Helping Labour to Win in the Countryside: Financial Support to Farmers

A year or so ago Mike over at Vox Political asked what could be done to enable the Labour party to win in the countryside. It’s a good question, as Britain’s rural areas tend to be Tory/Liberal strongholds. The countryside is in crisis. We have seen a number of agricultural crises force small farmers out of business, while at the same time local people are being forced out of their villages because they are unable to afford the house prices there, as housing is bought up by rich outsiders. Local services in these areas are also being cut back. Bus companies have reduced the services to rural areas, post offices, pubs and banks are closing around the country, not only in rural areas but also in towns. This also hits local businesses, and so the small businesses in these areas may also be forced to fold. The danger is that if these trends continue, Britain’s countryside and villages may decline from real, living communities to dormer suburbs consisting of retirement accommodation for the rich.

Brexit may also have an impact on this process. At the moment farmers are, or have been supported by a number of subsidies from central government and the EU under the Common Agricultural Policy. Any subsidies from the EU may vanish if and when we leave the EU. How then can we save our farmers from bankruptcy?

Some indication of how this may be done could come from Roosevelt’s New Deal, as described by John Strachey in his A Programme for Progress (London: Victor Gollancz 1940). In it, Strachey discusses how the Roosevelt administration tried to give help for farmers by reducing the rate of interest on their mortgages and extending credit to them. Strachey writes

It was not, then, mainly by means of transforming the Reconstruction Finance Corporation from being an agency for the relief of big business in distress to a method of providing cheap credit to the American people generally, that the Roosevelt administration began to show it progressive character. It did so rather by a variety of methods of both lending and of spending (distributing money) directly to various sections of the community. Let us pass these methods in review.

The American government began in 1933 to distribute money to two classes of the population-namely the farmers and the unemployed. In the case of the farmers the Government not only spent (i.e. distributed money), but also lent. The farmers were dealt with by the Farm Relief Act which the President signed on May 12th, 1933. This Act was in two parts. The first part set up the Agricultural Adjustment Administration. The Second part, called “The Emergency Farm Mortgage Act of 1933”, was designed to reduce the rate of interest paid by farmers on their mortgages. The principle on which they Agricultural Adjustment Administration, or A.A.A., worked is well known. Substantial payments were made to farmers on condition that they restricted their production of all the basic farm crops and products in accordance with the directions of the Department of Agriculture. The money for these payments did not, however, come out of the Federal Treasury as such, but was raised by a special processing tax, imposed up0on the output of these same farm products as they passed on their way to the consumer.

The second part of the Act established the Farm Credit Administration, to which farmers could apply for loans with which to pay off their existing mortgages. This measure appears to have resulted in a reduction of the interest rates paid by farmers from over 5 per cent to 3 1/2 per cent. Moreover, the average period of these government loans was raised to thirty years, instead of the five years, which was the average period during which the private loans had to be paid off. By September 1934 these government credit agencies held 37 per cent of the farm mortgage debt of the country. This, the less spectacular part of the Act, is often forgotten. But its effect has been of great importance, since it has driven down the whole structure of interest rates on farm mortgages. It affords a model example of the use of government credit to depress interest rates at a particular important point. (pp. 188-9).

I am not saying that this precise policy needs to be introduced, as I understand that at the moment interest rates are low and that, if this country does suffer food shortages due to loss of imports following Brexit, we may need our farmers to increase production rather than reduce it. But it is an example of the general type of policy that may need to be put into practice to regenerate the countryside: aid to farmers and country dwellers to be able to buy their properties and maintain them as proper communities in which people live and work.

Advertisements

Tags: , , , , , , , , , , , , , , , , , , ,

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.


%d bloggers like this: