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The Black Farmer, the CBC and Deflation

The recent debate in Congress over legislation said to be aimed at alleviating the problem of the struggling Black farmer obscures a much deeper issue. The public war of words and political maneuvering currently taking place between Rep. Jay Dickey (R-Arkansas) and members of the Congressional Black Caucus has done nothing to alleviate the short-term troubles of Black Farmers as it relates to payment of a $375 billion settlement owed to the farmers by the U.S. Government and it certainly has done little to address the root long-term issues that will continue to plague the Black Farmer whether they receive a dime from the government or not.

Last year I wrote the following communication to Black Farmers' associations, members of the Black and "mainstream media" and members of the Congressional Black Caucus. It was my effort to get to the core of the reason(s) why the Black Farmer will continue to suffer in this country. To this day I have never received a single reply to what I have written. Tomorrow I will run part two of my communication on this issue and my eventual run-in with U.S. Agricultural Secretary Dan Glickman, which took place in front of members of the Black Caucus.


The Black Farmer, the CBC and Deflation

What has happened to the Black Farmer can be considered nothing short of tragic. The root of the horrid condition that Black Farmers find themselves in can be found in the discriminatory practices of the United States Government, not only in those practices committed immediately after slavery ended, but also in the discriminatory practices of the supposedly benevolent New Deal programs of Franklin Delano Roosevelt. During the New Deal, Black farmers were denied access to Federal Land Banks, Production Credit Associations and various government subsidy programs that were made available to white farmers. By official pronouncement, President Roosevelt forbade discrimination in New Deal programs but many of the programs were riddled with significant loopholes that deprived Blacks of equal access to capital and other benefits. The Social Security Act, for instance, included provisions that excluded farmers and domestic workers, which accounted for roughly 65 percent of all black workers and in addition to this, the government's program to help black farmers- the Agricultural Adjustment Administration- displaced black sharecroppers and tenant farmers from their land.

Statistics regarding the state of the Black farmer read like a patient in critical condition. In 1920, 925,000 farmers (14 percent of all farms) were Black. Today, there are about 18,000 Black farmers. There is a backlog of over 1,000 complaints from Black Farmers who have filed cases regarding discrimination practiced by the United States Department of Agriculture (USDA). According to the Farmers Home Administration, 91.4 percent of the farm loans in 1997 went to white farmers, 4.2 percent went to Hispanic farmers 2.3 percent to Black Farmers and 1.2 percent to Native Americans. And of the 1.5 million acres of land in the USDA's inventory, Black farmers claim that 53 percent of it was land formerly owned by Black farmers. The farmers are unanimous that the 2 problems that have hurt the Black farmer the most are 1) government discrimination and 2) the lack of access to capital.

The Congressional Black Caucus has done an excellent job, at the prodding of struggling Black farmers, in raising awareness of the first problem. However, the second problem- access to capital- has been greatly ignored and misunderstood. At the heart of this lies the Congressional Black Caucus' aversion to dealing with United States monetary policy. Lost in the CBC's critique of the plight of the Black Farmer is the vital fact that for at least two and a half years the United States and the world have been undergoing a monetary deflation. A monetary deflation is caused when the Federal Reserve does not supply enough dollars to the economy in a manner that satisfies the demand for those dollars. In other words, by not supplying enough cash and bank reserves, the Federal Reserve has been starving the U.S. and World economy of liquidity, and in one way or another, everyone has felt the effects.

In a deflation, prices fall and those who have borrowed money before the deflation are forced to pay back their loans with more valuable dollars than the ones that they borrowed. This has particularly hurt Black farmers who borrowed money earlier in the 1990s and are attempting to pay back loans now. In a deflation- creditors and bankers benefit and debtors are hurt. Unfortunately, farmers and those in the commodities industry have felt the harmful effects of the deflation first and the worst. According to the Commodity Research Bureau, since 1996, the price of corn has fallen 32% and the price of wheat has fallen 42%. The best measure of a deflation is the price of gold, which during this time period, has fallen from a high of $385 per ounce to its current low of $256.00 per ounce. The fall in prices has made it virtually impossible to make a profit.

To further compound matters for the Black farmers and through no fault of their own, is the fact that the only economist making the argument about deflation (and for two years-in public) is supply-side economist Jude Wanniski - President of Polyconomics Inc. Mr. Wanniski is a former economic advisor to President Ronald Reagan and currently advises 1996 GOP vice-presidential candidate Jack Kemp and Republican presidential candidate Dan Quayle on monetary and fiscal policies. In fact, the only Presidential candidates who are making the deflationary argument and connecting it with the woes of farmers are Quayle and Steve Forbes - also formerly advised by Wanniski. Vice-President Gore and Bill Bradley have not uttered a word about the deflation and due to the Democratic Party's love affair with Federal Reserve Chairman Alan Greenspan, it is unlikely that they will do so in the future. But, where does that leave the Black Farmer? It leaves the Black Farmer without a monetary policy advocate anywhere in the Democratic Party. The CBC is either unaware of the deflationary argument or it refuses to raise it due to the conflict it would place them in with the Democratic Party establishment.

The hope that this will all change centers around the chance that the strongest advocates for the farmers from within the CBC - Congressman Bennie G. Thompson (D-MS), Congresswoman Eva M. Clayton (D-NC), Congressman Earl Hilliard (D-Alabama) and Congresswoman Maxine Waters (D-Ca.) - can break free of the Democratic Party's thinking on monetary policy and raise the deflation argument. There is further reason to hope, in the person of Congressman Mel Watt (D-NC), who recently posed a very powerful question regarding inflation to Alan Greenspan during Greenspan's recent testimony before the House Banking Committee. Greenspan, in typical fashion, wiggled out of the question posed by Rep. Watt but it is very apparent that Watt is not buying on face value the Fed Chairman's rationale for his monetary policy, which seeks to fight inflation when none exists. It is time for the CBC to rise above its allegiance to the Democratic Party, at least on this one issue, and embrace some very powerful and cogent arguments being made from men on the other side of the aisle. The future of the Black Farmer may depend upon it.

Cedric Muhammad

Wednesday, May 10, 2000

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The views and opinions expressed herein by the author do not necessarily represent the opinions or position of or Black Electorate Communications.

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