argentina-were          many complicated methods-including          nonrecourse
current   Pgriculturc       happy to fill.                                              loans, government purchases, direct payments,
policy, whluh was
developed in the 19308,         American farmers have also failed to respond to in-     planting allotments, and marketing quotas-to sup-
relies on B network of      creasing demand for canola, a crop that yields an edi-      port and stabilize prices and producer incomes for
supply- and price-control
polices that only a         ble oil with the lowest saturated-fat content of any oil    certain commodities. Export, market development,
Talmudic scholar                                                                        and scientific research programs also form part of the
could unravel.              currently on the market, World demand for canola is
                            growing very quickly. But U.S. farm programs offer          picture. The old saying that economics is common
                            many disincentives for growing new crops. Conse-            sense made difficult could easily apply to U.S. agri-
                            quently, U.S. farmers are planting only 100,000 acres       culture policy. It would be impossible to survey all
                            ofcanola; in 1989, manufacturers had to import the          farm programs in the space available here, but the
                            equivalent of 500,000 acres, mostly from Canada.            major programs do fall into three basic categories:
                                The lack of flexibility in American farm programs       l     Price supports. Used to keep commodity prices
                             is but one indication that much of U.S. agriculture            higher than they otherwise would be, price supports
                            policy is outdated. Some programs have objectives               include nonrecourse loans and direct government
                            that no longer serve the public interest. And others            purchases. Nonrecourse loans are loans that the gov-
                             have multiple and conflicting objectives that make             ernment provides to producers at a set price, with a
                            them difficult or impossible to administer effectively.         certain crop as collateral. Should the crop’s market
                                                                                            price turn out to be lower than the price of the non-
                                                                                            recourse loan, the producer has the option of forfeit-
                                                                                            ing the crop to the government and not repaying the
                            A&iculture             policy today                             loan. Essentially, this approach establishes a Aoor
                                                                                            price for commodities that allows farmers to wait for
                                                                                            prices above that floor before selling their crops. The
                            C   urrent agriculture policy, which was developed in           government also establishes a floor price through the
                             the 193Os, relies on a network of supply- and price-           direct purchase program, in this case by stating that
                            control policies that only a Talmudic scholar could             it will purchase any amounts of a certain commodity
                            unravel. The government’s original aim was to                   at a certain price. Producers know they can get this
                            smooth over some of the variations in production and            price from the government even if the market price
                             price that are inevitable in agriculture, thereby pro-         falls below it.
                            viding a measure of income stability that would allow           * Income supports.    Agriculture policy utilizes a va-
                            producers to farm more efficiently. Although Con-               riety of programs to provide additional income sup-
                            gress changes the program’s details every few years             port to farmers. The major method, deficiency
                            and has added new programs to accomplish new ob-                payments, operates under the premise that the gov-
                            jectives (relating primarily to conservation, the envi-         ernment should compensate producers for the differ-
                            ronment, and increasing exports), the federal                   ence between the actual market price and what the
                            government has continued to exercise a great deal of            government considers to be a fair market price. Pay-
                            supply and price control over the agricultural sector.          ments equaling this difference are sent directly to
                                The nation’s agriculture policy attempts to ensure          participating producers. This method raises farmers’
                            the provision of a safe, reliable, and affordable food          incomes without raising consumer prices. Disaster
                            supply. Every five years or so, agriculture policy is re-       payments are another means of income support:
                            vised with the passage of a new farm bill. This bill            Farmers are compensated for some of the difference
                            affects virtually all aspects of the nation’s economy           between what they produced and what they would
                            including international rrade, the environment, rural           have produced had no disaster occurred.


12 THE GA.0     JOURNAL
                                                                                                                       MODERNIZING FARh4 POLICY




                            l  Supplymaa@ement.          As a condition for receiving     on the fact that each year current programs cost the
                            price and income supports, participating farmers are          American public $30 billion-$20         billion through
                            sometimes required to take a number of actions to             taxes and $10 billion through higher food prices.
                            manage the amount of commodities they produce,                They also like to point out that Americans spend less
                            such as abiding by acreage set-aside and reduction            of their income on their food not because American
                            programs, marketing quotas, and dairy diversions              food is so cheap but because American incomes are
                            (programs under which farmers are paid to reduce              so high.
                            their milk sales). Other programs not directly related           Nevertheless, even within the context of the cur-
                            to supply management, such as soil and water con-             rent approach to agriculture, policymakers could im-
                            servation, have also become requirements for farm             plement a number of changes that would make a lot of
                            program participation. Farmers often receive addi-            sense. According to GAO,L improvements would in-
                            tional payments for participating in these programs.          volve increasing rhe flexibility of programs; eliminat-
                                There are two additional factors to keep in mind          ing programs that are outdated and therefore no
                            when thinking about farm programs. First, the bulk            longer necessary (the “dinosaurs”); and providing
                            of government expenditures provides support for               clearer program objectives.
                            only a select group of commodities: wheat, corn. bar-
                            ley, grain, sorghum, oats, rye, rice, peanuts, tobacco,
                            sugar, wool, mohair, soybeans, cotton, and milk.       NO
                                                                                          Flexibility
                            tomato programs, no pumpkin programs, and, of
                            course, no broccoli programs. In fact, more than 500
                            crops grown in the United States receive no subsidies          It is probably inevitable that widespread government
                                                                                           intervention in farming has led to regulations that sti-
                            at all. Those that do were selected partly in response
                            to historical events and are not dealt with uniformly,         fle innovation, initiative, and market responses. The
                            each being covered by different combinations of the            country’s recent experiences with oats, soybeans,
                            available programs.                                            and canola attest to some of the government-induced
                                It is also important to note that farm programs are        rigidity in the farm sector. This rigidity has its source
F arm programs PI62         generally based on production, not on financial need.          in programs that require farmers to qualify for federal
generallv based on
                            The largest farms are entitled co participate along            price and income-support benefits by establishing
  reduction,  not on
g nancinl need. Most U.S.   with the smallest farms, And in fact, most I;.S. gov-          crop acreage bases. Each farm’s acreage base for a
government farm                                                                            particular crop generally represents the five-year av-
payments go to about        ernment farm payments go to about 200,000 fidrmers,
200,000 farmers, who, on    who, on average, are wealthier than the typical Amer-          erage of the acreage planted with that crop. (Crops
avera& are wealthier                                                                       covered by these programs are wheat, corn, barley,
than the typical             ican household. Congress has passed a variety of laws
American household.
                            designed to limit these payments to wealthy farmers,           sorghum, oats, cotton, and rice.)
                             but farmers have found the laws easy to circumvent.’             ‘Ib retain eligibility for the full amount of program
                                                                                          benefits, farmers usually must plant program crops
                                                                                          on the maximum number of acres they are allowed.
                                                                                          Otherwise, program payments for the following year
                                                                                          could be reduced. For example, if a farmer with a
                                Fixing the farm program s                                 loo-acre base for corn chose to plant that land with
                                                                                          soybeans, the farmer’s corn acreage base would be
                                                                                          reduced to 80 acres the next year because of five-year
                                D.  tscussions of the need to reform agriculture pro-     averaging. The farmer would then be eligible to re-
                                grams often turn on questions of goals and objec-         ceive only 80 percent of the program benefits to
                                tives. Both proponents and detractors of government       which he or she was entitled when the base acreage
                                involvement in agriculture can muster arguments to        was 100 acres.
                                support their positions. Advocates from any side (and         These rules discourage farmers from planting al-
                                there are more than two sides to agriculture, as the      ternative crops, even when doing so in a particular
                                group of articles that follows makes clear) can haul      year might be more lucrative than sticking to pro-
                                out bushels of statistics proving whatever point seems    gram crops. Farmers are thereby limited in their abil-
                                to be fashionable at the moment. For example, advo-       ity to respond to changes in the commodity
                                cates of current programs like to stress how well         marketplace. These rules also deter farmers from ro-
                                American agriculture compares with that of the rest       tating crops on their fields-the environmentally pre-
                                of the world. Critics, on the other hand, like to focus   ferred means of farm conservation.


                                                                                                                                     FALL 1990    13
FOCUS




                                                                                         strategic material since 1960. So the real question is
                            The “dinosaurs”                                              whether the wool program has been good for the
                                                                                         economy. Industry representatives argue that the
                            Because times and conditions change, some govern-            program stabilized the industry and helped slow the
                            ment programs that may have been appropriate when            decline in wool production. GAO found, however,
                            established have now become obsolete. For example,           that despite high program casts, wool production has
                            the government no longer runs a homesteading pro-            continued to dec1ine.j Despite $1.1 billion in wool
                            gram-providing    40 acres and a mule-to settle the          payments from 1955 to 1980, annual II-S. wool pro-
                            West, nor does it maintain forts to protect settlers.        duction declined from 283 to 106 million pounds. In
                            But the government does currently operate several            1988, the federal government was purchasing wool at
                            agriculture programs that have outlived their original       $3.04 a pound when wool was selling on the market
                            purposes and are no longer necessary3                        for only $1.38 a pound.
                            l The honey program. Consider the honey pro-                    As with the honey program, wool and mohair pro-
                            gram, which was established in 1952. In addition to          gram benefits are not widespread. Although approxi-
                            supporting producer income (a goal of virtually all          mately 115,000 wool and 12,000 mohair producers
                            farm programs), the program was designed to main-            participate in the program, about 6,000 producers re-
                            tain sufficient bee populations to pollinate food and        ceive nearly 80 percent of all payments.
                            fiber crops. But since the program began, bee-               l The dairy program.       The nation’s dairy industry
                            keepers have been more concerned with increasing             has changed radically since the government’s dairy
                            honey production than with providing bees for crop           programs were established more than 60 years ago. In
                            pollination. Producers of crops requiring pollination        the early part of this century, milk was consumed
                            have not complained, however, because they have              either on the farms where it was produced or in
                            ready access to bees through rental and ownership.           nearby communities. Production was concentrated
                            Therefore, according to the U.S. Department of               in certain geographic areas, productivity was low
                            Agriculture (USDA}, the main purpose of the honey            compared to today, and distribution was limited he-
                            program now is to support beekeepers’ incomes.               cause of the lack of refrigerated transport. Conse-
                               If the program were vital for the nation’s economic       quently, there was a need for a government program
                            security, one could still argue irs merits. But the          to ensure adequate distribution of milk throughout
D airv pro@ms               honey industry is relatively small and the program           the country at reasonable, stable prices. The govern-
cokibute     to periodic    supports relatively few producers-mostly        the na-      ment accomplished this by regulating milk prices and
mrptuses by encouraging
the production of more      tion’s 2,000 commercial beekeepers, G.40 recom-              other marketing practices in those areas where pro-
milk than can he marketed   mended that Congress eliminate the program in
at prevailing prices.                                                                    ducers voluntarily adopted them and by guaranteeing
During the 198Os, surplus    1985.3 At the time, USDA agreed; hut it has since           a minimum price for whatever amounts of certain
d&y product@ eost the       backed off. Nevertheless, the program still serves lit-
government more than                                                                     dairy products farmers produced.
$17 hillion.                tle public purpose but to raise the incomes of a small          Over the past 60 years, however, dairy production
                            number of producers at an annual cost of $40 million         has spread throughout the country and the efficiency
                            to $100 million.                                             of milk production has greatly increased. Govern-
                                l The wool and mohair program. USDA’s wool               ment dairy programs, therefore, have contributed to
                                and mohair program is another example of costly farm     periodic surpluses by providing farmers incentives to
                                programs with dubious objectives. The government         produce more milk than can he marketed at prevail-
                                established the program in 1954, following a decade      ing prices. Because of excessive milk production
                                of dramatic decline in the U.S. sheep industry. The      during the 198Os, the government purchased more
                                wool program had multiple objectives, among them         than $17 billion of surplus dairy products; $2.6 billion
                                encouraging domestic wool production in the interest     was spent on such products in 1983 alone.
                                of national security, since wool was then considered a      To counter these surpluses over the past decade,
                                strategic material for the military. (Never mind that    the government has tried to curb milk production by
                                the United States managed to muddle through World        reducing price-support levels or by paying producers
                                War II without the program.) Framers of the mohair       to slaughter or export their entire herds and leave
                                program did not specify any objectives at all.           dairying for five years. GAO has concluded, however,
                                   As one analyzes the merits of the wool and mohair     that efforts to control surpluses by paying producers
                                program, the cover of national security can he           to leave dairy farming or to reduce production would
                                quickly dispatched: Wool has not been classified as a    have no lasting effect.h


14 THE G.A.0 JOURNAL
                                                                                                                        MODERNIZING FARM POLICY




                                    Instead of operating a program designed for a pro-      cumulated a deficit of nearly $29 billion. About half
                                 duction system that no longer exists, the government       of its $23 billion in outstanding direct farm loan prin-
                                 should pursue a more market-oriented approach that         cipal is owed by delinquent borrowers and is vulner-
                                 could provide a lasting solution to periodic dairy sur-    able to future losses. In fiscal year 1988 alone, FmHA
                                 pluses and reduce federal expenditures.’ According         reported $30.5 billion in unpaid principal and inter-
                                 to GAO, Congress could accomplish this by phasing          est on its direct farm loan portfolio.
                                 out the features of federal dairy programs that en-           Because FmHA’s financial condition continues to
                                 courage increases in milk production and by contin-        deteriorate despite an overall improvement in the ag-
                                 uing to penalize overproduction of milk by reducing        ricultural economy, Congress faces fundamental
                                 the guaranteed price.                                      questions about FmHA’s ability to serve as a tem-
                                                                                            porary source of credit while fulfilling its role as a
                                 Clearer program         objectives                         lender of last resort. Unless FmHA’s role and mission
                                                                                            are reevaluated, its farm loan portfolio will continue
                                 Government is often called upon to do what the pri-        to deteriorate and losses will mount.
                                 vate sector cannot or will not. For example, fearful
                                 that they could never charge enough to cover their
                                 risks, insurance companies never offered farmers
                                 comprehensive crop insurance that covered the full         An era of competition
                                  range of perils. So the government has increasingly
                                 taken on the responsibility of providing what is called
                                 multi-peril crop insurance. But the government is          D espite     agriculture policy’s complexity and, in
                                 also supposed to provide this service in a fiscally pru-   some areas, outdatedness, its beneficiaries have
                                 dent manner. So far it has not been able to find a way     grown accustomed to it. After years ofsuch extensive
                                 to meet both objectives simultaneously. Conse-             federal intervention in agriculture, other policy op-
                                 quently, the Federal Crop Insurance Corporation has        tions have begun to seem inconceivable. Yet many
                                 required an additional $2.3 billion in federal funds to    choices were available to the New Dealers creating
                                 cover losses during the 1980s.                             policies to address the severe farm crisis of the 1930s.
                                    Similarly, many other agriculture programs have         That they constructed the current policy only reflects
                                 multiple and conflicting objectives that make them         what seemed politically possible and economically
                                 difficult or impossible to operate effectively. Perhaps    reasonable at that time.
                                 the foremost example is the Farmers Home Admin-                It’s important to keep in mind that rhe New Deal-
                                 istration (FmHA), which provides what is intended           ers devised the current array of farm programs when
                                 to be temporary credit assistance to family farmers        worldwide competition was not a primary concern.
                                 whose financial situations prevent them from obtain-       They felt, rather, that their most important objective
                                 ing credit elsewhere at affordable rates and terms. In     was to stabilize the farm sector-to insulate produc-
                                 this capacity, FmHA must balance two competing             ers from the vagaries of weather and price fluctua-
                                 objectives: first, to provide assistance to financially     tions. All mature industries seek some level of
                                 troubled farmers; and second, to follow sound lending      stabilization: for example, a steady supply of parts
                                 practices that protect the government’s and, ulti-         and raw materials and a well-trained and content
Those who make farm
                                 mately, the taxpayers’ financial interests.                work force. But CT.S. agriculture policy may now pro-
policy could implement a            FmHA has been unable to balance these conflict-         vide too much stabilization and not enough flexibility
number of changes that
would make a I& of sense:        ing objectives.” Simply stated, FmHA has found it-         and incentive to compete in the world marketplace.
increa&g    the flexibility of   seif in financial trouble because its mission, in part,        This emphasis on stabilization may no longer be
pru&uns;    eliminating
outdated. unnece8sm-v            is to provide credit to uncreditworthy farmers. As a       appropriate, given that agricultural trade is becoming
programs; and providing          result, FmHA has become a continuous rather than a         increasingly internationalized and that the United
more clear-cut
program objeetives.              temporary source of subsidized credit for many bor-        States is facing increasingly tough competition for
                                 rowers (many of whose loans will never be repaid). As      overseas markets. Unlike many industries, U.S. ag-
                                 of September 30, 1989, about 35 percent of all             riculture still enjoys a competitive advantage on the
                                 FmHA farm program borrowers had had at least one           international market. America’s food and agricultural
                                 FmHA loan continuously for 10 years or more.               sector currently contributes $18 billion annually to
                                    The cost of this program has been enormous.             the U.S. balance of trade. But whether the United
                                 Since its inception, FmHa’s revolving fund has ac-         States can maintain a positive balance in this sector


                                                                                                                                      FALL 1990   15
FOCUS




                         is an open question, because its competitive advan-           tions are only partially successful, and call only for
                         tage is shrinking for some products and disappearing          the gradual dismantling of farm programs, Congress
                         for others. Many competitors--particularly       Australia,   will, as we have seen, have many candidates to
                         Brazil, and the European Community countries-                 choose from. One can only hope that Congress is as
                         have made inroads into the nation’s overseas markets.         successful in meeting the challenges and opportuni-
                             That is why this year’s farm bill is so critical. One     ties presented by the new era of international agricul-
                         of Congress’s main goals in drafting the 1985 farm bill       ture trade as the New Dealers were in confronting the
                         was to boost the competitiveness of U.S. farm prod-           challenges of their time. l
                         ucts overseas. Two new programs were enacted-the
                         Export Enhancement Program and the Targeted
                          Export Assistance Program-and export credit guar-            1. See Farm Payments: Rusic ChangesNeeded to Avoid Abuse of the
                         antee programs were strengthened.                             $50.000 PoymentLirnit(GAC)/RCED-87-176, July 20, 1987).
                                                                                       2. See IWO ~%bnnRillr Opportunities@ Change(GAOIRCE D-90-
                             So far, the 1990 farm bill promises more of the           142, Apr. 10, 1990).
                         same. At the same time, there are important devel-            3. See 1990 Funn Rilk Opportunities for Change.
                         opments in the current negotiations of GATT (the              4. See Federal Price Supportfor Honty ShouM Be Phased Out (GAO/
                                                                                       RCED-85-107, Aug. 19, 1985).
                         General Agreement on Tariffs and Trade), scheduled            5. See Itid and Mohair Program: Needfor Program StiU in Qwstb
                         to be completed this year, Specifically, the Bush             (GAOIRCED-90-51, Mar. 6, 1990).
                                                                                       6. See Datq Termination Pmgrum: An &&mote of Its Impact and
                         administration has taken an aggressive free-market            Cosf-&&mess       (GAO/RCED-89-96, July 6, 1989).
                          stand in these talks, placing top priority on eliminat-      7. See Federal Dairy Pmgmms: Insights Into Their eaSt Provide Per-
                          ing virtually all agricultural subsidies, If this attempt    rpertkm on T/leir F.&e (GAOIRCED-90-88, Feb. 28, 1990).
                                                                                       8. See IssuesSwmundinp the Rok and .llissicm of the EzmaersHome
                          is successful, Congress will need to revamp most of          Adminirtratian’s Farm Lo& Pmgrams (GAO/T-kCED-90-22,         Jan.
                         the nation’s current farm policy. Even if the negotia-        25, 1990, and GAO/T-RCED-90-27, Feb. 8, 1990).




16 THE C.A.0   JOURNAL
                       AT $ZSBILLION
 APPRAISING
 AMERICAN
AGRICULTURE




                       AYEAR,
                       PLENTYTO
                       THINKABOUT
                       T
                               HE GAO JOURNAL recently approached 10 experts-people         who have
                               made their living in agriculture or studied the issues surrounding U.S.
                               agriculture policy-and posed them a question:

                           “This year; American taxpayers will spend$Z5 billion on food andagriculture
              $1.364   programs. Are they getting their money’s worth? UVuztcutbucks, increases, OTre-
                       allocations of federal resources would you advocate?

                         The answers we received appear on the following pages. The range of issues
                       they raise certainly affirms that, as the author of the preceding article pointed
              10,239
                       out, “there are more than two sides to agriculture?
               1,144
               2.940




               3.020


               6.900




                                                                                            FALL 1990    17
FOCUS




66
  There is basically no need
for major changes-
certainly none that might
require large amounts of
taxpayer money?

                                      HE $25 BILLION in taxpayer money spent on food and agricuhural programs
                               T      must be seen, first of all, in the context of the overall size of U.S. agricul-
                               ture. In 1989, gross receipts for this sector of the economy totaled more than
                               $150 billion; farm assets, about $780 billion; net farm income, about $50 bil-
                               lion. The basic “return on assets” for production agriculture is thus about
                               6.5 percent, or about 5 percent if direct government payments are excluded
                               from income.
                                   Of the $25 billion spent by the government on food and agriculture pro-
                               grams, about half goes toward direct payments to farmers. The question for the
                               taxpayer is whether this money is helping U.S. agriculture become a more via-
                               ble industry for the future-both       in terms of producing the kind and quality of
                               food the consumer wants at the price the consumer wants to pay, and in terms
                               of competing abroad for export markets.
                                   The quality and safety of our domestic food supply is presently the subject
                               of extensive debate. I believe that the record contradicts all the hysteria and
                               hype. No finer food system than ours exists on the face of the earth, and there
                               is basically no need for major changes-certainly none that might require large
                               amounts of taxpayer money.
                                   To me, then, the big question is how competitive our agricultural sector can
                               become in serving world markets. As with all American businesses, the ulti-
                               mate future market has to be international.
                                   The opportunity likely to unfold over the next decade or two will be truly
                               immense. The United States has only about 5 percent of the world’s popula-
                               tion but about 25 percent of its food-producing capacity. In a world of over 5
                               billion people, only about 2 billion are reasonably well-fed. The remainder get
                               by on about “two square meals per day,” when they all would like to have
                               three. If the remaining 3 billion people find the means to buy the additional
                               meal, then demand for the world’s exportable food will quadruple, and in this
                               country we may have the opportunity to double or even triple our agricultural
                               production. I’m not talking here about food donations, but about the realistic
                               business opportunities that will present themselves to American agriculture as
                               world incomes increase enough to allow the world’s people to eat what they
                               want. The breakdown of communism and the growth of market economies
                               around the world bode well for future income growth.
                                   Regardless of new demand, however, export markets for our products will re-
                               main intensely competitive. Effective competition requires more than just
                               being the most efficient producer. In this we are certainly the leader. But other
                               nations seek to compete by means of subsidy programs for their farmers, and I


                               RICHARD P ANDERSON is President and Chief Exectltiwe Ofjct-rof The
                               Andersans, a diaers$ed agribusiness beadpurtered in Maumee, Ohio.


18 THE GA.0   JOURNAL
                                                                    AT $25 BILLION A YEAR PLENTY TO THINK ABOUT




                               think that we’ve all stopped trying to kid each other about this. Until the Gen-
                               eral Agreement on Tariffs and Trade (GATT) participants can agree on a new
                               agricultural trade protocol in which subsidies are progressively reduced and
                               eventually eliminated-by      all countries-then it seems to me that our yearly
                               expenditure of $10 billion to $15 billion on price supports and export enhance-
                               ments is justifiable. I would not want to “disarm” unilaterally, but I would cer-
                               tainly be in favor of eliminating these subsidies as part of a global agreement.
                                  Research and extension in U.S. agriculture cost the taxpayer about $2 bil-
                               lion. With the kind of eventual world demand I foresee and with the constant
                               need to produce more from fewer inputs-a consideration derived as much
                               from simple economics as from environmental concerns-I think that the ex-
                               penditure on research is entirely proper.
                                  Altogether, the future of agriculture in the United States is mainly a ques-
                               tion of public attitude. We have the resources to serve world markets. But will
                               we decide finally to use them effectively?



‘We should not ignore our
responsibility to keep the
agriculture system of family
farmers in place?              Linda i? Goludner

                                       ALK INTO ANY supermarket in the United States and you will see one
                                       measure of the success of American farm policy: The shelves are filled
                               with abundant supplies of a wide variety of fresh and processed food products
                               to meet any consumer’s tastes and food habits.
                                  When that same consumer walks up to the supermarket checkout stand,
                               another measure of the success of the American food production system is evi-
                               dent: He spends less of his hard-earned wages on food than any other con-
                               sumer in the world. The average American family spends only 10.4 percent of
                               its disposable income to keep itself fed.
                                  Drive down the streets of thousands of rural communities in America’s
                               heartland, however, and you get a different measure-f       the failure-f
                               America’s farm policy. You find empty storefronts and deteriorating services, all
                               of which take a toll on the lives of those individuals who have made America’s
                               abundant food supply possible.
                                  Take a closer look at that supermarket tab and you see yet another indication
                               that all is not well with America’s farm policy: The U.S. farmer today receives
                               only $1.40 out of every $14.41 bag of groceries, according to one recent survey.
                                  These are some of the early warning signs that something is wrong with
                               American farm policy and that the system that produces an abundance of
                               reasonably priced food is in jeopardy.
                                  At stake today is the issue of who will control this country’s food production
                               resources. The 1980s saw the demise of several hundred thousand full-time
                               commercial family farms because they did not receive enough income from


                               LINDA E GOLODNER is Executiae Director of the National Consumers League
                               in Wadington, D.C.


                                                                                                    FALL 1990      19
FOCUS




                                  farming to remain in existence. According to a recent Congressional Budget
                                  Office report, another 500,000 commercial farms could be lost in the 1990s
                                  if Congress authorizes the price levels embodied in farm legislation now
                                  under consideration.
                                     This would not be in the best interest of the American consumer. The pub-
                                  lic is not well served by a farm policy that tends to concentrate food production
                                  into a very few hands and removes it from diverse, mostly family-owned busi-
                                  nesses in rural communities. When individuals and families cannot earn a liv-
                                  ing from their farms, they also cannot support local businesses, pay taxes for
                                  schools and hospitals and public utilities, or support rural religious or commu-
                                  nity organizations. Moreover, it is the family farmer who respects the environ-
                                  ment, who knows and protects the richness of the land so it can be passed to
                                  the next generation in the same fertile condition as inherited. It is the family
                                  farmer who does not exhaust the soil by responding to economic concerns
                                  alone. Without this personal attachment to the land and understanding of what
                                  it can reap, the diversity and quality of food available to the consumer could
                                  be compromised.
                                     What is needed by the American consumer is a farm policy that fosters this
                                  diversity and prosperity in rural communities. The nation needs to spend its
                                  federal farm policy dollars in such a way that farmers can get a fair and reasona-
                                  ble price in the marketplace; in turn, rural communities will prosper.
                                      Even though this country has to watch every federal dollar that is spent, we
                                  should not ignore our responsibility to keep the agriculture system of family
                                  farmers in place. We need to keep in mind that only 16.9 percent of fiscal year
                                   1990 Department of Agriculture outlays actually went to support farm prices.
                                  The rest went to other vital programs, such as food safety inspections, school
                                  lunches, food stamps, and research to keep this country’s largest and most pro-
                                  ductive industry on the cutting edge of technology
                                     Cuts in federal farm spending would be an unwise investment decision-one
                                  that this country and the American consumer would come to regret.
“If the objective [of current
policy] is to ensure a supply
of cheap food, then the
public is certainly not getting
its money’s worth?                VernonM. c?-uwdt??-

                                        o DETERMINE WHETHER the American public is “getting its money’s worth”
                                  T     from agricultural programs, it is necessary to identify their objective.
                                     If that objective is to ensure a supply of cheap food, then the public is cer-
                                  tainly not getting its money’s worth. It is true that food is generally less expen-
                                  sive in the United States than in many other industrial countries. This results,
                                  however, not from federal farm programs but from the productivity of American



                                  VERNON M. CROWDER is a Vice Pxkfentas wellas secretq ofthe
                                  Agricultura/ Committee at Sec.&t~ Pa&k National Bank, an $80~plus billion
                                  bank holding company with about $2.5 billion in commitments to agriculture and
                                  agribusiness on the WestCoast.

20   THE GA.0   JOURNAL
                                      AT $25 BILLION A YEAR PLENTY TO THINK ABOUT




 agriculture and the intense competition in domestic commodity markets. And
the fact that Americans spend a comparatively small portion of personal income
on food does not reflect food’s “low cost”; rather, it reflects Americans’ rela-
tively high disposable incomes-a result of high U.S. productivity in a number
of sectors.
    Some farm programs have occasionally encouraged farmers to dispose of
their commodities at prices below their production costs, which would seem to
serve the objective of providing cheap food for the public. But in the case of
commodity supports, the programs’ primary effect has been not to lower food
costs but to increase the value of the real estate that produces the food, since
farmers qualify for support payments primarily on the basis of the acreage they
own or operate. In fact, historically there has been a very high positive correla-
 tion between total government expenditures on farm programs and average ag-
 ricultural real estate values. In general, these increased real estate values and
 prices have had the effect of raising the overall average costs of production. Par-
adoxically, then, federal support payments can have the effect not of lowering
food prices but rather of raising them.
    Farm programs have also contributed to the volatility of commodity markets.
Many farm program benefits are linked to the amount of commodities pro-
duced, which gives farmers nonmarket incentives to produce those commodi-
ties. As a result, inventories sometimes reach excessive levels; at that point,
farm programs must be adjusted to discourage the production of surpluses.
Such market interventions frequently either contradict or reinforce market
forces in such a way as to cause even greater surpluses or shortfalls.
    Many federal farm programs are also aimed at stabilizing market supplies or
ensuring consistent product quality. But most such efforts are administered by
farmers,. who use them to restrict total production, thereby raising market
prices. This benefits producers but not consumers. These programs can also             R
end up keeping new producers out of the market or impeding expansion efforts
by low-cost producers.
    Mention should also be made of restrictions on food imports. Their effect is
merely to raise the price that American consumers have to pay for these goods.
    Overall, then, federal farm programs seem relatively ineffective at ensuring a
supply of inexpensive food. But another objective these programs are often as-
sumed to have is that of providing an economic “safety net” for farmers, espe-
cially smaller ones. Farm programs are seen as constituting a social policy
aimed at slowing the historical shift of the agricultural industry from small
farming to agribusiness. In this regard, however, they appear to have been only
partially successful. Many smaller farmers either have left the industry or have
become larger farmers, expanding their operations to capitalize on the newer
technologies, which require greater economies of scale. And although there are
still relatively few larger farmers, they now account for a very high proportion of
total agricultural production.
    At the same time, the number of small farms has also been increasing, but
farm program benefits are not relevant to most of these new farmers. For one
thing, most of the new operations are located near communities where farmers
can obtain other employment to supplement their farm incomes. Furthermore,
many who have recently entered farming have done so for “life-style” consider-
ations; they generally are not concerned with receiving federal benefits. Even
in the cases of small farmers who do receive benefits, these benefits have not
always prevented them from acquiring high-priced real estate by taking on ex-
cessive debt, thereby jeopardizing their financial futures. (As we have seen,
real-estate prices are high partly because of federal support payments.)


                                                                      FALL 1990   21
FOCUS




                               Any significant changes in farm policy must be made with policy objectives
                            in mind. If the goal is to ensure that competitively priced food is available, the
                            federal government should allow the agricultural and food processing industries
                            to respond to market forces, independent of support payments or restrictions
                            on food production or imports. If farm policy is understood to have a social
                            component, farm benefits should be decoupled from the farmer’s production
                            decisions and real estate holdings. This would enable these benefits to function
                            more effectively as a safety net, since they could be explicitly targeted toward
                            the specific groups that the public wished to encourage. Many smaller farmers,
                            however, might resent this concept because it suggests that farm programs are
                            merely income transfers or “welfare:’




“We & have a ‘cheap food’
policy in America:’         Tkma R. Grabowski

                                  RE AMERICAN TAXPAYERS getting their money’s worth from government
                            A     spending on food and agriculture programs? Indeed they are. American
                            citizens enjoy the most abundant, safest, and most wholesome food-along
                            with the largest selection-f    any country in the world. According to the Agri-
                            culture Council of America, less than 15 percent of the American consumer’s
                            household budget is spent on food. This percentage is lower than in any other
                            country. We do have a “cheap food” policy in America.
                                The amazing production capability of the American farmer leaves 98percent
                            of Americans free to pursue academic and humanitarian interests, science and
                            technology, literature, the arts, and other endeavors.
                                Ideally, the farmer would produce for a free market, one governed only by
                            the law of supply and demand. But the ideal is not the actual, and interference
                            by governments over the decades has become a very real factor in the market-
                            place. We operate in a global economy, and the trade-distorting practices of
                            other countries, as well as our own, have very real implications for the world
                            market. The current General Agreement on Tariffs and Trade (GATT) negotia-
                            tions are aimed at correcting the well-intended but sadly misguided efforts of
                            many governments.


                            TRENN,4 R. GRABOWSKI is a farmer and cerrtQkdpublic accountant in Mt.
                            Lhnon, Illinois.




22   THE GA.0   IOURNAL
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   hmerican farmers are productive and efficient. They can compete in a free
market situation that rewards production and marketing efficiencies. But until
that much-talked-about “level playing field” is an actuality, the safety net of
deficiency payments, set-aside programs, guaranteed loans, and disaster assist-
ance will remain an economic necessity for American producers.
   The Food Security Act of 1985 encouraged a market orientation, with more
of the farmer’s income coming from the marketplace and less from the govern-
ment. The cost of the price support program has gone down in recent years, a
trend chat, I hope, will continue under the 1990 farm bill. The production flex-
ibility being written into the bill will allow farmers to respond, chat is, adjust
their production according to market forces.
    In allocating resources among government farm programs, we would do well
co emphasize export development and market enhancement to provide an ex-
panded horizon for 1j.S. farm products. It would be good to see government
involvement redirected toward programs that more effectively encourage a
healthy, contributing agriculture sector. Ideally, the government commodity
loan program should be devised as an alternate source of credit for the farmer,
rather than as a program to guarantee prices. The emphasis should move to-
ward market development; a broader use of the Foreign Agricultural Service; a
revolving fund for Commodity Credit Corporation credit to encourage sales to
developing countries; and a greater emphasis on trade, including the elimina-
tion of trade barriers. Encouragement of the creative use of vertical integra-
tion-selling     products in various stages of production-would   add jobs and
improve the U.S. economy.
   We all benefit from government research and development in the agricultural
area. Thanks to the agricultural research programs of past years and USDA ed-
ucational efforts, the American consumer is aware of the concept of a healthy
diet-and has access to the foods that make up that diet. The government
should go further to encourage research to develop alternative uses for tradi-
tional crops-such as degradable bags and diapers, road de-icer, fuel derived
from corn, and newspaper ink derived from soybeans. Through agricultural
research, we are finding new alternative and industrial crops; an example of
these is kenaf, which can be used to produce paper and is an annually
renewable resource.
   We all benefit from the fact that farmers take their stewardship seriously.
Farmers were the original environmentalists. Contrary to what one hears, farm-
ers have been practicing low-input sustainable agriculture (LISA) for years-
even before the practice became widely recognized enough co earn its own ac-
ronym. Farmers routinely take soil samples. They apply the levels of fertilizer
necessary to achieve optimum fertility. They replace what their crops take from
the land. As for crop protectors, farmers apply only what is needed to control
specific pests. After all, it would not make sense economically for farmers to
use more product than necessary to get the job done. Farmers have the same
environmental concerns as the rest of us; they are careful about farming prac-
tices. Many are second- and third-generation farmers, born on the land they
farm, and they want to preserve that land for their children and grandchildren.
The modern farm practices they employ reflect a healthy respect for the land
that feeds millions.




                                                                      FALL 1990      23
FOCUS




6k
  Many government
programs . . . create an
economic pressure to misuse
the agricultural resource
base . . . ”                  R&h       E. Gmsi

                                    HE CURRENT PRICE and income support structure of U.S. farm programs
                              T     reflects policy objectives encompassing both economic and social values;
                              purportedly, the overall goal is to ensure an abundance of food and fiber at rea-
                              sonable prices. But what has been the cost? Many government programs de-
                              signed to support farm income and commodity prices at the same time create
                              economic pressure to misuse the agricultural resource base-a pressure
                              that is not adequately counteracted by laws that ostensibly promote
                              agricultural conservation.
                                 In particular, current commodity program rules lock in rigid production pat-
                              terns that dictate continuous cultivation of certain crops. Therefore, because of
                              the economic considerations involved, farmers are effectively discouraged from
                              practicing crop rotation to retain or restore soil fertility, and they are encour-
                              aged to expand agricultural production into environmentally sensitive areas,
                              such as highly erodible lands. Moreover, payment provisions may prompt farm-
                              ers to strive for maximum yields through excessive use of fertilizers and inten-
                              sive cropping. In these ways, commodity programs present a financial barrier to
                              the use of sound conservation practices.
                                 Commodity programs also tend to skew farm production. Rather than stimu-
                              late cultivation geared toward consumer demand, these programs perpetuate a
                              “plant for the program” mentality among program participants. The financial
                              security offered by current farm programs provides a powerful incentive to
                              plant crops covered by the programs even when the local markets might indi-
                              cate that other crops would be more lucrative choices. This sometimes results
                              in shortages of non-program crops.
                                 During consideration of the 1990 farm bill, Congress has tried to introduce
                              flexibility into the commodity program rules. Many proposals reflect a concern
                              for making the programs more responsive to market forces. Others were de-
                              signed to allow farmers the freedom to adopt more ecologically sound produc-
                              tion practices. Yet these are simply attempts to fine-tune the existing policy
                              structure; one cannot help but wonder if the problem is not just a few mis-
                              guided program details but rather the policy structure itself.
                                 Consider the fact that in 1988 this country paid $12.5 billion to farmers under
                              subsidy programs-four times as much as was spent on conservation. These
                              direct government payments to farmers came to approximately $35 million ea8
                              day. More than 50 percent of these payments went to the largest 15 percent of
                              U.S. farms (as measured by volume of sales); the smallest 70 percent of U.S.
                              farms received only 18 percent of direct farm payments. It is difficult to justify
                              the sum of outlays going to a relatively small number of wealthy farm operators.

                              RALPH E. GROSS1 is Presia’ent vf the Amwicun Farmhand Test in
                              Wushingivn , 0. c.


24   THE C.A.0   JOURNAL
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                                   Perhaps it is time to reassess this nation’s agriculture policy structure. It is
                                one thing to spend billions of taxpayer dollars on programs that achieve a cur-
                                rent policy objective. It is another to spend that amount on programs that sub-
                                sidize the destruction of our natural resources to the detriment of many and the
                                benefit of only a few. Since Congress seems more than willing to continue rela-
                                tively high farm support payments, why not use those dollars to achieve con-
                                temporary public objectives? Instead of encouraging often unwise production
                                choices, could those payments go to farmers for resource stewardship? The
                                American taxpayer might be more amenable to continued farm subsidies if’they
                                were used to correct some of the environmental problems currently associated
                                with agriculture.




66
     A major consideration to
be kept in mind when
framing agriculture policy is
the policy’s social impact?     Don Reeves

                                       oou AND AGRICULTURE policies should contribute to three broad goals:
                                F      to ensure food security; to protect and enhance the environment; and to
                                build community.
                                    First, food policies should ensure that everyone has access to enough food to
                                sustain productive life. Good food, even luxury food, is practically a given for
                                those who read and write for policy journals such as this one. But secure access
                                to food has not been achieved for everyone-not even for all U.S. citizens. If
                                you doubt this, try living for a few months on the U.S. Department of Agricul-
                                ture’s Thrifty Food Plan, which forms the basis for allocating food stamps.
                                Then recall that half the families eligible for food stamps don’t get them, and
                                that because the deductions allowed for housing are low many families are
                                forced to choose between paying the rent and buying food. Food prices are
                                reasonable, but the safety net needs repair.
                                   The U. S. contribution to world food security also gets a mixed score. For
                                the past half-century, the United States has been the world’s principal reserve
                                granary-ften      inadvertently, as a result of domestic commodity programs, but
                                more deliberately since the creation of formal grain reserves in 1976. This
                                country remains the world’s largest food aid donor, as well it should. Three
                                times over the past decade, America’s large government-held and farmer-owned
                                reserve stocks have seen the nation and the world through crop shortfalls with-
                                out food shortages or serious price increases.
                                   But the storage bins are now nearly empty, largely as a result of the U.S.
                                drive to dominate world grain markets. This could have disastrous conse-
                                quences for the poorer food-importing nations. Because of the U.S.-European
                                Community subsidy war, food prices for these poorer nations have remained




                                                                                                     FALL 1990   25
FOCUS




                         low; but at the same time, these low prices, coupled in some instances with
                         misuse of food aid, have undercut poor nations’ efforts to develop their own
                         food-producing capacity. With this capacity low, and U.S. reserves low as well,
                         there is an increased possibility that crop failures could lead to famines.
                            The United States could enhance its role as a dependable supplier of grain in
                         world markets by more prudently managing its grain reserves. These reserves
                         should be continued-with        international cooperation if possible, but by the
                         United States alone if necessary. At present, U.S. grain reserves are too low.
                            The second major goal that agriculture policy should pursue is the encour-
                         agement of stewardship and sustainabiliry. Through the early 198Os,about one-
                         third of U.S. cropland was eroding at a threatening rate. Several provisions of
                         the 1985 farm bill aimed to slow further damage: the Conservation Reserve
                         Program; acceptable conservation practice as a condition of eligibility for com-
                         modity program benefits; and applying brakes to the plowing up of grasslands
                         and wetlands.
                            The concept of sustainable agriculture is gaining favor, but this country’s
                         grasp of the idea and of its policy implications is stili rudimentary. Much more
                         research is needed, particularly to understand the complex interactions and
                         trade-offs between fertilizer and pesticide use, on the one hand, and soil
                         health, water quality, and food quality and safety on the other hand. In the
                         meantime, commodity program rules, which now reward intensive farming
                         practices and planting of the same crops on the same land year after year,
                         should be changed to encourage practices less likely to cause long-term degra-
                         dation of natural resources.
                            A third major consideration to be kept in mind when framing agriculture
                         policy is the policy’s social impact. Although lip service is paid to the tradition
                         of family farms, broad social issues are currently given very little thought. This
                         is a serious oversight, because clearly the nature and distribution of farm com-
                         modity program benefits affect the number and character of farms as well as
                         the health of the communities in which they are located. One can make a
                         strong case for stabilizing farm family incomes-particularly       for families whose
                         livelihoods depend primarily on their farms. But it seems difficult to justify the
                         ever larger payments that go to families whose farms have expanded beyond
                         modest size and who are much better off than average U.S. taxpayers.
                            As things now stand, farm workers rank very low in nearly every social indi-
                         cator of well-being-a     result not only of agriculture policy but also of tax, im-
                         migration, and labor policies. Furthermore, the types of marketing systems
                         that are permitted or encouraged are leading to dramatic changes in the variety
                         and quality of foodstuffs-changes        that are not always to the benefit of the
                         American consumer. Add up these considerations-food security, environmen-
                         tdl sustainability, and social consequences-and        it becomes clear that if this
                         country thought more clearly about the goals of irs agriculture policy, it would
                         most likely decide that substantial changes were in order.




26   THE G.A.0 JOURNAL
                                                                   AT $25 B[FLION A YEAR PLENTY TO THINK ABOUT




“Sure, identify ways to
save in agriculture
spending . . . but also
check the government’s
other spending activities,?

                                  N 1990, FARMERS are receiving about $8.2 billion in support payments from the
                              I   federal government. Other federal agriculture programs, such as export sub-
                              sidies, agricultural research, the U.S. Forest Service, the Farmers Home
                              Administration, conservation programs, and inspection services, add $17 bil-
                              lion. Food stamps and other programs to help the poor add $23.5 billion to the
                              U.S. Department of Agriculture’s (USDA) budget.
                                 A budget rarity, USDA’s commodity support costs have actually decreased
                              over the past 5 years. Payments to farmers fell $11 billion, while Social Security
                              and medical outlays soared $91 billion, defense costs jumped $44 billion, and
                              health costs rose $24 billion,
                                  What does the taxpayer get for the money paid to farmers? Peace of mind,
                              economic growth, jobs, and full bellies. America’s farmers are the world’s most
                              productive. It is a rare American consumer who has seen empty shefves at the
                              market, a common occurrence in other lands.
                                  Furthermore, we pay less for what we eat than do inhabitants of other coun-
                              tries. W’hile Americans spend about 11 percent of their income for food, Euro-
                              pean and Japanese consumers spend between 15 and 20 percent, South Ameri-
                              cans spend between 30 and 40 percent, non-Japanese Asians spend from 35 to
                              50 percent, and Africans spend about 60 percent.
                                 Our food, besides being less costly, is safer and more wholesome, due in part
                              to the quality assurance function of USDA-financed,         of course, by taxpayer
                              money. Our foodstuffs are also frequently more nutritious, thanks to innova-
                              tions and improvements provided by government research, again funded by the
                              U.S. taxpayer.
                                 A robust American agricultural sector benefits the entire economy. While less
                              than 1 percent of America’s workers are farmers, more than 21 percent of the
                              nation’s work force depends on agriculture for its paycheck.
                                 Export sales of U.S. farm goods are also extremely important to the coun-
                              try’s economic growth. Agricultural exports habitually exceed imports, making
                              farm goods a positive contributor to our balance of trade. We will sell $40 bil-
                              lion worth of farm goods to foreign buyers this year, about one-fourth of our to-
                              tal production of food, feed, fiber, flowers, and lumber. Remember that every
                              $1 billion in export sales creates 30,000 jobs, and you see the human, as well as
                              the economic, value of increased exports.
                                  Rather than scrutinize the $8 billion in commodity support payments to
                              farmers, cake a look at the country’s annual trillion-dollar spending spree.
                              Sure, identify ways to save in agriculture spending, as has been done in a major




                                                                                                  FALL 1990   27
FOCUS




                               way over the past 5 years. But also check the government’s other spending ac-
                               tivities. Nearly 75 percent of government spending is exempt from Gramm-
                               Rudman-Hollings budget-balancing scrutiny and resultant penalties. Agricul-
                               ture is unprotected and bears an excessive burden when the law calls for
                               across-the-board budget cuts.
                                   .4gricuItural research and plant and animal health inspection services are
                               two areas that could suffer if further cuts occur. Scientists, for example, are on
                               the verge of producing disease-resistant plants that manufacture their own in-
                               sect repellents. Research funding cuts would stifle such advances. Inspection
                               services are also crucial in providing quality, wholesome agricultural products.
                               Imported diseases, such as hoof-and-mouth disease, or pests such as the
                               VIedfIg pose constant threats to our livestock and our fields. Research and in-
                               spection funding should be increased rather than cut.
                                   Payments through I.XIA to farmers yield tremendous dividends for .4merica.
                               Only here do citizens boast of abundant supplies of wholesome, nutritious food
                               at bargain prices. ,4 strong agriculture is a major contributor to a strong national
                               economy and farmers are proud to be a part of it.




“An environmentally sound
farm policy would reinforce,
rather than subvert,
American farmers’commit-
ment to stewardship.”

                                     REDICTAELY, CDNGRESSIONAL DELIBERATIONS about the 1990 farm bill have
                               P     been accompanied by editorial-page expressions of concern, mostly fo-
                               cused on the high cost of farm subsidies. Although the price of this year’s leg-
                               islation is likely to fall short of the record set in the mid-1980s, when Reagan-
                               omics resulted in costs of more than $30 billion annually, the rationale for
                               heavy federal subsidies is still subject to question. Endorsing legislation that
                               would deny payments to farmers who earn more than $100,000, or to farms with
                               sales of more than $500,000, the iV& York Times recently urged that the nation
                               “kick wealthy farmers off welfare.”
                                  High as the farm bill’s costs are likely to be, however, they do not include an
                               accounting for the irreparable damage to natural resources and the environment
                               that can be caused by today’s “industrial agriculture.” Intensive, large-scale
                               farming is the regrettable, if understandable, response to a farm policy that
                               subsidizes production and obscures market signals. Those subsidies, and the
                               agricultural practices they support, have contributed substantially to soil ero-
                               sion; depletion of freshwater aquifers; contamination of streams, rivers, and
                               bays; destruction of wetlands; and the loss of wildlife habitats. But for the gov-
                               ernment’s intervention, past practices suggest, most farmers would be careful
                               stewards of the land upon which they depend for their livelihood.


                               Doughs I’? LVheeleris fi~xecutive Vice President of The Conservation Foundation in
                               Washington, 0.6’.


28   THE C.A.0 JOLIRNAL
                                                                         AT $25 BILLION A YEAR PLENTY TO THINK ABOUT




                                       At the very least, an environmentally sound farm policy would reinforce,
                                    rather than subvert, American farmers’ commitment to stewardship. During
                                    debate on the 1985 Farm Bill, an unprecedented coalition of conservationists,
                                    farmers, and agricultural economists sought to reconcile the exigencies of price
                                    supports and other farm payments, on one hand, and the imperative of environ-
                                    mental protection, on the other. They succeeded in securing enactment of a
                                    far-reaching Conservation Title, which for the first time established linkage
                                    between these previously contradictory public policy objectives.
                                       In essence, the Conservation Title stipulated that farmers shall not be eligi-
                                    ble for commodity payments unless they make adequate provision for soil and
                                    water conservation. The Title also estabhshed a “conservation reserve” of
                                    highly erodible lands (now totalling 32 million acres), in which farmers are paid
                                    to substitute cover crops, such as trees and grass, for row crops. In addition,
                                    the Title imposed sanctions on those who destroy wetlands (the so-called
                                    “swampbuster” provision) and previously uncultivated grasslands (the “sod-
                                    buster” provision), and authorized the acceptance of conservation easements as
                                    payment for farm debts. These innovative programs have proved to be not only
                                    cost-effective and environmentally sound, but also popular among farmers.
                                    Five years after the imposition of “conservation compliance” requirements, a
                                    survey of 900 farmers in 15 states found agreement among an overwhelming
                                    majority (as high as 84 percent in Colorado, for instance) that they should be
                                    obliged to conserve fertile soil in return for federal farm program benefits.
                                       The same coalition of conservationists, farmers, and agricultural economists,
                                    now joined by consumer advocates, has worked to make comparable progress
                                    on environmental goals in 1990, stating quite rightly that “farm policy is envi-
                                    ronmental policy and consumer policy? It seeks to increase the protection of
                                    wetlands and-for the first time-to prevent pesticide and nutrient pollution of
                                    groundwater and surface water.
                                       Will taxpayers get their money’s worth from the 1990 farm bill? Perhaps not,
                                    as the Xre~ yOl;g Times suggests, unless welfare payments to the wealthy are
                                    sharply curtailed. But, because farmers and legislators have shown such com-
                                    mendable sensitivity to the environmental implications of farm program pay-
                                    ments, we can be hopeful that tax dollars will at long last be used to conserve
‘?t is imperative . . . that        and enhance, rather than degrade, the quality of soil and water resources.

government officials crafting
future agricultural policy
recognize the globalization
of agriculture . . . ”
                                -

                                         EDERAL EXPENDITURES ON agriculture affect all Americans. Farming and
                                    F    agribusiness provide jobs for nearly 20 percent of the U.S. work force and
                                    account for approximately 20 percent of Gross National Product (GNP). Ameri-
                                    can farmers not only feed the U.S. population, but also export roughly one-
                                    third of the crops they produce, at a value of $20 billion annually-which   helps
                                    offset our overall balance of payments deficit. Americans spend a much smaller


                                    MIKE HARPER is Chief Executive Officer of ConAgra, Inc., a diversifiedgroup
                                    of companies operating across the food chain, Aeadguariered in Omaha, Nebraska.


                                                                                                        FALL 1990   29
FOCUS




                         percentage of their income on food than the residents of any other country, yet
                         they eat out at restaurants more often and benefit from the highest quality and
                         most abundant food supply in the world.
                             For the most part, federal expenditures on food and agriculture have proven
                         to be a wise investment. During the past decade, federal spending on com-
                          modity programs represented only 1.5 percent of total government spending,
                         and this proportion has been even lower over the past three years. Because ag-
                         riculture tends to be cyclical, with some very good years and some very bad
                         years, government expenditures serve the important function of helping farm-
                          ers make it through the low-income years. They also help stabilize the rural
                         economy, where few alternative job opportunities exist for displaced workers.
                              Furthermore, federal support of the Land Grant College and Extension sys-
                          tem has provided for rapid technology transfer to U.S. producers, which helps
                          keep them the world’s most efficient. This state-of-the-art production technol-
                         ogy complements America’s unparalleled transportation and business infra-
                          structure and its favorable climate and land. Preservation of that land is
                          encouraged by federal conservation programs; federal sponsorship of produc-
                          tion technology development helps ensure clean water supplies for current and
                          future generations. Federal export assistance helps to level the international
                          playing field, where some foreign competitors unfairly provide huge export sub-
                          sidies in order to gain export market share at the same time that they maintain
                          high internal price supports.
                             It is imperative, however, that government officials crafting future agricul-
                         tural policy recognize the globalization of agriculture that has occurred since
                         the mid-1970s. In today’s global climate, government assistance that supports
                         grain prices above market levels is counterproductive because it makes U.S.
                         commodities uncompetitive in world markets, thereby giving foreign producers
                         an advantage. American grain ends up in government storehouses; not only is
                         storage expensive, but the presence of surplus grain tends to depress prices.
                             It also makes little sense for the government to pay producers to let land lie
                         idle when [here is growing world demand and U.S. agriculture has the capacity
                         to meet that demand. The United States is the only major agricultural exporter
                         to implement these kinds of large annual land retirement programs. These pro-
                         grams result in higher food prices, the need for higher taxes, and a shrinking
                         productive base. The efficiency of U.S. farmers is adversely affected while
                         competitors are encouraged to expand production.
                             Future federal expenditures should be designed to help keep U.S. products
                         competitive in world markets. Some people still see the family farm as 60
                         acres, a horse, and a plow, and think that the federal government should guar-
                         antee farm income because l7.S. producers cannot compete in the world mar-
                         ketplace. But this view is inaccurate. Family farms represent a mix of all sizes.
                         For example, the top 15 percent of U.S. farms each represented gross sales in
                         excess of $100,000 and together totaled 77 percent of gross agricultural sales in
                         1988. These are sophisticated, well-financed operations-yet an overwhelming
                         majority are operated by farm families.
                             Federal agricultural policy should not inhibit the ability of these commercial
                         family farms to compete and grow. Rather, farm policy ought to give producers
                         maximum flexibility to produce for changing markets, ensure that they are on a
                         level playing field to compete for foreign markets, and provide a financial safety
                         net to help them get through the low-income years of the agricultural cycle. If
                         the political process determines that farm support should be above current or
                         safety net levels, then specific income transfer measures should be designed
                         that do not reduce competitiveness or interfere with the market. The 1985 farm
                         bill, with its increased market orientation, began to recognize this policy need,
30   THE C-A.0 JOURNAL
                                                                     AT $25 BILLION AYEAR PLENTY TO THINK ABOUT




                               Farmers and farm income responded dramatically and positively: Net cash in-
                               come reached record levels in 1989. The challenge for the future is to build on
                               the market features of the 1985 legislation, recognizing the growing role the
                               world market will play for U.S. agriculture throughout the 1990s. Providing
                               farmers with more flexibility as it relates co their production and marketing de-
                               cisions, and maintaining the competitive price support structures contained in
                               the 1985 farm bill, are the keys to continued growth for U.S. agriculture in the
                               years ahead.


“The Achilles heel of the
USDA budget, from a
consumer perspective, is the
$8.17billion spent on
commodities programs I’        K?-ish??z
                                     McNtitt

                                                            dollars may not impress Members of Congress and
                               T    WENTY-FIVE BILLION
                                      staff who daily deal in large numbers. But for folks who worry about
                               monthly credit card payments, day care for latch-key kids, and the pros and
                               cons of investing in dental insurance, that amount of money is difficult even
                               to comprehend.
                                   hlost People I know have very Iimited knowledge of where their dollars go
                               after April 15. Their impressious come primarily from journalists who, because
                               of the ground rules of the communications industry, focus more on outIandish
                                Defense Department expenditures on toilet seats than on dollars spent for sav-
                               ing forests or keeping food safe.
                                   If the media did bring more attention to bear on U.S. Department of Agri-
                               culture (USDA) expenditures, my guess is that a better-informed public would
                               judge them by the usual standard: Do the expenditures fit the public’s values?
                                   LJSDA’s food and agriculture research and education programs ($1.38 bil-
                               lion), forestry programs ($3.18 billion), and soil and water conservation
                               ($2.71 billion) all coincide at least roughly with what consumers consider im-
                               portant. So does USDA’s food inspection service (9.78 billion). Even its rural
                               development program-while         a harder sell-has benefits for city folks, as well
                               as those out in the country.
                                   But the Achilles heel of the USDA budget, from a consumer perspective, is
                               the $8.17 billion spent on commodities programs. Tcr working people whose
                               paychecks (less deductions) are taxed by the federal government at up to 28
                               percent, paying farmers not to work is worse than just throwing money away:
                               h’s using tax dollars in a way that conflicts with taxpayers’ values. The eco-
                               nomic reasons behind these programs may well be sound, but neither the Con-
                               gress nor USDA has managed to explain these reasons convincingly, Their
                               failure to do so tarnishes consumer perceptions of all food and agriculture ex-
                               penditures, not just those for commodities programs. USDA and its supporters
                               must either hope that the media and the public continue not to pay a whole lot
                               of attention to these programs, or else do a much better job of explaining why
                               thev’re worth billions.




                                                                                                      FALL 1990   31
      APPRAISING
       AMERICAN         Ray    A.      GuZdberg
     AGRICULTURE




                        AGRIBUSINESS LEADERSHIP:
                        A KEYTOWORLDPROSPERITY
                        GettingthefalZ bmejt uf globul agtibsiness will dependon
                        innovation and ct9operution.
                                                         IS a major force in        These figures suggest not only that agriculture is

                        G
                                    LOBAL AGRIC~ILTURE
                                   world enterprise. It accounts for half the    growing, but that certain aspects of it-particularly
                                   world’s jobs, half the world’s assets, and    processing and marketing-are growing faster than
                        half the consumption of all world consumers.             others. In other words, the area of greatest potential
                        Growth in agriculture is considerable. In 1950,          growth is no longer only production-for     example,
                        global agriculture was worth $.4 trillion; by 2028,      determining how best to grow a bushel of wheat. In-
                        that figure will have risen to $10 trillion. Growth in   stead, today the real task is to figure out what kind
                        agriculture input services will have grown 16 times      of tasty, affordable, nutritious, healthy breakfast cer-
                        over this period, farming will have grown 11 times,      eal consumers in different parts of the world want:
                        and food processing and marketing will have grown        to select the best wheat seed to plant in the most
                        32 times.                                                appropriate farmland; to grow that wheat with inno-
                                                                                 vative, environmentally sound methods; and then to
                                                                                 store, transport, process, market, and distribute the
                                                                                 cereal worldwide. The original wheat may be Amer-
                                                                                 ican or Moroccan or French, or a blend of all three;
                                                                                 the final product might be sold anywhere.
                                                                                    This trend toward increased emphasis on value-
                                                                                 added innovation is becoming prevalent not only
                                                                                 among the wealthy nations but throughout the rest
                                                                                 of the world as well. And more and more, the leaders
                                                                                 of U.S. agribusiness-the major firms that produce,
                                                                                 process, market, and distribute food-are playing a
                                                                                 significant role in extending this innovation world-
                                                                                 wide. Their role can get even bigger in the future.
                                                                                 But to play that role effectively, they must continue
                                                                                 to move from emphasizing commodity production to
                                                                                 emphasizing value-added products and services. In
                                                                                 addition, government policies will have to be
                                                                                 changed to further encourage fair and open markets,
                                                                                 although safety nets will always be present for low-


                                                                                 RAY A. GOLDBERG is Mojjitltt Professsorof
                                                                                 Agriculture and Business at the Graduate School of
                                                                                 Business Administration at Harvard lhioersity.


32 THE GA.0   JOURNAL
    income consumers and producers during severe                the U.S. system to ensure their supplies and to ac-
    shocks to the system.                                       quire U.S. know-how. Zen-noh, a Japanese coopera-
       This country has invested heavily in its agricul-        tive of 5 million farmers, built the largest, most
    tural system over the past 40 years. There now ex-          efficient grain terminal in New Orleans to ensure
    ists an opportunity to capitalize on this                   continued access to U.S. grain. Toepfer, a German
    investment-to maximize the value of what is in              firm, entered into a joint venture with U.S. and EC
    place. But we can take advantage of this opportunity        (European Community) farm cooperatives, together
    only if we pay close aaenrion to the shifts now cak-        with Archer Daniels Midland (an agribusiness firm),
    ing place in the global agribusiness system.                to better integrate U.S. and EC markets.
                                                            l Third, the EC, in addition to making investments
                                                            in the U.S. system, used its Common Agricultural
                                                            Policy to further insulate itself from the rest of the
                                                            world and to develop increased self-sufficiency.
    The emerging gobal system                               These policies resulted in a commodity and
                                                            processed-food surplus that contributed to global
                                                            price instability.
    w or Id agriculture has passed through three phases         l Fourth, the United States imposed embargoes on
     since World War II, and is now entering a fourth           some commodities-soybeans,      for example-to pro-
     phase. During the first phase, from 1950 co 1970,          tect American consumers from the loss of supplies to
     U.S. grain surpluses provided a shock absorber for         export markets.
    the world’s food system. There were enough sur-         . Fifth, food security, food safety, nutrition, re-
    pluses chat prices and supplies remained relativeIy     source management, efficiency yield, and value-
    stable throughout the world. This stability provided    added processes became more important: Because a
    a sort of insurance policy for businesses and con-      seemingly endless supply of food could no longer be
    sumers: They did not have to be concerned about         taken for granted, food producers and processors
    grain availability, since the U.S. government had as-   had to work to get as much as they possibly could
    sumed responsibility for it. Farmers also relied on     out of raw commodities.
    the underpinnings provided by government pro-
    grams. In addition, the United States provided food        By the end of the 197Os,there was a widespread
    relief to many developing countries, and food stamps    assumption that there would continue to be a global
    became a major welfare program for 10 percent of        food shortage and that the United States would con-
    the U.S. population.                                    tinue to serve as the breadbasket: of the world. Many
        The next phase, the 197Os,changed all that. Es-     government policies and programs, such as those
    sentially, this was a boom period-a seller’s market     covering crop assistance and lending to farmers,
    that also saw the beginning of major price volatili-    were based on these assumptions.
    ties. Producers and consumers became aware that            But continued food shortages and high demand
    the surplus-grain shock absorber was reduced and        ended in a bust during the 1980s. Over this decade,
    that the quantity and quality of agricultural com-      U.S. agriculture alternated between gluts and short-
    modities wouId no longer always be assured.             ages. To a great degree, U.S. farmers, farm sup-
       A key event triggering these shifts was the U.S.     pliers, and commodity handlers bore the brunt of
    decision to sell surplus grain to the Soviet Union.     these changes. Food processing and retailing firms,
    This reduced U.S. surplus stocks dramatically and,      on the other hand, adjusted by taking advantage of
    together with the energy crisis, spurred inflation      recent technological innovations and seizing new op-
    worldwide, with several effects,                        portunities for cross-investment with firms in other
                                                            countries, thereby producing further global integra-
9 First, the United States became a significant             tion in the agriculture sector. In addition, it became
player in the world agriculture market. It had in           clear that food shortages were not going to continue,
place a sophisticated food production system, of            that world competition in foodstuffs was increasing,
which it was able to take increasing advantage.             and that the United States would not exclusively
l Second, other countries, such as Japan, realized          serve as the world’s breadbasket; the federal govern-
they could no longer rely on the United States as a         ment therefore refocused its attention on the global
surplus supplier and therefore needed to buy into           market and on regaining market share. The decade


                                                                                                      FALL 1990   33
FOCUS




                             marked the beginning of a global food system in            yet named a date for eliminating domestic subsidies.
                             every sense of the word.                                   The developed-country market is important be-
                                 This leads us to the present. The country has          cause, as it lowers its barriers, there is increased
                             reached a point where the effective use of new tech-       opportunity for trade in value-added products,
                             nology and the quality of leadership, among both on-           At the same time, the developing world represents
                             farm and off-farm managers, will determine the ex-         a growing market not just for commodities, as one
                             tent to which U.S. agriculture plays a major role in       might expect, but also, as Third World incomes
                             the world market. It is important to keep in mind          rise, for value-added products, for new production
                             that LT.S. agriculture has tremendous assets as it en-     techniques, for new distribution systems, and for
                             ters this period. The United States is an extraordi-       new partnerships with U.S. firms. In fact, it may
                             narily competitive, low-cost supplier of raw               well turn out that the Third World represents the
If the United States is to   commodities: In supplying large volumes of com-            real growth market in agribusiness trade over the
maintain a competitive po-   modities, it can compete with any other country on         coming decades. If we can get agribusiness markets
sition, it will have to work
to imorovc its own share of  a  global basis ~i~houtsttbsidies. In the volume of its    opened up and operating effectively now, the cen-
value:added products,                                                                   trally planned and developing economies will offer
which currently standN at    commodity exports and imports, the United States
only 13 percent    of the    is improving its position and is expected to move          extraordinary opportunities in the years to come.
global market.
                             from a global market share of 28 percent in 1987 to        These markets represent 4 billion consumers, as op-
                             33 percent in the year 2000.                               posed to the 1 billion in the developed world; more-
                                 But if the United States is to maintain a competi-     over, because these economies are starting out for
                             tive position, it will have to work to improve its         the most part at subsistence levels, there is tremen-
                             share of value-added products, which currently             dous room for growth in demand, in jobs, and in
                             stands at only 13 percent of the global market.            new enterprises.
                             Value-added services and products-such as the hy-              A few more words about the emerging structure of
                              pothecical breakfast cereal mentioned earlier-are          global agribusiness. One important trend is the in-
                              the fastest growing segment of global agribusiness.        crease in cross-ownership patterns worldwide. For
                             This growth springs from the development of mass            example, foreign firms now own 25 percent of U.S.
                             distribution and processing centers in both devel-          farm supply firms and 20 percent of U.S. agricul-
                             oped and developing countries, increasingly upscale         tural processing and distribution firms. Grand Met,
                             consumer food demand, and the growing ability of            an English company, has acquired Pillsbury; Tate
                              technology to add nutritional, taste, packaging, and       and Lyle, also English, has purchased Staley; Fer-
                              environmental values to assist both the manufac-           ruzzi, an Italian firm, now owns Central Soya; Brit-
                              turer and the distributor in catering to this changing     ish Petroleum has acquired the Feed Division of
                              demand. This is not to suggest that the world has          Ralston-Purina; and Zen-Noh has bought Consoli-
                             overcome poverty and malnutrition, but rather that          dated Grain and Barge Company. Seven EC super-
                              those who can afford to pay for food have upgraded         market chains have created a buying organization to
                              their diets.                                               improve their relationships with such firms as Coca-
                                 One crucial element in the emerging structure of        Cola and Proctor & Gamble.
                              global agribusiness is the role of the EC. Through            Consolidation is also occurring at the production
                              market barriers and internal subsidies, the EC has         level. Particularly in the United States, farm consoli-
                              continued to insulate itself from the world market-        dation continues: Over the next two decades, 75,000
                              place. In this kind of environment, the United             out of a total 2 million U.S. farms (ofwhich 1 mil-
                              States can’t compete efficiently: Being a low-cost         lion are part-time farms) are expected to account for
                              producer is meaningless if one does not have market        two-thirds of agricultural production. This type of
                              access or if one pays economic penal ties for the priv-    consolidation is also occurring in Europe, even
                              ilege of gaining that access. In addition, the EC’s        though the average farm size is still very small by
                              insulation forces the United States, along with Aus-       U.S. standards. In the developed world, therefore,
                              tralia, Canada, and the developing world, to serve as      there continues to be a consolidation of production
                              shock absorbers during volatile periods in the world       into fewer farms and a reduction in the total number
                              agriculture market. The LTnited States also contin-        of farms. Given these trends, U.S. farm income can
                              ues to be a major holder of inventories.                   increase-depending,      however, on the reduction of
                                 The EC does, however, seem to be moving to-             subsidy supports and trade barriers, the introduction
                              ward freer agribusiness trade, even though it has not      of new technologies, the implementation of new free


34 THE GA.0    JOURNAL
                                                                                                                     AGRIBUSINESS LEADERSHIP




                             trade patterns such as the Canadian Free Trade           and technology to become a global partner to new
                             Agreement, and the prevention of large surpluses so      firms in all aspects of global agribusiness.
                             that gluts of certain commodities do not develop.            The United States must also push for policies
                                The developing countries, which are still moving      that encourage freer trade and a market orientation
                             out of a subsistence agriculture stage, continue to      worldwide. In addition, this country needs policies
                             see a rise in the total number of farms. But the         that continue to support poor consumers and small-
                             trends occurring in the United States and Europe         scale producers without interfering in open trade. It
                             may be precursors of what is likely to happen else-      is also important that the United States recognize
                             where. As Third World incomes rise and new tech-         that it can no longer serve as the shock absorber for
                             nological innovations are absorbed, Third World          the world and instead can use new approaches such
                             farms will most likely undergo consolidation.            as just-in-time inventory management, global sourc-
                                All these changes add up to a continuing and mas-     ing, and surplus safety valves.
                             sive restructuring of the world’s food system. New           A crucial point in all this is the need to fully un-
                             technology, new players, new information and logis-      derstand consumer priorities and to anticipate how
                             tics systems, new packaging, new governmental and        they shift-both domestically and globally. Not only
                             environmental requirements, and new ownership            can this help the United States avoid excess sur-
                             patterns are changing the tasks to be performed and      pluses as well as shortfalls in supply, but it is a key to
                             the individuals and firms that are performing them.      improving the U.S. position in value-added prod-
                             Consolidation is occurring at every level, major deci-   ucts and services.
                             sions are constantly being reevaluated, and new              Finally, we need to capitalize on our leadership in
                             strategic global alliances are being forged. Who or      the biotechnology and information systems that are
                             what will coordinate the new global food system re-      crucial to improving the food system. These sys-
                             mains a very open question.                              tems offer opportunities for producing food and
                                                                                      services that can enhance health, reduce disease,
                                                                                       and improve environmental quality. On the other
                                                                                       hand, these technologies are more complicated and
                                                                                       link together all sorts of business enterprises, the
                                                                                      environment, and human life in a more complicated
                                                                                      fashion than anything we’ve ever dealt with before.
                             U.S. leadership                                          These complex linkages will require that technolo-
                                                                                      gies, products, and processes be carefully and im-
                                                                                      partially evaluated to ensure that human and
                             T fo u 11y capitalize on the wealth of U.S. agricul-     environmental safety and health are well served.
                             tural assets will require leadership from every spec-    Most likely, new national and international insti-
                             trum of agribusiness. This leadership will have to       tutions will be needed to do the job.
                             deal with four major trends thatwill be driving U.S.
                                                                                          Leadership in these areas can come from all parts
                             and global agribusiness over the next decades:
                                                                                      of the agribusiness industry: from unique retailers
                             9 the continued globalization and integration of         who develop private-label products, such as Marks
                             markets;                                                 & Spencer in the United Kingdom or Loblaws in
The United states must
encourage freer trade and    lgrowing dynamism in national and agricultural           Canada; from manufacturers who combine technol-
B market orientation                                                                  ogy and brand-name products, such as Unilever;
worldwide. It also needs     policies;
policies that continue to                                                             from new firms outside the system, such as the
provide a backstop of sup-   n   shifts in consumer priorities; and
port for poor con8umew
                                                                                      NutraSweet Division of Mansanto, which will help
                             l   increasing technological innovation.
and small-scale producers                                                             deveIop tailor-made foods; from farm input suppliers
without interfering in
open trade.                     As globalization and integration take place, stra-    that combine traditional plant and animal genetics
                             tegic alliances continue to be formed within and be-     with the new science of biotechnology, such as Pi-
                             tween markets. For the United States to take a major     oneer Hi-Bred and Booker-McConnell; and from
                             role, it must shift from being a commodity supplier      those firms that can integrate all the functional oper-
                             to becoming an integrated player not just in the de-     ations of the value-added food system from farm
                             veloped world but in the growing markets of the de-      supply to ultimate consumer, such as corporations
                             veloping world and the emerging free world of            like ConAgra and farm cooperatives like Ocean
                             Eastern Europe. We must use our market know-how          Spray and Land O’Lakes. In all cases, what is re-


                                                                                                                                 FALL 1990    35
                             quired for 1l.S. agribusiness to position itself effec-   key to an enhanced LJ.S. role in agribusiness. Al-
                             tively in a global food system is to continue to          ready, U.S. agribusiness firms have shown great skill
                             pursue a market-oriented perspective, to forge new        in developing such a system within the United
                             alliances, and to use new technology, new logistics,      States; in addition, these firms have greater access
                             and new institutional relationships.                      to technology and information than either public in-
                                                                                       stitutions or firms in other countries. As agribusiness
                                                                                       leaders work together with public institutions to sat-
                                                                                       isfy consumer priorities, the global food system can
                             An integrated               world food                    act as an engine of change and a force for social re-
                                                                                       sponsibility for the rest of the world.
                             system                                                       As discussed earlier, overseas investors obviously
                                                                                       believe that the long-term prospects for LJ.S. agri-
                                                                                       culture and agribusiness are excellent. Part of their
                             If we’re able to set aside special interest and nation-   enthusiasm was at one time due to the decline of the
                             alistic policies and capitalize on the value of the ex-   U.S. dollar, but, for the most part, their enthusiasm
                             isting assets in U.S. agribusiness, the opportunity       is based on the breakthroughs that are occurring in
                             truly exists for a fully integrated w-orld food system     biotechnology and information systems; the health
                             that serves consumers worldwide, that sources food        and vigor of the emerging superfarmers in the
                             worldwide, and that draws on cross-investment pat-         United States; the creative processing, packaging,
                             terns worldwide. In effect, the nations of the world      and logistical systems that are being developed; and
                             could look like America’s 50 states, where agribusi-       the new marketing opportunities that exist because
investors by focusing 00     ness management and technology have provided an           of sophisticated consumers who want nutritionally
the great potential for      open trading system and a finely tuned research and        sound and environmentally friendly food products.
continued growth in the
~rieulture  sector and bv    distribution network that gives American consumers            U.S.. government and agribusiness leaders should
tiking the steps accehssry   a wide variety and continuous supply of food prod-         take their cue from these foreign investors by focus-
to ensure that this growth
does owur.                   ucts and services.                                         ing on the great potential that exists for continued
                                How we measure the success of the system may            growth in the agriculture sector and by taking the
                             be very different from the way we’ve measured suc-         steps necessary to ensure that this growth occurs. Lf
                             cess in the past. The volume of commodities ex-            we don’t make the agriculture sector work to the
                             ported has always served as a hallmark of success.         mutual benefit of its major players and the con-
                             But in a sophisticated distribution system that oper-     sumers they serve. then real economic benefit will
                             ates worldwide, a more important indicator is rhe          not occur in our lifetime. For agribusiness is the
                             degree of coordination among the different parts of        most important sector of the world economy and the
                             the system. Providing that coordination may be the         key to global economic deJ.elopment. l




36 THE G.A.0 JOURNAI
                         SCALING DOWNAMERICAN
                         FORCESINEUROPE
                         The
                          presswe
                              isontobring
                                       troops
                                           home.
                                              hsthow
                                                   todoitisno


                        A
                                   NEW WCUU.I)order is emerging from the ashes    tion of these issues and an orderly withdrawal is the
                                   of two world wars and the subsequent face-     enormous size of the U.S. military presence on Eu-
                                   off between the two great superpowers. The     ropean soil.
                         massive presence of ll.S, military forces in Europe
                         without doubt helped buy time for Western Europe
                         to rebuild and for centrally planned economies in the
                         Eastern Bloc to fail. But political events and eco-      The scope of the U.S.
                         nomic realities are creating enormous pressures to re-
                         duce that presence as quickly as possible.               commitment

Counting   ci\:ilian cml~loy~~. and dcpcndcnts, the
                                                                                  0   ver the past four decades, American involvement
                                                                                  in the defense of Europe has led to the creation of an
l’nitcd   States    h;is ahout  723,000  pcoplc in
                                                                                  enormous complex of people, materiel, and organi-
I’:urope associated with its dcfcnsc commitment.
                                                                                  zational structures. Right after World War II, as the
More than half of these are not warriors hut rather
                                                                                  fighting commands demobilized, U.S. strength in
noncombatants of kwious types.
                                                                                  Europe dropped from about 3 million service mem-
                                                                                  bers to a low of 116,000 in MO. But tensions in Korea
                                                                                  and suspicion about Soviet intentions-heightened
                            Reducing U.S. forces will not, however, be a sim-     by the Soviet interventions in Hungary and Czecho-
                         ple task. Whether the final number is 225,000 or         slovakia and the building of the Berlin Wall-spurred
                         75,000, many complex issues-political,   military, lo-   the rebuilding of L1.S. forces within the NATO
                         gistical, and economic-will  need to be sorted out by    {North Atlantic ?ieaty Organization) alliance. The
                         policymakers both before withdrawals begin and           United States committed itself to fielding 10 full
                         while they are under way Complicating the resolu-        combat divisions in Europe within 10 days of mobili-
                                                                                  zation. About half of that force was already stationed
                                                                                  in Europe, and enormous caches of equipment for the
                                                                                  rest were stored and maintained on European soil.
                                                                                     Counting civilian employees and dependents, the
                                                                                  United States has about 723,000 people in Europe
                                                                                  associated with its defense commitment. h/lore than
                                                                                  half of these are not warriors but rather noncomba-


                                                                                                                          FALL 1990   37
38 THb G.A.0 lOURNAL
                                                                                                                AMERICAN FORCES IN EUROPE




                        tams of various types. Although assigned strength           A changing American                         role
                        has varied, by the end of fiscal year 1986, there were
                        more than 326,000 soldiers, sailors, and marines as-
                        signed ashore in the U.S. European Command. To               Th e t h reat on which the I1.S. military commitment
                        feed, house, clothe, and care for the troops and for ci-     was originally based-a quickly mounted, massive
                        \,ilian workers and their families, a vast service struc-   assault by Soviet-led forces through Eastern Eu-
                        ture has evolved. The Army and Air Force Exchange            rope-now seems a remote possibility. Therefore po-
                                                                                     litical pressure is mounting at home and abroad for
                                                                                    force reductions. At the same time, however, a con-
At   home, the I’.!+. defense budget is under                                       siderable amount of instabilit) remains in Central
intense pressure as anticipation is building for the                                 and Eastern Europe, which suggests that I!.S. mili-
much-touted    “pcacc dividend.” ‘I’hc debate on                                     tary forces will have to play a continuing, if dimin-
how to spend the pc:ice dividend          is already                                 ished, role in guaranteeing the region’s security
he:iting up.                                                                             At home, the I;..% defense budget is under intense
                                                                                     pressure as anticipation is building for the much-
                                                                                     touted “peace dividend.” The debate on how to
                         Services provide shopping and entertainment facili-         spend the peace dividend is already heating up. How
                         ties, employing more than 23.000 people in 1987.The         big it will bc and how quickly it might he available
                         I)OD (Department of 13efense) School System edu-           are still open to question. But there is no doubt that
                         cates more than 100,000 children in more than 200          +.merica has any number of good uses for it: crum-
                         schools. All these people reside either on teasef&i-        bling infrastructure, the waron drugs, education, the
                         rks or in nearb>- housing. ‘L’hc Army alone supports       svvings and loan crisis, housing, medical care, or just
                         39 separate military communities.                           reducing the budget deficit.
                            The amount ofweaponry and equipment in thea-                 ‘[‘he pressure to reduce 1r.S. forces is also great in
                         ter for the defense of Europe is staggering. :4s of JJn-    Europe, particularly in the Federal Republic of Ger-
                         uary 1988, more than 5,000 heavy and medium tanks           many, arguably the most occupied country in the
                         were kept in Central Europe, as were 5HO tactical          world. Rhat used to be a left-wing political plank-
                         fixed-wing aircraft and 258 attack helicopters. The        getting the L-nired States out-is now gaining sup-
                         1T.S. &y’s     Second and Sixth Fleets, which would        port in more conscrr.ative parties as well. One of the
                         be involved in NKI’O’s defense, contained more than        most heavily militarized areas in Germany is the
                         200 ships, including fixed-wing and helicopter air-         Rhineland-Pfalz (Palatinate). termed the “Aircraft
                        craft carriers, attack submarines, battleships. cruis-      Carrier Rhineland-Palatinate” by the state premier,
                        ers, destroyers, and other ocean forces.’ ,4nd these         Bernhard Vogel. Historically Vwgel’s party-the con-
                         numbers omit thousands of other types of weapons           servative (Christian Democratic Vnion (CDL!)-has
                        and support vehicles and equipment both in Europe           supported the American presence, in part because of
                        or read? to move there-an inventory of untold bil-          all the German jobs it creates. But, in late March of
                         lions of dollars.                                          this year, the Rhineland-Pfalz government called for
                            To direct and control all these resources, a complex    the L’nitcd States, during the initial phase of troop
                        military command structure was created and inte-            reductions, to shut some of its largest installations in
                        grated into the overall N.4’1’0 organization. LY.S.         West Germany-including          Kaiserstaucern, a com-
                        forces arc stationed in 14 N.41’0 European countries.       munit>- with 20,000 American military personnel and
                        ‘I‘hcy are assigned to the II.2 Army, Europe, and 12        their 26,000 family members.
                        other :2rmy commands: to the L1.S. Nay!,. Europe.                Along with these calls for U.S. withdrawal, some
                        and 18 other NW)- commands; and to the I1.S. Air            notes of caution have been sounded. Even though the
                        Force. Europe, and 20 other Air Force commands.             historical threat to NATO has all but disappeared.
                        ‘I‘here are six additional defense agencies involved.       with the Soviet L!nion’s aggressive will seeming to
                        such as the IJefense (:ommunications Agency, the            have abated and Moscow apparently preoccupied by
                        Defense (Fourier Service, and the Defense I,ogis-           domestic problems. rrverall European security is f;lr
                        tics Agency                                                 from settled. For one thing, the current political and
                            AII told, DOI> estimates that. of its total budget,     economic turmoil in the Soviet Union and Eastern
                        about 60 percent-\onie        $170 billion in fiscal year   Europe      could trigger more widespread instability.
                         19X7-is devoted to NXI‘O-related activftics.               Furthermore, the Soviet armed forces are as capable


                                                                                                                                FALL 1990   39
AMERICAN IORCES IN EUROPt




                            as ever. And, as NXlX) Secretary General Manfred
                            Wiirner wrote, “we have no guarantee, whatever our
                                                                                          Restructuring             U.S. forces
                            hopes, that the Soviet llnion will remain benign in its
                            attitude:’ Although he does not doubt Mikhail Gor-
                            bachev’s sincerity. Wiirner believes “it would be foo-
                                                                                          Before L~.s. troops    are withdrawn from Europe, the
                                                                                     forward-deployed force structure must be redesigned
                            hardy to make our security depend exclusively on his
                                                                                     to reflect a new defensive strategy toward Eastern
                            political survivalI”
                                                                                     Europe and the Soviet Union. -4s Senate Armed
                                Also to be considered in any plan to draw down
                                                                                     Services Chairman Sam Nunn has said, “Our strat-
                            L.S. forces is the fact that the past 40 years, when
                                                                                     egy must he revised to reflect the changed threat en-
                            there has been a strong I:.% presence in NATO, have
                                                                                     vironment. We must then determine what forces and
                            constituted one of the few lasting periods of peace
                                                                                     what level of defense spending are required to imple-
                            Europe has experienced in several centuries. In par-
                                                                                     ment our revised scrategy.“h Fair enough, but how
                            ticular, some residual fear lingers about the potential
                                                                                     does one go about restructuring the vast complex de-
                            actions of an economically revitalized and reunified
                                                                                      scribed above?
                            Germany-even one that remains Gthin NKIY1.
                                                                                          In the simplest terms, force structure is the num-
                                 It is doubtful, therefore, that the Irnited States can
                                                                                      ber, size, and composition of units that make up the
                             back completely awalt from its general role as a stabi-
                                                                                      defense force. It is usually described in terms of
                             lizing influence. Karel de Gucht, a member of the
                                                                                      numbers and types of Army and Marine Corps divi-
                             European Parliament, noted that, although the I-.!%
                                                                                      sions (Mechanized Infantry, Light Infantr?: Ar-
                             militar>- role might be diminished,           “the IJnited
                                                                                      mored, etc.), Kavy ships ((:arriers, Submarines,
                                                                                      Destroyers, etc.), and Air Force wings (Fighter,
                                                                                      Bomber, hlissile, etc.). Force structure is based
  Once NKI’O assesses the threats it potentially                                      upon a determination of who our likely adversaries
  faces. the problem becomes how to reduce 1r.S.                                      are,   where they are located, what trouble they are
  forces efficiently and effectively while retaining a                                likely   to cause us, and how we should deal with it.
  S.?i’l’O force capallle of defending         Western                                     These    are difficult questions to answer even with
  i;ccurity interests.                                                                a politically stable enemy. In today’s highly unstable
                                                                                       world, they become all the more challenging. And in
                                                                                       light of the rapid changes in Europe over the past few
                            States will remain a superpower, and will thus want        years,   NA’I’O must make entirely new assessments of
                            to remain in one or another wal- involved in the West-     the   threats    it may face. Once these assessments
                            ern European continent.“l Even the Germans ac-             are   made,     the    problem becomes how to reduce
                            knowledge the value of the U.S. presence. As               U.S.     forces    cfficientlv   and effectively while re-
                            observed by one German writer. “.Xmerica is clearly        taining    a NA’  I’
                                                                                                          O    force  capable of defending Western
                            still needed to guarantee the Old World’s stability. Its security interests.
                            presence in Europe, far from being called into ques-
                            tion, was presupposed in the terms agreed by [West Ways to restructure
                            (German Chancellor] Kohl and [Soviet President]
                                                                                       There exist various ways to restructure forces and to
                            Gorbachev . . I’-’Moreover, ?JATO’s Supreme Allied
                                                                                        reduce the number of troops permanently assigned
                            I:ommander, General john Calvin, has made the
                                                                                        in Europe. ‘l’hrec broad examples suggest some of
                             point chat NATO forces-including           American
                                                                                        the possibilities:
                             troops--could play a valuable part in verifying arms
                            control agrecments.s                                          The United States might identify non-wartime-
                                                                                           l


                                 Thus, while many good reasons exist to reduce the      essential units and personnel and send them home.
                             nllIT3bcJ of American troops in Europe, it seems           For instance, although military bands and other cer-
                             likely that the [Jnited States will need to maintain       emonial units have a positive effect on morale, they
                             some kind of crcdiblc military presence there.             are not essential in today’s cost-cutting environment.




  40   THE G.A.0 JOURNAI
                                                                                                                        AMERICAN FORCES IN EUROPE




                       l     The United States might reduce the size of the ex-         meet its NW0 commitment, however it is rede-
                           isting force structure, fully staff what is authorized,      fined, even if warning time were i-creased. The
                           and equip and train it to the highest possible readi-        United States must have adequate airlift and sealift
                           ness levels.                                                 capacity ready to deploy a significant number of
                       l     The United States might hollow out the existing            troops and hundreds of tons of equipment to Europe
                           force strucrure-leave     the structure on the books,        on short notice.
                           staff it below authorized levels, and accept reduced
                           readiness levels. A hollow force could mean that com-
                           mand and support structures remain forward-de-
                           ployed with only a small combat force in place, or it
                           could mean the opposite-a full combat force with             Managing force reductions
                           only a hollowed-out support structure.’

                                                                                        Pulling    I:$. troops, civilian employees, family
                                                                                        members, and equipment from Europe could be
In the near term, the price of restructuring will                                       compared to relocating a major 1T.S. tip-its    people
eat into the peace dividend in a big ~vay. ‘I’he                                        and their belongings, everything but items perma-
opportunin   for waste, fraud, and abuse-not    to                                      nently affixed to the earrh-from New York to Cali-
mention honest mistakes-witi    be significant.                                         fornia. Managing the relocations will stress to the
                                                                                        limit every existing personnel, transportation, inven-
                                                                                        tory control, and accounting system within the
                                                                                        DOD bureaucracy.
                                                                                           Needless to say, the process will be costly. In the
                           Considerations         when restructuring                    near term, the price of restructuring will eat into the
                                                                                        peace dividend in a big way. The opportunity for
                           Until the United States reexamines and revises its           waste, fraud, and abuse-not to mention honest mis-
                           defense commitments, whatever military force 1IOD            takes-will     be significant, and adequate controls
                           and Congress decide upon must be capable of meet-            must be designed and kept in place throughout the
                           ing the country’s current worldwide commitments              entire process.
                           and political interests. There are no magic formulas,           The key to holding down costs and ensuring a
                           but there are some basic things that must be consid-         smooth transition is planning. Before relocation be-
                           ered as the fixces are reduced and redesigned.               gins, and even before it is determined which units
                              ‘I&-e must be N bd..nre htween sirutegif and ronwn-       will be removed from or relocated within Europe,
                           tiana/,f~r~~. I1.S. strategic capability will remain the     planning for base closure and personnel and equip-
                           primary deterrent to a major aggressor against the           ment relocation must be completed. Base and facility
                           Irnited States and its allies. But, as recently demon-       commanders must be thoroughly aware of drawdown
                           strated in Grenada, Panama, and the Persian Gulf,            p~ococol, policy, and procedure, and they and their
                           conventional forces will be called upon to project           staffs must be trained to safely and efficiently re-
                           IT.5 military power in support of the interests of our-      locate people and equipment and return real prop-
                           selves, our friends, and our allies.                         ertv to host nation control. Some of the more obvious
                              Smder numhrx offo~~urc/-o’ep~~l~~~~rr~.~must bu           factors that must be taken into account are:
                           weil-ec/uipped UMI rtzf$ to $~$t ;f nefpssa?. Supplies,
                           ammunition, and equipment must be prepositioned              l preparing locations in the United States and else-
                           ro sustain troops in combat until they can be re-            where for units, troops, and equipment remaining in
                           inforced from the llnited States or elsewhere.               the force structure but withdrawn from fonvard-de-
                              .tiohilization 2iN be the rornerstona cif any ncz~force   plopd locations in Europe;
                           .s~~u~~zLw.  With fewer forces forward-deployed in Eu-           l    preparing social services in communities through-
                           rope, it would be a challenge for the lrnited States to              out the United States to help the hundreds of thou-




                                                                                                                                      FALL 1990   41
AMERICAN FORCES IN EUROPE




                          sands of people who will lose their military jobs as a      pay us. Hut, according to knowledgeable diplomatic
                          result of the drawdown;                                     and defense officials, these assessments may be so
                          * preparing and relocating troops, civilian employees,      difficult to make that facilities could simply be trans-
                          essential equipment, spare parts, and supplies Colo-        ferred back to the host nations without an attempt to
                          cations in the lrnited States;                              determine who owes what to whom.
                          l relocating troops, civilian employees, and their
                          family members within European countries to loca-
                          tions hosting the remaining forces;
                          l     preparing and relocating, as appropriate, mobiliza-
                                                                                      The economics                 of force
                              tion-essential equipment and supplies to preposi-       reductions
                              tioned storage sites in Europe; and
                          l    disposing of excess equipment and supplies in the
                              most cost-effective manner.                             T   he anticipation of a peace dividend is, in large
                                                                                      part, predicated on the expectation that major de-
                                                                                      fense procurements will be cancelled and that signif-
                                                                                      icant numbers of troops will be released from active
                                                                                      duty as part of an overall restructuring of the armed
                                                                                      services. The drawdovvn in Europe will obviously
, ‘Three years from now, I!. S. forces in Europe will                                 contribute to the overall cuts in the defense budget,
i be significantly  decreased; by the end of the                                      but to what extent and wrhen are unanswerable ques-
  decade if nor sooner, America may have only a                                       tions at this time. As discussed above, unwinding the
  token force there to demonstrate        support for                                 immense military complex will be an expensive
  whatever European security structure e~olvcs.                                       proposition, so the immediate dividend may not be
                                                                                      as large as some would anricipatc.
                                                                                          The ultimate impact of defense cuts on the I!.S.
                                                                                      economy will depend on which programs are can-
                                                                                      celled and hovv funds previously intended fordefense
                          Facilities the United Scams vacates will be returned        spending are used. If they go to finance new domes-
                          to the host countries under the provisions of the           tic programs or to expand existing ones, the net cost
                          NATO Status of Forces Agreement (SOFA). Rasi-               to the V.S. taxpayer may not change. If the defense
                          tally, the SOi?4 requires that facilities be returned in    cuts lead ro reduced budget deficits and therefore to
                          the same condition in which the): were received, with       less government borrowing, pressures on interest
                          allowance for normal wear and tear. ‘To prepare for fa-     rates may decrease and easier credit may stimulate
                          cilities transfer, 13311 will have ro assess the condi-     domestic investment. On the other hand, a decrease
                          tions of bases and fdciliries being returned to the host     in overall government spending when the economy is
                          nations, as well as the value of buildings and facilities   already sluggish could slow the economy still further.
                          constructed and improvements made during the U.S.           Hut even in this case, currently projected reductions
                          occupancy On the basis of these assessmenrs, the            in defense spending may have only minimal impact,
                          I;nited States will negotiate with the host nations to      as rhey are smaller in macroeconomic terms than the
                          determine how much we must pay rhem or they must            ones following World War II, Korea, and Vietnam.




42   THE C-A.0 JOURNAL
                                                                                                                       AMERICAN FORCES IN EUROPE




                              Regardless of the overall effects of defense cuts,      The end of the Cold                            War
                           some economic dislocations are inevitable. ‘I-he flow
                           of billions of dollars to defense contractors is already
                           starting to dry up, and the major contractors will         No    one doubts that the U.S. commitment to NAT0
                           probably face extensive restructuring. Some analysts       is outdated. In light of changed conditions in Eu-
                           believe that defense industries are ill-equipped to        rope, it does not make sense to forward-deploy four-
                           compete in the nondefense market. As a result, many        plus Army divisions and associated air and naval
                           local economies will have to suffer through layoffs        forces in European countries. Moreover, the United
                           and other effects of reduced spending.                     States can no longer afford to spend $300 billion a
                                                                                      year for defense, a good portion of which is dedicated
                                                                                      to the protection of a now economically and militarily
                                                                                      revitalized Europe.
                                                                                         U.S. strategic interests and commitments world-
                                                                                      wide are being reevaluated, and military planners
                                                                                      have already begun the arduous task of preparing for
                                                                                      the drawdow-n in Europe. Three years from now, the
                                                                                      U.S. military presence in Europe will be signifi-
                                                                                      cantly smaller than it is today; by the end of the dec-
                                                                                      ade if not sooner, America may have only a token force
                                                                                      there to demonstrate its support for whatever Euro-
                                                                                      pean security structure evolves.
                                                                                         It is imperative that policymakers make careful de-
                                                                                      cisions now about what the new U.S. force structure
                                                                                      should be and plan for the orderly reduction of U.S.
                                                                                      troops, their families, and support operations. If they
                                                                                      don’t, this country could waste much of the hoped-
l   Phning   and Munaging Furce Kestrxctbng
                                                                                      for peace dividend and be unprepared for tomorrow’s
l   lmpucts of Force Restmcturing (including                                          defense needs. l
    Logihx;     fib-ihies; Ikz~uns, Qz@ment, and
    the ik$in.se Indz4striu/ Base; und Strategies,                                     1. ,V.l7U- Wfsaw Pact: Cl~oflonvenrioacll
                                                                                                                             hn Brriunce--Papm for I’S,
    R&z, and Xissions)                                                                and Swift Penpertiws l~~brkshops    (GAOINSIAD-X9-23B, Dec. 13,
                                                                                       198X). pp. 98-m.
                                                                                      2. hlanfred Worrier, “Nj;ro’s       New Decade,” European    AJkrx,
                                                                                      Spring IWO, p. 12.
                                                                                      ,A. Karcl Ik Gucht, ”E‘rance/Germanv, Centrepoint I* European
l   Furare Economic Relations                                                         Security.” hurqbrun A,&in, Rkxcr 1989, p. 85.
                                                                                      4. Jiirgcn War, “America Looks to Redefine Its Role in the r\;ew
This extensive body of work is intended to ussist                                     hgc,” 7iirck7m       7aune. Aug. 5, 1990, p. 1.
C’.S. fxer2tive branch pohymakers, government                                         5. .fune’sD&~~e UkQ, Vol. 13. No. 11 (March 17, 1990), p. 486.
                                                                                      6. Ih~gmnonaf Rerwd-&~ir~          March 29, 1990, p. 53450.
administmtors, and Member of Congress as thy                                          Z The Comptroller General restificd, on March I. 1990, that his
adkst iiS. policies andprogrums to the new                                            preference is for a smaller, wll-trained, and Al-equipped      force
seczlri& political, und economic environment.                                         rather than a larger one wth no muscle. See De$xselhdge~undPm
                                                                                      gram fs.rue.~in the Fmd lhr IYYf Budget (GAO/I‘-NSIAD-9O- 18,
                                                                                      Mar. 1, 1990), p. 1.5.




                                                                                                                                        FALL 1990      43
                         Jthn M. Ku?nensky




                         THE 51x STATE?
                                    Nc:k A(;.sIN, THE question of Puerro Rico’s     If all goes as planned, this issue may be resolved

                         0           future political status is under debate.
                                     Should the island continue to be a com-
                         monwealth of the United States, as it has been since
                                                                                  next summer. I>uring the November 1988 elections,
                                                                                  candidates from all three of the main Puerto Rican

                         1952.’Should it opt instead for statehood? Or should     JOH,V A’. KrLliE:\-:ThT is on Assistmt Iliwtor for
                         it go its own way altogether by becoming an inde-        the /ntqgocernrmnnrd Kelrrtions Group in’GAO’s
                         pendent nation?                                          Humun Kcsrourceslltcision.




44   THE C.A-0 IOURNAL
political parties promised chat, if elected, they            the United States acquired Puerto Rico in 1898. In
would support a referendum in which Puerto Ricans            1917,U.S. citizenship was extended to Puerto Ri-
would decide their future political status. The pro-         cans, and they were given one nonvoting seat in
commonwealth party won, but the leaders of all               Congress. Puerto Rican pressure encouraged Con-
three parties jointly signed a letter to the President       gress to grant increasing autonomy until finally, in
and Congress requesting action. Their approach has           1952, Puerto Rico became a commonwealth. with
been to ask Congress to state, up front, what Puerto         full local executive, legislative, and judicial author-
Rico can expect from each of the three options it            ity. This new status also gave it immunity from
&es-“enhanced”        commonwealth, statehood, or            most federal taxes and limited access to some fed-
independence. All parties have agreed that the en-           eral benefit programs, although Puerto Ricans were
suing referendum, tentatively scheduled for the              still given no vote in federal elections.
summer of 1991,will be binding.’                                 Puerto Rico’s efforts to enhance its status have
                                                             continued over its 38 years as a commonwealth. Ex-
                                                             actly how Puerto Rico’s status should change is a
                                                             matter of dispute among its political parties: The
                                                             Popular Democratic Party supports enhanced com-
                                                             monwealth status; the New Progressive Party advo-
                                                             cates statehood; and the Puerto Rican Indepen-
                                                             dence Party (as its name indicates) pushes for inde-
                                                             pendence from the 1 Jnited States.
                                                                 The Popular Democratic Party argues that com-
                                                             monwealth has been good for Puerto Rico. Since be-
                                                             coming a commonwealth, the island has been
   Pressure for some change in Puerto Rico’s status          transformed from a farm-based economy to one
comes not just from Puerto Rico but also from inter-         based on manufacturing. Manufacturing now ac-
national sources. If Congress were to continue put-         counts for more than half of Puerto Rico’s gross
ting the whole issue on the back burner, as it has for       product. This high share results, in large part, from
the past four decades, it could face international op-       the huge federal and Puerto Rican tax benefits
probrium. The United Nations, for instance, has             granted to LJ.S.-based corporations that operate pro-
been urging since 1971 that the United States trans-        duction facilities there. For example, in 1983 (the
fer total sovereignty to Puerto Rico. Furthermore, it       last year for which data is available), pharmaceutical
recently adopted a resolution calling for decoloniza-       companies reaped $2.&S in federal tax benefits for
tion of all territories by the year 2000. (Even though      every dollar they paid to Puerto Rican workers.?
the Iinited States does not consider Puerto Rico a              overall, the federal government’s expenditures in
colony, some other nations do.) Therefore, leaving          Puerto Rico are considerable. In 1988, for example,
Puerto Rico’s status in limbo may not be an option,         Washington spent about $6.2 billion there, which
especially as movements toward political self-deter-        amounted to approximately one-third of the island’s
mination continue to gain worldwide popularity. A           $18 billion gross product (federal spending is only 18
referendum-ven          if it resulted simply in enhanced   percent of the average state’s gross product). Much
commonwealth status-would clear the IJnitcd                 of this spending is in the form of welfare benefits,
States of charges that it was impeding Puerto Rican         many of them capped at levels lower than on the
self-determination.                                         mainland. Moreover, in 198X the federal government
                                                            provided about $703 million in loans, loan guaran-
                                                            tees, and insurance, as well as about $2 billion in
                                                            tax benefits to l’.S.-based corporations (as men-
Commonwealth                                                tioned above)..’According to one study, if Puerto
                                                            Rico maintains its commonwealth status, annual
                                                            federal subsidies will be higher than they are now by
                                                            about $1.3 billion by the year 2000.4
Puerto R’ICOh as. b een pushing for increased politi-           What impact have all these federal expenditures
cal autonomy since the latter years of its four centu-      had on Puerto Rico? By [J.S. standards. the island is
ries under Spanish rule. ‘I-his effort continued after      still poor. Puerto Rican unemployment is three


                                                                                                     FALL 1990   45
THE 5 Isr STATE?




                             times the U.S. average; 44 percent of the population       Statehood
                             is eligible for the island’s version of food stamps;
                             and the commonwealth’s per-capita income is only
                             half that of Mississippi, the poorest state. On the        On the statehood issue, Puerto Rico has straddled
                             other hand, Puerto Rico’s per-capita income is             the fence. Depending on which party is in power, it
                             higher than that of any South American nation and is       has tried either to reinforce its separateness through
                             one of the highest in the Caribbean. It’s plausible to     new commonwealth powers--or to put the 51st star
                             argue that its position as a I!.% commonwealth has         on the U.S. flag. Political forces in Puerto Rico have
                             significantly boosted its economic well-being-that         historically favored commonwealth, but the state-
                             the economic and political ties between the United         hood option has attracted increasing support over
                             States and Puerto Rico have not relegated the island       the past year.
                             to colony status but have helped its people achieve a          Some statehood advocates, including the Bush
                             higher standard of living than might otherwise have        administration, depict statehood as a moral issue.
                             been possible.                                             For 73 years, Puerto Ricans have been citizens with-
                                                                                        out representation. At this point, the argument
                                                                                        goes, Puerto Ricans should be allowed to vote for
                                                                                        those who make the laws they have to live under;
                                                                                        their rights as citizens demand this.
                                                                                            Statehood would create complications, however,
                        Some statehood advocates,
                                                                                        from the U.S. as well as the Puerto Rican perspec-
in&ding the Bush administration, depict statehood
                                                                                        tive. For instance, Puerto Rico would be the 26th
as a moral issue. Puerto Ricans, the aqwnenntgoes,
                                                                                         iargest state, which would entitle it to as many as six
should be alhwed to vote for those who make their
                                                                                        Members of the House of Representatives. Making
Laws; their r&&s as citizens demand this.
                                                                                        room for them would inevitably affect other states.
                                                                                        Another issue is language: ,4bout 60 percenr of
                                                                                        Puerto Rico’s residents do not speak English. After
                                                                                         its four centuries of Spanish culture, should Puerto
                                                                                         Rico have to adopt English as its official language
                                Indeed, Governor Kafael Hernandez Colon, of the          before it can enter the l’nion, as has been required
                             Popular Democratic Party (PDP), sees the current            in some other cases? 13any Puerto Ricans value their
                             commonwealth arrangement as “a noble experiment            distinct cultural heritage and want to maintain it;
                             in flexible political relationships for people with dif-    they see statehood as posing a threat to centuries
                             ferent culturesl’F But his party does not simply advo-     of proud tradition.
                             cate a perpetuation of the status quo; it wmts those           Statehood could also create a political powder
                             political relationships to become even more flexi-          keg. Of Puerto Rico’s 3.3 million inhabitants,
                             ble-the enhanced commonwealth option. Specifi-              roughly h percent favor independence. How embit-
                             cally, the PDP wants Puerto Rico to have the                tered might these individuals become if Puerto Rico
                             authority to nominate all high-ranking federal offi-       were made the Slst stare? It’s important to remem-
                             cials sent there as well as to reject all federal laws      ber thdt Puerto Rican nationalists have at times
                             that adversely affect it. In addition, the PDP wants       committed acts of violence: During the early 19.50s
                             most federal grants to the island to be consolidated        they made an assassination attempt on the President
                             and the number of required grant applications to be         and wounded five Members of the House of Repre-
                             reduced so the government would have expanded              sentatives; more recently, Puerto Rican terrorists
                             discretion over their use.h                                 have bombed banks and military bases. ltlore




 46   THE GA.0     JOURNAL
                                                                                                                             THE 5 I st STATE?




                          peaceful protests have also indicated that feelings on    economic news in the CBO projections, have tried
                          this issue run deep. In June 1989, for example,           to portray the 2.4 percent growth rate as an encour-
                          80,000 marched for independence and burned U.S.           aging sign. They have also stressed the more intan-
                          flags during congressional hearings in San Juan. Be-      gible results of statehood, such as the increased
                          cause 1.l.S. law prohibits advocating secession,          attraction Puerto Rico would have as a secure, low-
                                                                                    cost site of production within the United States, and
                                                                                    the improved visibility Puerto Rico would have for
                                                                                    tourists from the l1.S. mainland.n


                           Those who advocate l%er#o                                Independence
Rican independence place zyalue on the increased
pride that nationhood wouM bring them. Not on(y
uould independence reinforce Puerto Rico’s separate                                 I  ntqgible benefits are also a main focus of those
identity, but it would immediutely transform                                         who support total independence for Puerto Rico.
perceptions of the islant/.                                                          They place a paramount value on the increased
                                                                                     pride that nationhood would bring them. Not only
                                                                                     would independence reinforce the island’s separate
                                                                                     cultural identity, but it would immediately trans-
                                                                                     form perceptions of the island: Far from being the
                           statehood would make outlaws of these members of          poorest state in the American union, it would be one
                           the currently legitimate Puerto Rican Independence       of the richest countries in Latin America.
                           Party More generally, although statehood might set-          Counterbalancing these intangible benefits would
                           tle the status debate, it could also create political     be some very tangible costs. Both the tax breaks
                          chaos in Puerto Rico, since the status debate is itself    that I!.S.-based corporations enjoy in Puerto Rico
                          a major reason the two nonstatehood parties exist.        and the welfare benefits supplied by the l1.Y. fed-
                              Statehood would have economic costs as well. Ac-      eral government would eventually be withdrawn.
                          cording to a Congressional Budget Office (CBO)            This would represent a major loss of financial sup-
                          study’ they would be high-a prediction that has           port. But independence advocates believe that. if
                          discouraged statehood supporters. For one thing,          the island were no longer dependent on the llnited
                          because the Constitution requires uniform federal         States, and if the local government could no longer
                          taxes among the states. statehood would mean the          afford to be the employer of last resort, the people
                          end of the special tax breaks that U.S.-based corpo-      might accept lower wages and become competitive
                          rations now enjoy in Puerto Kico. By the end of the       in the international economy And this, they say,
                          decade, enough corporations could pull out that the       would be preferable to Puerto Rico’s current eco-
                          island would lose almost half of the existing $22 bil-    nomic dependence on the United States.’
                          lion in private investment. This could translate into         Puerto Rican independence would have benefits
                          a loss of 100,000 of Puerto Rico’s 900,000 jobs.          and costs for the United States as well. The LJnited
                              On the other hand, federal welfare benefits under     States would certainly gain financially if it no longer
                          statehood would increase by $3.6 billion a year.          supported the Puerto Rican economy. I!nder one
                          I\Jevertheless, Puerto Kico’s economy would grow at       legislative proposal, by the year 2000, federal aid
                          a rate of only 2.4 percent-3.3 percent less than the      and tax benefits to the island would be cut by $1.5
                          rate anticipated under continued commonwealth             billion; over time, all aid and tax benefits would be
                          status. Statehood supporters, looking for sww good        phased out completely lo




                                                                                                                             FALL 1990    47
THE 5lst STATE?




                              Yet there are also some military considerations.        lying all these considerations, however, may be a
                            Puerto Rico is located in a strategic sea lane, and       more fundamental issue: fear of the future. One
                            houses one of the largest U.S naval bases. Inde-          Puerto Rican economist has noted that “statehood or
                            pendence could create more overt conflicts over the       independence could have big payoffs 15 years down
                            L1.S. military presence there, as has happened in         rhe road, but the risks are enormous. Common-
                            the Philippines; eventually, the United States might:     wealth is a safe bet:“1’ Barring some unforeseen,
                            have no choice but to withdraw its forces.                dramatic resolution of the issues at stake, this “safe
                                                                                      bet” calculation could well be the determining fac-
                                                                                      tor in Puerto Rico’s political status debate. l

                                                                                      1. Roth rhe House and the Senate dre currently considering Icgis-
                                                                                      lation to define the terms of the election. The ultimate passage of
                                                                                      this legislation is still not certain.
                                                                                      2. “‘l‘he OperaCon and Effect of rhe Possessions Corporation Sys-
                                                                                      rem of ‘lkation.      Slrrh Kcporr.” Departmentof the Treasury


                                                                                      70HK. ?&ar. 7, 19YO),p. 2x:
                                                                                      4. “Potential Economic Impacts of C:hange:esin Puerto Rico’s Sta-
                                                                                      [us Under S. 712,” Cnngrcssional Budget Office ((330) (April
                                                                                      lYYO), p. 21.
                                                                                      5. Rafael Hcrnindez-CZol6n. “Statehood for Puerto Ricans.. .A
                                                                                      Cultural and tkonomic LXsasrcr.” ,%w York Tomes,Feb. 26. 1990.
                                                                                      p. 17
                                                                                      6. S. 712,101SC(;ong.. 1st se% (Apr. 5, lY89), Star Print pp. 4?-
                            Enormous             risks                                72.
                                                                                      Z “Potential E:conomlc Impacts of Changes in Puerto Rico’s Sta-
                                                                                      tub I’nder S. 712.” p. 21.
                                                                                      8. “CR0 Economic Report on Puerto Rico,” louerto Rican S’cm-
                            T     I_                                                  hood,hwnenf i\rmderrw. Apr. 19, 1YYO.
                               he Issues  surrounding Puerto Rico’s political Srd-    9. Pctcr Passell. “Debarc on Puerto Rico’s Future Has a Bottom
                            tus have become so tangled that it is difficult to sort   Line.“.Gw ?iS 7imnr. May 15. IWO. p. A18.
                            out the relative importance of the political, eco-        10. “Porenridl Economic Impacts of Changes in Puerto Rico’s Sta-
                                                                                      tus L.nder S. 712.” p. 24.
                            nomic, cultural, and historic forces at work. (Under-     Il. P~SSCII,p. ‘i\lH.




48   THE C.A.0    IOURNAI
                                                          rekindled. Currently, however, the debate is gener-
                                                          ating more heat than light. It is therefore heartening
                                                          to encounter the level-headed, dispassionate per-
                                                          spective of economist George Borjas. In his book
                                                          Frads orS’truqm, Borjas examines key issues in
                                                          the debate: Economically are immigrants a blessing
                                                         or a burden? Do immigrants take jobs away from na-
                                                          tive-horn Americans? Do the)- lower wages of em-
                                                          ployed workers? Do today’s immigrants differ from
                                                          earlier immigrants, and if so, how?
                                                             Friends orSrrtln~ers draws comprehensively on re-
                                                         cent rcscarch, much of it Horjas’s own, to provide
                                                         answers that are solid and often reassuring. It ap-
IMMIGRATION        RECONSWEREL)                           pears that much of the concern over the current
                                                         wave of immigration is vastly overblown. Consider,
                                                         for example, rhe fact that the proportion of the U.S.
                                                          population that is foreign-born has dropped from
                                                          14.2 percent in the early 1900s to 6 percent in 1987.
                                                         While this percentage is beginning to increase
                                                         again, the statistics still call into question the notion
                                                         that immigrants are overrunning the country, Bor-
                                                         jas’s key findings include the following:
                                                             l  Despite all the concern that immigrants (legal and
                                                             illegal) will displace I:.S.-born workers, a M-per-
                                                             cent increase in the number of immigrants de-
                                                             creases the average wages of native-born Americans
                                                             1~):a mere 0.2 percent. This applies across the
A ccor ci’
        rng to news reports,   some CZalifornians have       board-such increases have little effect on the em-
taken to parking their cars side by side in long rows        ployment opportunities of practically all native
along the Mexican border, their headlights trained           groups, including African-Americans.
on areas that are not adequately patrolled. This vigi-       l To the extent that immigrants do have an impact, it
lantism, along with the results of opinion polls, sug-       is on the earning and employment opportunities of
gests that the Immigration Reform and C:ontrol rlict         foreign-born residents. .A K&percent increase in the
of 19Hh(IKCA) has not allayed public concern over            number of immigrants will decrease the wages of
illegal immigration into this country                        foreign-born persons by 2 percent-10 times the im-
    Such concern may be justified. TRW’s center-             pact on the native-born.
piece was the provision making it illegal for l1.S.
                                                         l Immigration creates immigrant enclaves within
employers to hire unauthorized aliens, which should
                                                         American cities. These enclaves are economically
hJve eliminated the “magnet” of American jobs.
                                                         vibrant and generate significant opportunities for
But evidence of this pruvision’s effectiveness in
                                                         immigrants; for instance, immigrants have higher
curbing illegal immigration is mixed at best. Fur-
thermore, as reported by Gi\O in hlarch IYYO,            self-employment rates than native-born Americans.
                                                         On the other hand, the Bow of new immigrants into
IRCA may well have contributed to a high level of
                                                         these enclaves can have a depressing effect on the
discrimination agdinSt  legitimate job applicants who
                                                         employment and wages of previous immigrants.
simply happen to look or sound foreign.
    Mthough it is too early to render final judgment        Mthough these assessments of immigration’s im-
on IR(:A, it is apparent that the law does not seem      pact are reassuring, some of Borjas’s other conclu-
to be accomplishing its objectives as fully as had       sions are much less so. For example, over the past
been hoped. The debate on immigration policy has         few decades the skills of immigrants have declined
                                                         “precipitously,” as measured bv a number of indica-
                                                         tors including educationa level, labor participation
                                                         rates, and potential lifetime earnings. Recent immi-


                                                                                                    FALL 1990 49
BOOK KMLWS




                        grants, now for the most part from Asian and Latin        political or religious
                                                                                                   -.    oppression. Yet even this kind
                        American countries, have zelatively less schooling,       of system, because of its selectivity, would be inher-
                        lower earnings, lower employment rates, and higher        ently discriminatory. Inevitably, Borjas concludes,
                        poverty rates than earlier immigrants had at similar      difficult choices must be made.
                        stages of assimilation. The typical male immigrant           Borjas is to be commended for separating the real
                        who arrived here between 1960 and 1964 will. over         from the perceived issues in immigration policy. But
                        his lifetime, cam about 7 percent less than a Lr.S.-      because of the trade-offs inherent in crafting any
                        born male, whereas men who immigrated during the          immigration policy, he doesn’t feel that, in the end,
                        late 1970s will have lifetime earnings that arc 30 per-   he can offer a clear recommendation. So while he in-
                        cent less. Recent immigrants are also more likely to      forms the debate, he may not have brought it closer
                        go on welfare-a likelihood that increases the longer      to resolution.
                        they live here.
                            In contrast, immigrants from Western Europe-
                        who made up 60 percent of all immigrants as re-
                        cently as 1950, but are now only 11 percent-fare
                        better in the V.S. labor market. This does not, in
                        Borjas’s view, reflect higher levels of discrimination
                        against other immigrant groups; rather, immigrants
                        from industrialized economies simply hake more
                        skills, and skills that are more easily transferred to
                        the I~.S. labor market, than do immigrants from less
                        developed cwntries.
                            ‘lb explain these trends and to develop possible
                        solutions, Borjas applies market economy concepts.
                        ‘The I [nited States, he suggests, participates in the
                         “immigration market” in an unsophisticated way
                        (:urrent LT.5 immigration policy emphasizes family        FITTING     PUNISHMENT
                        reunification and does not encourage the immigra-
                        tion of persons with high skill levels. The L:.S. im-
                        migration “offer, ” interacting with conditions in        Norval Morris and Michael Tony
                        source countries, ends up attracting unskilled immi-      BETWEES   PRISON AND PROBATION:
                        grants who have little chance of attaining economic       INTE KME DIATE PUNISHMENTS    IN A
                        parity with I-.$-born individuals. Canada and Aus-        RATIONAL SENTENCING    SYSTEM
                        tralia, in contrast, construct a different offer. In
                        screening visa applicants, these countries use point      ~%mkkk: 03cfrd IGzwcily Press, 1990. 283 pp.
                        systems that consider such factors as education, the
                        demand for certain occupations, employment ar-
                        rangements.     and initiative and motivation.  Both
                        countries attract higher percentages of skilled immi-
                        grants than does the llnited States.
                             lloes Borjas recommend that the lynited States
                        institute a point system based on the Canadian and        A.mencans tend to equate criminal      punishment
                        .Australian models? Not necessarily. He recognizes        with prison. Partly because of the war on drugs and
                        that systems of immigration control must reflect not      a general “get tough” attitude toward crime, the
                        only economic considerations but also, more funda-        U.S. prison population has more than doubled since
                        mentally, what a society believes about liberty. hu-      1980. The federal and sfate prison systems are now
                        man rights, and family values. International              operating at about 63 percent and 27 percent, re-
                        relations also enters the picture. Borjas discusses       spectively, over their rated capacities.
                        the possibility of an expanded point system incorpo-
                        rating these factors. Ic would need enough flexibility
                        to accommodate sudden political changes in wurce
                        countries and ro permit the entry of refugees fleeing


50   THE CRAG JOURNAL
                                                                                                                      BOOKRFVIEWS    I
                                                                                                                                     1
                                                                                                                                     j
                                                                                                                                     3
     In some states, prison overcrowding has resulted       simply choose whether, and for how long, to send a
 in sentencing policies or court orders that limit          convict to prison; instead, the choice of sentence
 prison populations by keeping some newly con-              would be guided hy the objectives of punishment in
victed criminals out of prison and releasing some           the individual case and by the “exchange rates”
 previously convicted prisoners. Federal and state          among the different punishments available. For ex-
construction programs have increased prison capaci-         ample, one day in jail might be equal to three day
 ties. But given the anticipated future growth in           of intensive probation.
 prison populations, prison construction costs of              At the top of Morris and Tonry’s list of punish-
about $50,000 per bed, and annual operating costs           ments that could be used more fully than at present
 running at ahout $20,000 per inmate, federal and           are tines and other financial sanctions. The authors
 state governments are unlikely to be able to afford to     find it paradoxical that a society so reliant on finan-
 build their way out of this problem.                       cial incentives in its social philosophy and economic
    The primary alternative to prison is prohation.         practice should be so reluctant to use financial disin-
Prison overcrowding and fiscal concerns logically           centives as punishments for crime. N’hy should it be
 suggest increased use of this option. Hut sentencing       thought unfair to impose a fine that causes an indi-
a convicted criminal to ordinary probation does not         vidual to lose his or her home, car, and accumulated
appear ro he an effective punishment. In many ur-           assets when a prison term has the same effect? Mor-
 ban areas, a single probation officer is expected to       ris and Tom)- argue that, in fact, fines could be the
 track and supervise more than ZOOpeople. This is           punishment of choice for most crimes if they were
 far from a manageable caseload, and the quality of         calibrated to the severity of the crime, collected
 supervision suffers so much that probation amounts         with the vigor and ruthlessness characteristic of fi-
 to virtually no punishment at all.                         nance companies, and tailored to each offender’s
     In Hemtea &&on rend P&&zz,       Noorval hlorris and   economic status so as to constitute roughly compara-
 Michael ‘T&y contend that the “prison or proba-            ble financial burdens.
 tion” system nf punishment is unworkable and inef-            Community service orders are another form of
fective, and that the IInited States should develop a       punishment that Morris and lbnry explore. The
system of intermediate punishments co hridge the            possibilities here are limited only by the imagina-
gdp    between these two extremes. The authors he-          tion of the sentencing judge and the availability of
 lieve that both prison and probation are used exces-       supervision to ensure that the terms of the sentence
sively. Some offenders now sent to prison could he          are fulfilled. Sentencing an offender to community
dealt with more effectively and economically                service could cut prison costs, provide symbolic re-
through intermediate punishments such as suhstan-           paration to the community, and give the offender a
tial tines, community service orders, house arrest,         sense nf self-worth. On the other hand, the cost of
intensive probation, and closely supervised treat-          close supervision, the uncertainty of community
ment programs for mental illness and drug and alco-         service’s deterrent value, and the possible displace-
hol abuse.                                                  ment of labor suggest that community service be
    The authors outline a comprehensive system of           used mainly as punishment for relatively minor of-
intermediate punishments they believe would better          fenses or in conjunction with other punishments.
serve the community, the victim, and the offender.             The remaining intermediate sanctions discussed
Central tu this system is the principle of inter-           in the hook all offer some degree of offender incapa-
changeability That is, the system should identify           citation (that is, they tend to limit the freedom of
prison and nonprison punishments that have rough11          convicts). These include intermittent imprison-
equal punitive properties, are appropriate to the of-       ment, house arrest, and intensive supervision pro-
fenders’ crimes and personal conditions and to soci-        bation. Any of these can be enforced by electronic
ety’s needs, and do not result in unwarranted               monitoring. They may be appropriate both for those
sentencing disparities. T’his requires that punish-         who otherwise would go to prison and for those who
ments at each level of the scale he roughly equiva-         would simply he put on probation. These individu-
lent from the offender’s perspective in terms of            als would need to he closely supervised and steered
pain, suffering, or intrusion on autonomy; and from         away from situations conducive to crime.
society’s perspective in terms of the purposes ful-            An important part of any community-based inter-
filled by the punishment (for example. retribution or       mediacc punishment is the treatment of alcohol
prevention of further crimes), The judge would not          abuse, drug abuse, and mental illness, all of which

                                                                                                                                     I

                                                                                                                      FALL 1990 51   b
BOOK REVIEWS




                         are frequently associated with criminal behavior. If     inadequately supervised.
                         they can be directly linked to the actual commit-           The third concern involves the budgetary impact
                         ment of a crime, participation in a treatment program    of the new system. At first, additional funding would
                         should be a condition of nonincarceration. Sufficient    be needed for personnel to supervise the offenders
                         supervision would be needed to ease anxiety about        sentenced to intermediate punishments and to make
                         such offenders remaining out of prison.                  the system work. Only over time, as increasing
                            In discussing how a system of intermediate pun-       numbers of offenders were diverted from prison,
                         ishments might be developed and implemented, the         could budgetary savings be expected. And these
                         authors raise three points of special concern. First,    would not occur (or would be greatly diminished) if
                         they warn that such a system might simply have the       the new system simply cast a wider net of social con-
                         effect of widening the net of social control: Each       trol, if close supervision proved costly or if new
                         new sanction might tend co draw in those who previ-      prison construction proved unavoidable.
                         ously would have been either less severely punished         In addition to these three concerns, Bemeen
                         or not punished at all, rather than those who would      Ption anti Pmbdion raises several fundamental
                         have been punished more severely In that case, a         questions. Do intermediate punishments really
                         system of intermediate punishments would simply          work? Would a comprehensive and graduated system
                         increase the number of individuals under the crimi-      be less costly than incarceration? How would recidi-
                         nal justice system’s supervision; instead of cost sav-   vism rates compare with those following prison sen-
                         ings, there would be cost increases.                     tences? How would the various sentencing
                            The authors’ second concern relates to the ques-      commissions deal with a system of intermediate
                         tion of who will enforce these intermediate punish-      sanctions governed only by the principle of inter-
                         ments. Probation officers, who work for the courts,      changeability and the discretion of the judge? Would
                         are now responsible for supervising offenders placed     this system correspond with society’s desire to put
                         on probation. But large caseloads often prevent them     offenders behind bars, and are nonprison punish-
                         from performing this task effectively; furthermore,      ments really interchangeable from society’s perspec-
                         most judges consider the preparation of presentence      tive? The authors do not have definitive answers to
                         reports to be probation officers’ primary responsibil-   these questions, but neither will anyone else until
                         ity and seem to provide them little incentive to         such a system is in operation and can be evaluated.
                         closely supervise offenders. Therefore, unless addi-     Until then, a decision to fully implement such a sys-
                         tional funding is made available so that more proba-     tem will be guided primarily by political considera-
                         tion officers can be hired, or their supervisory         tions rather than empirical evidence. Nevertheless,
                         responsibilities are assigned to executive branch law    the authors make a good case for revamping Ameri-
                         enforcement officers, it is likely that the terms and    ca’s system of punishment to make criminal sen-
                         conditions of inrermediate punishments would be          tences less costly and more meaningful. l




                                                                                  Illustration Credits-Pages 3 and 4: Rosanne Bono Pages I I-32:
                                                                                  Lew Azzinaro. Page 38: Christopher Bing. Page 44: John Heinly.
                                                                                  Pages 49 and 50: Les Kanturek.


52 THE C.A.0   JOURNAL
UNITED STATES
GENERAL ACCOUNTING       OFFICE
WASHINGTON,   D.C. 20548
Official Rusiness
Penalty for Private Use$300